2015 (11) TMI 29 - AT - Companies Law

Penalty imposed under Section 15H(ii) of SEBI Act, 1992 Public Offer and Open Offer under Regulations 10 and 12 of Takeover Regulation 1997 Delay of 89 days Appellant contends that Regulation 24(1) requires merchant banker to ensure arrangements for funds before public announcement and finances were organised within 85 days thus open offer was rightly made on 89th day Held That - Very purpose of public offer would be frustrated if acquirers are given opportunity to make P.A. after a long lapse of time There has been a definite prejudice to shareholders in matter of exercising their statutory rights - Time limit of 4 days prescribed in Regulation 14(1) is crucial and important - Monetary penalty of ₹ 8 lakh imposed under section 15H(ii) is not disproportionate as compared to maximum penalty of ₹ 25 crore imposable for such a violation - Any offer made by an acquirer after statutory time limit of 4 days prescribed in Regulations 14(1) would not amount to sufficient compliance of Takeover Regulations Decided in favour of Revenue.

Summary

Issues:
Violation of SEBI Act, 1992 - Delay in making public offer under Takeover Regulations, 1997.

Analysis:
The appellant appealed against the imposition of a monetary penalty under section 15H(ii) of the SEBI Act, 1992 due to a delayed open offer after acquiring shares of a company. The appellant entered into Share Purchase Agreements triggering the requirement for a public offer under the Takeover Regulations, 1997. The open offer was made after a delay of 89 days instead of the prescribed 4 days. The appellant argued that the delay was due to reasons beyond its control, and the open offer was made within 85 days as required by Regulation 24(1). The respondent opposed the appellant's case.

The tribunal held that the purpose of public offers under the Takeover Regulations would be frustrated if acquirers were allowed to delay public announcements after acquiring a significant stake in a company. The delay in making the public offer caused prejudice to the shareholders' statutory rights to exit or continue with the company. The tribunal emphasized the importance of the 4-day time limit prescribed in Regulation 14(1) and stated that the value of this time limit cannot be undermined unless exceptional circumstances are proven.

The tribunal analyzed the relevant provisions of the Takeover Regulations, 1997 and the SEBI Act, 1992. It concluded that the conditionality in Regulation 24 must be met before acquiring shares, not at a later date at the acquirer's discretion. The tribunal found no legal infirmity in the impugned order imposing a monetary penalty of Rs. 8 lakh, considering the maximum penalty of Rs. 25 crore for such violations. The judgment highlighted that making an open offer in accordance with the law does not absolve the acquirer from complying with the statutory time limits prescribed in the regulations.

In the final decision, the tribunal dismissed the appeal with no order as to costs, upholding the imposition of the monetary penalty for the delayed open offer.