9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (5) TMI 785 - SC - Companies LawWithdrawal of offer - Whether an open offer voluntarily made through a Public Announcement for purchase of shares of the target company can be permitted to be withdrawn at a time when the voluntary open offer has become uneconomical to be performed. - Held that - in the years 2006- 07, 2007-08 and 2010-11, the respondent had acquired shares in excess of 5% which breached the 5% creeping acquisition limit. In our opinion, the respondent was required to comply with Regulation 11 and make a Public Announcement to acquire shares in accordance with law. The respondent admittedly not having complied with Regulation 11, in our opinion, the appellant was perfectly justified in taking the non-compliance into consideration whilst considering the feasibility of the public offer made on 20th October, 2011 - Delay in performance of its duties by SEBI can not be equated to refusal of the statutory approval requires from other independent bodies, such as under the RBI, Taxation Laws and other regulatory statutes including Foreign Exchange Regulations. Delay by SEBI in taking a final decision in making its comments on the letter of offer would not fall under Regulation 27(1)(b). Respondent has failed to place on the record either before SAT or before this Court the prejudice that has been caused by not observing Rules of Natural Justice. It is by now settled proposition of law that mere breach of Rules of Natural Justice is not sufficient. Such breach of Rules of Natural Justice must also entail avoidable prejudice to the respondent. This reasoning of ours is supported by a number of cases. We may, however, refer to the law laid down in N atwar Singh Vs. Director of Enforcement & Anr., (2010) 13 SCC 255 wherein it was held that there must also have been caused some real prejudice to the complainant; there is no such thing as a merely technical infringement of natural justice - All the information sought by SEBI related to the three earlier acquisitions when the creeping limit for acquisition has been breached for triggering the mandatory Takeover Regulations. In appeal, SAT has left the question with regard to the earlier three acquisitions open and to be decided in accordance with law. Therefore, clearly no prejudice has been caused to the respondent. Distinction sought to be made by Mr. Nariman with regard to voluntary open offer and mandatory open offer which is the result of a triggered acquisition is not accepted. The consequences of both kinds of offers to acquire shares in the Target Company, at a particular price, are the same. As soon as the offer price is made public, the securities market would take the same into account in all transactions. Therefore, the withdrawal of the open offer will have to be considered by the Board in terms of Regulation 27(1)(b)(c) and (d). Further, the deletion of Regulation 27(1)(a) does not, in any manner, advance the case of the respondent. It rather reinforces the conclusion that an open offer once made can only be withdrawn in circumstances stipulated under Regulation 27(1)(b)(c) and (d). We also do not agree with Mr. Nariman that voluntary open offer made by the respondent ought to be permitted to be withdrawn under Regulation 27(1)(b) for the reasons already stated. We have already come to the conclusion that the delay in offering comments by the Board on the letter containing voluntary open offer, though undesirable, is not fatal to the decision ultimately taken by the Board. - Following decision of Nirma Industries Ltd. & Anr. Vs. Securities and Exchange Board of India 2013 (5) TMI 629 - SUPREME COURT OF INDIA - Decided in favour of appellants.
Issues Involved:
1. Whether a voluntary open offer can be withdrawn when it becomes uneconomical. 2. Compliance with Regulation 11 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. 3. Delay by SEBI in issuing comments on the draft letter of offer. 4. Applicability of Regulation 27 for withdrawal of the open offer. 5. Distinction between voluntary and mandatory public offers. 6. Whether the judgment in Nirma Industries Ltd. vs. SEBI is applicable. 7. Breach of natural justice due to lack of personal hearing. Issue-wise Detailed Analysis: 1. Whether a voluntary open offer can be withdrawn when it becomes uneconomical: The court held that a voluntary open offer cannot be withdrawn merely because it has become uneconomical. The court emphasized that permitting public offers to be withdrawn on the ground of economic unviability would compromise the integrity of the securities market. The court reiterated that Regulation 27 of the Takeover Regulations, which governs the withdrawal of public offers, applies equally to voluntary and mandatory offers. The court stated, "no public offer whether it is voluntary or triggered by Regulation 11 can be withdrawn, unless it satisfies the circumstances set out in Regulation 27(1)(b), (c) and (d)." 2. Compliance with Regulation 11 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997: The court noted that the respondent had breached the 5% creeping acquisition limit in the years 2006-07, 2007-08, and 2010-11 and was required to comply with Regulation 11 by making a public announcement to acquire shares. The court stated, "the respondent was required to comply with Regulation 11 and make a Public Announcement to acquire shares in accordance with law." 3. Delay by SEBI in issuing comments on the draft letter of offer: The court acknowledged the delay of 13 months by SEBI in issuing comments on the draft letter of offer, describing it as "wholly inexcusable and needs to be avoided." However, the court concluded that this delay did not nullify SEBI's actions. The court emphasized that SEBI's duty is to ensure that every public offer is bona fide for the benefit of shareholders and acquirers, and SEBI's delay does not permit the withdrawal of the public offer under Regulation 27(1)(b). 4. Applicability of Regulation 27 for withdrawal of the open offer: The court confirmed that Regulation 27 applies to both voluntary and mandatory public offers. The court rejected the respondent's argument that Regulation 27 should only govern mandatory open offers. The court stated, "The plain reading of the aforesaid regulation makes it clear that no public offer whether it is voluntary or triggered by Regulation 11 can be withdrawn, unless it satisfies the circumstances set out in Regulation 27(1)(b), (c) and (d)." 5. Distinction between voluntary and mandatory public offers: The court dismissed the argument that voluntary public offers should be treated differently from mandatory public offers. The court held that both types of offers have the same effect on shareholders and the market, and therefore, the provisions of Regulation 27 should be applied equally to both. The court stated, "There can be no distinction between a triggered public offer and a voluntary public offer. Both have to be considered on an equal footing." 6. Whether the judgment in Nirma Industries Ltd. vs. SEBI is applicable: The court affirmed that the judgment in Nirma Industries Ltd. vs. SEBI is applicable to the present case. The court reiterated that Regulation 27(1)(b), (c), and (d) are exceptions to the general rule that no public offer shall be withdrawn once made, and these exceptions must be construed strictly. The court stated, "We reiterate our opinion in Nirma Industries Ltd. (supra) that under Clause 27(1)(b)(c) and (d), a Public Offer, once made, can only be permitted to be withdrawn in circumstances which make it virtually impossible to perform the Public Offer." 7. Breach of natural justice due to lack of personal hearing: The court acknowledged that the respondent was not granted a personal hearing despite requesting one. However, the court concluded that the respondent failed to demonstrate any real prejudice caused by this breach of natural justice. The court stated, "It is by now settled proposition of law that mere breach of Rules of Natural Justice is not sufficient. Such breach of Rules of Natural Justice must also entail avoidable prejudice to the respondent." Conclusion: The appeal was allowed, and the order passed by the SAT was set aside. The court restored the directions issued by SEBI in the letter dated 30th November 2012, emphasizing that the voluntary open offer could not be withdrawn merely on the grounds of economic unviability and that SEBI's delay in issuing comments did not justify the withdrawal of the offer.
|
