TMI Blog2007 (1) TMI 642X X X X Extracts X X X X X X X X Extracts X X X X ..... itrakut Computers Pvt.Ltd., Goldfish Computers Pvt. Ltd., Nakshatra Software Ltd., Saimangal Investrade Ltd., Triumph Securities Ltd., Triumph International Finance India Ltd. and N. H. Securities Ltd., (for short Classic, PIL, PFMS, Luminant, Chitrakut, Goldfish, Nakshatra, Saimangal, Triumph, TIFIL and N.H. respectively) acquired shares of Shonkh Technologies International Ltd.(hereinafter called the target company) in excess of the threshold limits prescribed by Regulations 7 and 10 of the Regulations without making the necessary disclosure to the target company and without making a public announcement thereby violating the said Regulations. Adjudication proceedings were accordingly initiated against each of the aforesaid entities. The adjudicating officer issued show cause notice dated May 24, 2002 to Classic and the other entities making four allegations. It was alleged that Classic, PIL and PFMS had acquired 5 lac shares, 4.25 lac shares and 7 lac shares respectively of the target company through a preferential allotment made on July 18, 2000. It was also alleged that Kirit Kumar Parekh, Karthik K. Parekh and Ketan V Parekh are the directors of these companies which are being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oximate addresses and that their shareholders are common. According to Classic these were not per se conclusive of the fact that the entities were acting together for a common purpose. On a consideration of the material produced by the parties the adjudicating officer came to the conclusion that all the charges leveled against Classic and other entities except Saimangal stood established and accordingly a sum of ₹ 5 lacs penalty was imposed on each of the entities for violating Regulation 10 of the Regulations and another sum of ₹ 1,50,000/-for violating Regulation 7. Hence this appeal. 5. We have heard the learned Counsel for the parties. The learned Counsel for the appellant has not disputed any of the acquisitions made by Classic as referred to by the adjudicating officer in the impugned order. As a matter of fact, he has not even disputed the acquisition made by the other entities. What is contended by him is that the acquisition of shares by Classic, PIL and PFMS on July 18, 2000 was by way of preferential allotment made by the target company and, therefore, the same was exempt from the provisions of the Regulations and the adjudicating officer erred in law in i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were being controlled by Ketan Parekh and this fact was not disputed in reply filed by Classic or even by the other entities. On the other hand, it was said in reply that this fact per se did not amount to their acting in concert with each other. We cannot agree with this stand taken by the appellant. Sub-clause (2) of Regulation 2(1)(e) brings in the deeming provision and companies having the same management either individually or together are deemed to act in concert with each other. Since Ketan Parekh was in control of the companies and was managing them, it has to be presumed that the entities were 'persons acting in concert' with each other. Having done so, they acquired shares in excess of 5% of the threshold limit prescribed by Regulation 7. Admittedly, they did not disclose their shareholding to the target company. Regulation 7 thus stood violated and no fault can be found with the findings recorded by the adjudicating officer in this regard. The learned Counsel for the appellant strenuously contended that Sub-clause (2) of Regulation 2(1)(e) of the Regulations could not be relied upon by the adjudicating officer since the show cause notice issued to the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was shown as the beneficial owner of those shares in the records of the depository. This being so, the appellant will be deemed to be the beneficial owner in view of the provisions of Section 2(1)(a) of the Depositories Act, 1996 which defines a 'beneficial owner' to mean a person whose name is recorded as such with the depository. Section 10(3) of this Act further provides that the beneficial owner shall be entitled to all the rights and benefits and be subjected to all the liabilities in respect of his securities held by the depositor. It is, thus, clear that once the shares stand in the name of the appellant in the records of the depository, it will be deemed to be the acquirer of those shares for the purpose of the Regulations and if the acquisition exceeds the threshold limit prescribed by Regulations 7 and/or 10 the said Regulations will have to be complied with. Even if one were to assume that the shares were taken by the appellant by way of security and in trust as contended by the learned Counsel for the appellant, then a pledge or hypothecation in respect of those shares had to be created in terms of the procedure prescribed by the Depositories Act. This is the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31-12-00 31-01-01 28-2-01 31-3-01 30-04-01 Chitrakut Computers Pvt. Ltd. 0 75000 75000 0 0 0 0 00 Classic Credit Ltd. 500000 0 710000 1813850 1813850 1810400 810600 10000 10000 Goldfish Computers Pvt Ltd. 0 325000 325000 0 0 0 0 0 0 Luminant Investments Pvt. Ltd. 0 700000 700000 0 0 1000 6650 0 0 Nakshatra Software Pvt. Ltd. 0 275000 275000 0 0 0 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Entities 9.28 9.28 13.25 10.39 13.34 13.85 10.09 5.48 5.48 10. Luminant sold around 32% of the paid up capital of the target company to Classic and PFMS on different dates as is clear from the chart reproduced hereunder on which reliance has been placed by the adjudicating officer: Date Sale by (LIPL) Credit in LIPL demat account on that date Name of buying Ketan Parekh entity No % No % CCL PFMS Total of CCL PFMS No % No % No % 5/2/01 2000000 11.42 2000000 11.42 897150 5.12 698900 3.99 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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