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TMI Blog2015 (3) TMI 899X X X X Extracts X X X X X X X X Extracts X X X X ..... dent. After the said announcement, the petitioners stated to have purchased some shares of the 5th respondent - company. The case of the writ petitioners is that announcement of acquisition of respondent no.5 by respondent no.4 prior to 6.4.2014, constitutes confidential and unpublished price sensitive information, and Regulation 3A of Securities and Exchange Board of India (Prohibition of) Insider Trading Regulations, 1992 (for short 'Regulations'), which are enacted by virtue of the power conferred under Section 30 of Securities and Exchange Board of India Act, 1992, (for short 'the Act') prohibits a company from dealing in the securities of other company and associates of other company while in possession of any unpublished price sensitive information. The further case of the writ petitioners is that the 7th respondent -firm, which is the subsidiary of the 4th respondent - company, and which is actively involved in the merger negotiations and which allegedly is in possession of price sensitive information, has acquired the shares of the 5th respondent just before the notice of amalgamation was made public on 6.4.2014 and this acquisition of shares by 7th responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 25.4.2014 while ordering notice before admission, granted the order of status quo as prayed for in WPMP.No.16656/2014 in W.P.No.13309 of 2014. 5. Aggrieved by the interim order of this court dated 25.4.2014, the 4th respondent - Sun Pharmaceutical Industries Limited, carried the matter in Special Leave to Appeal (Civil) No.13714/2014 and the Apex Court by order dated 21.5.2014 passed the following order: "It is argued by Dr.Singhvi that there is a Scheme of Amalgamation between Sun Pharmaceutical Industries Limited and Ranbaxy Laboratories Limited who are the petitioners in these petitions. It is further pointed out that the petitioners under Sections 391 and 392 of the Companies Act, 1956 are to be filed seeking approval of the Scheme in the High Courts of Gujarat and Punjab and Haryana. However, before filing those petitions, certain other formalities are required which are listed in page 'C' of the list of dates in SLP( C ) No.13714 of 2014 and those steps have been taken/are being taken in the matters. At this stage, respondents 1 & 2 have filed writ petition in the High Court of Andhra Pradesh alleging insider trading. It is further pointed out that the High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in securities and to promote the development and regulate the securities market, failed to initiate necessary proceedings for conducting investigation in spite of the representation of the petitioners dated 15.4.2014 and press reports dated 9.4.2014 and 10.4.2014, therefore there is inaction on the part of the 1st respondent and sought a direction to investigate into the allegations and take appropriate action in accordance with law. 9. The learned Senior Counsel Sri Vedula Venkataramana also reiterated the averments made in the writ affidavit and further contended that Section 12-A of the Act prohibits manipulative and deceptive devices, insider trading and substantial acquisition of securities or control. In the present case, the 7th respondent, which is a subsidiary of the 4th respondent, purchased the shares of the 5th respondent, which is scheduled for amalgamation with 4th respondent and this is in violation of Sections 11 and 12-A of the Act and also contrary to Regulation 3-A. He contended that the respondents 2 and 3, which are stock exchanges, are required to give 'in principle clearance' and in view of the allegations, they may be directed not to process the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent and have to be dealt with under two different enactments by different forums and on the alleged offence of insider trading, amalgamation cannot be stalled. With these averments he sought to dismiss the writ petition. 12. The learned Counsel appearing for the 6th respondent Sri D.K.Seshadri, in continuation of the arguments advanced by the learned counsel appearing for respondents 4 and 5, submitted that the issue of amalgamation is an elaborate procedure and the writ petitioners will have an opportunity, if they so chooses, at different stages to file objections and the appeals and the issue of amalgamation has nothing to do with the issue of inquiring into the alleged offence of insider trading and further the interim order passed in the present writ petition would come in the way of respective High Courts, where the petitions for amalgamation are/or going to be filed. Therefore, he sought to vacate the interim order. 13. The learned Standing Counsel appearing for the 1st respondent - Board submitted that the Board has already initiated proceedings to investigate into the alleged insider trading, which is prohibited under Regulation 3-A and the same would be completed in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ither 'objections' or 'no objections' to the Board and this procedure which is introduced in the circular No.CIR/CFD/DIL/5/2013 dated 4.2.2013 also provides for redressal of complaints. The petitioners can avail the remedy under Clause 24(f) of Listing Agreement and without availing the said remedy by filing objections, filed the present writ petition and the same cannot be entertained even on this ground. It is further contended that even assuming for the sake of argument that the allegations of insider trading are found to be correct by the Board, the persons responsible for insider trading, will be liable and not the 5th respondent company and on this ground, the amalgamation cannot be stalled. Further, the interim order passed by this court would come in the way of the respective High Courts, where the registered head offices of respondents 4 and 5 companies are located, in considering the company petitions filed for amalgamation under Sections 391 to 394 of the Companies Act, 1956. It is contended that the registered offices of contesting respondents are not located within the jurisdiction of the High Court of A.P. and the petitioners have not made out clear ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of any unpublished sensitive information. Regulation 4A to 11A deals with investigation by the Board. 20. Sections 391 and 392 of the Companies Act, 1956 deal with the filing of petitions before the High Courts for seeking approval of the scheme of amalgamation. 21. In the present case, as noted above, the allegations of the petitioners are with regard to insider trading. Regulation 3-A states that no company shall deal in the securities of another company or associate of that other company while in possession of any unpublished price sensitive information. Regulation 4A empowers the Board to enquiry into the violations and provisions of the regulations. The procedure for investigation is contemplated from Regulations 6 to 11-A. Powers and functions of the Board and the Penalties are provided under the provisions of the Act. Therefore, from these provisions it is clear that the Act and the Regulations, provide for forum, procedure and penalty for investigating into the offences prohibited under the Act. In other words, under the above provisions, it is the Board, which is the competent authority to investigation into the alleged offence. While dealing with the duties of the Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spective High Courts, where the registered head offices of the two companies are located, have to consider the amalgamation of companies and in the process, they are required to consider all the issues. In my considered view, as contended by the learned counsel appearing for the 6th respondent, the present interim order may come in the process of considering the amalgamation proceedings. 24. Whether the alleged offence of insider trading will affect the amalgamation proceedings and whether they are independent issues effecting persons responsible vis-a-vis companies under amalgamation and the relevant issues are requires to be considered during the process of considering the proceedings for amalgamation. 25. The contesting respondents submitted that the respondents 2 and 3 stock - exchanges have sought for information and these respondents have accordingly submitted the same and they are in the process of due consideration. And as per the submissions of the learned counsel for the petitioners, the petitioners have already made representations to the Board and as per the submissions of the Standing Counsel for the 1st respondent - Board, it has initiated investigation, which will ..... X X X X Extracts X X X X X X X X Extracts X X X X
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