WTM/PS/139/CFD/JAN/2016

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

CORAM: PRASHANT SARAN, WHOLE TIME MEMBER
ORDER
Under Sections 11(1), 11(2)(j), 11(4) and 11B of the Securities and Exchange Board of
India Act, 1992 read with section 12A of the Securities Contracts (Regulation) Act, 1956
in the matter of non-compliance with the requirement of minimum public
shareholding by listed companies
In respect of Herman Milkfoods Limited

1.

Securities and Exchange Board of India (hereinafter referred to as SEBI) had passed
an interim order dated June 04, 2013 (hereinafter referred to as the interim order) with
respect to 105 listed companies who did not comply with the Minimum Public
Shareholding (MPS) norms as stipulated under rules 19(2)(b) and 19A of the
Securities Contracts (Regulation) Rules, 1957 (hereinafter referred to as SCRR) within
the due date i.e., June 03, 2013. The interim order was passed without prejudice to the
right of SEBI to take any other action, against the non-compliant companies, their
promoters and/or directors or issuing such directions in accordance with law. The
interim order was to be treated as a show cause notice by those companies for action
contemplated in paragraph 18 thereof.

2.

Herman Milkfoods Limited (hereinafter referred to as the Company) is one such

company against whom the interim order was passed. The equity shares of the
Company are listed on the Bombay Stock Exchange Limited (BSE). The scrip of the
Company is suspended for trading.

3.

The Company vide its letter dated June 22, 2013, replied to the interim order and
submitted its shareholding pattern as on March 31, 2013. The Company in its letter
also referred to an Order of the Company Law Board, New Delhi, dated February 21,
2013, in the matter of IFCI Limited Vs. Herman Milkfoods Limited wherein the
Company Law Board had directed the Company to maintain status quo on the fixed

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assets and shareholding as on the date of order till next date of hearing i.e. April 01,
2013.
4.

Before proceeding further, an opportunity of personal hearing was afforded to the

Company on July 01, 2015, which was later rescheduled to July 08, 2015. Mr. Ravinder
Garg, the director of the Company vide his e-mails dated June 23, 2015 and July 07,
2015, expressed his inability to attend the personal hearing on the date fixed due to
certain medical reasons. Mr. Ravinder Garg also filed the written submissions dated
June 23, 2015, on behalf of the Company, while stating that the Company is
maintaining MPS of 25% as per the listing agreement and requested that its name be
excluded from the list of companies which have not complied with the requirement
of maintaining MPS requirements. Along with the written submissions, the Company
also submitted a copy of the Order of the Company Law Board, New Delhi, dated
August 13, 2014. The said order states that the status quo order dated February 21,
2013, is subject to the decision of SEBI, if any, over the shareholding pattern of the
Company. Mr. Ravinder Garg, the director of the Company later vide his another email dated July 16, 2015, requested to adjourn the personal hearing for four weeks.

5.

Considering the request, another opportunity of personal hearing was granted to the
Company on August 17, 2015. On the date fixed, the Company failed to turn up for
the personal hearing. As the Company had claimed that the public shareholding is
maintained at 25% and no information regarding the procedure followed by it for
compliance with MPS requirements was available on record, SEBI vide an e-mail dated
September 09, 2015, advised the Company to submit the details regarding the date and
manner in which the promoter shareholding was reduced to 66.67% along with the
supporting documents. However, no reply was received from the Company. In view
of the same, it is considered that further opportunities to the Company to file reply/
personal hearing would not be required. Accordingly, I proceed to decide the matter
on merits on the basis of the material available on record.

6.

While proceeding further, I have considered the interim order passed in the matter
against the Company, its promoters and directors and the submissions made. The
interim order was issued against the Company as it had failed to maintain the MPS of

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25% as mandated under Rule 19A of the SCRR and Clause 40A of the Listing
Agreement read with section 21 of the Securities Contract (Regulation) Act, 1956
(SCRA). As per the shareholding pattern of the Company for the quarter ended
March 2013 (available at the BSE website), the promoters had held 93.47% and the
public had held 6.53%. The Company was therefore in violation of the MPS
requirements.
7.

The Company in its submissions has stated that it is maintaining the MPS of 25% as
per the listing agreement and requested that its name be excluded from the list of
companies which have not complied with the MPS requirements. In this regard, the
shareholding pattern of the Company for the quarter ended June 2013 is perused and
from the same, it is noted that the promoters held 66.97% and the public held 33.03%.
From the BSE website, it is seen that the Company has maintained the same
shareholding pattern till December 2014, which is the latest shareholding pattern
available.

8.

I note that the Company has not submitted anything to show as to how the promoters
shareholding was brought down to 66.97% in the quarter ended June 2013, despite
being asked. For proceeding further, the shareholding pattern for the quarter ended
March 2013 and June 2013 have been analysed and from the same following is noted:
Quarter
Promoter No. of shareholders
Number of shares
Percentage holding
Public
No. of shareholders
Number of shares
Percentage holding

March 2013
103
92,18,000
93.47
13,749
6,44,220
6.53

June 2013
81
66,04,386
66.97
13,759
32,57,834
33.03

It is noted that the promoters shareholding had reduced by 26,13,614 shares during
the quarters of March 2013 and June 2013. However, no announcements or
disclosures were made by the Company, in this regard. It is also seen that the details
regarding the promoters and promoter group is not available on the BSE website. The
Company vide its letter dated June 23, 2015, has submitted the details of the promoters
for the quarter ended March 31, 2013, according to which the number of promoters

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are 81. However, in the absence of any other detail and reply from the Company, it is
difficult to verify the procedure adopted by the Company for complying with the MPS
requirements.
9.

Considering the facts and circumstances of the case, it is clear that the Company had
the responsibility to comply with the MPS requirement by adopting the methods
available to it. The absence of any submissions and announcements/ disclosures, raises
serious doubt on the method of compliance with the MPS requirements by the
Company. In view of the same, it is necessary for SEBI, to confirm the directions
issued vide the interim order against the Company, its directors and promoters/
promoter group. Further, for proper regulation of the securities market, SEBI may
also initiate other action, as appropriate in law, against the Company, its directors and
promoters.

10.

Accordingly, I, in exercise of the powers conferred upon me under Section 19 of the

Securities and Exchange Board of India Act, 1992 read with Sections 11(1), 11(2)(j),
11(4) and 11B thereof and Section 12A of the Securities Contracts (Regulation) Act,
1956, hereby confirm the directions issued vide the interim order dated June 04, 2013
against the company, Herman Milkfoods Limited, its directors, promoters and
promoter group.

11.

Copy of this Order shall be served on the stock exchanges and depositories for their
information and action that may deem fit and necessary in this case.

Date: January 20th, 2016

Place: Mumbai

PRASHANT SARAN
WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA

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