TMI Blog2021 (7) TMI 1417X X X X Extracts X X X X X X X X Extracts X X X X ..... a settled position that there is no time limit for issuing notice and that an order cannot be set aside on the ground of delay. Such assertion being used time 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. Thus considering the long lapse of time in initiating the proceedings, the direction to make an open offer was not appropriate in the circumstances of the case. For the reasons stated aforesaid, the impugned order cannot be sustained and is quashed. The appeals are allowed - Misc. Application No. 337 of 2018 And Appeal No. 396 of 2018 With Misc. Application No. 360 of 2018 And Appeal No. 405 of 2018 With Misc. Application No. 525 of 2019 And Appeal No. 562 of 2019 - - - Dated:- 9-7-2021 - JUSTICE TARUN AGARWALA, PRESIDING OFFICER AND JUSTICE M.T. JOSHI, JUDICIAL MEMBER For the Appellant : Mr. Somasekhar Sundaresan, Advocate with Ms. Yugandhara Khanwilkar, Mr. Anshuman Sugla, Mr. Arihant Agarwal and Ms. Tanya Gupta, Advocates i/b. Joby Mathew Associates. For the Respondent : Mr. Shyam Mehta, Senior Advocate with Mr. Manish Chhangani, M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the five percent threshold as stipulated under Section 11(1) of the SAST Regulations, 1997 and since the acquirers crossed this threshold in the financial year they were required to make an open offer under the SAST Regulations, 1997. 5. Mrs. Krishna Kumari Bhanot, one of the acquirer died on November 30, 2006 and another acquirer Mr. R.D. Bhanot died on August 6, 2015. Even though the acquisition of the shares was in violation of Regulation 11(1) and was in the public domain no steps were taken by the respondent to correct this violation. In 2009, the target Company Bhanot Leasing Limited was amalgamated with M/s. Bhanot Construction and Housing Limited and, consequently, the substratum of the target Company came to an end. 6. On November 24, 2011 and February 2, 2012 certain queries were raised by SEBI seeking details regarding change in the shareholding pattern. Such details were provided by the Company on February 14, 2012. The respondent did nothing in the matter and slept over it. After more than eight years SEBI issued another letter dated July 16, 2014 seeking further details of the acquisition which details were provided by the Company on August 11, 2014. Thereaf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the financial year 2005-06 and such acquisition beyond five percent triggered the open offer under Regulation 11(1) which acquirers failed to make and, therefore, became liable for penal action under the SAST Regulations. 11. The WTM also came to the conclusion that all other promoters/noticees were acting in concert. The WTM concluded that since the obligation to make an open offer was not personal in nature and the relief of open offer to the shareholders was a valuable right of those shareholders to be enjoyed consequently, directed the appellants to make an open offer 12. The WTM further found that the cause of action survives and does not die on the death of Mr. R.D. Bhanot and Mrs. Krishna Kumar Bhanot. The WTM further found that since no period of limitation is prescribed the proceedings cannot be set aside only on the ground of laches. The appellants, being aggrieved, have filed the present appeals. 13. We have heard Mr. Somasekhar Sundaresan, Advocate assisted by Ms. Yugandhara Khanwilkar, Mr. Anshuman Sugla, Mr. Arihant Agarwal and Ms. Tanya Gupta, Advocates for the appellants and Mr. Shyam Mehta, Senior Advocate assisted by Mr. Manish Chhangani, Mr. Anubhav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delay. It only shows the lackadaisical attitude on the part of the respondent in handling the matter. The purpose of making a public offer is to bring relief to the shareholders on the creeping acquisition. Such relief is required to be made at the earliest opportune moment and the purpose is lost if steps are taken after 12 years. 17. The decision cited by the respondent in Akshay Infrastructure cited (supra) is totally distinguishable and is not applicable in the instant case. In that matter, SEBI was required to give comments on the value of the shares which under the Regulations was required to be given within a stipulated period. In that view of the matter, the Supreme Court held that even though there is an inordinate delay in giving the comments the proceedings will not lapse. The said decision is totally distinguishable and is not applicable in the instant case. In the present case, SEBI is sitting quietly and has not taken any action for 12 years. Such delay defeats the purpose of initiation of proceedings for appropriate action. 18. We are constrained to observe that inspite of specific orders being issued from time to time on the question of delay the WTM chooses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the determination of this question would depend on the facts of each case. This proposition of law has been consistently reiterated by the Supreme Court in Bhavnagar University v. Palitana Sugar Mill (2004) 12 SCC 670, State of Punjab v. Bhatinda District Coop. Milk P. Union Ltd. (2007) 11 SCC 363 and Joint Collector Ranga Reddy Dist. v. D. Narsing Rao (2015) 3 SCC 695. The Supreme Court recently in the case of Adjudicating Officer, SEBI v. Bhavesh Pabari 2019 SCC OnLine SC 294 held: There are judgments which hold that when the period of limitation is not prescribed, such power must be exercised within a reasonable time. What would be reasonable time, would depend upon the facts and circumstances of the case, nature of the default/statute, prejudice caused, whether the third-party rights had been created etc. 8. In the light of the aforesaid, we are of the opinion that there has been an inordinate delay in the issuance of the show cause notice and for completion of the adjudication proceedings. Since the power to adjudicate has not been exercised within a reasonable period no penalty could have been imposed for the alleged violations. 9. As a result, without going into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion or inheritance; 22. The said provision clearly indicates that even if the acquisitions have triggered the threshold limit under Regulation 11(1) by the original acquirers, the legal heirs cannot be saddled with this liability once they inherit the shares. 23. On the issue that the delay does not cause prejudice, we are of the opinion that the contention of the learned senior counsel for the respondent is patently misplaced. In the first instance, prejudice has been caused to the heirs of the deceased acquirers by issuing an order without impleading them and without giving them an opportunity of hearing. Further, promoters who have not made any acquisition are being prejudiced because they are not acting in concert nor was there any provision under the SAST Regulation of 1997 that promoters are deemed to be acting in concert. Further, there has to be an assessment and a finding that the promoters were acting with a common objective in mind which in the instant case, is lacking. Even otherwise, long delay in initiating proceedings by itself causes prejudice. In addition to the aforesaid, we find that the target Company had merged with another Company. Nothing has been brou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rget company contrary to the undertaking given in the letter of offer; (i) directing the person concerned, who has failed to make a public offer or delayed the making of a public offer in terms of these Regulations, to pay to the shareholders, whose shares have been accepted in the public offer made after the delay, the consideration amount along with interest at the rate not less than the applicable rate of interest payable by banks on fixed deposits. 25. In our view, considering the long lapse of time in initiating the proceedings, the direction to make an open offer was not appropriate in the circumstances of the case. 26. For the reasons stated aforesaid, the impugned order cannot be sustained and is quashed. The appeals are allowed. In the circumstances of the case, parties shall bear their own costs. 27. The present matter was heard through video conference due to Covid-19 pandemic. At this stage it is not possible to sign a copy of this order nor a certified copy of this order could be issued by the registry. In these circumstances, this order will be digitally signed by the Private Secretary on behalf of the bench and all concerned parties are directed to act o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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