LAW FOR ALL

Wednesday, November 9, 2016

Pre-natal Diagnostic Techniques (Prohibition of Sex Selection) Rules, 1996= increase of female foeticide, =VOLUNTARY HEALTH ASS. OF PUNJAB Vs. UNION OF INDIA & ORS. DIPAK MISRA, SHIVA KIRTI SINGH = 2016 Dec.http://judis.nic.in/supremecourt/imgst.aspx?filename=44287

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL ORIGINAL JURISDICTION

WRIT PETITION (CIVIL) NO. 349 OF 2006
Voluntary Health Association ... Petitioner(s)
of Punjab

Versus
Union of India and Others ... Respondent(s)

WITH
WRIT PETITION (CIVIL) NO. 575 OF 2014

J U D G M E N T

Dipak Misra, J.
The two writ petitions being inter-connected in certain aspects were
heard together and are disposed of by the singular order. We shall first
deal with the grievance agitated in Writ Petition (Civil) No. 349 of 2006
and thereafter advert to what has been asserted in the other writ petition.
Be it stated immediately that the issues raised in Writ Petition (Civil)
No. 349 of 2006 are not agitated for the first time, for they had been
raised on earlier occasions and dealt with serious concern and solemn
sincerity. It is because they relate to the very core of existence of a
civilized society, pertain to the progress of the human race, and expose
the maladroit efforts to throttle the right of a life to feel the mother
earth and smell its fragrance. And, if we allow ourselves to say, the
issues have been highlighted with sincere rhetorics and balanced hyperboles
and ring the alarm of destruction of humanity in the long run. It is not a
group prophecy, but a significant collective predication. The involvement
of all is obvious, and it has to be. The heart of the issue that is
zealously projected by the petitioner is the increase of female foeticide,
resultant imbalance of sex ratio and the indifference in the implementation
of the stringent law that is in force. In essence, the fulcrum of the
anguished grievance lays stress on the non-implementation of the provisions
of The Pre-conception and Pre-natal Diagnostic Techniques (Prohibition of
Sex Selection) Act, 1994 (for brevity “the Act”) and The Pre-conception and
Pre-natal Diagnostic Techniques (Prohibition of Sex
Selection) Rules, 1996 (for short “the Rules”) framed under the Act by the
competent authorities who are obliged to do so.
2. The grievance has a narrative, and it needs to be stated.
3. Realising the rise of pre-natal diagnostic centres in urban areas of
the country using pre-natal diagnostic techniques for determination of sex
of the foetus and that the said centres had become very popular and had
tremendous growth, as the female child is not welcomed with open arms in
many Indian families and the consequence that such centres became centres
for female foeticide which affected the dignity and status of women, the
Parliament brought in the legislation to regulate the use of such
techniques and to provide punishment for such inhuman act. The objects and
reasons of the Act stated unequivocally that it was meant to prohibit the
misuse of pre-natal diagnostic techniques for determination of sex of the
foetus, leading to female foeticide; to prohibit advertisement of pre-natal
diagnostic techniques for detection or determination of sex; to permit and
regulate the use of pre-natal diagnostic techniques for the purpose of
detection of specific genetic abnormalities or disorders; to permit the use
of such techniques only under certain conditions by the registered
institutions; and to punish for violation of the provisions of the proposed
legislation. The Preamble of the Act provides for the prohibition of sex
selection before or after conception, and for regulation of pre-natal
diagnostic techniques for the purposes of detecting genetic abnormalities
or metabolic disorders or chromosomal abnormalities or certain congenital
malformations or sex-linked disorders and for the prevention of their
misuse for sex determination leading to female foeticide and for matters
connected therewith or incidental thereto. Be it noted when the Act came
into force, it was named as the Pre-natal Diagnostic Techniques (Regulation
and Prevention of Misuse) Act, 1994 and after the amendments in 2001 and
2003, in the present incarnation, it is called The Pre-conception and Pre-
natal Diagnostic Techniques (Prohibition of Sex Selection) Act, 1994.
4. As the violence and cruelty meted out to women gradually got revealed
due to rights and protections prescribed under various legislations, the
Court perceived the magnitude of the crime. Such a situation compelled
this Court, in Ajit Savant Majagvai v. State of Karnataka[1], while
dealing with the physical violence, torture, mental cruelty and murder of
the female particularly the wife, to comment on the degeneration of
relationship and the prevalent atmosphere by observing that:-
“3. Social thinkers, philosophers, dramatists, poets and writers have
eulogised the female species of the human race and have always used
beautiful epithets to describe her temperament and personality and have not
deviated from that path even while speaking of her odd behaviour, at times.
Even in sarcasm, they have not crossed the literary limit and have adhered
to a particular standard of nobility of language. Even when a member of her
own species, Madame De Stael, remarked “I am glad that I am not a man; for
then I should have to marry a woman”, there was wit in it. When Shakespeare
wrote, “Age cannot wither her; nor custom stale, her infinite variety”,
there again was wit. Notwithstanding that these writers have cried hoarse
for respect for “woman”, notwithstanding that Schiller said “Honour women!
They entwine and weave heavenly roses in our earthly life” and
notwithstanding that the Mahabharata mentioned her as the source of
salvation, crime against “woman” continues to rise and has, today
undoubtedly, risen to alarming proportions.

4. It is unfortunate that in an age where people are described as
civilised, crime against “female” is committed even when the child is in
the womb as the “female” foetus is often destroyed to prevent the birth of
a female child. If that child comes into existence, she starts her life as
a daughter, then becomes a wife and in due course, a mother. She rocks the
cradle to rear up her infant, bestows all her love on the child and as the
child grows in age, she gives to the child all that she has in her own
personality. She shapes the destiny and character of the child. To be cruel
to such a creature is unthinkable.”
[Emphasis added]

5. We may repeat, the aforestated observation though made totally in a
different context but nonetheless, it seemly stated the marrow of the
problem. Needless to emphasise, the predicament with regard to female
foeticide by misuse of modern science and technology has aggravated and
enormously affected the sex ratio. To eradicate the malady, the Parliament,
as stated earlier, had enacted the Act. In the first year of this century,
a petition under Article 32 was moved for issuing directions to implement
the provisions of the said Act by (a) appointing appropriate authorities at
State and district levels and the Advisory Committees; (b) issuing
direction to the Central Government to ensure that the Central Supervisory
Board meets every 6 months as provided under the PNDT Act; and for banning
of all advertisements of prenatal sex selection including all other sex-
determination techniques which can be abused to selectively produce only
boys either before or during pregnancy. A two-Judge bench in Center for
Enquiry into Health & Allied Themes (CEHAT) and others v. Union of India
and others[2] and Center for Enquiry into Health & Allied Themes (CEHAT)
and others v. Union of India and others[3] on 04.05.2001 issued certain
directions. Apart from the directions contained in the said orders, the
Court, while finally disposing of the writ petition, issued the following
directions:-
“(a) For effective implementation of the Act, information should be
published by way of advertisements as well as on electronic media. This
process should be continued till there is awareness in the public that
there should not be any discrimination between male and female child.

(b) Quarterly reports by the appropriate authority, which are submitted to
the Supervisory Board should be consolidated and published annually for
information of the public at large.

(c) Appropriate authorities shall maintain the records of all the meetings
of the Advisory Committees.

(d) The National Inspection and Monitoring Committee constituted by the
Central Government for conducting periodic inspection shall continue to
function till the Act is effectively implemented. The reports of this
Committee be placed before the Central Supervisory Board and State
Supervisory Boards for any further action.

(e) As provided under Rule 17(3), the public would have access to the
records maintained by different bodies constituted under the Act.

(f) The Central Supervisory Board would ensure that the following States
appoint the State Supervisory Boards as per the requirement of Section 16-
A: 1. Delhi, 2. Himachal Pradesh, 3. Tamil Nadu, 4. Tripura, and 5. Uttar
Pradesh.

(g) As per the requirement of Section 17(3)(a), the Central Supervisory
Board would ensure that the following States appoint the multi-member
appropriate authorities: 1. Jharkhand, 2. Maharashtra, 3. Tripura, 4. Tamil
Nadu, and 5. Uttar Pradesh. It will be open to the parties to approach this
Court in case of any difficulty in implementing the aforesaid directions”.

6. Despite the directions issued by the Court, there had not been proper
implementation and that compelled the present petitioner, namely, Voluntary
Health Association of Punjab to file the present Writ Petition seeking
various directions. The Court on 08.01.2013 took note of the fact that
the provisions had not been adequately implemented by the various States
and Union Territories and accordingly directed for personal appearance of
the Health Secretaries of the States of Punjab, Haryana, NCT of Delhi,
Rajasthan, Uttar Pradesh, Bihar and Maharashtra, to examine what steps they
had taken for the proper and effective implementation of the provisions of
the Act as well as the various directions issued by this Court.
7. At a later stage, a reference was made to 2011 Census of India to
highlight there had been a sharp decline in the female sex ratio in many
States. It was also observed that there had been no effective supervision
or follow-up action so as to achieve the object and purpose of the Act. It
was observed that mushrooming of various sonography centres, genetic
clinics, genetic counselling centres, genetic laboratories, ultrasonic
clinics, imaging centres in almost all parts of the country called for more
vigil and attention by the authorities under the Act. The Court also found
that their functioning was not being properly monitored or supervised by
the authorities under the Act or to find out whether they are misusing the
pre-natal diagnostic techniques for determination of sex of foetus leading
to foeticide.
8. A reference was made to various facets of the Act and the Rules and
ultimately the Court in Voluntary Health Association of Punjab v. Union of
India and others[4] issued the following directions:-

“9.1. The Central Supervisory Board and the State and Union Territories
Supervisory Boards, constituted under Sections 7 and 16-A of PN & PNDT Act,
would meet at least once in six months, so as to supervise and oversee how
effective is the implementation of the PN & PNDT Act.
9.2. The State Advisory Committees and District Advisory Committees should
gather information relating to the breach of the provisions of the PN &
PNDT Act and the Rules and take steps to seize records, seal machines and
institute legal proceedings, if they notice violation of the provisions of
the PN & PNDT Act.
9.3. The committees mentioned above should report the details of the
charges framed and the conviction of the persons who have committed the
offence, to the State Medical Councils for proper action, including
suspension of the registration of the unit and cancellation of licence to
practice.
9.4. The authorities should ensure also that all genetic counselling
centres, genetic laboratories and genetic clinics, infertility clinics,
scan centres, etc. using pre-conception and pre-natal diagnostic techniques
and procedures should maintain all records and all forms, required to be
maintained under the Act and the Rules and the duplicate copies of the same
be sent to the district authorities concerned, in accordance with Rule 9(8)
of the Rules.
9.5. States and District Advisory Boards should ensure that all
manufacturers and sellers of ultrasonography machines do not sell any
machine to any unregistered centre, as provided under Rule 3-A and
disclose, on a quarterly basis, to the State/Union Territory concerned and
the Central Government, a list of persons to whom the machines have been
sold, in accordance with Rule 3-A(2) of the Rules.
9.6. There will be a direction to all genetic counselling centres, genetic
laboratories, clinics, etc. to maintain Forms A, E, H and other statutory
forms provided under the Rules and if these forms are not properly
maintained, appropriate action should be taken by the authorities
concerned.
9.7. Steps should also be taken by the State Government and the authorities
under the Act for mapping of all registered and unregistered
ultrasonography clinics, in three months’ time.
9.8. Steps should be taken by the State Governments and the Union
Territories to educate the people of the necessity of implementing the
provisions of the Act by conducting workshops as well as awareness camps at
the State and district levels.
9.9. Special cell be constituted by the State Governments and the Union
Territories to monitor the progress of various cases pending in the courts
under the Act and take steps for their early disposal.
9.10. The authorities concerned should take steps to seize the machines
which have been used illegally and contrary to the provisions of the Act
and the Rules thereunder and the seized machines can also be confiscated
under the provisions of the Code of Criminal Procedure and be sold, in
accordance with law.
9.11. The various courts in this country should take steps to dispose of
all pending cases under the Act, within a period of six months. Communicate
this order to the Registrars of various High Courts, who will take
appropriate follow-up action with due intimation to the courts concerned.”

A further direction was given to file the Status Report within a period of
three months. It is apt to note here that in the concurring opinion Dipak
Misra, J. only highlighted certain aspects that pertained to direction
contained in paragraph 9.8.
9. We may profitably reproduce certain passages from the concurring
opinion:-
“14. Female foeticide has its roots in the social thinking which is
fundamentally based on certain erroneous notions, egocentric traditions,
perverted perception of societal norms and obsession with ideas which are
totally individualistic sans the collective good. All involved in female
foeticide deliberately forget to realise that when the foetus of a girl
child is destroyed, a woman of the future is crucified. To put it
differently, the present generation invites the sufferings on its own and
also sows the seeds of suffering for the future generation, as in the
ultimate eventuate, the sex ratio gets affected and leads to manifold
social problems. I may hasten to add that no awareness campaign can ever be
complete unless there is real focus on the prowess of women and the need
for women empowerment.

x x x x x

19. A woman has to be regarded as an equal partner in the life of a man. It
has to be borne in mind that she has also the equal role in the society
i.e. thinking, participating and leadership.

x x x x x

21. When a female foeticide takes place, every woman who mothers the child
must remember that she is killing her own child despite being a mother.
That is what abortion would mean in social terms. Abortion of a female
child in its conceptual eventuality leads to killing of a woman. Law
prohibits it; scriptures forbid it; philosophy condemns it; ethics
deprecate it, morality decries it and social science abhors it. Henrik
Ibsen emphasised on the individualism of woman. John Milton treated her to
be the best of all God’s work. In this context, it will be appropriate to
quote a few lines from Democracy in America by Alexis de Tocqueville:
“If I were asked … to what the singular prosperity and growing strength of
that people [Americans] ought mainly to be attributed, I should reply: To
the superiority of their women.”

x x x x x

32. A cosmetic awareness campaign would never subserve the purpose. The
authorities of the Government, the non-governmental organisations and other
volunteers are required to remember that there has to be awareness camps
which are really effective. The people involved with the same must take it
up as a service, a crusade. They must understand and accept that it is an
art as well as a science and not simple arithmetic. It cannot take the
colour of a routine speech. The awareness camps should not be founded on
the theory of Euclidian geometry. It must engulf the concept of social
vigilance with an analytical mind and radiate into the marrows of the
society. If awareness campaigns are not appositely conducted, the needed
guidance for the people would be without meaning and things shall fall
apart and everyone would try to take shelter in cynical escapism.

33. It is difficult to precisely state how an awareness camp is to be
conducted. It will depend upon what kind and strata of people are being
addressed to. The persons involved in such awareness campaign are required
to equip themselves with constitutional concepts, culture, philosophy,
religion, scriptural commands and injunctions, the mandate of the law as
engrafted under the Act and above all the development of modern science. It
needs no special emphasis to state that in awareness camps while the
deterrent facets of law are required to be accentuated upon, simultaneously
the desirability of law to be followed with spiritual obeisance, regard
being had to the purpose of the Act, has to be stressed upon. The seemly
synchronisation shall bring the required effect. That apart, documentary
films can be shown to highlight the need; and instil the idea in the mind
of the public at large, for when the mind becomes strong, mountains do
melt.

34. The people involved in the awareness campaigns should have boldness and
courage. There should not be any iota of confusion or perplexity in their
thought or action. They should treat it as a problem and think that a
problem has to be understood in a proper manner to afford a solution. They
should bear in mind that they are required to change the mindset of the
people, the grammar of the society and unacceptable beliefs inherent in the
populace.”

10. As directed in the judgment, the matter was listed and certain
clarifications were sought for by the Union of India with regard to the
directions vide direction Nos. 2, 3, 4 and 6 pointing out that the
authorities mentioned in direction No. 2 should also include appropriate
authority under Section 17 and Section 17A of the Act. With regard to
direction No. 6, it was submitted that instead of Forms A, E and H, Forms
A, D, F, G & H be substituted. The said prayers were allowed and the
States were directed to file their respective status report.
11. On 16.9.2014 the Court took note of the directions already issued and
proceeded to deal with I.A. No. 11 of 2013 and recorded the submission of
Mr. Sanjay Parikh, learned counsel that the Union of India has to animate
itself in an appropriate manner to see that the sex ratio is maintained and
does not reduce further. It was also urged by him that the Central
Supervision Committee which is required to meet to take stock of the
situation and the National Monitoring Committee who is required to monitor
the activities, had failed in their duties.
12. Mr. Parikh had also drawn the attention of the Court to the proviso
to Section 4(3) of the Act which reads as follows:-

“4. Regulation of pre-natal diagnostic techniques.-- On and from the
commencement of this Act,-- (1) … (2) … (3) …

Provided that the person conducting ultrasonography on a pregnant woman
shall keep complete record thereof in the clinic in such manner, as may be
prescribed, and any deficiency or inaccuracy found therein shall amount to
contravention of the provisions of section 5 and section 6 unless contrary
is proved by the person conducting such ultrasonography.”

13. It was propounded by him that the concerned authorities have not
acted in accordance with the aforesaid provision in all seriousness as a
result of which the nation has faced the disaster of female foeticide. On
that day, Mr. Colin Gonsalves, learned senior counsel appearing
for the writ petitioner had drawn our attention to the affidavit filed by
the petitioner contending, inter alia, that the sex ratio in most of the
States had decreased and in certain States, there had been a minor
increase, but the same is not likely to subserve the aims and objects of
the Act. After referring to the history of this litigation which has been
continuing in this Court since long, he had submitted that certain
directions are required to be issued.
14. The Union of India was directed to file an affidavit of the
Additional Secretary of Health and/or any other concerned Additional
Secretary clearly stating what steps had been taken and on the basis of the
steps taken, what results have been achieved. It was also directed that
all the States shall file their responses through the concerned Health
Secretaries. The direction further contained that the affidavits shall be
comprehensive and must reflect sincerity and responsibility.
15. On 25.11.2014 the Court noted that affidavits by certain States had
been filed and certain States, namely, Assam, Arunachal Pradesh, Bihar,
Goa, Gujarat, Kerala, Madhya Pradesh, Meghalaya, Mizoram, Odisha, Tripura,
and UT of Daman and Nagar Haveli and Puducherry had not filed the
affidavits. Two weeks time was granted to file the necessary affidavits.
At that juncture, it was thought appropriate to advert to the States by
dividing them into certain clusters. It was decided to deal with the
situation pertaining to the States of Uttar Pradesh, Haryana and NCT of
Delhi first. The affidavit filed by the State of Uttar Pradesh was
considered and in that context it was observed that the census conducted in
2011 cannot be the guideline for the purposes of PC-PNDT Act. It was felt
that a different methodology was required to be adopted by the State.
Paragraph 28 of the affidavit, which is of significance, is extracted
below:-

“28. That it is pertinent to mention herein that according to “ANNUAL
HEALTH SURVEY (AHS)” for the year 2010-11, 2011-12 and 2012-13, improvement
has been revealed in the State in respect of Sex Ratio At Birth, Sex Ratio
of Child (0 to 04 years age) and Sex Ratio in all age group, which is clear
with the table given below:

|Year of |Sex Ratio |Sex Ratio |Sex Ratio |
|Annual |(at birth) |(0 to 4 |(In all |
|Health | |years of |ages) |
|Survey | | | |
|2010-11 |904 |913 |943 |
|2011-12 |908 |914 |944 |
|2012-13 |921 |919 |946 |

It is necessary to mention here that on a query being made by the
Court, learned counsel for the State was not in a position to explain on
what basis the said figures had been arrived at, for the same was not
reflectible from the assertions made in the affidavit.
16. As far as the State of Haryana is concerned, the chart given in
paragraph 15 of the affidavit indicated district-wise and month-wise sex
ratio of births during the year 2014. It is as follows:-

|“District wise and month wise Sex Ratio at Birth during year|
|2014 in Haryana State as per CRS (Prov) |
|Sr. |District |Up to |Up to |Up to|Up to|Up to|Up to |
|No | |Jan.14 |Feb.14 |Mar |April|May |June |
| | | | |14 |14 |14 |14 |
|1 |Ambala |1012 |993 |959 |939 |913 |910 |
|2 |Bhiwani |824 |812 |843 |848 |846 |832 |
|3 |Faridabad |929 |892 |889 |884 |890 |890 |
|4 |Fatehabad |859 |898 |890 |888 |886 |874 |
|5 |Gurgaon |829 |856 |851 |854 |855 |839 |
|6 |Hissar |892 |872 |883 |878 |885 |880 |
|7 |Jhajjar |797 |793 |793 |801 |800 |811 |
|8 |Jind |886 |876 |878 |911 |915 |899 |
|9 |Kaithal |953 |921 |920 |928 |927 |918 |
|10 |Karnal |911 |899 |888 |881 |889 |894 |
|11 |Kurukshetra |956 |904 |900 |892 |890 |888 |
|12 |Mewat |920 |942 |932 |923 |920 |919 |
|13 |Mohindergarh |777 |776 |797 |786 |782 |770 |
|14 |Palwal |867 |871 |871 |871 |876 |875 |
|15 |Panchkula |853 |837 |860 |914 |902 |914 |
|16 |Panpat |924 |931 |915 |904 |903 |895 |
|17 |Rewari |856 |850 |849 |822 |816 |806 |
|18 |Rohtak |894 |884 |865 |863 |859 |889 |
|19 |Sirsa |897 |872 |879 |885 |892 |886 |
|20 |Sonepat |859 |884 |850 |838 |834 |835 |
|21 |Yamuna naga |903 |940 |916 |897 |894 |869 |
| |Haryana State |889 |884 |881 |878 |878 |874” |

Nothing had been filed stating as to how the aforesaid figures had
been reached except making a statement that the figures were arrived at on
the basis of entry in certain registers.

17. On a perusal of the affidavit by the NCT of Delhi, it was noted that
in paragraph 5, it had been stated, thus:-
“5. It is submitted that Sex Ratio at Birth in Delhi, which is a reliable
indicator of violations under the PC & PNDT Act, has improved by 9 points
in 2013 over the previous year. The data available from Civil Registration
System indicates that Sex Ratio at Birth was 809 females per 1000 males in
the year 2001 and it is currently at 895 in 2013 Annexure R-I.”

18. At that stage, the Court felt the need for verification of the
documents that formed the basis on which these figures had been reached.
It was also clarified that the figures that had been put forth did not show
much indication of improvement but it was necessary to verify whether the
figures that had been set forth was correct or not. The purpose was to find
out whether there was degradation of sex ratio or stagnation or any steps
had really been taken by the concerned States to improve/enhance the sex
ratio or not; and accordingly it was directed that a meeting be held under
the auspices of National Inspection and Monitoring Committee wherein the
Additional Secretary who had filed the affidavit for the Union of India and
two other Joint Secretaries of the Ministry of Health and Family Welfare
shall remain present. The deponents who had filed the affidavits before
this Court on behalf of the State of Uttar Pradesh and NCT of Delhi were
directed to remain present. The Director General, Health Services, State of
Haryana and the Principal Secretary along with the Special Secretary, State
of Uttar Pradesh were also directed to remain present in the meeting and to
produce the relevant registers/records before the said Committee on the
date fixed. Mr. Gonsalves, learned senior counsel for the petitioner and
Mr. Parikh, learned counsel for the impleaded respondent(s) were allowed to
be present. The report was required to be filed before this Court by
10.12.2014. It was further directed that apart from the sex-ratio, the
aforesaid three States shall also bring records with regard to the
prosecutions levied by the State yearwise and the stage of the prosecution.

19. Pursuant to order dated 25.11.2014, the Committee verified the data
submitted by three States, namely, Uttar Pradesh, Haryana and Delhi. As
far as the State of Uttar Pradesh was concerned, on a perusal of the
report, it transpired that the figures that were submitted by the State of
Uttar Pradesh had been verified by the Committee and found to be correct.
On a perusal of the report along with the documents that had been annexed
to, it was noticed that certain cases were pending for trial before the
trial Court. Regard being had to the fact that they had been instituted
long back, a direction was issued to the effect that the proceedings that
were pending before for trial and where there was no stay order of the High
Court or this Court, the same shall be taken up in quite promptitude and be
disposed of within a period of three months commencing 20th January, 2015.
Be it stated certain other directions were issued to be complied with by
the State of Uttar Pradesh.
20. At a subsequent stage, the data furnished by the States, i.e.,
Bihar, Himachal Pradesh, Rajasthan and Tamil Nadu were verified. On
15.4.2015 this Court’s attention was drawn to the sex ratio in Delhi which
had been verified by the Monitoring Committee as per the population census.
The said sex ratio relates to 2011 which reads as follows:-
“Sex Ratio as per Population Census The universal sex ratio of Delhi as per
population census for all age groups taken together was 821 females per
1000 males in 2001 and it has become 866 females per 1000 males as per
provisional data of census – 2011. Children sex ratio (0-6) of Delhi went
down marginally from 868 (as per census 2001) to 866 (as per census 2011).
As can be seen from statement 1.3, at both points of the figures of Delhi
were below than All India level. The district-wise scenario for the
children of 0-6 years varies in different districts.

Statement 1.3: Sex ratio of Delhi/All India as per population Census Data

|Sl. No |Item |Census Year |
|A |District wise sex ratio |2001 |2011 |
| |(Children of 0-6 years) | | |
| |South |888 |878 |
| |South West |846 |836 |
| |North West |857 |863 |
| |North |886 |872 |
| |Central |903 |902 |
| |New Delhi |898 |884 |
| |East |865 |870 |
| |North East |875 |875 |
| |West |859 |867 |
| |Delhi | | |
| |Children of 0-6 years |868 |866 |
| |All ages |821 |866 |
| |All India | | |
| |Children of 0 -6 years |927 |914 |
| |All ages |933 |940 |

Source: Population census – 2011”

21. Our attention was also drawn to the document which is 'Monthly
monitoring of the sex ratio of institutional birth'. It stated thus:-
“The data is collected on monthly basis from 50 major hospitals which
accounts for 50.87% of total registered births in the year 2013 in Delhi.
This helps to review the sex ratio at the highest level in the shortest
possible time without waiting for the yearly indicators. The sex ratio of
institutional births on the basis of these 50 hospitals was also 895 in the
year 2013. Efforts will be made to increase the coverage of health
institutions under the monthly monitoring system to make this exercise
meaningful and truly representative of the ground reality.”

22. Learned counsel appearing for NCT of Delhi, had drawn our attention
to the affidavit filed by the Union of India and especially to Annexure
'E'. Annexure 'E' is only report on registration of births and deaths in
Delhi in 2013. At page 114, the profile of birth Registration had been
mentioned under the caption 'The birth registration in civil registration
system'. It is as follows:-
“During 2013, a total of 370000 birth events were registered by all the
local bodies taken together. Out of them, 1.95 lakhs (52.76%) were male and
1.75 lakhs (47.24%) were female. Statement 3.1: Total Number of Births
registered under CRS sex-wise.

|Year |Total |Male |Female |Sex Ratio|
| |Births | | | |
|2001 |296287 |163816 |132471 |809 |
| | |(55.29) |(44.71) | |
|2002 |300659 |164184 |136475 |831 |
| | |(54.61) |(45.39) | |
|2003 |301165 |165173 |135992 |823 |
| | |(54.84) |(45.16) | |
|2004 |305974 |167849 |138125 |823 |
| | |(54.86) |(45.11) | |
|2005 |324336 |178031 |146305 |822 |
| | |(54.89) |(45.11) | |
|2006 |322750 |176242 |146508 |831 |
| | |(54.69) |(45,39) | |
|2007 |322044 |174289 |147755 |848 |
| | |(54.12) |(45.88) | |
|2008 |333908 |166583 |167325 |1004 |
| | |(49.89) |(50.11) | |
|2009 |354482 |185131 |169351 |915 |
| | |(52.22) |(47.78) | |
|2010 |359463 |189122 |170341 |901 |
| | |(52.61) |(47.39) | |
|2011 |353759 |186870 |166889 |893 |
| | |(52.82) |(47.18) | |
|2012 |360473 |191129 |169344 |886 |
| | |(53.02) |(46.98) | |
|2013 |370000 |195226 |174774 |895” |
| | |(52.76) |(47.24) | |

23. The data furnished by the NCT of Delhi was contested on the ground
that it was collected from 50 major hospitals. The Court noticed that
there had really been no improvement with regard to the sex ratio. The
Court took note of the submissions of Mr. Gonsalves, learned senior counsel
for the petitioner and Mr. Parikh, learned counsel for the impleaded
respondent(s) and observed that under Section 16(2)(f)(ii) and (iii) there
should be eminent women activists from non-governmental oraganisations and
eminent gynaecologists and obstetricians or experts of stri-
roga or prasuti tantra to be the members and thought it apt to state that
there can be eminent women activists from non-governmental organizations,
eminent gynaecologists and obstetricians or experts of stri-roga or prasuti
tantra and eminent radiologists or sonologists but care has to be taken
that they do not have conflict of interest.
24. On 15.09.2015, the Court noted the submission of Ms. Anitha Shenoy,
learned counsel appearing for Dr. Sabu Mathew George, the newly impleaded
party, that the appropriate authorities are not following the mandate
enshrined under Rule 18A of the Rules. Keeping in view the language
employed in the said Rule, the Court directed that all the appropriate
authorities including the State, districts and sub-districts notified under
the Act shall submit quarterly progress report to the Government of India
through the State Government and maintain Form H for keeping the
information of all registrations readily available. The Court further
directed that the States shall file the compliance report pertaining to sub-
rule (6) of Rule 18A of the Rules and also directed counsel for the Union
of India to apprise the Court about the information received from the
various appropriate authorities.

25. On 17.11.2015 when the matter was taken up, the Court adverted to the
fact that the State of Odisha, as directed, had provided the Committee
relevant documents, especially the documents which are required for
eradicating the deficiencies pointed out by the Committee. Be it noted,
the Committee had earlier pointed out certain deficiencies. The State had
filed the documents in pursuance of the order of the Court and the
Committee had filed report pertaining to the State of Odisha. Paragraph 4
of the report reads as follows:-
“4. The State of Odisha had cited the data on Sex Ratio at Birth from the
Civil Registration of births of State. State Provided the relevant data and
C.D. M.O, Odisha. There are 314 rural registration units & 100 urban
registration units I 30 districts in Odisha State. All the data is based on
the records of civil registration system. The Sex Ratio at Birth (SRB) data
for the year 2013 submitted in the affidavit is 886 whereas as per the
records submitted by the State data for the same period is 890. The
representatives of the State clarified that in the affidavit, the figures
were provisional.”

26. Mr. Gonsalves, learned senior counsel had also filed a chart
containing 'District-wise Sex Ratio at Birth of Odisha State' commencing
from the year 2010 to 2014. The said chart is reproduced below:-
“District wise sex ratio at birth of Odisha State

|Sl.No |Name of the |2010 |2011 |2012 |2013 |2014 |
| |District | | | | | |
|1 |2 |3 |4 |5 |6 |7 |
|1 |Angul |894 |900 |879 |890 |904 |
|2 |Balasore |923 |891 |912 |870 |870 |
|3 |Argarh |923 |889 |913 |891 |913 |
|4 |Bhadrak |923 |891 |876 |883 |875 |
|5 |Bolangir |945 |930 |933 |950 |939 |
|6 |Boudh |983 |957 |936 |934 |918 |
|7 |Cuttack |860 |874 |860 |854 |843 |
|8 |Deogarh |896 |954 |958 |954 |938 |
|9 |Dhenkanal |856 |833 |850 |845 |849 |
|10 |Gajapati |875 |930 |927 |890 |892 |
|11 |Ganjam |902 |880 |867 |813 |794 |
|12 |Jagatsinghpur |912 |905 |842 |777 |852 |
|13 |Jajpur |863 |876 |828 |824 |823 |
|14 |Jharsuguda |859 |902 |882 |908 |878 |
|15 |Kalahandi |888 |935 |968 |989 |942 |
|16 |Kandhamal |912 |943 |950 |962 |940 |
|17 |Kendrapara |881 |836 |828 |734 |705 |
|18 |Keonjhar |934 |923 |950 |965 |930 |
|19 |Khurda |892 |876 |884 |885 |842 |
|20 |Koraput |935 |943 |960 |945 |942 |
|21 |Malkangiri |948 |947 |993 |942 |935 |
|22 |Mayurbhanj |955 |934 |936 |931 |933 |
|23 |Nawarangpur |962 |932 |936 |979 |965 |
|24 |Nayagarh |874 |859 |774 |844 |811 |
|25 |Nuapada |945 |956 |955 |909 |1055 |
|26 |Puri |933 |888 |874 |873 |854 |
|27 |Rayagada |955 |954 |939 |931 |945 |
|28 |Sambalpur |906 |918 |908 |891 |903 |
|29 |Subarnapur |940 |934 |946 |939 |965 |
|30 |Sundargarh |911 |892 |865 |897 |906 |
| |Odisha |911 |902 |896 |886 |889” |

Learned counsel submitted that when the sex ratio reduces below 900,
there is a signal of a social disaster. He had pointed out that there were
many districts where it had fallen below 900 and drawn the attention of the
Court to two districts, namely, Kendrapara and Ganjam to highlight that the
sex ratio had gone down to 705 and 794 in 2014. Be it stated, the two
districts were only referred to highlight how the sex ratio had fallen in
the year 2014 than what it was in 2010.
27. We have adumbrated the history of the litigation, the directions
issued by this Court from time to time and adverted to how this Court has
appreciated the impact of sex ratio on a civilized society having regard to
the legislative intendment under the Act, the suggestions given by the
learned counsel for the petitioner, the verification done by the Monitoring
Committee, and the crisis the country is likely to face if the obtaining
situation is allowed to prevail. As is manifest, this Court had issued
directions from 2001 onwards in different writ petitions and in the instant
writ petition, as noticed earlier, number of directions were issued and,
thereafter, certain clarifications were made. The narration shows the
concern.
28. It needs no special emphasis that a female child is entitled to enjoy
equal right that a male child is allowed to have. The constitutional
identity of a female child cannot be mortgaged to any kind of social or
other concept that has developed or is thought of. It does not allow any
room for any kind of compromise. It only permits affirmative steps that
are constitutionally postulated. Be it clearly stated that when rights are
conferred by the Constitution, it has to be understood that such rights are
recognised regard being had to their naturalness and universalism. No one,
let it be repeated, no one, endows any right to a female child or, for that
matter, to a woman. The question of any kind of condescension or
patronization does not arise.
29. When a female foetus is destroyed through artificial means which is
legally impermissible, the dignity of life of a woman to be born is
extinguished. It corrodes the human values. The Legislature has brought a
complete code and it subserves the constitutional purpose. We may briefly
refer to the scheme of the Act and the Rules framed thereunder. Section 2
of the Act is the dictionary clause and it defines “foetus”, “Genetic
Counselling Centre”, “Genetic Clinic”, “Genetic Laboratory”, “pre-natal
diagnostic procedures”, “pre-natal diagnostic techniques”, “pre-natal
diagnostic test”, “sex selection”, “sonologist or imaging specialist”.
Section 3 provides for Regulation of Genetic Counselling Centers, Genetic
Laboratories and Genetic Clinics. Section 3A imposes prohibition of sex-
selection. Section 3B prohibits the sale of ultrasound machine, etc., to
persons, laboratories, clinics, etc., not registered under the Act.
Section 4 regulates pre-natal diagnostic techniques. Section 5
stipulates written consent of pregnant woman and prohibition of
communicating the sex of foetus. Section 6 prohibits determination of sex.
Chapter IV of the Act deals with the Central Supervisory Board. Sections
7 – 16A deal with the constitution of the Board, meetings of the Board,
functions of the Board, which includes reviewing and monitoring
implementation of the Act and Rules made thereunder. Section 16A commands
the States and Union Territories to have a Board to be known as the State
Supervisory Board or the Union Territory Supervisory Board, as the case may
be, to carry out the functions enumerated therein. Chapter V provides for
the Appropriate Authority and Advisory Committee. Sub-section (4) of
Section 17 deals with the powers of the Appropriate Authority. The said
provision being significant is extracted hereunder:-
“(4) the Appropriate Authority shall have the following functions, namely –
(a) to grant, suspend or cancel registration of a Genetic Counselling
Centre, Genetic Laboratory or Genetic Clinic;
(b) to enforce standards prescribed for the Genetic Counselling Centre,
Genetic Laboratory and Genetic Clinic;
(c) to investigate complaints of breach of the provisions of this Act or
the rules made thereunder and take immediate action;
(d)to seek and consider the advice of the Advisory Committee, constituted
under sub-section (5), on application for registration and on complaints
for suspension or cancellation of registration;
(e) to take appropriate legal action against the use of any sex selection
technique by any person at any place, suo motu or brought to its notice and
also to initiate independent investigations in such matter;
(f) to create public awareness against the practice of sex selection or pre-
natal determination of sex;
(g) to supervise the implementation of the provisions of the Act and rules;
(h) to recommend to the Board and State Boards modifications required in
the rules in accordance with changes in technology or social conditions;
(i) to take action on the recommendations of the Advisory Committee made
after investigation of complaint for suspension or cancellation of
registration.”

30. Section 17A enumerates the powers of the Appropriate Authorities.
The said provision reads as follows:-
“17A. Powers of Appropriate Authorities.- The Appropriate Authority shall
have the powers in respect of the following maters, namely:-
(a) summoning of any person who is in possession of any information
relating to violation of the provisions of this Act or the rules made
thereunder;
(b) production of any document or material object relating to clause (a);
(c) issuing search warrant for any place suspected to be indulging in sex
selection techniques or pre-natal sex determination; and
(d) any other matter which may be prescribed.”

31. Section 18 deals with the registration of Genetic Counselling
Centres, Genetic Laboratories or Genetic Clinics. Sections 19 and 20
provide for certificate of registration and cancellation or suspension of
registration. Chapter VII deals with offences and penalties. Section 22
stipulates prohibition of advertisement relating to pre-
conception and pre-natal determination of sex and punishment for
contravention and Section 23 deals with offences and penalties. Section 24
which has been brought into the Act by way of an amendment with effect from
14.02.2003 states with regard to presumption in the case of
conduct of pre-natal diagnostic techniques. Section 26 provides for
offences by companies. Section 28 provides that no court shall take
cognizance of an offence under the Act except on a complaint made by the
Appropriate Authority concerned, or any officer authorized in this behalf
by the Central Government or State Government, as the case may be, or the
Appropriate Authority; or a person who has given notice of not less than
fifteen days in the manner prescribed. Section 29 occurring in Chapter
VIII which deals with miscellaneous matters provides for maintenance of
records. Section 30 empowers the appropriate authority in respect of search
and seizure of records. The rule framed under Section 32 of the Act is not
comprehensive. Various Forms have been provided to meet the requirement by
the Rules. On a perusal of the Rules and the Forms, it is clear as crystal
that attention has been given to every detail.
32. Having stated about the scheme of the Act and the purpose of the
various provisions and also the Rules framed under the Act, the dropping of
sex ratio still remains a social affliction and a disease.
33. Keeping in view the deliberations made from time to time and regard
being had to the purpose of the Act and the far reaching impact of the
problem, we think it appropriate to issue the following directions in
addition to the directions issued in the earlier order:-
(a) All the States and the Union Territories in India shall maintain a
centralized database of civil registration records from all registration
units so that information can be made available from the website regarding
the number of boys and girls being born.
(b) The information that shall be displayed on the website shall contain
the birth information for each District, Municipality, Corporation or Gram
Panchayat so that a visual comparison of boys and girls born can be
immediately seen.
(c) The statutory authorities if not constituted as envisaged under the Act
shall be constituted forthwith and the competent authorities shall take
steps for the reconstitution of the statutory bodies so that they can
become immediately functional after expiry of the term. That apart, they
shall meet regularly so that the provisions of the Act can be implemented
in reality and the effectiveness of the legislation is felt and realized in
the society.
(d) The provisions contained in Sections 22 and 23 shall be strictly
adhered to. Section 23(2) shall be duly complied with and it shall be
reported by the authorities so that the State Medical Council takes
necessary action after the intimation is given under the said provision.
The Appropriate Authorities who have been appointed under Sections 17(1)
and 17(2) shall be imparted periodical training to carry out the functions
as required under various provisions of the Act.
(e) If there has been violation of any of the provisions of the Act or the
Rules, proper action has to be taken by the authorities under the Act so
that the legally inapposite acts are immediately curbed.
(f) The Courts which deal with the complaints under the Act shall be fast
tracked and the concerned High Courts shall issue appropriate directions in
that regard.
(g) The judicial officers who are to deal with these cases under the Act
shall be periodically imparted training in the Judicial Academies or
Training Institutes, as the case may be, so that they can be sensitive and
develop the requisite sensitivity as projected in the objects and reasons
of the Act and its various provisions and in view of the need of the
society.
(h) The Director of Prosecution or, if the said post is not there, the
Legal Remembrancer or the Law Secretary shall take stock of things with
regard to the lodging of prosecution so that the purpose of the Act is
subserved.
(i) The Courts that deal with the complaints under the Act shall deal with
the matters in promptitude and submit the quarterly report to the High
Courts through the concerned Sessions and District Judge.
(j) The learned Chief Justices of each of the High Courts in the country
are requested to constitute a Committee of three Judges that can
periodically oversee the progress of the cases.
(k) The awareness campaigns with regard to the provisions of the Act as
well as the social awareness shall be undertaken as per the direction No
9.8 in the order dated March 4, 2013 passed in Voluntary Health Association
of Punjab (supra).
(l) The State Legal Services Authorities of the States shall give emphasis
on this campaign during the spread of legal aid and involve the para-legal
volunteers.
(m) The Union of India and the States shall see to it that appropriate
directions are issued to the authorities of All India Radio and Doordarshan
functioning in various States to give wide publicity pertaining to the
saving of the girl child and the grave dangers the society shall face
because of female foeticide.
(n) All the appropriate authorities including the States and districts
notified under the Act shall submit quarterly progress report to the
Government of India through the State Government and maintain Form H for
keeping the information of all registrations readily available as per sub-
rule 6 of Rule 18A of the Rules.
(o) The States and Union Territories shall implement the Pre-conception and
Pre-natal Diagnostic Techniques (Prohibition of Sex Selection) (Six Months
Training) Rules, 2014 forthwith considering that the training provided
therein is imperative for realising the objects and purpose of this Act.
(p) As the Union of India and some States framed incentive schemes for the
girl child, the States that have not framed such schemes, may introduce
such schemes.
34. Before parting with the case, let it be stated with certitude and
without allowing any room for any kind of equivocation or ambiguity, the
perception of any individual or group or organization or system treating a
woman with inequity, indignity, inequality or any kind of discrimination is
constitutionally impermissible. The historical perception has to be given a
prompt burial. Female foeticide is conceived by the society that definitely
includes the parents because of unethical perception of life and nonchalant
attitude towards law. The society that treats man and woman with equal
dignity shows the reflections of a progressive and civilized society. To
think that a woman should think what a man or a society wants her to think
is tantamounts to slaughtering her choice, and definitely a humiliating
act. When freedom of free choice is allowed within constitutional and
statutory parameters, others cannot determine the norms as that would
amount to acting in derogation of law. Decrease in the sex ratio is a sign
of colossal calamity and it cannot be allowed to happen. Concrete steps
have to be taken to increase the same so that invited social disasters do
not befall on the society. The present generation is expected to be
responsible to the posterity and not to take such steps to sterilize the
birth rate in violation of law. The societal perception has to be
metamorphosed having respect to legal postulates.
35. Now, we shall advert to the prayers in Writ Petition (Civil) No. 575
of 2014. The writ petition has been filed by Indian Medical Association
(IMA). It is contended that Sections 3-A, 4, 5, 6, 7, 16, 17, 20, 23, 25,
27 and 30 of the Act and Rules 9(4), 10 & Form “F” (including foot-note),
which being the subject matter of concern in the instant writ petition, are
being misused and wrongly interpreted by the concerned authorities thereby
causing undue harassment to the medical professionals all over the country
under the guise of the ‘so-called implementation’. It is also urged that,
implementation of steps and scrutiny of records was started at large scale
all over the country and lot of anomalies were found in records maintained
by doctors throughout the country. It is however pertinent to mention here
that the majority of the defaults were of technical nature as they were
merely minor and clerical errors committed occasionally and inadvertently
in the filing of Form “F”. It is also put forth that the Act does not
classify the offences and owing to the liberal and vague terminology used
in the Act, it is thrown open for misuse by the concerned implementing
authorities and has resulted into taking of cognizance of non-bailable
(punishable by three years) offences against doctors even in the cases of
clerical errors, for instance non-mentioning of N.A. (Not Applicable) or
leaving of any column in the concerned Form “F” as blank. It is further
submitted that the said unfettered powers in the hands of implementing
authority have resulted into turning of this welfare legislation into a
draconian novel way of encouraging demands for bribery as well as there is
no prior independent investigation as mandated under Section 17 of the Act
by these Authorities. It is also set forth that the Act states merely that
any contravention with any of the provisions of the Act would be an offence
punishable under Section 23(1) of the said Act and further all offences
under the Act have been made non-bailable and non-compoundable and the
misuse of the same can only be taken care of by ensuring that the
Appropriate Authority applies its mind to the fact of each case/complaint
and only on satisfaction of a prima facie case, a complaint be filed rather
than launching prosecution mechanically in each case. With these averments,
it has been prayed for framing appropriate guidelines and safeguard
parameters, providing for classification of offences as well, so as to
prohibit the misuse of the PCPNDT Act during implementation and to read
down this Sections 6, 23, 27 of PCPNDT Act. That apart, it has been prayed
to add certain provisos/exceptions to Sections 7, 17, 23 and Rule 9 of the
Rules.
36. In our considered opinion, whenever there is an abuse of the process
of the law, the individual can always avail the legal remedy. As we find,
neither the validity of the Act nor the Rules has been specifically
assailed in the writ petition. What has been prayed is to read out certain
provisions and to add certain exceptions. We are of the convinced view
that the averments of the present nature with such prayers cannot be
entertained and, accordingly, we decline to interfere.
37. In the result, Writ Petition (Civil) No. 349 of 2006 stands disposed
of in terms of the directions issued by us and Writ Petition (Civil) No.
575 of 2014 stands dismissed. In the facts and circumstances of the case,
there shall be no order as to costs.

.............................J.
[Dipak Misra]

............................ J.
[Shiva Kirti Singh]
New Delhi;
November 8, 2016
-----------------------
[1] (1997) 7 SCC 110
[2] (2001) 5 SCC 577
[3] (2003) 8 SCC 398
[4] (2013) 4 SCC 1

-----------------------
43

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. http://judis.nic.in/supremecourt/imgst.aspx?filename=44283

REPORTABLE

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.9103 OF 2014

PRAMOD JAIN AND OTHERS
…APPELLANT(S)

VERSUS

SECURITIES AND EXCHANGE BOARD OF INDIA ...RESPONDENT(S)

J U D G M E N T

ADARSH KUMAR GOEL, J.

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
Regulations).

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
substantially.

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
property.

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
Constitution.

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
crores.

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.

questions

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
decisions.

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
regulations.…

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
(1):

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
immediate.

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.

………………………………………………..J.
[ ANIL R. DAVE ]

………………………………………………..J.
[ ADARSH KUMAR GOEL ]

NEW DELHI
NOVEMBER 07, 2016
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[1]

[2] (2013) 8 SCC 20
[3]
[4] (2014) 11 SCC 112
[5]
[6] Justice P.N. Bhagwati Committee Report on Takeovers
[7]
[8] (2013) 8 SCC 20 para 67

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37

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