2019 (2) TMI 1044 - HC - SEBI

Dismissal of Writ Petition Challenging Share Price | Lack of Standing & Jurisdiction | SEBI Act

The High Court dismissed the writ petition, upholding the offer price of Rs. 61.73 per share for IDBI Bank Ltd. The court found the petitioner lacked ... Offer price computation under Regulation 8(2)(c) of the SAST Regulations, 2011 - persons acting in concert - maintainability of writ petition under Article 226 where alternate remedy exists under Section 15T of the SEBI Act, 1992 - locus of a shareholder for challenging open offer - SEBI's observations on draft letter of offer and power to determine offer priceMaintainability of writ petition under Article 226 where alternate remedy exists under Section 15T of the SEBI Act, 1992 - Whether the writ petition under Article 226 is maintainable when alternative remedies before SEBI and the Securities Appellate Tribunal are available - HELD THAT: - The Court examined Section 15T of the SEBI Act and the statutory scheme by which SEBI gives observations on draft letters of offer and determines matters under the SAST Regulations. The record shows availability of remedies: complaints to SEBI (including SCORES), SEEKING redressal from the manager/registrar/ compliance officer and appeal to the Securities Appellate Tribunal against orders of the Board. The Court noted earlier proceedings where Delhi High Court directed SEBI to treat a petition as a complaint and SEBI dealt with it, and the Apex Court declined further relief, indicating the availability and efficacy of statutory remedies. While the learned counsel raised maintainability objections, the Court, having considered the statutory remedies and the existence of an established adjudicatory route, treated the availability of alternate remedy as a factor against granting extraordinary relief under Article 226, and proceeded to consider merits as parties had argued them. [Paras 29, 30, 31, 32, 33]The availability of efficacious alternate remedies before SEBI and the SAT militates against extraordinary interference under Article 226; the Court nevertheless considered the merits.Locus of a shareholder for challenging open offer - Whether the petitioner, claiming to be a minority shareholder, has locus to challenge SEBI's final observation and the offer price - HELD THAT: - The petitioner asserted minority shareholder status but did not produce documentary proof of shareholding or transaction details. Respondents stated they could not locate any demat holdings or transaction in the petitioner's name. The Court observed that absence of such disclosure undermines the petitioner's locus to seek relief in this matter and recorded that, in the absence of proof of shareholding, the petition was liable to be dismissed on this ground alone. [Paras 32]Petitioner failed to establish locus by producing proof of shareholding; petition liable to be dismissed on this ground.Persons acting in concert - offer price computation under Regulation 8(2)(c) of the SAST Regulations, 2011 - SEBI's observations on draft letter of offer and power to determine offer price - Whether the Central Government is a 'person acting in concert' (PAC) with LIC such that the preferential allotment price paid to the Government (Rs.71.82) must be treated as an acquisition by a PAC for computing the open offer price under Regulation 8(2)(c) - HELD THAT: - The Court applied the established test that 'persons acting in concert' must have cooperated for a common objective of acquisition or control pursuant to an agreement or understanding, and that the existence of the PAC relationship is a question of fact determined by conduct at the time of acquisition. The Court found that the Central Government had relinquished management control and did not act with LIC to acquire control; the Government diluted its shareholding and expressly agreed not to participate in the offer. On these factual findings, the Government could not be characterized as an acquirer or as acting in concert with LIC. SEBI had issued observations on the draft letter of offer and, applying Regulation 8, arrived at the offer price which reflected the correct application of the Regulations in light of who constituted the acquirer/PAC. The Court relied on the Apex Court's exposition in Daiichi Sankyo regarding the factual inquiry necessary to establish PAC and held that Regulation 8(2)(c) was correctly applied by excluding the Government's preferential allotment from PAC computations. [Paras 36, 41, 42, 43, 44]Central Government is not a person acting in concert with LIC for the present acquisition; SEBI's application of Regulation 8(2)(c) excluding the Government's transaction was correct and the offer price determined (Rs.61.73 per share) accords with applicable law.SEBI's observations on draft letter of offer and power to determine offer price - Whether SEBI's final observation dated 7.12.2018 and the resultant offer price require judicial interference - HELD THAT: - SEBI gave observations on the draft letter of offer in exercise of its regulatory powers under the SAST Regulations. The Court considered the statutory framework governing open offers, SEBI's role in scrutinising the draft letter of offer, and the methodology provided in Regulation 8 for computation of offer price. Having found that the Central Government was not a PAC and that the preferential issue pricing and related calculations were in accordance with SEBI (ICDR) Regulations and SAST Regulations, and having regard to prior judicial decisions addressing similar contentions, the Court concluded there was no legal basis to interfere with SEBI's observation on the offer price. [Paras 34, 38, 40, 44]No interference with SEBI's final observation is warranted; the open offer price stands in accordance with the applicable regulations.Final Conclusion: On the facts and law, the petition is dismissed: the petitioner failed to establish locus; the Central Government is not a person acting in concert with LIC for the acquisition; SEBI correctly applied Regulation 8(2)(c) and its final observation fixing the offer price is upheld; no interference under Article 226 is warranted. Issues Involved:1. Maintainability of the writ petition under Article 226 of the Constitution of India.2. Determination of the offer price per share for IDBI Bank Ltd.3. Applicability of Regulation 8 (2) (c) of the SAST Regulations, 2011.4. Locus standi of the petitioner.5. Territorial jurisdiction of the court.Issue-wise Detailed Analysis:1. Maintainability of the writ petition under Article 226 of the Constitution of India:The respondents argued that the writ petition is not maintainable due to the availability of an alternative remedy under Section 15-T of the SEBI Act, 1992, which allows appeals to the Securities Appellate Tribunal (SAT). The petitioner countered that the appeal provisions do not explicitly cover their case, thus not barring the High Court's jurisdiction. The court emphasized that Section 15-T provides for appeals against orders of SEBI or adjudicating officers, suggesting that the petitioner should have first approached the SAT.2. Determination of the offer price per share for IDBI Bank Ltd.:The petitioner contended that the offer price should be Rs. 71.82 per share as per Regulation 8 (2) (c) of the SAST Regulations, 2011, based on the price at which the Government of India acquired shares. However, SEBI and LIC argued that the correct offer price was Rs. 61.73 per share, determined in compliance with SEBI regulations. The court found that the offer price of Rs. 61.73 per share was correctly determined as per the applicable legal provisions and affirmed by judicial precedent.3. Applicability of Regulation 8 (2) (c) of the SAST Regulations, 2011:The petitioner argued that the price of Rs. 71.82 per share paid by the Government of India should be considered under Regulation 8 (2) (c) as the highest price paid. The court examined the concept of 'persons acting in concert' and concluded that the Government of India and LIC are not acting in concert. Therefore, the price paid by the Government of India does not fall under Regulation 8 (2) (c), and the offer price of Rs. 61.73 per share is correct.4. Locus standi of the petitioner:The respondents questioned the petitioner's locus standi, arguing that the petitioner did not provide documentary proof of being a minority shareholder of IDBI. The court noted that the petitioner failed to establish their locus standi by not disclosing the number and details of shares held. Consequently, the court found that the petitioner lacked standing to file the writ petition.5. Territorial jurisdiction of the court:The respondents argued that the court lacked territorial jurisdiction as the transactions and respondents were primarily based in Maharashtra, except for the Union of India located in Delhi. The court observed that the petitioner did not adequately justify the jurisdiction of the Allahabad High Court, leading to the dismissal of the petition on jurisdictional grounds as well.Conclusion:The High Court dismissed the writ petition, concluding that the offer price of Rs. 61.73 per share was in accordance with the applicable legal provisions, and no interference under Article 226 of the Constitution of India was warranted. The court also highlighted the availability of alternative remedies and the lack of locus standi and territorial jurisdiction as additional grounds for dismissal.