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2010 (1) TMI 1260 - SECURITIES APPELLATE TRIBUNAL, MUMBAIWhether the share subscription and shareholders agreement executed by and between Subhkam Holding Private Ltd. (now taken over by the appellant), MSK Projects (India) Ltd. (target company) and its promoters in Schedule I to the agreement gives to the appellant ‘control’ over the target company - The case of the appellant is that by virtue of the agreement it did not acquire control over the target company and, therefore, Regulation 12 of the takeover code did not get triggered and that it rightly made the open offer only under Regulation 10. The Board, on the other hand, refers to the various clauses of the agreement and insists that the appellant acquired control over the target company and that it should mention Regulation 12 also in the letter of offer so that proper disclosures are made to the shareholders to enable them to take an informed decision. ‘Control’ carries with it certain responsibilities and obligations which the appellant does not want to be burdened with Provisions of clause 9 do impose fetters on the target company for purposes of good governance and it is conventional for financial investors to protect their investment and, indeed, the target company itself from the whims and fancies of the promoters who manage the target company. Such fetters fall far short of the existence of “control” over the target company. It must be remembered that every fetter of any nature in the hands of any person over a listed company cannot result in “control” of that person over that company. We also cannot lose sight of the fact that in the instant case even if the entire open offer is accepted and 20 per cent shares are tendered, the appellant would be far short of a simple majority that is necessary for getting an ordinary resolution passed. In these circumstances, we cannot hold that the appellant has gained control over the target company. HELD THAT:- Having gone through the agreement carefully with the help of the learned counsel for the parties, we are clearly of the view that none of the clauses therein taken individually or collectively demonstrates control in the hands of the appellant. In this view of the matter, Regulation 12 does not get triggered and the Board was not justified in making the appellant incorporate this regulation in the letter of offer. The question posed in the opening part of our order is , thus, answered in the negative. In the result, the appeal is allowed and the impugned direction contained in the letter dated December 15, 2008 set aside with no order as to costs.
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