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| Sebi threatens action against Sterling Holiday Resorts |
| BS Reporter / Chennai Nov 14, 2009, 01:01 IST |
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The Securities and Exchange Board of India (Sebi) today directed Chennai-based Sterling Holiday Resorts (India) Ltd to dematerialise 299,800 shares of the company registered in the name of Gujarat Industrial Investment Corporation Ltd (GIIC), failing which it said it would act against the company and its directors.
The order is a follow-up to Sebi’s own order of August 2005, based on a complaint by GIIC in February that year, that Sterling Holidays had failed to dematerialise these 299,800 shares held by it. GIIC stated it had given Rs 5 crore of financial help to Sterling in October 1996. For the loan, Sterling had pledged 25,92,800 shares held by its promoters/associates as collateral security for repayment.
As Sterling had defaulted in paying on the agreed schedule, this security was enforced and of the 2,592,800 shares pledged, 299,800 shares in physical form were transferred by the company in the name of GIIC in 2001.
The corporation lodged these 299,800 shares of Sterling with UTI Securities Ltd for the purpose of dematerialising these on July 27, 2001. However, the conversion is yet to take place.
GIIC asked Sebi to give directions to complete the request for dematerialisation. Sebi did so on August 30, 2005, telling Sterling to complete the transfer and dematerialisation of shares at the earliest.
Sterling admitted its promoters had pledged their personal holding of 25,92,800 equity shares of the company as a collateral security to GICC in 1996 for a loan raised by the company. But, it said, it was unable to repay the loan as it was facing severe “cash crunch”. It also told Sebi the matter (on the entire transaction with GIIC) had been taken to court and was pending there. Hence, its board of directors were unable to proceed with the transfer/demat.
The matter didn’t move much from then till this year, till Sebi decided the wait had been long enough. In its order, it said the fact that the company had borrowed Rs 5 crore from GIIC pursuant to an agreement is not in dispute. It is also not in dispute that the promoters of the company — Dove Investments Pvt Ltd, Maxworth Investments Pvt Ltd and P N Mohan — had pledged 25,92,800 physical shares of the company in favour of GIIC as security.
“The conduct of the company is not appreciable. They borrowed a sum of Rs 5 crore and repaid only Rs 2.5 lakh. It is the stand of (GIIC) that the loan would never have been given, but for the pledge of shares. It is not disputed that the petitioner (GIIC) is a state government undertaking and the amounts advanced are public funds.”
“The company (Sterling Holiday) is directed to dematerialise the 2,99,800 shares of the company standing in the name of GIIC immediately, but not later than 15 days from date of receipt of this order. The company is further directed to file a compliance report within a period of 15 days.”
If this is not done, it will take “appropriate action” against Sterling, says the order signed by K M Abraham, Director, Sebi.
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