TakeoverCode ZOOM LENS: M/s Khaitan Electricals Limited

On March 12, 2007, Mr. Sunil Khaitan, Mr. Krishna Khaitan, M/s Khaitan Lefin Limited (KLL) and M/s Orientale Mercantile Company Limited (OMCL) (Noticees) acquired 13,00,000 equity shares pursuant to conversion of warrants in M/s Khaitan Electricals Limited (Target Company) that has triggered Regulations 10 and 11(1) of SEBI (SAST) Regulations, 2011 requiring open offer to the shareholders of the Target Company. However, the Noticees failed to do so and accordingly, SEBI directed the Noticees to make a combined public announcement under regulation 10 and 11(1) of the SEBI (SAST) Regulations, 1997 and also to pay interest at the rate of 10% per annum.

We have endeavored to bring all the issues to help you understand the viewpoints and clarifications considered by the officers through “Zoom-in” section on this case study. Following are some of the queries involved in this order, which needs discussion: 

1. Whether Regulation 10 and regulation 11 of SEBI (SAST) Regulations, 2011 are considered to be mutually exclusive?
2. Whether the contention of the Notices that the reference date for determining the pre-allotment and post-allotment shareholding for the purposes of regulation 11(1) should be the first acquisition of shares by the acquirer in the financial year is acceptable?

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