TaxTMI 
TaxTMI 
TaxTMI 
2023 (1) TMI 1491
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....Securities and Exchange Board of India (hereinafter referred to as the 'SEBI') conducted an investigation into the trading in dealing in the scrip of M/s. Camson Bio Technologies Ltd. (hereinafter referred to as the 'Company') In the investigation it was observed that certain notices acting in concert failed to make a public disclosure of offer for acquisition of shares in violation of Regulation 11(1) read with Regulation 14(1) of the SAST Regulations. Accordingly, adjudication proceedings was initiated and show cause notice dated 18th September, 2017 was issued to show cause why an inquiry should not be initiated against the noticees including the appellant and why penalty should not be imposed under Section 15H of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the 'SEBI Act'). 3. The show cause notice alleged that the appellants along with the other noticees were persons acting in concert ('PACs' for short) in terms of Regulation 2(e) of the SAST Regulations in view of the inter-se relationship between them as depicted in the impugned order. It was also alleged that the total shareholding of the PACs as on June, 2009 was 37.51% of the total s....
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....ellants are concerned, the AO held that the appellants are husband and wife and the appellant Mr. Veerendra Kumar is the brother of the Managing Director and, therefore, there is a relationship between the appellants and other noticees and are therefore deemed to be PACs. 6. The AO further held that the appellants as noticees were required to make the public announcement in terms of Regulation 11(1) subsequent to the increase in the shareholding of the acquirer and since the appellants are acquirers under Regulation 2(1)(e) the appellants were under an obligation under Regulation 11(1) of the SAST Regulations. 7. We have heard Mr. Anilendra Pandey, Advocate assisted by Mr. Ajay H. Saravde, Advocate for the Appellant and Mr. Vyom Shah, Advocate assisted by Mr. Manish Chhangani, Ms. Samreen Fatima and Mr. Sumit Yadav, Advocates for the Respondent. 8. Before we proceed further, it would be appropriate to refer to certain provisions of the SAST Regulations namely Regulation 2(1)(b), 2(1)(e), 3(1)(e), and Regulation 11. "2(1) In these regulations, unless the context otherwise requires:- (a) ....... (b) "acquirer" means any person who, directly or indi....
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....estment company in which such person or his associate holds not less than 2 per cent of the paid up capital of the latter company. Note: For the purposes of this clause 'associate' means: (a) any relative of that person within the meaning of section 6 of the Companies Act, 1956 (1 of 1956); and (b) family trusts and Hindu Undivided Families." Regulation 3(1)(e) Applicability of the regulation. "3. (1) Nothing contained in regulations 10, 11 and 12 of these regulations shall apply to: ................... (e) inter se transfer of shares amongst- (i) group coming within the definition of group as defined in the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969) where persons constituting such group have been shown as group in the last published Annual Report of the target company; (ii) relatives within the meaning of section 6 of the Companies Act, 1956 (1 of 1956); (iii) (a) Qualifying Indian promoters and foreign collaborators who are shareholders; (b) Qualifying promoters: Provided that the transferor(s) as well as the transferee(s) have been holdi....
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.... transfer of shareholding shall be subject to such transferor(s) and transferee(s) having complied with regulation 6, regulation 7 and regulation 8;" Regulation 11 "Consolidation of holdings. 11. (1) No acquirer who, together with persons acting in concert with him, has acquired, in accordance with the provisions of law, [15per 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, [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 persons acting in concert with him any additional shares [entitling him to exercise voting rights] or voting rights therein, unless he makes a public....
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....igures seventy five per cent. (75%), the words and figures ninety per cent. (90%) were substituted. [(3) Notwithstanding anything contained in Regulations10, 11 and 12, in case of disinvestment of a Public Sector Undertaking, an acquirer 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." 9. The chart shown by the AO in paragraph 5(a) of the impugned order indica....
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.... joining together with the shared common objective and purpose of substantial acquisition of shares, etc. of a certain target company. There can be no "persons acting in concert" unless there is a shared common objective or purpose between two or more persons of substantial acquisition of shares, etc. of the target company. For, dehors the element of the shared common objective or purpose the idea of "person acting in concert" is as meaningless as a criminal conspiracy without any agreement to commit a criminal offence. The idea of "persons acting in concert" is not about a fortuitous relationship coming into existence by accident or chance. The relationship can come into being only by design, by meeting of minds between two or more persons leading to the shared common objective or purpose of acquisition or substantial acquisition of shares, etc. of the target company. It is another matter that the common objective or purpose may be in pursuance of an agreement or an understanding, formal or informal; the acquisition of shares, etc. may be direct or indirect or the persons acting in concert may cooperate in actual acquisition of shares, etc. or they may agree to cooperate in such a....
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....ompany. 13. In K.K. Modi vs. Securities Appellate Tribunal (2003) 113 Com. Cases 418 Bom., the Bombay High Court observed that a co-promoter of the target company, by reason of his being a co-promoter cannot be said to be a person acting in concert with the acquirer who also happens to be one of the promoters of the target company, unless the evidence on record clearly establishes that the promoters share the common objective or purpose of substantial acquisition of shares of voting rights for gaining control over the target company with the acquirer. 14. In SEBI vs. Sunil Kumar Khaitan and Ors. 2022 SCC Online SC 862, the Supreme Court further reiterated the position relating to persons acting in concert holding: "41. The expression 'person acting in concert' as defined in clause (e) to Section 2(1) is again broad and expansive. The expression 'person acting in concert' as per sub-clause (1) to Clause (e) includes a person, who for a common object or for purpose of substantial acquisition of shares, voting rights, gaining control over the company, pursuant to an agreement or understanding formal or informal, directly or indirectly, cooperate by acquiring or agreeing....
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....sed that there was no common intention or meeting of minds, the Adjudicating Officer has brushed aside the contention on the sole ground that the appellants are interconnected with the other noticees and are therefore deemed to be PACs. 17. We also find that there is an undue delay in the issuance of the show cause notice. The transaction in question is of the year 2009 and 2011. The show cause notice was issued on 18th September, 2017 after eight years from the date of the first transaction. The AO while considering the delay in paragraph 21 of the impugned order observed that "much time has passed after the alleged violation for issuance of the show cause notice in the matter", however proceeded to decide the matter by simply holding that the noticees have not suffered any prejudice. In our opinion, the word "prejudice" has been loosely used to get away from the laches. 18. This Tribunal in a large number of appeals have set aside the orders only on the ground of delay. In one such case namely, Ashok Shivlal Rupani vs. SEBI appeal no. 417 of 2018 decided on August 22, 2019. This Tribunal held: "6. Having considering the matter, we are of the view that there has bee....
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....d depend upon the facts and circumstances of the case, nature of the default/statute, prejudice caused, whether the third-party rights had been created etc." 8. In the light of the aforesaid, we are of the opinion that there has been an inordinate delay in the issuance of the show cause notice and for completion of the adjudication proceedings. Since the power to adjudicate has not been exercised within a reasonable period no penalty could have been imposed for the alleged violations. 9. As a result, without going into the merits of the case, we are of the opinion that on account of inordinate delay the initiation of proceedings by issuance of the show cause notice which culminated into a penalty order cannot be sustained. The show cause notice and the impugned orders passed by the AO are quashed. Both the appeals are allowed." 19. SEBI carried this matter to the Supreme Court in Civil Appeal no. 8444-8445 of 2019 which was dismissed by judgment dated November 15, 2019. Thus, the order passed by this Tribunal became binding upon SEBI which they have chosen to ignore completely. 20. The learned counsel for the respondent informed the Tribunal that pursuant to....