Tribunal Rules in Favor of Company Petition for Share Buyback

The Tribunal found that the respondents violated SEBI Regulations by acquiring shares without proper disclosure, leading to penalties imposed by SEBI. The Tribunal granted the company petition, allowing the company to buy back the shares at prevailing market value. Respondents were directed to return share certificates and forms within 30 days, with the petitioner to pay the buyback price. The case was disposed of as infructuous, with no costs awarded.

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Issues Involved:
1. Violation of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011.
2. Non-disclosure under SEBI (Prohibition of Insider Trading) Regulations, 1992.
3. Rectification of the share register.
4. Injunctions restraining the respondents from exercising rights over the shares.
5. Limitation for filing the petition.

Issue-wise Detailed Analysis:

1. Violation of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011:
The petitioner alleged that respondents Nos. 1 and 2 acquired shares in excess of 7% of the company without proper disclosure, violating the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011 (SAST Regulations). Specifically, respondent No. 1 initially acquired 1,20,500 shares (2.5% of the total paid-up share capital), and respondent No. 2 acquired 2,41,000 shares (4.86%), resulting in a combined holding of 7.3%, exceeding the 5% threshold. The mandatory information required under the Regulations was not provided, leading to the acquisition being done without the company's knowledge.

2. Non-disclosure under SEBI (Prohibition of Insider Trading) Regulations, 1992:
The petitioner claimed that the respondents failed to make the necessary disclosures under Regulation 13 of the SEBI (Prohibition of Insider Trading) Regulations, 1992, which mandates disclosures when an acquirer holds over 5% shares in a company. The petitioner argued that the disclosure under the Takeover Regulations by respondent No. 1 could not be deemed as a notice under the Insider Trading Regulations.

3. Rectification of the Share Register:
The petitioner sought a declaration that the acquisition of shares by respondents Nos. 1 to 6 in excess of the 5% threshold was illegal, null, and void, and requested rectification of the share register to delete the names of the respondents as owners of the shares acquired in excess of the threshold limit. Section 111A(3) of the Companies Act, 1956, provides a remedy for rectification if shares are acquired in contravention of SEBI Regulations.

4. Injunctions Restraining the Respondents from Exercising Rights Over the Shares:
The petitioner sought several ad-interim orders, including injunctions restraining the respondents from dealing with, disposing of, alienating, encumbering, or transferring any shares held by them in the company. Additionally, the petitioner requested injunctions to prevent the respondents from exercising any voting rights or claiming any other rights or benefits concerning the shares held in excess of the 5% threshold.

5. Limitation for Filing the Petition:
The respondents argued that the petition was barred by limitation. However, the petitioner contended that they only became aware of the non-compliance by the respondents on June 12, 2013, when a complaint was noted on the SEBI website. The Tribunal decided to address the limitation issue as it was a mixed question of law and fact.

Tribunal's Findings:
The Tribunal noted that the respondents had committed violations of SEBI Regulations, for which SEBI had already imposed penalties. The Tribunal emphasized that the powers exercised by the Company Law Board and SEBI fall in different and distinct jurisdictional fields. While SEBI imposed penalties for regulatory violations, Section 111A(3) of the Companies Act empowers the Tribunal to direct rectification of the share register to undo the mischief caused by such violations.

Order:
The Tribunal allowed the company petition, authorizing the company to buy back the shares at the market value prevailing on the date of the petition or the current market value, whichever is higher. Respondents Nos. 1 and 2 were directed to hand over the share certificates and Share Transfer Forms within 30 days, and the petitioner was ordered to pay the buyback price accordingly. Consequently, C.A. No. 1613/2015 was disposed of as infructuous. There was no order as to costs.

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