2010 (2) TMI 1127 - AT - Companies Law

Summary

Issues Involved:
1. Whether the appellant was a "person acting in concert" with other entities.
2. Whether the appellant violated Regulation 7 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.
3. Whether the findings of the adjudicating officer regarding the appellant's association with Ketan Parekh were justified.

Summary:

Issue 1: Whether the appellant was a "person acting in concert" with other entities.
The core issue was whether the appellant acted in concert with five other entities when acquiring shares of Adani Exports Ltd., thereby violating Regulation 7 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. The adjudicating officer concluded that the appellant, along with other entities, acquired shares exceeding 5% of the target company's paid-up share capital without necessary disclosures. However, the Tribunal found that the show cause notice lacked specific allegations of a common objective or agreement for substantial acquisition of shares, which is essential to establish "acting in concert." The Tribunal emphasized that close business associations do not equate to acting in concert for share acquisition purposes.

Issue 2: Whether the appellant violated Regulation 7 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.
The Tribunal noted that the appellant's share acquisitions alone did not exceed the 5% threshold. The adjudicating officer's findings were based on the assumption that the appellant acted in concert with other entities. Since the Tribunal concluded that the appellant was not acting in concert, it followed that the appellant did not violate Regulation 7. The Tribunal highlighted that mere business associations or acting as a broker for Ketan Parekh's companies did not constitute acting in concert.

Issue 3: Whether the findings of the adjudicating officer regarding the appellant's association with Ketan Parekh were justified.
The adjudicating officer cited several facts to establish the appellant's connection with Ketan Parekh, such as shared addresses, joint overdraft facilities, and common directors. However, the Tribunal found that these facts, individually or collectively, did not prove that the appellant was acting in concert with Ketan Parekh's entities. The Tribunal referred to a previous decision (Appeal no. 35 of 2002) where it was held that the appellant was not under Ketan Parekh's control, despite close business relations. The Tribunal reiterated that close business relations do not imply acting in concert for share acquisition.

Conclusion:
The Tribunal allowed the appeal, setting aside the impugned order, and concluded that the appellant was not acting in concert with the other entities managed and controlled by Ketan Parekh. Consequently, the appellant did not violate Regulation 7 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. The appeal was allowed with no order as to costs.