2019 (2) TMI 1044 - HC - SEBI

Determination of offer price in accordance with Regulation 8 (2) (c) of SAST Regulations 2011 - Appeal to the Securities Appellate Tribunal - Offer Price of Rs. 61.73 per share as being offered by the LIC - Held that - In the present case the shares of the target company i.e. IDBI are listed on Bombay Stock Exchange Ltd. (BSE) and National Exchange of India Ltd. (NSC). Union of India is presently in the control of the target company. LIC was holding 67, 36, 20, 000 shares in the target company representing 14.90% of the voting rights in the target company as a public shareholder of the target Company. The Board of Directors of the target company in their meeting held on 4.10.2018 authorized the issuance and allotment of equity shares aggregating upto 51% of the fully diluted voting share capital to LIC by way of a preferential issue. Therefore an open offer was required to be made in terms of Regulation 3 (1) and (4) of the SAST Regulations 2011. The LIC has issued an announcement of an open offer on 4.10.2018 in terms of Regulations 13 (2) (g) of the SAST Regulations 2011. As needed in terms of Regulation 16 of SAST Regulations 2011 LIC through its Merchant Banker i.e. ICICI Securities Limited filed a draft letter of offer with SEBI on which SEBI issued its observation letter on 7.12.2018 in terms of Regulations 16 (4) of the SAST Regulations. Thus the price to be paid to the shareholders of the target company for acquisition of their shares in the open offer made by the LIC has been determined in terms of Regulation 8 of the SAST Regulation 2011. It appears that the case of the petitioner proceed on the premise that in terms of the provisions of LIC Act 1956 and resultant disclosure made by the LIC in clause 4.5 of the letter of offer to the effect that LIC is wholly owned by the Central Government therefore the Central Government is the person acting in concert with LIC within the meaning of Regulation 2 (q) of the SAST Regulations 2011 for the purpose of present acquisition of control of the target company by the LIC. On this assumption the petitioner is of the view that since on 25.5.2018 the Government of India acquired 1, 09, 73, 26, 649 number of shares of the target company at the price of Rs. 71.82/- per share thus the said price of Rs. 71.82/- per share paid by the Government of India being person acting in concert of LIC will fall within Regulation 8 (2) (c). The petitioner is of the view that price of Rs. 71.82/- per share being highest amongst all parameters laid down in Regulation 8 (2) (a) to (f) should be the price of open offer. Examining the term persons acting in concert DAIICHI SANKYO CO. LTD. VERSUS JAYARAM CHIGURUPATI 2010 (7) TMI 289 - SUPREME COURT OF INDIA has observed that the deeming provision does not provide that the mere existence of a holding-subsidiary relationship is sufficient to create this relationship. The deeming provision does not dispense with the requirement that the parties must have cooperated for the common objective or purpose of substantial acquisition of shares and held further that this must be established as a matter of fact on an analysis of the conduct of the parties. In addition the Apex Court found the relationship of persons acting in concert must exist not at the time of the public announcement but at the time of acquisition for the purposes of Regulation 20(4)(b) of SAST Regulations 2011. On applying the aforesaid ratio to the facts of the present case it can easily be inferred that Union of India cannot be term as person acting in concert with LIC and consequently Regulations 8 (2) (c) of the SAST Regulations 2011 has been applied correctly in the present case and the Offer Price of Rs. 61.73 per share as being offered by the LIC is correct as per the justification given at para 6.1.5 and 6.1.6 of the Letter of Offer the said price has already been affirmed by a judicial verdict.

Summary

Issues Involved:
1. Maintainability of the writ petition under Article 226 of the Constitution of India.
2. Determination of the offer price per share for IDBI Bank Ltd.
3. Applicability of Regulation 8 (2) (c) of the SAST Regulations, 2011.
4. Locus standi of the petitioner.
5. Territorial jurisdiction of the court.

Issue-wise Detailed Analysis:

1. Maintainability of the writ petition under Article 226 of the Constitution of India:
The respondents argued that the writ petition is not maintainable due to the availability of an alternative remedy under Section 15-T of the SEBI Act, 1992, which allows appeals to the Securities Appellate Tribunal (SAT). The petitioner countered that the appeal provisions do not explicitly cover their case, thus not barring the High Court's jurisdiction. The court emphasized that Section 15-T provides for appeals against orders of SEBI or adjudicating officers, suggesting that the petitioner should have first approached the SAT.

2. Determination of the offer price per share for IDBI Bank Ltd.:
The petitioner contended that the offer price should be Rs. 71.82 per share as per Regulation 8 (2) (c) of the SAST Regulations, 2011, based on the price at which the Government of India acquired shares. However, SEBI and LIC argued that the correct offer price was Rs. 61.73 per share, determined in compliance with SEBI regulations. The court found that the offer price of Rs. 61.73 per share was correctly determined as per the applicable legal provisions and affirmed by judicial precedent.

3. Applicability of Regulation 8 (2) (c) of the SAST Regulations, 2011:
The petitioner argued that the price of Rs. 71.82 per share paid by the Government of India should be considered under Regulation 8 (2) (c) as the highest price paid. The court examined the concept of 'persons acting in concert' and concluded that the Government of India and LIC are not acting in concert. Therefore, the price paid by the Government of India does not fall under Regulation 8 (2) (c), and the offer price of Rs. 61.73 per share is correct.

4. Locus standi of the petitioner:
The respondents questioned the petitioner's locus standi, arguing that the petitioner did not provide documentary proof of being a minority shareholder of IDBI. The court noted that the petitioner failed to establish their locus standi by not disclosing the number and details of shares held. Consequently, the court found that the petitioner lacked standing to file the writ petition.

5. Territorial jurisdiction of the court:
The respondents argued that the court lacked territorial jurisdiction as the transactions and respondents were primarily based in Maharashtra, except for the Union of India located in Delhi. The court observed that the petitioner did not adequately justify the jurisdiction of the Allahabad High Court, leading to the dismissal of the petition on jurisdictional grounds as well.

Conclusion:
The High Court dismissed the writ petition, concluding that the offer price of Rs. 61.73 per share was in accordance with the applicable legal provisions, and no interference under Article 226 of the Constitution of India was warranted. The court also highlighted the availability of alternative remedies and the lack of locus standi and territorial jurisdiction as additional grounds for dismissal.