2001 (11) TMI 947 - HC - Companies Law

Summary

Issues Involved:
1. Whether a promoter of the target company must be deemed to be an acquirer or a person acting in concert with the acquirer in all cases.
2. Whether Modipon Ltd. was eligible to participate in the public offer made by the acquirers to the shareholders of MRL.
3. Whether the appeal filed before the Tribunal was authorized by the board of directors of Modipon Ltd.

Issue-Wise Detailed Analysis:

1. Whether a promoter of the target company must be deemed to be an acquirer or a person acting in concert with the acquirer in all cases:
The court examined the definition of 'promoter' and 'acquirer' under the Securities and Exchange Board of India Act, 1992, and the Securities and Exchange Board of India (Substantial Acquisition of Shares & Takeovers) Regulations, 1997. It was held that a promoter cannot automatically be deemed an acquirer or a person acting in concert with the acquirer. The determination depends on whether the promoter shares a common objective or purpose with the acquirer for substantial acquisition of shares or voting rights or gaining control over the target company. The court emphasized that each case must be examined on its facts to determine if the promoter is acting in concert with the acquirer.

2. Whether Modipon Ltd. was eligible to participate in the public offer made by the acquirers to the shareholders of MRL:
The court found that Modipon Ltd., despite being a promoter of MRL, did not share the common objective or purpose of the acquirers who made the public offer. Modipon Ltd. was interested in disinvesting its shares rather than acquiring additional shares. The Tribunal's decision that Modipon Ltd. could not be characterized as an acquirer or a person acting in concert with the acquirers was upheld. Therefore, Modipon Ltd. was eligible to participate in the public offer made by the acquirers to the shareholders of MRL.

3. Whether the appeal filed before the Tribunal was authorized by the board of directors of Modipon Ltd:
The court addressed the contention that the appeal was not authorized by the board of directors of Modipon Ltd. It was noted that Modipon Ltd. had previously filed a writ petition challenging SEBI's decision, which was not disputed for lack of authorization. The court had directed Modipon Ltd. to prefer an appeal before the Tribunal. Consequently, the appeal was deemed maintainable and did not suffer from any legal infirmity.

Conclusion:
The court concluded that Modipon Ltd., as a promoter of MRL, could not automatically be deemed an acquirer or a person acting in concert with the acquirers. Each case must be examined on its facts to determine if the promoter shares the common objective or purpose of the acquirers. Modipon Ltd. was eligible to participate in the public offer as it did not share the acquirers' objective of gaining control over MRL. The appeal filed before the Tribunal was maintainable and did not suffer from any legal infirmity. The appeal was dismissed, and the notice of motion was disposed of.