2020 (5) TMI 427

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....of 45 days alongwith payment of interest at the rate of 10% p.a. on the offer price the present appeals are filed. 2. The facts of the case would reveal that all the present appellants are promoters of the target Company. They were holding 54.46% of the share capital of the target Company in the year 2014. Additionally, appellant Moderate Leasing & Capital Services Ltd. and appellant A to Z Holding Pvt. Ltd. acquired additional shares during August 25, 2014 to September 16, 2014 increasing their shareholding from 54.46% to 63.86%. As the acquisition was of additional 9.4% of the voting rights it was claimed by the Respondent to be in breach of the SAST Regulations, 2011 and, therefore, the proceedings were launched. Notices were issued to all the appellants. The appellants while admitting all the transactions also additionally submitted that appellant Moderate Leasing & Capital Services Ltd. had also additionally acquired 1.31% shares of the target Company during March 18, 2015 to March 23, 2015 which additionally increased the shareholding of the promoter group. Regulation 3 of the SAST Regulations, 2011 provides as under:- Substantial acquisition of shares or voting righ....

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....g 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. 7 (4) Nothing contained in this regulation shall apply to acquisition of shares or voting rights of a company by the promoters or shareholders in control, in terms of the provisions of Chapter VI-A of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009. 3. It is an admitted fact that the shares were acquired without making any public announcement of an offer for acquiring shares of the target Company as provided by Sub-Regulation (2) above. The appellants however explained that due to continued losses the net worth of the Company was completely eroded. The target Company was therefore compelled to file a reference with Board of Industrial and Financial Reconstruction ("BIFR"). The Board vide order dated February 4, 2014 declared the target Company as sick. IDBI was appointed as operating agency for the preparation of Rehabilitation Scheme for revamping the position of the Company to normal. The two appellants who had acquired the disput....

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.... 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; (vi) a mutual fund, its sponsor, trustees, trustee company, and asset management company; (vii) a collective investment scheme and its collective investment management company, trustees and trustee company; (viii) a venture capital fund and its sponsor, trustees, trustee company and asset management company; (ix) 5 [***] (x) a merchant banker and its client, who is an acquirer; (xi) a portfolio manager and its client, who is an acquirer; (xii) banks, financial advisors and stock brokers of the acquirer, or of any company which is a holding company or subsidiary of the acquirer, and where the acquirer is an individual, of the immediate relative of such individual:  Provided that this sub-clause shall not apply to a bank whose sole role is that of providing normal commercial banking services or activities in relation to an open offer under th....

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....on of the WTM that the present appellant failed to rebut the presumption is wrong. 8. The learned counsel additionally referred to the para 3(f) of the rejoinder affidavit and submitted that the Appellant Company had not acquired a single additional share. It was never consulted in the acquisition of the shares. There is not a single letter/communication between the lending promoters and the appellant in relation to the loan given by lending promoters for acquisition of shares by the appellant. He submits that if this positive evidence is considered in right spirit then the order of the WTM cannot be sustained so far as the present appellant is concerned. The learned counsel further submitted that since the present appellant Company was not able to pay the listing fee it was delisted from the stock exchanges and, therefore, relying on the ratio of Supreme Court's decision in the case of Daichii Sankyo Co. Ltd. v. Jayaram Chigurupati [2010] 103 SCL 1 this Tribunal's decisions in the cases of Modipon Ltd. v. SEBI [2001] 33 SCL 85 (SAT) and Raghu Hari Dalmia v. SEBI [2011] 16 taxmann.com 100/110 SCL 634 (SAT) he submitted that the appeal be allowed. 9. In reply learned c....

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....g company and the subsidiary company. But the mere fact that two companies are in the relationship of a holding company and a subsidiary company, without anything else, is not sufficient to comprise "persons acting in concert". The Attorney General is quite right in his submission that something more is required to comprise "persons acting in concert" than the mere relationship of a holding company and a subsidiary company. There may be hundreds of instances of a company having a subsidiary company but to dub them as "persons acting in concert" would be quite ridiculous unless another company is identified as the target company and either the holding company or the subsidiary make some positive move or show some definite inclination for substantial acquisition of shares etc. of the target company. 11. The learned counsel for the respondent submitted that the above referred appeal was decided not on this issue but on another issue that the deeming fiction under Sub-Regulation (2) was not at all applicable in the said case. However, the observation of the Apex Court in para 47 are based on the similar facts as raised in the present case as detailed supra. In the case of Raghu H....

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....ions, 2011 as detailed supra. The issue is as to whether these Appellant Nos.5 and 6 can be directed to make public announcement to acquire shares of the target Company in accordance with the provisions of the Takeover Regulations, 2011. The WTM relying on the ratio of Nirvana Holdings (P.) Ltd. v. SEBI [Appeal no.31 of 2011, dated 8-9-2011] held that such a direction would be a normal rule and having deviation from the same can be permitted only if issuance of such a direction is not for protection of the securities market or is not for the protection of interest of investors. The learned counsel for the appellant however pointed out that the effect and operation of the order in Nirvana is stayed by the Supreme Court. It was submitted by the appellant that even Nirvana does not declare that a sole available mode would be a direction to make a public announcement ignoring other alternatives provided by Regulation 32 of the SAST Regulations, 2011. 14. In the present case, what we find is that Appellant Nos.5 and 6 had not deliberately acquired the shares of the target Company but they were willy nilly required to accept the shares due to inability of the borrowers to repay the lo....