TEXT OF LETTER TO SEBI ON MINDTREE TAKEOVER BY L&T

L & T has been stretching/ bending/ ignoring/ violating the regulations and propriety and getting away with it. All our pleas to SEBI have fallen on deaf ears. SEBI has not taken any action against  L & T. Rather SEBI has taken action against persons objecting to  L & T takeover of Mindtree. As per the press report  Nalanda surrendered and tendered its shares in the Open Offer because of SEBI notice to them. Nalanda felt threatened that they will be asked by SEBI to announce an Open Offer as they will be construed as PAC.

On the one hand SEBI has been trying to stretch its regulations to brand a person showing common cause with the promoter , as PAC, yet on the other hand SEBI has been ignoring all the wrong doings of  L & T, even when repeatedly pointed out by us. The impression being created is that SEBI has ignored the interest of small investors and appears to be playing ball with L & T.

The following questions remain unanswered till date:

1.   ATTEMPT TO BEAT THE REGULATION-- OPEN OFFER IN VIOLATION OF  THE TAKEOVER CODE 2011-The SAST 2011 does not allow voluntary offer by any third party. This is a departure from the earlier 1997 code. As per Regulation 6(1) of SAST 2011, only  persons holding 25% or more can bring a voluntary Open offer.

2.   FALSE DECLARATION IN THE PUBLIC ANNOUNCEMENT—wrongfully stated -this is a mandatory open offer.  incorrect to say that “This Open Offer is a mandatory open offer made in compliance with Regulations 3(1) and 4”

3.   FALSE AND CONTRADICTORY DECLARATION IN THE PRESS RELEASE-  The press release said 

“ Immediately following the filing of the Public Announcement, L & T has placed an order with its broker for on-market purchase of up to 15% of share capital of Mindtree at a price not exceeding INR 980 per share”. 

This statement is in contradiction with the statement made in the PA which said

“pursuant to execution of the SPA and proposal for placing of the Purchase Order” 

It an admitted fact that only a proposal was there for placing of the purchase order. There was no actual placement of an order. L & T was in no position to place such an order. They have stated the order could be placed only after receipt of regulatory approvals. An order to the share broker is a definitive order.  An order placed for a specific number of shares up to a limit price, in this case 2.48 Crs. Shares, to be bought  up to INR 980 will make the broker buy all the shares available in the market at a price at or below 980 till the desired quantity of 2.48 Crs. Shares is achieved. But this was never the case. In the Economic Times dated March 28, 2019, experts like Ex. Director of SEBI Shri JN Gupta and senior advocate Shri Rajesh Begur of ARA Law this was wrong on the part of  L & T- (a) the order was not actionable and (b) “They don’t need CCI approval to reach 25 per cent,”

4.   MALA-FIDE INTENTION OF L & T.—L&T acted in a great haste and without fulfilling legal & regulatory requirements with a   mala-fide intention to pre-empt the Board of MINDTREE who had notified the stock Exchange on 15-03-2019 that the meeting of the Board of Directors of the Company is scheduled on 20-03-2019, inter alia, to consider and approve Buyback of  equity shares of the Company. L & T successfully thwarted this meeting and the Board meeting of Mindtree had to be adjourned. The moment any Public Announcement is made for takeover of any company, Regulation 26 places several restrictions on the Target company. Under such circumstances  no buy back can be done without passing a special Resolution.

5.   UNWARRANTED DPS ISSUED ON 26.03.19 in violation of the Regulation—The Detailed Public Statement (DPS) issued by L&T is totally unwarranted and a misuse of the process of law. Till date  L&T has not purchased from open market,  or even paced a definitive order on its broker for purchase of shares as was falsely claimed. There  is no question of L&T triggering an Open Offer. Regulation 13(4) specifically provides that even if PA has been issued but  “the acquirer does not succeed in acquiring the ability to exercise or direct the exercise of voting rights in, or control over the target company,” then there is no need to make any DPS. The relevant portion is extracted below:

Explanation.— It is clarified that in the event the acquirer does not succeed in acquiring the ability to exercise or direct the exercise of voting rights in, or control over the target company, the acquirer shall not be required to make a detailed public statement of an open offer for acquiring shares under these regulations.         

6.   MANIPULATION OF RECORD DATE FOR PAYMENT OF SPECIAL DIVIDEND

On 9^th April the company announced the record date (RD) 

“The Record Date for payment of Interim &/ Special Dividend, if approved, will be April 27, 2019.” 

Accordingly the future was trading at a substantial discount to cash segment. The closing price of the shares on 16.04.19 in cash segment was 972.50 whereas in the future it was 10 lower. This is understandable because the Ex date is 25.04.19 which is also the settlement date.

On 17^th April 2019 the company has declared that :

“The Final Dividend and the Special Dividend are payable subject to the approval of Shareholders at the Twentieth Annual General Meeting.”

(The complete text of the messages copied from BSE website are appended below for detailed scrutiny. )

EXTRACTS FROM COMPANY NOTICE

Exchange Received Time 09-04-2019 17:10:19 Exchange Disseminated Time 09-04-2019 17:10:26 Time Taken 00:00:07

Notice pursuant to Regulation 29 of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, be and is hereby given that the meeting of the Board of Directors of the Company will be held on Wednesday, April 17, 2019, inter alia, to consider the audited financial results of the Company for the quarter and year ended March 31, 2019, to consider declaration of interim &/ special dividend, if any and also the recommendation of final dividend, if any, amongst other matters. The Record Date for payment of Interim &/ Special Dividend, if approved, will be April 27, 2019.

Exchange Received Time  17/04/2019 13:55:20         Exchange Disseminated Time   17/04/2019 13:55:23              Time Taken   00:00:03

MindTree Ltd has informed BSE that the Board of Directors of the Company at its meeting held on April 17, 2019, inter alia, has recommended a Final Dividend of 40% (Rs. 4 per equity share of face value of Rs. 10/- each) for the financial year ended March 31, 2019 and a Special Dividend of 200% (Rs. 20/- per equity share of face value of Rs. 10/- each) to celebrate the twin achievements of exceeding USD 1 billion annual revenue milestone and 20th anniversary of the Company. The Final Dividend and the Special Dividend are payable subject to the approval of Shareholders at the Twentieth Annual General Meeting.

7.   ATTEMPT TO ILLEGALLY DEPRIVE  SMALL INVESTORS FOR MORE THAN 100 CRS.

It is obvious that there is an attempt by  L & T to cheat the minority shareholders of more than Rs.100 Crores ( Rupees one hundred Crores) Dividend of  Rs.20 on 5.13 Crore shares. List of dates :

·       8^th July 2019 -The revised record date for the Special Dividend and Final dividend

·       28.06.19 closing of the offer

·       12.07.19. payment date

·       8.07.19. No ownership can be passed on to L & T till that date.

·       L & T pre-poned the date of payment in an attempt to enrich themselves with dividend that rightfully belongs to the small shareholders. L & T cannot be allowed to take advantage of the dividend and the entire dividend @ 24 ( Special Dividend 20 and Final dividend 4) should be passed on to the shareholders  who have tendered  the shares.

In their Letter of Offer also it is specifically mentioned that till the date of the Letter of offer all rights to dividend etc. will lie with the  shareholders tendering the share :

6.1.2 The Equity Shares tendered under this Offer shall be fully paid-up, free from all liens, charges, equitable interests and encumbrances and shall be tendered together with all rights attached thereto, including all rights to dividends, bonuses and rights offers, if any, declared hereafter, and the tendering Shareholder shall have obtained all necessary consents for it to sell the Equity Shares on the foregoing basis.    

·       MINDTREE  has a history of paying Special dividend. Special dividends in the past were considered as Interim Dividend and paid out accordingly. In this case also, special dividend was bunched together with interim Dividend with RD of 27.04.19 but later on the record date was shifted to 8^th July 19.

On 9^th April the company announced:

“The Record Date for payment of Interim &/ Special Dividend, if approved, will be April 27, 2019.” 

·       The market takes that dividend has been declared on the day the Board announces the dividend and the record date. The impact on the price of Future stock is a proof of this. Scrips where dividend has been declared will be quoted higher in the cash segment and lower in the Future segment. (except for some unique cases where the dividend is higher than 5% of the market price and hence adjustable in the Future price.) Same is the case in MINDTREE.

·       It may be argued that technically a dividend is declared upon approval by shareholders but interim dividend is paid out without any such approval. For all practical purposes, even a final dividend is considered to have been declared when it is announced by the Board and its Record date is announced.

8.   OFFER PRICE CANNOT BE ALLOWED TO BE REVISED LOWER

As per Regulation 8, the Offer Price cannot be lower than the price at which the Acquirer has acquired the shares. This price is 980 as per the PA dated 18^th March 2019. At that time the special dividend of Rs.20 was nowhere in sight. In case the dividend of 20 is not given to the Shareholders who have tendered the shares, it will tantamount to reduction in the share price by Rs. 20. The effective Offer price will reduce to 960 only as against the Offer price of 980.

9.   OFFER LETTER INDICATES DIVIDEND TO TENDERING SHAREHOLDERS

Even the scheduled dates of activity indicate that the shareholders should get the dividend. The scheduled date of payment (12.07.19) was after the record date for dividend (08.07.19). L & T would not have been the owner of the shares and could not have got the dividend. It seems, just to be able to get the dividend, although in violation of the basic terms of Offer etc.  L & T pre-poned the date of payment and released the payment before the record date. 

10.  LOSS OF THOUSANDS OF CRORES IN MARKET CAP AFTER L7T TAKEOVER

Investors in Mindtree have lost heavily because of L & T taking over the company. The market price  of the company shares have crashed to 675 from a peak of 1183 resulting in loss of thousands of crores to the investors. 

We pray to you to:

1.    Reply to the above points immediately.

2.    Take appropriate action to protect the interest of small shareholders and ensure that the special dividend of Rs.20 and the Final dividend of Rs.4 is paid out to them.

3.    To initiate disciplinary action against L & T for the above violation.

4.    To instruct  L & T to complete their committed purchase order for 2.48 Crore shares.

5.    In case you are not in able to appreciate our above points, please give us an appealable order so that in case some of the investors feel extremely distressed, they may escalate the matter and file appropriate appeals.  

Text of letter written to SEBI Reg. Withdrawal of Buy-Back by K.P.R. Mill Ltd.

SMALL INVESTORS’ WELFARE ASSOCIATION

Regn No. F-72744 (M)

703, Meadows, Sahar Plaza Complex, Andheri Kurla Road, J.B. Nagar, Andheri ( E) , Mumbai 400 059

Email : SirenBajao@gmail.com Tel : +91-22-4215 1349

The above company has informed BSE that they approached you with their desire to withdraw the already announced Buy-Back offer of shares. The reasons given are:

1.    “Increase in the amount of Buyback obligation due to the tax proposal in the Finance Bill 2019”

2.    Not permitted to increase the buyback amount beyond the amount approved by shareholders.

3.    In case the offer is implemented they have to borrow which is not permitted.

We would like to point out that as per  Buyback of Securities Regulations clause 24 (I) (d) it cannot be withdrawn.

“the company shall not withdraw the offer to buy-back after the 

Tax draft letter of offer is filed with the Board or public announcement 

of the offer to buy-back is made;”

The only problem the management is having is the requirement of additional funds to pay the Income Tax. We would like point out as follows:

·       No action to defeat a  Tax provision of the country can be encouraged.

·       As per the extant provision of law such withdrawal permission cannot be allowed.

·       No tax payment can be refused for want of sanction by the Board or the shareholders.

In the circumstances, we urge you to please reject such request for withdrawal of Buyback offer already announced.

Open Offer of Mindtree by L & T, Invesors’ losing about 100 Crs.

HIGHLIGHTS OF MAIL WRITTEN TO SEBI 

The highlights of key issues  raised in each of these letters is attached herewith for ease of your reference. You will find that all the points are very vital and important, yet they have remained unanswered.

We wish to once again state that Mindtree Open Offer by L & T is one of the most opaque Takeover violating the spirit of the Regulations.

ü  It was falsely stated that Open Offer has been triggered on 18^th March 2019.

ü  It was falsely stated that a Purchase order to purchase up to 2.48 Crs. Shares of MINDTREE upto a price of 980 has been  placed with its stock broker Axis Capital Limited on March 18, 2019.

ü  First purchase of shares actually took place is only on  April 30, 2019

ü  Till date the only 1.47 Crs. Shares have been purchased i.e. about 1 crore shares are yet to be purchased, but L & T is not buying it or why its broker Axis Capital is not buying it is a mystery. The shares are available at much lower than 980.

ü  The share purchase order is the KEY INSTRUMENT which triggered the Open offer. This should have been fully disclosed in the Letter of Offer.

ü  There is no clarity and SEBI is not forcing  L& T to come out clean, there is still no answer why the broker AXIS did not buy the shares between the period 18.03.19 to 29.04.19 although the shares were available below the mandate price.

ü  There is no clarity why the broker AXIS is still not buying the shares from the market when the price of the shares is much lower than the Purchase order price?

ü  Any large Purchase order in the public domain impacts the price significantly. L & T must be asked to transparently declare  when it is going to complete its committed purchase of 2.48 Crs. Shares.

L & T IS TRYING TO DEPRIVE THE MINORITY SHAREHOLDERS OF ABOUT 100 CRS. OF SPECIAL DIVIDEND.

1.    A Special dividend of Rs.20/- is still due from Mindtree. To overcome one of our objection it appears  L & T has made prepayment on 2 July much ahead of scheduled date of 12 July, just to be beneficial owner of the shares before the Record  date of 8^th July 2019. Still, as pointed out in our earlier letter, the dividend cannot be paid to L & T because as per the terms given in the Offer letter  all rights to dividend etc. will lie with the  shareholders tendering the share :

6.1.2 The Equity Shares tendered under this Offer shall be fully paid-up, free from all liens, charges, equitable interests and encumbrances and shall be tendered together with all rights attached thereto, including all rights to dividends, bonuses and rights offers, if any, declared hereafter, and the tendering Shareholder shall have obtained all necessary consents for it to sell the Equity Shares on the foregoing basis.    

2.    MINDTREE  has a history of paying Special dividend. Special dividends in the past were considered as Interim Dividend and paid out accordingly. In this case also, special dividend was bunched together with interim Dividend with RD of 27.04.19 but later on the record date was shifted to 8^th July 19.    

On 9^th April the company announced:

“The Record Date for payment of Interim &/ Special Dividend, if approved, will be April 27, 2019.” 

On 17^th April 2019 the company has declared that :

“The Final Dividend and the Special Dividend are payable subject to the approval of Shareholders at the Twentieth Annual General Meeting.”

3.    The market takes that dividend has been declared on the day the Board announces the dividend and the record date. The impact on the price of Future stock is a proof of this. Scrips where dividend has been declared will be quoted higher in the cash segment and lower in the Future segment. (except for some unique cases where the dividend is higher than 5% of the market price and hence adjustable in the Future price.) Same is the case in MINDTREE.

4.    It may be argued that technically a dividend is declared upon approval by shareholders but interim dividend is paid out without any such approval. For all practical purposes, even a final dividend is considered to have been declared when it is announced by the Board and its Record date is announced.     

5.    As per Regulation 8, the Offer Price cannot be lower than the price at which the Acquirer has acquired the shares. This price is 980 as per the PA dated 18^th March 2019. At that time the special dividend of Rs.20 was nowhere in sight. In case the dividend of 20 is not given to the Shareholders who have tendered the shares, it will tantamount to reduction in the share price by Rs. 20. The effective Offer price will reduce to 960 only as against the Offer price of 980.

Investors loosing money in manipulation of Open offer dates.- Open Offer of Mindtree by L & T

Content of my letter to SEBI dated 26th June, 2019 is as follows,

We wish to highlight that the Mindtree Open offer by L & T is one of the most manipulative Open Offer in the recent corporate history. Investors are losing money to all the manipulation by L & T Management and their related operators.  It seems that SEBI officials were not vigilant while clearing the Open offer. The offer was cleared with application of mind. The corporate event (payment of dividend) was completely ignored and there is no clarity or direction by SEBI to acquirers for payment of dividend.

The first case in my memory is that of  IPCL where the record date for payment of dividend was falling in the intervening period of date of closure offer but before the pay out of consideration for shares accepted in the Open offer. On my pointing it out to SEBI, the investors’ interest was fully protected and the Acquirers made the payment before the record date and became entitled for dividend. In all subsequent cases it was specifically mentioned that investors shall be entitled for dividend.

Mindtree is a strange case- please note the key dates:

1.    The record date for the Special Dividend and Final dividend is 8^th July 2019

2.    Closing date of the offer is 28.06.19

3.    Last date for purchasing the shares for participating I the offer is 26.06.19

4.    Vallan is ending on 27.06.19

5.    Payment for shares tendered in Open Offer will be made on 12.07.19.

6.    Dividend will be finally approved in AGM on 16.07.19

While clearing the Open Offer, SEBI seems to have completely ignored these significant dates. This is playing havoc in the market.  The closing price as on 25^th June 2019 on NSE will give you some indication:

1.    Cash 952

2.    June FUT 926

3.    July FUT 890

4.    June 980 PE 51

In the past we had pointed it out to you that how L & T is stretching the law too far and  falsely declared that they have triggered an  Open Offer in Mindtree without  triggering it. Even now there is no clarity with regard to their purchase order for Midtree.

We expect SEBI to act immediately in the matter and ensure that investors’ interest is fully protected. Please ensure that:

a. Dividend of Rs.24, (Special dividend 20 and Final  dividend 4) as already announced is paid to all the investors who have participated in the offer. As per the Letter of Offer L & T is not entitled to any dividend that has been already declared. Relevant Extract given below:  

6.1.2 The Equity Shares tendered under this Offer shall be fully paid-up, free from all liens, charges, equitable interests and encumbrances and shall be tendered together with all rights attached thereto, including all rights to dividends, bonuses and rights offers, if any, declared hereafter, and the tendering Shareholder shall have obtained all necessary consents for it to sell the Equity Shares on the foregoing basis.    

b. Investigate the matter for market manipulation by Operators causing huge loses to investors.

c. Issue general guidance to your officers to please take care of intervening dividend pay-out dates  and vallan dates etc. while clearing any offer.

Shall be obliged receive a formal reply from you. Till date we have not received any reply from anyone for all our previous mails. Neither the Acquirer nor their Merchant Banker bother to even acknowledge our letters.

Attempt to Cheat small investors for more than 100 Crs. - Open Offer of Mindtree by L & T

Content of my letter to SEBI dated 17th June, 2019 is as follows,

We wish to highlight once again, an attempt by  L & T to cheat the minority shareholders of more than Rs.100 Crores ( Rupees one hundred Crores) This they are able to do with the active connivance of the existing promoters of Mindtree. 

L & T has announced an Open offer for 5,13,25,371 (five crore thirteen lakh twenty five thousand three hundred and seventy one), dividend on these shares will now be paid to the Acquirers instead of the minority shareholders who are tendering the shares. This has been made possible by manipulating and changing the record date by the management of Mindtree.   

On 9^th April the company announced the record date (RD) 

“The Record Date for payment of Interim &/ Special Dividend, if approved, will be April 27, 2019.” 

On 17^th April 2019 the company has declared that :

“The Final Dividend and the Special Dividend are payable subject to the approval of Shareholders at the Twentieth Annual General Meeting.”

The record date for the Special Dividend and Final dividend has been kept at 8^th July 2019,  and the date for closing of the offer is 28.06.19 whereas payment will be made on 12.07.19. Since the shares will be transferred from the account of the  shareholders, they will not get the dividend, although technically they are still the owner of the shares since the payment will not be made till 8.07.19. No ownership can be passed on to L & T till that date. To add further, even if L & T is to pre-pone the date of payment, they cannot be allowed to take advantage of the dividend and the entire dividend @ 24 ( Special Dividend 20 and Final dividend 4) should be passed on to the shareholders  who are tendering the shares.

In their Letter of Offer also it is specifically mentioned that till the date of the Letter of offer all rights to dividend etc. will lie with the  shareholders tendering the share :

6.1.2 The Equity Shares tendered under this Offer shall be fully paid-up, free from all liens, charges, equitable interests and encumbrances and shall be tendered together with all rights attached thereto, including all rights to dividends, bonuses and rights offers, if any, declared hereafter, and the tendering Shareholder shall have obtained all necessary consents for it to sell the Equity Shares on the foregoing basis.     

This clearly states that the rights to dividends already declared are still vested with the shareholders tendering the shares.

You are requested to immediately direct the Acquirer- L & T, to clarify to the shareholders that, the dividend on the shares tendered and even if accepted, will still come to the account of the shareholder who has tendered the shares.

Shall be obliged for your immediate action in the interest of investor protection and maintaining market integrity.

IBC---UNFAIR TREATMENT OF SHAREHOLDERS

EDITED VERSION OF MY PETITION TO NCLT

MY CA NO. 308 OF 2018 WAS SUMMARILY DISMISSED ON 17 APRIL 2018.

Brief Introduction: Electrosteel Steels Limited (ESL) was  incurring losses due to delay in implementation of the project, Chinese Visa Issue, Local Issue, Delay in Disbursement of Loans, led to delay in implementation of project. Additional loan for completion of project etc., debt restructuring under CDR mechanism was carried out with some reliefs & concessions. The restructuring package was approved and implemented in December 2013.

Ultimately State Bank of India filed an application under section 7 of the Insolvency and Bankruptcy Code, 2016 in the NCLT, Kolkata on 27th June, 2017. The said application was disposed off by approving the resolution plan as submitted by VEDANTA  on 17^th April 2018. Shareholders capital, especially the Minority shareholders’ was almost completely wiped out.  I had filed a petition in the NCLT, putting forward the case of Shareholders, especially the Minority shareholders.

THE ‘ATMA’  OF MY ARGUMENT WAS:

A.    The earliest Economists had recognized three basic  resources or factors of production - Land, Labour and Capital. The entrepreneur first introduces capital and the capital mobilizes all the other resources for production.  Without capital no industrial development can take place.  Wiping out the share capital will have a long term negative impact on entrepreneurship and the Economic development of the country will be adversely effected in the long run.

B.    Preamble of IBC is  promoting entrepreneurship , maximization of value of assets , and balancing interest of all stakeholders.

C.    About 83,000 small shareholders lost their wealth unjustifiably. Trading in these shares were done  with the permission of CoC, wrongfully tempting the investors to buy the shares without being aware that they will lose their investment almost completely.

D.   Any value above LIQUIDATION value is because it is a going concern, an enterprise. As the shareholders are the earliest contributors to enterprise, they deserve to be fairly treated.

  

1.    The Preamble of the Code is quoted herein below:

“An Act to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto.”

2.    The preamble of the Code specifically  provided that the purpose of enactment of the instant Code include promoting entrepreneurship , maximization the value of assets , and balancing interest of all stakeholders.

The Code casts an express obligation on the resolution professional with regard to the stakeholders having interest in the corporate debtors as its shareholders. The text of Section 28 (1) (i) of the Insolvency and Bankruptcy Code, 2016 is reproduced below:

28. (1) Notwithstanding anything contained in any other law for the time being in force, the resolution professional, during the corporate insolvency resolution process, shall not take any of the following actions without the prior approval of the committee of creditors namely:—

(i) dispose of or permit the disposal of shares of any shareholder of the corporate debtor or their nominees to third parties

The shares of the corporate Debtor- Electrosteel Steels Limited(ESL) are listed on the National Stock Exchange(NSE) and Bombay Stock Exchange (BSE) are being traded very heavily on daily basis

Impliedly, this trading is allowed with “the prior approval of the committee of creditors”.  This gives a clear signal to the investors at large that the CoC is aware and shall take care of their interest in investment made in the shares of corporate debtors. With such powers being vested with the CoC, a fiduciary relationship is being established and the CoC is obliged to take care of the interest of the investors, especially the 83,000/- odd small investors of the Corporate Debtor. The CoC cannot be allowed to act in its own selfish interest to the detriment of the shareholders. The CoC cannot be allowed to destroy shareholders’ value. It is humbly submitted that the RP and CoC are solely responsible for any loss to the shareholders after 21.7.2017.

3.    One of the avowed objectives of the IBC is “to promote entrepreneurship”  The earliest Economists had recognized three basic  resources or factors of production - Land, Labour and Capital. The entrepreneur first introduces capital and the capital mobilizes all the other resources for production.  Without capital no industrial development can take place.  Wiping out the share capital will have a long term negative impact on entrepreneurship and the Economic development of the country will be adversely effected in the long run.  It is humbly submitted that the Resolution Professional should not be permitted to perform any act which would erode the share capital of the Corporate Debtor and prejudicially affect the interests of the majority as well as minority shareholders of the Corporate Debtor.

4.    The liquidation Value of the Corporate Debtor is Rs.2,900/- Crores. Therefore, if the assets are sold not as a going concern they will be able to realize only Rs.2,900/- Crores, but if the bidders/resolution applicants give more than that or almost double than the liquidation value, it is because the corporate debtors is a going concern, an enterprise. As the shareholders are the earliest contributors to enterprise, they deserve to be fairly treated and have a right to be informed about the resolution process. 

5.  The applicants further states that by 2^nd amendment in the Insolvency Resolution Process for Corporate Person Regulation 2017 the Regulations 38 has been amended which is quoted as follows :-

         Mandatory contents of the resolution plan

[‘(1A) A resolution plan shall include a statement as to how it has dealt with the interest of all stakeholders, including financial creditors and operational creditors, of the corporate debtor”].

6. The applicants state that the applicants are not given any access to the meetings of the committee of the creditors. The minutes of the committee of creditors and the records of the corporate insolvency resolution process is not being given to the shareholders of the corporate debtor. The applicant being a shareholder of the corporate debtor, is entitled to know whether the resolution plan has been prepared upon due compliance of Section 38 (1A) of the Insolvency and Resolution Process of Corporate Person Regulation,  2017.

7. The applicants state that equal and equitable treatment should be provided to the shareholders along with the Financial Creditors by the Resolution Professional. It is humbly submitted that the fact that the shareholders will not be entitled to any dividends and will also lose substantial part of their capital, whereas the Financial Creditors will be entitled to receive either in full or partial satisfaction the amount of money provided to the Corporate Debtor as finances is contrary to the objectives of the Code.

L&T—Open Offer for MindTree- violation 

of Takeover code 2011. 

TEXT OF LETTER WRITTEN TO SEBI & OTHERS

Reg. L&T—Open Offer for Mind Tree- violation of Takeover code 2011. 

We regret to note that there is no reply or any visible action in the above matter in spite of our bringing to your attention the gross irregularities committed by Larsen & Toubro Ltd., who continue to violate the regulations with impunity.

It will not be out of place to mention here that the  conduct of  L&T in the past on many occasions  have been much below the desired level of good corporate governance and it is a company shrouded in various shades of grey. In the past when Birlas acquired their cement division, Mr. Naik did a lot of arm twisting and bargained for himself a great personal benefit in the name of Employees trust. By sharing the unholy gain with his other colleagues, he was  able to institutionalise corruption and avoid public scrutiny. Earlier there were allegations of bribery by them in middle east. Recently there have been many allegations of L & T being party to corrupt practices involving crores of Rupees in the matter ov Cognizant. Earlier it was alleged that Mr. Naik has formed a trust and hospital on company land and with company indirect resources but in the name of his personal relative. If the Public Announcement dated March 18, 2019, other filings, press release and the DPS are examined thoroughly, you will find many irregularities and false declaration. I wish to point out the following:

1.   ATTEMPT TO BEAT THE REGULATION-- OPEN OFFER IN VIOLATION OF  THE TAKEOVER CODE 2011-The SAST 2011 does not allows voluntary offer by any third party. This is a departure from the earlier 1997 code. As per Regulation 6(1) of SAST 2011, only  person/s holding 25% or more can bring a voluntary Open offer.

2.   FALSE DECLARATION IN THE PUBLIC ANNOUNCEMENT—It has been wrongfully stated in the Public Announcement at point no.1 that this is a mandatory open offer.  L&T claimed to have triggered the Open offer by placing an order for 15% of the share capital of the target company. This is wrong and incorrect. Open offer was not triggered and it is incorrect to say that “This Open Offer is a mandatory open offer made in compliance with Regulations 3(1) and 4”

3.   FALSE AND CONTRADICTORY DECLARATION IN THE PRESS RELEASE-  The press release said 

“ Immediately following the filing of the Public Announcement, L & T has placed an order with its broker for on-market purchase of up to 15% of share capital of Mindtree at a price not exceeding INR 980 per share”. 

This statement is in contradiction with the statement made in the PA which said

“pursuant to execution of the SPA and proposal for placing of the Purchase Order” 

It an admitted fact that only a proposal was there for placing of the purchase order. There was no actual placement of an order. L & T was in no position to place such an order. They have stated the order could be placed only after receipt of regulatory approvals. An order to the share broker is a definitive order.  An order placed for a specific number of shares up to a limit price, in this case 2.48 Crs. Shares, to be bought  up to INR 980 will make the broker buy all the shares available in the market at a price at or below 980 till the desired quantity of 2.48 Crs. Shares is achieved. But this was never the case.

4.   MALA-FIDE INTENTION OF L & T.—L&T acted in a great haste and without fulfilling legal & regulatory requirements with a   mala-fide intention to pre-empt the Board of MINDTREE who had notified the stock Exchange on 15-03-2019 that the meeting of the Board of Directors of the Company is scheduled on 20-03-2019, inter alia, to consider and approve Buyback of  equity shares of the Company. L & T successfully thwarted this meeting and the Board meeting of Mindtree had to be adjourned. The moment any Public Announcement is made for takeover of any company, Regulation 26 places several restrictions on the Target company. Under such circumstances  no buy back can be done without passing a special Resolution.

5.   UNWARRANTED DPS ISSUED ON 26.03.19—The Detailed Public Statement (DPS) issued by L&T is totally unwarranted and a misuse of the process of law. Till date  L&T has not purchased from open market,  or even paced a definitive order on its broker for purchase of shares as was falsely claimed. There  is no question of L&T triggering an Open Offer. Regulation 13(4) specifically provides that even if PA has been issued but  “the acquirer does not succeed in acquiring the ability to exercise or direct the exercise of voting rights in, or control over the target company,” then there is no need to make any DPS. The relevant portion is extracted below:

Explanation.— It is clarified that in the event the acquirer does not succeed in acquiring the ability to exercise or direct the exercise of voting rights in, or control over the target company, the acquirer shall not be required to make a detailed public statement of an open offer for acquiring shares under these regulations.         

   

In the light of the above, you are requested to please examine the whole matter very thoroughly with the seriousness that it deserve and take strict action against L&T for violating the regulations and acting in a mala-fide manner and misguiding investors and others.  

Shall be obliged for your immediate action in the interest of investor protection and maintaining market integrity.

Thanks & Regards,

For Small Investors’ Welfare Association

Arun Goenka

Authorised Signatory,

1.