TaxTMI 
TaxTMI 
TaxTMI 
2014 (5) TMI 785
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....f 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 on 1st December, 2011 and conclude on 20th December, 2011. The consid....
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....e 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 SAT in Appeal No.3 of 2013. 7. The respondent claimed that the impugned directions, ostensibly in the form of comments and ....
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....nsel 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 Takeover Regulations. According to Mr. Nariman, Regulation 27 ought to be read in a manner that it would only govern mandatory open offers and not v....
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....lic 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. Relying on Regulations 11 to 14 of the Takeover Regulations, he submits that all the different types of open offers are set out therein. Each one of the....
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....ay 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 offer is filed, SEBI was required to dispatch the same to the shareholders immediately after 21 days. During 21 days, SEBI is permitted to stipulate the chang....
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....an 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. After a period of more than 13 months, from the date of filing of the draft letter of offer and after more than 8 months from the date of request for withdrawal,....
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....o 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 Court has held that Regulation 27 (b), (c) and (d) are all in the nature of impossibility. Mr. Nariman made a mention about Regulation 27(1)(a) which was omitted by t....
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....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 guardian of the interest of the shareholders. It is the protective shield against unscrupulous practices in the Securities Market. Therefore, SEBI like any other body, which is establ....
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.... 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 omitted, we are required to interpret only the scope and ambit of clauses (b), (c) and (d). The three sub-clauses are exceptions to the general rule and, therefore, have to be construed v....
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....s 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 proposition of law that mere breach of Rules of Natural Justice is not sufficient. Such breach of Rules of Natural Justice must also entail avoidable prejudice to the respondent. This reasoning o....