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Wednesday, May 7, 2014

SEBI - Regulations 11,16, 18, & 27 - Takeover Regulations- ejusdem generis principle- Acquired excess shares - breached the creeping limits of acquisition - against the rule 11 - made a voluntary open offer through a Public Announcement in major National Newspapers, under Regulation 11 of the Takeover Regulations - sought permission by letter to SEBI - Sebi delayed in giving it's comments - in the meanwhile - the company withdraw it's open offer as it is unviable - SEBI not accepted - challenged in SAT - SAT allowed - Apex court held that The plain reading of the regulation makes it clear that no public offer whether it is voluntary or triggered by Regulation 11 can be withdrawn, unless it satisfies the circumstances set out in Regulation 27(1)(b), (c) and (d). There can be no distinction between a triggered public offer and a voluntary public offer. Both have to be considered on an equal footing. and held that In our opinion, the ejusdem generis principle is fully applicable for the interpretation of Regulation 27(1)(b)(c) and (d) as there is a common genus of impossibility. This impossibility envisioned under the aforesaid regulation would not include a contingency where voluntary open offer once made can be permitted to be withdrawn on the ground that it has now become economically unviable. and allowed the appeal filed By SEBI set aside the SAT order and restored the directions of SEBI = Securities and Exchange Board of India …Appellant VERSUS M/s. Akshya Infrastructure Pvt. Ltd. ..Respondent=2014 (April. Part)http://judis.nic.in/supremecourt/filename=41474

SEBI - Regulations 11,16, 18, & 27 - Takeover Regulations- ejusdem  generis  principle- Acquired excess shares - breached the creeping limits of acquisition - against the rule 11 - made  a  voluntary  open offer  through  a  Public   Announcement   in   major   National Newspapers, under Regulation  11  of  the  Takeover  Regulations - sought permission by letter to SEBI - Sebi delayed in giving it's comments - in the meanwhile - the company withdraw it's open offer as it is unviable -  SEBI not accepted - challenged in SAT - SAT allowed - Apex court held that The  plain  reading  of  the regulation makes it clear that no public  offer  whether  it  is voluntary or triggered by Regulation 11 can be withdrawn, unless it satisfies the circumstances set out  in Regulation 27(1)(b), (c) and (d). There can be  no  distinction  between  a triggered public offer and a voluntary public offer.  Both  have to be considered on an equal footing. and held that In our opinion, the ejusdem  generis  principle is  fully  applicable  for  the  interpretation  of   Regulation 27(1)(b)(c) and (d) as there is a common genus of impossibility. This impossibility envisioned  under  the  aforesaid  regulation would not include a contingency where voluntary open offer  once made can be permitted to be withdrawn on the ground that it  has now become economically unviable. and allowed the appeal filed By SEBI set aside the SAT order and restored the directions of SEBI =


whether  an
      open offer voluntarily made through a  Public  Announcement  for
      purchase of shares of the target company can be permitted to  be
      withdrawn at a time when the voluntary  open  offer  has  become
      uneconomical to be performed.=

The appellant by letter dated 30th November, 2012  conveyed  its
      comments in terms of the proviso  to  Regulation  16(4)  of  the
      Takeover Regulations on  the  draft  letter  of  offer.  Certain
      information was sought  in  the  aforesaid  letter.           
No
      reference was made in this letter with  regard  to  the  request
      made by the respondent  for  permission  to  withdraw  the  open
      offer. 
Rather it was stated as under :
           “Please note that failure to carry out the suggested changes  in
           the letter of offer as well as violation of  provisions  of  the
           Regulations will attract appropriate action. Please also  ensure
           and confirm that apart from above, no other changes are  carried
           out in the letter of offer submitted to us.”=

Regulation 27(1)(a) before its deletion  on  September  9,  2002
      permitted the public offer to be withdrawn, consequent upon  any
      competitive bid. =
We see no reason to differ from the view  taken
      in Nirma Industries Ltd. (supra) wherein  we  have  observed  as
      follows:


           “62. A bare perusal of  the  aforesaid  Regulations  shows  that
           Regulation 27(1) states the general rule in negative  terms.  
It
           provides that no public offer, once made,  shall  be  withdrawn.
           
Since clause (a) has been omitted, we are required to  interpret
           only the scope and ambit of clauses (b), (c) and (d). 
The  three
           sub-clauses are exceptions to the general rule  and,  therefore,
           have to be construed very strictly.  
The  exceptions  cannot  be
           construed in such a manner that would destroy the  general  rule
           that no public offer shall be permitted to  be  withdrawn  after
           the public announcement has been made. 
Clause (b) would permit a
           public offer to be withdrawn in case of legal impossibility when
           the statutory approval required has  been  refused.  
Clause  (c)
           again provides for impossibility when the sole acquirer, being a
           natural  person,  has  died.  
Clause  (b)  deals  with  a  legal impossibility 
whereas clause (c) deals with a natural  disaster.
           
Clearly clauses (b)  and  (c)  are  within  the  same  genus  of impossibility. 
Clause (d) also being an exception to the general rule would have to be naturally construed in  terms  of  clauses (b) and (c). 
Mr Divan has placed a great deal of emphasis on the
           expression “such circumstances” and “in the opinion” to indicate
           that the Board would have a wide discretion to permit withdrawal
           of an offer even though it is not impossible to perform. 
We  are
           unable to accept such an interpretation.” =

 Factually, it cannot be denied that in the years 2006-07,  2007-
      08 and 2010-11, the respondent had acquired shares in excess  of
      5% which breached the 5%  creeping  acquisition  limit.  
In  our
      opinion, the respondent was required to comply  with  Regulation
      11  and  make  a  Public  Announcement  to  acquire  shares   in
      accordance  with  law.  
The  respondent  admittedly  not  having
      complied with Regulation 11, in our opinion, the  appellant  was
      perfectly  justified   in   taking   the   non-compliance   into
      consideration whilst considering the feasibility of  the  public
      offer made on 20th October, 2011.=
It  is
      true that under Regulation 18(2), SEBI was required to  dispatch
      the necessary letters to the shareholders  within  a  reasonable
      period. 
It is a matter of record  that  the  comments  were  not
      offered for 13 months. 
Such kind of delay is wholly  inexcusable
      and needs to be avoided. It can lead  to  avoidable  controversy
      with regard to whether such belated action is bona fide exercise
      of statutory power by SEBI. 
By adopting such a lackadaisical, if
      not callous attitude, the very object for which the  regulations
      have been framed is diluted,  if  not  frustrated.  It  must  be
      remembered that SEBI is the watchdog of the  Securities  Market.
      It is the guardian of the interest of the  shareholders.  
It  is
      the protective shield  against  unscrupulous  practices  in  the
      Securities Market. 
Therefore, SEBI like any other body, which is
      established as a watchdog, ought not to act in  a  lackadaisical
      manner  in  the  performance  of  its  duties.  
The  time  frame
      stipulated  by  the  Act  and  the  Takeover   Regulations   for
      performing certain functions is required  to  be  maintained  to
      establish the transparency in the functioning of SEBI.=

Ultimately, SEBI is  charged
      with the duty of ensuring that every public offer made  is  bona
      fide for the benefit of the shareholders as well  as  acquirers.
      
In  the  present  case,  SEBI  has  found  that  permitting  the
      respondent to withdraw the public offer would be detrimental  to
      the overall interest of the shareholders. =
The  only  reason  put
      forward by the respondent for withdrawal of the offer is that it
      is no longer economically viable to continue with the offer. =
The  plain  reading  of  the  aforesaid
      regulation makes it clear that no public  offer  whether  it  is
      voluntary or triggered by Regulation 11 can be withdrawn, unless
      it satisfies the circumstances set out  in Regulation 27(1)(b), (c) and (d). 
There can be  no  distinction  between  a
      triggered public offer and a voluntary public offer.  Both  have
      to be considered on an equal footing.=
In our opinion, the ejusdem  generis  principle
      is  fully  applicable  for  the  interpretation  of   Regulation
      27(1)(b)(c) and (d) as there is a common genus of impossibility.
This impossibility envisioned  under  the  aforesaid  regulation
      would not include a contingency where voluntary open offer  once
      made can be permitted to be withdrawn on the ground that it  has
      now become economically unviable. 
Accepting such  a  submission,
      would  give  a  field  day  to  unscrupulous  elements  in   the
      securities market to  make  Public  Announcement  for  acquiring
      shares in the Target Company, knowing perfectly well  that  they
      can pull out when the prices of the shares have  been  inflated,
      due to the public offer. Such speculative practices  are  sought
      to be prevented by  Regulation  27(1)(b)(c)  and  (d),  that  is
      precisely the reason why Regulation 27(1)(a) was deleted. 
Merely
      because there has not been any substantial change in  the  price
      of shares in this particular case, would  not,  in  any  manner,
      invalidate the conclusion reached in Nirma  Industries  (supra).

37. Last but not least, we are not  able  to  approve  the  approach
      adopted by SAT in adopting the Issue of Capital  and  Disclosure
      Requirements   Regulations,   2009   (ICDR)    Regulation    for
      interpreting the provisions contained in Regulation  27  of  the
      Takeover Regulations. The regulations in Takeover Code  have  to
      be  interpreted  by  correlating  these   regulations   to   the
      provisions of the SEBI Act.

38. In view of the above, the appeal is allowed. The impugned  order
      passed by the SAT dated 19th June, 2013 in Appeal No.3  of  2013
      is set aside and the directions issued by the appellant  in  the
      letter dated 30th November, 2012 are restored.

2014 (April. Part)http://judis.nic.in/supremecourt/filename=41474    
SURINDER SINGH NIJJAR, A.K. SIKRI

REPORTABLE


                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION


                       CIVIL APPEAL NO. 6041  OF 2013




      Securities and Exchange Board of India         …Appellant


                                   VERSUS


      M/s. Akshya Infrastructure Pvt. Ltd.           ..Respondent


                               J U D G M E N T


      SURINDER SINGH NIJJAR, J.

   1. This appeal under Section 15Z of  the  Securities  and  Exchange
      Board of India Act, 1992 (the ‘SEBI Act’)  is  directed  against
      the  judgment  and  final  order  of  the  Securities  Appellate
      Tribunal, Mumbai (SAT) dated 19th June, 2013 rendered in  Appeal
      No.3  of  2013,  by  which  the  appeal  filed  by  M/s.  Akshya
      Infrastructure Private Limited – the respondent  herein  against
      the         directions          issued          by          SEBI
      on 30th November, 2012 has been allowed.


   2. The fundamental issue which arises in this appeal is whether  an
      open offer voluntarily made through a  Public  Announcement  for
      purchase of shares of the target company can be permitted to  be
      withdrawn at a time when the voluntary  open  offer  has  become
      uneconomical to be performed.


   3. In this case, the respondent herein, M/s  Akshya  Infrastructure
      Pvt. Ltd., is a part of the Promoter Group of MARG Limited (‘the
      Target Company’). For the years 2006-07,  2007-08  and  2010-11,
      the gross acquisition by the Promoter Group  of  shares  in  the
      Target Company was as under :
           “Financial Year          Percentage         Date  triggered
           on
               2006-07         14.34%                30.03.2007
               2007-08          5.64%                12.10.2007
               2010-11           7.11%                19.02.2011”


           As  a  consequence  of  the  foregoing  acquisitions,   the
      acquirers breached the 5% creeping acquisition  limit  and  were
      required to comply with the provisions of Regulation 11  of  the
      SEBI  (Substantial  Acquisition   of   Shares   and   Takeovers)
      Regulations, 1997 (hereinafter  referred  to  as  the  “Takeover
      Regulations”).


   4. On 20th October, 2011, the  respondent  made  a  voluntary  open
      offer  through  a  Public   Announcement   in   major   National
      Newspapers, under Regulation  11  of  the  Takeover  Regulations
      wherein the public shareholders of the Target Company were given
      an opportunity to exit at an offer price of Rs.91/-  per  equity
      share.  This price  represents  a  premium  of  10.3%  over  the
      average market closing price for the  two  weeks  preceding  the
      Public Announcement.  The  tendering  period  was  scheduled  to
      commence on 1st December, 2011 and conclude  on  20th  December,
      2011.  The consideration for the tendered shares was to be  paid
      on or before 4th January, 2012. As  on  the  date  of  the  open
      offer, the list of  Promoters/Promoter  Group  Entities  was  as
      under:-
           Sl. No.     Name
            1.         Mr. G.RK. Reddy
            2.         Mr. G. Raghava Reddy
            3.         Ms. V.P. Rajini Reddy
            4.         Mr. G. Madhusudan Reddy
            5.         GRK Reddy & Cons (HUF)
            6.         M/s. Global Infoserve Ltd.
            7.         M/s. Marg Capital Markets Limited
            8.         M/s. Exemplarr Worldwide Limited
            9.         M/s. Marg Projects and Infrastructure Limited
                       (formerly Marg Holdings and Financial  Services
                       Limited)
            10.        M/s. Akshya Infrastructure Private Limited


   5. However, due to certain events, which have been  highlighted  by
      both the parties, the respondent by  letter  dated  29th  March,
      2012 through M/s. Motilal Oswal Investment  Advisors  (P)  Ltd.,
      the Managers to  the  Issue  (hereinafter  referred  to  as  the
      “Merchant Banker”), addressed to SEBI, sought  to  contend  that
      the  open  offer  in  question  had  become  outdated,   thereby
      outliving its necessity and, therefore, the  same  ought  to  be
      permitted to be withdrawn.   It  was  also  contended  that  the
      amount of Rs.17.46 crores deposited  by  the  respondent  in  an
      escrow account towards the open offer ought to be allowed to  be
      withdrawn.  The letter emphasizes that the  public  announcement
      was in nature of a voluntary open offer under Regulation  11  of
      the Takeover Regulations for consolidation  of  shareholding  of
      the Promoter Group in the Target Company.  The  offer  price  of
      Rs.91/- per equity share of the  Target  Company  was  aimed  at
      presenting a commercially reasonable opportunity to  the  public
      shareholders to exit and at  the  same  time  it  was  meant  to
      consolidate the shareholding  of  the  promoter  in  the  Target
      Company.  It was further stated  that  due  to  the  unjustified
      delay by SEBI in taking a decision as to whether to approve  the
      draft letter  of  offer  has  rendered  the  entire  open  offer
      exercise academic and  meaningless.  It  was  claimed  that  the
      transaction envisaged by the respondent is no longer justifiable
      on any ground, including the grounds of economic  rationale  and
      commercial reasonableness.  The respondent sought the withdrawal
      of open offer made under the public  announcement  in  terms  of
      Regulation 27 of the Takeover Regulations. The exact prayer made
      by the respondent was as follows:-
           “Consequently, we hereby seek withdrawal of the open offer  made
           under the public announcement in terms of Regulation 27  of  the
           Takeover Regulations (the benefit of which continue to accrue to
           us in  terms  of  Regulation  35(2)  of  the  SEBI  (Substantial
           Acquisition of Shares  and  Takeovers)  Regulations,  2011  “New
           Takeover Regulations”).  Regulation 23(1)(d) of the New Takeover
           Regulations equally empowers withdrawal of an open offer.”


   6. The appellant by letter dated 30th November, 2012  conveyed  its
      comments in terms of the proviso  to  Regulation  16(4)  of  the
      Takeover Regulations on  the  draft  letter  of  offer.  Certain
      information was sought  in  the  aforesaid  letter.           No
      reference was made in this letter with  regard  to  the  request
      made by the respondent  for  permission  to  withdraw  the  open
      offer. Rather it was stated as under :
           “Please note that failure to carry out the suggested changes  in
           the letter of offer as well as violation of  provisions  of  the
           Regulations will attract appropriate action. Please also  ensure
           and confirm that apart from above, no other changes are  carried
           out in the letter of offer submitted to us.”


           The aforesaid comments  of  SEBI  were  challenged  by  the
      respondent before SAT in Appeal No.3 of 2013.


   7. The respondent claimed that the impugned directions,  ostensibly
      in the form of comments and observations on the draft letter  of
      offer, reject the plea of the petitioner that the  delay  caused
      by SEBI in clearance of the draft letter of offer,  now  renders
      the open offer unviable  and  academic.  Further,  the  impugned
      directions purport to bind the appellant and thereby  constitute
      an order by which the respondent was aggrieved; and necessitated
      the appeal before the SAT.


   8. In the appeal  before  SAT,  the  respondent  claimed  that  the
      directions contained in the impugned letter of SEBI  dated  30th
      November, 2012, incorrectly allege that prima facie  requirement
      to make an open offer was triggered by  the  promoters  and  the
      promoter group entities of the Target Company  (Promoter  Group)
      under Regulation 11(1) of the Takeover Regulations on three past
      occasions, viz. March 30, 2007, October 12,  2007  and  February
      19, 2011 (Alleged Triggers). It was  further  claimed  that  the
      directions  to  revise  the  offer  price,  on  account  of  the
      requirement to make open offers pursuant to the alleged triggers
      was illegal and without jurisdiction. It was also  claimed  that
      the directions contained  in  the  impugned  letter  has  caused
      severe civil consequences to the respondent. It was also claimed
      that the submissions on the issues presented by  the  respondent
      before  the  appellant  have   neither   been   considered   nor
      appreciated.


   9. The appeal was contested by the appellant by filing  a  detailed
      affidavit on 12th April, 2013. As noticed above,  the  aforesaid
      appeal has been allowed by SAT in terms of  prayer  clause  (a),
      (b) and (c) of Para 7 of the appeal  filed  by  the  respondent,
      which are as under:-
           “(a)  That this Hon’ble Tribunal be pleased  to  set  aside  the
                 Impugned Direction;
           (b)   That this Hon’ble Tribunal be pleased to order and  direct
                 the respondent to allow the appellant to withdraw the  open
                 offer without any adverse orders or directions against  the
                 appellants or the Promoter Group;
           (c)   That this Hon’ble Tribunal be pleased to order and  direct
                 the respondent to  allow  the  appellant  to  withdraw  the
                 amount of Rs.17.46 crores deposited in escrow  in  lieu  of
                 the Open Offer.”


  10.  It  was,  however,  made  clear  that  SAT  has  not  made  any
      observation on the merits  of  the  issue  regarding  the  three
      alleged triggers and the contentions  of  the  parties  in  this
      regard were kept open.   Aggrieved  by  the  aforesaid  impugned
      judgment, SEBI has filed the present Civil Appeal.


  11. We have heard the learned counsel for the parties at length.


  12. Mr.  C.U.  Singh,  learned  senior  counsel  appearing  for  the
      appellant, has submitted that the issues raised by the appellant
      herein are squarely covered against the respondent by an earlier
      judgment of this Court in  Nirma  Industries  Ltd.  &  Anr.  Vs.
      Securities and Exchange Board of India[1].


  13.  At  this  stage,  Mr.  R.F.  Nariman,  learned  senior  counsel
      appearing for the respondent,  has  raised  certain  preliminary
      objections with regard to the maintainability of the appeal.  He
      submits that the directions issued by the SEBI are  based  on  a
      misconception of the law applicable to  the  peculiar  facts  of
      this case.  He submits that firstly: this is a  case  where  the
      respondent had made voluntary open offer.  It was not a case  of
      an open offer made because of a triggered  mechanism  under  the
      Takeover Regulations; secondly: since the open offer was a  pure
      and simple voluntary offer, no prejudice has been caused to  any
      shareholder; thirdly: the present case does not fall within  the
      ambit of Regulation 27 of Takeover  Regulations.   According  to
      Mr. Nariman, Regulation 27 ought to be read in a manner that  it
      would only govern mandatory open offers and not  voluntary  open
      offers;   fourthly:   SEBI   has   without   any   justification
      intermingled acquisition of shares  by  the  respondent  on  the
      three  earlier  occasions  in  2006-07,  2008-09  and   2009-10;
      fifthly: SEBI unjustifiably and arbitrarily took  13  months  to
      offer comment(s) on the draft letter of offer.   Even  then  the
      clarification sought by the  appellant  pertained  to  the  past
      alleged triggers which had no connection with the voluntary open
      offer. It is submitted that even if the case of  the  respondent
      falls within the ambit  of  Regulation  27,  the  withdrawal  is
      permissible in such circumstances which in the opinion  of  SEBI
      (the Board) merit withdrawal; sixthly:  the  judgment  in  Nirma
      Industries (supra) is distinguishable; lastly: the  judgment  in
      Nirma Industries (supra) is incorrect and needs reconsideration.


  14. Mr.  C.U.  Singh,  learned  senior  counsel  appearing  for  the
      appellant,  has  submitted  that  the  correspondence  exchanged
      between the parties would show that the delay  in  consideration
      of the letter of offer was  caused  by  the  respondent  by  not
      giving the necessary information. He relies  on  the  voluminous
      correspondence between the parties in support of his  submission
      which, if necessary,  shall  be  considered  later.  His  second
      submission is that the request for withdrawal of open  offer  is
      to be considered strictly under the provision of  Regulation  27
      of the Takeover Regulations.


  15.   The   respondent    had    made    a    Public    Announcement
      on  20th  October,  2011  which  clearly  informed  the   public
      shareholders of the Target Company that they were being given an
      opportunity to exit at an offer  price  of  Rs.91/-  per  equity
      share, which represented a premium of  10.3%  over  the  average
      market closing price for the  two  weeks  preceding  the  Public
      Announcement. This Public Announcement and the Public Offer  was
      sought to be withdrawn on 29th March, 2012. He points  out  that
      in  the  aforesaid  letter;  the  request  for   withdrawal   is
      specifically  made  under  Regulation   27   of   the   Takeover
      Regulations. Therefore, Mr. Nariman cannot be permitted to, now,
      submit that Regulation 27 is not applicable to the open offer in
      the present case.


  16.  Mr.  C.U.  Singh  then  submits  that  the   respondents   have
      consciously proceeded with an open offer and they  have  rightly
      not been permitted to withdraw the same by  the  appellant.  The
      next submission of Mr. C.U. Singh is that  Regulation  27  deals
      with only withdrawal of ‘Public Offer’  and  not  withdrawal  of
      ‘Public Announcement’. In any event, according to learned senior
      counsel,  submission  with  regard  to  withdrawal   of   Public
      Announcement has been made,  only,  at  the  time  of  arguments
      before this Court. It was neither pleaded nor raised before  the
      SEBI/SAT, nor even in the counter affidavit before  this  Court.
      He next submitted that under the provisions  of  Regulation  27,
      public offer is a rule and withdrawal is an  exception.  Relying
      on the interpretation  of  Regulation  27  in  Nirma  Industries
      Ltd.(supra), he submits that an offer can  be  permitted  to  be
      withdrawn only if it becomes virtually  impermissible  to  carry
      out. Permitting public offers once made to be withdrawn  on  the
      ground that it has  become  uneconomical  would  compromise  the
      integrity of the Securities Market. This would  be  contrary  to
      the scheme of the  Takeover  Code.                     Mr.  C.U.
      Singh then submits that there is no distinction under Regulation
      27 between the voluntary open offer  and  mandatory  open  offer
      which is the result  of  a  triggered  acquisition.  Relying  on
      Regulations   11   to   14   of   the   Takeover    Regulations,
      he submits that all the different types of open offers  are  set
      out therein. Each one of the open offers has the same effect  on
      shareholders and the market. Therefore, the provisions contained
      in Regulation 27 have to be strictly adhered to  in  considering
      the request for withdrawal of the  open  offer.  It  is  further
      submitted that the appellant had fixed the offer price under the
      relevant regulations and in accordance with the law laid down by
      this Court in Clariant International Ltd. & Anr. Vs.  Securities
      & Exchange Board of India[2].




  17. According to Mr. C.U. Singh, in normal circumstances, withdrawal
      can only be made under Regulation  27(1)(b),  (c)  and  (d).  He
      submits  that  in  the  letter  dated  29th  March,  2012,   the
      respondent claims that the offer has become “outdated due to the
      sheer efflux of time”. The second reason given is the  delay  in
      clearance of open offer from SEBI.  The  letter  also  indicates
      that the respondent does not agree with the views of the SEBI on
      the fact situation. Another reason given is that  “even  if  the
      SEBI were to approve the draft letter of offer today,  the  open
      offer exercise would  be  entirely  academic  and  meaningless.”
      Another reason given is that “the transaction then envisaged  by
      us is no longer justifiable on any ground including  grounds  of
      economic rationale and  commercial  reasonableness.”  All  these
      factors, according to Mr. C.U. Singh, will not be covered by any
      of the clauses in Regulation 27(1)(b)(c)(d). He  then  submitted
      that even if there is a delay by SEBI, the ordinary investor  in
      shares of the Target Company  should  not  be  made  to  suffer.
      According to Mr. C.U.  Singh,  the  controversy  raised  in  the
      appeal is squarely covered against the respondent by judgment of
      this Court in Nirma Industries Ltd. (supra).


  18. Mr. Nariman has rebutted the aforesaid submissions of  Mr.  C.U.
      Singh. He submits that the  single  most  important  distinction
      between Nirma and this case is that it pertains to  a  voluntary
      public offer.  This  Court  had  no  occasion  to  deal  with  a
      voluntary public offer in  Nirma  Industries  Ltd.  (supra).  In
      reply  to  the  other  submissions  made  by  Mr.  C.U.   Singh,
       Mr. Nariman has also relied on some correspondence. He has also
      relied upon a table to substantiate the submission that the  law
      laid down in Nirma Industries would not  be  applicable  in  the
      facts and circumstances of this case.  Dealing with the issue of
      delay, it  is  submitted  by  Mr.  Nariman  that  there  was  an
      unjustifiable and inexplicable delay  by  SEBI  in  issuing  its
      comments on the draft  letter  of  offer.  In  support  of  this
      submission, he has relied on some correspondence.


  19. He  relies  on  letter  dated  October  20,  2011,  whereby  the
      respondent made a voluntary open offer  by  Public  Announcement
      under Regulation 11 of the Takeover Regulations. He  points  out
      that Clause 11.4 of the Public Announcement clearly states  that
      voluntary open offer can be withdrawn by the respondent  at  any
      time. He then points out that on 25th October, 2011, SEBI called
      upon the respondent to provide information  on  the  changes  in
      shareholding and capital build up of the Target  Company,  along
      with compliance  of  the  SEBI  Regulations.   He  submits  that
      although  the  information  sought  pertains  to   the   earlier
      acquisition it  was  duly  provided  on  November  4,  2011  and
      November 8, 2011. Mr.  Nariman  submits  that  under  Regulation
      18(1) of the Takeover Regulations, the draft letter of offer  is
      required to be filed with SEBI well within 14 days from the date
      of the Public Announcement. Once the letter of offer  is  filed,
      SEBI was required to  dispatch  the  same  to  the  shareholders
      immediately after 21 days. During 21 days, SEBI is permitted  to
      stipulate the changes required to be made in the letter of offer
      which the Merchant Banker and the Acquirer shall incorporate  in
      the  letter  of  offer,  before  it   is   dispatched   to   the
      shareholders. In case, SEBI receives a complaint or it initiates
      an enquiry or investigation in respect of public offer,  it  can
      call for a revised letter of offer. In  this  case,  he  submits
      that the draft letter of offer was given  on  October  28,  2011
      well within 14 days period stipulated  under  Regulation  18(1).
      But SEBI did not issue its comments on the draft letter of offer
      within 21 days, as required. Not only there was a non-compliance
      of                Regulation 18(1) but there was no occasion  to
      invoke proviso to Regulation  18(2).  SEBI  did  not  inform  or
      advise the respondent to revise the draft  letter  of  offer  on
      account  of  any  inadequacy  in  the  disclosure  made  by  the
      respondent in the draft  letter  of  offer  in  respect  of  the
      voluntary offer. All  the  queries  were  related  to  the  past
      alleged triggers. These alleged triggers were  wholly  unrelated
      to the voluntary open offer for which the draft letter of  offer
      was filed with the appellant. He then pointed out that by letter
      dated 17th November, 2011, the appellant again sought  the  same
      clarification on the alleged triggers, as stated in  its  letter
      dated November 11, 2011.         He submitted that the  Merchant
      Banker and the respondent  provided  all  explanation  regarding
      these acquisitions  on  November  28,  2011.  The  letter  dated
      November 24,  2011  of  the  respondent  was  forwarded  to  the
      appellant by the Merchant Banker  on  November  28,  2011.  This
      letter gave date wise explanation on all the issues raised as to
      why no open offer was made pertaining to the  alleged  triggers,
      as there was no violation of Regulation 11(1) and 11(2)  of  the
      Takeover  Regulations.  This  explanation  was   reiterated   on
          December 14, 2011 by the respondent/Promoters but there  was
      no response from the appellant to any of the aforesaid  letters.
      This  led  the  respondent  to  a  reasonable  belief  that  the
      explanation  had  been  accepted.  Subsequently,  there  was   a
      telephonic  request  by  the  appellant  to  provide  the   same
      information on the alleged  triggers  in  various  formats.  The
      respondent duly                re-arranged the same  information
      in the desired format and provided the same to the appellant  on
      January 13, 2012, January 16, 2012 and February 3, 2012. Inspite
      of all this, still there were no comments  from  the  SEBI.  Mr.
      Nariman emphasized  that  the  unjustifiable,  inexplicable  and
      inordinate, delay on  the  part  of  the  appellant  in  issuing
      comments on the  draft  letter  of  offer  created  a  situation
      wherein it was impossible for the respondent  to  implement  the
      voluntary open offer. By that time, the underlying  decision  to
      consolidate shareholding had become infructuous by sheer  efflux
      of time. It was under these circumstances  that  the  respondent
      intimated its decision to withdraw its voluntary open offer  and
      sought withdrawal of the same in terms of the Regulation  27  of
      the Takeover Regulations.


  20.  It  was  pointed  out  by  Mr.  Nariman  that  the   respondent
      specifically and expressly  sought  opportunity  of  a  personal
      hearing on the aforesaid request for withdrawal,  the  appellant
      did not  revert  on  the  request.  The  respondent  once  again
      furnished the  same  information  on  the  alleged  triggers  in
      different  formats  as  required  by   the   appellant   through
      communications  dated  April   12,   2012;   April   20,   2012;
           May 10, 2012; May 21, 2012; June 6, 2012 and July 5,  2012.
      After a period of more than 13 months, from the date  of  filing
      of the draft letter of offer and after more than 8  months  from
      the date of request for withdrawal,  the  appellant  issued  the
      impugned letter dated November 30, 2012. Mr. Nariman points  out
      that the directions issued in the  impugned  letter  are  wholly
      unjustified. He points out to the following two directions :-
           (a) Go ahead with the voluntary open offer on  account  of  some
           alleged triggers (for creeping acquisitions under Regulation  11
           of the Takeover Code, 1997) in the past  i.e.  2006-07;  2007-08
           and 2010-11.
           (b) make an open offer with upward revision in price per  share.
           The share prices offered by the respondent in 2009 were RS.91.00
           per equity share and as on date  the  prices  is  RS.315.90  per
           equity share.


  21. Mr. Nariman submitted that SAT without going into the merits and
      demerits of the alleged earlier acquisitions, has left  it  open
      for SEBI to take appropriate action in accordance with law  with
      regard to the aforesaid three acquisitions.  Therefore,  clearly
      the aforesaid three acquisitions have no  connection  whatsoever
      with  the  voluntary  offer   under   consideration   in   these
      proceedings.


  22. The next submission of Mr. Nariman is the foundation of all  his
      other  submissions.  According  to  Mr.  Nariman,  there  is   a
      fundamental difference between a mandatory public  offer  and  a
      voluntary open offer. It cannot be placed on the same  pedestal.
      According to learned senior counsel, in a mandatory public offer
      there  exists  an  underlying  transaction  which  triggers  the
      Takeover Code under which the shareholders  obtain  a  right  to
      exit from the company. However, in a voluntary  open  offer,  no
      such right accrues to the  shareholders  to  exit  the  company,
      since the offer is not the result of a triggered acquisition. In
      the present case, the action of SEBI, according to Mr.  Nariman,
      is contrary to Regulation  18.  The  letter  of  offer  was  not
      dispatched  to  the  shareholders  as  per   Regulation   18(1).
      Regulation 15(4) deems that the offer is made  on  the  date  on
      which the Public Announcement has appeared in any newspaper. But
      according to Mr.  Nariman,  this  deeming  fiction  is  for  the
      purpose of price fixation for the offer. It has  nothing  to  do
      with Regulation 18 which is to dispatch the actual offer to  the
      shareholders. Therefore,  according  to  Mr.  Nariman,  reliance
      placed by Mr. C.U. Singh on the expression “offer once made”  in
      Regulation  27  is  misconceived.  This  expression  has  to  be
      understood in terms of Regulation 18. Since  Regulation  18  had
      not been complied with and there was no dispatch of  the  letter
      of offer to the shareholders,  there  was  no  question  of  any
      prejudice being caused to the interest of the shareholders.  Mr.
      Nariman then submits that because of the inaction on the part of
      SEBI, the respondent would be squarely covered under  Regulation
      27(1)(b). The approval of the letter of offer by  the  appellant
      is statutory in nature. Since it had not been granted within the
      stipulated period of time, the respondent was entitled to assume
      that it had been refused. According to Mr. Nariman, it has  been
      erroneously submitted by Mr. C.U. Singh that the  claim  of  the
      respondent is not covered under Regulation 27(1)(b). Mr. Nariman
      then submits that  the  judgment  in  Nirma  Industries  is  not
      applicable in the facts and circumstances of this case. Finally,
      he has submitted that the judgment in Nirma  Industries  (supra)
      requires reconsideration. In  support  of  this  submission,  he
      submits that Regulation 27 has to be interpreted by  keeping  in
      mind the earlier Regulation 27(1)(a). In Nirma Industries,  this
      Court has held that Regulation       27 (b), (c) and (d) are all
      in the nature of  impossibility.                    Mr.  Nariman
      made a mention about Regulation 27(1)(a) which  was  omitted  by
      the SEBI  (Substantial  Acquisition  of  Shares  and  Takeovers)
      (Second Amendment) Regulations, 2002 with effect from  September
      9, 2002. Prior to deletion, it read as under :
           “-(a) the withdrawal is consequent upon any competitive bid,”


           Based on this, he submits that economic viability of public
      offer was the genus of Regulation 27. The  facts  of  this  case
      would clearly place the request of the respondent for withdrawal
      of the public offer in  the  realm  of  impossibility.       Mr.
      Nariman has submitted that for the interpretation of  Regulation
      27, the ejusdem generis principle would not apply as there is no
      common genus between Clauses 27(1)(b)(c) and (d).


  23. Mr. C.U. Singh in rejoinder has submitted that in  view  of  the
      law laid down in Nirma Industries, the public offer made by  the
      respondent  cannot  be  permitted  to  be   withdrawn.   Earlier
      incidence of the alleged triggers can be relied upon.  According
      to him, the price has to be fixed on the  basis  of  the  public
      announcement/offer. He submits that Regulation 18(1) talks of 14
      days of  the  Public  Announcement.  Furthermore,  public  offer
      cannot be said to be made only on  dispatch  of  the  letter  of
      offer  to  the  individual  shareholders.   The  impact  on  the
      securities market  would  follow  the  public  announcement.  He
      reiterates that even the withdrawal letter seeks  permission  to
      withdraw the Public  Offer  under  Regulation  27.  Finally,  he
      submits that the interpretation of  Regulation  27  rendered  in
      Nirma Industries Ltd. (supra) is correct.  It fully  applies  to
      the facts of the present case. It is neither distinguishable nor
      does it require reconsideration.


  24. We have considered the submission made by  the  learned  counsel
      for the parties.


  25. Factually, it cannot be denied that in the years 2006-07,  2007-
      08 and 2010-11, the respondent had acquired shares in excess  of
      5% which breached the 5%  creeping  acquisition  limit.  In  our
      opinion, the respondent was required to comply  with  Regulation
      11  and  make  a  Public  Announcement  to  acquire  shares   in
      accordance  with  law.  The  respondent  admittedly  not  having
      complied with Regulation 11, in our opinion, the  appellant  was
      perfectly  justified   in   taking   the   non-compliance   into
      consideration whilst considering the feasibility of  the  public
      offer made on 20th October, 2011.


  26. With regard to delay, we do  not  find  much  substance  in  the
      submission of Mr. C.U. Singh. Mr. Singh has  sought  to  explain
      the delay on the ground that information sought by the appellant
      was not given by the respondent. In our  opinion,  this  was  no
      ground for the appellant to delay the issuance  of  comments  on
      the letter of offer, especially not for a period of  13  months.
      In the event the information was not forthcoming, the  appellant
      had the power to refuse the approval of the public offer. It  is
      true that under Regulation 18(2), SEBI was required to  dispatch
      the necessary letters to the shareholders  within  a  reasonable
      period. It is a matter of record  that  the  comments  were  not
      offered for 13 months. Such kind of delay is wholly  inexcusable
      and needs to be avoided. It can lead  to  avoidable  controversy
      with regard to whether such belated action is bona fide exercise
      of statutory power by SEBI. By adopting such a lackadaisical, if
      not callous attitude, the very object for which the  regulations
      have been framed is diluted,  if  not  frustrated.  It  must  be
      remembered that SEBI is the watchdog of the  Securities  Market.
      It is the guardian of the interest of the  shareholders.  It  is
      the protective shield  against  unscrupulous  practices  in  the
      Securities Market. Therefore, SEBI like any other body, which is
      established as a watchdog, ought not to act in  a  lackadaisical
      manner  in  the  performance  of  its  duties.  The  time  frame
      stipulated  by  the  Act  and  the  Takeover   Regulations   for
      performing certain functions is required  to  be  maintained  to
      establish the transparency in the functioning of SEBI.


  27. Having said this, we are afraid such delay is of  no  assistance
      to the respondent. It will not result in nullifying  the  action
      taken by SEBI, even though belated. Ultimately, SEBI is  charged
      with the duty of ensuring that every public offer made  is  bona
      fide for the benefit of the shareholders as well  as  acquirers.
      In  the  present  case,  SEBI  has  found  that  permitting  the
      respondent to withdraw the public offer would be detrimental  to
      the overall interest of the shareholders. The  only  reason  put
      forward by the respondent for withdrawal of the offer is that it
      is no longer economically viable to continue with the offer. Mr.
      Nariman has referred to a tabular statement  and  data  to  show
      that there is no substantial variation in the share prices  that
      ensued making of the public offer. Having  seen  the  table,  we
      find substance in the submission of                 Mr.  Nariman
      that there is hardly any variation in the shares of  the  Target
      Company  from  20th  October,  2011  till                   30th
      November, 2011. The variation seems to  have  been  between  Rs.
      78.10  (on  24.11.2011)  and   Rs.   87.60                   (on
      20.10.2011). Such a variation cannot be said to be the result of
      the public offer. But this will not detract from the well  known
      phenomena  that  Public  Announcement  of  the  public  offering
      affects the securities market  and  the  shares  of  the  Target
      Company. The impact is immediate.


  28. We are unable to agree with the submission of                Mr.
      Nariman  that  Regulation  27  would  not  be  applicable  to  a
      voluntary public offer. A perusal of Regulation 27(1)  makes  it
      patently clear that Regulation 27(1)  reads  “no  public  offer,
      once made, shall not be withdrawn  except  under  the  following
      circumstances.” Accepting Mr. Nariman’s submission would  be  to
      reconstruct the aforesaid provision. This Court,  or  any  other
      court,  whilst  construing  the   statutory   provision   cannot
      reconstruct  the  same.  The  plain  reading  of  the  aforesaid
      regulation makes it clear that no public  offer  whether  it  is
      voluntary or triggered by Regulation 11 can be withdrawn, unless
      it satisfies the circumstances set out  in            Regulation
      27(1)(b), (c) and (d). There can be  no  distinction  between  a
      triggered public offer and a voluntary public offer.  Both  have
      to be considered on an equal footing. We find substance  in  the
      submission made by Mr. C.U. Singh that Regulation 18(2)  has  no
      relevance to  the  case  projected  by  the  respondents  having
      singularly failed to give the necessary information to SEBI with
      regard to the earlier three acquisitions.


  29.   We   also   do   not   agree    with    Mr.    Nariman    that
      Regulation 27 has to be read in the context of the Regulation as
      it existed when  it  was  first  enacted.  As  noticed  earlier,
      Regulation 27(1)(a) before its deletion  on  September  9,  2002
      permitted the public offer to be withdrawn, consequent upon  any
      competitive bid. We see no reason to differ from the view  taken
      in Nirma Industries Ltd. (supra) wherein  we  have  observed  as
      follows:


           “62. A bare perusal of  the  aforesaid  Regulations  shows  that
           Regulation 27(1) states the general rule in negative  terms.  It
           provides that no public offer, once made,  shall  be  withdrawn.
           Since clause (a) has been omitted, we are required to  interpret
           only the scope and ambit of clauses (b), (c) and (d). The  three
           sub-clauses are exceptions to the general rule  and,  therefore,
           have to be construed very strictly.  
The  exceptions  cannot  be
           construed in such a manner that would destroy the  general  rule
           that no public offer shall be permitted to  be  withdrawn  after
           the public announcement has been made. 
Clause (b) would permit a
           public offer to be withdrawn in case of legal impossibility when
           the statutory approval required has  been  refused.  
Clause  (c)
           again provides for impossibility when the sole acquirer, being a
           natural  person,  has  died.  
Clause  (b)  deals  with  a  legal
           impossibility 
whereas clause (c) deals with a natural  disaster.
           
Clearly clauses (b)  and  (c)  are  within  the  same  genus  of
           impossibility. 
Clause (d) also being an exception to the general
           rule would have to be naturally construed in  terms  of  clauses
           (b) and (c). 
Mr Divan has placed a great deal of emphasis on the
           expression “such circumstances” and “in the opinion” to indicate
           that the Board would have a wide discretion to permit withdrawal
           of an offer even though it is not impossible to perform. 
We  are
           unable to accept such an interpretation.”




  30. The submission with regard to the non-applicability  of  ejusdem
      generis for interpretation of the Takeover Regulations has  been
      considered  and  rejected  in  Nirma  Industries  Ltd.   (supra)
      (Paragraphs 63 to 71).


  31.   We   are   also   not   impressed   by   the   submission   of
      Mr. Nariman that it has now become  economically  impossible  to
      give effect to the public offer. This very submission  has  been
      rejected in Nirma Industries  Ltd.  (supra).  We  reiterate  our
      opinion  in   Nirma   Industries   Ltd.   (supra)   that   under
      Clause 27(1)(b)(c) and (d), a Public Offer, once made, can  only
      be permitted to be withdrawn  in  circumstances  which  make  it
      virtually impossible to perform the Public Offer.  In fact,  the
      very purpose for deleting Regulation 27(1)(a) was to remove  any
      misapprehension that an offer once made can be withdrawn  if  it
      becomes economically  not  viable.  We  are  of  the  considered
      opinion that the distinction sought to be made  by  Mr.  Nariman
      between a voluntary public offer and a triggered public offer is
      wholly misconceived. Accepting such a  submission  would  defeat
      the very purpose for which the Takeover Code has been enacted.


  32. We also do not find any merit in  the  submission  of        Mr.
      Nariman that the delay of 13  months  by  SEBI  in  issuing  the
      impugned directions would permit the respondent to withdraw  the
      Public Offer under Regulation  27(1)(b).  The  consideration  by
      SEBI is as to whether a Public Offer is in conformity  with  the
      provisions of the SEBI Act and the Takeover Regulations.   Delay
      in performance of its duties by  SEBI  can  not  be  equated  to
      refusal  of  the  statutory   approval   requires   from   other
      independent bodies, such as under the  RBI,  Taxation  Laws  and
      other   regulatory   statutes   including    Foreign    Exchange
      Regulations.  Delay by SEBI in taking a final decision in making
      its comments on  the  letter  of  offer  would  not  fall  under
      Regulation 27(1)(b).


  33. This now brings us to the submission of Mr. Nariman  that  there
      was a breach of Rules of Natural Justice. It is matter of record
      that the respondent had asked for an opportunity of hearing  but
      none was granted. But the question that arises is as to  whether
      this is sufficient to nullify  the  decision  of  SEBI.  In  our
      opinion, the respondent has failed to place on the record either
      before SAT or before this Court  the  prejudice  that  has  been
      caused by not observing Rules of Natural Justice. It is  by  now
      settled proposition of law that mere breach of Rules of  Natural
      Justice is not sufficient.  Such  breach  of  Rules  of  Natural
      Justice must also entail avoidable prejudice to the  respondent.
      This reasoning of ours is supported by a  number  of  cases.  We
      may, however, refer to the law laid down  in  Natwar  Singh  Vs.
      Director of Enforcement & Anr.,[3]  wherein  it  was  held  that
      “there must also have been caused some  real  prejudice  to  the
      complainant; there is  no  such  thing  as  a  merely  technical
      infringement of natural justice.”


  34. All the information sought by SEBI related to the three  earlier
      acquisitions when the creeping limit for  acquisition  has  been
      breached for triggering the mandatory Takeover  Regulations.  In
      appeal, SAT has left the question with  regard  to  the  earlier
      three acquisitions open and to be  decided  in  accordance  with
      law. Therefore, clearly no prejudice  has  been  caused  to  the
      respondent.




  35. Finally, we are unable to accept the  submission  of         Mr.
      Nariman that the ratio of law as declared  in  Nirma  Industries
      Ltd.  (supra)  would  not  be  applicable  to  the   facts   and
      circumstances of this case. As pointed out earlier,  we  do  not
      accept the distinction sought to be made  by  Mr.  Nariman  with
      regard to voluntary open offer and mandatory open offer which is
      the result of a triggered acquisition. The consequences of  both
      kinds of offers to acquire shares in the Target  Company,  at  a
      particular price, are the same. As soon as the  offer  price  is
      made public, the securities market  would  take  the  same  into
      account in all transactions. Therefore, the  withdrawal  of  the
      open offer will have to be considered by the Board in  terms  of
      Regulation  27(1)(b)(c)  and  (d).  Further,  the  deletion   of
      Regulation 27(1)(a) does not, in any manner, advance the case of
      the respondent. It rather reinforces the conclusion that an open
      offer  once  made  can  only  be  withdrawn   in   circumstances
      stipulated under Regulation 27(1)(b)(c) and (d). We also do  not
      agree with Mr. Nariman that voluntary open  offer  made  by  the
      respondent  ought  to  be  permitted  to  be   withdrawn   under
      Regulation 27(1)(b) for the  reasons  already  stated.  We  have
      already come to  the  conclusion  that  the  delay  in  offering
      comments by the Board on the letter  containing  voluntary  open
      offer,  though  undesirable,  is  not  fatal  to  the   decision
      ultimately taken by the  Board.  We,  therefore,  reiterate  our
      conclusion in Nirma Industries (supra).




  36. We also do not find substance  in  the  submission  of       Mr.
      Nariman that the judgment  in  Nirma  Industries  (supra)  needs
      reconsideration. In our opinion, the ejusdem  generis  principle
      is  fully  applicable  for  the  interpretation  of   Regulation
      27(1)(b)(c) and (d) as there is a common genus of impossibility.
      This impossibility envisioned  under  the  aforesaid  regulation
      would not include a contingency where voluntary open offer  once
      made can be permitted to be withdrawn on the ground that it  has
      now become economically unviable. Accepting such  a  submission,
      would  give  a  field  day  to  unscrupulous  elements  in   the
      securities market to  make  Public  Announcement  for  acquiring
      shares in the Target Company, knowing perfectly well  that  they
      can pull out when the prices of the shares have  been  inflated,
      due to the public offer. Such speculative practices  are  sought
      to be prevented by  Regulation  27(1)(b)(c)  and  (d),  that  is
      precisely the reason why Regulation 27(1)(a) was deleted. Merely
      because there has not been any substantial change in  the  price
      of shares in this particular case, would  not,  in  any  manner,
      invalidate the conclusion reached in Nirma  Industries  (supra).






  37. Last but not least, we are not  able  to  approve  the  approach
      adopted by SAT in adopting the Issue of Capital  and  Disclosure
      Requirements   Regulations,   2009   (ICDR)    Regulation    for
      interpreting the provisions contained in Regulation  27  of  the
      Takeover Regulations. The regulations in Takeover Code  have  to
      be  interpreted  by  correlating  these   regulations   to   the
      provisions of the SEBI Act.




  38. In view of the above, the appeal is allowed. The impugned  order
      passed by the SAT dated 19th June, 2013 in Appeal No.3  of  2013
      is set aside and the directions issued by the appellant  in  the
      letter dated 30th November, 2012 are restored.






                                                             ……………………………….J.
                                                     [Surinder Singh Nijjar]






                                                            ………………………………..J.
                                                [A.K.Sikri]
      New Delhi;
      April 25, 2014.















-----------------------
[1] (2013) 8 SCC 20
[2] (2004) 8 SCC 524
[3] (2010) 13 SCC 255

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