TMI Blog2007 (11) TMI 411X X X X Extracts X X X X X X X X Extracts X X X X ..... an through Finsider International Co. Ltd. It was the case of the petitioner that the said acquisition was in violation of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1994 (hereinafter referred to as "the Regulations of 1994") and in violation of the provisions of Clauses 40A and B of the Listing Agreement of the Stock Exchange. 3. In a nutshell, the facts of the case are that respondent No. 4, Finsider International Company (FINCO), held 51 per cent shareholding in respondent No. 3, which is called "M/s. SESA Goa Limited" (SESA Goa). Respondent No. 4 is a 100 per cent subsidiary of EARLY GUARD, which, in turn, is a 100 per cent subsidiary of respondent No. 5, Mitsui Company (MITSUI). Before respondent No. 4 became a 100 per cent subsidiary of EARLY GUARD, it was a 100 per cent subsidiary of LIVA, which was owned by a consortium of companies held by RIVA Group. In the course of time, the shareholding of respondent No. 4 changed hands from LIVA to EARLY GUARD. The control and management of respondent No. 3, therefore, passed on from RIVA Group to the MITSUI Group, and, therefore, the MITSUI Group now controls respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the acquirer acquires any share which would give him more than 10 per cent voting rights in the target company, then the obligation to make the public announcement/offer is triggered. Therefore, even if MITSUI through EARLY GUARD acquired shares of FINSIDER whereby it acquired 51 per cent voting rights in the target company, provisions of Regulation 9(1) of the Regulations of 1994 would be attracted. It is the contention of the petitioner that SEBI in its impugned order failed to appreciate that the provisions of Regulation 9(1) would be triggered by way of acquisition of shares of anybody corporate if, as a result of such acquisition, the acquirer acquires more than 10 per cent voting rights in the target company, and, therefore, SEBI erred in holding that merely because no shares of target company were acquired, the said Regulation would not be attracted. 5. Another contention of the petitioner is that Regulation 9(3) is triggered when an acquirer acquires securities which would entitle him to more than 10 per cent of the voting rights of the target company, i.e., SESA Goa. It is his contention that the term securities as defined in section 2( h )( i ) of the Securitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave held that SESA Goa has acted in concert or colluded with MITSUI in violating the provisions of the Listing Agreement; and that the transaction was nothing but in violation of the Regulations of 1994 and clauses 40-A and 40-B of the Listing Agreement, as it was binding upon a raider, and it cannot be said that mainly because the raider is located outside India and/or he acquires securities of a body corporate outside India so as to, in effect, takeover an Indian company. 8. It is contended by the petitioner that the authorities have failed to take into consideration that there is, in substance, a takeover of a listed Indian company, i.e., SESA Goa, by MITSUI, in total violation of the Regulations of 1994 and the Listing Agreement, and the authorities, by not taking action against the target company and the raider company, have failed to protect the interests of the investors, which is the whole object created by the Regulations of 1994 read with Clauses 40-A and 40-B of the Listing Agreement, and, therefore, the impugned order is illegal and void, and deserves to be quashed and set aside. 9. The respondents submitted that respondent No. 4 is a holding company of respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquired voting rights in respondent No. 3 is not tenable. 10. It is the case of respondent No. 3 that there has been no contravention of clauses 40-A and 40-B of the Listing Agreement signed by respondent No. 3 with the Stock Exchange. It is their contention that the Listing Agreement is required for listing of securities by the listed company, and the recital provides that it is the requirement of the Stock Exchange that the company should enter into this Agreement to qualify for the admission and continuance of its securities to be listed on the Stock Exchange; and insofar as clause 40-A is concerned, it shall not be applicable to an acquisition by a person who has announced his firm intention to make an offer to the company and also notified the Stock Exchange. Further, the expression securities or voting capital in clause 40-B(2) can only refer to the same being of the listed company. Hence, clause 40-B(2) has no application to this case, and these expressions cannot refer to shares/securities in other companies than the listed company concerned, much less to body corporates situated outside and not listed in India. 11. It is submitted that the Securities Contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities) being the protection of the rights of the minority shareholders, the clear and unambiguous language of the Takeover Regulations, 1994 and clauses 40-A and 40-B of the Listing Agreement should be disregarded, is untenable in law. 12. It is the contention of the respondents that the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as "1997 Takeover Regulations") are a completely new set of Regulations, and repeal the earlier 1994 Takeover Regulations. These are not merely clarifications in nature nor do they explain the 1994 Takeover Regulations as contended by the petitioner or otherwise. It is their case that the petitioner based his case on a completely erroneous and ill-founded premise and has erroneously invoked the provisions of the 1994 and 1997 Takeover Regulations, both of which have no application to the facts of the transaction in question. Both the SEBI and the Appellate Authority have, vide detailed speaking orders, replied the case of the petitioner. 13. It is the case of the respondents that the Takeover Regulations of 1997 were brought into effect on 20-2-1997, and the transaction in question took place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought by him, and the petition deserves to be dismissed with costs. 16. The key issue which arises in the matter for decision is : Whether an indirect takeover of the company, by acquiring control of the corporate body, which holds a large percentage of the shares of the target company, attracts the provisions of SEBI Takeover Regulations, 1994 and the Listing Agreement and makes it mandatory for the acquirer company to make public announcement/offer ? 17. The complaint made by the petitioner to the Securities and Exchange Board of India (SEBI) came to be turned down by the impugned order dated 6-3-1997 by SEBI primarily, on the ground that the provisions of the Takeover Regulations are not applicable and in the instant case, they have not been violated; and secondly, the provisions of Clauses 40-A and 40-B of the Listing Agreement are not applicable, and in the instant case, they have not been violated; and that the Regulations are applicable if an acquirer has acquired or agreed to acquire more than 10 per cent shares as per the provisions of Regulations 9 and 10. The Regulations prohibit any acquirer who holds less than 10 per cent of the voting rights to acquire more th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EARLY GUARD and FINCO are persons acting in concert under the Regulations, the fact remains that no shares of SESA Goa have been acquired either by FINCO, MITSUI or EARLY GUARD. SESA Goa is the company which is said to have been taken over. However, this change in control, if at all, has taken place without acquiring any shares. Even if interpretation of the petitioner is accepted, the provisions of the Regulations (dealing with substantial acquisition of shares) would not be applicable in the facts and circumstances of this case. It was observed that the Regulations do not have any concept of change in the control of management requiring public offer. Therefore, the question of violation of Regulations does not arise. 21. It may be mentioned that these Regulations have now been repealed by SEBI and new Regulations have been notified on 20-2-1997. Only in the new Regulations, the concept of control, triggering off public offer, has been introduced. On the aspect relating to applicability of the Listing Agreement, they gave a finding that as in the instant case, FINCO already holds more than 51 per cent of the voting rights of SESA Goa, and has not acquired any share after the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in the case of ESSAR, the investment companies through which the company was taken over were all Indian companies. Therefore, reliance cannot be placed on these two cases in the facts and circumstances of the present case; and, therefore, they concluded that the provisions of Clauses 40-A and 40-B will not be applicable to MITSUI and EARLY GUARD, as there is no change in position regarding the control of FINCO vis-a-vis SESA Goa, which resulted in dismissal of the complaint. 25. Before the Appellate Authority, the contention of the petitioner was that the acquisition of SESA Goa Ltd. by MITSUI Co., Japan, through FINCO was in violation of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1994 and in violation of the provisions of Clauses 40-A and 40-B of the Listing Agreement of the Stock Exchanges on the ground that the provisions of section 9(1) of the Takeover Regulations are triggered if the acquirer himself or in concert with other persons acquired or agreed to acquire shares whereby he would be entitled to more than 10 per cent of the voting rights of the target company; and that there is no pre-requisite for acquiring the shares in the targe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SESA Goa, which is a listed company in India, is concerned, it is clear that FINCO was all along the 51 per cent shareholders of SESA Goa and no change in the shareholding of SESA Goa is alleged to have taken place. The acquisition of FINCO by MITSUI from the RIVA Group has not altered the control of FINCO or SESA Goa. It found that insofar as Indian shareholders in SESA Goa are concerned, no change in control of the company has taken place. The provisions of the Old Takeover Code, thus, do not seem to be attracted in the present case, and the Appellate Authority found no reasons to disagree with the findings of SEBI, and dismissed the appeal. 28. In our view, to decide the controversy, it would be proper to refer to some excerpts from the report of the committee on substantial acquisition of shares and takeovers under the chairmanship of justice P.N. Bhagwati, which led to the repeal of the 1994 Takeover Regulations by the 1997 Takeover Regulations : "The SEBI Act enacted in 1992, empowered SEBI to regulate substantial acquisition of shares and takeovers, and made substantial acquisition of shares and takeovers a regulated activity for the first time. The SEBI Regulations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et acquisition of shares, competitive bid and revised offer in the regulations allowed hostile takeovers and competitive offers to be launched, and the consequent revision of offers to take place for the first time in the Indian market; nonetheless, these offers demonstrated with certain degree of acuity, the deficiencies in the existing provisions. These needed to be specifically addressed in the extant regulations to make the regulatory framework more comprehensive and equitable. A committee was therefore set up by SEBI in November 1995, under the chairmanship of Justice P.N. Bhagwati, former Chief Justice of India, to review the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1994. The terms of reference of the Committee were : to examine the areas of deficiencies in the existing regulations; and to suggest amendments in the regulations with a view to strengthening the regulations and making them more fair, transparent and unambiguous and also protecting the interest of investors and of all parties concerned in the acquisition process." 29. The committee submitted its report in two parts. The first part contains the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... broad, the acquirer acquires shares or voting rights or control over a listed company;" Chapter-III No explanation. Regulation 11 11(1) and (2) ** ** ** 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 holding companies, whether listed or unlisted, whether in India or abroad. Regulation 12 Not there. Regulation 12 Acquisition of control over a company : "Irrespective of whether or not there has been any acquisi-tion of shares or vot- [[[[ 1994 1997 Regulation No. Takeover Regulation Regulation No. Takeover Regulation ing 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be exempted if by virtue of such acquisition, or change in control of the unlisted company whether in India or abroad, there is brought about a change in control of the listed company or acquisition of control over the voting rights of the listed company. The Committee recommends that concept of indirect acquisitions be brought in. This has been done in the definition of acquirer in clause ( b ) of sub-regulation (1) of regulation 2; in the definition of persons acting in concert in sub-clause (1) of clause ( e ) of sub-regulation (1) of regulation 2; further while excluding unlisted companies from the purview of the regulations in clause ( k ) of sub-regulation (1) of regulation 3." Therefore, apart from the submissions made before us by the learned counsel for the parties, which we propose to deal with in the latter part of our judgment, at least one thing is crystal clear that there existed a lacuna in the existing regulations, i.e., the 1994 Takeover Regulations, which would allow persons to acquire indirect control of a listed company by acquiring the holding company or a set of investment companies, which has block-holding and which may be unlisted, because the scop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d an open offer announced by a foreign company, viz., GE Capital (Mauritius) Investment Ltd. (incorporated under the laws of Mauritius), which had agreed to acquire voting equity share capital of an Indian registered company, viz., SRF Finance Ltd., and, therefore, the impugned order was passed by SEBI rejecting the petitioner s complaint, though the fact remains that no shares of SESA Goa have been acquired by FINCO or MITSUI or EARLY GUARD. SESA Goa is a company which is stated to have been taken over. However, this change in control, if at all, has taken place without acquiring any shares. According to the petitioner, this is palpably a perverse finding of SEBI, which totally ignores the reality that the acquisition of shares of FINSIDER by MITSUI (through EARLY GUARD) entitled MITSUI to exercise voting rights in respect of 51 per cent of the shares of SESA Goa held by FINSIDER. That was the stated purpose of the acquisition. 35. It is further contended that even in the appellate order, the finding to the effect that "Insofar as SESA Goa which is a listed company in India is concerned, it is clear that FINCO was all along the 51 per cent shareholder of SESA Goa and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... announcement is stated to be at the time immediately before "his entitlement to obtain voting rights" on such securities. 40. It is further submitted that by definition under section 2( h ) of the Securities Contract Regulation Act, securities include the "shares of any body corporate", which definition admittedly applied to the Substantial Acquisition of Shares and Takeovers Regulations, 1994. 41. It is also submitted that under section 2(7) of the Companies Act, 1956, "body corporate" by definition includes "any company whether incorporated in India or abroad". FINSIDER was, thus, a body corporate" whose shares were securities . Acquisition of these securities entitled MITSUI to more than 10 of voting rights in SESA Goa. 42. It is further submitted that the shares of FINSIDER are thus Securities for the purposes of the Substantial Acquisition of Shares and Takeovers Regulations, 1994. It is undisputed that the acquisition of these securities, viz., the shares of FINSIDER, gave MITSUI the voting rights in regard to 51 per cent of the share capital of SESA Goa, the target company. 43. It is also submitted that the sole purpose of MITSUI acquiring the shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts regulatory fold all those who would otherwise escape if a strict construction were resorted to. 47. It is further submitted that the SEBI Act, 1992 and the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1994 are not penal or criminal statutes. They are regulatory in nature, and in construing a regulatory statute, as in the present case, the principles of purposive interpretation must be adopted. In order to substantiate his contentions, the learned Senior Advocate placed reliance on Swedish Match AB v. SEBI [2004] 122 Comp. Cas. 83 1 (SC), M. Sreenivasulu Reddy v. Kishore R. Chhabria [2001] 34 SCL 1 (Bom.), the Herbertson Ltd. s case [(1999) 5 Comp. LJ 81 (Bom.)]; and Standard Chartered Bank v. Directorate of Enforcement [2005] 125 Comp. Cas. 513 2 . Therefore, MITSUI s reliance on the judgment of the Supreme Court in Nathi Devi v. Radha Devi Gupta [2005] 2 SCC 271 is misplaced. In any event, by the application of those principles as stated therein, the present transaction would fall within and would be covered by the provisions of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1994 inasmuch as regulation 9 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elve into the question of acquisition of unlisted companies, as this issue did not arise in that case. 51. It is further submitted that the submission on the part of Respondent No. 5, MITSUI, that the Division Bench in Herbertson Ltd. s case ( supra ) has approved the SEBI order in SESA Goa is plainly incorrect. The Division Bench distinguished the case of SESA Goa and did not approve SEBI s order. The correctness of SEBI s order is a matter for the determination of this Court in the present proceedings. 52. It is also submitted that in substance, therefore, as far as Herbertson Ltd. s case ( supra ) is concerned, ( i )the learned Single Judge dealt with the matter on the basis that it involved an indirect acquisition of shares in the target company and held that such an indirect acquisition was covered by the 1994 Regulations as otherwise the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1994 would be frustrated. ( ii )the Division Bench dealt with the matter on the basis that it was a case of persons acting in concert and that the question of direct or indirect acquisition did not arise. In that context, the Division Bench distinguished SESA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstantial Acquisition of Shares and Takeovers) Regulations, 1994 do not require respondent No. 5 to make a public announcement to acquire shares in SESA Goa from the other shareholder of SESA Goa. It is contended that Regulation 3( d ) of 1994 Regulations, however, excludes the application of Chapter III of the said Regulations to the acquisition of shares in unlisted companies; and according to Mr. Chagla, the only shares acquired by respondent No. 5 (acting through EARLY GUARD) were the shares in Finsider International Company (FINCO), respondent No. 4, which is a foreign, unlisted company. 56. In the case of Shirish Finance Investment (P.) Ltd. s case ( supra ), a Division Bench of this Court held that by virtue of Regulation 3( d ) of the 1994 Regulations, the acquisition of shares in a company, which is not listed on any stock exchange in India does not come within the purview of Regulation 10 of the 1994 Regulations. This dicta also clearly applies to cases under Regulation 9 of the 1994 Regulations which along with Regulation 10 forms part of Chapter III of the 1994 Regulations. In fact, the Division Bench considered the order of the Appellate Authority in SESA Goa, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by it. However, in the course of the final hearing of the petition, the petitioner stated that he was no longer pressing for this relief. In the circumstances, since a declaration of the nature sought by the petitioner cannot be granted by the Court under Article 226 of the Constitution of India, the only relief that survives is the relief for quashing the impugned orders. In this regard, reference may also be usefully made to the case of General Manager, Eastern Railway v. Kshirode Chandra Khasmobis AIR 1966 Cal. 601 wherein the Court has held thus : "... article 226 should not be used and was not intended to be used as a medium or means for declaratory orders or declaratory reliefs declaring acts and orders invalid even though no relief could be granted to the petitioner. The court under article 226 should not issue writs of consolation or writs propounding theories and thesis. That is not the function, scope and purpose of article 226...." (p. 603) As on the date of the hearing of the petition, the petitioner did not hold a single share in SESA Goa. In the circumstances, coupled with the fact that the petitioner was not pressing prayer ( c ) of his petition, the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sought by the petitioner is not only meaningless for himself, given his lack of shareholding, it is equally academic and futile for all shareholders in SESA Goa. 59.5 The petitioner has sought to rely on the principles of Order 22, Rule 10 of the Code of Civil Procedure whereby a suit that would ordinarily abate on the death of a party in the absence of legal heirs being brought on record, may be continued even if there is an assignment/devolution of interest, by or against the person to or upon whom such interest has devolved. It is submitted that the reliance placed by the petitioner on the aforesaid principle of law is completely misconceived and untenable. In. the present proceedings, the interest of the petitioner has extinguished and not devolved upon any third party for the proceedings to be continued by that party. The petitioner has lost his right, if any, upon transferring his shareholding in SESA Goa to third parties. A shareholder who does not continue to be a shareholder at the time of the public offer is not entitled to any relief under the Regulations, assuming without admitting that any relief could be granted in the facts and circumstances of the present case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both civil and criminal. 60. In reply to Mr. Chagla s contention on behalf of respondent No. 5 that the petitioner has lost his locus to maintain the petition on account of the fact that during the pendency of the petition, the petitioner has ceased to be a shareholder of SESA Goa and as such, it also appears to be the contention of MITSUI that by reason of the fact that the petitioner ceasing to be a shareholder of SESA Goa during the pendency of the petition, the relief sought in prayer clause ( c ) that the acquirer be directed to make a public offer to the existing shareholders cannot survive; and that being so, no reliefs can be granted to the petitioner. It is submitted that on the date of the acquisition of voting rights in SESA Goa by MITSUI and on the date of presentation of the petition, the petitioner and his family held 13,53,559 equity shares of SESA Goa equivalent to 14.09 per cent of its Indian shareholding and constituting 6.9 per cent of its total issued, subscribed and paid-up share capital of SESA Goa. The petitioner was, thus, the largest Indian individual shareholder of SESA Goa, and his two sons continue to be shareholders of SESA Goa to the extent of 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts own merits". It is submitted that this judgment of the Supreme Court has been followed by the Madras High Court in the case of S. Varadrajan v. Venkateswara Solvent Extraction [1994] 80 Comp. Cas. 693 (Mad.) and L.RM.K. Narayanan v. Pudhuthotam Estates [1992] 74 Comp. Cas. 30 (Mad.); and, therefore, according to the petitioner, it is the settled legal position that the devolution of interest of a party plaintiff/petitioner during the pendency of the proceedings cannot and does not affect the continued trial of the action and does not render the proceedings infructuous, as contrasted to a case of the death of the plaintiff, in which case the proceedings would be put to an end if his legal representatives were not brought on record. 62. The learned counsel appearing for the petitioners therein also placed reliance on the decision of the Supreme Court in the case of Dhurandhar Prasad Singh v. Jai Prakash University AIR 2001 SC 2552 while dealing with the rights of the parties as specified under Order 22, Rule 10, of the Code of Civil Procedure, 1908. The Supreme Court held : "6. Rule 10 provides for cases of assignment, creation and devolution of interest during t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner, that as regards locus, the Supreme Court in the decision rendered in the case of M.S. Jayaraj v. Commissioner of Excise [2000] 7 SCC 552 has recognized that there has been a change in the earlier interpretation regarding locus standi and that "a much wider canvass has been adopted in later years regarding a person s entitlement to move to the High Court involving the writ jurisdiction"; and has recognized three categories of persons vis-a-vis locus standi (1) a person aggrieved, (2) a stranger and (3) a busy body or a meddlesome interloper. Therefore it is the case of the petitioner that he is a person aggrieved, and the impugned order of SEBI dated 6-3-1997 and that of the Appellate Tribunal dated 15-12-1997 continue to operate against the petitioner, and, therefore, he is entitled to maintain the petition to have the said orders set aside and can very much seek an appropriate writ from this Court under Article 226 of the Constitution of India to set aside the impugned decisions and seek a declaration that the takeover by MITSUI of FINSIDER constituted a takeover which attracted and requires compliance of the provisions of the SEBI Takeover Regulations, 1994 and Cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e action in accordance with law. 66. On the other aspect canvassed by the respondents that during the pendency of the petition, the voting rights of SESA Goa have also been sold to Vedanta, and hence, the grant of any reliefs is infructuous, it is submitted that MITSUI having sold the shares of Vedanta, MITSUI has transferred the acquired shares/voting rights of SESA Goa to Vedanta, and, therefore, the grant of any relief is infructuous, cannot be tenable, as the said transaction is the subject-matter of pending Special Leave Petition, filed by the petitioner in the Hon ble Supreme Court, being Special Leave Petition (Civil) No. 7962 of 2007; and that on 27-4-2007, the Hon ble Supreme Court has passed an order Issue notice . It is directed that if henceforth the sale is conducted, the same shall be subject to the result of this Petition. Further, MITSUI s contention that the sale of shares to Vedanta is completely untenable having regard to the fact that by law, no such sale can be completed until the public offer is made under the prevailing regulations. It is submitted that the contention of MITSUI in their sur-rejoinder that the petition is not maintainable on the ground of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Target Company, MITSUI through EARLY GUARD having acquired 100 per cent shares of FINCO had, in effect, taken over control of FINCO from the RIVA Group. FINCO is not an Indian Target Company, i.e., a Company listed on a Stock Exchange in India and consequently, the 1994 Regulations were not triggered. 69. According to SEBI, since FINCO held 51 per cent shares in SESA Goa, FINCO was in control of SESA Goa. MITSUI through its 100 per cent subsidiary EARLY GUARD having taken over FINCO, had indirectly taken over control of SESA Goa. Further, neither MITSUI nor EARLY GUARD nor FINCO are listed on any Stock Exchange in India nor had any of them acquired any shares in SESA Goa (which is a company listed on a Stock Exchange in India) and consequently, the provisions of Chapter III of the 1994 Regulations were not triggered. 70. Therefore, neither MITSUI nor EARLY GUARD nor FINCO has acquired or agreed to acquire any shares in such Company, i.e., an Indian Target Company (SESA Goa Ltd.) and consequently, the provisions of the Takeover Chapter, i.e., Chapter III, were not triggered. The only shares that have been acquired are the shares of FINCO (not an Indian Target Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the 1994 Regulations and recommend suitable amendments. 75. It is the case of SEBI that the difference between me two cases of acquisition as referred to by the petitioner can be distinguished; 75.1 In the case of acquisition of shares of GE Capital Transportation Finance Ltd. (formerly known as "SRF Finance Ltd.") (target company) by GE Capital (Mauritius) Investments Company Ltd. (the acquirer). The open offer was made by the acquirer pursuant to an acquisition of 50.05 per cent equity shares of the target company vide agreement entered in January, 1997 with the promoters (SRF Promenade Holdings Ltd., SRF Cgary Holdings Ltd., SRF Superior Holdings Ltd., SRF Transactional Ltd. and their associates) of the target company. The acquisition was a direct acquisition of the shares in the listed Indian company and, therefore, the open offer was made in terms of the Takeover Regulations, 1994. 76. In the case of acquisition of shares of Sterling Computers Ltd. (SCL) (target company) by Essar Investments Ltd. (EIL) (acquirer). SCL was a listed company whose 80 per cent of the voting capital was held by three private limited investment companies. Originally, the entire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Regulations, 1997; but, with all humility at our command, we may observe that the two decisions, on which reliance is placed by the learned counsel for the petitioner, do not help the petitioner, in any manner, to support his case that the takeover by MITSUI of finsider constituted a takeover which attracted and required compliance of the provisions of the SEBI Takeover Regulations, 1994 and clauses 40A and 40B of the Listing Agreement. The Learned counsel appearing for the petitioner has made submissions by leaving emphasis on the regulations of 1997, which have brought about drastic change in the regulations of 1994, which were, at the relevant time, governing the field by contending that the provisions of the Regulations of 1997 can be read into the Regulations of 1994; and that such a legislation must be construed in a purposive manner having regard to the object, purpose and also underlying the legislation; and submitted that the Securities and Exchange Board of India Act, 1992 and the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1994 being regulatory in nature, therefore, in construing a regulatory statute, the princip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered by the Division Bench was whether the indirect acquisition of shares of Herbertsons Ltd. by Kishore Chhabria by acquiring shares of companies which were not listed on any stock exchange but which held share of Herbertons Ltd. was in violation of the 1994 Regulations. It will be recalled that in Herbertsons Ltd. s case ( supra ) this Court made several key findings of fact as follows: ( a )Acting under the direction and funding of one controlling mind (the Chhabria Group), various companies participated in a clandestine scheme to acquire shares in Herbertsons; ( b )Herbertsons was a listed company; ( c )The defendants collective shareholding in Herbertsons changed (and did so significantly, increasing by over 25 per cent) as a result of the various transactions i.e., the shareholding pattern of Herbertsons changed as a result of the scheme; and ( d )The scheming companies had, together, owned shares in Herberstons before they undertook their scheme to acquire further shares. It is instructive to see what the Division Bench had to say about SESA Goa and for convenience, the following paragraphs of the judgment are extracted: "94. ... Mr. Chidambaram next ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge. It would, therefore, follow that, if without anything else, the shares of these companies were acquired by the defendant No. 11, the acquisition of these companies by him may not come within the purview of Regulation 10. But the facts of the case give a different picture altogether. It was not as if defendant Nos. 3 to 5 had acquired the shares of Herbertsons Ltd. on their own. These companies were controlled by persons known to defendant Nos. 1 and 11, and in fact, related to them though not within the meaning of section 6. These companies did not have the capacity to make such huge investments in share of Herbertsons Ltd. According to the plaintiffs, and indeed admitted by the defendants, the funds were made available to them by defendant Nos. 1 and 11 through the companies under their control. The plaintiffs, therefore, contend that all the defendants, which include defendant No. 1, defendant No. 11 and the defendant companies under their control, were acting in concert with each other. A concerted plan had come into existence much before the acquisition of these three companies by the defendant No. 11, and it was in pursuance of such a common plan that funds were made avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Regulations does not arise. It may be mentioned that these Regulations have now been repealed by SEBI and new Regulations have been notified on 20-2-1997. Only in the new Regulations, the concept of control triggering off public offer has been introduced. 97. So far as the instant case is concerned, the acquisition of shares of Herbertsons Ltd., defendant No. 12, took place while the 1994 Regulations were in force. The decision of the SEBI and the appellate authority in SESA Goa must, therefore be understood in the facts and circumstances of that case, because the question of acquisition of shares in breach of Regulation 10 did not arise in that case. 98. As noticed earlier, Mr. Nariman also agrees that the provisions of the 1994 Regulations must be understood on their own, and in fact, he went to the extent of submitting that the aid of a subsequent law cannot be taken for interpreting an earlier law. He, therefore, submitted that one need not look at the Regulations of 1997. Even without the aid of the 1997 Regulations, it must be held that under the Regulations of 1994, an acquirer need not be a registered shareholder and a holder of shares on the basis of blank transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rely acquired another U.K. Company, respondent No. 4, FINCO. Regulation 9 of the 1994 Regulations requires the acquisition of shares/securities in the target company. In the present case, no shares/securities were acquired in SESA Goa by any entity, only the ownership of FINCO changed. FINCO held the same number of shares in SESA Goa after the transaction as it held before the transaction. As regards the argument by the petitioner that FINCO s shareholding in SESA Goa was indirectly acquired by respondent No. 5, or that control of SESA Goa changed, these are matters that were not covered by the 1994 Regulations. 81. Respondent No. 5 s primary submission is that no shares in SESA Goa were acquired, hence exclusion of regulation 3( d ) applies and the 1994 Regulations do not cover the transaction in question. The contrived nature of the petitioner s argument is none the more apparent than in the game of statutory leap-frog that he plays in his contention that regulation 9(3) of the 1994 Regulations applies to the present case. From regulation 9(3) of the 1994 Regulations, he leaps [ via Regulations 2(1)( b ) and 2(2) of the 1994 Regulations] to the definition of securities con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n held a majority stake in the listed company, or by acquiring voting rights in a listed company from the present promoters through power of attorney or by entering into covert voting arrangements. It is beyond doubt that as shareholder interest is involved in such cases too these must be covered by the Regulations by incorporating them in the definition of acquirer. The Committee recommends that uNot only acquisition of shares but also voting rights in a company or control over a company, howsoever such control can be exercised - directly or indirectly - must be covered under the regulations and the present definition of acquirer expanded to include these situations. uThe term control be defined to include the light to appoint majority of the directors or to control the management or policy decisions, exercisable by person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements, or in any other manner. 3.34 Indirect acquisition. The Committee had noted that there exists a lacuna in the existing regulations which would allow persons to acqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words, the committee acknowledged that such cases were not covered by the 1994 Regulations. 84. SEBI as well as the Appellate Authority, therefore, considered the issue in its proper perspective when they arrived at a finding and concluded that indirect acquisitions are not covered by the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1994. Regulation 3 of the 1994 Regulations deals with application of the said Regulations. Regulation 3 is couched in the negative i.e., to say that Chapter III of the 1994 Regulations (which deals with Substantial Acquisition of Shares and Takeovers) would not be triggered in the circumstances set out therein. Use of the negative language in regulation 3 clearly implies that the framer of the said regulation (SEBI) intended that the provisions of the said regulation 3 are mandatory in character and are to be strictly construed. Regulation 3( d ), inter alia , provides that nothing contained in Chapter III of these regulations shall apply to acquisition of shares in companies whose shares are not listed on any stock exchange. 85. Regulation 2(1)( i ) of the 1994 Regulations defines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the 1994 Regulations which would allow persons to acquire indirect control of a listed company by acquiring the holding company or a set of investment companies which have block holding and which may be unlisted, because the scope of the 1994 Regulations applies only to acquisitions of shares in listed companies, The Committee recommended that the concept of indirect acquisitions be brought in. 88. After considering the recommendations of the Committee, the 1994 Regulations were repealed by the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, which came into force on 20-2-1997 and which does not apply in the present case. Regulations 3(1)( k ) of the 1997 Regulations also provides for the same provision as contained in regulation 3( d ) of the 1994 Regulations, except that an explanation has been added which reads : "The exemption under clause ( k ) above shall not be applicable, if by virtue of acquisition or change in control of any unlisted company whether in India or abroad the acquirer acquires shares or voting rights or control over a listed company." 89. The word control was also defined in regulati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t would be amending the law in the garb of interpretation, which is not permissible. . . ." Per Markandey Katju, J. (p. 245) If the present case is examined on the basis of principles laid down in Raghunath Bareja s case ( supra ), it is quite clear that there is no equivocality, but there is difficulty to see how the words are incorporated in Regulation 3( d ) of the 1994 Regulations: "Nothing contained in Chapter III of these Regulations shall apply to acquisition of shares in companies whose shares are not listed on any stock exchange." 91. The Hon ble Supreme Court, in the aforesaid case, also observed :- "... once we depart from the literal rule, then any number of interpretations can be put to a statutory provision. Each judge having a free play to put his own interpretation as he likes. This would be destructive of judicial discipline, and also the basic principle in a democracy that it is not for the Judge to legislate as that is the task of the elected representatives of the people. . . . Hence departure from the literal rule should be only done in very rare cases, and ordinarily there should be judicial restraint in this connection. . . . In Jinia Keotin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion passed under section 13 of the 1962 Act had remained valid and in force despite enactment of the 2003 Act, as provided for under section 20(1) of the 2003 Act. The Hon ble Supreme Court dealt with the issue on the touchstone of various principles like doctrine of promissory estoppel, legitimate expectation; and it found that primacy will have to be given to the interpretation of statutes, particularly statutes of provisions which are in the nature of consolidating statutes and repeal thereof and how they will have effect of the existing law, and observed in paragraphs 77 to 106 of the judgment as under: "77. We are not unmindful of the fact that the 2003 Act was enacted not only to consolidate but also to rationalise the Act. Mr. Nariman [learned Senior Advocate for the Appellant takes us to various authorities in regard to the construction of a consolidating statute including RC v. Hinchy [1960] AC 748, Beswick v. Beswick [1968 AC 58], Director of Public Prosecutions v. Schildkamp [1971 AC 1], Maunsell v. Olins [1975 AC 373] and Farrell v. Alexander [1977 AC 59], to suggest that a consolidating statute is not meant to alter the law. But, in these decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of such a statute surely was that on any point specifically dealt with by it the law should be ascertained by interpreting the language used, instead of, as before, by roaming over a vast number of authorities in order to discover what the law was, extracting it by a minute critical examination of the prior decisions... . The Court in interpreting a statute must therefore proceed without seeking to add words which are not to be found in the statute, nor is it permissible in interpreting a statute which codifies a branch of the law to start with the assumption that it was not intended to alter the pre-existing law; nor to add words which are not to be found in the statute, or for which authority is not found in the statute. But we do not propose to dispose of the argument merely on these general considerations. In our view, even, the legislative history viewed in the light of the dictum of the Privy Council in Hurrish Chunder case ( Hurrish Chunder Chowdry v. Kali Sundari Debia ) [(1882-83) 10 IA 4] does not afford any adequate justification for departing from the plain and apparent intendment of the statute. Such construction is to be put only when it is a pure consolida ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act becomes inevitable. Repeal issue 83. Section 20 of the 2003 Act repeals the 1962 Act as well as the 1939 Act. The effect of repeal is well known wherewith there does not appear to be any general controversy. Thus, before proceeding to advert to the rival contentions of the parties, as noticed hereinbefore, we may notice certain precedents of this Court operating in this behalf. 84. In State of Punjab v. Mohar Singh Pratap Singh AIR 1955 SC 84, this Court has stated : (AIR p. 88 para 8). Whenever there is a repeal of an enactment, the consequences laid down in section 6 of the General Clauses Act will follow unless, as the section itself says, a different intention appears. In the case of a simple repeal there is scarcely any room for expression of a contrary opinion. But when the repeal is followed by fresh legislation on the same subject we would undoubtedly have to look to the provisions of the new Act, but only for the purpose of determining whether they indicate a different intention. The line of enquiry would be, not whether the new Act expressly keeps alive old rights and liabilities but whether it manifests an intention to destroy them. We cannot ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion - See State of Punjab v. Mohar Singh Pratap Singh AIR 1955 SC 84 and T.S. Baliah v. ITO AIR 1969 SC 701. 86. In India Tobacco Co. Ltd. v. CTO [1975] 3 SCC 512 this Court has held : (SCC pp. 517-18, paras 15-17) 15. The general rule of construction is that the repeal of a repealing Act does not revive anything repealed thereby. But the operation of this rule is not absolute. It is subject to the appearance of a different intention in the repealing statute. Again such intention may be explicit or implicit. The questions, therefore, that arise for determination are: Whether in relation to cigarettes, the 1941 Act was repealed by the 1954 Act and the latter by the 1958 Act? Whether the 1954 Act and 1958 Act were repealing enactments? Whether there is anything in the 1954 Act and the 1958 Act indicating a revival of the 1941 Act in relation to cigarettes? 16. It is now well-settled that repeal connotes abrogation or obliteration of one statute by another, from the statute-book as completely as if it had never been passed ; when an Act is repealed, it must be considered (except as to transactions past and closed) as if it had never existed . [Per Tindal, C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w statute and the mere absence of a saving clause is by itself not material. In other words, the provisions of section 6 of the General Clauses Act will apply to a case of repeal even if there is a simultaneous re-enactment unless a contrary intention can be gathered from the new statute. 88. In Gajraj Singh v. STAT [(1997) 1 SCC 650] this Court held : (SCC pp. 665-66, para 24) When there is a repeal and simultaneous re-enactment, section 6 of the GC Act would apply to such a case unless contrary intention can be gathered from the repealing Act. Section 6 would be applicable in such cases unless the new legislation manifests intention inconsistent with or contrary to the application of the section. Such incompatibility would have to be ascertained from all relevant provisions of the new Act. Therefore, when the repeal is followed by a fresh legislation on the same subject, the Court would undoubtedly have to look to the provisions of the new Act only for the purpose of determining whether the new Act indicates different intention. The object of repeal and re-enactment is to obliterate the repealed Act and to get rid of certain obsolete matters. 89. We may at this junct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be deemed to have been repealed and re-enacted in such area or part within the meaning of this section. 90. What, however, is the matter of moment would be that the expression unless a different intention appears occurring in section 6 of the General Clauses Act, 1897 has not been inserted in sub-section (1) of section 20 of the 2003 Act. Sub-sections (1) and (2) of section 20 of the 2003 Act, thus, operate in different situations. Whereas the proviso appended to sub-section (1) of section 20 of the 2003 Act provides for the consequences flowing from the repeal of the 1939 Act and the 1962 Act, section 20(2) provides for a legal fiction for continuation of certain things/proceedings on the premise as if the said Acts had not been repealed. Repeal of the 1939 Act and the 1962 Act would lead to repeal of notifications issued thereunder also. The proviso appended to sub-section (1) of section 20 of the 2003 Act, however, carves out an exception in regard to the consequences flowing therefrom. 91. If sub-sections (1) and (2) of section 20 of the 2003 Act operate in different fields, as we have held, the marginal note of section 20 viz. repeal and savings, in our opinion, wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... truing the said words ... we may require to construe section 14 of the 2003 Act at the outset. The word corresponding may mean to be in harmony with or to be similar or analogous to or to be identical with as has been held in H.V. Mathai v. Subordinate Judge [1969 2 SCC 194]. 95. The word correspond as contained in Stroud s Judicial Dictionary, 2nd Edn., Vol. 1, p. 355, is to mean to harmonise with or to be identical with . 96. But, we may notice that whereas the 1939 Act did not contain any provision for exemption from payment of tax in respect of sale of electrical energy, section 13 of the 1962 Act dealing with taxation on consumption of electrical energy expressly provided therefor. Section 14 of the 2003 Act, on the other hand, makes a provision for grant of exemption in respect of sale of energy as contradistinguished from the provisions of the 1939 Act. It takes away the power of exemption on consumption of electrical energy which had been expressly provided under the 1962 Act. Can the 1939 Act and the 1962 Act, on the one hand, and the 2003 Act, on the other be said to be containing similar or identical provisions? The answer thereto must be rendered in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ieve the same purpose, subject of course, to the repealing Act having no provision inconsistent with the repealed Acts. The 1962 Act provided for grant of exemption from payment of electricity tax levied on consumption of electricity. When a notification was issued by the appropriate authority, the same had to be given a purpose. A notification issued thereunder could be an act which would come within the purview of the words anything duly done . 99. In our opinion, it would not be correct to contend that only because sub-section (2) of section 20 of the 2003 Act refer to notification, the same would not ( sic ) mean that wherever the word notification has been issued, sub-section (1) thereof will have no application. 100. We are also unable to agree with Mr. Andhyarujina that exemption from tax is a mere concession defeasible by the Government and does not confer any accrued right to the recipient. Right of exemption with a valid notification issued gives rise to an accrued right. It is a vested right. Such right had been granted to them permanently. Permanence would mean unless altered by statute. Thus, when a right is accrued or vested, the same can be taken away only b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mported by them which stood confiscated. Clause 6 of the Agreements reads thus: (AIR pp. 44-45, para 12) Unless otherwise specifically provided in the Schedule, all laws in force in the French Establishments immediately before the commencement of the Order, which correspond to enactments specified in the Schedule, shall cease to have effect save as respect things done or omitted to be done before such commencement. Analysing the said provision, this Court held: (AIR p. 46, para 16) The words things done in para 6 must be reasonably interpreted and, if so interpreted, they can mean not only things done but also the legal consequences flowing therefrom. If the interpretation suggested by the learned counsel for the respondents be accepted, the saving clause would become unnecessary. If what it saves is only the executed contracts, i.e., the contracts whereunder the goods have been imported and received by the buyer before the merger, no further protection is necessary as ordinarily no question of enforcement of the contracts under the pre-existing law would arise. The phraseology used is not an innovation but is copied from other statutory clauses. Section 6 of the Gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it may impliedly provide against continuance of such right, obligation or liability. " (p. 481) 94. The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 contain the following regulation as regards repeal and saving. Regulation 47 reads as under: " Repeal and Saving. (1) The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1994 are hereby repealed. (2) Notwithstanding such repeal, ( a )Anything done or any action taken or purported to have been done or taken including approval of letter of offer, exemption granted, fees collected, any adjudication, enquiry or investigations commenced or show-cause notice issued under the said regulations shall be deemed to have been done or taken under the corresponding provisions of these regulations; ( b )Any application made to the Board under the said regulations and pending before it shall be deemed to have been made under the corresponding provisions of these regulations; ( c )Any appeals preferred to the Central Government under the said regulations and pending before it shall be deemed to have been preferred under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tutory provisions creating substantive rights or taking away substantive rights are ordinarily prospective; they are retrospective only if by express words or by necessary implication the Legislature has made them retrospective; and the retrospective operation will be limited only to the extent to which it has been so made by express words, or necessary implication. The second rule is that the intention of the Legislature has always to be gathered from the words used by it, giving to the words their plain, normal grammatical meaning. The third rule is that if in any legislation, the general object of which is to benefit a particular class of persons, any provision is ambiguous so that it is capable of two meanings, one which would preserve the benefit and another which would take it away, the meaning which preserves it should be adopted. The fourth rule is that if the strict grammatical interpretation gives rise to an absurdity or inconsistency such interpretation should be discarded and an interpretation which will give effect to the purpose the Legislature may reasonably be considered to have had will be put on the words, if necessary even by modification of the language used." ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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