The Securities and Exchange Board of India (Sebi) has referred the case of Bank of Rajasthan (BoR) to adjudication after discovering that the Tayals had violated some provisions of Sebi's regulations while wresting management control of the bank from the city-based Bangur group.
Sebi found the Tayals of the Shree Krishna group had violated rules 3(4) and 7 of Sebi's Substantial Acquisition of Shares and Takeovers, 1997 (SAST).
Sebi held the Tayals guilty on two grounds. First, the promoters of the Shree Krishna group did not inform BoR within the stipulated four working days after scaling up their stake beyond 5 per cent.
Secondly, the Tayals did not inform Sebi within the stipulated 21 days after their acquisition of sole control of the bank.
In an order signed by the Sebi chairman D R Mehta on January 16, the market regulator observed that both the acts were liable to for penal action. However, without imposing penalty, these issues were deferred to adjudication.
If recent Sebi orders on proved cases of SAST violation were any indication, the Tayals were likely to be penalised with a payment of Rs 5 lakh or exclusion from capital markets operations for a year, said market sources.
The capital market watchdog , however, exonerated the Tayals from other allegations. The allegations against the Tayals were three-fold.
First, the Tayals have acquired shares and voting rights of BoR of more than 5 per cent without complying with the norms.
Second, they exceeded the threshold limit of 10 per cent and 15 per cent acquisition from market or otherwise, without making the mandatory open offer.
Third, they acquired more than the threshold limit of 15 per cent by subscribing to the undersubscribed portion of the right issue of the bank.
Sebi's investigation into the alleged violation of takeover code was in response to allegations filed by Economic Intelligence Bureau of India, All India Bank of Rajasthan Officers Association and two minority shareholders, namely Ram Prasad Somani and Rahul Patni.
The Bangurs took over BoR in the early 1990s through a series of deals brokered by the erstwhile ITC Classic Finance. The Bangurs, later, offered some shares to their friends, the Tayals and reportedly raised money by pledging BoR shares with them.
That was the beginning of the end of Bangurs' control over the bank. They failed to repay the borrowings to Tayals and in consequence, the bank shares went into their ownership.
