TMI Blog2019 (4) TMI 596X X X X Extracts X X X X X X X X Extracts X X X X ..... was less than 10%. The trigger for mandated disclosure under Regulation 7 of the Takeover Regulations, 1997, has been violated does not have merit since it is found that respondents who were found to be PACs had a maximum shareholding of only about 4.85% of the shareholding in the appellant company. We also found no merit in the argument that all the 10 respondents were persons acting in concert and came together to dislodge the then management of the company based on the fact that they were petitioners/consenting shareholders to a Company Petition filed against mismanagement and oppression etc. In fact what is on evidence is that some of the respondents had sold part of their shares even prior to the Company Petition filed in March 2010. If these entities were in fact consolidating their shareholding in the appellant company such reverse transactions would not have been done. Similarly, some of the entities such as Respondent No. 2 had acquired the shares of the appellant company since the latter’s incorporation and as such cannot be held to have acquired the shares of the appellant with a motive or objective of dislodging the management and for taking over the company. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lations, 1997. Further, it was also alleged in this communication that the nature of trading of some of those parties and their source of fund may be investigated to ascertain whether these entities violated the SEBI PFUTP Regulations and the antimoney laundering laws. Those 10 entities who, allegedly committed the violations, have been made respondents in this appeal and are listed as Respondent Nos. 2 to 11 while SEBI is Respondent No. 1. 3. On April 15, 2013 SEBI closed the complaint filed by the appellant on September 26, 2011 by stating that while some of the entities alleged to be PAC were in fact PACs, all those 10 entities together were not PACs. Further, the shareholding of the entities who were PACs was 1.07% (Respondent Nos. 2 to 5) and about 4% (Respondent Nos. 8 to 10), both of which was less than the threshold level of more than 5% required for triggering disclosure under Regulation 7(1) of the Takeover Regulations, 1997. 4. The appellant company filed an appeal before this Tribunal aggrieved by the decision of SEBI dated April 15, 2013. When the matter came up for hearing before this Tribunal on November 07, 2014 the learned counsel for Respondent No. 1 (SEBI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... March 07, 2017) which held that circulars and administrative orders issued by SEBI cannot be appealed before this forum. Similarly, the appellant also raised a preliminary objection stating that the impugned order/ communication is issued by an Officer who does not have the power to issue such orders under the Scheme of Delegation in SEBI. Without going into the legality of all these preliminary objections we hold that in view of the order of this Tribunal dated November 07, 2014, which dealt with a similar order/ communication passed by same Officer of SEBI in the same matter and where no such ground was considered we are of the view that these preliminary objections at this stage are devoid of any merit and are, therefore, disposed off. Accordingly, we proceed to deal with the basic issues raised in this appeal as to whether, given the factual matrix, there was indeed violation of the relevant Takeover Regulations by Respondent Nos. 2 to 11. 7. For convenience, we reproduce the relevant provisions of Takeover Regulations, 1997 as under:- Definitions. 2. (1) In these Regulations, unless the context otherwise requires:- ( a) ( b) acquirer means a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany or with any other investment company in which such person or his associate holds not less than 2 per cent of the paid-up capital of the latter company. Note: For the purposes of this clause associate means,- ( a) any relative of that person within the meaning of section 6 of the Companies Act, 1956 (1 of 1956); and ( b) family trusts and Hindu undivided families; Acquisition of 5 per cent and more shares or voting rights of a company. 7. (1) Any acquirer, who acquires shares or voting rights which (taken together with shares or voting rights, if any, held by him) would entitle him to more than five per cent or ten per cent or fourteen per cent [or fifty four per cent or seventy four per cent] shares or voting rights in a company, in any manner whatsoever, shall disclose at every stage the aggregate of his shareholding or voting rights in that company to the company and to the stock exchanges where shares of the target company are listed. ( 1A) Any acquirer who has acquired shares or voting rights of a company under sub-regulation (1) of regulation 11, [or under second proviso to subregulation (2) of regulation 11] shall disclo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,50,961 0.85 2. Earthstone Holding (Two) Limited. Respondent No. 3 65,790 0.09 3. Aventz Finance Pvt. Ltd. Respondent No. 4 98.316 0.13 4. Adventz Securities Enterprises Ltd. Respondent No. 5 11 0.00 5. Govind Promoters Pvt. Ltd. Respondent No. 6 5155 0.01 6. Merlin Securities Pvt. Ltd. Respondent No. 7 21,65,481 2.81 7. Lifecycle Infotech Pvt. Ltd. Respondent No. 8 11,85,010 1.54 8. G K Trading Pvt. Ltd. Respondent No. 9 12,45,589 1.61 9. Mr. Anil Goyal Respondent No. 10 34,381 0.05 10. Brijmohan Sagarmal Capital Services Pvt. Ltd. Respondent No. 11 14,22,500 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earing to the appellant nor the documents obtained from the respondents were shared with the appellant. It was also contended that some of the statements made by the respondents regarding their PAC status were relied on by the SEBI Officer blindly and if an opportunity was provided to the appellant it would have been able to prove that all these respondents were indeed PACs. 12. It was further contended by the learned senior counsel for the appellant that detailed evidence was provided by the appellant in its complaint regarding the reasons for the respondents therein to be PACs. All of them were parties to Company Petition No. 1 of 2010 filed before the Company Law Board ( CLB ) under Section 397/ 398 of the Companies Act, 1956 seeking removal of the Chairman of the appellant company and they acquired about 8% of the share capital of the appellant company during the period 2008-2009. Further they had voted against the management in the General Body Meeting of the Company. Therefore, all these respondents had a single motive in removing the then management of the company and taking over control of the company. Their behavior undoubtedly shows the same motive and, therefore, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Distillers Co. PLC (Panel hearing on 25 August 1987 and 2 September 1987) direct evidence in such issue may not be forthcoming inference need to be drawn based on the circumstances. Similarly appellant submitted that as held in the judgment of the Supreme Court of India in the matter of Chairman, SEBI V/s Shriram Mutual Fund and Anr. (2006) 5 SCC 361 (Civil Appeals Nos. 9523-24 of 2003, decided on May 23, 2006) mens rea or intension is always not needed while deciding imposition of penalty wherever breach or contravention of statutory obligation is established. 16. We have heard the learned counsel for the various respondents Shri Rafique Dada and Shri Janak Dwarkadas, learned senior counsel and learned counsel Shri Kumar Desai, Shri Vinay Chauhan and Shri Joby Mathew. 17. Shri Dada, learned senior counsel for SEBI contended that the only ground on which the appellant is holding that Respondent Nos. 2 to 11 are acting together is based on the fact that they were party to the Company Petition filed under Section 397/398 of the Companies Act. It was further contended that apart from what is shown in the impugned order that some of these Respondents were PACs there is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not the case here even according to the appellant. Conversely, if such a view is taken, then all the parties who support the promoter group entity/ entities would automatically become PACs supporting the promoters thereby necessitating an enquiry as to whether there is any violation of Takeover Regulations committed by the promoters and such PACs. Therefore, PACs as under Takeover Regulations, 1997 and shareholders coming together for filing a Company Petition are different. Beyond that the appellant has not provided any evidence of acting in concert nor SEBI could find any evidence by its investigation to link all the respondents, other than the two identified sub-groups of PACs. Therefore, there is nothing on record to show that all the ten Respondents were indeed PACs as defined under Regulation 2(1) e (1) of the Takeover Regulations, 1997. Regarding the submission of the appellant that they were not given an opportunity of personal hearing nor given the documents collected from the respondents the senior counsel for SEBI submitted that the impugned communication is an administrative order and not an adjudication order. Information from the respondents was sought and the same, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... V/s Jayaram Chigurupati and Ors. (2010) 7 SCC 449 (Civil Appeals No. 7148 of 2009 with 7314 of 2009, decided on July 8, 2010) submitted that to decide on PACs those who cooperate with each other should have a common objective of acquiring substantial number of shares in a target company while interpreting Regulation 2(1) e(1) of Takeover Regulations, 1997. Even in the case of co-promoters said to be acting in concert it is held in the matter of K.K. Modi V/s Securities Appellate Tribunal and Ors. 2001 SCC OnLine Bom 969 (SEBI Appeal No. 9 of 2001 with Notice of Motion No. 2033 of 2001 decided on November 5, 2001) that there is a need for proving a common objective for acquiring shares. The mere fact that one of the promoters of the company wishes to acquire more shares of the company is not a reason to hold the other promoters also necessarily share the same objective or purpose . 22. Learned counsel for Respondent Nos. 2 to 11 also made their submissions broadly on the above lines. However, in addition, learned senior counsel Shri Dwarkadas appearing for Respondent Nos. 2 to 6 made additional submissions that the reliefs sought by the appellant are far beyond the alleged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for Respondent No. 11 submitted that it is a stock broker who trades in shares on proprietary account as well as on behalf of its clients. It is contended that the investment in the shares of the appellant company was made because the book value of the share was greater than its market value in 2008. They were not acting in concert with any other respondent. Its borrowing from Birla Global Finance Co. ( BGFC ) has nothing to do with any common interest in the appellant company. It was borrowing which is like they borrowed from other entities such as Religare Finvest Pvt. Ltd. and whatever was borrowed from BGFC or Religare Finvest Pvt. Ltd. was repaid with interest. Total acquisition of the shares of the company of this respondent was only 14,22,500 shares (1.85%) and as such no violation of disclosure requirement under Regulation 7 of Takeover Regulations, 1997 has been committed. 26. We have perused the documents placed before us and carefully considered the submissions of all parties. We do not find any merit in the contention of the appellant that Takeover Regulations, 1997 has been violated by Respondent No. 2 to 11 herein looking at the facts and the evidence/ records pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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