TMI Blog2011 (9) TMI 1169X X X X Extracts X X X X X X X X Extracts X X X X ..... y promoter of the target company other than the Naras and that is of No. consequence. Even if the shareholding of the other promoters is excluded, the shareholding of the Naras and the Appellant together is enough to trigger Regulation 11(1). In this view of the matter, No fault can be found with the conclusion arrived at by the whole time member that Regulation 11(1) got triggered and the Appellant by not making a public announcement violated the said provision. The question posed in the opening part of the order is answered in the affirmative. Direction issued - The Board need not give reasons as to why such a direction is being issued because that is the mandate of Regulations 10, 11 and 12. However, if the issuance of such a direction is not in the interest of the securities market or for the protection of interest of investors, the Board may deviate from the normal rule and issue any other direction as envisaged in Regulation 44 of the takeover code. In that event, the Board should record reasons for deviation. In the case before us No reasons have been recorded for deviating from the normal rule and we find No ground for deviation. Thus, we modify the direction issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ters of the target company and they are also promoters of the Appellant company holding 100 per cent of its share capital, the Appellant company automatically becomes a part of the promoter group of the target company as per Explanation I to the definition of 'promoter' contained in Regulation 2(h) of the takeover code, the relevant part of which reads as under: Promoter means - (a) any person who is in control of the target company; (b) any person named as promoter in any offer document of the target company or any shareholding pattern filed by the target company with the stock exchanges pursuant to the Listing Agreement, whichever is later; and includes any person belonging to the promoter group as mentioned in Explanation I: Provided that .... Explanation I: For the purpose of this clause, promoter group shall include: (a) in case promoter is a body corporate - (i) to (iii) .... (b) In case the promoter is an individual - (i) .... (ii) any company in which 10 per cent or more of the share capital is held by the promoter or an immediate relative of the promoter or a firm or HUF in which the promoter or any one or more of his immed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he promoters group of the Target Company (including our promoters) were acting in concert with us when we acquired 6.17 % shares of the Target Company through the stock exchange in November 2008. Same is legally untenable. There is No. justification for equating us with the promoter group of the Target company and treating us as their part. We reiterate that, at the relevant time, when we acquired the shares of the Target Company, we were not acting in concert with either Mrs Nara Bhuvaneshwari Mr N. Lokesh or the entities/persons constituting the promoter group of the Target Company. Our acquisitions of shares of the Target Company were independent of acquisitions/holdings of promoter group of the Target Company. Therefore, our shareholding of 6.17% cannot be added to the promoter groups shareholding of 45.7% in order to allege that promoter's shareholding increased from 45.7% to 51.87% in the financial year 2008-2009. (emphasis supplied) The Appellant was called for a personal hearing before the whole time member on May 25, 2010 and instead of appearing on that date, it filed a supplementary reply/submissions stating as under: Without prejudice to the afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bed the acquisition of the Appellant company (6.17 per cent) with the holding of the promoter group which was 45.70 per cent including that of the two Naras. It is on this basis that he concluded that Regulation 11(1) of the takeover code got triggered because the Appellant crossed the permissible creeping acquisition limit of 5 per cent in a financial year and not having come out with a public announcement, it violated the said provision. We have on record the statement showing the shareholding of persons belonging to the promoter group of the target company. A copy of this statement was furnished to the Appellant alongwith the show cause notice. A perusal of this statement shows that there were in fact 17 promoters including the two Naras and not 18 because the name of Ms. Nara Bhuvaneshwari appears twice in the list. It is common ground between the parties that the total shareholding of these promoters (as shown in the statement) is 45.70 per cent out of which the two Naras hold 33.38 per cent and all the others hold 12.32 per cent. The statement showing the shareholding pattern of the promoter group of the target company as on September 30, 2008 was furnished by this company to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be taken without their authority, knowledge, consent and approval. The Appellant being a body corporate is distinct from the two Naras. In this view of the matter, it is obvious that when the Appellant company which is a body corporate acquired shares of the target company, it acted in concert with the two Naras in their individual capacity who are also the promoters of the target company. The shares acquired by the Appellant company and the holding of the two Naras has to be clubbed for the purposes of Regulation 11(1) of the takeover code as they were acting in concert. When we do this, it becomes clear that the Appellant crossed the permissible creeping acquisition limit of 5 per cent thereby triggering Regulation 11(1) of the takeover code and not having made a public announcement, violated the said provision. The learned senior counsel for the Appellant is right only to the extent that the Appellant company did not act in concert with any promoter of the target company other than the Naras and that is of No. consequence. Even if the shareholding of the other promoters is excluded, the shareholding of the Naras and the Appellant together is enough to trigger Regulation 11(1). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he mandate of Regulations 10, 11 and 12. However, if the issuance of such a direction is not in the interest of the securities market or for the protection of interest of investors, the Board may deviate from the normal rule and issue any other direction as envisaged in Regulation 44 of the takeover code. In that event, the Board should record reasons for deviation. In the case before us No. reasons have been recorded for deviating from the normal rule and we find No. ground for deviation. In these circumstances, we modify the direction issued by the whole time member and direct the Appellant to make a public announcement to acquire the shares of the target company in accordance with the provisions of the takeover code. For this limited purpose, the Appellant shall now approach the Board within one week to comply with the procedural requirements in this regard. In the result, the appeal is dismissed and the direction issued by the whole time member modified as stated above. There is No. order as to costs. After we pronounced the order in Court, the learned counsel for the appellant has made an oral prayer that the operation of the direction issued by us be stayed for a period ..... X X X X Extracts X X X X X X X X Extracts X X X X
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