TaxTMI 
TaxTMI 
2022 (7) TMI 582
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....er Regulations 44 read with 45 of the Takeover Regulations, 1997; and the power and jurisdiction of the Appellate Tribunal under Section 15T of the Securities and Exchange Board of India Act, 1992. For short, the 'Act' A. Background facts: I) Appeal No. 23 of 2013 (Sunil Krishna Khaitan's case) 3. Khaitan Electrical Limited, For short, 'KEL' a company incorporated in 1975, listed on BSE Limited and National Stock Exchange Limited, is engaged in the business of manufacturing and marketing of electrical goods. 4. KEL was founded by late Shri Krishna Khaitan (R12 in the appeal), who had passed away on 04th November 2012 and is represented by his legal representatives. The promoter group consists of his family member/relative and associate entities, which include other respondents in the appeal, namely Sunil Krishna Khaitan, M/s. Khaitan Lefin Limited and M/s. The Oriental Mercantile Company Limited (R11st, R13rd and R14th respectively). 5. In the Extraordinary General Meeting held on 23rd March 2006, the shareholders of KEL had approved issuance of 10,00,000 equity share warrants with the face value of Rs. 10/- each at a premium of Rs. 50/- each on preferential basis to....
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....egulation 11(1) read with Regulations 14(1) of the Takeover Regulations 1997 within four working days from 12th March 2007. 9. The respondents contested the show-cause notice on various grounds, which we will be canvassing subsequently. 10. The Whole Time Member^8 of the Board did not agree with the submissions made by the respondents and vide his order dated 31st December 2012 held that there was violation of Regulations 10 and 11(1) of the Takeover Regulations 1997 and, therefore, the respondents shall make a combined public announcement to acquire shares of the target company,^9 namely KEL, in terms of Regulations 10 and 11(1) of the Takeover Regulations 1997 within forty-five days of the order. Further the respondent, along with the consideration amount, shall pay interest @ 10% per annum from 16th June 2007 till the date of payment to the shareholders who were holding shares in KEL on the date of violation, and whose shares shall be accepted in the open offer, albeit after adjustment of dividend, if any, paid. The effect of the aforesaid direction in the order dated 31st December 2012 would be examined by us subsequently. 11. The respondents preferred an appeal before....
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....ect of his purported failure to make public announcement at the time of acquisition of the shares in 2005 and 2006. 18. After a lapse of more than one year, the Board through Assistant General Manager, Corporate Finance Department, Division of Corporate Restructuring issued the letter dated 17th December 2012, mandating the Merchant Banker of the respondents to inter alia revise the schedule of the offer by taking into account the acquisitions made by R23 on 26th April, 2006 and 11th April, 2007 and thereby, revise the offer price to the shareholders. 19. The respondents challenged the letter before the Appellate Tribunal, which vide impugned order dated 31st October 2013 allowed the appeal and permitted the respondents to continue with their offer excluding the Board's directions relating to the acquisitions by R23 in the years 2006 and 2007. The impugned order observes that the Board by such letters could not issue directions to listed companies, by terming it as a mere advice without giving any choice in the matter. Further, placing reliance on the impugned order herein in Sunil Khaitan v. SEBI, Appeal No. 23 of 2013 decided on 19th June 2013, the Appellate Tribunal observ....
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....e an opportunity to the shareholders to exit in case an acquirer of shares, having 15% or more but less than 55% of the shares or voting rights, either individually or with persons acting in concert, increases their shareholding or voting rights over 5% at any given point in a financial year. As such acquisition enables the individual or the person acting in concert with others to yield greater influence over management of the company, and Regulations 11(1) of the Takeover Regulations 1997 provides for an exit option to the existing shareholders. 27. Regulation 3(3) of the Takeover Regulations 2011 makes explicit what was already implicit in the Takeover Regulations 1997, that in a case an individual within the group crosses the stipulated minimum shareholding threshold, such an individual shall make a public offer even when there is no change in aggregate shareholdings of the group, that is, persons acting in concert. Reference is made to the report of the Takeover Regulation Advisory Committee headed by Mr. C. Achuthan, which exhibits that Regulation 3(3) is to clarify the requirement that was already existing in the Takeover Regulations 1997. 28. There is no estoppel again....
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....ich states that as soon as the contravention of the statutory obligation is established, penalties must follow. This is a distinct objective envisaged in Sections 11 and 11B of the Act read with Regulation 44 of the Takeover Regulations 1997, as has been held in several decisions of this Court in Zile Singh v. State of Haryana and Others, (2004) 8 SCC 1 Chairman, SEBI v. Shriram Mutual Funds and Another (2006) 5 SCC 361 and Securities and Exchange Board of India v. Saikala Associates Limited. (2009) 7 SCC 432. 32. The Appellate Tribunal does not exercise jurisdiction under Article 226 of the Constitution of India and is a creation of the statute and, therefore, cannot pass any order inconsistent with the scheme of the Act. Thus, imposition of monetary penalty for violation of Regulation 11(1) of the Takeover Regulations 1997, as directed by the Appellate Tribunal, is contrary to law and would also result in weakening of investor confidence in securities market as defaulters would be able to escape the obligation. 33. Lastly, the delay in issue of show-cause notice itself would not exonerate the defaulters under the Act and the relevant Regulations, as has been held in Adjudic....
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.... (iii) directors of companies referred to in sub-clause (i) of clause (2) and their associates; (iv)mutual fund with sponsor or trustee or asset management company; (v) foreign institutional investors with sub-account(s); (vi) merchant bankers with their client(s) as acquirer; (vii) portfolio managers with their client(s) as acquirer; (viii) venture capital funds with sponsors; (ix) banks with financial advisers, stock brokers of the acquirer, or any company which is a holding company, subsidiary or relative of the acquirer : Provided that sub-clause (ix) shall not apply to a bank whose sole relationship with the acquirer or with any company, which is a holding company or a subsidiary of the acquirer or with a relative of the acquirer, is by way of providing normal commercial banking services or such activities in connection with the offer such as confirming availability of funds, handling acceptances and other registration work; (x) any investment company with any person who has an interest as director, fund manager, trustee, or as a shareholder having not less than 2 per cent of the paid-up capital of t....
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....nder second proviso to sub-regulation (2) of regulation 11] shall disclose purchase or sale aggregating two per cent or more of the share capital of the target company to the target company, and the stock exchanges where shares of the target company are listed within two days of such purchase or sale along with the aggregate shareholding after such acquisition or sale. Explanation.-For the purposes of sub-regulations (1) and (1A), the term ‗acquirer' shall include a pledgee, other than a bank or a financial institution and such pledgee shall make disclosure to the target 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 of 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 subregulations (1) and ....
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....cordance with the provisions of law, 15 per cent or more but less than fifty five per cent (55%) 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% of the voting rights, with post acquisition shareholding or voting rights not exceeding fifty five per cent., in any financial year ending on 31st March unless such acquirer makes a public announcement to acquire shares in accordance with the regulations. (2) No acquirer, who together with persons acting in concert with him holds, fifty-five per cent (55%) or more but less than seventy-five per cent (75%) of the shares or voting rights in a target company, shall acquire either by himself or through or with persons acting in concert with him any additional shares entitling him to exercise voting rights or voting rights therein, unless he makes a public announcement to acquire shares in accordance with these Regulations: Provided that in a case where the target company had obtained listing of its shares by making an offer of at least ten per cent (10%) of issue size t....
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....r who together with persons acting in concert with him, has made a public announcement, shall not be required to make another public announcement at the subsequent stage of further acquisition of shares or voting rights or control of the Public Sector Undertaking provided:- (i) both the acquirer and the seller are the same at all the stages of acquisition, and (ii) disclosures regarding all the stages of acquisition, if any, are made in the letter of offer issued in terms of regulation 18 and in the first public announcement. Explanation. - For the purposes of regulation 10 and regulation 11, acquisition shall mean and include - (a) direct acquisition in a listed company to which the regulations apply; (b) indirect acquisition by virtue of acquisition of companies, whether listed or unlisted, whether in India or abroad. 12. Acquisition of control over a company. Irrespective of whether or not there has been any acquisition of shares or voting rights in a company, no acquirer shall acquire control over the target company, unless such person makes a public announcement to acquire shares and acquires such shares in accordance with the regulations: P....
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.... the company, under sub-regulation 1 to Regulation 11 or under second proviso to sub-regulation 2 to Regulation 11, shall disclose the purchase or sale aggregating 2% or more of the share capital of the target company to the target company, and to the stock exchanges where the shares of the target company are listed within two days of such purchase or sale along with aggregate of shareholding after such acquisition or sale. The explanation to Regulation 7(1) and (1A) states that the term 'acquirer' for sub-regulation (1) and (1A) shall include a pledgee, other than a bank or financial institution. Such pledgee shall make a disclosure to the target company and the stock exchange within two days of creation of the pledge. Sub-regulation (2A) to Regulation 7 states that the stock exchange shall immediately display the information received from the acquirer under sub-regulation (1) and (1A) on the trading screen, the notice board and also on its website. Sub-regulation (3) requires every company whose shares are acquired in the manner referred to in sub-regulation (1) and (1A) to disclose to all stock exchanges, on which the shares of the said company are listed, the aggregate number o....
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....k exchange is mandated by Regulation 8(3) to make a disclosure to all stock exchanges where their shares are listed, within 30 days of the end of the financial year as well as the record date for the purpose of declaration of dividend as to the holdings of the persons covered by sub-regulations (1) and (2) of Regulation 8. Regulation 8(4) states that every company, whose shares are listed, shall maintain a register in the specified format to record the information received under sub-regulation (3) to Regulation 6, sub-regulation (1) to Regulation 7 and sub-regulation (2) to Regulation 8. 40. The expression 'acquirer', as defined in the Takeover Regulations 1997, is broad, wide and is given an expansive definition. An 'acquirer' is a person who directly or indirectly acquires or agrees to acquire shares or control over the target company by himself or with any person acting in concert with him. The phrase 'directly or indirectly' as well as the expressions 'acquired shares or voting rights' and 'with any person acting in concert with the acquirer' underlines the extensive and widespread ambit of the term 'acquirer'. The term 'acquirer' is not restricted to the person or individua....
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....cision in the case of Sunil Krishna Khaitan, has opined: "21. The first ingredient of the regulation in question is "acquirer", the second is "shares or voting rights, if any, held by him or by persons acting in concert with him"; and the third is "entitle such acquire to exercise fifteen percent or more of the voting rights in a company". The definitions of "acquirer" and "persons acting in concert" as given in the Code of Conduct, 1997 are reproduced below for the sake of convenience": "2(b) "acquirer" means any person who, directly or indirectly, acquires or agrees to acquire shares or voting rights in the target company, or acquires or agrees to acquire control over the target company, either by himself or with any person acting in concert with the acquirer; 2(e) "person acting in concert" comprises, - (1) persons who, for a common objective or purpose of substantial acquisition of shares or voting rights or gaining control over the target company, pursuant to an agreement or understanding (formal or informal), directly or indirectly cooperate by acquiring or agreeing to acquire shares or voting rights in the target company or control over th....
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....al shareholding increases during the course of the acquisition even while acting in concert with other persons is conspicuously missing in the SAST Regulations, 1997. KLL was, therefore, not required to make a public offer and the finding in the Impugned Order qua appellant no. 3, i.e., KLL is hereby set aside. At any rate, since the amendment of the Takeover Code and the inclusion of regulation 3(3) in the SAST Regulations, 2011 the discussion regarding the applicability of regulation 10 of the SAST Regulations, 1997 has been rendered academic. Having said that, in the facts and circumstances of the present case, KLL cannot be called upon to make an open offer by applying regulation 3(3) of the new Takeover Code retrospectively." 23. Therefore, it is evident that the framers of the Takeover Regulation, 1997 intended to bring out a clear distinction between individual acquiring of shares on one hand and shares acquired by persons acting in concert on the other. The benchmark of 15% would, thus, apply to an individual when the individual is acquiring shares/voting rights on his behalf alone. Similarly, when we attempt to determine whether or not the said limit has been cros....
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....res or voting rights are acquired. The bracketed portion of Regulation 10, namely "taken together with shares or voting rights, if any, held by him or by persons acting in concert with him" affirms and endorses this interpretation. 45. When a word/term has been defined in a statute in a particular manner then the interpreter can assume the word/term must be understood in the stipulated sense. The principle applies with greater vigour when the definition of the word/term is given a legal and substantive meaning, different from the common meaning, as then the writer demands that the reader should understand the term/word in the sense defined. When the content and meaning given is technical, the interpreter is entitled to infer that the intention of the draftsmen is to deviate and depart from the ordinary, literal or customary meaning. Therefore, when a statutory enactment consciously defines a word or expression by enlarging or restricting the ordinary meaning, in the absence of clear indication to the contrary, the term as defined shall cover what is proposed, authorised, done or referred to in the enactment. Lord Lowry, Wyre Forest District Council v. The Secretary of State for ....
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.... acting in concert with him, acquire additional shares or voting rights entitling him to exercise more than 5% of the voting shares in addition to already acquired shares/voting rights. 48. Thus Regulation 10 does not apply when the 'acquirer' already holds more than 15% shares or voting rights in the target company. The 'acquirer', for the purpose of the said Regulation, not only means the individual person but also the 'person acting in concert' with the individual person. In such cases, Regulation 11(1) may apply when the 'acquirer' who hold between 15% to 55% of shares or voting rights, post the acquisition of the additional shares or voting rights is entitled to exercise more than 5% of the voting rights. 49. The contention of the Board that the interpretation by the Appellate Tribunal defeats the object and purpose of the Takeover Regulations 1997 is a feeble and evanescent argument. The interpretation, does not render Regulation 10 ineffective to deal with cases where an individual, parts ways with the 'person(s) acting in concert' to acquire shares beyond the threshold of 15% with the intend to gain control or stake in the target company. The argument overlooks the wo....
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....and dropped penalty proceedings, which orders have attained finality and accepted by the Board. Relevant portions of some communications/orders passed are reproduced below: 1. Letter dated 22nd February 2006 to Nagreeka Exports Ltd. (CFD/DCR/AK/IG/60950/2006) "3.0 Without necessarily agreeing with your analysis, our views on the proposed transactions as mentioned in para 2.0 above are as under -............... (iii) Regulation 10 of the Takeover Regulations applies in case of acquisition of shares or voting rights which taken together with shares rights, if any, held by the acquirer or by persons acting in concert with him, entitle such acquirer to exercise 15°/o or more of the voting target company. Where the shareholding of the promoters is already more than 15°/o, this regulation will not be triggered by acq (sic.) additional shares by such promoters. In your case, the promoters' shareholding in the company is stated to be 41.95°/o. Therefore, if a of conversion of warrants into equity shares by promoters of the company, regulation 10 as it exists today prevails, it will not app (sic.) acquisition of additional equity shares." 2. Letter dated 03rd ....
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....Regulation 10 as the acquirer with the person acting in concert were already holding more than the prescribed percentage of shares/voting rights in the target company. 51. Thus, the Board as well as the Adjudicating Officer have treated the expression 'acquirer', for the purpose of Regulation 10, to include a 'person acting in concert' and the combined shareholding were taken into consideration for deciding whether there was a breach of Regulation 10. Where the 'acquirer', including the 'person acting in concert', already had shares or voting rights in excess of the prescribed limit, they were not held guilty of violating Regulation 1028. 52. It is important for the regulator to be consistent and predictable. Further regulations must be clear as ambiguous regulations cause confusion and uncertainty. Regularity and predictability, along with certainty, are hallmarks of good regulation and governance. These principles underpin the 'rule of law', check arbitrariness and are read as the intent of the legislation, which the Courts, if need be, will enforce as a principle of interpretation. The Board is entrusted to preform legislative, executive, investigative ....
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....nd which he can legitimately expect to be permitted to continue to do until he has been communicated some rational grounds for withdrawing it and he has been given an opportunity to comment. It also means that the assurance given by the decision maker will not be withdrawn, without giving him an opportunity of advancing reasons to contend that they should not be withdrawn. Reference can also be made to a recent decision of this Court in State of Jharkhand and Others v. Brahmputra Metallics Ltd., Ranchi and Another (2020) SCC Online SC 968 wherein reference was made to earlier judgment in National Buildings Construction Corporation v. S. Raghunathan and Others (1998) 7 SCC 66 to reiterate that claims based on legitimate expectations have been held to acquire reliance on the representations and resulting detriment to the complainant in the same way as claims based on promissory estoppel. 54. In the context of the present case, it is to be noted that the Board is the draftsman of the legislation having enacted the Takeover Regulations 1997 and hence, their interpretation and understanding of the Regulations is of importance and relevance. In the context of the present case, the Boa....
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....ncis Bennion's Statutory Interpretation which observes that the principle of doubtful penalisation, often limited to criminal statutes, in fact, extends to any form of detriment. The jurist has opined that it is a principle of legal policy that a person should not be penalised except under clear law. We, when considering in relation to the facts of the instant case, wherein the opposing constructions of the enactment is possible, should presume that the legislature intended to observe this principle. The courts, therefore, try to avoid adopting a construction which penalises a person where the legislature's intention to do so is doubtful. 56. We would quote Section 278 from the Bennion on Statutory Interpretation, 5th Edition, Indian Reprint, which reads as under: "Section 278. Statutory interference with economic interests One aspect of the principle against doubtful penalisation is that by the exercise of state power the property or other economic interests of a person should not be taken away, impaired or endangered, except under clear authority of law." In the comments in Section 278 of the treatise, it is stated that the presumption against imposition o....
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....fers to Regulation 10 and states that the same would apply as no public announcement was made in its compliance. It is to be noted that Regulation 10 was not invoked by the Board in Swedish Match (supra) and its violation was not alleged. In the subject appeal before this Court in Swedish Match (supra), reliance was placed on Regulation 12 to get over the mandate of Regulation 11, which contention was rejected. One stray sentence in paragraph 77 that Regulation 10 would apply should not be read as ratio decidendi of the said decision and as a finding on the interpretation of Regulation 10.^48 Decision dated 25th July 2012 of the Appellate Tribunal in Hanumesh Realtors Private Limited v. Securities and Exchange Board of India Before Securities Appellate Tribunal, Mumbai, Appeal No. 66 of 2012, Date of Decision: 25.07.2012 is per incuriam as it has referred to the decision in Swedish Match (supra), which decision relates to and interprets Regulation 11(1). In the present reasoning, we are not dealing and interpreting Regulation 11(1) but Regulation 10 of the Takeover Regulations,1997. 60. Contention of the Board that there is no estoppel against law is well known, but the said pri....
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....gulation 10 would apply both when an individual acquirer or an acquirer in concert with others acquires shares or voting rights beyond the threshold level and such an acquirer would have to comply with the applicable regulation. Takeover Regulations 1997 and Takeover Regulations 2011, therefore, postulate different preconditions and thresholds. Reliance placed upon the Takeover Regulatory Advisory Committee Report would show that there was a rethought and re-examination of Regulation 10 pursuant to which Regulation 3(3) was enacted and made a part of the regulatory mechanism under the Takeover Regulations 2011. 63. It is a general rule of law of interpretation that unless explicitly mentioned, a law cannot be presumed to be retrospective. In Commissioner of Income Tax, (Central) -I, New Delhi v. Vatika Township Private Ltd., (2015) 1 SCC 1 a constitution bench decision, this court observed that: "31. Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should gove....
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....012 64. The impugned order in Appeal No. 23 of 2013 (Sunil Krishna Khaitan case) dismisses the appeal preferred by the respondents and thereby affirms the order holding the respondents guilty of violation of Regulation 11(1) of the Takeover Regulations 1997. The respondents have not filed appeals or cross objections challenging the said finding of the Appellate Tribunal. Hence, we are not required to and would not comment on the findings recorded by the Appellate Tribunal on violation of Regulation 11(1) of the Takeover Regulations 1997. We proceed on the basis that the respondents are guilty and have failed to make public announcement within stipulated timeline as per the Takeover Regulations 1997. 65. As noticed above, the contention of the Board is that the Appellate Tribunal should not have modified the direction given by the Whole Time Member obligating public announcement with the monetary penalty of Rs. 25,00,000/-. 66. Regulations 44 and 45 of the Takeover Regulations 1997 read thus: "44. Directions by the Board. Without prejudice to its right to initiate action under Chapter VIA and section 24 of the Act, the Board may, in the interest of securit....
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....t of the sum in the escrow account shall be liable to be forfeited and the acquirer or such a person shall also be liable for action in terms of the regulations and the Act. (3) The board of directors of the target company failing to carry out the obligations under the regulations shall be liable for action in terms of the regulations and the Act. (4) The Board may, for failure to carry out the requirements of the regulations by an intermediary, initiate action for suspension or cancellation of registration of an intermediary holding a certificate of registration under section 12 of the Act: Provided that no such certificate of registration shall be suspended or cancelled unless the procedure specified in the regulations applicable to such intermediary is complied with. (5) For any mis-statement to the shareholders or for concealment of material information required to be disclosed to the shareholders, the acquirers or the directors where the acquirer is a body corporate, the directors of the target company, the merchant banker to the public offer and the merchant banker engaged by the target company for independent advice would be liable for action in te....
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....iled to comply with the provisions of any of the sections specified in sub-section (1), he may impose such penalty as he thinks fit in accordance with the provisions of any of those sections." 68. Regulation 44 states that the Board, without prejudice to their rights to initiate action under Chapter VI-A Chapter VI-A: "Penalties and Adjudication" (Section 15A to 15JA) and Section 24 Section 24: "Offences" of the Act, may in the interest of the securities market or for protection of the interests of the investors, issue such directions as it may deem fit. Thereafter, it specifies certain directions in clauses (a) to (i), using the word 'including', which implies that the directions issued by the Board can include the directions given in clauses (a) to (i), albeit the Board may issue directions even beyond what is stated in clauses (a) to (i). Thus, the Board's power to give directions is wide. This is also clear from the relevant provisions of the Act, namely, Section 11 and 11B and Sections 11(2)(h), which read: "11. Functions of Board. - (1) Subject to the provisions of this Act, it shall be the duty of the Board to protect the interest of investors in securities and t....
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....1 SCC OnLine Del 3684 70. Use of the word 'may' and not 'shall' in Regulation 44 is significant. It is not mandatory that in case of every violation and breach of Regulations 10, 11 and 12, direction under Regulation 44 shall be issued. The interpretation gets fortified in view of the words and object of the Regulation 44 which empowers the Board to issue directions as it deems fit. Section 11(1), while broadly defining the functions of the Board, states that it is the duty of the Board to protect interest of investors in securities and to promote the development of, and regulate the securities market by such measures as it thinks fit. Section 11B, which deals with the power of the Board to give directions, states that the Board, after making or causing an inquiry, may issue directions if it is satisfied that it is necessary in the interest of the investors, or orderly development of the securities market; to prevent the affairs of any intermediary or other persons referred to in Section 12 from conducting affairs in a manner detrimental to the interest of the investors or to secure proper management of such intermediary or persons. Section 11(2)(h) provides that the Board is en....
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....d Others, (1991) 4 SCC 54 at para 46 and 48 Legal exercise of discretion is one, where the authority examines and ascertains the facts, is aware of the law, and then decides objectively and rationally what serves the interest better. This is true even when the statutes are silent and only the power is conferred to act in one way or the other. Reasonableness as a standard is tested by reference to the community standards at the time of exercise of discretion. This means that discretion should be exercised within the limit to which an honest man competent to discharge his office ought to confine himself.^62 It will be also true to state that the greater the harm or penal consequences, greater is the duty and obligation of the public authority to ensure that discretion is used as an effective tool in regulation or administration but does not cause confusion, chaos and instability. 72. In the context of Regulations 44 and 45, it implies that the Board has the power to make a choice between different courses of action or inaction. This choice is not unfettered but is always held subject to implied limitations inherent in every statute, limitations set by the common law and the consti....
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....thority should be satisfied that the person has failed to comply with the provisions of the section specified in sub-section (1).^65 75. In this context, reliance placed by the Board on the judgments which relate to and arise from the orders passed by the adjudicating officer under Chapter VI-A of the Act are of no relevance, as Regulation 44 is a discretionary power and not mandatory in nature. Not only this, the directions under Regulation 44 are required to be issued considering relevant factors, including, interest of the securities market and protection of the investors in mind. Regulation 44 is not a strict liablity provision. 76. The above position in law gets fortified from Regulation 45 which stipulates that any person violating a provision of the regulations shall be liable in terms of the Regulation, that is, the Takeover Regulations 1997 and the Act. Sub-regulation (6) to Regulation 45, with reference to the penalties, states that it would include monetary penalties under Section 15-H of the Act. It may also include directions under the provisions of Section 11B and 11(4) of the Act. Further, there is power to issue cease and desist order in proceedings under Sect....
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....in this case, as observed by Hon'ble Supreme Court in 'Swedish Mach' case, the noticees shall make a combined public announcement under regulations 10 and 11 read with regulation 14(1) of the Takeover Regulations, 1997. 34. Had the noticees made the public announcement in accordance with the Takeover Regulations, 1997 regulations and complied all related activities within the timelines specified under the Takeover Regulations, 1997, all formalities with respect to their public announcement and the open offer would 7 have been completed on June 15, 2007. Since the noticees have failed to make the public announcement within the stipulated time and the public announcement in compliance with this order would be after delay, the noticees shall pay interest on consideration amount as provided under the Takeover Regulations, 1997 to the shareholders who tender their shares in the open offer and who are eligible for interest as per law. 35. I, therefore, in exercise of powers conferred upon me under sections 19, 11 and 11B of the SEBI Act, 1992 and regulations 44 and 45 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 read with r....
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....that the two conversions of warrants on March 12, 2007, which were different transactions, in as much as the shares in the first tranche pertaining to 5 lac shares allotted to the promoter group were allotted pursuant to conversion of warrants at the rate of Rs.60 per share, and the shares in the second transaction consisting of 8 lac warrants were converted at the rate of Rs.131 per share. Although, the two spells were different, they were executed on the same date and the creeping acquisition limit of 5% was clearly crossed in respect of the acquisition by the promoter group. Therefore, technically there is violation of Regulation 11(1) of the Takeover Code of 1997. For this violation, we are of the opinion that a suitable monetary penalty, must be imposed instead of calling upon the Appellants to make a combined public announcement to acquire shares of the Company at this belated stage. The requirement of making a public announcement would be totally superfluous in the facts and circumstances of the case and would not beget any good. The objective of the preferential allotment of shares in question was only to address the working capital requirements of the Company for ....
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....shares. Direction has also been given to pay interest @ 10% per annum from 16th June 2007 till shares have been accepted in the open offer. The dividend paid, if any, would be adjusted. We are not stating that this direction can never be issued, but the exercise of discretion to issue the said directions has to be predicated and based upon good grounds and reasons. The directions of this nature are not automatic and are to be issued only when they are warranted and justified. The incongruities and absurdities of the directions issued have been highlighted and noticed in the order passed by the Appellate Tribunal. 80. The direction given by the Board vide letter dated 17th December 2012 in the case of Madhuri S. Pitti in the form of direction to modify the draft letter of offer submitted to the Board for approval on 19th September 2011 pursuant to the public announcement made by PLL on 9th September 2011, it must be stated, is rather odd and defies objectivity and logic. The Appellate Tribunal is right in noticing that there was lack of clarity on the part of the Board as to the provision under which the power has been exercised, as the Board's power under Regulation 18 of the Ta....
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....sent case had specifically referred to the respective dates of default and the date of compliance, which was made between 30-8-2011 to 29-11-2011 (delay was between 927 days to 1897 days). Only upon compliance being made that the defaults had come to notice. In the aforesaid background, and so noticing the quantum of fine/penalty imposed, we do not find good ground and reason to interfere." 82. The directions given in the aforesaid quotation should not be understood as empowering the authorities/Board to initiate action at any time. In the absence of any period of time and limitation prescribed by the enactment, every authority is to exercise power within a reasonable period. What would be the reasonable period would depend upon facts of each case, such as whether the violation was hidden and camouflaged and thereby the Board or the authorities did not have any knowledge. Though, no hard and fast rules can be laid down in this regard as determination of the question will depend on the facts of each case, the nature of the statute, the rights and liabilities thereunder and other consequences, including prejudice caused and whether third party rights have been created are relevant....
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....r after 31st December 2012, possibity of distruption on the functioning market place, detrimental impact on the market place/investor confidence, qualitative impact of the retroactive directions on the law's santity predicated on predicibilty and legal stability, as well as undermining of the people's faith and trust on the Board as the protector of law. The directions, therefore, cannot be sustained. 84. There is, as noticed and held below, some merit in the contention of the Board that the Appellate Tribunal could not have imposed penalty under Section 15-H when proceedings under the said Section had not been invoked by the Board and there is no order passed by the adjudicating authority imposing penalty under Section 15-H of the Act. However, the effect of the argument raised by the Board would be that the order passed by the Whole Time Member under Regulation 44 giving directions would be quashed and set aside. The respondents would have, therefore, escaped without having to pay any penalty for violation of Regulation 11(1) of the Takeover Regulations 1997. It is in this factual background we have to decide the present appeals. As noticed above, the respondents have not file....
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.... of the appeal finally within six months from the date of receipt of the appeal." 86. The Board has contended that the Appellate Tribunal, in the exercise of power under Section 15-T and while considering appeals against proceedings under Section 11 and 11B of the Act and Regulation 44 of the Takeover Regulation, 1997, could not have converted the directions of the Board with monetary penalty under Section 15-H. Thus, the impugned order could not have substituted the direction of the Board against respondents to: (a) make a public offer in terms of Regulation 11; and (b) pay consideration amount along with interest at the rate of 10% per annum from June 16, 2007 to the date of payment of consideration to the shareholders, with the direction to pay a monetary penalty of Rs. 25,00,000 for the breach of Regulation 11(1) of Takeover Regulation 1997. We have briefly referred to the reasoning in the earlier paragraphs, and commented on the same. We have also reproduced the reasoning given by the Appellate Tribunal to substitute the direction of the Whole Time Member with that of the penalty. 87. The appeal before the Appellate Tribunal under Section 15T, is the first appeal against....
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....cept the contention of the Board that the Appellate Tribunal while exercising appellate power could not have set aside and quashed the directions given in the appeal. 89. At the sametime, in Sunil Krishna Khaitan's case proceedings under Section 15-H for levy of penalty were not initiated and no order of penalty under 15-H was passed by the adjudicating authority. The Appellate Tribunal, therefore, was not hearing an appeal against imposition of penalty under Section 15-H of the Act. Further, an order under Section 15-H of the Act is passed by an adjudicating authority which, while imposing penalty, is required to take into consideration the factors mentioned in Section 15-J.^72 90. We have also referred to Regulation 45 which in sub-regulation (6) refers to different types of penalties which can be imposed on a person violating any of the provisions of the Regulations. The Appellate Tribunal does not have the power for the first time to initiate and thereupon, impose penalty for non-compliance of the provisions of the Regulations under Chapter VI-A of the Act while deciding an appeal against directions issued under Regulation 44 of the Takeover Regulations, 1997. That power ....
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....th the clarification as to the power of the Appellate Tribunal under Section 15-T of Chapter VI-A of the Act, which is confined to examination of correctness and legality of the order under challenge. 94. There will be no order as to costs. Foot Note 7 Hereinafter referred to as the 'Takeover Regulations 2011'. 8 See Section 4(1)(d) of the Act: "The Board shall consist of the following members, namely: (d) five other members of whom at least three shall be the whole-time members." 9 Regulation 2(1)(o): "target company" means a listed company whose shares or voting rights or control is directly or indirectly acquired or is being acquired. 11 In Appeal No. 2 of 2013 (Madhuri S. Pitti's case), there is no specific order under Regulation 44 by the Whole Time Member, albeit, as noticed above, directions were issued by the Board to amend the draft letter of offer submitted by PLL for the Board's approval on 19th September 2011, vide the Board's letter dated 17th December 2012. The Appellate Tribunal has adversely commented on the Board's conduct in issuing the said direction by directing amendment of the draft letter o....
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....portunity of advancing reasons for contending that they should not be withdrawn. 39 Ibid, para 8: "The question that needs our determination in such a situation is whether Section 18(1) makes punishable receipt of money at a moment of time when the lease had not come into existence, and when there was a possibility that the contemplated lease might never come into existence. It may be here observed that the provisions of Section 18(1) are penal in nature and it is a well-settled rule of construction of penal statutes that if two possible and reasonable constructions can be put upon a penal provision, the court must lean towards that construction which exempts the subject from penalty rather than the one which imposes penalty. It is not competent to the court to stretch the meaning of an expression used by the legislature in order to carry out the intention of the legislature. As pointed out by Lord Macmillan in London and North Eastern Railway Co. v. Berriman [1946 AC 278, 295] "where penalties for infringement are imposed it is not legitimate to stretch the language of a rule, however, beneficient its intention, beyond the fair and ordinary meaning of its language". ....
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....100% shares of SMS. It stands categorically admitted by the appellants herein that acquisition of shares from the Jatia Group in favour of SMS was done by the Swedish company as a group and not as an individual company. Factually, therefore, it is not correct to contend, although in its notice dated 28-1-2002, SEBI had given indication thereof, that SMS had acquired 21.89% shares of its own. Even if SMS had done so, Regulation 10 would apply as no public announcement was made therefor." 48 See Natural Resources Allocation, In re, Special Reference No. 1 of 2012, (2012) 10 SCC 1: "70. Each case entails a different set of facts and a decision is a precedent on its own facts; not everything said by a Judge while giving a judgment can be ascribed precedential value. The essence of a decision that binds the parties to the case is the principle upon which the case is decided and for this reason, it is important to analyse a decision and cull out from it the ratio decidendi........ 73. It is also important to read a judgment as a whole keeping in mind that it is not an abstract academic discourse with universal applicability, but heavily grounded in the facts an....
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.... all the jurisdiction as that of the Board. It can exercise its discretionary jurisdiction in the same manner as the Board. ................. 77. The Board exercises its legislative power by making regulations, executive power by administering the regulations framed by it and taking action against any entity violating these regulations and judicial power by adjudicating disputes in the implementation thereof. The only check upon exercise of such wide-ranging powers is that it must comply with the Constitution and the Act. In that view of the matter. where an expert Tribunal has been constituted, the scrutiny at its end must be held to be of wide import. The Tribunal. another expert body, must, thus, be allowed to exercise its own jurisdiction conferred on it by the statute without any limitation." (Emphasis Supplied) 71 Securities and Exchange Board of India v. Opee Stock-Link Ltd. and Another, (2016) 14 SCC 134: "15. Upon perusal of the impugned order passed by SAT, we do not find any specific conclusion arrived at by SAT to the effect that the findings recorded by the WholeTime Member as well as the Adjudicating Officer of SEBI were in....