Sebi slaps Rs 5 lakh penalty on Sakthi Sugars

The Securities and Exchange Board of India (Sebi) has let off the promoters of Sakthi Sugars after the entity agreed to voluntarily pay a penalty of Rs 500000 for alleged violation of the takeover regulations. Sebi has found that adequate disclosures had not been made in the notices sent to shareholders for a preferential allotment which sought to increase the stake of promoters, ABT Investment Limited from 12.41% to 49.97%. After a scrutiny, Sebi noted that the acquirers should not be given the benefit of exemption from the regulations. Sebi observed that the non-compliance with the statutory requirements was unintentional and done without an intent to obtain any benefit or deny any benefit to the shareholders, and the preferential allotment was intended to finance the expansion plan of the company and to comply with conditions stipulated by IDBI. In Sebi’s view the preferential offer was made at a much higher price than the existing market price, investors’ interest was not prejudiced. Sakthi Sugar on June 30, 2000 had allotted 1,21,66,200 equity shares at Rs 14.30 each on preferential basis to ABT Investments. SEBI later noted that the same did not contain disclosures regarding the price, the consequential changes in the board of directors, voting rights, shareholding patterns and the changes in the control of the company after the proposed allotment in favour of the acquirers. According to ABT Investment, shares were issued at Rs 14.30 per share which was higher than the prevalent market price of Rs 7.50 and that as there was no change in the management of the target company pursuant to the preferential allotment and the shares were issued to the promoters and the promoter group companies, no specific disclosure to that effect were made. Further, the shares had been issued as part of the terms and conditions stipulated by IDBI for infusing additional funds into the target company by the promoters. It was observed that the non-compliance with the statutory requirements was unintentional and done without an intent to obtain any benefit or deny any benefit to the shareholders, and the preferential allotment was intended to finance the expansion plan of the company and to comply with condition stipulated by IDBI. Hence, Sebi decided to treat the present proceedings as formal adjudication proceedings in exercise of its power under the provisions of Section 15 I of SEBI Act, 1992 and accepted the maximum amount of Rs 500000 voluntarily deposited on behalf of the acquirers and disposed off the matter without any further orders.