TMI Blog2015 (6) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... tions have bee made, acting in concert, have acquired the shares more than threshold him prescribed under the provisions of the Takeover Code. In my view, the decisions, Kesha Appliances (P.) Ltd. v. Royal holdings Services Ltd. [2005 (11) TMI 261 - HIGH COURT OF BOMBAY ] , Azzilfi Finlease & Investments v. Ambala Sarabhai Enterprises [1999 (7) TMI 660 - COMPANY LAW BOARD, MUMBAI] , Redwood Holdings (P.) Ltd. v. Sandesh (P.) Ltd. [2002 (8) TMI 836 - COMPANY LAW BOARD, MUMBAI] relied upon by the Respondents' Counsel are squarely applicable to the Facts of the case in hand. In my considered view, on a careful analysis of the relevant provisions contained in the Takeover Code and Section 59(4) of the Act and upon a close scrutiny of the decisions cited above by the rival parties in support of their respective contentions, the legal position that emerges, in my opinion, is as follows - (i) where any acquirer(s) acquired impugned shares, which, ex-facie, are in violation of the Takeover Code, such acquisition shall be void and in that case no finding is required from the Competent Authority i.e. SEBI and in such case, the CLB by virtue of the powers conferred upon it under Section 59 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to estoppel, waiver or acquiescence/ abandonment against the statutory provisions. However, I am not impressed with the submission advanced on behalf of the Appellant Company that the principles of waiver, acquiescence, estoppel and abandonment would not be attracted in the present case. In the present case, admittedly, the impugned shares were acquired from time to time by the Respondents since 2005 onwards within the knowledge of the company and its officers on the Board as shown by the Appellant in Chart- "C". The Company kept silent throughout during this period. It failed to assert its right at the proper opportunity and allowed the Respondents, shareholders to alter their positions from time to time. As indicated above, the Appellant Company did not raise this issue prior to filing of this petition, not even at the time of filing of the first Company Petition, being C.P. No. 111/2013, wherein the parties have jointly filed Consent Terms. It is a settled proposition of law that question "parties acting in concert" is a mixed question of fact and law. It is not a pure question of law. I have held here that the Competent Authority has to decide such question after due enquiry/i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng pharmaceutical products were sold in the year 2007 and the business of growing mushrooms has been shut as it being found not viable. The current issued paid-up and subscribed share capital of the Appellant is ₹ 12,24,00,000/- divided into 1,22,40,000 equity shares of ₹ 10/- each. 2.2 It is the case of the Appellant that the Respondent No.1 Company acquired 5,49,752 equity shares of ₹ 10/- each of the Appellant Company. The said equity shares in the Appellant Company are representing 4.49% of the total shareholding of the Appellant Company. 2.3 It is further case of the Appellant Company that the Respondent No.1 Company had transferred its entire equity to Religare on 31/12/2006. However, on 31/12/2012 the said equity was re-transferred to the Respondent No.1 Company and since then its name is reflected in the books of the Appellant Company. 2.4 It is stated that the Respondent No.2 is an unlisted company, having a paid-up capital of ₹ 10,00,00,000/- and it has acquired 5,70,000 equity shares of ₹ 10/- each of the Appellant Company. The said equity shares in the Appellant Company are representing 4.65% of the total shareholding of the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pression and mismanagement purportedly committed by them in the affairs of the Respondent No.1 Company. In the said Petition, the Petitioners, who are the Respondents herein, had referred to various proceedings pursuant to the complaint filed by National Agricultural Co-operative Marketing Federation of India Ltd. (NAFED), the details of which are set out in the said CP.No.111/2013. 2.11 It is further stated by the Appellant that the Respondents, (the Petitioners in C.P. No.III of 2013) had suppressed in the said Petition the various facts and particulars of the case and the orders passed by the CBI, which are material and relevant to the status of the Respondent Nos.2 to 4. It is further averred that the Respondents herein are wrongly holding themselves out as shareholders of the Appellant Company. 2.12 It is pleaded that the Respondents in their Company Petition No. 111/2013 have inter alia stated that the Petitioner Nos.1 to 7 therein collectively hold 31,94,886 shares of ₹ 10/- each in the Issued and Paid-up Capital of the Respondent No.1 Company, the Appellant Company herein, which represents 26.10% of the shareholding in the Respondent No.1 i.e. Appellant Company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led for the alleged violation of the provisions of the SEBI Takeover Code only after the Respondents have pointed out the acts of oppression and mismanagement committed by the Appellant and its Directors and sought redressal of the grievances from this Board. It is lastly stated in the Reply that there is no violation of the provisions of the Takeover Code, and hence, the Appeal deserves to be dismissed. 4. In the Reply, the Respondents have further stated that this appeal is a counterblast to the previous petition filed by them, wherein the Consent Terms came to be entered into between the parties. It is further stated that the appellant herein did not enquire Into whether or not the respondents are presently the persons acting in concert or their respective shareholding, and they having entered into the consent terms with the Respondents, now they have chosen to raise these disputes indirectly. The Appellant is, therefore, stopped from disputing the shareholding of the Respondents now. 5. I have heard the Ld. Counsels appearing for the respective parties at length and perused the record. 6. In order to appreciate the controversies involved in the present case in a bett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITION OF SHARES OR VOTING RIGHTS IN AND ACQUISITION OF CONTROL OVER A LISTED COMPANY Rule 10 Acquisition of fifteen per cent or more of the shares or voting rights of any company No acquirer shall acquire shares or voting rights which (taken together with shares or voting rights, if any, held by him or by persons acting in concert with him), entitle such acquirer to exercise fifteen per cent or more of the voting rights in a company, unless such acquirer makes a public announcement to acquire Shares of such company in accordance with the regulations. [....] SUBSTANTIAL ACQUISITION OF SHARES, VOTING RIGHTS OR CONTROL Rule 3 Substantial acquisition of shares or voting rights (1) No acquirer shall acquire shares or voting rights in a target company which taken together with shares or voting rights, if any, held by him and by persons acting in concert with him in such target company, entitle them to exercise twenty-five per cent or more of the voting rights in such target company unless the acquirer makes a public announcement of an open after for acquiring shares of such target company in accordance with these regulations. (2) No acquirer, who together with persons a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany, shall disclose their aggregate shareholding and voting rights in such target company in such form as may be specified. (2) Any acquirer, who together with persons acting in concert with him, holds shares or voting rights entitling them to five per cent or more of the shares or voting rights in a target company, shall disclose ever acquisition or disposal of shares of such target company representing two per cent or more of the shares or voting rights in such target company in such form as may be specified. (3) The disclosures required under sub-regulation (1) and sub-regulation (2) shall be made within two working days of the receipt of intimation of allotment of shares, or the acquisition of shares or voting rights in the target company to. (a) every stock exchange were the shares of the target company are listed; and (b) the target company at its registered office. (4) For the purposes of this regulation, shares taken by way of encumbrance shall be treated as an acquisition, shares given upon released of encumbrance shall be treated as a disposal, and disclosures shall be made by such person accordingly in such form as may be specified: Provided that su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 570000 Nil Nil Karnakhyaa Impex Pvt Ltd. (P-3) 568000 Nil Nil Firstcorp Holdings Pvt. Ltd. (P-4) 570000 Nil Nil Bayswater Enterprises Ltd. (P-5) 227363 232699 227363 Bayswater Enterprises Pvt Ltd. (P-6) 417663 109832 467663 Upasna Distributers Pvt Ltd. (P-7) 292108 292108 292108 Total 3194666 1184361 1536886 % 26.10% 9.67% 2.55% Chart - B Not reproduce here Chart - C Table reflecting the history of acquisition of shares by the Respondents: Sr. No. Year Date of Acquisition Respondents Relation between the Acquiring Respondents Common Share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Holding of M/s. Bayswater Enterprises Pvt. Ltd. in the capital of Transchem Limited. (No. of equity shares of ₹ 10/- each) Holding of M/s. Upasna Distributers Pvt. Ltd. in the capital of Transchem Limited. (No. of equity shares of ₹ 10/- each) 30.09.2013 227,363 479,663 31.12.2013 275,684 534,401 31.03.2014 275,684 578,401 30.06.2014 275,684 593,826 30.09.2014 331,329 593,826 31.12.2014 351,764 593,826 Chart-E Certificate dated 30/1/2015 issued by the Company Secretary of the Appellant Company I, Amita Saxena, Company Secretary in Practice, have examined all relevant books, registers, forms, documents and papers of M/s. Transchem Ltd. having its Registered Office at 304, Ganatra Estate, Pokhran Road No, 1, Khopat, Thane (w) -400 601 and that of M/s. Adroit Corporate Services Pvt Ltd. having their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Upasna Distributers Pvt. Ltd. 574801 4.73 Total Shares held In Transchem Ltd. 3028261 24.74 9. In the backdrop of the above, I proceed to consider the contentions advanced by the Ld. Counsels appearing for the respective parties. At the outset, I would like to deal with the preliminary objection raised on behalf of the Respondents as to the jurisdiction of the CLB to entertain the Petition. 10. In this connection, it is contended by the Ld. Counsel appearing for the Respondents that admittedly the percentage of acquisition of shares by each of the Respondent, as shown by the Appellant in Chart E is less than 5% and therefore, ex-facie there is no violation of any regulation of the Takeover Code. It is further submitted that the Respondents are group companies and if they have collectively filed a petition under Section 397/398 of the Act, through a common Power of Attorney holder, it cannot be a reason for holding that the Respondents, acting in concert, have acquired the shares. It is further submitted that merely having certain common shareholder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ster transfer, the Company Law Board has to examine whether such refusal is with sufficient cause or not and if it finds that the refusal is without sufficient cause, then the Company Law Board is bound to direct the company to register the transfer. In case of post-registration, the register of members can be ordered to be rectified only on three grounds, i.e. if the transfer is in contravention of the provisions of the Securities and Exchange Board of India Act, 1992 (hereinafter the SEBI Act ) or Regulations there-under, the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter 'the SICA') or any other law for the time being in force. 12 . The only ground available in this case and which has been invoked by the company is violation of the Regulations relating to SEBI Take Over Code. The company has alleged that these shares have been acquired in violation of the said Code. However, as discussed earlier, it is not possible for us to concur with the company's contention of the alleged violation of the SEBI's Take Over Code in view of the inadequate material on the basis of which registration of transfer of shares has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in accordance with the regulations as the Respondent Company already filed compliant with the SEBI. 14 to 19.** ** ** c Kesha Appliances (P.) Ltd. v. Royal holdings Services Ltd. [2006] 65 SCL 293 (Bom.), wherein the Hon'ble High Court of Bombay has observed as under :- .... Thus reading of the provisions of Section 15Y and 20A alongwith the provisions of Takeover Regulation I have no doubt in my mind that there is an express bar as to the jurisdiction of this court for rectification of the register when it solely based on the contention that the allotment and/or transfer of shares is contrary to takeover Regulations. . 42. ** ** ** 43. I am of the opinion that on plain and simple reading of section 15Y and 20A of the Act all the cases arising out of the breach and Take Over Regulation must fall within the exclusive domain of SEBI and cannot be complained in the court of Law by virtue of express bar contained under section v of the SEBI Act, I am also of the further opinion that there is no doubt that there is a common law right in a share holder to apply for rectification of the share register even though it is not his own share in respect of which he is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be dismissed for want of Jurisdiction and therefore dismiss the suit accordingly. In view of the dismissal of the suit, both the motions being Notice of Motion No 2260 of 2005 and 2486 of 2005 does not survive and both the motions are dismissed as infructuous. 12. Further, in the case of Rasoi Ltd. v. Jaideep Halwasiya [2009] 89 SCL 317 (CLB - Kol.), a question arose before the CLB as to whether in respect of listed companies, investigation sought on a complaint of violation of Takeover Regulations should rest with SEBI? The CLB answered the question in affirmative. The CLB, (Kolkata), in the said order inter alia observed as under :- In view of above, the instant petition could be dismissed. However, it was also examined whether in respect of a listed company a petition under section 247/250 could be filed to find out whether by acting in concert shares had been acquired in violation of the provisions of the Takeover Regulations, more so when a petition under section 111A was pending on the same allegation. The concept of acting in concert and substantial acquisition of shares/takeover came in with the coming into force of the Takeover Regulations which are self contained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and cash rich company. He further added that the Respondents are the persons who intentionally to take over control of the company have acquired the shares-in-question and in contravention of the provisions of the Takeover Code and hence, the acquisition of shares-in-question by them is void In law. Mr. Chagla, therefore, contended that the Impugned shares deserve to be forfeited and also an order for rectification in the Register of Members is required to be made in terms of the provisions contained in Section 59(4) of the Act, for which the CLB is the only competent authority. To support his view, the Ld. Sr. Advocate appearing for the Appellant Company, relied upon the following decisions In the cases of :- a. Bombay Dyeing Mfg. Co. Ltd. v. Arun Kumar Bajoria [2001] 34 SCL 320 (CLB - New Delhi) wherein it has been held as under : 26. The next argument of the teamed counsel for the respondents is that in terms of regulation 7, only an acquirer has to disclose and not those acting in concert. According to him, the word, 'acquirer' has been used in singular and there is no mention of 'those acting in consent' in regulation 7 unlike regulations 10 and 11. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will have to be considered in terms of regulation 7. b. Shrish Finance Invest. (P.) Ltd. v. M. Sreenivasulu Reddy [2002] 35 SCL 27 (Bom.) wherein it has been held as under : 131. We are satisfied that the circumstances established on record prima facie do lead to the Inference that defendants Nos. 1 and 11, acting in concert with defendants Nos 2 to 10, acquired the shares of Herbertsons Ltd., over a period of time. Since they were acting in concert, the acquisition by each one of them must be considered to be the acquisition of the others as well. The funds for the acquisition of the shares, whether through defendants Nos. 2 and 6 to 10 or through defendants Nos. 3 to 5, originated from the companies controlled either by defendant No. 1 or defendant No. 11. Advancing of funds to defendants Nos 3 4 and 5 cannot be said to be by way of investment because the facts disclose that the amounts were advanced free of interest and without any security, and for acquiring the shares of Herbertsons Ltd. Defendants Nos. 3, 4 and 5 were also managed by persons known to defendants Nos. 1 and 11 and associated with them in their various companies. It is not necessary that persons acting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 340 (CLB). 16. I have considered the rival submissions carefully and examined the decisions cited above. I find enough force in the submissions advanced by the Ld. Counsel appearing for the Respondents that the CLB, in exercise of its rights and powers conferred upon it by virtue of the provisions contained in Section 59(4) of the Act, is not empowered to make investigation/enquiry into the allegation that the Respondents acting in concert have acquired shares in violation of the Takeover Code, and hence, the shares are liable to be forfeited and the Register of Members requires to be rectified under the said provisions by deleting the name of the Respondents therefrom. In my considered view, it is only the SEBI who has domain to enquire/investigat into as to whether the parties against whom the allegations have bee made, acting in concert, have acquired the shares more than threshold him prescribed under the provisions of the Takeover Code. In my view, the decisions relied upon by the Respondents' Counsel are squarely applicable to the Facts of the case in hand. 17. On the contrary, the proposition laid down in the decisions cited by the Ld. Counsel appearing for the App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture of the Impugned shares. 20. In the case of Karam Prasad Securities (supra), the facts are that subsidiary companies of a Company acting in concert had purchased the shares-in-question. In this case, the Companies are group companies and not the subsidiary company(ies) of a Company. In view of the above, the decisions referred to by the Appellant to my mind do not apply having regard to the facts of the case in hand. 21. In my considered view, on a careful analysis of the relevant provisions contained in the Takeover Code and Section 59(4) of the Act and upon a close scrutiny of the decisions cited above by the rival parties in support of their respective contentions, the legal position that emerges, in my opinion, is as follows :- (i) where any acquirer(s) acquired impugned shares, which, ex-facie, are in violation of the Takeover Code, such acquisition shall be void and in that case no finding is required from the Competent Authority i.e. SEBI and in such case, the CLB by virtue of the powers conferred upon it under Section 59(4) of the Act, is empower to pass an order for rectification of Register of Members of a Company. (ii) However, where the acquirer is more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght of the plaintiffs is to complain to the SEBI of such breach and seek necessary remedy. The contention of the learned counsel for the plaintiffs that to merely file complaint with the SEBI is not equivalent to the right of the plaintiffs to file a suit for substantial relief cannot be accepted because the nature of the right conferred by the Takeover Regulation provides for substantial nature of remedy thereunder. The pfaintiffs must therefore seek relief as per the provision of law and cannot Independently invoke any common law right of rectification of the share and file a suit independent to the provision of section 15Y and 20A of the SEBI Act, I am therefore of the opinion that the present suit as framed is not maintainable in this court and this court has no Jurisdiction in view of the express bar conferred under the provision of section 15Y and 20A of the SEBI Act to entertain and try the present suit. I therefore, answer the preliminary issue of Jurisdiction in negative and I hold that this court has no Jurisdiction to entertain and try the present suit under section 15Y and 20A of the SEBI Act : 23. In view of the foregoing discussions, I hold that the petition is bar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... names of persons or party to the transactions. Hence, the obligation is cast on the Shareholder to give Notice. Further, it is an admitted fact that no Notice has been given by the Respondents under any of the Regulations since the acquisition of the shares until the intimation is received from Religare on 27/06/2014. Hence, the Company had no basis to doubt the intention of the Respondents in the absence of any notice received from them and therefore, the Company was entitled to at that time i.e. at the time of filing of the 1st petition treat the Respondents as bonafide co-shareholders and had no justification to nurture any apprehension of any takeover bid, which became apparent subsequently. In addition to the above, it is contended that on a perusal of the Consent Terms, it may be noted that it operate as a concession from the Appellant in favour of the Respondents without the Respondents offering anything in return. Furthermore, the Appellant has abided by the terms and conditions of the Consent Terms since 2/1/2014 and appointed, the Nominee Director as an Additional Director and later confirmed him in the General Meeting, as per the Undertaking in the Consent Terms, and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission advanced on behalf of the Appellant Company that the principles of waiver, acquiescence, estoppel and abandonment would not be attracted in the present case. In the present case, admittedly, the impugned shares were acquired from time to time by the Respondents since 2005 onwards within the knowledge of the company and its officers on the Board as shown by the Appellant in Chart- C . The Company kept silent throughout during this period. It failed to assert its right at the proper opportunity and allowed the Respondents, shareholders to alter their positions from time to time. As indicated above, the Appellant Company did not raise this issue prior to filing of this petition, not even at the time of filing of the first Company Petition, being C.P. No. 111/2013, wherein the parties have jointly filed Consent Terms. It is a settled proposition of law that question parties acting in concert is a mixed question of fact and law. It is not a pure question of law. I have held here that the Competent Authority has to decide such question after due enquiry/investigation under the SEBI Act and Rules made there under to whom admittedly the Appellant Company did not approach till da ..... X X X X Extracts X X X X X X X X Extracts X X X X
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