WTM/PS/46 /CFD/NOV/2014

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

CORAM : PRASHANT SARAN, WHOLE TIME MEMBER
DECISION
On the Representation dated January 16, 2012 filed by Mr. Amit Bhagvatprasad Barot
Proceedings in compliance with the directions of the Hon'ble Securities Appellate
Tribunal made vide Order dated September 03, 2013 in the matter of Amit Bhagvatprasad
Barot vs. Securities and Exchange Board of India (Appeal No. 157 of 2012)

1.

The instant proceeding is in compliance with the directions of the Hon'ble Securities

Appellate Tribunal (hereinafter referred to as "the Hon'ble SAT") made vide Order dated
September 03, 2013 in Appeal No. 157 of 2012 (Amit Bhagvatprasad Barot vs. Securities and Exchange
Board of India). Vide the Order, the Hon'ble SAT, inter alia observed and directed the Securities
and Exchange Board of India (hereinafter referred to as "the SEBI") as follows :
" We set aside impugned order dated 8th June, 2012 and direct SEBI to reconsider complaint of
appellant dated 16th January, 2012 afresh and pass appropriate orders as it deems fit. We make it clear that we
have not expressed any opinion on merits of the case." {Emphasis supplied}
2.

Background of the matter :

As the said application made by Mr. Amit Bhagvatprasad Barot is with respect to an open
offer made to acquire shares of the Target Company, Global Offshore Services Limited, it is
necessary to note the facts of the said open offer and the subsequent events before dealing with
the application :
(a)

On November 6, 2007, India Star (Mauritius) Limited (hereinafter referred to as "the

Acquirer"), a public shareholder of Global Offshore Services Limited (previously known as

"Garware Offshore Services Limited") {hereinafter referred to a "Target Company"}, acquired
22,72,727 equity shares representing 9.54% of the paid up equity share capital of the Target
Company, through conversion of 25,00,000 Unsecured Optionally Convertible Debentures ("the

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OCDs"). This acquisition resulted in the increase in the shareholding of the Acquirer from
12.07% to 20.42% of the paid-up voting equity share capital of the Target Company triggering
regulation 10 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997
("the Takeover Regulations").
(b)

Accordingly, the Acquirer, through HSBC Securities and Capital Markets Private

Limited ("the Merchant Banker") made an open offer vide Public Announcement dated
November 07, 2007 to acquire 20% of the share capital of the Target Company. The offer
opened on March 19, 2008 and closed on April 07, 2008. From the Post-offer Public
Announcement made on May 26, 2008, the following is inter alia noted :
Offer price per equity share

`234.67/- including interest of `4.67/-

Shares acquired in the open offer

23,98,201 shares (10.06%)

Size of the offer (20% of voting capital)

`56.28 crores

Post offer shareholding of the Acquirer

72,60,928 shares (30.48%)

(c)

Complaint filed by Mr. Amit Bhagvatprasad Barot :

After almost 4 years, one Mr. Amit Bhagvatprasad Barot (hereinafter referred to as the
"applicant" or "complainant"), through M/s. Prism Partners, Advocates, filed a representation
dated January 16, 2012, inter alia stating the following :
(i)

The applicant is a shareholder in the Target Company and has been holding 1,560 equity

shares, before, during and after the Open Offer made by the Acquirer. He did not tender the
equity shares in the Open Offer.
(ii)

The applicant came across a press release dated August 16, 2011, in which it has been

stated that Sycamore Ventures and IFCI Limited, one of India's premier financial institutions,
have agreed to jointly launch the "IFCI-Sycamore Infrastructure Fund".

On a review of the

information available, it has come to light for the first time that Sycamore Ventures is actually
the beneficial owner of the equity shares held in the Target Company through the Acquirer. A
copy of the press release dated August 16, 2011 was enclosed.

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(iii)

The Acquirer and the Manager to the Open Offer did not make full disclosures as

required under the Takeover Regulations and on the contrary have withheld material
information, which resulted in projecting a clean image of the Acquirer because of which many
investors like the applicant took a decision not to tender their equity shares in the Open Offer.
Had the Acquirer and the Manager disclosed true and correct information, which were required
to be disclosed in the Letter of Offer ("the LOF"), the decision of the Acquirer would have been
different.
(iv)

The applicant referred to the disclosures made in paragraphs 2.1 (a) i) {Background of the

offer}and also paragraph 3 (b) a) & b) of the LOF and contended as follows :
Contentions :
(1)

The Acquirer and the Manager failed to make disclosure of the material information with

regard to the background of the Acquirer as required in the standard LOF format stipulated by
SEBI vide Circular dated March 08, 2004. In terms of paragraph 4 of the said SEBI Circular, it is
stated that in relation to the background of the acquirer, disclosures pertaining to the
identification of the promoters and or persons having control over such companies and the
group, if any, to which such companies belong to, should be disclosed. The relevant extract of the
said SEBI Circular was referred to :
" 4 Background of the Acquirer
.
4.1 If acquirer(s) (including PACs) is a company
..
4.1.4 Brief history and major areas of operation
4.1.5 Identity of the promoters and or persons having control over such companies and the group if any, to which
such companies belong to."
(2)

Sycamore Ventures, at the time of the Open Offer, was and continues to be in control of

the Acquirer as evidenced by the following facts :

(i) As per the date available on the website of "trademarkia.com", which is a search engine
for United States trademark, it is found that "indiaStar" is a mark owned and registered

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by Sycamore Management Corporation located in Princeton, New Jersey. Copy of the

above data was enclosed.
(ii) On a perusal of the information available on the website of Sycamore Ventures, it is
found that 'indiaStar Fund' is one of the funds of Sycamore Ventures and the Acquirer
was in fact controlled by Sycamore Ventures. Copy of the data was enclosed.
(3)

However, the fact that Sycamore Ventures was controlling the Acquirer, was not

disclosed and the consequential disclosures pertaining to Sycamore Ventures including their track
record, litigations etc were also avoided.
(4)

In the absence of the material information on beneficial owners and persons and the

group that is actually in control of the equity shares and voting rights of the Target Company, the
intentions of the Acquirer and the persons in control of the Acquirer, their investment
philosophy, intention to control the management and policy decisions and whether they support
the board of directors through their international experience or whether they are in joint control
with the promoters were not known. In the absence of this material information, there was an
intention to wilfully mislead the shareholders and hence an informed decision could not have
been taken on the impugned open offer made by the Acquirer.
(5)

The correct background of one of the directors of the Acquirer i.e., Mr. Ravi Pratap

Singh, was deliberately withheld. As per the LOF, the experience of Mr. Ravi Pratap Singh is
disclosed as under :
"Ravi Singh is a partner with Sycamore Ventures. Over the course of his 25 year career, he has structured and led
numerous public and private financings, mergers and acquisitions and global investments. In the past he held
successive positions as a Manager with Coopers and Lybrand in New York (now Pricewaterhouse Coopers,
General Partner and Managing Director at Cowen & Company (now SG Cowen) ; Managing Director of
Forbes and Walker, a New York Merchant banking firm; Partner, Managing Director and Head of Technology
Investment Banking at Punk, Ziegel & Company and Founding Partner of Converge Partners LLC, a New
York based investment advisory firm."
However, according to the applicant, the following facts about Ravi Pratap Singh, who is in fact
responsible for the Acquirer (as per the information of Sycamore Ventures itself refers to Exhibit 6 of the
application) have been deliberately withheld:

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(i)

Mr. Singh's experience in Silverline Technology Limited ("Silverline") is disclosed

in other reports, whereas it has been withheld from the LOF with ulterior motives, as
his association with Silverline would raise the 'antennae' in the minds of the
shareholders and SEBI in view of the dubious track record of Silverline and its
association with the securities scam.

(ii)

There were law suits for negligent misrepresentation, fraudulent misrepresentation

and securities laws violations by Sera Nova (a company taken over by Silverline) and the
promoters of Sera Nova including Mr. Ravi Pratap Singh.

(iii)

Dahava Resources Limited of which Mr. Ravi Pratap Singh was the CEO had
violated securities laws and a "Cease Trade Order" was passed by the Canadian
regulators.

(6)

The omission/withholding of the above information were deliberate and with ulterior

motives, as the LOF itself was signed by Ravi Pratap Singh as Managing Director of the
Acquirer.
(7)

The Acquirer and its Managing Director Mr. Ravi Pratap Singh have committed a 'fraud'

in that, there has been a 'concealment of material fact in order that another person may act to his
detriment'; 'an active concealment of a fact by a person having knowledge or belief of the fact' ;
'deceptive behaviour by a person depriving another of informed consent or full participation' and
hence they have also violated the provisions of the SEBI (Prohibition of Fraudulent and Unfair
Trade Practices Relating to Securities Market) Regulations, 2003 ("the PFUTP Regulations") and
the Securities and Exchange Board of India Act, 1992 ("the SEBI Act").
Remedies sought by the applicant :
(i)

As a shareholder, the applicant has a statutory right to true and adequate disclosure to

make an informed decision. This statutory right has been violated by the Acquirer with ulterior
motives and hence the applicant is entitled to a status quo ante vis--vis the Open Offer.
(ii)

The withholding of the material information had a critical impact on the decisions of the

shareholders, as against the offer of 20% in the Open Offer, the Acquirer could garner only
10.06% of the equity shares, thus leaving the Open Offer under subscribed. Had true and

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adequate disclosures been made, the outcome could have been different, particularly the fact that
the Managing Director of the Acquirer, Mr. Ravi Pratap Singh was associated with Silverline
which was a so called "K-10 stocks" and was involved in the Ketan Parekh scam.
(iii)

The Acquirer has employed and devised a scheme and artifice to defraud the

shareholders of the Target Company while dealing in its securities. It has also engaged itself in
an act and practice to defraud and deceive the shareholders of the Target Company.

In

consideration of the facts and circumstances mentioned above, it is contended that the Acquirer
is in violation of regulation.
(iv)

In view of facts and circumstances, the applicant requested SEBI to

(i) Order the Acquirer to make another open offer and provide an opportunity to the
shareholders to take an informed decision whether to tender or not to tender their equity
shares.
(ii) Such offer be directed to be made by the Acquirer at the same price paid to the
shareholders in the impugned Open Offer plus interest from the due date of payment in
the impugned offer to the date of payment at the rate decided by SEBI.
(iii) Take punitive action against the Acquirer and its director including Mr. Ravi Pratap
Singh, the Managing Director.
(iv) Direct the Acquirer not to transfer, alienate or otherwise dispose of its shareholding in
the Target Company until the matter is reviewed by SEBI and orders are passed, as the
applicant apprehends that they may sell off their shareholding and avoid actions by SEBI,
which would be highly prejudicial to the interests of the applicant
(v) Pass such additional orders against the Acquirer and its directors, as SEBI may deem fit.
3.

SEBI had also received several other complaints in the matter. The complaints were

examined and vide SEBI letter dated June 08, 2012, addressed to the complainants including the
applicant, SEBI inter alia replied that ".. it is disclosed at Para 3(g) of the Letter of Offer that the Acquirer is a privately held limited liability
company and is a wholly owned subsidiary of indiaSTAR Fund L.P., a limited partnership. Further, the

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fact regarding association of Mr. Ravi Pratap Singh, one of the directors of the board of directors of the target
company, with Sycamore Venture has been disclosed at Para 3(f) of the Letter of Offer.
3.

In view of the above, there appears that the acquirer has not violated any of the provisions of SEBI (SAST)
Regulations, 1997 as alleged by the complainants. Hence, the question of SEBI giving any further directions
to the Acquirer does not arise."

4.

The applicant filed an appeal before the Hon'ble Securities Appellate Tribunal in Appeal

No. 157 of 2012 challenging the aforesaid reply of SEBI, which was disposed off by the Hon'ble
SAT vide Order dated September 03, 2013, wherein the Hon'ble SAT had directed SEBI to
reconsider the applicant's representation and pass fresh orders. This Order of the Hon'ble SAT
has been mentioned in paragraph 1 above.
5.

Thereafter, the applicant through his counsel, forwarded another letter dated September

12, 2013 inter alia stating the following :

(i)

The allegations made and irregularities committed by the Acquirer i.e., India Star

(Mauritius) Limited are the ones which the applicant had noticed till the date of his complaint
dated January 16, 2012. However, in the reply (to the appeal of the applicant) filed by the
Acquirer, new disclosures were made, which proved the extent to which the Acquirer had
suppressed information from the shareholders of the target Company while making the open
offer.
(ii)

The new disclosures which the Acquirer made in its Affidavit before the Hon'ble SAT are

as under :
(a)

IndiaStar Fund LP ("ISLP"), the partnership firm which owns 100% of the

Acquirer is itself a 'pooling vehicle' and the Acquirer is a "special purpose vehicle".
(b)

The actual owners of the funds for the purchase of the shares of the Target

Company were other investors of ISLP from various countries and such investors are the
'limited partners' of ISLP and the investment in the shares was made on their behalf and
they are the 'principal beneficiaries' thereof. However, even now, the identity of such
'limited partners' who are admitted to be the actual beneficiaries is still not disclosed.
(c)

The funds contributed by the 'limited partners' have been invested by the 'general

partners' for the purchase of shares of the Target Company. However, even now, the
identity of such general partners is still not disclosed.
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(d)

ISLP is administered, managed and supervised by the Sycamore Management

Corporation and pursuant to some agreement dated March 13, 2006.

(iii)

Though the applicant asked for a copy of the agreement (pursuant to which ISPL is

administered, managed and supervised by Sycamore Management Corporation), the Acquirer

refused to disclose such agreement. The Acquirer continues to suppress this information.
(iv)

None of the obviously relevant facts have been disclosed in the LOF. Even now the true

identity of the beneficial owners of the Acquirer and the investment in the Target Company has
not been disclosed and the identity of the 'persons having control over such companies' has not
been disclosed as required by clause 4.1.5 of SEBI's circular dated March 08, 2004. Ex-facie this is
a gross and wilful suppression.
(v)

What is ex-facie evident from the aforesaid is the deep and pervasive control of Sycamore

group over the Acquirer and ISLP. As stated, the Acquirer, in its affidavit before the Hon'ble
SAT, has admitted that Sycamore Management Corporation is actually in management and
supervision of ISLP. ISLP 100% owns and controls the Acquirer. Sycamore Venture claims that
IndiaStar Fund is its investment and is within its portfolio. Sycamore Management Corporation
owns the name/trademark "IndiaStar Fund". The LOF does disclose that the Acquirer's director
Mr. John Whitman is a Managing Partner of "SMC" (now disclosed as Sycamore Management
Corporation) and that the director, Ravi Pratap Singh is a partner of Sycamore Ventures and that
director David Lichtenstein is the CFO of Sycamore Ventures. The Acquirer is beyond doubt a
part of the "Sycamore Group" but this was never disclosed in the LOF in violation of Clause
4.1.5 of the aforesaid SEBI Circular.
(vi)

In its affidavit, the Acquirer while admitting that one Richard Chong was an employee of

Sycamore Management Corporation, and that he is being investigated by the authorities in the
USA for money laundering offences, it is stated that Sycamore Ventures/Sycamore Management
Corporation is not involved in the same. However, the report of the Permanent Sub-Committee
on Investigations of the United States Senate, which deals with the said money laundering
allegations does contain references to Sycamore Ventures and Mr. Chong's transfer of funds to
Sycamore Venture Capital LP, in which Mr. Chong was a partner.

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(vii)

There was gross, wilful and fraudulent suppression in the LOF. The complete relevant

facts were not disclosed as required by the Takeover Regulations and the aforesaid SEBI
Circular. New additional highly relevant facts have been disclosed by the Acquirer only now.
(viii)

In view of the above mentioned circumstances, SEBI should consider the new

disclosures now made by the Acquirer for the first time (which were not disclosed in the LOF),
while passing fresh orders.
(ix)

The suppression of information by the Acquirer in the open offer had a critical impact on

the decisions of shareholders, whether to tender their shares in the Open Offer. Therefore, in the
interest of justice and equity, the applicant requested SEBI to direct the Acquirer to make a fresh
open offer and provide an opportunity to shareholders to take an informed decision whether to
tender its shares or not in the fresh open offer.
(x)

It is also relevant for SEBI to note that as per the Economic Times Newspaper dated

May 13, 2013, it is noted that Germany's DVB Bank is in advanced talks with the Acquirer to
purchase 20% stake in Target Company(GOSL). It is therefore clear that Acquirer is making
efforts to exit its holding in GOSL and if such exit happens, the prayer made by the applicant
would become infructuous. SEBI may therefore pass appropriate orders against the Acquirer
restraining it from exiting GOSL.
6.

Thereafter, vide letter dated October 14, 2013, the applicant through his counsel

requested SEBI to inform him regarding the status of his complaint and whether any steps were
taken to restrain the Acquirer from exiting the Target Company.
7.

The Merchant Banker, HSBC Securities and Capital Markets (India) Private Limited, vide

letter dated October 28, 2013 (this reply was in respect of the SEBI letter dated September 18, 2013
enclosing complaints received from certain shareholders (including the applicant) of the Target Company against the
Acquirer) inter alia stated the following :
A.

Nature of the acquisition :

(i)

The stake of the Acquirer in the Target company was primarily in the nature of financial

investment and not held with the intent to control the management or policy decision of the
target company (as disclosed in paragraph 2.1(a) of the letter of offer) and accordingly the offer
was made under Regulation 10 of the Takeover Regulations and not under Regulation 12 even
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though the acquirer would be the single largest shareholder of the target company pursuant to
the open offer.
(ii)

As disclosed in paragraphs 2.1(a) and 5(m) of the letter of offer, the acquirer did not have

any representation on the Board of the target company and did not intend to appoint its
representatives on the Board of Directors of the Target company in the future.
(iii)

The acquirer shareholding of the Target Company is classified as public for the quarter

ended September 2013 as per disclosures made by the Target Company to the BSE.
B.

Due Diligence

(i)

It has complied with the disclosure requirements and specifically the requirements

notified by SEBI to merchant bankers vide

SEBI circular dated March 8, 2004.

The

requirements imposed by SEBI inter alia require disclosure of the acquirer the brief history and
major areas of operation, identity of the promoters and the group to which the companies
belong. Para 3 of the letter of offer contains all necessary disclosure in this regard.
(ii)

For the disclosures made in the letter of offer, it had relied on the information provided

by the acquirer in response to a request for such disclosure made by it.

(iii)

As per the standard practice it obtained information and certificates from the acquirer in

relation to the information provided by the acquirer in the letter of offer. The last page of the
letter of offer conclusively establishes that

the onus of correctness and accuracy of the

information provided to the manager to an open offer is on the acquirer.

(iv)

As disclosed in the letter of offer (paragraph 3(b) the Acquirer was 100% owned by

IndiaSTAR Fund L.P. (ISLP or IndiaStar Fund), a limited liability partnership. ISLP is a fund
established to make equity and equity linked investments in growth companies with significant
interest in the Indian Subcontinent. This fund therefore an independent fund which has been
established to make investments in India. The Acquirer acts as an investment holding company
for IndiaSTAR Fund for all investments undertaken by the said fund. The ownership of the
trade mark (as alleged in the additional representation dated September 12, 2013) does not demonstrate
control by Sycamore.

The practice in open offers does not mandate the disclosures of all

entities up the chain. Such disclosures of the holding companies are made typically when the
acquirer in question is being funded by such holding companies or is otherwise relying on the
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financial wherewithal of such holding company which was not the case with respect to this open
offer. Therefore, disclosures regarding the acquirer and immediate parent were considered
sufficient to meet the disclosure requirements under the Takeover Regulations.
(v)

Further, as disclosed to SEBI vide letter dated January 30, 2008, it had provided the

following additional details on IndiaSTAR Fund.

"IndiaStar Fund L P is professionally managed broad based fund registering in the Cayman Islands as an
exempted limited partnership (the 'Fund" or the "Partnership"). The fund invests in growth companies with
potential for significant value appreciation utilizing a private equity discipline. IndiaStar Partner LP is registered
as the General Partner of the Partnership. In addition, the partnership has 38 limited partners, comprised of the
institutions, insurance companies, trusts and foundations and high net worth foreign individuals, principally based
in the US and Japan.
The Agreement of Limited Partnership between Indiastar Partners LP as the General Partner and 38 limited
partners of the Partnership states that "The limited partners shall take no part in the control or management of
the business or affairs of the Partnership nor shall the limited partners have any authority to act for or on behalf of
the Partnership or otherwise in respect of Partnership matters". Accordingly, Indiastar Partners LP, as the
General Partner of the Fund, has complete authority and responsibility for the management of Indiastar Partner
LP (should be read as 'IndiaStar Fund LP', as informed by the Merchant Banker). The sole general partner of
Indiastar Partner LP is Sycamore Management Corporation, 845 Alexander Road, Princeton, NJ 08540,
USA, a highly reputable professional investment management firm (SMC). Furthermore SMC has formed and
authorised an Investment Committee comprised of three members to manage all of the investment activities and
business matters of the fund".
(vi)

In addition to the disclosures made by the acquirer, an independent due diligence was

conducted on the acquirer, its directors including Mr. Ravi Pratap Singh. The same was done for
ascertaining whether there is any adverse information which ought to be disclosed in the letter of
offer.
(vii)

For carrying out such due diligence it utilised a system which involves carrying out a

search on an online database known as World Check. World Check creates and maintains a
database of heightened risk individuals and organisations. This database is used by organisations
around the world to help identify and manage financial, regulatory and reputational risks. Based

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on statistics, World Check provides practical intelligence for informed decision making, useful
for mergers and acquisitions, security of supply chain, cross border expansion and exploration
and production. It reports deliver a detail background check on any entity or individual no matter
where they are located in the world.
(viii)

Like in all cases, HSBC Securities being the manager to the open offer in the present case

also conducted a background check on the acquirer and its directors. The search did not reveal
any adverse information against the acquirer and Mr. Ravi Pratap Singh. Even now if the search
is conducted on the said names, no adverse results are available.
(ix)

It has therefore, taken such necessary steps within its control to ensure and prevent any

non disclosure in the letter of offer. Thus HSBC Securities is not and cannot be held liable for
the alleged non disclosures purportedly made in the letter of offer as alleged or at all.
(x)

With respect to the non disclosure of pending litigation against acquirer and Mr. Ravi

Pratap Singh in the letter of offer, it stated that as disclosed in the paragraph 3 of the letter of
offer, the acquirer had confirmed that there are no pending litigations. It further reiterated that
the acquirer was not in control of the target company. Accordingly, the offer was not made
under Regulation 12 of the Takeover Regulations. Moreover the acquirer was a financial acquirer
and therefore could not control or decide the manner in which the target company was to be run.
This disclosure along with the Acquirer's investment objective has been clearly set out in the
letter of offer.
(xi)

As regards the allegations that certain details regarding Mr. Ravi Pratap Singh, a director

on the Board of Directors of the acquirer, were not adequately disclosed in the letter of offer, it
was submitted that even if such association were to be true, Mr. Ravi Pratap Singh is just one of
the directors of the Board of Directors of the acquirers. The Board of Directors of the acquirer
consists of a number of distinguished personnel and the antecedents of one such member are in
no event reflective of the acquirer or the indiaSTAR Fund.
(xii)

Even otherwise, the association of one of the directors of the acquirer with companies

that have faced lawsuits is to be seen in the context of the fact that the acquirer is not in control
of the management of the target company and is only a financial investor. Therefore, even if it
were to be assumed (though not admitted) that the allegations made by the applicant regarding
Mr. Ravi Pratap Singh are true, there is nothing to indicate such association could or has had any
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adverse impact on the target company, as the acquirer is not in control of the target company and
is only a shareholder.
(xiii)

Further, SEBI does not warrant that any litigation against the directors of the acquirer be

disclosed for an open offer made in terms of Regulation 10 of the Takeover Regulations. In
terms of the SEBI circular, pending litigation matters of the acquirer is required to be disclosed
in the instances where the acquirer is a listed company.
8.

The Acquirer, also made its response, through its Advocate, vide letter dated January 30,

2014 forwarded by the Merchant banker (HSBC Securities) through an email dated February 03,
2014. The following were inter alia its submissions :
(a)

The Acquirer denied each of the allegations made by the applicant, as being erroneous in
law and fact.

(b)

The "new disclosure" made in its affidavit in reply dated January 21, 2013 filed before the
Hon'ble SAT were made specifically to counter and refute the unsubstantiated allegation
made by the complainant in his appeal dated January 21, 2013. The new disclosure made
to refute those allegations, have no bearing or relevance whatsoever to the open offer
and were not required under the Takeover Regulations to be disclosed in the LOF.

(c)

The Acquirer had provided and disclosed all relevant information in the LOF as required
by the Takeover Regulations.

The Acquirer's transparency in responding to the

allegations made in the Appeal cannot remotely be interpreted, as is being sought by the
applicant, to be an admission by the Acquirer that the so called 'new disclosures' were
required to have been made in the LOF.
(d)

The Complainant has, right from the outset, been seeking to abuse and manipulate SEBI
and the Hon'ble SAT to further his own unjust enrichment. The complainant has 'lied' on
record that he owned 1,560 equity shares in Target Company "before, during, and after
the open offer". An inspection of Target Company's shareholding records clearly
established that the Complainant held 4,200 equity shares as on the date of the Public
Announcement and held 1,560 equity shares throughout the period of open offer. The
data revealed that the complainant actually sold 2640 equity shares of Target Company
after the PA was made on November 07, 2007. Even subsequent to the open offer the
Complainant periodically traded in shares of Target Company on the stock exchange, and
his holding at a certain point went down to as low as 72 equity shares (on October 10,
2008). Details of the transaction history of the Complainant is as follows
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Date

Number of Shares
Purchase

Sale

17.11.2006

50

50

28.11.2006

650

700

23.01.2007

2500

3200

19.10.2007

1000

4200

16.11.2007

200

4000

23.11.2007

50

4050

14.12.2007

10

4060

25.01.2008

800

3260

08.02.2008

1200

2030

22.02.2008

500

1560

06.06.2008

200

1360

22.08.2008

464

1824

29.08.2008

448

2272

26.09.2008

1000

1272

30.09.2008

500

772

10.10.2008

700

72

04.12.2009

700

772

31.03.2009

471

1243

09.04.2010

271

1514

30.04.2010

570

2084

07.05.2010

(e)

Balance

2000

84

06.05.2011

2000

2084

03.06.2011

1500

3584

The LoF clearly disclosed in page 8 paragraph 3(b) that the Acquirer is a wholly owned
subsidiary of IndiaStar Fund L.P. (ISLP), a limited partnership incorporated under the
laws of Cayman Islands. The LoF further disclosed that the Acquirer acts as an
investment holding company for the investments undertaken by ISLP and that ISLP is
principally engaged in the business of investing in equity and equity linked investments.

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Hence, the disclosures in the LoF make it abundantly clear that ISLP is a limited
partnership which makes equity linked investments, which has several limited partners as
is customary in any fund or investment company.
(f)

It is fairly common and customary structure for investment funds to be set up as limited
partnerships which receive investment from various investors who in turn are the limited
partners of the partnership. The funds invested by the limited partners into the limited
partnership are typically managed by professional fund management companies on behalf
of the limited partners. As disclosed in LoF, ISLP (the entity that owns 100% of the
share capital of the Acquirer) is a limited partnership and as such, is a broad based entity
which cannot be said to be controlled or owned by any particular person or group of
persons. Therefore, the identity of the partners of ISLP or the fact that ISLP's funds are
managed by a professional fund management company are irrelevant and immaterial for
the purposes of the Open offer and were not required to be disclosed under the
Takeover Regulations. Similarly, the Acquirer does not consider that details pertaining to
trademark licensing arrangement for the use of the "indiaStar" name were relevant or
required by the Takeover Regulations to be disclosed in the LoF.

(g)

In the disclosure in page 9 paragraph 3(f) of the LoF, the complete details of the board of
directors of the Acquirer was disclosed as required by the Takeover Regulations. The said
disclosure of the board composition of the Acquirer had profiles of each of the directors
which made it very evident that 3 of the directors of Acquirer were associated with
Sycamore Ventures Group and Sycamore Management Corporation.

The Acquirer reiterated that the only reason why it provided the information in its reply filed
before the Hon'ble SAT was merely to address the unsubstantiated and wild allegations made by
the applicant in his appeal. The transparent disclosure by the Acquirer of all the information to
the Hon'ble SAT to defend the vexatious proceedings commenced by the applicant cannot be
construed as an admission by the Acquirer that any of these facts were necessary disclosures to
be made in the LOF as per the Takeover Regulations.
9.

In addition to above, the following are the information disclosed in the reply submitted

to Hon'ble SAT by Merchant Banker and Mr. Ravi Pratap Singh :

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a) Mr. Ravi Pratap Singh has submitted that corporate structure of the acquirer has been
detailed with adequate clarity on page 8 of the LoF. "Acquirer is a privately held limited
liability company incorporated under the law of Republic of Mauritius and is wholly owned subsidiary
of indiaStar Fund, L.P (ISLP) a limited partnership established by a limited partnership agreement
under the laws of Cayman Islands". Consistent with fund structures typical of the global
and Indian private equity industry, ISLP serves as the pooling vehicle for reputable and
sophisticated global investors, such as financial institutions, endowment funds, seeking
to invest in a professionally managed investment fund. The investor of ISLP can be
broadly classified as follows
Financial Institution
Trusts,

66.40%

Foundations,

and 21.40%

Endowment Funds
Insurers

3.10%

High Net-Worth Individuals

9.10%

Such investors, generally referred to as 'limited partners' in industry parlance, subscribe

to the units of the investment fund by making capital contribution which are in turn
deployed of making long term investments on behalf of the limited partners.
Accordingly, the primary objective of the ISLP is to make investments into lucrative
portfolio companies through various special purpose vehicles such as Acquirer, in
order to derive monetary benefits for its limited partners. Thus it is submitted that it is
the limited partners of ISLP that are the principal beneficiaries of the investments that
are made, primarily using the funds contributed by the limited partners, through
Acquirer.
b) ISLP is professionally administered and advised by Sycamore Management
Corporation (SMC), a limited liability company incorporated in 1995 under the laws of
the State of Delaware. Pursuant to an investment advisory agreement dated March 13,
2006, SMC was appointed as the investment advisor to ISLP by indiaStar Partners LP,
the General partner of ISLP. Apart from providing advisory services to ISLP, SMC is
an independent professional management company.

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c) As is typical in the case of a corporate entity, the management and control of the
Acquirer, including decisions on investments and disinvestments, finally vests in the
board of directors of the Acquirer (BoD). The BoD, independently and at its sole
discretion, decides on investments and disinvestments. The composition of BoD of
Acquirer was clearly disclosed in page 10 through para 13 of the LoF which also make
it amply clear that three of the directors of BoD (viz. John R Whitman (managing
partner of SMC), Ravi Pratap Singh (partner at Sycamore Ventures), and David S.
Lichtenstin (Chief financial officer at Sycamore Ventures)) are associated with
Sycamore Management Corporation and Sycamore Ventures.Mr. Ravi Pratap Singh has
denied the allegation of non-disclosure that some of Acquirer's key decision-makers
were also key decision-makers of some Sycamore entities, as baseless and completely
irrelevant for the purposes of the disclosure requirement under the Takeover
Regulations.
d) In the light of the above, Mr Ravi Pratap Singh has submitted that neither does
Sycamore Ventures have any, direct or indirect, shareholding in the Acquirer nor does
it exercise control over the Acquirer which would deem it to be promoter of the
Acquirer. He has also submitted that it would be incorrect, to classify the Acquirer or
ISLP as belonging to the Sycamore Ventuers group or any other group.
e) The statement that Sycamore Ventures is in control of the Acquirer merely on the
ground that the trademark 'indiaStar' is registered in the name of SMC, is untenable
and misleading. SMC, had in the course of its management and administrative services
has registered the trademark 'indiaStar' and has permitted ISLP and the Acquirer to use
such trademark. Such an arrangement does not give SMC control or ownership over
the Acquirer or ISLP as alleged by the applicant.
f) Submissions regarding alleged non-disclosure pertaining to Ravi Pratap Singh: All the
relevant and the material details regarding his academic and professional background
had been provided in page 10 of LoF and no material disclosures have been withheld.
The following submissions were made :

He was the chief financial officer of SeraNova prior to its merger with Silverline
in 2001. In order to facilitate the integration of SeraNova into Silverline, he was

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requested to act as the co-CEO of Silverline for a limited period of

approximately 7 months (August 2001 to March 2002). The MB has stated that
Mr. Ravi Pratap Singh has confirmed that he has not been made party to any
legal proceeding or investigation by any regulatory authority in connection with
his holding the position of co-CEO in Silverline.

In his capacity as a director of SeraNova, he was made a party to a lawsuit filed

by NSA Investment against SeraNova regarding certain disputed loan
obligation. Subsequently, NSA Investment and SeraNova arrived at an amicable
out of court settlement regarding the dispute and the said lawsuit was thereafter
withdrawn several years prior to the Open Offer. The said dispute therefore,
was not even in existence at the time of the Open offer.

He was on the board of directors of Dahava Resources from June 2006 until his
resignation in June 2009. On February 7, 2008 a cease trade order was passed by
the British Columbia Securities Commission against Dahava Resources
restraining insider and persons in control of Dahava Resources due to a delay in
filing the comparative financial statement for the financial year ended September
30, 2007 and Form 52-102F1 (Management's Discussion and Analysis) from the
financial year ended September 20, 2007 and which cease trade order was
subsequently revoked upon submission of the necessary documents by Dahava.

10.

Subsequently, the Merchant Banker vide email dated May 08, 2014 submitted that

Sycamore Management Corporation (SMC) is a professional services company, which, under

separate service contracts, provides investment management and other services to multiple and
unrelated series of private equity funds, one of which is indiaSTAR Fund L.P. (ISLP) the
entity that owns 100% of the share capital of indiaSTAR (Mauritius) Limited (i.e., the Acquirer).
SMC also provides services to several other funds. The MB has also stated that Sycamore
Ventures is a brand name used by SMC and there is no entity in existence called Sycamore
Ventures, and as such, there can be no question of disclosing any alleged Control by
Sycamore Ventures of the Acquirer as the complainant seeks to suggest.
The following submissions were also made :

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(a) The funds that SMC operates under the Sycamore Ventures brand have very different
investment strategies and geographical focus from ISLP and the Acquirer. The MB has
stated that importantly, the investors in each of these funds are completely different from
one another, and accordingly, are completely different from the investors in
ISLP/Acquirer. Hence, ISLP and the Acquirer have no connection or commonality with
the other funds that SMC provides services to, let alone be controlled by the Sycamore
Ventures funds.
(b) The composition of the investment committee (committee that is charged with taking
investment and exit decisions of a private equity fund) of each of the funds or series of
funds that SMC provides services to is very different from the composition of the
investment committee of the indiaStar funds.
(c) Very importantly, the stock price of the Target Company has in recent times, experienced
a significant hike in value, going up to an all time high of `359.50/- per share, which is
significantly above the open offer price of around `235/- per share. Hence, without
prejudice to any of the points made above or in the Affidavit-in-response, the
complainant or any other person who may be similarly aggrieved, has had a very
reasonable window of opportunity in recent times to sell their shares of the Target
Company at a price that is substantially higher than the open offer price.
11.

Consideration :

As the applicant has contended that the Acquirer failed to make proper and complete disclosures
in the LOF, I first proceed to consider the mandatory requirements to be made in the letter of
offer. SEBI vide Circular dated March 08, 2004 had specified formats for letter of offer under
the Takeover Regulations. Clause 4 of the "Format of the Standard Letter of Offer" requires
disclosures of the Background of the Acquirer(s) (including PACs, if any).
"4 BACKGROUND OF THE ACQUIRER (INCLUDING PACs, IF ANY)
(In case, the open offer is for the change in control of the Target Company or is an offer where the offer price is
payable in terms of exchange of securities, details under this heading shall be given as per Annexure I. In all other
cases, the following details shall be furnished)
4.1 If acquirer(s) (including PACs) is a company
4.1.1 Name, address (registered and corporate office) and phone no. of the company(ies).
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4.1.2 The relationship, if any, existing between them

4.1.3 Salient features of the agreement, if any, entered between them with regard to the offer/ acquisition of shares.
4.1.4 Brief History & Major areas of operations.
4.1.5 Identity of the promoters and /or persons having control over such companies and the group, if any, to which
such companies belong to.
4.1.6 Confirm and disclose as to whether the applicable provisions of chapter II of SEBI Takeover Regulations
has been complied with by acquirer/ PACs within the time specified in the Regulations. Delay or non-compliance
with these provisions if any, may be disclosed in the letter of offer. Further the extent of compliance by the
acquirers/ PACs with the applicable provisions of chapter II should be furnished under a separate annexure to
SEBI along with the draft letter of offer as per the format at Annexure III of the standard letter of offer.
4.1.7 Names and residential addresses of Board of directors of acquirer(s).
Confirm whether any of such director(s) is already on the Board of Directors of Target Company. If so, disclosures
in terms of Regulation 22(9).
4.1.8 Details of the experience, qualifications, date of appointment of the Board of Directors.
.."
In the LOF, the details regarding Background of the Acquirer in this case was presented as item
3 from page no. 8 onwards. The following were the disclosures :
"3. BACKGROUND OF THE ACQUIRER - M/s. IndiaSTAR (Mauritius) Limited

(Acquirer)
a) The Acquirer, indiaSTAR (Mauritius) Ltd., is a privately held limited liability company incorporated on
February 17, 2006 (Registration Number 61002) in the Republic of Mauritius under the (Mauritius)
Companies Act, 2001 with its registered office at Level 3, Alexander House, 35 Cyber city, Ebene, Mauritius.
Tel: +230 403 0800.The Acquirer does not have a separate corporate office.
b) The Acquirer is a wholly owned subsidiary of indiaSTAR Fund, L.P., a limited partnership established by a
Limited Partnership Agreement dated December 5, 2005 under the Limited Partnership laws of Cayman
Islands, having its registered office at c/o Trident Trust Company (Cayman) Ltd., P.O. Box 847 GT, One
Capital Place, George Town, Grand Cayman, Cayman Islands. Tel: +345 949 0800; Fax: +345 949 0881;
Email: gmclaughlin@tridenttrust.com. indiaSTAR Fund, L.P. owns 3,70,50,001 (three crore, seventy lakhs
,fifty thousand and one) shares, as of limited review financial on September 28, 2007 representing 100% (one
hundred percent) of the issued and outstanding shares of the Acquirer. Further as of limited review financial dated
November 6, 2007 indiaSTAR Fund, L.P. owns 6,86,50,001 (six crore, eighty six lakhs ,fifty thousand and
one) shares, representing 100% (one hundred percent) of the issued and outstanding shares of the Acquirer. The
principal purpose of indiaSTAR Fund, L.P.is to invest in equity, equity linked and equity related investments in
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growth companies with significant interest in the Indian subcontinent. The Acquirer acts as an investment holding
company for indiaSTAR Fund L.P. for all investments undertaken by indiaSTAR Fund, L.P.
c) The Acquirer is an India-focused investment company that primarily provides growth capital to mid-market
companies in India. To date, the Acquirer has consummated investments in (i) Radha Madhav Corporation
Limited, (ii) Surana Industries Limited, (iii) IOL Chemicals and Pharmaceuticals Limited, and (iv) KEW
Industries Limited, in addition to its existing investment in the Target. The above-mentioned investments excepted,
the Acquirer has no other existing business in India. Further, the Acquirer has not promoted any company in
India. Outside of India, the Acquirer has established SV India I Ltd, a wholly owned subsidiary in Mauritius
(the Subsidiary). The Subsidiary is only intended to be an investment holding company and as on date of the
PA, the Subsidiary has not made any investments and has not conducted any business.
d) The Acquirer confirms that it has complied with the provisions of Chapter II of the SEBI (SAST)
Regulations within the time specified in the SEBI (SAST) Regulations.
e) Shareholding pattern of the Acquirer, as on the date of the PA, is as under:
Sl. No.

Shareholders category

No. and percentage of shares held

1.

Promoters

68,650,001 ordinary Shares of face value USD 1, 100%

2.

FII/Mutual Funds/FIs/Banks

Nil

3.

Public

Nil

Total paid up capital

68,650,001 ordinary Shares of face value USD 1, 100%

h) The Acquirer is a privately held limited liability company and is not listed on any stock exchange. The
Acquirer is a wholly owned subsidiary of indiaSTAR Fund, L.P., a limited partnership.
i) The Acquirer has a total of fully paid up 68,650,001 ordinary shares of face value USD 1 each amounting to
a paid up share capital of USD 68,650,001
.."
The applicant has alleged that the Acquirer did not make complete disclosures as according to
him, 'Sycamore Ventures' controlling and continuing to control the Acquirer was not disclosed
by the Acquirer in the LOF. According to the applicant, the trademark "indiaStar" was owned
and registered by Sycamore Management Corporation ("SMC") and that IndiaStar Fund is one of
the funds of Sycamore Ventures. In the supplementary representation (applicant's letter dated
September 12, 2013 sent through his counsel), the applicant has mentioned of new disclosures which
were made by the Acquirer in his affidavit filed before the Hon'ble SAT. According to applicant,
the facts such as :

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a) ISLP which owns 100% of the Acquirer, is itself a 'pooling vehicle' and the Acquirer is a
'special purpose vehicle' ;
b) Actual owners of the funds for the purchase of the shares of the Target Company were
other investors of ISLP from various countries and such investors are 'limited partners'
of ISLP ;
c) The funds contributed by the 'limited partners' have been invested by the 'general
partners' for the purchase of shares of the Target Company ;
d) ISLP is administered, managed and supervised by SMC pursuant to an agreement ;
indicate that the Acquirer is part of the Sycamore group and this fact was not disclosed in the
LOF. The applicant has stated that even now the true identity of the beneficial owners of the
Acquirer and the investment in the Target Company has not been disclosed as required under
Clause 4.1.5 of SEBI Circular dated March 08, 2004.
I have considered the submissions made by the applicant and also the disclosures made in the
LOF by the Acquirer. In terms of the SEBI Circular, the details (if the acquirer is a company)
such as name, address (registered and corporate office), phone number, brief history, major areas
of operation, identity of the promoters and/or persons having control over such companies and
the group, if any, to which such companies belong to, needs to be furnished by the Acquirer in
the LOF.
The Acquirer has stated that it is a privately held limited liability company incorporated in the
Republic of Mauritius. Its address and telephone number were given in the LOF. The Acquirer
has also stated that it is a wholly owned subsidiary of ISLP, a limited partnership established by a
Limited Partnership Agreement dated December 05, 2005 under the limited partnership laws of
Cayman Islands. It was also disclosed that ISLP owns 100% shares of the Acquirer and that the
Acquirer acts as an investment holding company for ISLP for all investments undertaken by
ISLP. It is also stated in LOF that the Acquirer is an India-focussed investment company that
primarily provides growth capital to mid-market companies in India.
From the above, it is noted that as against the requirement to "identify the promoters" as
required in terms of clause 4.1.5 of the SEBI Circular, the disclosure is made to the effect that
ISLP holds 100% capital of the Acquirer. The above disclosure presents information regarding
the identity of the promoter.

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As regards the requirement to state that "persons having control over such companies and the
group, if any, to which such companies belong to" as also required in terms of clause 4.1.5 of the
SEBI Circular, I note the following :
The Merchant Banker and the Acquirer have stated that authority and responsibility over ISLP
was by IndiaStar Partners LP, a general partner. Further, SMC was a sole general partner of
IndiaStar Partners LP. The Merchant Banker has also stated that "The sole general partner of

Indiastar partners LP(general partner of indiaSTAR L.P.) is Sycamore Management

Corporation, 845 Alexander Road, Princeton, NJ 08540, USA, a highly reputable professional investment
management firm (SMC). Furthermore, SMC has formed and authorized an Investment Committee comprised
of three members to manage all of the investment activities and business matters of the Fund.
The statements made by the Acquirer and the Merchant Banker with respect to the manner of
holding the Acquirer can be pictorially represented as follows :
Sycamore Management Corporation

SMC

(sole general partner of Indiastar partners LP)

and

IndiaStar

Partners LP are two

entities which have not

Indiastar Partners LP

been disclosed in the

(general partner of indiaSTAR L.P.)

LOF.

IndiaSTAR Fund, L.P. (Parent company of

These

India STAR (Mauritius) Ltd

two

entities

have been disclosed in

the LOF

IndiaSTAR (Mauritius) Ltd (Acquirer)

The above manner of control by SMC, as represented by the Acquirer and the Merchant Banker,
on the Acquirer has not been disclosed in the LOF. Instead, the Acquirer and the Merchant
Banker hurried their way to terminate the disclosures at the first possible stop. Therefore, the
disclosure made in the LOF does not present a true and a fair representation of the persons
having control over the Acquirer.
The Acquirer has a responsibility to disclose all relevant disclosures in satisfaction of the SEBI
guidelines made in this regard. Further, the Merchant Banker is also expected to have done its

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due diligence regarding the facts, statements and disclosures made in the LOF. It is for this very
purpose that merchant banker, who are SEBI registered intermediaries, are given the
responsibility to ensure that proper and adequate disclosures are made by an acquirer in a letter
of offer. The veracity and adequacy of such statements/disclosures should have been examined
by the Merchant Banker and in case any disclosure is not properly or adequately presented, it is
his responsibility to probe into the same so that investors who are the target in any open offer do
get all details which will enable them to make a reasoned decision on whether to off-load or hold
on to the shares whenever there is a substantial acquisition of shares or voting rights, or change
in control in a target company.
In this regard, I refer to the following observations made by the Hon'ble SAT in the matter of
Eider-E-Commerce Ltd. vs. SEBI (Order dated January 01, 2001) on the importance of SEBI
mandating disclosures in offer documents. Though the observations are made in respect of the
disclosures under the SEBI (Disclosure and Investor Protection) Guidelines, 2000, the same
would hold good for disclosures in LOF filed under the Takeover Regulations also :
".......The Issuer Company is required to maintain certain standards of disclosure relating to various matters
having a bearing on the investment decision of the investors. The Respondent has already prescribed the disclosure
requirements and an issuer company in its own interest is required to fulfil those requirements, lest the public issue
will not be through. The lead manager is also required to ensure that the information furnished in the offer
document is not in any way exaggerated or deficient and that the material facts are not suppressed to the
disadvantage of the subscribers."
On a consideration of the above observations and taking into account the importance of such
proper and adequate disclosures in offer documents, it could be concluded that the Acquirer and
the Merchant Banker have failed to reach the standards of disclosures expected by SEBI. For the
same, the Acquirer and the Merchant Banker are reprimanded and are advised to comply with
disclosure requirements mandated by SEBI in its regulations and circulars, in letter and spirit.
Allegation with respect to the disclosures of details of Mr. Ravi Pratap Singh.
As mentioned above, the SEBI Circular vide Clause 4.1.7 and 4.1.8, mandates that details such as
(1) Names and residential addresses of Board of directors of Acquirer ; and
(2) Details of the experience, qualifications, date of appointment of the Board of directors,
be disclosed in the LOF.
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In the LOF, the following details are given with respect to Mr. Ravi Singh :
"
f) The Directors of indiaSTAR (Mauritius) Limited and their addresses are as listed below :
(only that of Mr. Ravi Singh is mentioned)
Name
(Age)/Date of
Appointment

Educational
Qualification

Ravi Pratap Singh Ravi has an MBA

(49)
in Finance &
Director
since International
February
Business from
17, 2006
Columbia
University, New
York, and BS in
Mechanical
Engineering
from
University of Delhi,
India.

Experience

Residential
Address

Ravi Singh is a Partner with Sycamore Ventures.

701 Horseshoe
Trail, Franklin
Over the course of his 25-year career, he has Lakes, NJ 07417,
structured and led numerous public and private USA
financings, mergers & acquisitions and global
investments.
In the past, he held successive positions as a Manager
with Coopers & Lybrand in New York (now
PriceWaterhouseCoopers); General Partner and
Managing Director at Cowen & Company (now SG
Cowen); Managing Director of Forbes & Walker, a
New York merchant banking firm; Partner,
Managing Director and Head of Technology
Investment Banking at Punk, Ziegel & Company
and Founding Partner of Converge Partners LLC, a
New York based investment advisory firm.

g) None of the Directors of the Acquirer is on the Board of Directors of the Target.
.."
From a reading of the above disclosures, it can be said that the Acquirer has complied with the
requirements of the aforesaid requirement of the SEBI Circular.
The applicant has stated that Mr. Singh's experience in Silverline ; law suits for negligent
misrepresentation and securities laws violations by Sera Nova and its promoters including Mr.
Singh ; and Dahava Resources of which Mr. Singh was the CEO had violated securities laws and
a cease trade order was passed by Canadian Regulators, were not disclosed in the LOF.
The Merchant Banker has contended that even if the allegations were true, there was nothing to
indicate that such association could or has had any adverse impact on the Target Company, as
the Acquirer is not in control of the Target Company and is only a shareholder. Further, it is
also contended that SEBI does not require disclosure of litigation against directors of the
Acquirer in an open offer made in terms of regulation 10 of the Takeover Regulations. Further,

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pending litigation matters of the Acquirer have to be disclosed in instances where the Acquirer is
a listed company.
In this regard, I note that Clause 4 of the SEBI Circular does not mandate disclosures of
litigations against directors of the Acquirer. Further, the Acquirer is not a listed company in
order to compel it to disclose litigation matters.
I also note that the aforesaid SEBI Circular does not also mandate the disclosure of information
with respect to investigations/proceedings against employees of the Acquirer. Therefore, the
allegation with respect to references being made of Sycamore Ventures and Mr. Chong
(employee of SMC) may also not stand.
In view of the above, the allegations made by the applicant in this regard does not have any
merit.
12.

I also note that the complainant has been using the name "Sycamore Ventures in his

representation. The same, as clarified by the Acquirer/Merchant Banker, is a brand name used
by SMC and there is no entity in existence with the name Sycamore Ventures. Accordingly,
there can be no question of disclosing any alleged Control by Sycamore Ventures of the
Acquirer.
13.

Relief sought by the Complainant : The Complainant in his complaint has requested

SEBI to direct the Acquirer to make another open offer and provide an opportunity to the
shareholders to take an informed decision whether to tender or not to tender their equity shares.
He has also requested that such offer be directed at the same price paid to the shareholders in the
impugned Open Offer plus interest from the due date of payment in the impugned offer to the
date of payment at the rate decided by SEBI.
I have considered the request. The Complainant needs to appreciate that the open offer in this
matter had closed on April 07, 2008. Shares which were tendered have been purchased and
consideration had moved from the Acquirer to those shareholders who had tendered shares in
the open offer in terms of the completion of the activity schedule of such open offer. The
Complainant has made his complaint on January 16, 2012, which is almost after 4 years of
completion of the open offer made by the Acquirer. Though there is no limitation period for

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such complaints or representations to be made to SEBI, in terms of the Takeover Regulations, a

period of 21 days is available for the shareholders to peruse the LOF and forward their
grievances/complaints, if any, in connection with the open offer to SEBI/Merchant
Banker/Acquirer. Even if a complaint is received after one day of closure and completion of
open offer formalities, the same would create a huge difficulty in undoing the process that are
already completed. Further, it could also be possible that third party rights are created in the
meantime. If representations and complaints are made after a considerable lapse of time seeking
for another fresh offer, the same could create uncertain ground for acquirers who have acquired
voting rights or gained control and also for the target companies.
The disclosures made under the Takeover Regulations to be made in the LOF is almost similar to
that of a notice, giving details of a proposed compromise or arrangement under sections 391/393
of the Companies Act, 1956 (now repealed), to a creditor or member of a company. The same is
done so that the concerned creditor or member may consider the proposal and file his objections
to such proposal. If such objections are not sufficient, the court may proceed and approve such
scheme. In this regard, the following observations made in the matter of Kusum Products Limited
[1999 98 CompCas 10 Cal], by the Hon'ble Calcutta High Court are worth noting :
"......65. It is well settled that if the statutory formalities have been complied with and the scheme is fair and
reasonable, there is no fraud involved, then the court would proceed to give effect to the majority decision of the
shareholders of the company. In other words, only if the court finds that the scheme is fraudulent or unreasonable,
the court would proceed not to sanction the scheme. Reference may be made in this connection to Palmer's Company
Law, 24th edition, para. 70.14. If the court is satisfied that all the statutory formalities have been complied with
and the scheme is fair and reasonable and there is no fraud involved in propounding the scheme, the petitioners are
taken to have discharged their onus and the scheme ought to be sanctioned by the court.
.......
66. The onus lies heavily on those who oppose the sanction of the scheme to show that the scheme is unfair,
unreasonable or fraudulent. In this connection, the following decisions may also be taken note of : (i) Hindustan
General Electric Corporation Ltd., In re ; (ii) Sussex Brick Co. Ltd. In re [1960] 30 Comp Cas 536 ; [1961]
1 Ch. 289, In the aforesaid decisions, it was held in No. (i) case that (head-note of AIR 1959 Cal) "the
functions and duties of the court in the matter of sanctioning of schemes are well known. Any scheme which is fair
and reasonable and made in good faith will be sanctioned if it could reasonably be supported by sensible people to
be for the benefit of each class of the members or creditors concerned. It is also the duty of the court to see that the
resolutions were passed by the statutory majority. The majority of the three-fourths value must be of persons who
were present and who took part in the voting. Mere presence would not be enough. The onus of proving

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unreasonableness or unfairness about the scheme or of want of good faith is on those who object to the sanction of
the scheme. This onus is not discharged by vague and general assertions devoid of any particulars."
67. In the aforesaid decision No. (ii) it was held that although it might be possible to find faults in a scheme that
would not be sufficient ground to reject it. It was further held that a scheme must be obviously unfair, patently
unfair, unfair to the meanest intelligence. It cannot be said that no scheme can be effective to bind a dissenting
shareholder unless it complies to the extent of 100 per cent. It is the consistent view of the courts that no scheme can
be said to be fool-proof and it is possible to find faults in a particular scheme but that by itself is not enough to
warrant a dismissal of the petition for sanction of the scheme. The courts have gone further to say that a scheme
must be held to be unfair to the meanest intelligence before it can be rejected. It must be affirmatively proved to the
satisfaction of the court that the scheme is unfair before the scheme can be rejected by the court. ......... "
In the present case, I note the allegation that adequate disclosures with respect to the persons in
control of the Acquirer was not made. However, it has not been shown that the shortfall in
disclosure would have changed the decision of the shareholders who had tendered shares in the
open offer. Further, for the inadequate disclosures, as discussed above, the Acquirer and the
Merchant Banker have been reprimanded. Repeated violations by either of them would be
viewed very seriously by SEBI.
There is another reason why I would not be agreeable to granting the relief as sought for by the
Complainant. The complainant has stated that he owned 1,560 equity shares in the target
Company "before, during, and after" the open offer. As per submissions made to SEBI, it has been
observed that claim of the complainant is not true. At the time of PA, the complainant held 4200
shares of Target Company. He sold 2640 equity shares of Target Company after the PA was
made on November 07, 2007. Even subsequent to the open offer, the Complainant periodically
traded in shares of Target Company on the stock exchange, and his holding at a certain point
went down to as low as 72 equity shares. Subsequently, before filing the complaint, he bought
shares of Target Company and as on the date of complaint he was holding 3,584 shares of the
Target Company. Moreover, the complainant has also purchased 700 shares during April 2013,
which is much after his complaint. It is surprising to note as to how the Complainant had
purchased shares when he has made such allegations in his complaints and has requested SEBI to
direct the Acquirer to make another open offer to the shareholders. In this regard, the Hon'ble
Supreme Court has held that a person approaching court for an equitable relief should come with
clean hands. Any suppression or concealment of relevant facts would make him ineligible for
such relief. In this regard, I note the following :

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(1) The Hon'ble Supreme Court in Mohammadia Co-op. Building Society Ltd. v. Lakshmi Srinivasa
Co-op. Building Society Ltd. [(2008) 7 SCC 310} had observed that "71. Grant of a decree for
specific performance of contract is a discretionary relief. There cannot be any doubt whatsoever that the
discretion has to be exercised judiciously and not arbitrarily. But for the said purpose, the conduct of the
plaintiff plays an important role. The courts ordinarily would not grant any relief in favour of the person
who approaches the court with a pair of dirty hands."
[Emphasis supplied]
(2) Further, the Hon'ble Supreme Court in G. Jayashree v. Bhagwandas S. Patel, [(2009) 3 SCC
141], has observed "..........A plaintiff is expected to approach the court with clean hands. His conduct
plays an important role in the matter of exercise of discretionary jurisdiction by a court of law...."
In view of the above observations, it may not be appropriate and reasonable to allow the relief as
sought for by the Complainant.
14.

The Complainant has also referred to a news item and stated that a foreign bank was in

advanced talks with the Acquirer to acquire 20% stake in the Target Company and requested
SEBI to restrain the Acquirer from exiting its shareholding in the Target Company. In this
regard, I note that the said news item was on May 13, 2013, whereas the complainant has made
the said allegation belatedly in his additional complaint dated September 12, 2013. Further, I also
note from the shareholding pattern of the Company for the quarter ended June 2014, that the
Acquirer is shown as public shareholder of the Company holding 72,60,928 shares (29.36%). This
quantity of shares is the same as was its shareholding post the open offer made by it in the year
2008. The apprehension of the applicant that the Acquirer would exit the Company is therefore
not warranted.
15.

Considering the facts and circumstances of this case and the observations made in this

decision, a direction in the nature of ordering the Acquirer to make another public offer is not
warranted. As discussed above, the Acquirer and the Merchant Banker should be reprimanded
for failing to reach the standards of disclosure expected under the SEBI regulations.

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Decision:
16.

In view of the above reasons and observations, I hereby dispose of the application dated

January 16, 2012 and the supplementary representation dated September 12, 2013 filed by Mr.
Amit Bhagvatprasad Barot, without granting any relief.
17.

I reprimand the Acquirer and the Merchant Banker for failing to reach the standards of

disclosures expected under the SEBI Circular dated March 08, 2004.

PRASHANT SARAN
WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA

Date : November 21st, 2014

Place : Mumbai

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