2013 (10) TMI 1562 - AT - SEBI

Tribunal Rules on Binding Directions in Shareholding Dispute

Madhuri S. Pitti and Ors. Versus Securities and Exchange Board of India

The Tribunal held that the impugned letter contained binding directions, not mere advice, under regulation 18(2) of the Takeover Regulation, 1997. It ... - Issues Involved:1. Whether the impugned letter is a direction or mere comments/advice.2. Alleged violations of regulation 10 of SAST Regulations, 1997 by Mr. Akshay S. Pitti in 2006 and 2007.3. Applicability of the principle of 'persons acting in concert' under SAST Regulations, 1997.4. Procedural fairness and principles of natural justice.Summary:1. Nature of the Impugned Letter:The Tribunal disagreed with the Respondent's claim that the impugned letter was merely advisory. It held that the language of regulation 18(2) of the Takeover Regulation, 1997 is mandatory, requiring changes to the letter of offer when suggested by the Respondent. As such, the directions in the letter are binding and appealable under Section 15T of the SEBI Act.2. Alleged Violations of Regulation 10:The Appellants challenged the Respondent's comments regarding alleged violations of regulation 10 by Mr. Akshay S. Pitti in 2006 and 2007. The Tribunal noted that the Respondent did not issue any Show Cause Notice or provide an opportunity for the Appellants to be heard, violating principles of natural justice. Furthermore, the Tribunal found that the shareholding of Mr. Akshay S. Pitti should be considered collectively with the promoter group, which had already exceeded the 15% threshold before the acquisitions in question.3. Persons Acting in Concert:The Tribunal emphasized that the concept of 'persons acting in concert' under the SAST Regulations, 1997 requires the collective shareholding of the group to be considered. It held that once individuals act as part of a group with the intention of acquiring shares, their individual identities merge into the group's collective identity. Thus, the 15% threshold under regulation 10 should apply to the group's combined shareholding, not to individual members.4. Procedural Fairness:The Tribunal criticized the Respondent for not following due process, including failing to conduct a proper investigation into the past allotments and not issuing a Show Cause Notice. The Tribunal reiterated that any adverse findings must follow the due process of law, including giving the concerned parties an opportunity to be heard.Conclusion:The appeal was allowed, permitting the Appellants to continue with their offer without incorporating the Respondent's impugned directions related to the acquisitions by Mr. Akshay S. Pitti in 2006 and 2007. The Tribunal underscored the importance of procedural fairness and the collective nature of shareholding when determining compliance with the SAST Regulations, 1997.