TaxTMI 
TaxTMI 
2007 (11) TMI 411
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....A Goa Co. Ltd. by MITSUI & Co. of Japan through Finsider International Co. Ltd. It was the case of the petitioner that the said acquisition was in violation of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1994 (hereinafter referred to as "the Regulations of 1994") and in violation of the provisions of Clauses 40A and B of the Listing Agreement of the Stock Exchange. 3. In a nutshell, the facts of the case are that respondent No. 4, Finsider International Company (FINCO), held 51 per cent shareholding in respondent No. 3, which is called "M/s. SESA Goa Limited" (SESA Goa). Respondent No. 4 is a 100 per cent subsidiary of EARLY GUARD, which, in turn, is a 100 per cent subsidiary of respondent No. 5, Mitsui & Company (MITSUI). Before respondent No. 4 became a 100 per cent subsidiary of EARLY GUARD, it was a 100 per cent subsidiary of LIVA, which was owned by a consortium of companies held by RIVA Group. In the course of time, the shareholding of respondent No. 4 changed hands from LIVA to EARLY GUARD. The control and management of respondent No. 3, therefore, passed on from RIVA Group to the MITSUI Group, and, therefore, ....
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....res in the target company, but if the acquirer acquires any share which would give him more than 10 per cent voting rights in the target company, then the obligation to make the public announcement/offer is triggered. Therefore, even if MITSUI through EARLY GUARD acquired shares of FINSIDER whereby it acquired 51 per cent voting rights in the target company, provisions of Regulation 9(1) of the Regulations of 1994 would be attracted. It is the contention of the petitioner that SEBI in its impugned order failed to appreciate that the provisions of Regulation 9(1) would be triggered by way of acquisition of shares of anybody corporate if, as a result of such acquisition, the acquirer acquires more than 10 per cent voting rights in the target company, and, therefore, SEBI erred in holding that merely because no shares of target company were acquired, the said Regulation would not be attracted. 5. Another contention of the petitioner is that Regulation 9(3) is triggered when an acquirer acquires securities which would entitle him to more than 10 per cent of the voting rights of the target company, i.e., SESA Goa. It is his contention that the term 'securities' as defined in section ....
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....ore, they ought to have held that SESA Goa has acted in concert or colluded with MITSUI in violating the provisions of the Listing Agreement; and that the transaction was nothing but in violation of the Regulations of 1994 and clauses 40-A and 40-B of the Listing Agreement, as it was binding upon a raider, and it cannot be said that mainly because the raider is located outside India and/or he acquires securities of a body corporate outside India so as to, in effect, takeover an Indian company. 8. It is contended by the petitioner that the authorities have failed to take into consideration that there is, in substance, a takeover of a listed Indian company, i.e., SESA Goa, by MITSUI, in total violation of the Regulations of 1994 and the Listing Agreement, and the authorities, by not taking action against the target company and the raider company, have failed to protect the interests of the investors, which is the whole object created by the Regulations of 1994 read with Clauses 40-A and 40-B of the Listing Agreement, and, therefore, the impugned order is illegal and void, and deserves to be quashed and set aside. 9. The respondents submitted that respondent No. 4 is a holding c....
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....in concert or acquired voting rights in respondent No. 3 is not tenable. 10. It is the case of respondent No. 3 that there has been no contravention of clauses 40-A and 40-B of the Listing Agreement signed by respondent No. 3 with the Stock Exchange. It is their contention that the Listing Agreement is required for listing of securities by the listed company, and the recital provides that it is the requirement of the Stock Exchange that the company should enter into this Agreement to qualify for the admission and continuance of its securities to be listed on the Stock Exchange; and insofar as clause 40-A is concerned, it shall not be applicable to an acquisition by a person who has announced his firm intention to make an offer to the company and also notified the Stock Exchange. Further, the expression 'securities' or 'voting capital' in clause 40-B(2) can only refer to the same being of the listed company. Hence, clause 40-B(2) has no application to this case, and these expressions cannot refer to shares/securities in other companies than the listed company concerned, much less to body corporates situated outside and not listed in India. 11. It is submitted that the Securiti....
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.... securities) being the protection of the rights of the minority shareholders, the clear and unambiguous language of the Takeover Regulations, 1994 and clauses 40-A and 40-B of the Listing Agreement should be disregarded, is untenable in law. 12. It is the contention of the respondents that the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as "1997 Takeover Regulations") are a completely new set of Regulations, and repeal the earlier 1994 Takeover Regulations. These are not merely clarifications in nature nor do they explain the 1994 Takeover Regulations as contended by the petitioner or otherwise. It is their case that the petitioner based his case on a completely erroneous and ill-founded premise and has erroneously invoked the provisions of the 1994 and 1997 Takeover Regulations, both of which have no application to the facts of the transaction in question. Both the SEBI and the Appellate Authority have, vide detailed speaking orders, replied the case of the petitioner. 13. It is the case of the respondents that the Takeover Regulations of 1997 were brought into effect on 20-2-1997, and the transaction in question took pla....
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....ought by him, and the petition deserves to be dismissed with costs. 16. The key issue which arises in the matter for decision is : Whether an indirect takeover of the company, by acquiring control of the corporate body, which holds a large percentage of the shares of the target company, attracts the provisions of SEBI Takeover Regulations, 1994 and the Listing Agreement and makes it mandatory for the acquirer company to make public announcement/offer ? 17. The complaint made by the petitioner to the Securities and Exchange Board of India (SEBI) came to be turned down by the impugned order dated 6-3-1997 by SEBI primarily, on the ground that the provisions of the Takeover Regulations are not applicable and in the instant case, they have not been violated; and secondly, the provisions of Clauses 40-A and 40-B of the Listing Agreement are not applicable, and in the instant case, they have not been violated; and that the Regulations are applicable if an acquirer has acquired or agreed to acquire more than 10 per cent shares as per the provisions of Regulations 9 and 10. The Regulations prohibit any acquirer who holds less than 10 per cent of the voting rights to acquire more than....
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....D and FINCO are persons acting in concert under the Regulations, the fact remains that no shares of SESA Goa have been acquired either by FINCO, MITSUI or EARLY GUARD. SESA Goa is the company which is said to have been taken over. However, this change in control, if at all, has taken place without acquiring any shares. Even if interpretation of the petitioner is accepted, the provisions of the Regulations (dealing with substantial acquisition of shares) would not be applicable in the facts and circumstances of this case. It was observed that the Regulations do not have any concept of change in the control of management requiring public offer. Therefore, the question of violation of Regulations does not arise. 21. It may be mentioned that these Regulations have now been repealed by SEBI and new Regulations have been notified on 20-2-1997. Only in the new Regulations, the concept of control, triggering off public offer, has been introduced. On the aspect relating to applicability of the Listing Agreement, they gave a finding that as in the instant case, FINCO already holds more than 51 per cent of the voting rights of SESA Goa, and has not acquired any share after the Regulations ....
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....nvestment companies through which the company was taken over were all Indian companies. Therefore, reliance cannot be placed on these two cases in the facts and circumstances of the present case; and, therefore, they concluded that the provisions of Clauses 40-A and 40-B will not be applicable to MITSUI and EARLY GUARD, as there is no change in position regarding the control of FINCO vis-a-vis SESA Goa, which resulted in dismissal of the complaint. 25. Before the Appellate Authority, the contention of the petitioner was that the acquisition of SESA Goa Ltd. by MITSUI & Co., Japan, through FINCO was in violation of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1994 and in violation of the provisions of Clauses 40-A and 40-B of the Listing Agreement of the Stock Exchanges on the ground that the provisions of section 9(1) of the Takeover Regulations are triggered if the acquirer himself or in concert with other persons acquired or agreed to acquire shares whereby he would be entitled to more than 10 per cent of the voting rights of the target company; and that there is no pre-requisite for acquiring the shares in the target company for attraction of Regula....
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.... in India, is concerned, it is clear that FINCO was all along the 51 per cent shareholders of SESA Goa and no change in the shareholding of SESA Goa is alleged to have taken place. The acquisition of FINCO by MITSUI from the RIVA Group has not altered the control of FINCO or SESA Goa. It found that insofar as Indian shareholders in SESA Goa are concerned, no change in control of the company has taken place. The provisions of the Old Takeover Code, thus, do not seem to be attracted in the present case, and the Appellate Authority found no reasons to disagree with the findings of SEBI, and dismissed the appeal. 28. In our view, to decide the controversy, it would be proper to refer to some excerpts from the report of the committee on substantial acquisition of shares and takeovers under the chairmanship of justice P.N. Bhagwati, which led to the repeal of the 1994 Takeover Regulations by the 1997 Takeover Regulations :- "The SEBI Act enacted in 1992, empowered SEBI to regulate substantial acquisition of shares and takeovers, and made substantial acquisition of shares and takeovers a regulated activity for the first time. The SEBI Regulations for Substantial Acquisition of Share....
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....nd revised offer in the regulations allowed hostile takeovers and competitive offers to be launched, and the consequent revision of offers to take place for the first time in the Indian market; nonetheless, these offers demonstrated with certain degree of acuity, the deficiencies in the existing provisions. These needed to be specifically addressed in the extant regulations to make the regulatory framework more comprehensive and equitable. A committee was therefore set up by SEBI in November 1995, under the chairmanship of Justice P.N. Bhagwati, former Chief Justice of India, to review the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1994. The terms of reference of the Committee were : to examine the areas of deficiencies in the existing regulations; and to suggest amendments in the regulations with a view to strengthening the regulations and making them more fair, transparent and unambiguous and also protecting the interest of investors and of all parties concerned in the acquisition process." 29. The committee submitted its report in two parts. The first part contains the recommendations of the committee based on w....
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....planation. Regulation 11 11(1) and (2)** ** ** Explanation: For the purposes of regulation 10 and regulation 11, acquisition shall mean and include:- (a) direct acquisition in a listed company to which the regulations apply; (b) indirect acquisition by virtue of acquisition of holding companies, whether listed or unlisted, whether in India or abroad. Regulation 12 Not there. Regulation 12 Acquisition of control over a company : "Irrespective of whether or not there has been any acquisi-tion of shares or vot- [[[[ 1994 1997 Regulation No. Takeover Regulation Regulation No. Takeover Regulation ing rights in a company, no acquirer shall acquire control over the target company, unless such person makes a public announcement to acquire shares and acquires such shares in accordance with the Regulations : Provided that nothing contained herein shall apply to any change in control which takes place pursuant to a special resolution passed by the shareholders in a general meeting." Explanation: ( i) For the purpose o....
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.... of indirect acquisitions be brought in. This has been done in the definition of acquirer in clause (b) of sub-regulation (1) of regulation 2; in the definition of persons acting in concert in sub-clause (1) of clause (e) of sub-regulation (1) of regulation 2; further while excluding unlisted companies from the purview of the regulations in clause (k) of sub-regulation (1) of regulation 3." Therefore, apart from the submissions made before us by the learned counsel for the parties, which we propose to deal with in the latter part of our judgment, at least one thing is crystal clear that there existed a lacuna in the existing regulations, i.e., the 1994 Takeover Regulations, which would allow persons to acquire indirect control of a listed company by acquiring the holding company or a set of investment companies, which has block-holding and which may be unlisted, because the scope of the regulations applies only to acquisition of shares in listed companies, and for that, the committee recommended that the concept of indirect acquisition be brought in. This has been done in the definition of 'acquirer' in clause (b) of sub-regulation (1) of regulation 2; in the definition of "pers....
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....petitioner's complaint, though the fact remains that no shares of SESA Goa have been acquired by FINCO or MITSUI or EARLY GUARD. SESA Goa is a company which is stated to have been taken over. However, this change in control, if at all, has taken place without acquiring any shares. According to the petitioner, this is palpably a perverse finding of SEBI, which totally ignores the reality that the acquisition of shares of FINSIDER by MITSUI (through EARLY GUARD) entitled MITSUI to exercise voting rights in respect of 51 per cent of the shares of SESA Goa held by FINSIDER. That was the stated purpose of the acquisition. 35. It is further contended that even in the appellate order, the finding to the effect that - "Insofar as SESA Goa which is a listed company in India is concerned, it is clear that FINCO was all along the 51 per cent shareholder of SESA Goa and no change in the shareholding of SESA Goa is alleged to have taken place. The acquisition of FINCO by MITSUI from the RIVA Group has not altered the control of FINCO or SESA Goa. Insofar as Indian shareholders in SESA Goa are concerned, no change in control of the company has taken place. The provisions of the old takeove....
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.... to the Substantial Acquisition of Shares and Takeovers Regulations, 1994. 41. It is also submitted that under section 2(7) of the Companies Act, 1956, "body corporate" by definition includes "any company whether incorporated in India or abroad". FINSIDER was, thus, a 'body corporate" whose shares were 'securities'. Acquisition of these 'securities' entitled MITSUI to more than 10 of voting rights in SESA Goa. 42. It is further submitted that the shares of FINSIDER are thus 'Securities' for the purposes of the Substantial Acquisition of Shares and Takeovers Regulations, 1994. It is undisputed that the acquisition of these securities, viz., the shares of FINSIDER, gave MITSUI the voting rights in regard to 51 per cent of the share capital of SESA Goa, the target company. 43. It is also submitted that the sole purpose of MITSUI acquiring the shares of FINSIDER - "securities" for the purposes of clause 9(3) of the Substantial Acquisition of Shares and Takeovers Regulations, 1994 - was to acquire voting rights of the target company, SESA Goa. There is no other object for such acquisition. In view of this admitted position, the takeover of SESA Goa by MITSUI squarely falls with....
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....he present case, the principles of purposive interpretation must be adopted. In order to substantiate his contentions, the learned Senior Advocate placed reliance on Swedish Match AB v. SEBI [2004] 122 Comp. Cas. 83 ^1 (SC), M. Sreenivasulu Reddy v. Kishore R. Chhabria [2001] 34 SCL 1 (Bom.), the Herbertson Ltd.'s case [(1999) 5 Comp. LJ 81 (Bom.)]; and Standard Chartered Bank v. Directorate of Enforcement [2005] 125 Comp. Cas. 513 ^2. Therefore, MITSUI's reliance on the judgment of the Supreme Court in Nathi Devi v. Radha Devi Gupta [2005] 2 SCC 271 is misplaced. In any event, by the application of those principles as stated therein, the present transaction would fall within and would be covered by the provisions of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1994 inasmuch as regulation 9 is clear and unambiguous. 48. In Herbertson Ltd.'s case (supra) the Single Judge (H.L. Gokhale, J.) came to the conclusion that some of the acquisitions involved in that case were indirect acquisitions which were covered under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1994. (See paragraph 123 at pages 161 and 162) "Indirect acquis....
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....ve SEBI's order. The correctness of SEBI's order is a matter for the determination of this Court in the present proceedings. 52. It is also submitted that in substance, therefore, as far as Herbertson Ltd.'s case (supra) is concerned, (i)the learned Single Judge dealt with the matter on the basis that it involved an indirect acquisition of shares in the target company and held that such an indirect acquisition was covered by the 1994 Regulations as otherwise the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1994 would be frustrated. (ii)the Division Bench dealt with the matter on the basis that it was a case of persons acting in concert and that the question of direct or indirect acquisition did not arise. In that context, the Division Bench distinguished SESA Goa's order of SEBI and did not decide the issue as to whether indirect acquisitions were covered by the 1994 Regulations. 53. It is the contention of Mr. D'Vitre that the fact that the 1994 Regulations were repealed by the 1997 Regulations and that the 1997 Regulations contained provisions which 'improved' upon the provisions under the 1994 Regulations is irrelevant. Merely because an indire....
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....a, the only shares acquired by respondent No. 5 (acting through EARLY GUARD) were the shares in Finsider International Company (FINCO), respondent No. 4, which is a foreign, unlisted company. 56. In the case of Shirish Finance & Investment (P.) Ltd.'s case (supra ), a Division Bench of this Court held that by virtue of Regulation 3(d) of the 1994 Regulations, the acquisition of shares in a company, which is not listed on any stock exchange in India does not come within the purview of Regulation 10 of the 1994 Regulations. This dicta also clearly applies to cases under Regulation 9 of the 1994 Regulations which along with Regulation 10 forms part of Chapter III of the 1994 Regulations. In fact, the Division Bench considered the order of the Appellate Authority in SESA Goa, which is impugned in the present petition, and expressly held in that context that the 1994 Regulations did not apply to the acquisition of shares in the SESA Goa case. Respondent No. 5 was not an 'acquirer' of shares in SESA Goa under the 1994 Regulations. As stated above, respondent No. 5 only acquired shares of FINCO. 57. Mr. Chagla submitted that this Court ought not to import into the 1994 Regulations m....
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....ase of General Manager, Eastern Railway v. Kshirode Chandra Khasmobis AIR 1966 Cal. 601 wherein the Court has held thus : "... article 226 should not be used and was not intended to be used as a medium or means for declaratory orders or declaratory reliefs declaring acts and orders invalid even though no relief could be granted to the petitioner. The court under article 226 should not issue writs of consolation or writs propounding theories and thesis. That is not the function, scope and purpose of article 226...." (p. 603) As on the date of the hearing of the petition, the petitioner did not hold a single share in SESA Goa. In the circumstances, coupled with the fact that the petitioner was not pressing prayer (c ) of his petition, the petitioner ceased to have the locus standi to prosecute the petition and the same was not maintainable and was rendered infructuous and academic. 59.3 The petitioner, vide his affidavit dated 28-3-2007, admits that he transferred his shareholding in SESA Goa. As on date the petitioner does not hold even a single share of SESA Goa. This is not a representative action or public interest litigation. It is a pure money claim that hinges on the ....
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....f interest, by or against the person to or upon whom such interest has devolved. It is submitted that the reliance placed by the petitioner on the aforesaid principle of law is completely misconceived and untenable. In. the present proceedings, the interest of the petitioner has extinguished and not devolved upon any third party for the proceedings to be continued by that party. The petitioner has lost his right, if any, upon transferring his shareholding in SESA Goa to third parties. A shareholder who does not continue to be a shareholder at the time of the public offer is not entitled to any relief under the Regulations, assuming without admitting that any relief could be granted in the facts and circumstances of the present case. That apart, the rules of the C.P.C. cannot be invoked in aid of writ proceedings before the Court. 59.6 To further support his contention that he continued to have the locus standi to maintain and prosecute the petition, the petitioner relied upon the decision of the Hon'ble Supreme Court in the case of Rajahmundry Electric Supply Corpn. Ltd. v. A. Nageshwara Rao AIR 1956 SC 213, wherein the Hon'ble Apex Court held that the validity of a petition for....
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...., the relief sought in prayer clause (c ) that the acquirer be directed to make a public offer to the existing shareholders cannot survive; and that being so, no reliefs can be granted to the petitioner. It is submitted that on the date of the acquisition of voting rights in SESA Goa by MITSUI and on the date of presentation of the petition, the petitioner and his family held 13,53,559 equity shares of SESA Goa equivalent to 14.09 per cent of its Indian shareholding and constituting 6.9 per cent of its total issued, subscribed and paid-up share capital of SESA Goa. The petitioner was, thus, the largest Indian individual shareholder of SESA Goa, and his two sons continue to be shareholders of SESA Goa to the extent of 100 shares. The petitioner has tried to explain that between 1997 and 1999, the petitioner's shares were sold partly by the pledgees to whom the shares were pledged, which transaction is under challenged by the petitioner, who has filed suits against the pledgees, i.e., against Reliance Capital Ltd. and Standard Chartered Bank Ltd., seeking return of the shares. According to the petitioner, in the case of Creative Outerwear Ltd., there is no dispute with that party tha....
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....oes not affect the continued trial of the action and does not render the proceedings infructuous, as contrasted to a case of the death of the plaintiff, in which case the proceedings would be put to an end if his legal representatives were not brought on record. 62. The learned counsel appearing for the petitioners therein also placed reliance on the decision of the Supreme Court in the case of Dhurandhar Prasad Singh v. Jai Prakash University AIR 2001 SC 2552 while dealing with the rights of the parties as specified under Order 22, Rule 10, of the Code of Civil Procedure, 1908. The Supreme Court held : "6. Rule 10 provides for cases of assignment, creation and devolution of interest during the pendency of a suit other than those referred to in the foregoing rules and is based on the principle that the trial of a suit cannot be brought to an end merely because the interest of a party in the subject-matter of suit is devolved upon another during its pendency but such a suit may be continued with the leave of the Court by or against the person upon whom such interest has devolved. But, if no such a step is taken, the suit may be continued with the original party and the persons....
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....r and (3) a busy body or a meddlesome interloper. Therefore it is the case of the petitioner that he is a person aggrieved, and the impugned order of SEBI dated 6-3-1997 and that of the Appellate Tribunal dated 15-12-1997 continue to operate against the petitioner, and, therefore, he is entitled to maintain the petition to have the said orders set aside and can very much seek an appropriate writ from this Court under Article 226 of the Constitution of India to set aside the impugned decisions and seek a declaration that the takeover by MITSUI of FINSIDER constituted a takeover which attracted and requires compliance of the provisions of the SEBI Takeover Regulations, 1994 and Clauses 40A and 40B of the Listing Agreement. It is submitted that even in the case of Clariant International (supra), it was held that the open offer to be made once the Regulations were triggered was to be made to and interest would be paid to "such persons who were shareholders of the target company as on a triggering date". It was also held that a shareholder "... must be one who was a shareholder on the triggering date"; and, therefore, according to the petitioner, he was undoubtedly a shareholder on the ....
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.... Leave Petition, filed by the petitioner in the Hon'ble Supreme Court, being Special Leave Petition (Civil) No. 7962 of 2007; and that on 27-4-2007, the Hon'ble Supreme Court has passed an order 'Issue notice'. It is directed that if henceforth the sale is conducted, the same shall be subject to the result of this Petition. Further, MITSUI's contention that the sale of shares to Vedanta is completely untenable having regard to the fact that by law, no such sale can be completed until the public offer is made under the prevailing regulations. It is submitted that the contention of MITSUI in their sur-rejoinder that the petition is not maintainable on the ground of inordinate delay also cannot be accepted, as the facts of the case relied upon by MITSUI i.e., General Manager, Eastern Railway's case (supra ), is wholly untenable to the facts of the present case. In the present case, the petitioner filed the present petition in 1998 itself, immediately after the Appellate Tribunal passed the impugned order, and the petitioner has been vigilant in prosecuting the matter; and, therefore, the petition survives insofar as grant of reliefs in terms of prayer clauses (a) and (b) is concerned;....
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..... Further, neither MITSUI nor EARLY GUARD nor FINCO are listed on any Stock Exchange in India nor had any of them acquired any shares in SESA Goa (which is a company listed on a Stock Exchange in India) and consequently, the provisions of Chapter III of the 1994 Regulations were not triggered. 70. Therefore, neither MITSUI nor EARLY GUARD nor FINCO has acquired or agreed to acquire any shares in such Company, i.e., an Indian Target Company (SESA Goa Ltd.) and consequently, the provisions of the Takeover Chapter, i.e., Chapter III, were not triggered. The only shares that have been acquired are the shares of FINCO (not an Indian Target Company) by EARLY GUARD (also not an Indian Target Company). 71. It is submitted that unless there is an acquisition of shares in a target company, the 1994 Regulations are not triggered. It is submitted that neither change in control nor indirect acquisition triggers the provisions of the 1994 Regulations. In the case of Shirish Finance and Investment (P.) Ltd.'s case (supra) and Herbertson Ltd.'s case (supra), the Court found that there was acquisition of shares in the target company and the Appellate Bench of the High Court found that the par....
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....y, 1997 with the promoters (SRF Promenade Holdings Ltd., SRF Cgary Holdings Ltd., SRF Superior Holdings Ltd., SRF Transactional Ltd. and their associates) of the target company. The acquisition was a direct acquisition of the shares in the listed Indian company and, therefore, the open offer was made in terms of the Takeover Regulations, 1994. 76. In the case of acquisition of shares of Sterling Computers Ltd. (SCL) (target company) by Essar Investments Ltd. (EIL) (acquirer). SCL was a listed company whose 80 per cent of the voting capital was held by three private limited investment companies. Originally, the entire capital of these three companies was held by M/s. C. Sivsankaran & Associates (Shiva Group). EIL acquired these three investment companies from Shiva Group. Pursuant to the said acquisition of these three companies, EIL introduced its nominee directors on the Board of Target Company. It is understood that by the acquisition of shares in unlisted companies, there has been takeover of management control of the target company. However, the acquisition of shares in unlisted company was outside the purview of the takeover Regulations, 1994 and also Clauses 40A and 40B....
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....ut drastic change in the regulations of 1994, which were, at the relevant time, governing the field by contending that the provisions of the Regulations of 1997 can be read into the Regulations of 1994; and that such a legislation must be construed in a purposive manner having regard to the object, purpose and also underlying the legislation; and submitted that the Securities and Exchange Board of India Act, 1992 and the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1994 being regulatory in nature, therefore, in construing a regulatory statute, the principle of purposive interpretation must be adopted. According to him, what has been, introduced in the subsequent Regulations of 1997 is nothing but explanatory, and the Court takes view that indirect acquisition will have to be read with the Regulations of 1994, which have been further clarified by repealing the same and introducing radical changes in the 1997 Regulations. The main thrust of the petitioner that the 1994 Regulations are repealed by the 1997 Regulations and that the 1997 Regulations contained the provisions which improve the provisions of the 1994 Regulations is n....
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....mpany; (c)The defendants' collective shareholding in Herbertsons changed (and did so significantly, increasing by over 25 per cent) as a result of the various transactions i.e., the shareholding pattern of Herbertsons changed as a result of the scheme; and (d)The scheming companies had, together, owned shares in Herberstons before they undertook their scheme to acquire further shares. It is instructive to see what the Division Bench had to say about SESA Goa and for convenience, the following paragraphs of the judgment are extracted:- "94. ... Mr. Chidambaram next submitted that the acquisition of shareholding of defendant Nos. 3 to 5 by seven star and defendant No. 11 did not violate the regulations because of the express provisions in regulation 3(d) of the 1994 Regulations. Regulation 10 has no application when shares of unlisted companies are acquired by virtue of regulation 3(d). Defendant Nos. 3 to 5 not being listed companies, their acquisition did not attract regulation 10. He relied on the decision, of the SEBI in the case of Sesa Goa which was affirmed by the appellate authority. Mr. Nariman, on the other hand, submitted that regulation 3(d ), no doubt, makes ....
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....tsons Ltd. According to the plaintiffs, and indeed admitted by the defendants, the funds were made available to them by defendant Nos. 1 and 11 through the companies under their control. The plaintiffs, therefore, contend that all the defendants, which include defendant No. 1, defendant No. 11 and the defendant companies under their control, were acting in concert with each other. A concerted plan had come into existence much before the acquisition of these three companies by the defendant No. 11, and it was in pursuance of such a common plan that funds were made available to the three unlisted companies who acquired the shares of Herbertsons Ltd., and later, handed over those companies to the defendant No. 11. Since an acquirer by definition includes any person acting in concert with the acquirer, the acquisition by these three unlisted companies of the shares in Herbertsons Ltd., were in fact acquisition by the acquirers within the meaning of Regulation 10. When two or more persons acquire shares in a company, acting in concert with each other, each one of them is an acquirer within the meaning of regulation 2(b) of the 1994 Regulations. If this Court ultimately finds that the de....
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....lation 10 did not arise in that case. 98. As noticed earlier, Mr. Nariman also agrees that the provisions of the 1994 Regulations must be understood on their own, and in fact, he went to the extent of submitting that the aid of a subsequent law cannot be taken for interpreting an earlier law. He, therefore, submitted that one need not look at the Regulations of 1997. Even without the aid of the 1997 Regulations, it must be held that under the Regulations of 1994, an acquirer need not be a registered shareholder and a holder of shares on the basis of blank transfer with a right to get his name registered was included in that term. On the question of indirect acquisition and control, he submitted that in the facts and circumstances of this case, that was not relevant in view of the fact that the defendants were acting in concert with each other, and, therefore, on a purposive interpretation, whether the acquisition was direct or indirect is immaterial. 99. We are inclined to agree with Mr. Nariman. We have already recorded our conditions earlier. As far as indirect acquisition is concerned, in the facts and circumstances of this case, if it is held that the defendants were acti....
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....dent No. 5's primary submission is that no shares in SESA Goa were acquired, hence exclusion of regulation 3(d) applies and the 1994 Regulations do not cover the transaction in question. The contrived nature of the petitioner's argument is none the more apparent than in the game of statutory leap-frog that he plays in his contention that regulation 9(3) of the 1994 Regulations applies to the present case. From regulation 9(3) of the 1994 Regulations, he leaps [via Regulations 2(1)(b) and 2(2) of the 1994 Regulations] to the definition of 'securities' contained in section 2(h ) of the Securities Contract (Regulation) Act, 1956 and 'body corporate' in the Companies Act, 1956. The expression 'securities' in regulation 9(3) clearly and obviously refers to securities of the target company and not securities of a company which holds shares in the target company. The expression 'securities' has been used in contradistinction to the expression 'shares' in regulation 9(1) and 9(2) so as to cover a case where an acquirer acquires voting rights in a company by acquiring securities other than shares which may entitle the acquire to such voting rights. It is not as if the expression 'securities....
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....irer' expanded to include these situations. uThe term 'control' be defined to include the light to appoint majority of the directors or to control the management or policy decisions, exercisable by person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements, or in any other manner. 3.34 Indirect acquisition.-The Committee had noted that there exists a lacuna in the existing regulations which would allow persons to acquire indirect control of a listed company by acquiring the holding company or a set of investment companies which has block holding and which may be unlisted, because the scope of the regulations apply only to acquisitions of shares in listed companies. The committee thought it fit to clarify by way of an explanation that acquisition of an unlisted company would not be exempted if by virtue of such acquisition, or change in control of the unlisted company whether in India or abroad, there is brought about a change in control of the listed company or control over the voting rights of the listed company. The Committee recommends that: ....
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....t be triggered in the circumstances set out therein. Use of the negative language in regulation 3 clearly implies that the framer of the said regulation (SEBI) intended that the provisions of the said regulation 3 are mandatory in character and are to be strictly construed. Regulation 3(d ), inter alia, provides that nothing contained in Chapter III of these regulations shall apply to acquisition of shares in companies whose shares are not listed on any stock exchange. 85. Regulation 2(1)(i ) of the 1994 Regulations defines 'shares' to mean "shares in the share capital of a company carrying voting rights and include any 'security' which would entitle the holder to receive shares with voting rights". Regulation 2(1)(h) defines a Stock Exchange to mean a stock exchange which has been granted recognition under section 4 of the Securities Contract and Regulations Act, 1956 (SCRA). The word 'company' or 'companies' is not defined in the 1994 Regulations; but regulation 2(2 ) of the 1994 Regulations provides that all other expressions unless defined herein shall have the same meaning as have been assigned to them under the SEBI Act or the Companies Act, 1956, or the SCRA, as the case ....
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....he present case. Regulations 3(1)(k) of the 1997 Regulations also provides for the same provision as contained in regulation 3(d) of the 1994 Regulations, except that an explanation has been added which reads : "The exemption under clause (k ) above shall not be applicable, if by virtue of acquisition or change in control of any unlisted company whether in India or abroad the acquirer acquires shares or voting rights or control over a listed company." 89. The word 'control' was also defined in regulation 2(1)(c) of the 1997 Regulations to include direct or indirect control. The Explanation to Regulations 10 and 11 of the 1997 Regulations provided that the acquisition under Regulations 10 and 11 shall mean and include - (a)direct acquisition in a listed company to which the regulations apply; (b)indirect acquisition by virtue of acquisition of holding companies, whether listed or unlisted, whether in India or abroad. Therefore, it is quite evident that the concept of indirect acquisition of shares or change in control has been introduced for the first time by the 1997 Regulations. 90. Mr. Chagla has placed reliance on the decision rendered by the Hon'ble Supreme Co....
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....ns can be put to a statutory provision. Each judge having a free play to put his own interpretation as he likes. This would be destructive of judicial discipline, and also the basic principle in a democracy that it is not for the Judge to legislate as that is the task of the elected representatives of the people. . . . Hence departure from the literal rule should be only done in very rare cases, and ordinarily there should be judicial restraint in this connection. . . . In Jinia Keotin v. Kumar Sitaram Manjhi [2003] 1 SCC 730, this Court observed that the court cannot legislate under the garb of interpretation. Hence there should be judicial restraint in this connection, and the temptation to do judicial legislation should be eschewed by the Courts, in fact, judicial legislation is an oxymoron." 92. We, therefore, do not find that both SEBI and the Appellate Authority were in error when they concluded that the transaction did not come within the ambit of the provisions of the 1994 Regulations and no public offer was required to be made. 93. Recently, followed by the decision in Raghunath Rai Bareja's case (supra) the Hon'ble Supreme Court had another occasion to deal with ....
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.... to rationalise the Act. Mr. Nariman [learned Senior Advocate for the Appellant takes us to various authorities in regard to the construction of a consolidating statute including RC v. Hinchy [1960] AC 748, Beswick v. Beswick [1968 AC 58], Director of Public Prosecutions v. Schildkamp [1971 AC 1], Maunsell v. Olins [1975 AC 373] and Farrell v. Alexander [1977 AC 59], to suggest that a consolidating statute is not meant to alter the law. But, in these decisions, it has also been suggested that a consolidating statute may also be an amending Act. 78. It is one thing to say that where the words or expressions in a statute are plainly taken from an earlier statute in pari materia which have received judicial interpretation, it must be presumed that Parliament was aware thereof and intended it to be followed in the latter enactment. But, it is another thing to say that it is necessary or proper to resort to or consider the earlier legislations on the subject only because the consolidating Act re-enacts in an orderly form the various statutes embodying the law on the subject. (See Williams v. Permanent Trustee Co. of New South Wales 1906 AC 249 AC at p. 252 and N.S. Bindra's Interpret....
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....propose to dispose of the argument merely on these general considerations. In our view, even, the legislative history viewed in the light of the dictum of the Privy Council in Hurrish Chunder case (Hurrish Chunder Chowdry v. Kali Sundari Debia) [(1882-83) 10 IA 4] does not afford any adequate justification for departing from the plain and apparent intendment of the statute.' Such construction is to be put only when it is a pure consolidating statute but there cannot be any doubt whatsoever that the same has to yield to plain words to the contrary. [See Beswick v. Beswick 1960 AC 58 and Grey v. IRC (1960) AC 1] 81. However, there is no constitutional or statutory embargo that a consolidating Act must also be an amending Act. When different terms are used in the new Act, it would not be proper for the Court to refer to the provisions of a repealed statute. 82. We may furthermore notice that the distinction between consolidating statute and other statutes is no longer valid. It is only in certain exceptional situations that the language used in the earlier Act can be resorted to. In G.P. Singh's Principles of Statutory Interpretation, 10th Edn., pp. 315-16, it is stared: '....
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....xpression of a contrary opinion. But when the repeal is followed by fresh legislation on the same subject we would undoubtedly have to look to the provisions of the new Act, but only for the purpose of determining whether they indicate a different intention. The line of enquiry would be, not whether the new Act expressly keeps alive old rights and liabilities but whether it manifests an intention to destroy them. We cannot therefore subscribe to the broad proposition that section 6 of the General Clauses Act is ruled out when there is repeal of an enactment followed by a fresh legislation. Section 6 would be applicable in such cases also unless the new legislation manifests an intention incompatible with or contrary to the provisions of the section. Such incompatibility would have to be ascertained from a consideration of all the relevant provisions of the new law and the mere absence of a saving clause is by itself not material. It is in the light of these principles that we now proceed to examine the facts of the present case.' 85. In Jayantilal Ararathlal v. Union of India [1972] 4 SCC 174 this Court held: (SCC pp. 177-78, para 8). 'The above contention is untenable. Th....
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....e is anything in the 1954 Act and the 1958 Act indicating a revival of the 1941 Act in relation to cigarettes? 16. It is now well-settled that 'repeal' connotes abrogation or obliteration of one statute by another, from the statute-book as completely 'as if it had never been passed'; when an Act is repealed, 'it must be considered (except as to transactions past and closed) as if it had never existed'. [Per Tindal, CJ. In Kay v. Godwin (1830) 6 Bing 576] and Lord Tenterdon in Surtees v. Ellison [(1829) 9 BSC 750] cited with approval in State of Orissa v. M.A. Tulloch & Co. AIR 1964 SC 1284. 17. Repeal is not a matter of mere form but one of substance, depending upon the intention of the Legislature. If the intention indicated expressly or by necessary implication in the subsequent statute was to abrogate or wipe off the former enactment, wholly or in part, then it would be a case of total or pro tanto repeal. If the intention was merely to modify the former enactment by engrafting an exception or granting an exemption, or by super-adding conditions, or by restricting, intercepting or suspending its operation, such modification would not amount to a repeal [see Craies on Statu....
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....new Act. Therefore, when the repeal is followed by a fresh legislation on the same subject, the Court would undoubtedly have to look to the provisions of the new Act only for the purpose of determining whether the new Act indicates different intention. The object of repeal and re-enactment is to obliterate the repealed Act and to get rid of certain obsolete matters.' 89. We may at this juncture also notice that whereas section 6 of the General Clauses Act provides for effect of repeal, section 24 thereof provides for continuation of orders issued under the enactments repealed and re-enacted. They read as under : '6. Effect of repeal.-Where this Act, or any Central Act or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not- (a )revive anything not in force or existing at the time at which the repeal takes effect; or (b )affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or (c )affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; ....
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....d to repeal of notifications issued thereunder also. The proviso appended to sub-section (1) of section 20 of the 2003 Act, however, carves out an exception in regard to the consequences flowing therefrom. 91. If sub-sections (1) and (2) of section 20 of the 2003 Act operate in different fields, as we have held, the marginal note of section 20 viz. repeal and savings, in our opinion, would not be material. If both the sub-sections of section 20 of the 2003 Act are not dependent on each other and in particular having regard to the phraseology used therein, they need not be read together. One cannot proceed on the basis while reading the provisions of the statute that anomaly would be created and then urge that they should be read together. 92. Submission of Mr. Andhyarujina (learned Senior Advocate for the respondents) that this Court must read the words 'unless a different intention appears' in sub-section (1) of section 20 of the 2003 Act, in our opinion, is impermissible in law. We have rejected a similar contention of Mr. Nariman urging us to read down and apply the purported rule of purposive construction while construing section 14 of the 2003 Act. We do not intend to ap....
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....f sale of energy as contradistinguished from the provisions of the 1939 Act. It takes away the power of exemption on consumption of electrical energy which had been expressly provided under the 1962 Act. Can the 1939 Act and the 1962 Act, on the one hand, and the 2003 Act, on the other be said to be containing similar or identical provisions? The answer thereto must be rendered in the negative. Once section 14 of the 2003 Act is held to be not containing any provision 'corresponding' to the relevant provisions of the 1939 Act and the 1962 Act, sub-section (2) of section 20 of the 2003 Act in our opinion, will have no application. If sub-section (2) of section 20 of the 2003 Act would have no application, sub-section (1) of section 20 would apply. Once sub-section (1) of section 20 of the 2003 Act is found to have application, the absence of the words 'unless a different intention appears' will assume great significance. If that be so, then there is no conflict between the proviso appended to sub-section (1) of section 20 and sub-section (2) thereof. In that view of the matter, sub-section (2) of section 20 of the 2003 Act would prevail. 97. The High Court, therefore, in our opin....
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....a mere concession defeasible by the Government and does not confer any accrued right to the recipient. Right of exemption with a valid notification issued gives rise to an accrued right. It is a vested right. Such right had been granted to them permanently. 'Permanence' would mean unless altered by statute. Thus, when a right is accrued or vested, the same can be taken away only by reason of a statute and nor otherwise. Thus, a notification which was duly issued would continue to govern unless the same is repealed. 101. Mr. Andhyarujina, however, would submit that reference to the words 'anything duly done' should be given a restrictive meaning. He referred to - Statutory Interpretation.- A Code by FAR Bennion, 3rd Edn., p. 229, wherein it was stated : 'Paragraph (ii ).-This derives from the Interpretation Act, 1978, section 16(1)(b). The reference to 'anything duly done' avoids the need for procedural matters, such as the giving of notices, to be done over again. Example 89.3.-The Interpretation Act, 1978, section 16 preserved the effect of a noise nuisance notice served under the Control of Pollution Act, 1974, section 58(1) before its repeal and replacement by the En....
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....is only the executed contracts, i.e., the contracts whereunder the goods have been imported and received by the buyer before the merger, no further protection is necessary as ordinarily no question of enforcement of the contracts under the pre-existing law would arise. The phraseology used is not an innovation but is copied from other statutory clauses. Section 6 of the General Clauses Act (10 of 1897) says that unless a different intention appears, the repeal of an Act shall not affect anything duly done or suffered thereunder.' Thus, a liberal and extensive construction was given by this Court. 104. To the same effect is also a decision of the Court in Ram Prasad (Ram Prasad v. State of Punjab AIR 1966 SC 1607 wherein power to make rule was held to be a thing done within the meaning of article 357(2) of the Constitution of India. 105. In Harnek Singh (State of Punjab v. Harnek Singh) [2002] 3 SCC 481 this Court held: (SCC p. 490, para 16) 'The words 'anything duly done or suffered thereunder' used in clause (b) of section 6 are often used by the Legislature in saving clause which is intended to provide that unless a different intention appears, the repeal of an Act wo....
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....ns of these regulations; (b)Any application made to the Board under the said regulations and pending before it shall be deemed to have been made under the corresponding provisions of these regulations; (c)Any appeals preferred to the Central Government under the said regulations and pending before it shall be deemed to have been preferred under the corresponding provisions of these regulations." A plain reading of this regulation clearly indicates that the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1994 stand repealed and the only saving is in respect of what has been provided in sub-regulation (2)(a), (b) and (c ). Further, regulation 47 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 nowhere provide for retrospective application of these Regulations. Therefore, Regulation 47, which provides for repeal and saving, is in consonance with the usual provisions which are required to be incorporated under section 6 of the General Clauses Act, i.e., it merely qualifies that anything done or any action taken or purported to have been done or taken, includin....