Appeal allowed, SAT order set aside, SEBI's open offer directions restored

The appeal was allowed, and the order passed by the Securities Appellate Tribunal (SAT) was set aside. The court restored the directions issued by the Securities and Exchange Board of India (SEBI) in the letter dated 30th November 2012, emphasizing that the voluntary open offer could not be withdrawn merely on the grounds of economic unviability and that SEBI's delay in issuing comments did not justify the withdrawal of the offer.

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Issues Involved:
1. Whether a voluntary open offer can be withdrawn when it becomes uneconomical.
2. Compliance with Regulation 11 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.
3. Delay by SEBI in issuing comments on the draft letter of offer.
4. Applicability of Regulation 27 for withdrawal of the open offer.
5. Distinction between voluntary and mandatory public offers.
6. Whether the judgment in Nirma Industries Ltd. vs. SEBI is applicable.
7. Breach of natural justice due to lack of personal hearing.

Issue-wise Detailed Analysis:

1. Whether a voluntary open offer can be withdrawn when it becomes uneconomical:
The court held that a voluntary open offer cannot be withdrawn merely because it has become uneconomical. The court emphasized that permitting public offers to be withdrawn on the ground of economic unviability would compromise the integrity of the securities market. The court reiterated that Regulation 27 of the Takeover Regulations, which governs the withdrawal of public offers, applies equally to voluntary and mandatory offers. The court stated, "no public offer whether it is voluntary or triggered by Regulation 11 can be withdrawn, unless it satisfies the circumstances set out in Regulation 27(1)(b), (c) and (d)."

2. Compliance with Regulation 11 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997:
The court noted that the respondent had breached the 5% creeping acquisition limit in the years 2006-07, 2007-08, and 2010-11 and was required to comply with Regulation 11 by making a public announcement to acquire shares. The court stated, "the respondent was required to comply with Regulation 11 and make a Public Announcement to acquire shares in accordance with law."

3. Delay by SEBI in issuing comments on the draft letter of offer:
The court acknowledged the delay of 13 months by SEBI in issuing comments on the draft letter of offer, describing it as "wholly inexcusable and needs to be avoided." However, the court concluded that this delay did not nullify SEBI's actions. The court emphasized that SEBI's duty is to ensure that every public offer is bona fide for the benefit of shareholders and acquirers, and SEBI's delay does not permit the withdrawal of the public offer under Regulation 27(1)(b).

4. Applicability of Regulation 27 for withdrawal of the open offer:
The court confirmed that Regulation 27 applies to both voluntary and mandatory public offers. The court rejected the respondent's argument that Regulation 27 should only govern mandatory open offers. The court stated, "The plain reading of the aforesaid regulation makes it clear that no public offer whether it is voluntary or triggered by Regulation 11 can be withdrawn, unless it satisfies the circumstances set out in Regulation 27(1)(b), (c) and (d)."

5. Distinction between voluntary and mandatory public offers:
The court dismissed the argument that voluntary public offers should be treated differently from mandatory public offers. The court held that both types of offers have the same effect on shareholders and the market, and therefore, the provisions of Regulation 27 should be applied equally to both. The court stated, "There can be no distinction between a triggered public offer and a voluntary public offer. Both have to be considered on an equal footing."

6. Whether the judgment in Nirma Industries Ltd. vs. SEBI is applicable:
The court affirmed that the judgment in Nirma Industries Ltd. vs. SEBI is applicable to the present case. The court reiterated that Regulation 27(1)(b), (c), and (d) are exceptions to the general rule that no public offer shall be withdrawn once made, and these exceptions must be construed strictly. The court stated, "We reiterate our opinion in Nirma Industries Ltd. (supra) that under Clause 27(1)(b)(c) and (d), a Public Offer, once made, can only be permitted to be withdrawn in circumstances which make it virtually impossible to perform the Public Offer."

7. Breach of natural justice due to lack of personal hearing:
The court acknowledged that the respondent was not granted a personal hearing despite requesting one. However, the court concluded that the respondent failed to demonstrate any real prejudice caused by this breach of natural justice. The court stated, "It is by now settled proposition of law that mere breach of Rules of Natural Justice is not sufficient. Such breach of Rules of Natural Justice must also entail avoidable prejudice to the respondent."

Conclusion:
The appeal was allowed, and the order passed by the SAT was set aside. The court restored the directions issued by SEBI in the letter dated 30th November 2012, emphasizing that the voluntary open offer could not be withdrawn merely on the grounds of economic unviability and that SEBI's delay in issuing comments did not justify the withdrawal of the offer.

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