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Issues Involved:
1. Public announcement and its impact on the share price. 2. Alleged funding of Damayanti group for market manipulation. 3. Alleged bail-out of brokers during payment crisis. 4. Legal authority and appropriateness of SEBI's directions under sections 11 and 11B of the SEBI Act and regulation 12(a) of the 1995 Regulations. 5. Prosecution of directors/officers under section 24 of the SEBI Act. Issue-wise Detailed Analysis: 1. Public Announcement and Its Impact on the Share Price: The promoters of the Appellant company announced on 9.4.1998 their intention to acquire 2% of the company's equity capital by making an open offer at a price of Rs. 140 per share, later revised to Rs. 165 on 25.5.1998. The share price, which was around Rs. 62, increased to Rs. 165 by 04.06.1998 and then fell sharply to Rs. 51. The Respondents alleged that this public announcement led to artificial price inflation and market distortion. However, the Tribunal found that the public announcement was transparent, in line with the Takeover Regulations, and aimed at benefiting the investors. The Tribunal noted that the market response was in tune with the pattern normally found in such situations and that the Respondents failed to establish any motive or gain for the promoters or the company from this action. 2. Alleged Funding of Damayanti Group for Market Manipulation: The Respondents alleged that the Appellant company provided Rs. 10 crores to Damayanti group, a front for Shri Harshad Mehta, to manipulate the market. The Tribunal found that the funds were provided by Videocon Petroleum Ltd (VPL) and not the Appellant company. The Tribunal noted that the evidence showed that the Appellant was only one of the conduits in the fund movement chain and that the Respondents failed to prove that the funds belonged to the Appellant company or that they were used to purchase its own shares. 3. Alleged Bail-out of Brokers During Payment Crisis: The Respondents alleged that the Appellant company provided Rs. 15.53 crores to bail out brokers connected with Damayanti group during a payment crisis in June 1998. The Tribunal found that the bail-out was done at the behest of BSE and NSE to prevent a market collapse and that there was no evidence to show that any particular broker was chosen by the Appellant. The Tribunal noted that the Respondents failed to establish a direct link between the Appellant company and the Damayanti group or that the bail-out was a quid pro quo measure. 4. Legal Authority and Appropriateness of SEBI's Directions: The Tribunal examined the scope and reach of sections 11 and 11B of the SEBI Act and regulation 12(a) of the 1995 Regulations. It held that the powers under section 11B are preventive and remedial, not punitive. The direction prohibiting the Appellant from raising money from the public in the capital market for three years was found to be punitive in effect and beyond the scope of section 11B. The Tribunal also held that the expression "dealing in securities" in regulation 12(a) does not include accessing the capital market, and thus the direction under regulation 12(a) was also untenable. 5. Prosecution of Directors/Officers Under Section 24 of the SEBI Act: The Tribunal noted that the direction to launch prosecution against the Appellant company through its directors/officers was made under section 24 of the SEBI Act. It observed that the Tribunal does not have the power to quash the prosecution proceedings and that the directors/officers could defend themselves in the trial court by proving their non-involvement in the alleged contravention. Conclusion: The Tribunal set aside the direction prohibiting the Appellant company from raising money from the public in the capital market for three years, finding it beyond the scope of SEBI's powers under sections 11 and 11B of the SEBI Act and regulation 12(a) of the 1995 Regulations. The Tribunal did not interfere with the direction to launch prosecution against the Appellant company through its directors/officers, as it was beyond its jurisdiction to do so.
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