Hira Automobiles Fined Rs14 Lakh by SEBI for 10-year Delay in Compliance
Market regulator Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs14 lakh on Hira Automobiles Ltd (HAL) for not submitting quarterly compliance reports in time and the outcome of the delisting process. In two interim orders in 2013, SEBI directed HAL to submit the reports by 22 May 2014. However, the company submitted the reports only on 8 April 2024.
In an order, Barnali Mukherjee, adjudicating officer (AO) of SEBI, says, “I am of the view that HAL, by not following the directions of SEBI WTM interim order on 4 June 2013 and 2 November 2013, has compromised the regulatory framework of SEBI. Such non-compliance is detrimental to the interest of investors in the securities market. The interim directions regarding submitting quarterly reports to the exchanges aimed to inform existing and potential shareholders about the status of HAL’s compliance with the minimum public shareholding requirements.”
SEBI order outlines allegations against HAL regarding non-compliance with Rule 19A of the Securities Contracts Regulation Rules, 1957. This rule mandates that listed companies with public shareholding below 25% increase it to 25% within three years from the commencement of the Securities Contracts Regulation and Amendment Rules, 2010, with a deadline of 3 June 2013.
HAL allegedly failed to meet this requirement within the specified timeline, leading to interim directions issued by SEBI on 4 June 2013.
In the interim order, SEBI restricted the promoters, promoter group, and directors of HAL from engaging in any transactions involving its securities except for actions necessary to meet the minimum public shareholding requirement.
Despite initiating voluntary delisting from the exchanges on 28 May 2013 and requesting a five-month extension, HAL could not complete the process and delist shares. Consequently, SEBI issued a modified order on 22 November 2013, allowing Raghulinder Singh (promoter) to purchase shares held by public shareholders for delisting purposes. However, this permission was contingent upon HAL completing the delisting within five months from the order date and reporting the outcome to SEBI within one month.
However, HAL’s shares could not be delisted due to a lack of consent from public shareholders. Although this was reported to the stock exchanges, the company failed to inform SEBI about the outcome of the delisting process, thereby allegedly not complying with SEBI’s order regarding reporting the delisting outcome.
HAL’s shareholding pattern remained non-compliant with minimum public shareholding (MPS norms) until the quarter ended June 2023. Additionally, HAL failed to submit quarterly compliance reports on MPS norms from the quarter ended September 2014 to the quarter ended June 2023.
SEBI says, “HAL has not met MPS requirements and failed to submit quarterly compliance reports to Stock Exchanges from 30 September 2014 to 30 June 2023. This violates the interim order from 4 June 2013, regarding quarterly reports to the BSE.
“HAL’s submission that it misunderstood that it was not required to submit quarterly compliance reports as there was no update with the delisting process is bereft of merit and hence cannot be accepted. I find that HAL has not complied with the directions of the interim order dated 4 June 2013,” the SEBI order says.
