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2018 (7) TMI 114 - AT - Companies LawAdditional shares entitling voting rights - additional shares acquired in violation of regulation 11(2) - Second proviso to regulation 11(2) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 permitting to acquirer to acquire additional shares without making public announcement of an open offer, entitling additional voting rights only up to 5% of the total voting rights of the target company - Held that:- Fact that the shares acquired after 06.08.2009 were directed to be sold in the peculiar facts of that case, would not come in the way of SEBI in reconsidering the question as to why benefit of doubt should not be extended to the appellants in relation to the acquisitions made prior to 06.08.2009. In the present case, acquisitions made by the appellants in violation of regulation 11(2) relate to the period prior to 06.08.2009. Therefore, if by order dated 05.09.2014 benefit of doubt could be given to Madhusudan Jhunjhunwala & Ors. in respect of additional shares acquired in violation of regulation 11(2) prior to 06.08.2009, there is no reason as to why the same benefit of doubt ought not be extended to the appellants in Appeal We answer the first question by holding that under the second proviso to regulation 11(2), additional shares entitling voting rights up to a maximum of 5% alone could be acquired without making open offer. Since the appellants had acquired additional shares entitling more than 5% voting rights in the target company in violation of regulation 11(2), appellants were liable to make open offer. However, in view of the decision of WTM dated 04.09.2014 in case of Madhusudan Jhunjhunwala & Ors., we restore the issue for the limited purpose of considering the question as to whether the benefit of doubt extended to Madhusudan Jhunjhunwala & Ors. (2014 (9) TMI 1154 - SECURITIES AND EXCHANGE BOARD OF INDIA) in relation to acquisitions in violation of regulation 11(2) on or before 06.08.2009 could be extended to the appellants in Appeal. Whether the expression ‘bulk deal’ in the second proviso to regulation 11(2) of the 1997 Regulations disentitles the acquirer covered under regulation 11(2) from acquiring additional shares entitling up to 5% of voting rights without making open offer, if additional shares are acquired in excess of 0.5% shares of the target company by a single transaction executed during the day in the normal market segment? - Held that:- The appellants in their letters/ reply had erroneously admitted that by acquiring additional shares in excess of 0.5% they have committed technical breach cannot be a ground to disregard the clarification issued by SEBI vide interpretative Circular dated 06.08.2009. Similarly, fact that BSE and NSE have shown the transactions of the appellants in the category of ‘bulk deal’ cannot be a ground to deny the benefit of the second proviso to regulation 11(2) especially in view of the interpretative Circular of SEBI dated 06.08.2009. Accordingly, we answer the 2nd question by holding that as per the second proviso to regulation 11(2) of the 1997 Regulations read with the interpretative Circular issued by SEBI on 06.09.2009, an acquirer covered under regulation 11(2) could acquire additional shares entitling more than 0.5% voting rights in a single transaction up to a maximum of 5% voting rights without making an open offer.
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