TaxTMI 
TaxTMI 
2007 (11) TMI 702
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....arviz J. Batliwala. These three promoters are the only shareholders of PSPL which was incorporated in 1975. Appellant No. 2 Jost's Engineering Company Limited (for short, Jost) is a public limited-listed company. Mr. Burjor H. Reporter is its chairman and untogether with other members of his family hold majority stake in it. Admittedly, Jost is under the management of the Reporter family. Appellant Nos. 3 and 4 are the aforesaid Mr. Burjor H. Reporter and Mrs. Aloo Reporter. 3. Kerry Jost Engineering Limited (for short, KJEL) the target company, was incorporated in 1962. Its paid up capital of Rs. 20 lakhs comprises of 2 lakh fully paid up equity shares of Rs. 10 each. KJEL is listed on the Bombay Stock Exchange (for short, BSE) for the last several years. KJEL stopped its business of manufacturing of machine tools, dryers etc. from the year 1999 and incurred losses thereafter. Shares of KJEL were thinly traded. Admittedly Jost, Mr. B.H. Reporter. Mrs. Aloo Reporter. Mrs. Parviz Batliwala and her two children with the other promoters were holding 1,33,440 shares for the last several years. Mrs. Batliwala and her two children (for short, Batliwalas) owned 16,000 shar....
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....judice to the generality of this definition, the following persons will be deemed to be persons acting in concert with other persons in the same category, unless the contrary is established: (i) a company, its holding company, or subsidiary or such company or company under the same management either individually or together with each other; (ii) a company with any of its directors, or any person entrusted with the management of the funds of the company; (iii) directors of companies referred to in Sub-clause (i) of Clause (2) and their associates; [Emphasis Supplied] 5. These definitions have been examined by this Tribunal in the case of Modipon Ltd. v. SEBI [2001] 33 SCL 85. The relevant discussion of the judgment is reproduced hereunder: 31. Shri Doctor had stated that since the provisions of Regulation 2(1)(e)(2) defining person acting in concert being a deeming provision, must be....
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....bsp; As the Tribunal has rightly pointed out, there is no hard and fast rule that a promoter must always be deemed to be an acquirer or a person acting in concert with the acquirer. On the facts, it may be held that a promoter shares the common objective or purpose of substantial acquisition of shares with the acquirer. It may well be that he may not share the said common objective or purpose. If he does, he shall be deemed to be a person acting in concert with the acquirer but if he does not, he cannot be deemed to be an acquirer merely because he happens to be a promoter. Regulation 2(1)(e)(2) also make this clear. The persons named therein are deemed to be persons acting in concert with other persons in the same category, unless the contrary is established. It, therefore, follows that even though there is a presumption that the persons described therein may be deemed to be persons acting in concert with the acquirer, the presumption is rebuttable, and therefore, in each case, the facts have to be examined to reach a conclusion as to whether a person is or is not acting in concert with the acquirer for the purpose of substantial acquisition of shares or voting rights ....
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....cent of the shares or voting rights in a company, shall acquire, either by himself or through or with persons acting in concert with him, additional shares or voting rights entitling him to exercise more than 5 per cent of the voting rights, in any financial year ending on 31st March unless such acquirer makes a public announcement to acquire shares in accordance with the regulations. The provisions of Regulation 11(1) have been considered and explained by the Hon'ble Supreme Court in the case of Swedish Match AB v. SEBI [2004] 54 SCL 549. The relevant discussion on the facts and the law is given which read as under: 53. Swedish Match Singapore agreed to acquire majority shareholding in Haravon and Seed subsequent to 17-12-1997 wherefor the public offer was made. SMS comprising of Haravon and Seed had 28.28 per cent and 10.33 per cent whereas Jatia Group comprising of AVP and Plash had 5 per cent and 15 per cent respectively whereas public/others had 41.39 per cent shares. In concert with each other the two Groups acquired shares from public. On or about 25-8-1999 by acquiring preferential shares the Swedish Match Group obtained 52.11 per cent and Jatia....
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....t had got. Such acquisition of Additional shares may be either from public or from a person with whom at one point of time the acquirer had acted in concert. If such a meaning is not assigned, the disjunctive clauses contained in the expressions 'either by himself or through or with person acting in concert with him', may not carry a true and effective meaning. 55. The pre-conditions attracting Regulation 11 are: (i) that an acquirer had acquired shares in concert with another, (ii) such acquisition was more than 15 per cent but less than 50 per cent of the shares or voting rights in a company; (iii) in the event, the acquirer intends to acquire such additional shares or voting rights which would allow him to exercise more than 5 per cent of the voting rights within a period of 12 months, public announcement is required to be made therefore; (iv) such acquisition of additional shares contemplates three different situations, i.e., the acquisition may be by acquirer himself or through or with the person acting in concert with the person whom they had acquired shares earlier in concert with each other. [Emphasis Supplied] (p. 571) ....
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.... 1st Floor, Royal Insurance Building, 14, Jamshedji Tata Road, Mumbai - 400 020 Sub: Notice under Rule 4 of SLBI (Procedure for holding inquiry and imposing penalties by Adjudicating Officer) Rules, 1995. The undersigned has been appointed as the Adjudicating Officer, vide order-dated 8-3-2005, to inquire into and adjudge under Section 15H(ii) of the SEBI Act, 1992, your alleged violation of Regulation 11(1) read with Regulation 14(1) of the SEBI (Substantial Acquisition of shares and Takeovers) Regulations, 1997 (for brevity's sake hereinafter referred to as Takeover Regulations), in the matter of the acquisition of 16,000 shares representing 8 per cent of the paid up capital of Kerry Jost Engineering Ltd. (hereinafter for brevity's sake referred to as KJEL) by you on 12-12-2002. From the facts on record, it appears that you along with the persons acting in concert had acquired 16.000 shares, representing 8 per cent of the paid up capital of KJEL on December 12, 2002; thereafter, your collective shareholding went up from 1,17,440 shares repres....
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....cating officer treated all these sixteen persons, as persons acting in concert with PSPL. However, it is observed that their collective shareholdings in KJEL as on 12-12-2002 was 1,17,440 shares. With the said 16,000 shares acquired by PSPL, on that day, the total shareholdings of the notice-PSPL and the said sixteen persons aggregate 1,33,440 shares. These collective shareholdings have been referred to in the show cause notice to invoke the provisions of Regulation 11(1). It may be stated here itself that only Jost, Mr. Reporter and Mrs. Reporter (appellant Nos. 2 to 4) have been treated as persons acting in concert with PSPL in the impugned order. Further, there is no discussion in the impugned order for not treating the remaining thirteen persons as persons acting in concert with PSPL. 11. We now examine the defence of the appellants against the show-cause notice. In its reply to the show-cause notice and in the subsequent proceedings before the adjudicating officer. PSPL claimed that the provisions of Regulation 11(1) were not attracted in its case because it did not hold any share of KJEL prior to 12-12-2002 and therefore, the purchase of 16,000 shares from Batliwalas was n....
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.... The appellants have however urged that the commonality of objective and community of interest that are the basic requirements of a person to act in concert with PSPL were missing in their case. The appellants have further contended that the promoters and person acting in concert are not one and the same and that they cannot form part of persons acting in concert, as they are being clearly identified as forming part of the promoter's category. 36. Granted that it was PSPL undoubtedly, which singly acquired 8 per cent shares of KJEL. However in the light of the facts placed before me, which reveals that Jost, Mr. B.H. Reporter, Mrs. Aloo Reporter and PSPL were part of the same promoter group and their total holding in the share capital of KJEL was 64.58 percent, while on their own, they held a majority slake in Jost, it is clear that these entities had more than a commonality of purpose or objective Le., of acquiring the shares of KJEL and hence acted in concert at that particular juncture. ........... .......... 43. The expression 'person acting in concert' defined in Regulation 2(1)(e) of the Takeover Regulations has be....
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....39;, argued that all the four appellants were acquirers in this case. We cannot agree with the learned Counsel. A perusal of this judgment clearly shows that the learned Counsel is reading the above observations out of context to claim that all the four appellants were acquirers for the purposes of Regulation 11(1) in the case before us. The High Court has not laid down as a general proposition of law that an acquirer includes within its definition 'person acting in concert' for the purposes of takeover Regulations. The definitions of the two terms 'acquirer' and 'person acting in concert' are separately given in the Takeover Regulations. It is clear that they are different persons and not the same. Unless they are different persons, they cannot act in concert. Further, the High Court itself has treated them separately: its observations in the same judgment, reproduced in para 5 ante, proves the point. Be that as it may, the adjudicating officer has treated PSPL as acquirer of 16,000 shares of KJEI, in the show cause notice and the impugned order. We also, for the purposes of this appeal, treat it so. 15. We shall now deal with the arguments advanced b....