TMI Blog2013 (10) TMI 1562X X X X Extracts X X X X X X X X Extracts X X X X ..... essing the legal issues actually involved in the matter. 2. Appellant Nos. 1 and 2, namely, Mrs. Madhuri Pitti and M/s. Pitti Electrical Equipment Pvt. Ltd., are the acquirers of Pitti Laminations Ltd., the target company and intend to acquire about 20% of the voting rights of the target company by way of the present open offer. They are acting jointly with Appellant No. 3, Mr. Akshay S. Pitti and Mr. Sharad Pitti, who is the chief promoter of the target company. Mr. Sharad Pitti is not one of the Appellants before us. 3. Records reveal that the target company was incorporated in the year 1983 under the Companies Act, 1956 and its six promoters, namely, Mr. Sharad B. Pitti; Mr. Akshay S. Pitti; Ms. Madhuri Pitti, Mrs. Shanti B. Pitti; Mr. Sharad B. Pitti and Pitti Electrical Pvt. Ltd. have been controlling the affairs of the company since its inception. It is also a matter of record that all the entities belonging to the Pitti Group have all along been acting in concert as is evident from their repeated annual filings under regulation 8(3) of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 and also from their period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o make a corrigendum to the Public Announcement (PA) in all newspapers, in which the original PA was made, Incorporating revised figures of offer price, before the date of opening of the offer. Suitably disclose that SEBI may initiate appropriate proceedings against Shri Akshay S. Pitti for failing to make a public announcement on account of acquisition which entitled him to exercise 15% of shares and voting rights. 6. There are some other suggestions also to be incorporated in the Draft LO but the same are inconsequential. The appellants are mainly aggrieved of the comment regarding violation of regulation 11 of the SAST Regulations, 1997 by Mr. Akshay S. Pitti in April 2006 and April 2007. Similarly, the appellants also challenge the recommendation/comment of the respondent regarding revision of the offer price on account of said two acquisitions by Mr. Akshay S. Pitti. 7. The case of the appellants is that the impugned direction has been issued completely disregarding the concept of persons acting in concert which is enshrined in explicit terms in the SAST Regulations, 1997. The Appellants state that the past allotments for which they are being targeted after all thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal is not maintainable before this Tribunal on the ground that the impugned letter is not a direction but consists of mere comments issued by the Respondent which cannot be challenged under provisions of Section 15T of the SEBI Act. It is submitted that an opportunity to be heard was granted on March 19, 2012, which was duly availed of by the Appellants. The letter in question has been issued under regulation 18(2) of the SAST Regulations, 1997 which do not mention any requirement regarding issuance of a Show Cause Notice. 12. The Respondent submits that as per regulation 10 of the Takeover Regulation, 1997, an acquirer is mandatorily required to make a public announcement in case if his shareholding goes beyond the 15% benchmark individually or collectively with persons acting in concert. Regulations 10 and 11 of the Takeover Regulation, 1997 are not mutually exclusive, and both regulators may apply simultaneously to a given set of facts in certain situations. 13. Regarding the Appellants' submission that action has not been taken by the Respondent against listed companies under similar circumstances, the Respondent states whether or not action has been taken in those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Section 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 15T of the SEBI Act and hence appealable before this Tribunal. 18. We now come to violations allegedly committed by the Appellants with respect to the Past Allotments, on the basis of which the Respondent desires the inclusion of certain superfluous information in the letter of offer as per the Appellants. 19. As far as these Past Allotments are concerned, the issue is one which has been dealt with before by this Tribunal in the case of Suni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her hand, the definition of persons acting in concert reveals that people who cooperate with each other in order to acquire substantial voting rights in a particular company would be considered persons acting in concert. At this point, we find it necessary to quote paragraph 31 from Sunil Khaitan v. SEBI (Appeal No. 23 of 2013 decided on 19.06. 2013) mentioned herein below: 31. In this connection, it may also be pertinently noted that the SAST Regulations, 1997 allow certain persons/entities to act in concert for the purpose of acquisition. Even the definition of persons acting in concert as provided in Regulation 2 (e)(1) clearly provides that this expression includes persons who agree to cooperate with each other to acquire shares/voting rights in a target company or control over the target company pursuant to a formal or informal understanding between them, directly or indirectly. Thus, the definition is wide enough and gives ample scope to persons to act in concert as one unit for the purpose of acquisition of shares/voting rights. Further, Regulation 2(e)(2) also enumerates various persons who could act in concert and they, inter alia, include a company, its holding com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 3 free of any blame with respect to provisions of regulation 10 of the SAST Regulations, 1997 regarding his acquisitions in the years 2006 and 2007. 23. Moreover, before holding Appellant No. 3 guilty of violating regulation 10 of the Takeover Regulation, 1997, the Respondent ought to have conducted a proper investigation into affairs related to the Past Allotments. In Akshya Infrastructure (supra) this Tribunal has pertinently held 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 Appellants with respect to the violation of Regulation 10 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 SAST 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 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d limit of 15% prescribed by the erstwhile Regulation 10 of the SAST Regulations, 1997, it is the collective holding of the entire group/concert which would be the benchmark for determining the increase in shareholding and not Appellant No. 3's (Mr. Akshay S. Pitti) shareholding as an individual. Once an individual becomes part of the group acting in concert with the intention of acquiring shares, it loses its identity as an individual and takes on the identity of the group as a whole. As per scheme of law as envisaged in the erstwhile SAST Regulations, 1997 an individual is no longer regarded as a separate entity of the group as he becomes an integral part of the entire unit as one cohesive structure. This is the only logical inference since it is not disputed by the Respondent that all the Appellants had been acting in concert with each other by agreeing to pool their holdings together in respect of the target company in a common basket as per law and hence in our considered opinion all the Appellants have acted as a unit/group and not in their individual capacity at least for the limited purpose of the acquisition of shares/voting rights in question. It is also not denied by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15H(ii) of the SEBI Act, 1992. 28. It is, therefore, evident that regulation 10 of the SAST Regulations, 1997 was never in dispute in the case of Hanumesh Realtors and whatsoever has been stated or held by this Tribunal in Hanumesh Realtors Pvt. Ltd. is only in the context of violation of regulation 11(1) of the SAST Regulations, 1997 which is clear from para 5 that order as reproduced below:-- 5. ...The takeover code obligates acquirer of shares or voting rights of a company in three different scenarios which are discussed in regulations 10, 11 and 12 of the takeover code. They operate in different areas of acquisition and consolidation of holdings of a listed company. Regulation 10 provides for making the public announcement in cases where acquisition of shares or voting rights of the company is 15 percent or more by the acquirer or by persons acting in concert with him. Regulation 12 makes a provision for public announcement in case of acquisition of control over the target company. Regulation 11 makes provision for public announcement in case of consolidation of holdings. For the purpose of present case, we are concerned with regulation 11(1) of the takeover code which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of regulation 11(1) of the SAST Regulations, 1997. On the contrary it is only the Appellants who have taken initiative by going to the Respondents, pursuant to the provisions of regulation 11(1) of the SAST Regulations, 1997 to duly comply with the said provisions by making public announcements and offer. While doing so and as required by the regulations, the Appellants had submitted a Draft Letter of Offer dated September 19, 2011 to the Appellants and while giving its comments under regulation 18(2) of the SAST Regulations, 1997, the Respondent had alleged that the Appellants had not complied with the regulation 10 of the SAST Regulations, 1997 in the remote past i.e., in the years 2006-2007. Therefore, Hanumesh Realtors case is clearly distinguishable and does not help the case of the Respondent at all. 31. It is pertinent to keep in mind that regulation 10 mandates an acquirer, whether acting individually or collectively as a group, to make a public offer if the shareholding of such an acquirer crosses the threshold of 15%. On the other hand, regulation 11, lays down the concept of creeping acquisition and its limit as 5% in a year for an acquirer who already holds between ..... X X X X Extracts X X X X X X X X Extracts X X X X
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