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TMI Blog2023 (8) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer imposing a penalty of Rs. 25 crores to be paid jointly and severally by the appellants under Section 15H of the Securities and Exchange Board of India Act 1992 (hereinafter referred to as the 'SEBI Act') for violation of Regulation 11(1) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as the 'SAST Regulations). 2. The facts leading to the filing of the present appeal is, that on 10th December, 1992 the shareholders of Reliance Industries Ltd. (hereinafter referred to as 'RIL') a listed public Company approved the issuance of Non-Convertible Secured Redeemable Debentures ('NCDs' for short) with warrants. On 12th January, 1994, Reliance allotted 6 crore NCDs of Rs. 50 each to 34 entities for Rs. 300 crores alongwith 3 crore detachable warrants. These allottees/34 entities/warrant holders were entitled to receive two equity shares of Reliance against each warrant upon payment of Rs.150 per equity shares within a period of six years. These warrants were tradeable on the stock exchange platform and were disclosed to the Stock Exchange in 1994. 3. On 7th January, 2000, the Board of Dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pursuant to a merger which was exempted under the 1997 SAST Regulations. 4.3 Notwithstanding the fact that the 1997 SAST Regulations were not in force when the Warrants were issued to the Noticees in January 1994, the Show Cause Notice alleges that the acquisition of 6.83% shares in RIL pursuant to exercise of Warrants ("Warrant Shares"), was in excess of the prescribed thresholds under Regulation 11(1) of the 1997 SAST Regulations, triggering a requirement for making a public announcement for the shares of RIL under the 1997 SAST Regulations. As the Noticees failed to make a public announcement, the Show Cause Notice alleges that the Noticees have contravened Regulation 11(1) of the 1997 SAST Regulations." 7. The Adjudicating Officer after considering the replies and the oral and written submissions and after considering the evidence that was brought on record passed the impugned order imposing a penalty of Rs. 25 crores upon the appellants for violation of Regulation 11(1) of the SAST Regulations. 8. The AO held that the promoters of Reliance and persons acting in concert acquired the shares and voting rights on 7th January, 2000 which is the date of acquisition and on which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consequence where public interest outweighs the requirement of adjudication. On this basis, the AO rejected the plea of delay and laches raised by the appellants. 12. The AO further found that the appellants are not entitled for the exemption under Regulation 3(1)(c) from making a public announcement for an open offer since the procedure specified in Regulation 3(1)(c) was not followed nor complied by the appellants and, therefore, they are not entitled to avail the exemption for making a public announcement or an open offer under Regulation 11(1) of the SAST Regulations. 13. We have heard Mr. Harish Salve, Senior Advocate assisted by Mr. Somasekhar Sundaresan, Mr. Raghav Shankar, Mr. Ashwath Rau, Mr. Vivek Shetty, Ms. Ramya Suresh, Ms. Cheryl Fernandes, Ms. Praneeta Ragji and Mr. Dhaval Vora, Advocates and Mr. Amey Nabar, Advocate for the appellants and Mr. Arvind Datar, Senior Advocate assisted by Mr. Shiraz Rustomjee, Senior Advocate, Mr. Suraj Chaudhary, Mr. Prateek Pai, Mr. Mihir Mody, Mr. Arnav Misra and Mr. Mayur Jaisingh, Advocates for the respondent. 14. Shri Harish Salve, learned senior counsel contended that the impugned order holds that: (i) The entire scheme of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned senior counsel urged that there cannot be any dispute that warrant is a security which entitles the holder to receive shares with voting rights. According to Shri Salve, the 'warrant' is a share for the purpose of Regulation 11(1) of the SAST Regulations. The learned senior counsel further urged that under Regulation 11(1) of the SAST Regulations, an obligation to make an open offer is triggered at the time of acquisition of warrants since warrants is a security which entitles the holder to receive shares with voting rights entitling him to exercise voting rights on such shares. According to Shri Salve, the obligation would have triggered on 12th January, 1994 if the SAST Regulations as they existed on 7th January, 2000 were existing on 12th January, 1994. 18. The learned senior counsel thus contended that the plain language of Regulation 11 of the SAST Regulations makes it clear that it is not the acquisition of voting rights which triggers the obligation to make an open offer under Regulation 11(1) of the SAST Regulations and that the obligation to make an open offer is triggered under Regulation 11(1) only if the warrants had been acquired after the SAST Regulations came in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm 'shares' as defined under Regulation 2(1)(k) of the SAST Regulations nor has considered the issue as to whether the SAST Regulations were applicable to the warrants acquired by the acquirers in January, 1994. It was urged that the right to receive the shares with voting rights with the conversion of warrants was crystallized on 12th January, 1994 at which point there was no SAST Regulations in force. These aspects has not been considered by the AO in the impugned order. 23. In support of his contention, the learned senior counsel relied upon a decision in Mr. M. Srinivasalu Reddy v. Kishore R. Chabbariya (1999) SCC Online Bom. 902 and contended that the said decision is squarely applicable on the facts and circumstances which arises in the present appeal. The Bombay High Court held that the obligation to make an open offer was not triggered at the time of conversion of the security. Relying upon the said decision the learned senior counsel contended that the SAST Regulations has no retrospective application and that the trigger to make an open offer arises only at the time of acquisition of securities which entitles the holder to receive the shares with voting rights and not at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sanjay Jethalal Soni v. SEBI, 2019 SCC OnLine SAT 247. 3. Rakesh Kathotia v. SEBI, 2019 SCC OnLine SAT 74. 4. Shriram Insight Share Brokers Ltd. v. SEBI, SAT order dated 04.01.2020 in Appeal No. 559 of 2020. 5. Ashlesh Gunwantbhai Shah v. SEBI, Appeal No. 169 of 2019 decided on 31.1.2020. 6. Anil Kumar Harchandani v. SEBI, Appeal No. 75 of 2019 decided on 5.12.2019. 7. ICICI Bank v. SEBI, Appeal No. 583 of 2019 decided on 8.7.2020. 8. Rajiv Banot v. SEBI, Appeal No. 369 of 2018 decided on 9.7.2021. 28. The learned senior counsel thus contended that the impugned order is manifestly erroneous in law and was liable to be set aside. 29. Shri Dattar, the learned senior counsel for the respondent submitted that the following issues arise for consideration, namely, (i) Whether the SAST Regulations are retrospective in their application? (ii) Whether the acquisition prior to the coming into force of the 1994 and SAST Regulations of warrants entitling the holder to acquire shares would attract the provisions of Regulations 11(1) of the SAST Regulations only on the ground that the equity shares in respect of the warrants were formally received after the coming into force of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispute that the appellants, namely the promoters and the PACs were holding more than 15% and less than 55% in the Company in January, 2000 and that upon the conversion of the warrants into shares in January, 2000 the appellants acquired 6.83% voting rights. 34. It was contended that the issuance of detachable warrants in January, 1994 with an option to acquire shares within six years did not amount to acquisition of additional shares or acquisition of voting rights in 1994 and that the triggering event took place only in 2000 when the SAST Regulations was already in force. Consequently, when warrants were converted into shares in January, 2000, it triggered the obligation to make an open offer under Regulation 11(1) under the SAST Regulations. It was, thus, contended that the SAST Regulations was not being applied retrospectively. 35. Shri Dattar, learned senior counsel submitted that the SAST Regulations of 1994 applied to acquisition of shares with voting rights exceeding the prescribed threshold. The SAST Regulations brought in the term of 'shares or voting rights'. It was urged that there was a possibility that in some cases voting rights alone could be acquired through an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other parties can enforce a specific performance. 39. In view of the aforesaid, it was urged that Regulation 11(1) is not applicable to an option to acquire shares at a later date. Regulation 11(1) applies only when the acquirer has actually acquired the additional shares or voting rights which entitles him to exercise more than the prescribed percentage of votes. 40. It was, thus, urged that the exercise of option and the allotment of shares in January, 2000, was not a ministerial act. In support of his submission, the learned counsel placed reliance upon a decision in Jamal uddin Ahmad vs. Abu Saleh Najamuddin (2003) 4 SCC 257 which illustrated the essential features of a ministerial act as under: "A 'ministerial act', on the other hand, may be defined to be one, which a person performs in a given state of facts, in a prescribed manner, in obedience to the mandate of a legal authority, without regard to, or the exercise of, his own judgment upon the propriety of the act done. In ministerial duty, nothing is left to discretion; it is a simple, definite duty." (emphasis supplied) 41. Shri Dattar, learned senior counsel also referred to Black's Law Dictionary, 11th edition wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation to make an open offer. Since the open offer was not made the appellants violated Regulation 11(1) which will continue 'de die in diem'. 46. It was urged that since it was a continuing offence the penalty was rightly levied under the amended 15H of SEBI Act. In support of his submission, the learned counsel has placed reliance upon the following decisions. (i) "Bhagirath Kanoria v. State of M.P. (1984) 4 SCC 222, (ii) Adjudicating Officer, SEBI v. Bhavesh Pabari (2019) 5 SCC 90 (iii) Maya Rani Punj v. CIT (1986) 1 SCC 445 (iv) CWT v. Trustees of Sahebzadas of Saraf-E-Khas Trust (1997) 3 SCC 481 (v) Mohan Lal v. State of Rajasthan, (2015) 6 SCC 222 (vi) RIL v. SEBI, decided on 05.08.22 para 40" 47. Shri Dattar contended that there is no inordinate delay in the issuance of the show cause notice or in the disposal of the proceedings. It was contended that SEBI received a complaint on 20th January, 2002 and further information on 16th May, 2002 based on which an investigation was initiated on 21st October, 2002. The investigating authority undertook a detailed and comprehensive scrutiny of the financial transaction against 103 entities which was complex involving s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether the obligation to make a public announcement for an open offer under Regulation 11(1) of the SAST Regulations is at the time of conversion of warrants into equity shares which warrants were acquired in January 1994 and is, therefore, a retrospective application or a retroactive application of the SAST Regulations. (e) Whether the impugned proceedings are barred by limitation, delay or laches. (f) Whether the violation of Regulation 11(1) is continuing violation and, therefore, monetary penalty under the amended Section 15H of the SEBI Act could be imposed. 51. Before we deal with the rival submissions, it would be appropriate to consider certain provisions of the SAST Regulations which are extracted hereunder :- Regulation 2(1)(b) of the SAST Regulations "2(1)(b). "acquirer" means any person who, directly or indirectly, acquires or agrees to acquire shares or voting rights in the target company, or acquires or agrees to acquire control over the target company, either by himself or with any person acting in concert with the acquirer." Regulation 2(1)(k) of the SAST Regulations "2(1)(k). "shares" means shares in the share capital of a company carrying voting r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulation 10 or Regulation 11, the public announcement referred to in sub-regulation (1) shall be made not later than four working days before he acquires voting rights on such securities upon conversion, or exercise of option, as the case may be. (3) The public announcement referred to in Regulation 12 shall be made by the merchant banker not later than four working days after any such change or changes are decided to be made as would result in the acquisition of control over the target company by the acquirer." Section 2(h) of the SCRA "(h) "securities" include- (i) shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate; (ia) derivative; (ib) units or any other instrument issued by any collective investment scheme to the investors in such schemes; (ic) security receipt as defined in clause (zg) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; (id) units or any other such instrument issued to the investors under any mutual fund scheme; (ii) Government securities; (iia) such other ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stantial acquisition of shares and takeovers of the companies. The objective of the Regulations is to provide an orderly framework within which the process of substantial acquisition of shares could be conducted. The Bhagwati Commission report clearly stated that the Regulations for substantial acquisition of shares and takeover should operate principally to ensure fair and equal treatment of all shareholders in relation to substantial acquisition of shares and takeover and that the Regulations should ensure that such process do not have place in a clandestine manner without protecting the interest of the shareholders. The SAST Regulations attempts to strive at that. 57. Regulations 10, 11 and 12 are core provisions. Regulations 10 and 11 require the acquirer acquiring shares beyond the prescribed limit to make a public announcement to acquire shares of the target Company from the shareholders in accordance with the Regulations. While Regulations 10 and 11 deal with the substantial acquisition of shares, Regulation 12 deals with the acquisition of control over a Company. 58. The term 'acquirer' as defined in Regulation 2(1)(b) applies to the term 'acquirer' used in Regulations 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es shares which includes warrants beyond a percentage specified in Regulation 11, then it triggers an obligation to make an open offer. The contention that acquisition of warrants does not trigger the obligation to make an open offer under Regulation 11 as the warrants does not carry any voting rights is misconceived. Further, the contention that such obligation is triggered only when the warrants are converted into equity shares carrying voting rights is also erroneous. A plain reading of Regulation 2(1)(k) makes it clear that shares includes warrants and, therefore, the contention that warrants is not a share for the purpose of Regulation 11(1) is erroneous. 64. It is a cardinal principle of interpretation that when a term/word is defined in a statute in a particular manner, then the said term/word must be understood as defined therein. It would be absurd to interpret the said term/word in any other manner. 65. Under the SAST Regulation, the word "shares" has been defined to mean shares carrying voting rights and also includes "any security which would entitle the holder to receive shares with voting rights". Therefore, shares are shares with voting rights and shares that would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts which upon acquiring should immediately entitle the acquirer to exercise voting rights is erroneous. The contention that mere acquisition of securities which would confer voting rights at a later date cannot trigger the requirement to make a public announcement at the point of acquisition is erroneous and is against a bare reading of Regulation 2(1)(k) read with Regulation 2(1)(b) and Regulation 11(1). The contention that the SAST Regulations would be attracted only at the point when voting rights are acquired would lead to an absurd result making the second part of the definition of shares superfluous or redundant which was not the intention of the framers of the Regulations. 70. According to us the words "entitling him to exercise more than 5% of the voting rights" as provided in Regulation 11(1) means the ability of the acquirer to exercise the voting rights which may either be in praesenti or at a later point of time, namely, when the security entitling him to receive shares with voting rights is converted into shares carrying voting rights in future. In our opinion, the entitlement to exercise voting rights is not with reference to the security acquired but is with referen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of an acquirer acquiring securities...........". Regulation 14(2), thus, carves out an exception to Regulation 14(1). Regulation 14(2) contains the words "the public announcement referred to in sub-regulation (1)". Regulation 14(1) refers to the public announcement referred to in Regulation 11. Accordingly, the public announcement referred to in Regulation 14(2) is the one triggered under Regulation 11(1) and, therefore, there can be no other meaning attached to it. Regulation 14(2) provides that such public announcement shall be made not later than four working days before he acquires voting rights on such securities upon the conversion. We are of the opinion that in case of warrants, the public announcement for open offer is triggered under Regulation 11(1) at the time of acquisition to acquire such warrants which can be made at any time from the date of agreement to acquire such warrants up to four working days prior to the acquisition of voting rights upon conversion. In our opinion, the acquirer can make the open offer even immediately after agreement to acquire warrants since it is not later than four working days before he acquires and such decision to make an open offer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ST Regulations is also extracted hereunder: Substantial acquisition of shares or voting rights. "3(2) No acquirer, who together with persons acting in concert with him, has acquired and holds in accordance with these regulations shares or voting rights in a target company entitling them to exercise twenty-five per cent or more of the voting rights in the target company but less than the maximum permissible non-public shareholding, shall acquire within any financial year additional shares or voting rights in such target company entitling them to exercise more than five per cent of the voting rights, unless the acquirer makes a public announcement of an open offer for acquiring shares of such target company in accordance with these regulations: Provided that such acquirer shall not be entitled to acquire or enter into any agreement to acquire shares or voting rights exceeding such number of shares as would take the aggregate shareholding pursuant to the acquisition above the maximum permissible non-public shareholding. Explanation.-For purposes of determining the quantum of acquisition of additional voting rights under this sub-regulation,- (i) gross acquisitions alone shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and in the 2011 Regulations. The contention of the respondent that under the SAST Regulations and the 2011 Regulations the obligation to make the open offer is triggered only at the time of acquisition of securities carrying voting rights is incorrect and cannot be accepted. 82. Words in a statute as defined should be used to interpret the Act unless such interpretation results in an absurdity. The Supreme Court in SEBI vs. Sunil Krishna Khaitan & Ors., (2022) SCC Online SC 862 dealt with the interpretation of the word 'acquirer' in the SAST Regulations and held: "When a word/term has been defined in a statute in a particular manner then the interpreter can assume the word/term must be understood in the stipulated sense. The principle applies with greater vigour when the definition of the word/term is given a legal and substantive meaning, different from the common meaning, as then the writer demands that the reader should understand the term/word in the sense defined. When the content and meaning given is technical, the interpreter is entitled to infer that the intention of the draftsmen is to deviate and depart from the ordinary, literal or customary meaning. Therefore, when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es' in Regulation 11(1) should be considered in the ordinary sense and not as per the term 'shares' defined under Regulation 2(1)(k). The contention of SEBI that the obligation to make an open offer is triggered at the time of acquisition of voting rights under SAST Regulations as well as under the 2011 SAST Regulations is patently erroneous. It is only the 2011 SAST Regulations which has shifted the trigger to make an open offer from the point of time of acquisition of securities which entitle the holder to receive shares with voting rights to a latter point of time, namely, at the time of acquisition of securities which entitle the holder to exercise voting rights. Thus, under the 2011 SAST Regulations in the case of acquisition of non-voting security, the trigger to make an open offer is at the time when such non-voting security is converted into a security carrying voting rights. The contention raised by the learned counsel for the respondent is identical to the contention raised by them in Supreme Court in the case of Sunil Krishna Khaitan and is in the teeth of the decision of the Supreme Court in the case of Sunil Krishna Khaitan. The contention, thus, raised cannot be accep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no express decision to acquire Burmah Castrol Plc. The said contention was rejected by this Tribunal holding that the announcement made by BP Amoco Plc. on 14th March, 2000 was a decision to acquire Burmah Castrol Plc. and hence the trigger for public announcement arose on 14th March, 2000. This Tribunal held: "On a perusal of regulation 14 it is clear that a public announcement is required to be made not later than four working days after any change or changes decided to be made, as would result in any acquisition of control over the target company. On a plain reading of regulation 14(3) it is difficult to agree with the view that regulation 14(3) applies only when a change or changes in the Board of Directors or control is decided upon. I fully agree with the Respondent's view that the term " change or changes decided to be made" must be read in the light of regulation 12 and be construed so as to mean decision taken for such changes, as would result in the acquisition of control of the target company. The word "would" used in regulation 14(3) conveys that what the said regulation is concerned with is the likely acquisition of control and not the actually effected acqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake an example, that if an acquirer acquires 15% of the warrants and converts 5% of the warrants into shares with voting rights in each financial year, then the acquirer would be escaping from making an open offer under Regulation 11 since the conversion of warrants into shares with voting rights would be less than the prescribed limit as prescribed under Regulation 11. Such position would definitely will not be in the interest of the public shareholders. In our view, the SAST Regulations have to be interpreted as triggering the open offer even at the time of acquisition of warrants. Any other interpretation would, definitely, will not be in the interest of the shareholders. 94. The contention of the respondent that in case of convertible securities the obligation to make a public announcement is triggered under Regulation 11(1) only when voting rights are acquired and not at the time of acquisition. The respondent submits that this interpretation is strengthened or reinforced by Regulation 14(2) which provides that in case of convertible securities like warrants, GDRs, ADRs, the obligation to make an open offer is triggered only at the time of conversion into equity shares carryi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 81(1A) of the Companies Act, 1956. The preferential allotment of warrants was made to the appellant on 27th January, 2007. The said appellant converted 5,75,000 warrants into equity shares on 30th March, 2007 and the remaining 29,55,000 warrants were converted in June, 2008 and the shares against these warrants were allotted on 28th June, 2008. Thus, upon conversion, the voting rights of the promoter group increased from 50.38% to 60.48%. The public announcement for open offer was made by the said appellant on 21st June, 2008. The appellant arrived at the open offer price of Rs.19 in terms of Regulation 20 of the SAST Regulations and applied the formula price as per Regulation 20(4)(c) as existing on 16th December, 2006, namely, the said date when the board of directors authorized the preferential issue of warrants. This Tribunal held that the open offer price as per Regulation 20(4)(c) should be determined by applying the formula price with reference to the date of the board meeting in which the equity shares were allotted, namely, 28th June, 2008. The Tribunal held when the board meeting on 16th December, 2006 only authorized preferential allotment of warrants whereas the boa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation was whether the pledgee had acquired 16.24% of the shares of Aurobindo Pharma Ltd., thereby triggering the requirement to make a public announcement under Regulation 10. This Tribunal rejected the contention of SEBI that the pledge agreement amounted to an "agreement to acquire" by the pledgee. The Tribunal held that though 3,32,540 shares of Aurobindo Pharma Ltd. were held only as security, however, since these shares were transferred in the name of the pledgee with the pledgee becoming entitled to exercise the voting rights thereon, the pledgee was deemed to have acquired 7.037% voting rights of Aurobindo Pharma Ltd. With respect to the balance 4,35,040 shares, the Tribunal held that there was no acquisition by the pledgee. 101. From the above, it is clear that the case was whether the pledge of 16.24% shares of Aurobindo Pharma Ltd. by the pledgor amounted to an acquisition by the pledgee triggering an obligation to make an open offer under Regulation 10. The decision makes it apparently clear that a pledge in which the shares are not transferred in the name of the pledgee is not an acquisition and when the pledged shares are transferred in the name of pledgee, to that ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellants to make an open offer which was triggered under the SAST Regulations had to be made under the 2011 SAST Regulations since the SAST Regulations had been repealed. Consequently, for the same reasons the decision in M/s. Surya Pharmaceuticals Ltd. vs. SEBI, Appeal No.174 of 2009 decided on 22nd December, 2009 and in the case of Mr. Naagraj Ganeshmal Jain & Ors. vs. Mr. P. Sri Sai Ram, AO, SEBI, (2001) SCC Online SAT 24 are distinguishable and does not support the case of the respondent. 105. Similarly, the decision in the matter of M/s. Vishvapradha Commercial P. Ltd. vs. SEBI, Appeal No. 293 of 2018 and other connected appeals decided on 20th July, 2022 and in the case of Mr. Victor Fernandes & Anr. vs. SEBI decided on 28th September, 2021, are distinguishable on facts and is not applicable to the present facts and circumstances of the case. The question involved in the aforesaid two matters was whether on the basis of an agreement conferring certain veto rights entered into with promoter and the target companies, the persons who entered into the agreement acquired control of the target companies or not. These cases were not on the issue of acquisition of shares. 106. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the 1994 SAST Regulations is not an 'acquirer' under the 1994 SAST Regulations and that the conversion of such securities into shares carrying voting rights is not an acquisition triggering a public announcement under the 1994 SAST Regulations. 109. In the matter of acquisition by Ramco Industries Ltd., (2004) SCC Online SEBI 246, we find from a perusal of the order of SEBI which states that the inclusive definition of the term 'shares' in Regulation 2(1)(k) covers any security which would entitle the holder to receive shares with voting rights and that warrants issued to the promoters entitled the holder to apply for and get allotted the equity shares with voting rights and that the provisions of Regulation 11 will not apply to the acquisition of warrants which were allotted on 18th May, 2002 and 24th May, 2002 since exemption under Regulation 3(1)(c) was operative. 110. In view of the aforesaid the decisions cited by the respondent in Sohel Malik and Eight Capital Master Fund etc., are distinguishable on facts and cannot be applied in the facts and issues in the present appeal. On the other hand, the decisions in M. Sreenivasalu Reddy, B.P. Amoco Plc., and in B.P. Jhunjhunw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the parties. However, since long drawn arguments were made we find it fit to dwell on these issues in brief. 113. We are of the opinion that the warrants that were acquired by the appellants in January, 1994 amounts to 'agreeing to acquire shares carrying voting rights'. In our opinion, the Company had a binding obligation to allot 12 crore equity shares upon payment of Rs. 900 crores in exchange for the 3 crore warrants held by the appellants. This obligation was not conditional and the appellants had the right to enforce a specific performance against the Company in the event of failure by the Company to allot equity shares upon payment. Accordingly, in our opinion, the warrants is an agreement to acquire shares carrying voting rights. The words 'agrees to acquire' is part of the definition of the word 'acquire'. The words used in Regulation 14(1) 'entering into an agreement' only suggests that it is a decision to acquire. The words 'agreement to acquire' is, thus, equated with the intention to acquire. In our opinion, the words 'agreement to acquire' have to be understood as the decision or intent by the acquirer to acquire shares or voting rights. Regulation 11(1) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of warrants without any obligation attached to such warrants. The obligation to make an open offer is a substantive obligation under the SAST Regulations and if the legislature decided to impose an obligation on warrants and other convertible instruments outstanding at the time of enactment of the SAST Regulations it could have done so by inserting a specific provision for the same. Admittedly, there is no such provision under the SAST Regulations dealing with warrants and other convertible instruments outstanding at the time to enactment of these Regulations. 117. In the light of the aforesaid, reliance by the respondent in the case of SEBI vs. Rajkumar Nagpal (2022) SCC Online SC 1119, is not applicable to the facts and circumstances of the present appeal for the following reasons. (i) The warrants in question were issued and allotted to persons acting in concert and right to convert the warrants into equity shares carrying voting rights have been conferred on the persons acting in concert after the shareholders of the Company approved the issue of warrants with the right to convert them into equity shares in exercise of the statutory powers vested on them under Section 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to acquire' or 'decision to acquire' the shares. The Cabot case did not consider as to whether the obligation to make an open offer was triggered at the time of agreeing to acquire in January, 1994, when the 1994 SAST Regulations was in force. In the absence of such questions being decided the said decision does not concern Regulation 11(1) and, consequently, the said decision cannot be relied upon. Similarly, the decision in State Bank's Staff Union vs. Union of India & Ors. (2005) 7 SCC 584; Jay Mahakali Rolling Mills vs. Union of India & Ors., (2007) 12 SCC 198 and Kingfisher Airlines Ltd. vs. Competition Commission of India (2010) SCC Online Bom. 2186, does not advance the cause of the respondent, in any manner, nor the principles enunciated in these cases have a bearing to the issue involved and, therefore, we do not find it necessary to dwell on these judgments. In view of the aforesaid, we are of the view that a law cannot be presumed to have retrospective application unless there is an explicit mention in the statute. In Commissioner of Income Tax (Central)-1, New Delhi vs. Vatika Township P. Ltd. (2015) 1 SCC 1, a Constitution Bench of the Supreme Court held: "28. Of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sures under Regulation 8(3) of the SAST Regulations was made before the appropriate stock exchange on 28th April, 2000. The disclosures indicated that 6.83% of the equity shares were allotted to the persons acting in concert. This fact came into the public domain and SEBI cannot say that they were unaware of the aforesaid disclosure made by the Company. Inspite of being aware, SEBI did nothing in the matter and only started investigation when a complaint was received in respect of the allotment on 20th January, 2002. According to SEBI, the investigation started in February, 2002 and continued till February, 2005. Assuming that SEBI took three years to complete the proceedings there is no justification for the respondent to issue a show cause notice in 2011 after six years from the submission of the investigation report. The contention that SEBI took legal opinion twice which took another three years is unacceptable. Delay in obtaining legal opinion can be condoned in exceptional cases but not where the only documents relied upon by the respondent in the show cause notice is based on two documents, namely, the list of 38 allottees and the disclosure made by the Company under Regulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Lal vs. State of Rajasthan, (2015) 6 SCC 222 (f) Gokak Patel Volkart Ltd. vs. Dundayya G. Hiremak and others, (1991) 2 SCC 141, and (g) Samarpan Agro and Livestock Ltd. vs. SEBI, (2010) SCC Online Del. 3688 123. On the other hand, Shri Salve urged that the violation, if any, is committed once and for all and is not a continuing violation. In support of his submission, the learned senior counsel, has placed reliance on the following decisions, namely: (a) State of Bihar vs. Deokaran Nenshi and Ors., (1972) 2 SCC 890 (b) Rupali Devi vs. State of Uttar Pradesh, (2019) 5 SCC 384 (c) M. Siddiq vs. Mahant Suresh Das, (2020) 1 SCC 1, and (d) Udai Shankar Awasthi vs. State of Uttar Pradesh, (2013) 2 SCC 435 124. The concept of "continuing offence" has evolved through various decisions of the Supreme Court. The decision of the Supreme Court in Deokaran Nenshi (supra) sets out the basic principles of a 'continuing offence'. This decision still holds the field. The Supreme Court held that a continuing offence is one which is susceptible of continuance and is distinguishable from the one which is committed once and for all. 125. In our opinion, hair splitting argument as to wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is would depend upon the facts of each case and whether the violation was hidden and camouflaged or whether the authority had or had not the knowledge of the alleged violation. 129. This Tribunal in a plethora of cased have quashed the proceedings and the impugned order on the ground of inordinate delay. 130. In Mr. Rakesh Kathotia vs. SEBI in Appeal No. 7 of 2016 decided by this Tribunal on May 27, 2019 this Tribunal held:- "23. It is no doubt true that no period of limitation is prescribed in the Act or the Regulations for issuance of a show cause notice or for completion of the adjudication proceedings. The Supreme Court in Government of India vs, Citedal Fine Pharmaceuticals, Madras and Others, [AIR (1989) SC 1771] held that in the absence of any period of limitation, the authority is required to exercise its powers within a reasonable period. What would be the reasonable period would depend on the facts of each case and that no hard and fast rule can be laid down in this regard as 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sal of the proceedings. The impugned order, thus, is liable to be set aside also on this ground. 136. A penalty of Rs. 25 crores has been imposed under Section 15H of the SEBI Act which came into existence with effect from 8th September, 2015. It was contended by the appellants that the violation, if any, came into existence in January, 2000 and, therefore, the provision imposing a penalty existing on that date would apply. 137. On the other hand, the contention of the respondent is, that the violation committed by the appellant is a continuing violation and even though the appellants may have acquired the shares in January, 2000 without making an open offer and continue to hold the shares and exercise voting rights thereon even as on date hence the amended provision in the Section 15H prevailing on the date of the passing of the impugned order would apply. In support of their contention parties have relied upon various decisions which we need not refer as in our opinion the issue of continuing violation is only for the purpose of deciding the period of limitation to be computed with reference to every point of time during which the said violation continues. The purpose of introd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the impugned order since the provision was omitted. If such contention of the respondent is accepted it would lead to an absurd result. In view of the aforesaid, it is not necessary for us to go into the question as to whether the alleged violation was a continuing violation. 142. In view of the aforesaid, we find that the appellant has not violated Regulation 11(1) of the SAST Regulations. The imposition of penalty upon the appellant is without any authority of law. Consequently, the impugned order cannot be sustained and is quashed. The appeal is allowed. All the misc. applications are accordingly disposed of. 143. We have been informed that the penalty amount pursuant to the impugned order was deposited by the appellants under protest. Since we have set aside the impugned order, the respondent is directed to refund the amount of Rs. 25 crore within four weeks from today. In the circumstances of the case, parties shall bear their own costs. 144. This order will be digitally signed by the Private Secretary on behalf of the bench and all concerned parties are directed to act on the digitally signed copy of this order. Certified copy of this order is also available from the Reg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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