TaxTMI 
TaxTMI 
TaxTMI 
2017 (5) TMI 494
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....quisition of Shares and Takeovers) Regulations, 2011 ('SAST/Takeover Regulations, 2011' for short). The question of law being raised in these appeals, therefore, is whether the inter-se promoter transfers made prior to completion of 3 years of listing the target company are eligible for general exemption from open offer under Regulation 10(1)(a)(ii) of SAST Regulations. These appeals also raise the question of the legal status of informal guidance given by a department of SEBI, under the SEBI (Informal Guidance) Scheme, 2003. 2. Laurel Energetics Private Limited, Appellant in Appeal no.124 of 2016, an original co-promoter of India Bulls Real Estate Ltd. and the target company, M/s. RattanIndia Infrastructure Ltd. alongwith Arbututs Corporation LLP (Appellant in Appeal no.123 of 2016), Yantra Energetics Pvt. Ltd., Spire Constructions Pvt. Ltd., Nettle Constructions Pvt. Ltd. and Mr. Rajiv Rattan made a public announcement under Regulation 15 of the SAST/Takeover Regulations, 2011 for the acquisition of 35.94 crore equity shares from the public shareholders of the target company on October 28, 2015. This was pursuant to voluntary acquisition of more than 5% of the voting share capit....
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....17, 2011. * The target company was listed on the BSE and NSE on July 30, 2012. Documents relating to the shareholding pattern of promoters etc were filed with the stock exchanges on July 20, 2012. Laurel Energetics Pvt. Ltd., one of the co-promoter of IBREL and the target company acquired various quantities of equity shares from 3 other co-promoters of IBREL and the target company on July 9-10, 2014. *Laurel acquired various quantities of the equity shares of the target company from 4 other co-promoters of IBREL and the target company on September 5, 2014. * Laurel further acquired various quantities of equity shares of the target company from two co-promoters of IBREL and the target company on October 20, 2014. * All these acquisitions made in July, September and October, 2014 were duly disclosed to the stock exchanges as per SAST/ Takeover Regulations, 2011. * On October 28, 2015 the Appellants alongwith persons acting in concert made a public announcement for acquisition of 35.95 crore equity shares of the target company. On November 10, 2015 the draft letter of offer was filed with SEBI by the Manager to the issue. * On May 5, 2016 the impugned order was issued by ....
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.... pursuant to exemption provided for in clause (a) of sub-regulation (1), sub-clause (iii) of clause (d) of subregulation (1), clause (h) of sub-regulation (1), sub-regulation (2), sub-regulation (3) and clause (c) of sub-regulation (4), clauses (a), (b) and (f) of sub-regulation (4), the acquirer shall, within twenty-one working days of the date of acquisition, submit a report in such form as may be specified along with supporting documents to the Board giving all details in respect of acquisitions, along with a non-refundable fee of rupees twenty five thousand by way of a banker's cheque or demand draft payable in Mumbai in favour of the Board. Explanation.- For the purposes of sub-regulation (5), sub-regulation (6) and sub-regulation (7) in the case of convertible securities, the date of the acquisition shall be the date of conversion of such securities" 6. We have heard the extensive contentions made by the learned counsel for both the sides as well as the submissions made by the intervening applicants. 7. Shri J.J. Bhatt, learned senior counsel for the Appellants reiterated the facts in the matter and submitted as follows: (a) The promoters of IBREL and the promoters of t....
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....lied on the report of the Takeover Regulations Advisory Committee dated July 19, 2010 to emphasize the intention behind the amendments made in SAST in the year 2011. The intention of this Committee was also to continue to provide exemption for inter-se transfer of shares among qualifying parties and the purpose of amendment in terms of new Regulations is to curb the abuse of introduction of new entities as qualifying parties. It was further emphasized in this Report that in respect of a scheme of arrangement sanctioned by a court or other competent authority it would be desirable to continue with the exemption from making the open offer. In terms of the Respondent's own interpretation submitted at page 7 of their reply this benefit should be available to the Appellants. (h) It was further argued that the Appellants have squarely used a guidance given by SEBI to another entity. Citing the informal guidance issued by SEBI on October 25, 2012 to Weizmann Forex Ltd. it was argued that the situation of the Appellant is exactly similar to that in the Weizmann Guidance. The Appellants would not have gone for any inter-se promoter transfers but for this Guidance. The Appellants only follo....
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....2008). Emphasizing the Constitution Bench Judgment at (d) above, it was argued that the circulars and instructions issued by the Board are binding in law on the authorities under the respective statutes. 8. With regard to the Miscellaneous Applications, on instruction, learned senior counsel for the Appellants stated that a total amount of Rs. 115 crore has already been secured to enable the open offer @ Rs. 3.20 per share. On direction, the Appellants filed an affidavit dated March 10, 2017 before this Tribunal, inter alia, stating therein that:- (a) The acquirers have created an escrow account with HDFC Bank in favour of the Manager to the Open Offer for a sum of Rs. 30 crore; (b) An amount of Rs. 20 crore has been provided in a fixed deposit with lien in favour of the Manager to the Open Offer that can be used to meet the obligations of the acquirers under the open offer; (c) Mr. Rajiv Rattan, one of the PACs, has certified and provided an undertaking of financial support to Arbutus Consultancy LLP (one of the Appellants herein) upto an aggregate amount of Rs. 65 crore. In addition, a certificate relating to the networth of the acquirers issued by chartered accountant has a....
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....n terms of the SAST/Takeover Regulations, 2011. Such a mistake made by an officer of the respondent cannot be used to furtherance of the mistake. SEBI in all its subsequent informal guidances insisted that the target company has to complete a minimum period of 3 years as a listed entity and filing to that effect about promoter holdings for availing the exemption of inter-se promoter transfers from public offer obligation. In fact while the Weizmann Guidance was dated October 25, 2012 the correct guidance insisting on 3 years post-listing requirement was available as early as December 5, 2012, just 40 days later, in the matter of Commercial Engineers and Body Builders Company Ltd. Since the inter-se promoter transfers in the impugned order relates to 2014 the latter informal guidance also should have been relied on by the Appellants and a fresh guidance should have been sought from SEBI in case of any doubt. 12. 2011 amendments to SAST Regulations was specifically brought in to prevent the potential abuse of new promoters getting in soon after a company is listed. That is why for inter-se promoter transfers to be eligible for exemption from open offer a minimum 3 years condition af....
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..... If such an interpretation is accepted a company listed today with an unchanged promoter holding for more than 3 years prior to listing becomes eligible for exemption from making an open offer for inter-se promoter transfers even tomorrow. This is not the intention behind the amended law (SAST/ Takeover Regulations, 2011). If that be the case SAST, 1997 would suffice. If such an interpretation is agreed to the very purpose of providing stability for promoter holding for a reasonable period of 3 years post listing will be defeated. 15. The impugned order clearly states that the inter-se transfers amongst promoters on July 9-10, 2014, September 5, 2014 and October 20, 2014 were not exempted from the open offer obligations. Further, vide e-mail dated December 4, 2015 addressed to the Manager to the Open Offer it was stated that Regulation 10(1)(a)(ii) of SAST/Takeover Regulations, 2011 was triggered. As such, there is no ambiguity in the order as the provision relating to exemption of inter-se promoter transfers from the open offer obligations is available only under Regulation 10(1)(a)(ii) of SAST/Takeover Regulations, 2011. 16. Fact that all relevant filings to SEBI / Stock Excha....
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....uidance dated October 25, 2012 was not a correct interpretation of law applicable as on that date. SEBI official should have been more careful and diligent in issuing interpretations of Regulations; however, a wrong interpretation given by an official cannot be used as a shelter in interpreting provisions of law. It is on record that on December 5, 2012 informal guidance on Commercial Engineers and Body Builders Company Ltd. was also available in public domain. The argument of the Appellants that this was not a relevant example as no details relating to this company was available in public domain prior to its listing in 2010 has no merit since this guidance as well as Regulation 10(1)(a)(ii) very clearly state that 3 years subsequent to listing of the Target Company is invariably needed for inter-se promoter transfers to become eligible for exemption from an open offer obligation. 19. We have also perused the Securities and Exchange Board of India (Informal Guidance) Scheme, 2003. Clauses 12 and 13 of the scheme state as follows:- "12. A no-action letter or an interpretive letter issued by a Department constitutes the view of the Department but will not be binding on the Board, th....