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Wednesday, August 01, 2001



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Modipon allowed to take part in MRL open offer

Our Bureau

MUMBAI, July 31

THE Modi Rubber open offer issue has taken a fresh turn with the Securities Appellate Tribunal (SAT) today allowing Modipon Ltd to participate in the open offer made by Modi Rubber Ltd (MRL).

Mr C. Achuthan, Presiding Officer, SAT, set aside the order of the Securities and Exchange Board of India (SEBI) dated May 30, denying Modipon permission to take part in the open offer. SEBI had said that the company cannot participate in the offer as it is also a promoter of Modi Rubber and hence an acquirer or person acting in concert with the acquirers.

The open offer had closed on July 23 with the Modi brothers picking up an additional 36 per cent equity.

Mr Achuthan said in his order that even though SEBI's argument that Modipon is a promoter is tenable, it cannot be held that it is a person acting in concert or an acquirer.

He said the case is peculiar in that there are ``disputes and resultant litigations between the two promoter groups. In such a scenario, while one group is managing the company, is enhancing its holding in the company to its benefit'', it is to be seen t o what extent it is ``reasonable not to allow the other group to avail the opportunity of exiting the company''.

The Tribunal said SEBI's observation as a general proposition is flawless. SEBI had said, ``when an offer is made by existing promoters to further consolidate its holding, it is obvious that the persons belonging to the promoter group cannot participate in the public offer. Otherwise, there will be no meaning of consolidation by persons in control or promoter group.''

Mr Achuthan, however, said it cannot have universal application as the facts and circumstances of all the cases need not be common. He said the regulations are devised to protect the interest of all shareholders and should not be interpreted in such a wa y as would suppress the interests of any shareholders.

The case was referred to SAT by the Bombay High Court which had observed while hearing the writ petition filed by Modipon that the proper course would be to appeal before the Appellate Authority.

Related links:
Modi Rubber board meet on July 31
Modi Rubber: SAT ruling on Modipon likely by July 31
SEBI bars Modipon from open offer -- Closing date extended by a week

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