TMI Blog2013 (6) TMI 864X X X X Extracts X X X X X X X X Extracts X X X X ..... en offer was made by the Appellant to acquire 20% of the fully diluted equity capital of the Target Company. It is submitted by the Appellant that the Public Announcement was made by it with a view to consolidate its holding in the Target Company. The said open offer gives a commercially reasonable opportunity to the public shareholders of the Target Company to exit at the offer price of ₹ 91 per equity share of the said Target Company which represented a premium of 10.30% over the market average closing price for the two weeks preceding the Public Announcement. The tendering period was scheduled to commence on December 1, 2011 and conclude on December 20, 2011. The consideration for the tendered shares was to be paid before January 4, 2012. The Appellant submits that the impugned direction, albeit, in the form of comments , observations and advice on the draft letter of offer, hereinafter referred to as Draft LO , filed by the Appellant in connection with the voluntary Public Announcement is really a diktat. Further, the Appellant submits that because of the lapse of a period of more than one year from the date of the open offer, the same has been rendered non-feasible a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and other connected relevant documents. Some more details were filed vide letter dated November 4, 2011 with the Respondent. In the meanwhile, the Respondent vide letter dated October 25, 2011 sought certain details relating to an earlier change in the shareholding of the Promoter Group. The same were provided forthwith by the Merchant Banker on behalf of the Appellant vide letter dated November 8, 2011. The Respondent, however, vide letter dated November 11, 2011, inter alia, stated that the Promoter Group appeared to have acquired shares in excess of the limits prescribed by Regulations 11(1) and 11(2) of the Takeover Regulations of 1997 on March 30, 2007, October 12, 2007 and February 19, 2011, hereinafter referred to as Alleged Triggers . 4. The Appellant, including the Promoter Group, responded to the said communication referring to the Alleged Triggers by letter dated December 14, 2011 stating that the details in relation to the transactions pertaining to the three Alleged Triggers had already been provided to the Respondent on time as and when required by law. It was also pointed out to the Respondent that at no point of time was there any acquisition by the Promoter Gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29, 2012 that the Respondent issued impugned letter dated November 30, 2012 impliedly declining the request of the Appellant to withdraw the open offer and directing the Appellant to go ahead with the same offer after making certain modifications as per the comments contained in the impugned letter dated November 30, 2012. It also contains an annexure, para 4(a) which notably provides as under:- 4.a It has been observed that pursuant to acquisition of shares by the promoter group on March 30, 2007, October 12, 2007 and February 19, 2011, prima facie Regulation 11(1) of the Takeover Regulations, 1997 has been violated. The MB if advised to make appropriate disclosures in the offer document regarding the violation of regulation 11(1) of the Takeover Regulations, 1997. Also disclose that SEBI may initiate appropriate penal action against the promoter/acquirer for violation of Regulation 11(1) of the Takeover Regulations, 1997 and failing to make a public announcement under regulation 14(1) of the Takeover Regulations, 1997 on account of such triggers. In addition, the MB is advised (to) revise the offer price. MB may also be advised to make a corrigendum to the Public Anno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to read the words in any financial year as at the end of any financial year which is entirely impermissible. I state that on a plain reading of the language of Regulation 11(1), it is clear that the purpose and object of the said provision is to place a limit on the percentage of acquisition in a given year, with the said limit of 5% being reckoned without making allowances for decrease in shareholding or disinvestment. 9. Lastly, the Respondent has contended that the impugned letter dated November 30, 2012 is not an order within the meaning of Section 15T of the SEBI Act. It is contended that the impugned letter is only advisory in nature and hence not binding. It is also argued that the SEBI Act does not intend to give locus to each and every person who may be aggrieved by a mere letter of SEBI s. 10. We have heard both the learned counsel for the parties at length and have minutely perused the pleadings and documents attached therewith. 11. At the outset, we may deal with the contention of the learned counsel for the Respondent that the impugned letter dated November 30, 2012 is merely advisory in nature and as such does not amount to an order within the meanin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is available to a party only once an order is passed by this Tribunal in respect of any subject matter. 12. The scope of Section 15T of the SEBI Act was elucidated upon by this Tribunal in the order pertaining to the National Securities Depository Ltd. case referred to above on a preliminary objection being raised by the Advocate General on behalf of SEBI which was concerned with whether or not the impugned circular reviewing the dematerialization charges, in the form of a circular, was in the interest of the investor or not. While dealing with that preliminary objection, this Tribunal relying upon the judgments of State of Maharashtra vs. Marwanjee P. Desai, AIR 2002 SC 456, and Clariant International Ltd. and Anr. vs. Securities and Exchange Board of India AIR 2004 SC 4236, held in para 5 as under:- 5. What is contended by the learned Advocate General is that the circulars issued by the Board and policy decisions taken by it are beyond the appellate jurisdiction of this Tribunal. We are not impressed with this argument. The word circular according to Chambers Dictionary means a letter or notice sent to a number of persons . The Concise Oxford Dictionary (Ninth Edition) d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r passed by the Board to be scrutinized in appeal by the Tribunal. We may observe that even though every order passed by the Board is amenable to the appellate jurisdiction of this Tribunal, due weight has to be given to the views expressed by the former as a body of experts in its administrative orders, policy decisions and regulations. 13. To any reasonable person who were to sit in judgment, it is clear that this Tribunal, while delivering the aforesaid judgment, had but one thing in mind, viz. every entity ought to be given at least one opportunity to be heard and to have their side of the story brought out in the open in every forum where it is their legal right to do so. It has been succinctly stated that the words an order in Regulation 15T must be read without any limitation while bringing every comment/observation put forth in the garb of mere advice within their ambit, and that is precisely what this Tribunal intends to do. The mandatory nature of the impugned communication cannot be denied by clothing it as mere innocuous advice. In light of the aforesaid observations, we hold that the impugned letter dated November 30, 2012 is an order within the meaning of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lic announcement in the same newspapers in which the public announcement of offer was published, indicating reasons for withdrawal of the offer; (b) simultaneously with the issue of such public announcement, inform-(i) the Board, (ii) all the stock exchanges on which the shares of the company are listed; and (iii) the target company at its registered office. 15. A perusal of the above Regulation clearly reveals that a public offer once made shall not be withdrawn except under certain eventualities mentioned in sub-regulations (b), (c) and (d) of Regulation 27(1). Regulation 27(1)(b) lays down that if statutory approval has been refused, the offer can be withdrawn. It is pertinent to point out in this regard that Regulation 6(2) of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, hereinafter referred to as ICDR Regulations deals with the time period within which the Respondent should deliver its comments on a draft offer document submitted to it by an issuer of securities. For the sake of convenience Regulation 6(2) of the ICDR Regulations is reproduced hereinbelow:- (2) The Board may specify changes or issue observations, if any, on the draft of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestors. Therefore, we feel that the Appeal deserves to be allowed on this count as well. 17. Turning to the second issue of the Alleged Triggers raised by the Respondent in para 4(a) of the annexure annexed with the impugned letter dated November 30, 2012, we are of the considered view that such allegations, although stated to be prima facie, go to the root of the matter and may lead to adverse monetary consequences on the Appellant and the Promoter-Group, particularly as they would not be a result of lawfully conducted proceedings. The said allegations levelled against the Appellant with respect to the violation of Regulations 11(1) and (2) could have been proceeded with only as per law laid down in the SEBI Act, particularly provisions of Regulation 11C, 15I and 15J read with provisions of Chapter V of the Takeover Regulations which deal with investigations conducted into questionable acts of corporate houses while trying to circumvent the law. In the instant case, however, regrettably so, it is the Respondent which has failed to act as per law. Being the corporate watchdog of the country, it does not behave the Respondent to make such observations without recourse to the due ..... X X X X Extracts X X X X X X X X Extracts X X X X
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