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Securities & Exchange Board of India Versus Burren Energy India Ltd. & Others

2016 (12) TMI 255 - SUPREME COURT

Guilty of contravening the provisions of Regulation 22(7) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 - whether the words 'Memorandum of Understanding' are not words of Art conveying a single meaning? - Held that:- In the present case, while Burren was the acquirer, UBL was the person acting in concert. This is evident from the letter of offer (public announcement) dated 15th February, 2005. The embargo under Section 22(7) is .....

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is correct that in the definition of 'offer period' contained in Regulation 2(1)(f) of the Regulations, relevant for the present case, a concluded agreement is not contemplated to be the starting point of the offer period. But such a consequence must naturally follow once the offer period commences from the date of entering into a Memorandum of Understanding which, in most cases would reflect an agreement in principle falling short of a binding contract. If the offer period can be triggered of b .....

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he penalty awarded by the Adjudicating Officer by order dated 25th August, 2006 shall be deposited in the manner directed within two months from today. - Civil Appeal No. 361 of 2007 - Dated:- 2-12-2016 - Ranjan Gogoi And N. V. Ramana, JJ. JUDGMENT Ranjan Gogoi, J. 1. The challenge in this appeal is to an order of the learned Securities Appellate Tribunal, Mumbai (hereinafter referred to as the Tribunal ) reversing the order of the Adjudicating Officer dated 25th August, 2006 holding the respond .....

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in dispute. The first respondent herein - Burren Energy India Ltd. (hereinafter referred to as Burren ) was incorporated in December, 2004 under the laws of England and Wales with its registered office in London. Burren was formed to acquire the entire of the equity share capital of one Unocal Bharat Limited (hereinafter referred to as UBL ), incorporated in Mauritius in July, 1996. The shares of the aforesaid UBL were acquired in September, 1996 by one Unocal International Corporation (for sho .....

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name of Burren on the same day itself i.e. 14th February, 2005. On account of this transformation Burren came to hold 26.01% of the share capital in the target company. As the acquisition was beyond the stipulated 15% of the equity share capital of the target company the Regulations got attracted making it obligatory on the part of Burren to make a public announcement in accordance with the Regulations. Such public announcement in the form of a public offer for sale/purchase of 20% of the share .....

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he target company. This, according to SEBI, amounted violation of Regulation 22(7) of the Regulations inasmuch as the said appointment was made during the offer period which had commenced on and from 14th February, 2005 i.e. date of execution of the share purchase agreement. 6. To appreciate the issue the provisions of Regulation 2(1)(f) of the Regulations which defines 'offer period' and Regulation 22(7) of the Regulations alleged to have been violated by the respondents may be extracte .....

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ed on the Board of Directors of the target company: Provided that in case of acquisition of shares or voting rights or control of a Public Sector Undertaking pursuant to a public announcement made under the proviso to sub-regulation (1) of Regulation 14, the provisions of sub-regulation (8) of Regulation 23 shall be applicable: Provided further that where the acquirer, other than the acquirer who has made an offer under regulation 21A, after assuming full acceptances, has deposited in the escrow .....

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gulations 'offer period' is clearly defined as the period of time between the date of entering into Memorandum of Understanding or the public announcement, as the case may be, and the date of completion of offer formalities. The learned Tribunal was of the view that when there was no ambiguity or uncertainty in the provisions of the Regulations the definition of 'offer period' has to be literally interpreted. The learned Tribunal went into the dictionary meaning of the expression .....

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s before it) cannot be held liable for violating Regulation 22(7) of the Regulations, as found by the Adjudicating Officer. 8. The main thrust of the contentions advanced on behalf of the appellant before us appears to be that the words 'Memorandum of Understanding' are not words of Art conveying a single meaning. In an appropriate situation a 'Memorandum of Understanding' may also include a concluded agreement between the parties. Even in a given case where a Memorandum of Under .....

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o submitted that the commencement of the offer period from the date of public announcement would primarily have relevance to a case where acquisition of shares is from the market and there is no Memorandum of Understanding or a concluded agreement pursuant thereto. 9. In reply, Shri Shyam Divan, learned Senior Counsel appearing for the respondents has urged that Regulation 22(7) of the Regulations can have no application to the present case inasmuch as the disqualification from appointment on th .....

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the year 2002 (which provision is relevant for the purposes of the present case) and the subsequent amendment effected in the year 2011. Shri Divan has submitted that meaning sought to be attributed to the Regulations relevant to the present case i.e. 2002 Regulations has been specifically incorporated in the Regulations amended in the year 2011. That the concluded share purchase agreement would be the starting point of the 'offer period' is mandated under the 2011 Regulations and not un .....

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