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Monday, November 7, 2016

Section 15 Z of the Securities and Exchange Board of India Act, 1992 = application for withdrawal of the public offer to acquire shares of the Golden Tobacco Ltd. in terms of public announcement (PA) dated November 12, 2009 under the provisions of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (the Takeover Regulations). - Thus, there is no justification for automatic withdrawal from public offer without clear prejudice to the acquirer to the extent of rendering the carrying out of public offer impossible. In the facts of the present case, we do not find any ground to interfere with the concurrent finding of the SEBI and the SAT that request for withdrawal from public offer was not justified. = PRAMOD JAIN AND ORS Vs. SEBI ANIL R. DAVE, ADARSH KUMAR GOEL 07/11/2016 = 2016 Nov.


                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO.9103 OF 2014




                               J U D G M E N T


1.    This appeal has been preferred under Section 15 Z  of  the  Securities
and Exchange Board of India Act, 1992  (the Act)  against  order  dated  6th
August, 2014 passed by the Securities Appellate Tribunal,  Mumbai (the  SAT)
 in Appeal No.111 of 2012.  The SAT  upheld  the  order  of  Securities  and
Exchange Board  of  India  (SEBI)  dated  13th  April,  2012  rejecting  the
application of the appellants for withdrawal of the public offer to  acquire
shares of the Golden Tobacco Ltd.  in  terms  of  public  announcement  (PA)
dated  November  12,  2009  under  the  provisions  of   SEBI   (Substantial
Acquisition  of  Shares  and  Takeovers)  Regulations,  1997  (the  Takeover

Facts :

2.    Golden Tobacco Limited (the target company) is a  company  having  its
registered office at Tobacco House, S.V. Road, Vile Parle (West),  Mumbai  –
400 056.  The equity shares of the target company are listed on  the  Bombay
Stock Exchange Limited (BSE)  and  the  National  Stock  Exchange  of  India
Limited (NSE).

3.    On November 12, 2009, Mr. Pramod Jain and  Pranidhi  Holdings  Private
Limited (the acquirers) along with J.P. Financial Services  Private  Limited
(the person acting in concert (PAC) made PA through  VC  Corporate  Advisors
Private Limited (the merchant banker) in accordance with regulations 10  and
12 read with regulation 14.  As on the date of the  PA,  the  acquirers  and
PAC collectively held 11, 39,  002  equity  shares  (6.47%)  of  the  target
company.  The PA was voluntarily made  by  the  acquirers  and  the  PAC  to
acquire 44, 02, 201 equity shares (25%)  of  the  target  company  from  its
equity shareholders at a price of Rs.101/-  (the  offer  price)  per  equity
share.  At that time, market price of the target company shares was Rs.109/-
 per share.  Networth of the target company as  on   31st  March,  2009  was
Rs.42.44 crores.  Net current assets were Rs.134.4 crores  and  gross  sales
were Rs.173.68 crores.  The offer was for hostile  takeover  of  the  target
company.  The PA mentioned that  the  prime  object  of  the  offer  was  to
acquire substantial shares/voting rights accompanied  with  the  change  and
control of the management of the target company.   The  acquisition  was  in
the nature of strategic investment for diversification  and  growth  and  to
reap the benefit of corporate opportunities.   The  draft  letter  of  offer
also mentioned that the PAC had advanced loan against shares of  the  target
company and on account of default, it acquired the said shares  representing
5.05% of the equity share capital.  The  acquirers  and  the  PAC  had  also
acquired 71034 equity shares at highest and average price of  Rs.100.15  and
Rs.89.13 respectively.  Thus, the acquirers and the PAC had 6.47  %  of  the
issue of equity share capital as on the date of PA.  The background  of  the
acquirers mentioned in the DLO was that Mr. Pramod Jain was  prime  Director
of PHPL and had experience in financial and consultancy services.

4.    The acquirers and PAC, through the merchant banker,  filed  the  draft
letter of offer (DLO) with SEBI on November, 26, 2009.   During  examination
of the DLO, certain complaints were received by SEBI against  the  acquirers
and PAC as well as against the  target  company  and  its  promoters.    The
appellants (the acquirer) in their complaints to SEBI and other  proceedings
including petition under Section 397/398 of the  Companies  Act  before  the
Company Law Board and a suit before the Civil Court  inter  alia  questioned
the transaction for joint development of Vile Parle  Property  in  terms  of
Memorandum of Understanding (MoU) dated  26th  September,  2009  with  Sheth
Developers and Suraksha Realty Ltd.  Various correspondences were  exchanged
between SEBI and the merchant banker, acquirers,  PAC,  the  target  company
and certain other entities in respect of such complaints.

5.    The  appellants  vide  application  dated  8th  October,  2011  sought
permission to withdraw the offer under Regulation 27(1)(d).   The  stand  of
the appellants in the said letter was  that  the  SEBI  had  not  taken  any
decision on the DLO in two years during which period the management  of  the
target company had systematically siphoned off  its  coffers,  depleted  its
valuable fixed assets and  eroded  its  net  worth  substantially  with  the
intention of making it a shell company.  This has defeated the  very  object
of the offer,  without  any  fault  on  the  part  of  the  acquirers.   The
management had availed huge high cost borrowing  from  banks  and  financial
institutions against its property, including 18.7 per  cent  shares  out  of
the promoters’ shareholdings.  Disputes were pending before  the  arbitrator
arising out of default in payments.  Most  valuable  assets  of  the  target
company had been encumbered in violation of  SEBI  regulations  and  against
the interest of minority shareholders and the acquirers.  Since the date  of
PA,  financial   position   of   the   target   company   had   deteriorated

Order of SEBI

6.    The SEBI  vide  order  dated  13th  April,  2012  declined  to  permit
withdrawal of the PA but observed that alleged violation  of  Regulation  23
by the target company shall be  investigated.   It  was  held  that  as  per
Regulation 23(1), the target company was entitled to dispose of  its  assets
with the approval of the shareholders even  after  the  PA.   Correspondence
which the SEBI had with the acquirers  was  referred  to,  with  a  view  to
explain the delay in deciding the DLO.  It was observed that  the  SEBI  had
informed the merchant banker of the appellants on 3rd  February,  2010  that
it was not competent to  administer  the  authenticity  of  the  process  of
Resolution in the General Body Meeting (GBM) dated 18th January, 2010.   The
merchant banker vide letter dated 5th May, 2010 informed the SEBI  that  the
acquirers had reached a settlement with the  target  company  and  withdrawn
their petition before the Company Law Board  (CLB)  against  the  Resolution
dated 18th January, 2010.  SEBI had also advised the  merchant  banker  that
it had not been provided any  material  in  support  of  the  allegation  of
violation of Regulation 23 by the target  company  in  selling  its  assets.
The merchant banker informed the SEBI vide letter dated 19th May, 2011  that
the acquirers had filed a suit  for  restraining  the  target  company  from
creating any third party interest in the assets of the target company.   The
SEBI had also received complaints against the acquirers and  the  PAC  which
were being looked into when the PAC  vide  letter  dated  2nd  August,  2011
sought permission to withdraw the PA.  Vide letter dated 9th  August,  2011,
the acquirers requested that the process of open offer be kept in  abeyance.
 SEBI vide e-mail dated  9th  September,  2011  responded  to  the  merchant
banker, seeking tabulated list of the allegations of the acquirers  and  the
PAC but instead of doing so,  the  merchant  banker  forwarded  request  for
withdrawal of the PA.   It was observed that in the circumstances there  was
no delay on the part of  the  SEBI.    It  was  further  observed  that  the
acquirers had challenged  the  Resolution  of  the  Extra  Ordinary  General
Meeting (EGM) and had also filed a suit.   The  acquirers  entered  into  an
amicable settlement before  the  CLB.   SEBI  had  no  jurisdiction  in  the
matter.  Referring to Regulation 22, it  was  observed  that  the  acquirers
could make PA only after most careful consideration and must ensure that  it
is able to implement the offer. Referring to Regulation 27, it was  observed
that  public  offer  once  made  could  not  be  withdrawn  except  in   the
circumstances provided in the said Regulation  which  had  to  be  construed
strictly.  Unchecked automatic withdrawal of  offer  was  capable  of  being
misused.  It was also observed that  the  acquirers  should  have  used  due
diligence with regard to the allegation in FIR dated 25th July,  2009  about
personal borrowings by promoters of the target  company  by  sale  of  prime
properties as the  PA was much after the FIR.  The  acquirers  and  the  PAC
had already purchased substantial shares of the  target  company  and  thus,
could not make PA without exercising due diligence regarding  the  financial
condition and quality of management of the target  company.   The  acquirers
were not strangers to the target company.  They had 6.47  per  cent  shares.
Discovery of adverse effects pertaining to financial  health  subsequent  to
the PA could not be a ground to withdraw the PA.  Doing so  will  jeopardize
the interests of the shareholders.  The takeover  regulations  laid  down  a
self-contained code and withdrawal of  public  offer  was  not  governed  by
principles of withdrawal of an offer under the Contract Act, 1872.

Order of Sat

7.    The above view has been affirmed by the SAT in its impugned order  (by
majority).  As regards the timeline stipulated  in  Regulation  18,  it  was
observed that under the second proviso thereto, the SEBI could take time  in
making inquiry on a complaint  and  thereafter  could  call  for  a  revised
letter of offer with  or  without  re-scheduling  the  date  of  opening  or
closing the offer.  However, it was observed that in the present case,  SEBI
was wholly unjustified in taking  more  than  two  years  for  offering  its
comments on  the  letter  of  offer  submitted  by  the  appellants.   This,
however, did not constitute a ground to permit withdrawal  of  the  PA.   As
regards the contention that the  public  offer  was  frustrated  and  became
impossible of implementation on account of encumbering of the most  valuable
property of the target company in  violation  of  Regulation  23  and  other
steps of the promoters making the target company a  shell  company,  it  was
observed that the target company had taken  decision  to  develop  its  Vile
Parle property even before the PA.  Appellant No.1 had given his  offer  for
joint development of the said property on 29th September, 2008 but the  said
offer was rejected and Sheth Developers were shortlisted  for  the  purpose.
It was thereafter that the  appellants  decided  to  make  hostile  takeover
public offer to frustrate the decision of the target company to develop  the
property with Sheth Developers.  It will be  appropriate  to  refer  to  the
findings of the SAT in this regard:

“14. We see no merit in the above contentions. Admittedly, GTL  had  decided
to develop the Vile-Parle property even before  public  offer  was  made  by
appellants on November 12, 2009. In fact Appellant No. 1 had made  an  offer
to GTL on September 29, 2008 for joint development  of  Vile-Parle  property
by offering ` 150 crores as non refundable amount and had  suggested  profit
sharing in the joint venture at a ratio 50:50.  However,  GTL  rejected  the
offer made by appellants and on recommendation of Ernst & Young  shortlisted
Sheth Developers as best 20  bidder  for  joint  development  of  Vile-Parle
property. Thereupon appellants decided  to  make  hostile  public  offer  on
November 12, 2009 with a view to frustrate decision of GTL  to  develop  the
Vile-Parle property jointly with Sheth Developers. Although  object  of  the
proposal to acquire 25% shares of GTL at Rs. 101/- per share as against  the
market price of Rs.109/- per share, as stated in the  public  offer  was  to
obtain substantial stake/voting rights of GTL, it is  not  in  dispute  that
appellants were basically interested in developing the Vile-Parle  property.
Thus, it is evident that appellants being frustrated in their  endeavour  to
develop the Vile-Parle property, had resorted to  the  mechanism  of  public
offer with a view to frustrate the decision of  GTL  in  jointly  developing
the Vile-Parle property with Sheth Developers. Therefore, appellants  having
made public offer out of  frustration  on  account  of  not  being  able  to
develop  the  Vile-Parle  property,  are  not  justified  in  alleging  that
entrusting the development of Vile-Parle property to  Sheth  Developers  has
frustrated the public offer made by appellants.

15. Admittedly, after making public  offer,  appellants  had  filed  Company
Petition No. 3 of 2010, wherein specific grievance was made  to  the  effect
that GTL had entered into MOU with Sheth Developers without  disclosing  all
material facts to the shareholders and without the approval of  shareholders
which was in gross violation of regulation 23 of SAST Regulations, 1997.  It
was also alleged in the Company Petition that  the  promoters  of  GTL  have
been mismanaging the affairs of  the  company  and  have  siphoned  of  huge
amounts from the company, as a result whereof, there has been  deep  decline
in the performance and profitability of the  company.  Appellants  had  also
sought an order restraining GTL from holding EGM which was scheduled  to  be
held on January 18, 2010.

16. Company Law  Board  in  its  order  dated  January  19,  2010,  recorded
statement made by counsel for GTL that in the EGM held on January  18,  2010
requisite resolutions have been passed in relation to development  of  Vile-
Parle property and in implementation of  the  said  resolution  third  party
rights have been created. By that order  Company  Law  Board  directed  that
during the pendency of Company Petition No. 3 of  2010  GTL  shall  not  act
upon resolution dated January 18, 2010 any  further.  From  aforesaid  order
passed by Company Law Board it is clear that in view  of  resolution  passed
in the EGM held on January 18, 2010, violation of  regulation  23  committed
by GTL in relation to development of Vile-Parle  property  stood  rectified.
Dispute, if any in relation to passing of resolution  on  January  18,  2010
was to be considered at the hearing of Company Petition No. 3 of 2010.

17. However, on February 8, 2010, appellants withdrew Company Petition  No.3
of 2010 by merely recording  that  the  parties  have  amiably  settled  the
matter without any further claims against each  other.  Having  settled  the
dispute  relating  to  development   of   Vile-Parle   property   with   the
promoters/management of GTL on the basis of undisclosed reasons  and  having
withdrawn Company Petition No. 3 of 2010 unconditionally, it is not open  to
appellants to allege that their public offer is  frustrated  on  account  of
GTL entering into MOU with Sheth Developers for  development  of  Vile-Parle

18. Similarly, having settled the dispute relating to siphoning of funds  by
GTL during 2009-2010 which plea was specifically raised in Company  Petition
No. 3 of 2010, appellants are not  justified  in  agitating  the  very  same
issue before SEBI on ground that GTL has siphoned of its  funds  during  the
year 2009-2010 and 2010-2011. In other words, since the  plea  of  siphoning
of funds by GTL during the year 2009-2010  and  prior  thereto  having  been
specifically raised in Company Petition No. 3 of 2010 and that issue  having
been settled by  appellants  with  the  promoters/  management  of  GTL  for
undisclosed reasons, the appellants are not  justified  in  reagitating  the
very same issue before SEBI in relation to siphoning of funds either  during
2009-2010 or during 2010-2011.

21. It is relevant to note that  appellants,  subsequent  to  withdrawal  of
Company Petition No. 3 of 2010 in February 2010, have filed S. C.  Suit  No.
817 of 2011 in April 2011 before the City Civil Court  at  Mumbai,  alleging
for the first time that the Company Petition No. 3 of 2010 was withdrawn  on
account of  oral  assurance  given  by  promoters  of  GTL  that  Vile-Parle
property would be developed only after holding public auction and  that  the
promoters of GTL have committed breach of that oral assurance.

22. Admittedly, City Civil Court at Mumbai has granted  ad-  interim  relief
in favour of appellants on  April  26,  2011  and  that  ad-  interim  order
continues to be in operation till date. Therefore, irrespective of the  fact
that SEBI was not justified in taking more than two years for approving  the
draft  letter  of  offer,  in  the  facts  of  present  case,  grievance  of
appellants that the public offer is frustrated and has become impossible  of
performance cannot  be  accepted,  because,  both  grounds  based  on  which
appellants had sought withdrawal of public offer, were in  fact  settled  by
appellants on the basis of oral assurance given  by  promoters  of  GTL  and
further, for the alleged breach of oral  assurance,  appellants  have  filed
Suit in the Bombay City Civil Court and  obtained  stay  of  development  of
Vile-Parle property and that stay is admitted operating till date.

23. Strong reliance was placed by counsel  for  appellants  on  decision  of
SEBI dated February 14, 2014 wherein penalty of ` 1 crore  has  been  levied
against the promoters of GTL interalia for violating regulation 23  of  SAST
Regulations, 1997. No doubt that entering into an  MOU  by  GTL  with  Sheth
Developers on November 26, 2009 without obtaining approval of  general  body
of shareholders was in violation  of  regulation  23  of  SAST  Regulations,
1997.  However,  admittedly  on  January  18,  2010  the  general  body   of
shareholders has authorized GTL to enter into  Joint  Development  Agreement
is in respect of Vile-Parle property. In view of  approval  granted  by  the
general body of shareholders on January 18, 2010,  grievance  of  appellants
that Vile-Parle property has been encumbered in violation of  regulation  23
does not survive at least from January 18, 2010.

26. Apart from above, as late as on August 9, 2011 appellants had  addressed
a letter to SEBI requesting them to  keep  the  process  of  open  offer  in
abeyance, because, in the proceedings pending before the  City  Civil  Court
at Mumbai, GTL had filed an affidavit stating that in the  board  resolution
dated May 25, 2011 company has decided not to proceed further with  the  MOU
dated November 26, 2009  (wrongly  stated  therein  as  December  26,  2009)
entered with Sheth Developers and instead take necessary  steps  to  develop
the Vile-Parle property by the company of its own. By the said letter  dated
August 9, 2011 appellants called upon SEBI to investigate  about  the  exact
legal status of the Vile-Parle property,  investigate  regarding  possession
of  the  original  title  deeds  of  Vile-Parle  property  and   investigate
regarding possession of the original title  deeds  of  Vile-Parle  property,
investigate regarding usage of funds etc. It was further stated in the  said
letter until appellants are assured of their concern on  the  above  issues,
SEBI should keep the process of open offer in abeyance.

27. Aforesaid letter dated August 9, 2011, clearly  falsifies  the  case  of
appellants that the actions taken by promoters of GTL during the  course  of
two years has frustrated the public offer,  because,  if  public  offer  was
frustrated, appellants would not have asked SEBI  to  keep  the  process  of
public offer in abeyance. Having asked SEBI on August 9, 2011  to  keep  the
process of public offer  in  abeyance,  appellants  were  not  justified  in
filing application on October 11, 2011 seeking permission  to  withdraw  the
open offer on ground that inordinate delay has frustrated the open offer.”

8.    We have heard learned counsel for the parties.

contentions of the appellants

9.    Main contention raised on behalf of the appellants is  that  there  is
no justification for long  delay  on  the  part  of  the  SEBI  in  granting
approval to the offer of the appellant and situation having changed  to  the
prejudice of the appellant, the appellants are entitled  to  withdraw  their
offer.  Since under the scheme of the regulations, the appellants could  not
withdraw  the  offer  once  made  except  in  circumstances   mentioned   in
Regulation 27, the regulation should be read as creating  an  obligation  on
the part of the SEBI to take speedy decision and if  there  was  unexplained
delay resulting in prejudice to  the  appellants-acquirers,  the  appellants
are entitled to be absolved of the liability to honour the offer.   GTL  had
become a BIFR company on account of siphoning off funds  by  the  promoters.
It was submitted that in absence of obligation to approve the  offer  within
reasonable time, the promoters could take  steps  to  siphon  the  funds  or
dispose of the assets which could prejudice the interests of  the  acquirer.
Thus, it could not be held that the acquirer was indefinitely bound  by  the
offer.  Reference was also made to the timeline provided  in  Regulation  22
and the  provisions of Regulation 23.  It was submitted  that  while  normal
ups and downs in the market may not be a  ground  to  permit  withdrawal  of
offer, unilateral action of the promoters resulting in  transfer  of  assets
could certainly be the ground to permit withdrawal of offer.  The object  of
binding an acquirer  to  the  offer  is  to  protect  the  interest  of  the
shareholders but this was required to be balanced with the interest  of  the
acquirer.   If the assets are unduly transferred by the promoters after  the
PA, the acquirer was entitled to be relieved from the  offer.  SEBI  in  its
capacity as regulator has to adopt an approach which is  fair  to  all.   In
the facts of present case, the decisions of this Court in  Nirma  Industries
Limited vs. Securities and Exchange Board of  India[1]  and  Securities  and
Exchange Board of India vs. M/s. Akshya Infrastructure Pvt. Ltd.[2]   relied
upon in the impugned order are  not  applicable.   Even  if  clause  (d)  of
regulation 27 is read ejusdem generis so as  to  apply  only  in  situations
where it is impossible for the acquirer to  perform  the  public  offer,  it
cannot exclude situations  where  SEBI  itself  is  satisfied  that  serious
prejudice  was  caused  to  the  acquirer  by  intervening  actions  of  the
promoters in alienating or encumbering the assets of the company,  rendering
it inequitable to require the acquirer to be bound  by  its  offer.    Thus,
the obligation of the acquirer cannot be divorced from the  conduct  of  the
promoters  in  the  intervening  period.   Apart  from  distinguishing   the
judgment in Nirma Industries Limited (supra) which has been followed in  the
impugned order, the judgment in M/s. Akshya Infrastructure Pvt. Ltd  (supra)
was also sought to be distinguished as being limited to  cases  where  delay
by SEBI does not cause any serious prejudice to the acquirer.

10.   Thus, the submissions of the appellants are two fold :

(i)   The SEBI failed  to  adhere  to  the  timeline  prescribed  under  the
Takeover Code which rendered it impossible for the  appellants  to  conclude
their open  offer.   Adherence  to  timeline  prescribed  under  Regulations
18(2), 22(2), (3)  and  (4)  are  critical  under  the  Takeover  Code,  the
Bhagwati Committee Report and the International Practice.  The  time  is  of
essence in cases of hostile takeover.

(ii)   The  existing  promoters  should  not  be  given  an  opportunity  to
administer a poison pill to defeat the offer  of  the  potential  acquirers.
This principle is recognized under Regulation 23.

11.   Adverting to the facts it was submitted that first  complaint  against
the appellants was received on 8th January, 2010 i.e. 21 days after the  PA.
 Complaints against the appellants  were  frivolous.   The  appellants  duly
responded to the complaints in timely manner.  The complaints were  made  at
the behest of the promoters.  The appellants  pointed  out  various  illegal
acts of the  promoters  but  the  SEBI  failed  to  take  any  action.   The
appellants requested the SEBI to  keep  the  open  offer  in  abeyance  till
action was taken against the promoters. This justifies  the  prayer  of  the
appellants to withdraw the open offer.

12.    Shri  C.A.  Sundaram,  learned  senior  counsel  for  the  appellants
submitted that all the members of the SAT (majority  as  well  as  minority)
have held the delay by SEBI  to  be  unjustified  but  still,  on  erroneous
interpretation, right of the appellants to withdraw  the  public  offer  has
not been upheld.  Reference was made to  the  complaint  about  transfer  of
valuable property of the Company which was un-encumbered at the time of  PA.
 The funds raised from the transaction have been siphoned off.  One  of  the
key promoters was arrested by the Economic Offences Wing of the  Police  and
remained in jail for one and a half years.  Chargesheet  was  filed  against
him.  The financial ratio of the target company  reflects  manner  in  which
financial position quickly deteriorated after the PA.   The  petition  filed
by the  acquirers  before  the  Company  Law  Board  was  withdrawn  on  the
assurance of the promoters that the assets will not  be  encumbered  without
the public auction.  Thereafter, the matter was pending in the  civil  suit.
Thus, there was a breach of Regulation 23.

13.   Shri Sundaram submitted that open offer was not a  concluded  contract
but mere invitation to the public to offer their shares.  The result of  not
allowing the offer to be withdrawn will be that the promoters will  be  able
to sell their shares at the price specified in  open  offer  even  when  the
value of the shares was far lower.  This will be against the policy  of  law
underlying the Takeover Regulations.  Moreover, the action of the  SEBI  was
required to be fair, reasonable  and  consistent  with  Article  14  of  the

14.   Shri Sundaram sought to distinguish the judgments  of  this  Court  in
Nirma Industries Limited (supra) and M/s. Akshya  Infrastructure  Pvt.  Ltd.
(supra) by submitting that unlike the  said  cases,  in  the  present  case,
there was undue delay on the part of the SEBI and prejudice  was  caused  to
the acquirers for reasons  not  attributable  to  them.  He  submitted  that
doctrine of frustration under Section 56 of the Contract  Act  will  clearly
apply.  As a regulator, the SEBI is duty bound to protect  the  interest  of
the acquirer and also to ensure that a genuine attempt  by  an  acquirer  is
not defeated by the promoters by their unilateral action.

response by the sebi

15.   Shri Arvind P. Datar, learned senior counsel for the SEBI opposed  the
above submissions, he submitted that adverse finding  against  SEBI  on  the
issue of delay was unjustified, but even if the  said  finding  was  upheld,
the withdrawal of open offer was not permissible under  Regulation  27(1)(d)
of the Takeover Regulations.  The acquirers held 6.47% share  and  had  lent
Rs.8.5 crores to  the  target  company.  They  had  purchased  shares  worth
Rs.63.33 lakhs before making the PA.  The first appellant was aware  of  the
acts of mismanagement by the promoters of the target company.   The  PA  was
made with the intention of curbing fraudulent and the illegal  practices  of
the  promoters  and  for  the  target  company’s  benefit.   The  appellants
approached SEBI to investigate the  illegalities  knowing  fully  well  that
SEBI’s role was only to regulate the security market.  For mismanagement  or
other illegalities, remedy was under Section 397/398 of  the  Companies  Act
which remedy the appellants had taken.  The appellants reached  an  amicable
settlement with the target  company  and  thereafter  approached  the  civil
court.  It was wrong to state that the target company  had  become  defunct.
The target company continued to own the Vile Parle  property  worth  Rs.2000

16.   Shri  Datar  submitted  that  more  than  43  complaints/letters  were
received which were to be dealt with by SEBI.   In  such  circumstances,  it
could not be held that there was undue delay on the  part  of  the  SEBI  in
dealing with the DLO.

17.   It was submitted that the  appellants  ought  to  have  exercised  due
diligence before making the PA.  The appellants were not strangers  and  had
6.47% shares.  They had advanced loan of Rs.8.5 crores and  acquired  shares
worth Rs.66.33 lakhs before the PA.  They were aware of the FIR and  alleged
acts of mismanagement they had resorted to public offer out  of  frustration
against the decision  of  the  target  company  developing  the  Vile  Parle
property with Sheth Developers.  They settled the matter before the  Company
Law Board with the target company and also approached the  civil  court  for
alleged breach of settlement and obtained stay of development  of  the  Vile
Parle property.  In these circumstances, the plea of frustration  could  not
be allowed to be raised by the appellants.  The PA could not be  allowed  to
be withdrawn merely on the ground that the acquirers find it  not  to  be  a
prudent decision.  Moreover, the company still owns assets  and  was  not  a
shell company and no prejudice was suffered by the acquirers.  Referring  to
the penalty levied by SEBI on the target company for  entering  into  a  MoU
without approval of the General Body, it was submitted that this  could  not
furnish a ground for withdrawal of  the  PA.    Appellants  had  raised  the
issue before the CLB and settled the matter.


18.   The rival submissions require us to determine the following  questions

(i)    To  what  extent  is  the  timeline  laid  down  under  the  Takeover
Regulations required to be adhered to and effect of delay  by  SEBI  in  the
present case?

(ii)  To what extent unilateral action of  the  target  company  in  dealing
with the property of the company  after  a  hostile  public  offer  is  made
furnish cause of action to the acquirers to withdraw the  public  offer  and
whether in the present case, decision not permitting  withdrawal  of  public
offer is justified?

the takeover regulations

19.   Needless  to  mention  that  mergers  and  takeovers  are  well  known
processes in the corporate world.  Acquisition of controlling interest of  a
company can be friendly or hostile.  In a friendly  acquisition,  management
of the target company sells its controlling shares to the  acquirer.   Where
management  of  the  target  company  is  unwilling  to  negotiate  with  an
acquirer, the acquirer can directly approach the shareholders by  making  an
open offer which is called Hostile takeover.   A Hostile takeover  helps  to
unlock the hidden value of the shares and puts pressure  on  the  management
to work efficiently.   On  the  other  hand,  it  has  potential  of  unduly
upsetting the normal functioning of a target company.   Thus,  there  is  an
undoubted need to regulate the process of acquisition and takeovers in post-
 liberalisation era after 1991.  It is  well  known  that  takeover  attempt
being unpleasant for  the  target  company  is  normally  met  with  defence
strategies  such  as  ‘Poison  Pills’  (making  takeover  unviable  for  the
acquirer  by  making  the  cost   of   acquisition   unattractive),   ‘Shark
Repellents’ (measures to  repel  an  unwanted  takeover)  sale  of  valuable
assets, etc.

20.   Justice P.N. Bhagwati Committee was appointed  in  November,  1995  to
review the existing framework of regulations and to  suggest  amendments  in
the interest of investors and  all  parties  concerned  in  the  acquisition
process.  The Committee kept in mind the following principles :

      “i.   Equality of treatment and opportunity to all shareholders.

            ii.  Protection of interests of shareholders.

            iii. Fair and truthful disclosure of  all  material  information
by the acquirer in all public announcements and offer documents.

      iv.   No information  to  be  furnished  by  the  acquirer  and  other
parties to an offer exclusively to any one group of shareholders.

v.    Availability of sufficient time to shareholders  for  making  informed

       vi.    An  offer  to  be  announced  only  after  most  careful   and
responsible consideration.

vii.  The acquirer and all other intermediaries professionally  involved  in
the offer, to exercise highest standards of care and accuracy  in  preparing
offer documents.

viii. Recognition by all persons connected with the process  of  substantial
acquisition of shares that there  are  bound  to  be  limitations  on  their
freedom of action and on the manner in which the pursuit of their  interests
can be carried out during the offer period.

      ix.   All parties to an offer to refrain from creating a false  market
in securities of the target company.

      x.    No action to be taken by the  target  company  to  frustrate  an
offer without the approval of the shareholders.” [3]

    The Committee made  various  recommendations  including  requirement  of
disclosure  by  the   acquirers,   procedure   for   public   announcements,
obligations of the acquirers and  the  target  company.   This  led  to  the
adoption of the 1997 Takeover Regulations.

21.   We may reproduce some of the Regulations which are necessary  for  the
decision of controversy in the case before us :

“ Acquisition of fifteen per cent or more of the shares or voting rights  of
any company.

10.   No acquirer  shall  acquire  shares  or  voting  rights  which  (taken
together with shares or voting rights, if any, held by  him  or  by  persons
acting in concert with him), entitle such acquirer to exercise  fifteen  per
cent or more of the voting rights in a company, unless such  acquirer  makes
a public announcement to acquire shares of such company in  accordance  with
the regulations.

Acquisition of control over a company.

12.   Irrespective of whether or not  there  has  been  any  acquisition  of
shares or voting rights in a company,  no  acquirer  shall  acquire  control
over the target company, unless such person makes a public  announcement  to
acquire  shares  and  acquires  such   shares   in   accordance   with   the

Timing of the public announcement of offer.

14.    (1)  The  public  announcement  referred  to  in  regulation  10   or
regulation 11 shall be made by the  merchant  banker  not  later  than  four
working days of entering into an agreement  for  acquisition  of  shares  or
voting rights or deciding to acquire shares or voting rights  exceeding  the
respective percentage specified therein .…

Submission of letter of offer to the Board.

18.   (1) Within fourteen days from the date  of  public  announcement  made
under regulation 10, 11 or 12 as  the  case  may  be,  the  acquirer  shall,
through its merchant banker, file with the Board, the draft  of  the  letter
of offer containing disclosures as specified by the Board.

      (2) The letter of offer shall be despatched to  the  shareholders  not
earlier than 21 days from its submission to the Board  under  sub-regulation

Provided that if, within 21 days from the date of submission of  the  letter
of offer, the Board specifies changes,  if  any,  in  the  letter  of  offer
(without being Page 35 of 75 under any obligation to do  so),  the  merchant
banker and the acquirer shall carry out such changes before  the  letter  of
offer is despatched to the shareholders :

[Provided further that if the disclosures in the draft letter of  offer  are
inadequate or the Board has received any  complaint  or  has  initiated  any
enquiry or investigation in respect of the public offer, the Board may  call
for revised letter of  offer  with  or  without  rescheduling  the  date  of
opening or closing of the offer and may offer its comments  to  the  revised
letter of offer within seven working days of filing of such  revised  letter
of offer.

(3) The acquirer shall, while filing the draft  letter  of  offer  with  the
Board under sub-regulation (1), pay a fee  as  mentioned  in  the  following
table,  by  bankers‘  cheque  or  demand  draft  drawn  in  favour  of   the
‘Securities and Exchange Board of India’….

General Objections of the acquirer.

22.   (1) The public announcement of an offer to acquire the shares  of  the
target company shall be made only when the acquirer  is  able  to  implement
the offer.

(2) Within 14 days of the public announcement of  the  offer,  the  acquirer
shall send a copy of the draft letter of offer to the target company at  its
registered office address, for being placed before the  board  of  directors
and to all the stock exchanges where the shares of the company are listed.

(3) The acquirer shall ensure that the letter of offer is sent  to  all  the
shareholders (including non-resident Indians) of the target  company,  whose
names appear on the register of members of the company as on  the  specified
date mentioned in 1 Inserted by the SEBI (Substantial Acquisition of  Shares
and Takeovers) (Second Amendment) Regulations, 2002, w.e.f.  9-9-2002.  Page
47 of 75 the public announcement, so as to reach them within  45  days  from
the date of public         announcement.…

General obligations of the board of directors of the target company.

23.   (1) Unless the  approval  of  the  general  body  of  shareholders  is
obtained after the date of the public announcement of offer,  the  board  of
directors of the target company shall not, during the offer period,—

 (a) sell, transfer, encumber or otherwise  dispose  of  or  enter  into  an
agreement  for  sale,  transfer,  encumbrance  or  for  disposal  of  assets
otherwise, not being sale or disposal of assets in the  ordinary  course  of
business, of the company or its subsidiaries; or

 (b) issue 2 [or allot] any  authorised  but  unissued  securities  carrying
voting rights during the offer period; or

(c) enter into any material contracts.

Withdrawal of offer.

27.    (1) No public offer, once made, shall be withdrawn except  under  the
following circumstances:—

 (a)  [***]

(b) the statutory approval(s) required have been refused;

(c) the sole acquirer, being a natural person, has died;

(d) such circumstances as in the opinion of the Board merit withdrawal.

Board’s right to investigate.

38.   The Board may appoint one or more persons as investigating officer  to
undertake investigation for any of the following purposes, namely:—

(a) to investigate into the complaints  received  from  the  investors,  the
intermediaries or any other person on any matter having  a  bearing  on  the
allegations of substantial acquisition of shares and takeovers ;

(b) to investigate suo motu upon its own knowledge or  information,  in  the
interest of the securities market or investors‘ interest, for any breach  of
the regulations;

(c) to ascertain whether the provisions of the Act and the  regulations  are
being complied with for any breach of the regulations.”

22.   In Nirma Industries Limited (Supra),  the  acquirer  after  making  PA
sought withdrawal therefrom on the ground of embezzlement of  funds  by  the
target company.  SEBI rejected the application  with  the  observation  that
the acquirer ought to have used due diligence prior  to  making  the  public
offer.  Rejecting the plea that the embezzlement and siphoning off of  funds
by the target company could not have been found by third  party  even  after
exercising diligence, this Court held under the scheme of the takeover  code
public offer once  made  could  not  be  withdrawn  so  as  to  deprive  the
shareholders of their valuable right to have exit option and also to  ensure
that public announcement is not made by way of speculation.  The  scheme  of
takeover code was held to be as follows:

“ 59. A conspectus of the aforesaid Regulations would show that  the  scheme
of the Takeover Code is: (a) to ensure that the target company is  aware  of
the substantial acquisition; (b) to  ensure  that  in  the  process  of  the
substantial acquisition or takeover, the security market  is  not  distorted
or manipulated; and (c) to ensure that the  small  investors  are  given  an
option to exit, that is, they are offered a choice to either  offload  their
shares at a price as determined in accordance with the Takeover Code  or  to
continue as shareholders under the new dispensation.  In  other  words,  the
Takeover  Code  is  meant  to  ensure  fair  and  equal  treatment  of   all
shareholders in relation to substantial acquisition of shares and  takeovers
and that the process does not take place in  a  clandestine  manner  without
protecting the interest of the shareholders.  It  is  keeping  in  view  the
aforesaid aims and objects of the  Takeover  Code  that  we  shall  have  to
interpret Regulation 27(1).”

23.   As regards the scheme of Regulation 27, it was further observed :

“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.

67. Applying the aforesaid tests, we have no  hesitation  in  accepting  the
conclusions  reached  by  SAT  that  clauses  (b)  and   (c)   referred   to
circumstances which pertain to a class, category or genus, that  the  common
thread which runs through them is the  impossibility  in  carrying  out  the
public offer. Therefore, the term “such circumstances” in clause  (d)  would
also be restricted to a situation which would make  it  impossible  for  the
acquirer to perform the public offer. The discretion has been  left  to  the
Board by the legislature realising that it is impossible to  anticipate  all
the circumstances that may arise making it impossible to complete  a  public
offer. Therefore, certain amount of discretion has been left with the  Board
to determine as to whether  the  circumstances  fall  within  the  realm  of
impossibility as visualised under clauses (b) and (c). In the present  case,
we are not satisfied  that  circumstances  are  such  which  would  make  it
impossible for the acquirer to perform the  public  offer.  The  possibility
that the acquirer would end-up making losses instead of  generating  a  huge
profit would not bring the situation within the realm of impossibility.

70. Mr. Venugopal, in our opinion, has rightly submitted that  the  Takeover
Regulations, which is a special law to regulate “substantial acquisition  of
shares and takeovers” in a target company lays down  a  self-contained  code
for open offer; and also that interest of  investors  in  the  present  case
required that they should be given an exit route when  the  appellants  have
acquired  substantial  chunk  of  shares  in  the  target  company.  He  has
correctly emphasized in his submissions that the orderly development of  the
securities market as a whole requires that public  offers  once  made  ought
not to be allowed to be withdrawn on the ground of fall in  share  price  of
the target  company,  which  is  essentially  a  business  misfortune  or  a
financial decision of the acquirer having gone wrong. SEBI as  well  as  SAT
have correctly concluded that withdrawal of the open offer in the given  set
of circumstances is neither in the interest of investors nor development  of
the securities market.

90. We are inclined to agree with the submission made by Mr  Venugopal  that
the appellants cannot be permitted to wriggle out of  the  obligation  of  a
public offer under the Takeover Regulation. Permitting them to do  so  would
deprive the ordinary shareholders of their valuable right to  have  an  exit
option under the aforesaid Regulations. The SEBI  Regulations  are  designed
to ensure that public announcement is not made by way of speculation and  to
protect the interest of the other shareholders. Very solemn obligations  are
cast on the Merchant Banker under Regulation 24(1) to ensure that—
“24. (1)(a) the acquirer is able to implement the offer;
(b) the provision relating to escrow account referred to  in  Regulation  28
has been made;
(c) firm arrangements for funds and money  for  payment  through  verifiable
means to fulfil the obligations under the offer are in place;
 (d) the public announcement of offer is made in terms of the Regulations;
(e) his shareholding, if any in the  target  company  is  disclosed  in  the
public announcement and the letter of offer.”

91. Regulation 24(2) mandates that the Merchant Banker shall furnish to  the
Board a due diligence certificate which shall accompany the draft letter  of
offer. The aforesaid Regulation clearly indicates  that  any  enquiries  and
any due diligence that has to be made by the acquirer have to be made  prior
to the public announcement. It is, therefore, not  possible  to  accept  the
submission of Mr Shyam Divan that the appellants  are  to  be  permitted  to
withdraw the public announcement based on the  discovery  of  certain  facts
subsequent to the making of the public announcement. In such  circumstances,
in our opinion, the judgments cited by Mr Shyam Divan are of  no  relevance.

24.   As regards the effect of delay on the part of SEBI, it was observed:

“94. A perusal of the aforesaid Regulation clearly shows that  the  acquirer
is required to file the draft letter  of  offer  containing  disclosures  as
specified by the Board within a period of 14 days from the  date  of  public
announcement. Thereafter, letter of  offer  has  to  be  dispatched  to  the
shareholders not earlier than 21 days from  its  submission  to  the  Board.
Within 21 days, the Board is required to specify changes if any, that  ought
to be made in the letter of offer. The  merchant  banker  and  the  acquirer
have then  to  carry  out  such  changes  before  the  letter  of  offer  is
dispatched to the shareholders. But there is no obligation to do  so.  Under
the second proviso, the Board may call for revised letter of offer  in  case
it finds that the disclosures in the draft letter of  offer  are  inadequate
or the Board has received any complaint or  has  initiated  any  enquiry  or
investigation in respect of the public offer.  It  is  important  to  notice
that in the first proviso the Board does not have any obligation to  specify
any change in the draft letter of offer within a period of 21 days.  In  the
present case, in fact, the Board had not specified  any  changes  within  21
days. We have already noticed earlier that the letter of offer  was  lacking
and deficient in detail. The  appellants  themselves  were  taking  time  to
submit details  called  for,  by  their  merchant  bankers  through  various
letters between 8-8-2005 to 20-3-2006. We have already noticed the  repeated
advice given by the Merchant Banker to enhance the issue size  of  the  open
offer and to comply with other requirements  of  the  Takeover  Regulations.
The appellants, in fact, were prevaricating  and  did  not  agree  with  the
interpretation placed on Regulation 27(1)(d) by  the  Merchant  Banker.  We,
therefore, reject the submission of Mr Shyam Divan that there was  delay  on
the part of SEBI in approving the draft letter of offer. ”

25.   In M/s. Akshya Infrastructure Pvt. Ltd. (supra), this Court held  that
SEBI is not justified in causing delay in dealing with the issuance  of  its
comments on a letter of offer  as  delay  can  lead  to  controversy  as  to
whether the belated action  was  bona  fide  exercise  of  statutory  power.
However, delay by itself may not vitiate action of the SEBI.  The  SEBI  has
to be guided by the overall interest of the  shareholders  in  dealing  with
the prayer for withdrawal from the public offer.  The  economic  unviability
is  no  ground  to  justify  prayer  for  such  withdrawal.   The   relevant
observations are:

“30. 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.

31. 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  20-10-2011  till  30-11-
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

35. 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. We reiterate  our
opinion in Nirma Industries Ltd. that under Regulations  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.”

Our Findings

Re. Question (i)

26.   Applying the decisions of this Court  to  the  facts  of  the  present
case, we are in agreement with the finding recorded by the  SAT  that  there
was undue delay on the part of the SEBI in dealing with the DLO.  No  doubt,
in a given case  timeline  prescribed  under  the  Regulations  may  not  be
adhered to when  the  SEBI  justifiably  takes  time  in  dealing  with  the
complaints, as rightly submitted by Shri Datar, in  the  present  case,  the
stand of the SEBI itself is that it could not go  into  the  complaints  for
which the right forum was CLB.  As regards the time taken  in  dealing  with
the  complaints  against  the  acquirers,  the  SEBI  could  have   promptly
proceeded with the matter.  However, mere upholding of  finding  of  SAT  on
the aspect of delay by SEBI is not enough to hold that  the  appellants  are
entitled to withdrawal of the public offer.  The withdrawal has to be  dealt
with under Regulation 27, as held by this Court.   The general principle  is
that public offer once made cannot be withdrawn.  Exception to the  rule  is
the specified situations under the Regulation as laid down by this Court  in
above decisions particularly in Nirma Industries  Limited  (Supra)[4].    In
the present case, though SEBI was not justified in causing delay  in  giving
its comments on public offer, this  by  itself  is  not  enough  to  justify
withdrawal from public offer so  long  as  the  case  does  not  fall  under
Regulation 27.  First question is answered accordingly.

Re. Question (ii)

27.   As already observed above, under the scheme of the regulations  public
offer has to be made after due diligence (Regulation 22). Obligation of  the
board of  directors  under  Regulation  23  against  alienation  of  assets,
issuance of unissued securities carrying  voting  rights  or  entering  into
material contracts is  applicable  only  if  approval  of  general  body  of
shareholders  is  not  obtained.   We  are  not  dealing  with  validity  of
imposition of fine on the target company for its decision  in  dealing  with
Vile Parle property, without approval of the general body as this  issue  is
not before us. The fact remains that ex post facto approval of  the  general
body has since been obtained.  Moreover, SEBI had observed that this  aspect
of the matter will be separately enquired into.   It  is  clear  that  under
the scheme of Regulation 23,  there  is  no  bar  to  a  decision  with  the
approval of the general body  of  shareholders,  if  otherwise  valid.   The
question whether unilateral decisions of the target  company  have  rendered
the carrying out of the public offer possible, is a question to  be  decided
on facts of each case.  In the present case, the SEBI as  well  as  the  SAT
have concurrently held that public offer is capable  of  being  carried  out
and has not become impossible.  The assets are  available  with  the  target
company.  Finding has also been recorded about the  circumstances  preceding
the public offer and the conduct of the acquirer which is based  on  record.
The steps for development of  the  Vile  Parle  property  had  already  been
initiated and the acquirer had taken remedies before  the  CLB  against  the
decision of the target company and had settled the matter  with  the  target
company.  It is clear from the scheme of the regulations that  there  is  no
absolute bar for the target company  to  take  decision  about  its  assets,
subject to compliance with statutory procedure and subject to  the  decision
being otherwise valid.  There is  no  doubt  that  against  any  mala  fide,
illegal  or  unjustified  decision  of  the  target  company,  remedies   at
appropriate fora are available to the aggrieved parties.  Thus, there is  no
justification for automatic  withdrawal  from  public  offer  without  clear
prejudice to the acquirer to the extent of rendering  the  carrying  out  of
public offer impossible.  In the facts of the present case, we do  not  find
any ground to interfere with the concurrent finding of the SEBI and the  SAT
that request for withdrawal from public offer was not  justified.   Question
(ii) is answered accordingly.

28.   In view of the above, we do not find any merit in this appeal and  the
same is accordingly dismissed.  There shall be no order  as to costs.

                                                            [ ANIL R. DAVE ]

                                                       [ ADARSH KUMAR GOEL ]

NOVEMBER 07, 2016

      [2] (2013) 8 SCC 20
      [4] (2014) 11 SCC 112
      [6] Justice P.N. Bhagwati Committee Report on Takeovers
      [8]  (2013) 8 SCC 20 para 67


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