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WTM/PS/140/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 KUSUM IRON AND STEEL LIMITED
Appearance:
For the Company Mr. Ramesh Chandra Mishra, Company Secretary and Mr. Loknath Mishra,
Advocate
For SEBI Dr. Anitha Anoop, Deputy General Manager, Mr. N. Murugan, Assistant General
Manager and Mr. Rohan Vijay, Assistant Manager

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.

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2.

Kusum Iron & Steel Limited (hereinafter referred to as "the Company") is one of such

companies against whom the interim order was passed. The equity shares of the Company are
listed on the Bombay Stock Exchange Limited ("BSE").
3.

An opportunity of personal hearing was afforded on July 02, 2015, when Mr. Ramesh

Chandra Mishra, the Company Secretary and Mr. Loknath Mishra, Advocate appeared on
behalf of the Company and made oral submissions. It was submitted that as on September
2014 the MPS requirement had been complied with by the Company though without following
the permitted modes. As requested, liberty was granted to file written submissions.
4.

The Company, thereafter, vide letter dated September 14, 2015 filed the written

submissions wherein the Company stated as follows a. The paid up capital of the company consists of 24,08,000 equity shares of face value
of 10 each. The promoters holding reached to 77.89% due to forfeiture of 30,67,600
shares on August 8, 1998 by operation of law.
b. Since the company is suspended with effect from November 12, 2001, the Company
is not able to disinvest the shares as per the methods included in SEBI circular dated
December 16, 2010.
c. After obtaining the proper valuation report, 94,250 equity shares of promoters
consisting of 3.92% were sold off market to the persons belonging to the public at
large and not connected to the promoter. Thereby the promoter holding has come
down to 73.97%.
d. The Company has already initiated the process of revocation of suspension of trading.
5.

I have considered the submissions made by the Company and other material available

on record. The interim order was issued against the Company as it failed to maintain the
minimum public shareholding of 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"). SEBI had issued circulars dated December 16, 2010, February 08, 2012 and
August 29, 2012, in order to suitably amend Clause 40A of the Listing Agreement by specifying
the manner in which public shareholding may be raised to the prescribed minimum level. The

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amended Clause 40A of the Listing Agreement, inter alia, provided the following methods for
complying with the MPS requirement:
a. Issuance of shares to the public through prospectus,
b. Offer for sale of shares held by promoters to public through prospectus,
c. Sale of shares held by promoters through Stock Exchange Mechanism i.e. OFS
through Stock Exchange,
d. Institutional Placement Programme,
e. Rights Issues to public shareholders, with promoters/ promoter group
shareholders forgoing their rights entitlement,
f. Bonus Issues to public shareholders, with promoters/ promoter group
shareholders forgoing their bonus entitlement,
g. Any other method as may be approved by SEBI, on a case to case basis.
6.

From the shareholding pattern as on June 2013, filed by the Company in BSE, I find

that the following persons are disclosed as the shareholders belonging to the promoter and
promoter group of the Company.
S.No.

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19

Name of promoters

No. of shares % of shareholding

Naresh Kumar Agrawala


Sanjay Kumar Agrawala
Manoj Kumar Agrawala
Kailash Kumar Agarwala
Neem Chand Mitruka
Jagdish Prasad Agarawala
Ashok Kumar Agrawala
Sohanlal Agrawala
Beena Mitruka
Usha Mitruka
Anita Mitruka
Anita Dhanawat
Indra Devi Agrawala
Anita Mitruka
Ramesh Kumar Agrawala
Sushil Kumar Agrawala
Sapna Mitruka
Dropadi Devi Agrawala
Indra Devi Agrawala

37,550
13,050
35,545
24,445
80,005
91,005
64,905
70,400
52,500
46,700
43,000
13,000
55,000
15,000
13,100
3,000
30,000
60,000
52,500

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1.56
0.54
1.48
1.02
3.32
3.78
2.7
2.92
2.18
1.94
1.79
0.54
2.28
0.62
0.54
0.12
1.25
2.49
2.18

20
21
22
23
24
25
26
27
28
29
30
31

7.

Raj Kumar Modi


Kusum Modi
Neem Chand Sushil Kumar
Sohanlal Ramesh Kumar
Naresh Kumar Agrawala & Sons
Pawan Kumar Agrawala & Sons
Ramesh Kumar Agrawala & Sons
Mitruka Tea Co. Pvt. Ltd.
Annapurna Plantions Pvt. Ltd.
Idea Sale Pvt. Ltd.
Brind Niketan Pvt. Ltd.
Simco Merchandise Pvt. Ltd.
Total

10,000
13,000
20,150
24,000
3,000
4,000
4,000
2,04,000
2,04,700
2,29,900
1,90,700
1,67,345
18,75,500

0.42
0.54
0.84
1
0.12
0.17
0.17
8.47
8.5
9.55
7.92
6.95
77.89

As on June 3, 2013 the promoter holding in the company was 77.89% and public

shareholding was 22.11 % which is less than the required MPS. The Company had submitted
that 94,250 equity shares of promoters consisting of 3.92% were sold in off market to the
persons belonging to the public at large and not connected to the promoter. In this regard, I
note from the details submitted by the RTA of the Company that the following promoters
had transferred shares in off-market to Avinash Capital (P) Limited and Madan Lal Kansal:
(a) Sushil Kumar Agarwala (sold 3000 shares), Raj Kumar Modi (sold 10,000 shares),
Ramesh Kumar Agarwala (sold 13,100 shares) and Anita Dhanawat (sold 13,000
shares) sold a total of 39,100 shares to Avinash Capital Markets (P) Limited; and
(b) Neem Chand Sushi Kumar (sold 20,150 shares), Sohanlal Ramesh Kumar (sold 24,000
shares), Naresh Kumar Agarwala & Sons. (sold 3000 shares), Pawan Kumar Agarwala
& Sons. (sold 4000 shares) and Ramesh Kumar Agarwala & Sons. (sold 4000 shares)
sold a total of 55,150 shares to Madan Lal Kansal.
8.

As on June 30, 2015, the shareholding of promoters is said to have reduced to 73.97%

as per the details below:


Serial
No.
1
2
3
4

Name of promoters

No. of shares

Naresh Kumar A
Sanjay Kumar A
Manoj Kumar Ag
Kailash Kumar A

37,550
13,050
35,545
24,445

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% of shareholding
1.56
0.54
1.48
1.02

5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
9.

Neem Chand Mitr


Jagdish Prasad A
Ashok Kumar Ag
Sohanlal Agarw
Beena Mitruka
Usha Mitruka
Anita Mitruka
Indra Devi Agar
Anita Mitruka
Sapna Mitruka
Dropadi Devi Ag
Indra Devi Agar
Kusum Modi
Mitruka Tea Co P.
Idea Sale Pvt. Ltd.
Brind Niketan Pvt. Ltd.
Simco Merchandise
Sohanlal Ramesh Agar
Ramesh Kumar Agar
Seema Agarwala
Manoj Kumar Agarwala
Payal Mitruka
Total

80,005
91,005
64,905
70,400
52,500
46,700
43,000
55,000
15,000
30,000
60,000
52,500
13,000
2,04,000
2,29,900
1,90,700
1,67,345
20,000
26,000
40,000
30,000
88,700
17,81,250

3.32
3.78
2.7
2.92
2.18
1.94
1.79
2.28
0.62
1.25
2.49
2.18
0.54
8.47
9.55
7.92
6.95
0.83
1.08
1.66
1.25
3.68
73.97

On perusal of the shareholding patterns as mentioned in the tables above, it can be

seen that few persons are removed and new persons are added in the list of promoters. The
Company has not made any disclosures in this regard. BSE had informed SEBI vide email
dated November 30, 2015 that trading of companys shares were suspended since August 24,
1998 for non-compliance with listing agreement. BSE further stated that the company had not
informed the method adopted for complying and that no disclosures were made under the
Takeover Regulations and PIT Regulations.
10.

The company stated that as it was suspended with effect from November 12, 2001, it

was not able to disinvest the shares as per the methods prescribed by the SEBI Circulars.
Therefore, during the period of September 2014, the promoters sold off market 94,250 equity
shares consisting of 3.92% of total equity capital to the persons belonging to the public,
thereby the promoter holding came down to 73.97%. It may be noted that it is the
responsibility of the Company to have the suspension revoked. Moreover, the status of the

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company as suspended from the Stock Exchange cannot be an excuse for non-compliance
of the MPS requirement. The company has not brought to my notice that it took any effort
for revocation of the suspension of trading. Off market sale by promoters is not an approved
method of MPS compliance unless the same was approved in appropriate cases by SEBI under
the case to case basis method prescribed under Clause 40A of the Listing Agreement. In the
instant case, the promoters have sold off market 3.92% of shares after the due date of MPS
compliance. It is also noteworthy that several companies had approached SEBI with a request
to permit them for open market sale so as to achieve compliance of MPS requirements and
SEBI had granted permissions to many such companies in appropriate cases. Considering the
facts and circumstances of the case, it is quite clear that the Company had the primary
responsibility to comply with the MPS requirement by adopting the methods available to it as
discussed in paragraph 6 above. In case the Company was experiencing any difficulty it
should have approached SEBI before due date of compliance, with its proposed method for
approval, which the Company has clearly failed to do.
11.

Paragraph 17(b) of the interim order, prevents promoters/directors from buying and

selling or dealing in securities of the company except for the purpose of complying with the
MPS requirement. The promoters/promoters group can sell the shares only as per the
methods prescribed under the various circulars discussed in paragraph 6 above. By selling
the shares off market, the promoter who have sold the shares have violated the interim order
as well. As already mentioned above, there is no clarity as how new promoters came in to the
Company. Therefore, the reduction by 3.92% cannot be considered for MPS compliance.
12.

In view of the above, company cannot be considered to have complied with MPS

norms as on date. The Company may have to adopt methods recognized by SEBI for this
purpose. Considering the fact that the Company has not complied with the MPS requirements
till date in breach of rule 19A of the SCRR and Clause 40 A of the Listing Agreement read
with section 21 of the SCRA, and such non-compliance being continuous in nature, it becomes
necessary for me, 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 and the continuing nature of the violations committed by the Company, SEBI may

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also initiate other action including action for adopting an unapproved method and also for
breach (transferring shares while under restraint) of the interim order, against the Company,
its directors and promoters.
13.

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,
Kusum Iron and Steel Limited, its directors, promoters and promoter group.
14. This Order shall remain in force till further directions.
15. Copy of this Order shall be served on the stock exchanges and depositories for their
information and necessary action.

Date: January 20th, 2016


Place: Mumbai

PRASHANT SARAN
WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA

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