Tribunal confirms open offer price, orders reinvestigation on control impact.

The Tribunal upheld SEBI's approval of the open offer price at Rs. 41.04 per share. However, it directed SEBI to reinvestigate the ZOCD agreement's impact on control over the target company. The appeal was disposed of with no order as to costs.

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Issues Involved:

1. Whether SEBI was justified in permitting the acquirers to acquire shares of the target company at an open offer price of Rs. 41.04 per share instead of Rs. 5,68,430.32 per share as claimed by the appellants.
2. Whether the ZOCD agreement dated 27.02.2012 triggered the open offer obligation.
3. Whether the appellants' grievances against the acquirers and the lead manager were justified.
4. Whether SEBI's investigation and decision were adequate and justified.

Issue-wise Detailed Analysis:

1. Justification of SEBI's Open Offer Price Approval:

The principal question was whether SEBI's approval of the open offer price at Rs. 41.04 per share was justified. The appellants argued that the highest negotiated price per share under the Share Purchase Agreement (SPA) dated 29.05.2014 should be Rs. 5,68,430.32 per share. However, SEBI determined the open offer price at Rs. 41.04 per share, considering the total amount paid under the SPA and the ZOCD agreement. The Tribunal found that SEBI's decision to include the amount invested under the ZOCD agreement while determining the open offer price was justified. The acquisition of 60,000 shares of the six holding companies by respondent no. 2 from the Bahl Group constituted the acquisition of 100% shares of the six holding companies, as the six holding companies had not issued any equity shares under the ZOCD agreement.

2. Triggering of Open Offer Obligation by ZOCD Agreement:

The appellants contended that the open offer obligation got triggered on the execution of the ZOCD agreement dated 27.02.2012. SEBI, however, rejected this claim, stating that respondent no. 2 had not acquired any voting rights, shares, or control over the six holding companies by subscribing to the ZOCDs. The Tribunal noted that SEBI's communication dated 09.02.2015 did not address the unusual clauses in the ZOCD agreement, which prima facie indicated that respondent no. 2 exercised control over the six holding companies and the target company. Therefore, the Tribunal directed SEBI to reinvestigate the matter to determine if the ZOCD agreement triggered the open offer obligation.

3. Grievances Against Acquirers and Lead Manager:

The appellants alleged various violations by the acquirers and the lead manager, including non-compliance with the Takeover Regulations, 2011. However, SEBI, in its communication dated 09.02.2015, rejected these allegations. The Tribunal refrained from considering these issues as the appellants did not challenge SEBI's decision dated 09.02.2015. Without challenging this decision, the appellants could not justify their grievances against the acquirers and the lead manager.

4. Adequacy and Justification of SEBI's Investigation and Decision:

The Tribunal found that SEBI's decision dated 09.02.2015 did not adequately address the unusual clauses in the ZOCD agreement. These clauses indicated that the Bahl Group might have divested control over the six holding companies and the target company without receiving any consideration, which could trigger the open offer obligation. The Tribunal directed SEBI to reinvestigate whether respondent no. 2 indirectly acquired control over the target company through the ZOCD agreement without following the prescribed procedure under the Takeover Regulations, 2011. SEBI was instructed to complete the reinvestigation and submit an action taken report within six months.

Conclusion:

The Tribunal upheld SEBI's approval of the open offer price at Rs. 41.04 per share but directed SEBI to reinvestigate the ZOCD agreement's impact on control over the target company. The appeal was disposed of with no order as to costs.

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