Shri S.V.Narasimha Rao, learned Representative of the Appellant referred to various documents filed along with the appeal to show that the share transaction was interse the promoters and the foreign collaborator, and thereby covered under regulation 3 (1) (e). He submitted that the transferee i.e., the Appellant, is the foreign collaborator of the company and this fact has been admitted by the Respondent. Shri. Rao contested the Respondent’s contention that the transferors are not promoters covered by the definition of "promoters" available under section 2 (h) of the Regulations. According to Shri Rao, Shri. V.Ramesh, the managing director of the company is a promoter of the company and the 26 transferors are all his relatives and associates, associated with him in promoting the company. He submitted that the Respondent’s contention that Shri. V.Ramesh is not a promoter of the company is contrary to the evidence on record. In support, citing documentary evidence he stated that the original collaboration agreement was signed between Shri.V.Ramesh and Shin-A Corporation of Korea. Shri. Ramesh subsequently transferred this agreement in favour of the Indian Company (page 9 of the prospectus). Industrial license was in his name. Shri. Ramesh also signed the original joint venture agreement with the Korean Company. Under the heading "other ventures promoted by the Indian promoting company and/or its promoters", details of Navabharat Industries Linings and Equipment Limited are given (page 7 of the prospectus). No other individual or corporate body mentioned in the prospectus had even the remotest connection with Navabharat Industrial Linings & Equipment Limited. The particulars of this company were provided only because Shri. Ramesh was its managing director, and was a promoter of Shin-A Chemicals. He further stated that Shri. Ramesh entered into a Promoters’ agreement with Tamilnadu Industrial Development Corporation (TIDCO) for setting up the project and (page 18 of the prospectus) also gave personal guarantees to all the financial institutions for the moneys they lent to the company. Shri. Rao stated that Shri. Ramesh has been a Director of the company from its inception (page 16 of the prospectus) and subsequently became its Managing Director, a position, which he holds even on date. According to him as per regulation (2) (1) (h), definition of a promoter includes a person or persons who are in control of the company. Shri. Ramesh by virtue of being the Managing Director of the company is a person in control of the management of the company. He reiterated that in the light of irrebuttable evidence, it has to be accepted that Shri. Ramesh is a promoter of the company. He further submitted that the share holding of Shri. Ramesh and his relatives need be taken into consideration. In this context he referred to para 4.4 of the adjudication order wherein the names and share holdings of 27 transferors have been listed and stated that shareholders at sl.No.1, 2 and 3 are close relatives of Shri. Ramesh - Ms. V Rajeshwari is his wife, Ms. V Shilpa is his daughter and Mr. V Sandeep is his son - and the total number of shares transferred by them to the Appellant accounted for 3.92% out of the 4.86% shares involved in the transaction. Shri. Rao submitted that the remaining .94% shares were transferred by 24 transferors. The Respondent’s submission that the names of the transferors were not mentioned as promoters in the prospectus is devoid of merit, as all that the prospectus requires is to classify the promoters and there is no requirement to state therein the name of each and every promoter. According to him the fact that the transferors are promoters is borne out of the records that their names were shown as promoters in the list filed with stock exchange. He submitted that the letter filed by the company with the stock exchange as accepted by them would prove this fact. He submitted that a true copy of the same was made available to the Respondent. Shri. Rao submitted that the Respondent had refused to accept the transferors as promoters because they were numbering 26 and some of their holding was very low. In the absence of any restriction on the number of promoters and minimum holding of shares held to consider as a promoter, the Respondent’s decision to ignore them as promoters should not be agreed to. He further submitted that in the prospectus dated 2.4.1993 the company had clearly stated the quantum "reserved to promoters" and also the number of equity shares held by "Director’s friends and relatives". He referred to the information under para "previous issue of shares for cash" appearing on page 16 of the prospectus that " the company had issued 23, 12, 525 equity shares of Rs. 10 each for cash at par and the same has been allotted for the aggregate face value of Rs. 2, 31, 25, 250 to the Indian and Korean promoters of the company" He submitted that as the prospectus was issued by the company prior to the notification of the Regulations in 1997, the definition of promoters provided in the 1997 Regulations, was not applicable to them. The expression promoter need be understood as it was commonly understood at the time of allotment. In this context he referred to section L of SEBI guidelines for Disclosure and Investor Protection issued in 1992 and also the related clarifications. Shri. Rao submitted that the transferors are friends / associates /relatives of Shri. Ramesh and as such constituted part of the promoter group. Therefore the transaction comes well within the exemption provided under regulation 3 (1) (e) (iii) (a). He also submitted that acquisition of additional shares by a promoter in due course will not change his status as a promoter to exclude his holdings from the promoter group holding.
