SEBI Tribunal rules on Ambuja's ACC acquisition, remands for further investigation

The Tribunal upheld SEBI's finding that Regulation 10 was not violated as Ambujas' acquisition was below the 15% threshold. However, the matter was remanded to SEBI for a proper investigation into the allegations of Regulation 12 violation and determination of control. SEBI was directed to investigate whether Ambujas acquired control over ACC by acquiring Tata Group's shares and to decide on further action based on the investigation's findings.

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Issues Involved:

1. Violation of Regulation 10 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.
2. Violation of Regulation 12 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.
3. Determination of "control" as per Regulation 2(1)(c) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.
4. Validity of the shareholding and voting rights calculation excluding shares under attachment.
5. Proper investigation by SEBI into the allegations.

Issue-wise Detailed Analysis:

1. Violation of Regulation 10 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997:

The appellants argued that the acquisition of shares by Ambujas from Tata Group amounted to acquiring more than 15% of the voting rights in ACC, thus violating Regulation 10. They contended that shares held by Harshad Mehta were frozen and should be excluded from the total voting rights calculation, which would result in Ambujas holding more than 15%. SEBI and the respondents countered that the shares under attachment still carried voting rights and should be included in the total voting rights calculation. The Tribunal agreed with SEBI, stating that the shares under attachment still carried voting rights and should not be excluded. Therefore, Ambujas' acquisition of 14.45% did not trigger Regulation 10 as it was below the 15% threshold.

2. Violation of Regulation 12 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997:

The appellants alleged that Ambujas acquired control over ACC without making a public offer, violating Regulation 12. They argued that Tatas were in control of ACC and Ambujas stepped into their shoes by acquiring their shares. SEBI and the respondents denied that Tatas had control over ACC and argued that the acquisition did not result in Ambujas gaining control. SEBI concluded that there was no material evidence to show that Ambujas acquired control over ACC. The Tribunal found that SEBI had not conducted a proper investigation to determine whether Ambujas acquired control and directed SEBI to investigate the matter further.

3. Determination of "control" as per Regulation 2(1)(c) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997:

The definition of "control" includes the right to appoint the majority of directors or to control management or policy decisions directly or indirectly. The appellants argued that Tatas had control over ACC, evidenced by their ability to appoint directors and influence management decisions. SEBI and the respondents countered that Tatas did not have control as they did not have the right to appoint the majority of directors and their shareholding was not significant enough. The Tribunal noted that SEBI had not thoroughly investigated whether Tatas had control and whether Ambujas acquired such control. It directed SEBI to investigate this aspect further.

4. Validity of the shareholding and voting rights calculation excluding shares under attachment:

The appellants argued that shares held by Harshad Mehta, which were under attachment, should be excluded from the total voting rights calculation. SEBI and the respondents contended that the shares under attachment still carried voting rights and should be included. The Tribunal agreed with SEBI, stating that the shares under attachment still carried voting rights and should not be excluded from the calculation. Therefore, Ambujas' acquisition of 14.45% did not exceed the 15% threshold, and Regulation 10 was not triggered.

5. Proper investigation by SEBI into the allegations:

The Tribunal found that SEBI had not conducted a proper investigation into the allegations made by the appellants. It noted that SEBI had relied on submissions from the parties without independently verifying the facts. The Tribunal directed SEBI to conduct a thorough investigation to determine whether Ambujas acquired control over ACC and whether any further action was required under Regulation 12. It emphasized the need for SEBI to act fairly, reasonably, and transparently to protect investors' interests.

Conclusion:

The Tribunal upheld SEBI's finding that Regulation 10 was not violated as Ambujas' acquisition was below the 15% threshold. However, it remanded the matter to SEBI for a proper investigation into the allegations of violation of Regulation 12 and the determination of control. SEBI was directed to investigate whether Ambujas acquired control over ACC as a result of acquiring Tata Group's shares and to decide on further action based on the investigation's findings.

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