CLB lacks jurisdiction in Takeover Code violation case, advises SEBI relief

The Company Law Board (CLB) dismissed the petition due to lack of jurisdiction to adjudicate on alleged violations of the Takeover Code, advising the appellant to seek relief from SEBI. The CLB found that SEBI has exclusive jurisdiction over breaches of the Takeover Code and cannot order forfeiture of shares or rectification of the Register of Members without SEBI's investigation. Additionally, the CLB considered principles of waiver and acquiescence, noting the appellant's delay in asserting rights as grounds for dismissal. The petition was dismissed, with orders to vacate any interim orders and no costs awarded.

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Issues Involved:
1. Jurisdiction of the Company Law Board (CLB) to entertain the petition.
2. Alleged violation of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (Takeover Code).
3. Whether the respondents acted in concert in acquiring shares.
4. Validity of the shares acquired by the respondents and their forfeiture.
5. Rectification of the Register of Members of the appellant company.
6. Principles of waiver, acquiescence, and abandonment.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Company Law Board (CLB):
The respondents contested the maintainability of the appeal, arguing that the CLB lacked jurisdiction to adjudicate on matters concerning the alleged violation of the Takeover Code. They asserted that SEBI is the competent authority to investigate such violations. The CLB agreed, citing several precedents, including *Azzilfi Finlease & Investments v. Ambala Sarabhai Enterprises* and *Redwood Holdings (P.) Ltd. v. Sandesh (P.) Ltd.*, which established that SEBI has exclusive jurisdiction over breaches of the Takeover Code.

2. Alleged Violation of the SEBI Takeover Code:
The appellant claimed that the respondents acquired shares in violation of the Takeover Code, specifically exceeding the threshold limits without making a public announcement or open offer. The appellant sought the forfeiture of these shares and rectification of its Register of Members. The CLB noted that the respondents denied acting in concert and acquiring shares in violation of the Takeover Code.

3. Whether the Respondents Acted in Concert:
The appellant argued that the respondents acted in concert, citing common shareholders and directors among the respondent companies. The CLB observed that determining whether parties acted in concert requires a detailed investigation, which falls under SEBI's purview. The CLB referenced the definition of "persons acting in concert" under Section 2(q) of the Takeover Code and concluded that such matters should be investigated by SEBI.

4. Validity of the Shares Acquired by the Respondents and Their Forfeiture:
The appellant sought a declaration that the shares acquired by the respondents were illegal and should be forfeited. The CLB held that it does not have the authority to declare shares void or order their forfeiture based on alleged violations of the Takeover Code. This responsibility lies with SEBI, which can investigate and take appropriate action if a violation is established.

5. Rectification of the Register of Members:
The appellant requested rectification of its Register of Members to remove the names of the respondents. The CLB stated that rectification under Section 59(4) of the Companies Act, 2013, is permissible only if the acquisition of shares is ex-facie illegal. Since the respondents denied acting in concert and the alleged violation required investigation by SEBI, the CLB concluded that it could not order rectification without SEBI's findings.

6. Principles of Waiver, Acquiescence, and Abandonment:
The respondents argued that the appellant's delay in raising the issue and its previous consent to the respondents' shareholding indicated waiver and acquiescence. The CLB noted that the appellant had not raised the issue in earlier proceedings, including a previous petition where consent terms were agreed upon. The CLB held that the appellant's failure to assert its rights earlier suggested waiver and acquiescence, further supporting the dismissal of the petition.

Conclusion:
The CLB dismissed the petition, holding that it lacked jurisdiction to adjudicate on the alleged violations of the Takeover Code and that SEBI is the competent authority to investigate such matters. The petition was deemed premature, and the appellant was advised to approach SEBI for appropriate relief. The principles of waiver and acquiescence were also considered, reinforcing the dismissal of the petition. The order included the dismissal of the petition, vacation of any ad-interim orders, and no order as to costs.

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