TaxTMI 
TaxTMI 
2015 (6) TMI 107
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....unal may deem fit and proper. It is further prayed that the Appellant Company may be permitted to remove the names of the Respondent Nos. 1 to 7, including their transferees, from its Register of Members and accordingly the Appellant Company may be permitted to carry out rectification of its Register of Members. The Appellant Company has also sought a permanent injunction order thereby restraining the Respondents from acquiring directly or indirectly equity in the Appellant Company. 2. The facts of the case leading to filing the present appeal may be summarized as under:- 2.1 The Appellant Company is a public limited company and was incorporated on 18/11/1976 under the provisions of the Companies Act, 1956. The Respondent No.1 Company is having a paid-up capital of Rs. 6,62,59,120/- and the main business of the Appellant was growing mushrooms and manufacturing pharmaceutical products. However, the said manufacturing pharmaceutical products were sold in the year 2007 and the business of growing mushrooms has been shut as it being found not viable. The current issued paid-up and subscribed share capital of the Appellant is Rs. 12,24,00,000/- divided into 1,22,40,000 equity shar....
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....ellant Company are representing 1.86% of the total shareholding of the Appellant Company. 2.8 The Respondent No.6 is having a paid-up capital of Rs. 32,76,000/-and it has acquired 4,17,663 equity shares of Rs. 10/- each of the Appellant Company. The said equity shares in the Appellant Company are representing 3.41% of the total shareholding of the Appellant Company. 2.9 The Respondent No.7 has acquired 2,92,108 equity shares of Rs. 10/- each of the Appellant Company. The said equity shares in the Appellant Company are representing 2.38% of the total shareholding of the Appellant Company, 2.10 It is stated that the Respondents herein had filed a Company Petition, being C.P. No. 111 of 2013, under Sections 397 and 398 of the Companies Act, 1956 before this Board against the Appellant Company, the Respondent No. 1 therein, and its Directors for the acts of oppression and mismanagement purportedly committed by them in the affairs of the Respondent No.1 Company. In the said Petition, the Petitioners, who are the Respondents herein, had referred to various proceedings pursuant to the complaint filed by National Agricultural Co-operative Marketing Federation of India Ltd. (NAFED)....
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....Act, 2013, and hence, this appeal. 3. Pursuant to the notice, the Respondents appeared and filed their Reply. In their reply, they have challenged the maintainability of the present Appeal on a preliminary ground contending that the Company Law Board is not a competent authority to adjudicate the questions raised In this appeal by the Appellant regarding the alleged violation of the provisions of the Takeover Code. It is further submitted that the Appellant has filed this Appeal with malafide and oblique motive in order to defeat a subsequent petition, being C.P. No. 29 of 2014, filed by the Respondents against the Appellant under Section 397/398 of the Companies Act, 1956 alleging various acts of oppression and mismanagement purportedly committed by the Appellant Company and its Directors. It is further stated by the Respondents that this Appeal has been filed for the alleged violation of the provisions of the SEBI Takeover Code only after the Respondents have pointed out the acts of oppression and mismanagement committed by the Appellant and its Directors and sought redressal of the grievances from this Board. It is lastly stated in the Reply that there is no violation of the ....
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....et company and the stock exchange within two days of creation of pledge. (2) The disclosures mentioned in sub-regulations (1) and (1A), shall be made within two days of, - (a) the receipt of intimation of allotment of shares; or (b) the acquisition 01 shares or voting rights, as the case may be. (2A) The stock exchange shall immediately display the information received from the acquirer under sub-regulations (1) and (1A) on the trading screen, the notice board and also on its website. (3) Every company, whose shares are acquired in a manner referred to in sub-regulations (1) and (1A), shall disclose to all the stock exchanges on which the shares of the said company are listed the aggregate number of shares held by each of such persons referred above within seven days of receipt of information under sub-regulations (1) and (1A). SUBSTANTIAL ACQUISITION OF SHARES OR VOTING RIGHTS IN AND ACQUISITION OF CONTROL OVER A LISTED COMPANY Rule 10 Acquisition of fifteen per cent or more of the shares or voting rights of any company No acquirer shall acquire shares or voting rights which (taken together with shares or voting rights, if any, held by him or by persons acting....
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....ntage voting rights shall be regarded as the quantum of additional acquisition. (3) For the purposes of sub-regulation (1) and sub-regulation (2), acquisition of shares by any person such that the individual shareholding of such person acquiring shares exceeds the stipulated thresholds, shall also be attracting the obligation to make an open offer for acquiring shares of the target company irrespective of whether there is a change in the aggregate shareholding with persons acting in concert. DISCLOSURES OF SHAREHOLDING AND CONTROL Rule 29 Disclosure of acquisition and disposal (1) Any acquirer who acquires shares or voting rights in a target company which taken together with shares or voting rights, if any, held by him and by persons acting in concert with him in such target company aggregating to five per cent or more of the shares of such target company, shall disclose their aggregate shareholding and voting rights in such target company in such form as may be specified. (2) Any acquirer, who together with persons acting in concert with him, holds shares or voting rights entitling them to five per cent or more of the shares or voting rights in a target company, sha....
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....ng company, subsidiary company and company under the same management or control. (ii) a company, its directors and any person entrusted with the management of the company. (iii) directors of companies referred to in item (i) and (ii) of this sub-clause and associates of such directors. (iv) promoters and members of the promoter group. (v) immediate relatives, Chart-A Particulars of Shares held by the Petitioners in the CP. No. 111/2013 and 29/2014. No. of Petitioner Holding as per petition Holding as per Respondent No. 1 as on the date of Postal Ballot Holding as per Respondent No. 1 as on 06.09.2013 Firstcorp International Ltd. (P-I) 549752 549752 549752 Earthtech Enterprises Ltd. (P-2) 570000 Nil Nil Karnakhyaa Impex Pvt Ltd. (P-3) 568000 Nil Nil Firstcorp Holdings Pvt. Ltd. (P-4) 570000 Nil Nil Bayswater Enterprises Ltd. (P-5) 227363 232699 227363 Bayswater Enterprises Pvt Ltd. (P-6) 417663 109832 467663 Upasna Distributers Pvt Ltd. (P-7) 292108 292108 292108 Total 3194666 1184361 1536886 % 26.10% 9.67% 2.55% Chart - B Not repr....
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....ry in Practice, have examined all relevant books, registers, forms, documents and papers of M/s. Transchem Ltd. having its Registered Office at 304, Ganatra Estate, Pokhran Road No, 1, Khopat, Thane (w) -400 601 and that of M/s. Adroit Corporate Services Pvt Ltd. having their Registered Office at 19, Jaferhhoy Industrial Estate, 1st Floor, Makwana Road, Marot Naka, Andheri (East), Mumbai - 400 059 the Share Transfer Agent of the Company and based on the record hereby certify that the shareholding details of following Companies in the capital of Transchem Limited as at 31st December 2014 were as follows: Sr. No. Name of Shareholder Companies Number of equity shares of Rs. 10/-each held as at 31.12.2014 % to total paid up capital of Transchem Limited 1 Firstcorp International Limited 549752 4.49 2 Earthtech Enterprises Limited 570000 4.66 3 kamakhyaa Impex Private limited 568000 4.64 4 Firstcorp Holdings Private Limited 570000 4.66 5 Bayswater Enterprises Limited 292108 2.39 6 Bayswater Enterprises Private Limited 351764 2.87 7 Upasna Distributers Privaic Limited 593826 4.85 ....
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..... Counsel, the only competent body under the statute is the SEBI and the CLB has no domain to determine this issue. It was, therefore, contended that the jurisdiction of the CLB is barred by the provisions contained in sections 15Y and 20A of the SEBI Act and the CLB has no jurisdiction to adjudicate upon the issues raised before it. The Appeal, therefore, deserves to be dismissed on this ground alone. To support his contentions, the Ld. Counsel appearing for the Respondents has relied upon the following decisions :- a. Azzilfi Finlease & Investments v. Ambala Sarabhai Enterprises [2000] 23 SCL 52 (CLB - Mum.), wherein, Inter alia it is observed as under :- "2 .........The respondent-company, vide its letter dated October 14, 1997, conveyed the company's decision to refuse to register the transfers of the said shares alleging that the petitioners have violated the provisions of Chapters II and III of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997, by acquiring more than the stipulated percentage of shares in concert with others. ...........It is further submitted that the respondent-company has not submitted any concrete evidence as to how ....
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....cluded, M/s. Crawford Bayley and Company, Advocates and Solicitors, vide their letter dated May 8, 1999, forwarded a copy of the SEBI's letter dated May 5, 1999, wherein it is indicated that they are examining the matter. The SEBI is seized of the matter since October, 1997, and it is not known how much more time it will take. In our opinion, the investors should not be allowed to suffer when there are sufficient provisions under Section 111A(3) to rectify the situation. Further, if after examination/investigation SEBI comes to the conclusion that the shares have been acquired in violation of the SEBI Take Over Code then under regulation 44 of the Code they are also empowered to give necessary directions to take remedial measures: b. Redwood Holdings (P.) Ltd. v. Sandesh (P.) Ltd. [2003] 41 SCL 246 (CLB - Mum.), wherein the Company Law Board, inter alia, observed as under :- 12. In view of the provisions of SEBI Act and the Regulations, any breach of the Regulations can be looked into and appropriate order passed only by the SEBI and that the jurisdiction of the CLB, so far SEBI Regulations are concerned, is barred. 13. Under the SEBI Regulations, SEBI has right to enq....
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....ovision of section 15Y and 20A bars the suit which has been filed by the plaintiffs in the present court and the remedy of the plaintiffs is only before the SEBI 45. ** ** ** 46. I am therefore of the further opinion that the entire suit is based on the sole ground of violation and/or breach of the Take Over Regulation and no other ground has been invoked for rectification of the Share Register. The take over regulation has been enacted under the SEBI Act 1922 and the board is empowered to take cognizance of the breach thereof and therefore the right of the plaintiffs is to complain to the SEBI of such breach and seek necessary remedy. The contention of the learned counsel for the plaintiffs that to merely file complaint with the SEBI is not equivalent to the right of the plaintiffs to file a suit for substantial relief cannot be accepted because the nature of the right conferred by the Takeover Regulation provides for substantial nature of remedy thereunder. The plaintiffs must therefore seek relief as per the provision of law and cannot independently invoke any common law right of rectification of the share and file a suit independent to the provision of section 15Y and 20A....
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....section 111A was pending." 13. Based on the above, it was argued on behalf of the Respondents, that the instant petition is not maintainable due to lack of jurisdiction. 14. Responding to the above contentions, Mr, Iqbal Chagla, Ld. Sr. Advocate, has taken me through the Chart-C referred to above, to show the interse relation between the parties and submitted that the Respondent companies have many common shareholders and common directors. In order to establish the Fact that the Respondents are the parties acting in concert, Mr. Chagla, Ld, Sr. Advocate, has further invited my attention to the share transaction pattern highlighted therein, the names of the common shareholders and the directors of the different companies. The Ld. Sr, Advocate then took me through the reply filed on behalf of the Respondents herein and submitted that the Respondents have not disputed the fact that the Respondent Nos. 1 to 4 on 30/9/2006 had transferred all the shares to the Religare, who thereafter on 27/6/2014, had transferred 1,17,8000 shares back to the Respondent No. 3, which fact is also evident from perusal of the chart referred to above. Moreover, according to him, the Respondent Nos. 1 ....
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....acquires or agrees to acquire shares or voting rights in the target company or acquires or agrees to acquire control over the target company, or acquires or agrees to acquire control over the target company, whether by himself or with any person acting in concert ' From the last line of the above, it is clear that the term 'acquirer' is an inclusive term covering the persons acting in concert also. Therefore, the use of the term in singular or the absence of the words 'acting in concert' in regulation 7 does not mean that an acquirer need not include the shares of those acting in concert in computing the 5% limit. The acceptance of the contention of Shri Mookerjee would mean that each person acting in concert could acquire 4,99% shares without disclosure and continue to do so upto 14,99% without attracting the provisions of regulation 10 relating to public offer. Such an interpretation would defeat the very purpose of the regulations framed in the interest of the shareholders at large in Azzilfi Finlease and Investments (P.) Ltd. v. Ambalal Sarabhai Enterprises Ltd. [2000] 1 Camp LJ 118 (CLB) relied on by the learned counsel, the complaint was that persons actin....
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....right in submitting that, in the facts of this case, regulation 10(2) was attracted. The course adopted by defendants Nos. 1 and 11 leaves no room for doubt that they were acting in concert, and through unlisted companies, who hardly had a share capital base, and which were managed by persons related or known to them. They provided funds to those companies to acquire the shares of Herbertsons Ltd., and in all three cases, the companies were unable to repay the loans and, therefore, defendant No. 11 took over those companies. The identical nature of transactions and the events that followed, prima facie establish that defendants Nos. 1 and 11 along with defendants Nos. 3, 4 and 5 were acting pursuant to a plan and that the similarity of events was not accidental. Funds were advanced to all the three companies for the purchase of shares of Herbertsons Ltd., and all the three companies failed to repay with the result that they were taken over by defendant No. 11. In all the three cases, there is hardly anything to suggest that apart from major investments in the shares of Herbertsons Ltd., those companies invested any sizable amount in shares of other companies, except in one case, wh....
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....egulations does not mean that an acquirer need not include the shares of those acting in concert in computing the 5% limit. The facts further reveal that the Respondents had acquired shares, with others acting in concert, over and above the thresnold limit and applied for rectification of registration of shares, which was rejected by the Company contending that since the shares have been acquired beyond the threshold limit under the Takeover Code, the same cannot be registered. However, on perusal of para No.26 of this case, it may be noted that the Respondent in the said case had admitted that shareholding the Respondents were acting in concert, therefore, it was held that holding of all the Respondents will have to be considered in terms of Regulation 7 of the Takeover Code. In the present case, the Respondents have categorically denied that they have acted in concert. Therefore, the facts are different. 18. In so far as the case of Shirish Finance and Investments Ltd. (supra) is concerned, the facts of this case are also different. On perusal of the facts of the said case, it is apparent that the acquisition of shares was under challenge before the SEBI and certain proceeding....
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....ion of the Impugned shares, and if their names are already entered in the Register of Members of the Company, they may approach the CLB for rectification of its Register of Members by deleting the names of such shareholders/members in respect of the impugned shares. 22. In the present case, ex-facie there is no violation of the Takeover Code in view of the fact that each acquirer has acquired shares below 5% which is within the prescribed limit under the provisions of the Takeover Code. Further the Respondents have denied the fact that they acting in concert have acquired the impugned shares as alleged by the Respondents. Therefore, in my opinion, the Appellant is required to approach the Competent Authority of the SEB1 first, by way of filing a complaint in accordance with law. If such Competent Authority of the SEBI renders a finding to the effect that the Respondents, acting in concert, have acquired the shares-in-question, thereafter the Petitioner is entitled to approach the CLB seeking rectification of Register of Members of the Company. In my opinion, the CLB has no domain to entertain this Appeal in the present form for want of jurisdiction. The Appeal, therefore, deserv....
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....various reliefs praying to pass appropriate orders to bring an end to the complaints and to do substantial justice to the parties. In the said case, both the parties entered into consent terms. I, therefore, raised a query to the Ld. Sr. Advocate for the Appellant herein as to why this issue was not raised in the said petition at that point of time or at any time prior to that, since 2005. I further requested him to clarify on the question formulated by me as to whether despite knowledge, by not raising this issue at the first available opportunity and having obtained a consent order, why the CLB should not presume that the Appellant Company has abandoned its right and therefore, this petition is barred by the principles of waiver, acquiescence / abandonment? I may like to add here that as per settled law, a party who has obtained a benefit under an order, cannot claim that it was valid for one purpose and invalid for another. It is further established proposition that a party cannot approbate and re-approbate and in equity a party drawing benefit from an order, is not permitted to escape from the disadvantage, If any, flowing from it. 25. Answering to the clarifications sought ....
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....in the Company, as stated by them in the said Petition, especially the acquisition of shares during the period 13/09/2013 to 31/03/2014. This shows that the Respondent No.6 to the appeal has acquired 1,60,000 shares approximately during this period. The Ld. Sr. Advocate further submitted that this alerted the position of the Appellant Company herein that during this period the total traded volume by the Appellant was approximately 2,00,000 shares, whereas the quantity acquired by the Respondents was almost 80% of the traded equity. According to the Ld. Sr. Advocate, this kind of aggressive buying reveals an intention of the Respondents to take over control of the Company. 27. Thereafter, the Ld. Counsel appearing for the Appellant attracted my attention to Clause 1 of the Consent Terms filed on 2/1/2014 in C.P.No.111 of 2013, which reads as under :- "The Petitioners and the Respondents have amicably resolved the subject matter of the Petition and based on the mutual understanding as reached between them, the Petitioners have agreed to withdraw this Petition." 28. It was, therefore, contended that the doctrine of estoppel, waiver, acquiescence and abandonment would not appl....