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of <h1>Promoters' Voting Rights Not Acquired in Buyback: SEBI Tribunal Decision</h1> <h3>Mr. Raghu Hari Dalmia And others Versus Securities and Exchange Board of India</h3> The Tribunal held that the increase in the promoters' voting rights due to a buyback did not constitute an acquisition under Regulation 11(1) of the SEBI ... - Issues Involved:1. Applicability of Regulation 11(1) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.2. Power of SEBI to grant exemption from the provisions of the takeover code post-acquisition.Summary:Issue 1: Applicability of Regulation 11(1) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997The appellants, promoters of OCL India Ltd., did not participate in the company's buyback scheme, which led to an increase in their voting rights from 62.56% to 75% without any acquisition of additional shares. The Securities and Exchange Board of India (SEBI) issued a show cause notice alleging violation of regulation 11(1) of the takeover code, which mandates a public announcement for acquiring shares. The appellants contended that the increase in voting rights was passive and incidental to the buyback, not an acquisition. The Tribunal agreed, stating, 'Such a passive increase in the proportion of the voting rights of the promoters of the company will not attract regulation 11(1) of the takeover code.' The Tribunal emphasized that the word 'acquire' implies a positive act of acquisition, which was absent in this case. Therefore, regulation 11(1) was not applicable.Issue 2: Power of SEBI to Grant Exemption Post-AcquisitionAfter the initial order, the appellants sought exemption from SEBI u/s 3(1)(l) of the takeover code. SEBI rejected the application, stating it had no power to grant exemptions post-acquisition. The Tribunal did not delve into this issue, as it found regulation 11(1) inapplicable. Consequently, the Tribunal set aside the order dated January 28, 2010, and allowed the appeal, rendering the subsequent order dated July 19, 2011, infructuous.Conclusion:The appeal was allowed, and the orders dated January 28, 2010, and July 19, 2011, were set aside. The Tribunal concluded that passive acquisition does not attract regulation 11(1) of the takeover code, and thus, the appellants were not required to make a public announcement. Parties were directed to bear their own costs.
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