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2013 (5) TMI 629 - SC - Companies LawPrinciple of natural justice - Takeover code - SRMTL - the request of the appellants for withdrawal of an offer to acquire the equity shares of Shree Ram Multi Tech Limited (SRMTL) under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (Takeover Code/Takeover Regulation) has been rejected. Principle of natural justice - order of SEBI - held that:- it is apparent that all the necessary information was available before SEBI for taking a decision as to whether the claim of the appellants seeking exemption from the Takeover Code, or withdrawal of the Letter of Offer would fall within the purview of Regulation 27(1) (d). The purpose of granting an opportunity of hearing is to ensure fair treatment of the person or entity against whom an order is likely to be passed. - In our opinion, the appellants cannot justifiably claim that any order had been passed by SEBI that would cause adverse civil consequences, as envisaged by this Court in B. Karunakar & Ors. (1993 (10) TMI 310 - SUPREME COURT). The person challenging the order on the basis that it is causing civil consequences would have to prove the prejudice that has been caused by the non-grant of opportunity of hearing. In the present case, we must hasten to add that, in the letter dated 4th May, 2006, the appellants have not made a request for being granted an opportunity of personal hearing. Therefore, the ground with regard to the breach of rules of natural justice clearly seems to be an after thought. About takeover code - held that:- the takeover code is meant to ensure fair and equal treatment of all shareholders in relation to substantial acquisition of shares and takeovers and that the process does not take place in a clandestine manner without protecting the interest of the shareholders. It is keeping in view the aforesaid aims and objects of the takeover code that we shall have to interpret Regulations 27(1). Power of the board to allow withdrawal from the scheme - held that:- certain amount of discretion has been left with the Board to determine as to whether the circumstances fall within the realm of impossibility as visualized under sub-clause (b) and (c). In the present case, we are not satisfied that circumstances are such which would make it impossible for the acquirer to perform the public offer. The possibility that the acquirer would end-up making loses instead of generating a huge profit would not bring the situation within the realm of impossibility. Principle of ejusdem generis - held that:- The appellants wanting to withdraw the public offer merely wishes to cut its losses at the expense of the innocent shareholders, who are entitled under the Regulations to the exit option. In such circumstances, the appellants would have to buy the shares at the quoted prices of Rs.18.60 per share, placing a financial burden on the appellants. The aim of the appellants was merely to avoid such an added burden. - we are not inclined to accept the submissions of Mr. Divan that the principle of ejusdem generis is not applicable for interpreting Regulation 27(1) (d) of the Takeover Code. Regulation 24(2) mandates that the merchant banker shall furnish to the Board a due diligence certificate which shall accompany the draft letter of offer. The aforesaid regulation clearly indicates that any enquiries and any due diligence that has to be made by the acquirer have to be made prior to the public announcement. It is, therefore, not possible to accept the submission of Mr. Shyam Divan that the appellants are to be permitted to withdraw the public announcement based on the discovery of certain facts subsequent to the making of the public announcement. Regarding delay in approval - held that:- the repeated advice given by the merchant banker to enhance the issue size of the open offer and to comply with other requirements of the Takeover Regulations. The appellants, in fact, were prevaricating and did not agree with the interpretation placed on Regulation 27(1) (d) by the Merchant Banker. We, therefore, reject the submission of Mr. Shyam Divan that there was delay on the part of SEBI in approving the draft letter of offer. Regarding valuation - held that:- The formula given in Regulation 20 would have no applicability in the facts and circumstances of this case. The determination of the lowest price under Regulation 20 would be at a stage prior to the making of the public announcement and not thereafter. - appeal dismissed - Decided against the appellant company.
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