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2014 (5) TMI 785
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....hya Infrastructure Pvt. Ltd., is a part of the Promoter Group of MARG Limited ('the Target Company'). For the years 2006- 07, 2007-08 and 2010-11, the gross acquisition by the Promoter Group of shares in the Target Company was as under : "Financial Year Percentage Date triggered on 2006-07 14.34% 30.03.2007 2007-08 5.64% 12.10.2007 2010-11 7.11% 19.02.2011" As a consequence of the foregoing acquisitions, the acquirers breached the 5% creeping acquisition limit and were required to comply with the provisions of Regulation 11 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as the "Takeover Regulations"). 4. On 20th October, 2011, the respondent made a voluntary open offer through a Public Announcement in major National Newspapers, under Regulation 11 of the Takeover Regulations wherein the public shareholders of the Target Company were given an opportunity to exit at an offer price of Rs.91/- per equity share. This price represents a premium of 10.3% over the average market closing price for the two weeks preceding the Public Announcement. The tendering period was scheduled to commence ....
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....ently, we hereby seek withdrawal of the open offer made under the public announcement in terms of Regulation 27 of the Takeover Regulations (the benefit of which continue to accrue to us in terms of Regulation 35(2) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 "New Takeover Regulations"). Regulation 23(1)(d) of the New Takeover Regulations equally empowers withdrawal of an open offer." 6. The appellant by letter dated 30th November, 2012 conveyed its comments in terms of the proviso to Regulation 16(4) of the Takeover Regulations on the draft letter of offer. Certain information was sought in the aforesaid letter. No reference was made in this letter with regard to the request made by the respondent for permission to withdraw the open offer. Rather it was stated as under : "Please note that failure to carry out the suggested changes in the letter of offer as well as violation of provisions of the Regulations will attract appropriate action. Please also ensure and confirm that apart from above, no other changes are carried out in the letter of offer submitted to us." The aforesaid comments of SEBI were challenged by the respondent before S....
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....were kept open. Aggrieved by the aforesaid impugned judgment, SEBI has filed the present Civil Appeal. 11. We have heard the learned counsel for the parties at length. 12. Mr. C.U. Singh, learned senior counsel appearing for the appellant, has submitted that the issues raised by the appellant herein are squarely covered against the respondent by an earlier judgment of this Court in Nirma Industries Ltd. & Anr. Vs. Securities and Exchange Board of India (2013) 8 SCC 20. 13. At this stage, Mr. R.F. Nariman, learned senior counsel appearing for the respondent, has raised certain preliminary objections with regard to the maintainability of the appeal. He submits that the directions issued by the SEBI are based on a misconception of the law applicable to the peculiar facts of this case. He submits that firstly: this is a case where the respondent had made voluntary open offer. It was not a case of an open offer made because of a triggered mechanism under the Takeover Regulations; secondly: since the open offer was a pure and simple voluntary offer, no prejudice has been caused to any shareholder; thirdly: the present case does not fall within the ambit of Regulation 27 of Takeo....
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.... been permitted to withdraw the same by the appellant. The next submission of Mr. C.U. Singh is that Regulation 27 deals with only withdrawal of 'Public Offer' and not withdrawal of 'Public Announcement'. In any event, according to learned senior counsel, submission with regard to withdrawal of Public Announcement has been made, only, at the time of arguments before this Court. It was neither pleaded nor raised before the SEBI/SAT, nor even in the counter affidavit before this Court. He next submitted that under the provisions of Regulation 27, public offer is a rule and withdrawal is an exception. Relying on the interpretation of Regulation 27 in Nirma Industries Ltd.(supra), he submits that an offer can be permitted to be withdrawn only if it becomes virtually impermissible to carry out. Permitting public offers once made to be withdrawn on the ground that it has become uneconomical would compromise the integrity of the Securities Market. This would be contrary to the scheme of the Takeover Code. Mr. C.U. Singh then submits that there is no distinction under Regulation 27 between the voluntary open offer and mandatory open offer which is the result of a triggered acquisition. Rel....
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....acts and circumstances of this case. Dealing with the issue of delay, it is submitted by Mr. Nariman that there was an unjustifiable and inexplicable delay by SEBI in issuing its comments on the draft letter of offer. In support of this submission, he has relied on some correspondence. 19. He relies on letter dated October 20, 2011, whereby the respondent made a voluntary open offer by Public Announcement under Regulation 11 of the Takeover Regulations. He points out that Clause 11.4 of the Public Announcement clearly states that voluntary open offer can be withdrawn by the respondent at any time. He then points out that on 25th October, 2011, SEBI called upon the respondent to provide information on the changes in shareholding and capital build up of the Target Company, along with compliance of the SEBI Regulations. He submits that although the information sought pertains to the earlier acquisition it was duly provided on November 4, 2011 and November 8, 2011. Mr. Nariman submits that under Regulation 18(1) of the Takeover Regulations, the draft letter of offer is required to be filed with SEBI well within 14 days from the date of the Public Announcement. Once the letter of off....
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....ame to the appellant on January 13, 2012, January 16, 2012 and February 3, 2012. Inspite of all this, still there were no comments from the SEBI. Mr. Nariman emphasized that the unjustifiable, inexplicable and inordinate, delay on the part of the appellant in issuing comments on the draft letter of offer created a situation wherein it was impossible for the respondent to implement the voluntary open offer. By that time, the underlying decision to consolidate shareholding had become infructuous by sheer efflux of time. It was under these circumstances that the respondent intimated its decision to withdraw its voluntary open offer and sought withdrawal of the same in terms of the Regulation 27 of the Takeover Regulations. 20. It was pointed out by Mr. Nariman that the respondent specifically and expressly sought opportunity of a personal hearing on the aforesaid request for withdrawal, the appellant did not revert on the request. The respondent once again furnished the same information on the alleged triggers in different formats as required by the appellant through communications dated April 12, 2012; April 20, 2012; May 10, 2012; May 21, 2012; June 6, 2012 and July 5, 2012. Afte....
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....ade" in Regulation 27 is misconceived. This expression has to be understood in terms of Regulation 18. Since Regulation 18 had not been complied with and there was no dispatch of the letter of offer to the shareholders, there was no question of any prejudice being caused to the interest of the shareholders. Mr. Nariman then submits that because of the inaction on the part of SEBI, the respondent would be squarely covered under Regulation 27(1)(b). The approval of the letter of offer by the appellant is statutory in nature. Since it had not been granted within the stipulated period of time, the respondent was entitled to assume that it had been refused. According to Mr. Nariman, it has been erroneously submitted by Mr. C.U. Singh that the claim of the respondent is not covered under Regulation 27(1)(b). Mr. Nariman then submits that the judgment in Nirma Industries is not applicable in the facts and circumstances of this case. Finally, he has submitted that the judgment in Nirma Industries (supra) requires reconsideration. In support of this submission, he submits that Regulation 27 has to be interpreted by keeping in mind the earlier Regulation 27(1)(a). In Nirma Industries, this C....
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.... of the public offer made on 20th October, 2011. 26. With regard to delay, we do not find much substance in the submission of Mr. C.U. Singh. Mr. Singh has sought to explain the delay on the ground that information sought by the appellant was not given by the respondent. In our opinion, this was no ground for the appellant to delay the issuance of comments on the letter of offer, especially not for a period of 13 months. In the event the information was not forthcoming, the appellant had the power to refuse the approval of the public offer. It is true that under Regulation 18(2), SEBI was required to dispatch the necessary letters to the shareholders within a reasonable period. It is a matter of record that the comments were not offered for 13 months. Such kind of delay is wholly inexcusable and needs to be avoided. It can lead to avoidable controversy with regard to whether such belated action is bona fide exercise of statutory power by SEBI. By adopting such a lackadaisical, if not callous attitude, the very object for which the regulations have been framed is diluted, if not frustrated. It must be remembered that SEBI is the watchdog of the Securities Market. It is the guardi....
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....hether it is voluntary or triggered by Regulation 11 can be withdrawn, unless it satisfies the circumstances set out in Regulation 27(1)(b), (c) and (d). There can be no distinction between a triggered public offer and a voluntary public offer. Both have to be considered on an equal footing. We find substance in the submission made by Mr. C.U. Singh that Regulation 18(2) has no relevance to the case projected by the respondents having singularly failed to give the necessary information to SEBI with regard to the earlier three acquisitions. 29. We also do not agree with Mr. Nariman that Regulation 27 has to be read in the context of the Regulation as it existed when it was first enacted. As noticed earlier, Regulation 27(1)(a) before its deletion on September 9, 2002 permitted the public offer to be withdrawn, consequent upon any competitive bid. We see no reason to differ from the view taken in Nirma Industries Ltd. (supra) wherein we have observed as follows: "62. A bare perusal of the aforesaid Regulations shows that Regulation 27(1) states the general rule in negative terms. It provides that no public offer, once made, shall be withdrawn. Since clause (a) has been om....
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.... Nariman that the delay of 13 months by SEBI in issuing the impugned directions would permit the respondent to withdraw the Public Offer under Regulation 27(1)(b). The consideration by SEBI is as to whether a Public Offer is in conformity with the provisions of the SEBI Act and the Takeover Regulations. Delay in performance of its duties by SEBI can not be equated to refusal of the statutory approval requires from other independent bodies, such as under the RBI, Taxation Laws and other regulatory statutes including Foreign Exchange Regulations. Delay by SEBI in taking a final decision in making its comments on the letter of offer would not fall under Regulation 27(1)(b). 33. This now brings us to the submission of Mr. Nariman that there was a breach of Rules of Natural Justice. It is matter of record that the respondent had asked for an opportunity of hearing but none was granted. But the question that arises is as to whether this is sufficient to nullify the decision of SEBI. In our opinion, the respondent has failed to place on the record either before SAT or before this Court the prejudice that has been caused by not observing Rules of Natural Justice. It is by now settled pr....