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TMI Blog2021 (7) TMI 1417X X X X Extracts X X X X X X X X Extracts X X X X ..... of 2018 and 525 of 2019 are allowed. 2. This group of appeals is against the common order of 2nd August, 2018 passed by the Whole Time Member ("WTM‟ for short) of the Securities and Exchange Board of India ("SEBI‟ for short) directing the acquirers, heirs of the deceased and the promoters of M/s. Bhanot Leasing Limited (hereinafter referred to as the "target Company‟) to make an open offer under section 11 and 11 B of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as "SEBI Act‟) read with and Regulation 44 and 45 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as "SAST Regulations, 1997‟) and Regulation 32 and 35 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (hereinafter referred to as "SAST Regulations, 2011). There are three kinds of appellants before us, namely, the heirs of the deceased acquirers, the acquirers and the promoters. All are aggrieved by the impugned order. 3. The facts leading to the filing of the present appeal is, that appellant nos.1 to 4 in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e notice was issued on March 1, 2017. 7. In this show cause notice which was issued to the acquirers and to the promoters of the erstwhile target Company Bhanot Leasing Limited it was alleged that as on March 31, 2005 the promoters held 25.08% of the shares and that in the financial year 2005-06 five of the promoters had acquired 8.85% thereby increasing their shareholding to 33.93%. It was alleged that since the acquisition was beyond 5% during the financial year 2005-06 the noticees were required to make a public announcement under Regulation 11(1) which they failed to do so. 8. The appellant Mr. Rajeev Bhanot filed his reply contending that Mr. R.D. Bhanot and Mrs. Krishna Kumari Bhanot who crossed the threshold of five percent by their acquisition have died long back and that Mr. R.D. Bhanot and Mrs. Krishna Kumari Bhanot was the Chairman and Managing Director and were aware of all the transactions. It was also stated that the target Company had merged with M/s. Bhanot Construction and Housing Ltd. and that persons who have transacted and have triggered the Regulation 11(1) have died and, therefore, the proceedings should be abated. The other promoters in their reply contende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rajesh Toshniwal vs. SEBI & Ors., appeal no.139 of 2011 decided on June 1, 2012 and in the case of Ram Piari & Ors. vs. SEBI, appeal no.484 of 2015 decided on November 20, 2017 on the issue of promoters acting as a homogenous group and, therefore, are responsible to make the open offer even though one of the promoters had breached the threshold limit as provided under Section 11(1) of the Regulations and that such promoters acting as a homogenous group there is a deemed presumption of them acting in concert. On the issue of delay, the learned senior counsel placed reliance on SEBI vs. Akshya Infrastructure Pvt. Ltd., civil appeal no.6041 of 2013 decided on April 25, 2014 wherein the Supreme Court held that the delay even though the delay was inordinate the proceedings could not be set aside. 15. Having heard the learned counsel for the parties at some length, we are of the opinion that the impugned order cannot be sustained for the following reasons; 16. In the instant case, the acquisition of shares was made in the financial year 2005-06. The show cause notice was issued in the year 2017. There is a lapse of 12 years. There is an inordinate delay in the initiation of proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me and again in the order passed by the AO or the WTM is patently erroneous. This Tribunal in a large number of appeals have set aside the orders only on the ground of delay. In one such case namely, Ashok Shivlal Rupani vs. SEBI appeal no.417 of 2018 decided on August 22, 2019. This Tribunal held: "6. Having considering the matter, we are of the view that there has been an inordinate delay on the part of the respondent in initiating proceedings against the appellants for alleged violations. Much water has flown since the alleged violations and at this belated stage the appellants cannot be penalized. It is alleged that disclosure under PIT Regulations was not made but similar disclosure was made by the appellant under SAST Regulations. Therefore, information was available on the Stock Exchange and therefore it cannot be said that the respondents were unaware of the alleged violations. Further, the purpose of disclosure was to make the market aware of the change of shareholding of the shareholders. When a disclosure was made by the company under SAST Regulations the investors became aware of the change in the shareholding. The non-compliance of Regulation 13 if any becomes techni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . SEBI carried this matter to the Supreme Court in Civil Appeal no.8444-8445 of 2019 which was dismissed by judgment dated November 15, 2019. Thus, the order passed by this Tribunal became binding upon SEBI which they have chosen to ignore completely. 20. Even otherwise, proceedings initiated against Mr. R.D. Bhanot and Mrs. Krishna Kumar Bhanot was ex facie illegal. Inspite of having knowledge that two noticees have died SEBI chose to initiate proceedings against dead persons. It is settled law that no proceedings can be initiated against dead person. Further, the directions of the WTM that the heirs of the deceased are liable to make an open offer is illegal and is without any authority of law. In the first instance, no direction can be issued to any of the heirs unless they are brought on record and heard. Secondly, Regulation 27(1)(c) of the SAST Regulations, 1997 provides as under: "Withdrawal of offer 27. (1) No public offer, once made, shall be withdrawn except under the following circumstances:- (a) ......... (b) .......... (c) the sole acquirer, being a natural person, has died;" 21. The said provision clearly indicates that the direction of making a public of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tention of the respondent cannot be accepted. 24. In the end, the direction of make an open offer after 12 years of the alleged transactions was not an appropriate measure. Regulation 44 provides various measures that can be taken for violation of Regulation 11(1). For facility Regulation 44 is extracted hereunder. "Directions by the Board. 44. Without prejudice to its right to initiate action under Chapter VIA and section 24 of the Act, the Board may, in the interest of securities market or for protection of interest of investors, issue such directions as it deems fit including: - (a) directing appointment of a merchant banker for the purpose of causing disinvestment of shares acquired in breach of regulations 10, 11 or 12 either through public auction or market mechanism, in its entirety or in small lots or through offer for sale; (b) directing transfer of any proceeds or securities to the investors protection Fund of a recognised stock exchange; (c) directing the target company or depository to cancel the shares where an acquisition of shares pursuant to an allotment is in breach ofregulations10,11 or 12; (d) directing the target company or the depository not to gi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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