The acquirers submitted a report in September 2002 to Sebi claiming exemption from making a public anouncement for acquisition of 22.31 per cent shares of GG Automotive Gears Ltd by way of preferential allotment. Following the preferential allotment, the acquirers shareholding in GG Automotive increased to 22.31 per cent. Earlier the acquirer was not holding a single share in GG Automotive, whose shares were listed on The Stock Exchange, Mumbai (BSE) and the Madhya Pradesh Stock Exchange( MPSE).
Sebi asked the acquirer to submit documentary evidence regarding compliance with various regulations by the acquirer of Sebi (Substantial Acquisition of Shares and Takeover, SAST) Regulations. After getting a reply from the acquirer and not being satisfied with it, Sebi asked the BSE to confirm about the documents filed by the acquirer, which BSE could not confirm. In the meantime the acquirer hiked its stake in GG Automotive to 34.02 per cent from the earlier level of 22.31 per cent.
Sebi issued a show-cause notice to the acquirer following prima-facie violation of its regulations, asking the acquirer why the exemption sought by them should be given. Sebi said there was non-compliance with the provisions, by the acquirer, with regard to the acquisition of 9 lakh shares constituting 22.31 per cent equity capital on August 25, 2002 and there has been violation of SAST Regulation 10, for which the adjudication proceedings should be taken up.