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Nilanjan Dey

Kolkata , March 3

SEBI has ordered Mr Dinesh Kumar Singhania, member of the Calcutta Stock Exchange (CSE), to dissociate from the capital market and not deal in securities in any manner for one year. The order is in the context of acquisition of shares of Bombay Dyeing and Manufacturing Co, allegedly in violation of takeover regulations by Mr Arun Kumar Bajoria, the well-known jute baron.

The regulator, which passed the order under Sections 11 and 11B of the SEBI Act, 1992, referred to adjudication proceedings to be initiated against him. The order, passed by former SEBI Chairman, Mr G.N. Bajpai, follows investigations into the acquisition of the company's shares, allegedly in violation of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 by Mr Bajoria and others.

The jute baron had stated that he (along with persons acting in concert) had acquired 49,64,014 shares in June 2000, a holding that subsequently went up to 52,53,826 shares. He also stated that Mr Singhania was the person who acted in concert with him.

The law firm representing the broker submitted that its client never intended to acquire substantial Bombay Dyeing shares. The stock purchased by him during the relevant period was all bought in his capacity as a CSE member. It was delivered to the purchasers — Bluechip Capital Markets and Mega Stocks.

Also, that he had nothing to do with any alleged acquisition of shares nor was he an `acquirer.'

SEBI felt that the threshold for acquisition of shareholding of five per cent for the purpose of disclosure to the company was 20,50,091 shares. It was found that 9,00,000 shares were transferred to Mr Singhania (in June 2000) by the jute baron through his firms (that is, Mega Resources and Mega Stocks). In fact, these shares were transferred to the beneficiary demat account of the CSE member and not to his pool account.

Further, the shares were held in his demat account for over five months; and from this beneficial demat account, these were pledged with various banks (including ABN Amro, Global Trust, HDFC Bank) for obtaining loan/overdraft. Overdraft facilities of Rs 1.95 crore by pledging 3,04,600 shares were obtained by Mr Singhania from ABN Amro.

In this case, these 9,00,000 shares were transferred to the beneficiary demat account and as such he was a beneficial owner of the said shares as per the Depositories Act, 1996.

The SEBI order rejected the contention that these shares were purchased by Mr Singhania as a broker and not as an acquirer. It found no critical disclosure was made by him to the target company.

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