SEBI slaps penalty on Fortis Healthcare for violating provisions

SEBI slaps penalty on Fortis Healthcare for violating provisions

The market regulator on 11 January imposed penalty of Rs 1 lakh for noncompliance to listed provisions

In respect of Fortis Healthcare Ltd. (target company), a draft letter of offer (DLOF) was filed with Securities and Exchange Board of India (SEBI), by managers to the open offer viz. HSBC Securities and Capital Markets (India) Pvt. Ltd., HDFC Bank Ltd., Citibank Global Markets India Pvt. Ltd. and Deutsche Equities India Pvt. Ltd. (Merchant Bankers/MB).

On perusal of the DLOF, prima facie noncompliance with the provisions of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011 (SAST Regulations, 2011) by the erstwhile promoter of the target company viz. Fortis Healthcare Holdings Pvt. Ltd. (Noticee) were observed by SEBI. Accordingly, it was alleged that the Noticee had violated the provisions of Regulations 29(2) read with 29(3) of SAST Regulations, 2011.

The first issue for consideration was whether the Noticee had violated Regulations 29(2) read with 29(3) of SAST Regulations, 2011.

It was opined by the Adjudicating Officer(AO) that in terms of Regulation 29(2) r/w Reg. 29(3) of the SAST Regulations, any person, who together with persons acting in concert with him, holds shares or voting rights entitling them to five per cent or more of the shares or voting rights in a target company, shall disclose the number of shares or voting rights held and change in shareholding or voting rights, even if such change results in shareholding falling below five per cent if there has been a change in such holdings from the last disclosure made and such change exceeds two per cent of the total shareholding or voting rights in the target company.

The disclosure made in the context of the above said regulations shall be made to the stock exchanges and to the company as per the prescribed format within two working days of such acquisition or disposal of shares which has resulted in the change in shareholding or voting rights in the target company.

It was also noted that disclosure made by the Noticee on 14 August 2017 was in respect of change in shareholding of the Noticee from 37.57 per cent to 36.51 per cent (i.e. transaction on 10 August 2017). However, the disclosure made on 14 August 2017 did not mention about the change in shareholding from 39.71 per cent to 37.60 per cent, and there was just a note which mentioned that due to sale from 25 July 2017 to 10 August 2017, the cumulative shareholding had been reduced by more than two per cent and accordingly, this disclosure had been made.

It was further noted that, for the purpose of the disclosure requirement, a particular format had been specified under the said Regulation, containing specific details about transactions of promoters of the company such as: Name(s) of Acquirer along with the persons acting in concert (PACs), no. of shares acquired/sold, Pre and Post holding of the Acquirer along with PACs after the acquisition/sale of shares, date of transaction, the equity share capital of target company before and after the acquisition/sale of shares etc.

Hence, this mere note without the aforementioned details as specified in the format under the aforesaid Regulation could not be considered as compliance with Regulation 29(2) of SAST Regulations 2011 for the change in shareholding of promoters from 39.82 per cent to 37.71 per cent.

The judgment of the SAT in the matter of Premchand Shah and Others v SEBI was also referred to wherein it was held that when a law prescribes a manner in which a thing is to be done, it must be done only in that manner. Non-disclosure of information in the prescribed manner deprives the investing public of the information which is required to be available with them when they make an informed decision while making investments.

Based on these findings, it was concluded that the Noticee had violated the provisions of Regulations 29(2) read with 29(3) of SEBI SAST Regulations, 2011.