WTM/RKA/CFD-DCR/04/2015

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

ORDER
Under sections 11 and 11B of the Securities and Exchange Board of India Act, 1992 and
regulations 44 and 45 of the SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 1997 read with regulations 32 and 35 of the SEBI (Substantial Acquisition of
Shares and Takeovers) Regulations, 2011 in the matter of acquisition of shares of Brand
Realty Services Limited (formerly known as Sahil Financial Services Limited).
In respect of Mr. Kamal Manchanda, Ms. Renu Manchanda, Mr. Ravi Manchanda, Mr.
Ramesh Chand Girdhar, Ms. Pratibha Gupta, Mr. Krishan Lal Manchanda, Ms. Aruna
Manchanda and Mr. Jagdish Chander Manchanda
__________________________________________________________________________
1. M/s Brand Realty Services Limited (hereinafter referred to as "the target company") is a
company incorporated under the Companies Act, 1956 having its registered office at S-8 & S2 DDA Shopping Complex, Opp. Pocket-1, Mayur Vihar Phase-1, Delhi- 110 091. The
shares of the target company are listed on Bombay Stock Exchange Limited (BSE). During
the period September 30, 2008 to December 31, 2010 Mr. Kamal Manchanda, Ms. Renu
Manchanda, Mr. Ravi Manchanda, Mr. Ramesh Chand Girdhar, Ms. Pratibha Gupta, Mr.
Krishan Lal Manchanda, Ms. Aruna Manchanda and Mr. Jagdish Chander Manchanda
(collectively referred to as "the promoter group") were the promoters of the target company.
2. As per the shareholding pattern filed by the target company, the promoter shareholding for
the quarter ending on September 30, 2008 was 62.56% of the total share capital of the target
company, which increased to 74.12% for the quarter ending on December 31, 2010. The
increase in shareholding of the promoter group was entirely due to the increase in
shareholding of Mr. Kamal Manchanda. The increase in the promoter group shareholding
took place in the following manner:
Quarter
ending
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09

No. of shares held % of Promoters' Total equity capital of

by promoters
shareholding
the target company
18,79,618
62.56
30,04,400
19,40,646
64.59
30,04,400
20,26,893
67.46
30,04,400
20,90,328
69.58
30,04,400
20,97,328
69.81
30,04,400

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Mar-10
Sep-10
Dec-10

21,71,038
22,17,341
22,26,841

72.26
73.8
74.12

30,04,400
30,04,400
30,04,400

3. Between October 31, 2008 to March 31, 2009, Mr. Kamal Manchanda had acquired 1,47,275
shares (4.90%) of the target company. On April 08, 2009 he further acquired 4,000 shares
(0.13%). Consequently, the promoter group's collective shareholding in the target company
increased from 62.56% (as on October 30, 2008) to 67.60% (as on April 08, 2009), i.e., more
than permissible threshold limit of 5% prescribed under regulation 11(2) of the SEBI
(Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to
as "the Takeover Regulations, 1997"). Thus, it was prima facie observed that these acquisitions
had triggered the obligation to make public announcement in accordance with the provisions
of regulation 11(2) read with regulation 14(1) of Takeover Regulations, 1997 within 4 working
days from April 08, 2009.
4. Accordingly, a show cause notice dated June 11, 2014 (SCN) was issued to the promoter
group of the target company (hereinafter collectively referred to as "the noticees") calling
upon them to show cause as to why suitable directions under sections 11 and 11B of the
Securities and Exchange Board of India Act, 1992 and regulations 44 and 45 of the Takeover
Regulations, 1997 read with the corresponding provisions of regulations 32 and 35 of SEBI
(Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (the Takeover
Regulations, 2011) should not be issued against them for the alleged violations of regulation
11(2) read with regulation 14(1) of the Takeover Regulations, 1997.
5. Vide letter dated June 25, 2014, the noticees filed their reply to the SCN and inter alia
submitted that:
i.

The increase in their shareholding has been within 5% in every financial year, which is as
per rules. Therefore, they have not violated any provision of the law.
ii. Purchases made in one financial year cannot be clubbed with the purchases made in the
previous financial year. If all financial years are considered separately, their shareholding in
the target company has not increased by more than 5% in any financial year, as detailed
below:
Financial
Year
2008-09
2009-10
2010-11

No. of shares acquired

1,47,275
1,44,145
55,803

% of shares acquired
4.9%
4.8%
1.86%

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iii. In spite of the fact that the noticees had been extremely careful in their conduct, as can be
seen from their track record, if at all there is a lapse on the part of the noticees, the same
may be condoned as it is purely non-intentional and is only due to changing rules and
guidelines.
6. An opportunity of personal hearing was granted to the noticees on August 06, 2014. Mr.
Praveen Rastogi, Company Secretary appeared on the scheduled date on behalf of the
noticees and made submissions on the lines of their reply dated June 25, 2014. The noticees
were granted liberty to file written submissions within one week of the hearing. The noticees
filed their written submissions vide letter dated August 14, 2014. The submissions of the
noticees are inter alia as follows:
i.

ii.

iii.

iv.
v.
vi.

On April 08, 2009, the collective shareholding of the promoter group increased from
67.46% to 67.60% due to acquisition of 4000 shares by one of the promoters, namely, Mr.
Kamal Manchanda.
The acquisition of such 4000 shares was made through open market purchase in normal
segment on the stock exchange. As per regulation 11(2) of the Takeover Regulations,
1997, the additional purchase of 5% equity shares was allowed through normal market.
Their acquisitions were bona fide and in view of ambiguity with regard to application of
regulation 11(2), their acquisitions being within 5% in each financial year, they should be
given benefit of doubt and a lenient view should be taken in the facts and circumstances of
this case.
There was no change in control of the target company pursuant to the said acquisition.
Further, as per the Takeover Regulations, 2011, acquisitions up to 5% of shares are
allowed every financial year which was not in earlier regulations.
Mr. Kamal Manchanda and the target company had complied with the requisite
disclosures with respect to regulations 7(1), 7(1A), 7(3) of the Takeover Regulations, 1997
for the acquisitions in question.

7. I have considered the SCN, the oral and written submissions made on behalf of the noticees
and other relevant material available on record. I note that the acquisitions in question that
resulted in increase in collective shareholding of the noticees from 62.56% to 67.60% i.e.
more than 5% have not been disputed. In this regard, the noticees have submitted that their
acquisition in respective financial years i.e. 2008-09, 2009-10 and 2010-11 did not increase
beyond 5%. According to them, their acquisitions were bona fide and in view of ambiguity
with regard to application of regulation 11(2), their acquisitions being within 5% in each
financial year, they should be given benefit of doubt and a lenient view should be taken in the
facts and circumstances of this case.
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8. In order to deal with the charge and the above submissions of the noticees, it is necessary to
refer to background of second proviso of regulation 11(2) that was inserted therein vide
amendment dated October 30, 2008. It is noted that prior to this amendment, relevant
provisions of regulation 11 provided as under:"Consolidation of holdings
11. (1) No acquirer who, together with persons acting in concert with him, has acquired, in accordance
with the provisions of law, 15 per cent or more but less than fifty five per cent.(55%) of the shares or
voting rights in a company, shall acquire, either by himself or through or with persons acting in concert
with him, additional shares or voting rights entitling him to exercise more than 5% of the voting rights, in
any financial year ending on 31st March, unless such acquirer makes a public announcement to acquire
shares in accordance with the Regulations.
(2) No acquirer, who together with persons acting in concert with him holds, fifty five per cent. (55%) or
more but less than seventy five per cent. (75%) of the of the shares or voting rights in a target company,
shall acquire either by himself or through persons acting in concert with him any additional shares or
voting rights therein, unless he makes a public announcement to acquire shares in accordance with these
Regulations:
Provided that in a case where the target company had obtained listing of its shares by making an offer of
at least ten per cent. (10%) of issue size to the public in terms of clause (b) of sub-rule (2) of rule 19 of
the Securities Contracts (Regulation) Rules, 1957, or in terms of any relaxation granted from strict
enforcement of the said rule, this sub-regulation shall apply as if for the words and figures 'seventy five per
cent. (75%)', the words and figures 'ninety per cent. (90%)' were substituted."
9. In terms of the above regulation 11(1), an acquirer holding 15% or more but less than 55%
of the shares or voting rights in a target company, in which mandatory minimum public
shareholding limit was 25%, could acquire additional 5% shares or voting rights in any
financial year ending on 31st March. This acquisition of 5% in every financial year is
commonly called as 'creeping acquisition'. However, in terms of above provision of
regulation 11(2) an acquirer, holding 55% or more but less than 75% shares or voting rights
in such target company could acquire any additional shares or voting rights therein only by
way of an open offer by making a public announcement in accordance with the Takeover
Regulations, 1997. On harmonious construction of these two provisions, the provisions of
regulation 11(1) were being applied such that an acquirer holding less than 55% shares or
voting rights in a target company could not cross the threshold of 55% by way of 'creeping
acquisition' under regulation 11(1).

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10. On October 30, 2008, the Takeover Regulations, 1997 were amended vide SEBI (Substantial
Acquisition of Shares and Takeover Regulations) (Amendment) Regulations, 2008 whereby
another proviso was added in regulation 11(2) which provided as under:"Provided further that such acquirer may, without making a public announcement under these
Regulations, acquire, either by himself or through or with persons acting in concert with him, additional
shares or voting rights entitling him up to five per cent. (5%) voting rights in the target company subject
to the following:(i) the acquisition is made through open market purchase in normal segment on the stock exchange but
not through bulk deal /block deal/ negotiated deal/ preferential allotment; or the increase in the
shareholding or voting rights of the acquirer is pursuant to a buy back of shares by the target company;
(ii) the post acquisition shareholding of the acquirer together with persons acting concert with him shall
not increase beyond seventy five per cent.(75%)."
11. As per the language of this proviso, an acquirer holding 55% or more but less than 75% of
shares or voting right in a target company could acquire additional shares or voting rights
upto 5% without making a public announcement. This acquisition was, however, allowed
subject to the two conditions that - (a) the acquisition should be made through open market
purchase in normal segment on the stock exchange or it is pursuant to buy back of shares by
the target company; and (b) the post acquisition shareholding of the acquirer together with
PACs should not increase beyond 75%. It is relevant to mention here that this amendment
was brought in to provide 'creeping acquisition' up to 5% to persons holding above 55% but
below 75% shares or voting rights in a target company.
12. Following the above amendment, SEBI received several queries/informal guidance requests
regarding the applicability of the amended regulation 11(2) such as whether the acquisition
of 5% under amended regulation 11(2) is only an interim measure up to March 31, 2009,
whether it is only a one-time measure, whether shares can be acquired in several tranches,
whether 'creeping acquisition' of 5% under regulation 11(2) was available in every financial
year, etc. In view of such doubts and ambiguities, SEBI issued interpretative circular dated
August 06, 2009 under regulation 5 of the Takeover Regulations, 1997 for removal of
difficulties in interpretation of the second proviso to regulation 11(2). The said circular
provided as under:"SEBI has been receiving representations from market participants / listed companies with respect to the
interpretation of the proviso inserted by the aforesaid amendment. After examining these representations, it
is hereby clarified that
a) The acquisition, within the limit of five per cent (5%) under the second proviso to sub-regulation
(2) of regulation 11, may be made by an acquirer who, together with persons acting in concert

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with him, holds fifty five per cent (55 %) or more but less than seventy five per cent (75 %) of
the shares or voting rights in the target company ;
b) The acquirer together with persons acting in concert with him, holding shares or voting rights as
specified at (a) above, may acquire additional shares or voting rights upto a maximum of five
per cent (5 %) voting rights in the target company in one or more tranches, without any
restriction on the time-frame within which the same can be acquired;
c) The aforesaid acquisition of five per cent (5 %) shall be calculated by aggregating all purchases,
without netting the sales.
d) Consequent to such acquisition, the percentage of shareholding / voting rights of the acquirer,
together with persons acting in concert with him, in the target company, shall not increase beyond
seventy five per cent (75 %). This limit is applicable irrespective of the level of minimum public
shareholding required to be maintained by the target company in terms of clause 40A of the
Listing Agreement."
13. Thus, on and from August 06, 2009 the generally prevailing doubts and ambiguities were
removed and it was clarified that an acquirer who holds 55% or more but less than 75% of
the shares or voting rights in a target company could acquire additional shares or voting right
upto a maximum of 5% in a target company in one or more tranches without any restriction
on the time-frame without making a public announcement. Accordingly, an acquirer falling
under regulation 11(2) could not avail benefit of 'creeping acquisition' of 5% in every financial
year.
14. In this case, there is no dispute as to compliance with two conditions of the proviso of
regulation 11(2). Admittedly, the noticees held 55% shares in the target company before the
acquisition of 4.90% shares therein by the promoter during the financial year ending on
March 31, 2009. This acquisition was clearly exempted from obligation to make public
announcement as it was within 5% threshold in regulation 11(2).
15. I note that the collective shareholding of the noticees in the target company had increased
from 67.46% as on March 31, 2009 to 67.60% as on April 08, 2009, which resulted in
acquisition of more than 5% shareholding as per regulation 11(2). Admittedly, the persons
belonging to the promoter group of the target company had purchased 1,44,145 shares
constituting 4.8% of the share capital of the target company during the financial year ending
March 31, 2010. Pursuant to the same, the collective shareholding of the noticees in the
target company had increased from 67.46% to 72.26% as on March 31, 2010. Considering the
ambiguity prevailing till clarification was issued on August 06, 2009 and the fact that noticees
have not acquired more than 5% in the previous financial year, I give benefit of doubt to
them with regard to their acquisitions on or before August 06, 2009.

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16. I further note that as on August 06, 2009, the noticees collectively held 21,02,328 shares
(constituting 69.97% of shares capital) of the target company and one of the promoters, Mr.
Kamal Manchanda acquired additional 1,24,513 shares (4.14%) in the target company from
August 06, 2009 till December 31, 2010. These acquisitions were admittedly made when
doubts with regard to applicability of regulation 11(2) post the above amendment had already
been removed on August 06, 2009. Thus, they cannot feign ignorance about applicability of
regulation 11(2) as clarified by circular dated August 06, 2009 and cannot be given benefit of
doubt with regard to these acquisitions. Since these acquisitions were clearly in breach of
regulation 11(2), the consequences of this breach should follow. In this regard, I note the
Hon'ble SAT vide order dated September 08, 2011 in the matter of Nirvana Holdings Private
Limited vs. SEBI (Appeal no. 31/2011) observed as follows:
"It must be remembered that whenever an acquirer violates Regulation 10, 11 or 12 of the takeover code
by not making a public announcement, he should be directed to comply with the provision by making a
public offer. The words unless such acquirer makes a public announcement appearing in Regulations 10
and 11(1) make these provisions mandatory and a public announcement has to be made. Similar words
appear in Regulation 12 as well. These provisions make the acquisition conditional upon a public
announcement being made. The primary object of the takeover code is to provide an exit route to the public
shareholders when there is substantial acquisition of shares or a takeover. This right to exit is an
invaluable right and the shareholders cannot be deprived of this right lightly. It is only when larger interest
of investor protection or that of the securities market demands that this right could be taken away.
Therefore, as a normal rule, a direction to make a public announcement to acquire shares of the target
company should issue to an acquirer who fails to do that. The Board need not give reasons as to why such a
direction is being issued because that is the mandate of Regulations 10, 11 and 12. However, if the
issuance of such a direction is not in the interest of the securities market or for the protection of interest of
investors, the Board may deviate from the normal rule and issue any other direction as envisaged in
Regulation 44 of the takeover code. In that event, the Board should record reasons for deviation."
17. I note that regulation 44 read with regulation 45 of the Takeover Regulations, 1997 provided
for consequences of breach thereof. The guiding principles for the directions as provided in
these regulations are the interest of the investors and securities market which are the statutory
guiding principles as inbuilt in the SEBI Act and the Takeover Regulations, 1997.
18. It is important to mention here that I have already given the benefit of doubt in respect of all
the acquisitions prior to August 6, 2009. However, since the noticees were collectively
holding more than the threshold of 55% stipulated in regulation 11(2) as on August 6, 2009
(i.e. (69.97% ), an acquisition of even a single share would have triggered the open offer
requirement under regulation 11(2). Thus, when Mr. Kamal Manchanda acquired 2900 shares
(0.097% of the share capital) on August 25, 2009, the noticees collectively triggered the
requirement to make an open offer under regulation 11(2) and were therefore required to
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make a public announcement within 4 days from August 25, 2009. In the facts and
circumstances of the present case discussed hereinabove, I do not find any reason to deviate
from the normal rule to make a public announcement to acquire shares of the target
company in accordance with the provisions of Takeover Regulations, 1997, and issue any
other direction as envisaged in regulation 44.
19. I note that had the noticees made the public announcement within a period of 4 days from
August 25, 2009 in accordance with the Takeover Regulations, 1997 and complied with all
related activities within the timelines specified therein, all formalities with respect to their
public announcement and the open offer would have been completed on November 30,
2009. Therefore, I am of the view that since the public announcement now would provide a
delayed exit opportunity to the shareholders of the target company, the noticees should pay
interest on the consideration amount to the shareholders who tender their shares in the open
offer and who are eligible for interest as per law.
20. Considering the above, I, in exercise of powers conferred upon me under sections 11, 11B
read with section 19 of the SEBI Act and regulation 44 and 45 of the Takeover Regulations,
1997 read with regulations 32 and 35 of the Takeover Regulations, 2011, hereby issue the
following directions:
a) The noticees shall make a public announcement to acquire shares of the target company in
accordance with the provisions of the Takeover Regulations, 1997, within a period of 45
days from the date of this order;
b) The noticees shall, alongwith the consideration amount, pay interest at the rate of 10% per
annum from December 01, 2009 to the date of payment of consideration, to the
shareholders who were holding shares in the target company on the date of violation and
whose shares are accepted in the open offer, after adjustment of dividend paid, if any.
21. This order shall come into force with immediate effect. A copy of this order shall be served
upon the noticees for ensuring compliance with the above directions

Sd/DATE: January 21st , 2015

PLACE: MUMBAI

RAJEEV KUMAR AGARWAL

WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA

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