Mumbai, Dec. 10: The Securities and Exchange Board of India (Sebi) today gave HSBC Securities and Capital Markets a clean chit for its role in managing a Modi Rubber open offer where some junior Life Insurance Corporation (LIC) executives allegedly sold shares without sanction from the top brass.
The order was passed by T. M Nagarajan, a whole-time member of Sebi, whose current chairman G. . Bajpai was at the helm of LIC when the share deal took place.
The offer was made in June 2001 by V. K. Modi and others to acquire shares adding up to 35 per cent of Modi Rubber’s share capital. Sebi said the HSBC arm had not done anything that would call for a penalty.
The inquiry officer erred in ruling that the HSBC arm acted negligently by paying money from the escrow account without considering claims on the balance public shares.
The inquiry officer appointed by Sebi sought details from HSBC Securities regarding the amount in escrow account for meeting the liability towards LIC/ public shareholders as the case may be and the extent of compliance with relevant provisions of the takeover code.
The offence was for having released the balance amount from the escrow account to the acquirer prior to the completion of all obligations with respect to the open offer.
HSBC Securities had acted as a merchant banker for the open offer made by V. K. Modi, B. K. Modi and others to acquire up to 87.64 lakh shares of Modi Rubber representing 35 per cent of the paid up capital of the target company.
The offer opened on June 4, 2001 and was to be closed on July 3, 2001. The shares tendered in the offer were 1.08 crore, including 27.04 lakh shares by LIC.
In July 2001, Life Insurance Corporation wrote to HSBC Securities and Karvy (registrar to the issue) to return the shares tendered by it on the ground that the shares had been tendered in an unauthorised manner and the act of lodgement of the shares was the “offer” and not an “acceptance” of the offer.
On July 23, 2001 HSBC Securities replied to LIC that shares once tendered cannot be returned. LIC also filed a suit in the Bombay High Court. Sebi did not allow Modipon and Modi Spinning and Weaving Mills, considered as the promoters of MRL, to participate in the open offer.