Hira Automobiles takes 10 years to follow Sebi directive; fined Rs 14 lakh

The company submitted that it was not sure of the regulator's directions but Sebi responded saying that attributing non-compliance to misunderstanding its instructions was "bereft of merit" and therefore could not be accepted.

It took 10 years for a company to follow a regulatory directive.

Hira Automobiles Ltd was asked to report the progress of implementing minimum public shareholding (MPS) norms by May 2014 and the company submitted the report only in April 2024. As the market regulator noted in its order fining the company a total of Rs 14 lakh, "there has been a delay of around 10 years".

The Securities and Exchange Board of India (Sebi) issued the order on April 16.

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The matter dated back to June 3, 2013, when all listed entities were asked to meet the MPS norms. HAL failed to comply and Sebi issued interim orders on June 4, 2013, freezing voting rights and corporate benefits with respect to the excess promoter holding; prohibiting the promoters from dealing in the securities market till MPS norms are met; restraining the shareholders forming part of the promoter group from holding any new position as a director in any listed company and so on.

The order also asked the company to attempt to meet the MPS norms and file its progress in this front every quarter.

That May, the company submitted that it had initiated the process for voluntary delisting. Taking this into consideration, Sebi passed an order on November 22, 2013, permitting the promoter to buy shares of HAL held by public shareholders.

The company was asked to complete the delisting in five months (by May 2014) and report the outcome of delisting process within a month thereafter (June 2014). However, in August 2014, the company informed the stock exchanges that the delisting could not be completed because it could not obtain the requisite consent of public shareholders.

Meanwhile, the company's shareholding pattern continued to be in non-compliance with MPS norms. As the Sebi order noted, this was the case till the quarter ended June 2023.

The company also failed to submit quarterly compliance report on MPS norms from the quarter ended September 2014 to the quarter ended June 2023.

The company submitted that it was not sure of the regulator's directions but the regulator responded saying that attributing non-compliance to misunderstanding its instructions was "bereft of merit" and therefore could not be accepted.

On updating the regulator on its delisting process, the company submitted that it had informed the exchanges of its progress through its August 2014 communication.

The Sebi order stated that submissions to the exchanges cannot be construed as submissions to the regulator. Therefore, the regulator found it in violation of its directions.