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Order valid till case against HFCL promoters is disposed of

Kolkata March 8 The Securities and Exchange Board of India has withheld clearance of HFCL Infotel Ltd (HIL) share sale document "till the proceedings" pending against the promoters and associates of HFCL including HIL in another case are disposed of by the regulator. The draft document was a proposed offer for sale of 80 lakh shares, representing 61.98 per cent voting rights in HIL, held by HFCL.

Mr T.C. Nair, Whole Time Member of SEBI, in his order on Wednesday clarified that it was passed for a limited purpose of dealing with the HIL draft document.

The company had filed the draft sale offer document with SEBI through its lead manager, KJMC Global Market (India) Ltd, on December 23, 2005. SEBI had informed HIL on June 13, 2006 that the draft document would have to be "examined in the light of investigation" conducted by it into the alleged violation of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulation by the promoters/associates and subsidiaries of HFCL and HIL.

SEBI, however, kept the proceedings in abeyance once HFCL moved the Division Bench of Delhi High Court by way of a writ petition questioning the jurisdiction of SEBI in the said proceedings.

Subsequently on February 20, 2007 SEBI had issued a show-cause notice to HIL as to why an order withholding communication of observations of SEBI on the draft offer document should not be passed.

Mr Nair in his order also observed that any direction regarding the sale of promoters' holding in HIL at this stage would "affect the interest of the investors who will be subscribing to the proposed offer".

The order further stated that considering the pending proceedings against several HFCL entities including HIL over alleged charges of having aided and assisted KP (Ketan Parekh) entities in creating an artificial market and thereby indulging in market manipulation, severing HIL from HFCL group was not possible.

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