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2015 (6) TMI 107 - Board - Companies LawViolation of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 - Forfeiture of shares - Removal of name from Register of Members - Permanent injunction order to restrain from acquiring directly or indirectly equity in the Appellant Company - Jurisdiction of the CLB to entertain the Petition - Doctrine of abandonment, waiver and acquiescence - Held that - I find enough force in the submissions advanced by the Ld. Counsel appearing for the Respondents that the CLB, in exercise of its rights and powers conferred upon it by virtue of the provisions contained in Section 59(4) of the Act, is not empowered to make investigation/enquiry into the allegation that the Respondents acting in concert have acquired shares in violation of the Takeover Code, and hence, the shares are liable to be forfeited and the Register of Members requires to be rectified under the said provisions by deleting the name of the Respondents there from. In my considered view, it is only the SEBI who has domain to enquire/investigate into as to whether the parties against whom the allegations have bee made, acting in concert, have acquired the shares more than threshold him prescribed under the provisions of the Takeover Code. In my view, the decisions, Kesha Appliances (P.) Ltd. v. Royal holdings Services Ltd. 2005 (11) TMI 261 - HIGH COURT OF BOMBAY , Azzilfi Finlease & Investments v. Ambala Sarabhai Enterprises 1999 (7) TMI 660 - COMPANY LAW BOARD, MUMBAI , Redwood Holdings (P.) Ltd. v. Sandesh (P.) Ltd. 2002 (8) TMI 836 - COMPANY LAW BOARD, MUMBAI relied upon by the Respondents Counsel are squarely applicable to the Facts of the case in hand. In my considered view, on a careful analysis of the relevant provisions contained in the Takeover Code and Section 59(4) of the Act and upon a close scrutiny of the decisions cited above by the rival parties in support of their respective contentions, the legal position that emerges, in my opinion, is as follows - (i) where any acquirer(s) acquired impugned shares, which, ex-facie, are in violation of the Takeover Code, such acquisition shall be void and in that case no finding is required from the Competent Authority i.e. SEBI and in such case, the CLB by virtue of the powers conferred upon it under Section 59(4) of the Act, is empower to pass an order for rectification of Register of Members of a Company. - (ii) However, where the acquirer is more than one and there is allegation that the acquirers together, acting in concert, have acquired the shares in violation of the relevant provisions of the Takeover Code and the acquirers deny/rebut such allegation, then the question as to whether such acquirers have acquired the impugned shares, acting in concert is required to be investigated/enquired into by the SEBI and in case the Competent Authority/Adjudicator of the SEBI comes to the conclusion that the acquirers acting in concert, have acquired the shares, in that case, the company may refuse the registration of shares if such acquirers have sought for registration of the Impugned shares, and if their names are already entered in the Register of Members of the Company, they may approach the CLB for rectification of its Register of Members by deleting the names of such shareholders/members in respect of the impugned shares. In the present case, ex-facie there is no violation of the Takeover Code in view of the fact that each acquirer has acquired shares below 5% which is within the prescribed limit under the provisions of the Takeover Code. Further the Respondents have denied the fact that they acting in concert have acquired the impugned shares as alleged by the Respondents. Therefore, in my opinion, the Appellant is required to approach the Competent Authority of the SEB1 first, by way of filing a complaint in accordance with law. If such Competent Authority of the SEBI renders a finding to the effect that the Respondents, acting in concert, have acquired the shares-in-question, thereafter the Petitioner is entitled to approach the CLB seeking rectification of Register of Members of the Company. In my opinion, the CLB has no domain to entertain this Appeal in the present form for want of jurisdiction. The Appeal, therefore, deserves to be dismissed being pre-mature. In view of the foregoing discussions, I hold that the petition is barred by the provisions of Section 15Y and 20A of the SEBI Act. It deserves to be dismissed accordingly. Doctrine of abandonment, waiver and acquiescence - I have considered the submissions advanced on behalf of the Respondents. I respectfully agree with the contention of Mr. Chagla, Ld. Sr. Advocate that there can be no plea as to estoppel, waiver or acquiescence/ abandonment against the statutory provisions. However, I am not impressed with the submission advanced on behalf of the Appellant Company that the principles of waiver, acquiescence, estoppel and abandonment would not be attracted in the present case. In the present case, admittedly, the impugned shares were acquired from time to time by the Respondents since 2005 onwards within the knowledge of the company and its officers on the Board as shown by the Appellant in Chart- C . The Company kept silent throughout during this period. It failed to assert its right at the proper opportunity and allowed the Respondents, shareholders to alter their positions from time to time. As indicated above, the Appellant Company did not raise this issue prior to filing of this petition, not even at the time of filing of the first Company Petition, being C.P. No. 111/2013, wherein the parties have jointly filed Consent Terms. It is a settled proposition of law that question parties acting in concert is a mixed question of fact and law. It is not a pure question of law. I have held here that the Competent Authority has to decide such question after due enquiry/investigation under the SEBI Act and Rules made there under to whom admittedly the Appellant Company did not approach till date. In these circumstances, it is difficult for me to accept the contention that doctrine of abandonment, waiver and acquiescence is not attracted in this case. However, having principally held that the petition itself is not maintainable due to lack of jurisdiction, I dismiss this petition accordingly. - Decided against the appellant.
Issues Involved:
1. Jurisdiction of the Company Law Board (CLB) to entertain the petition. 2. Alleged violation of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (Takeover Code). 3. Whether the respondents acted in concert in acquiring shares. 4. Validity of the shares acquired by the respondents and their forfeiture. 5. Rectification of the Register of Members of the appellant company. 6. Principles of waiver, acquiescence, and abandonment. Issue-wise Detailed Analysis: 1. Jurisdiction of the Company Law Board (CLB): The respondents contested the maintainability of the appeal, arguing that the CLB lacked jurisdiction to adjudicate on matters concerning the alleged violation of the Takeover Code. They asserted that SEBI is the competent authority to investigate such violations. The CLB agreed, citing several precedents, including *Azzilfi Finlease & Investments v. Ambala Sarabhai Enterprises* and *Redwood Holdings (P.) Ltd. v. Sandesh (P.) Ltd.*, which established that SEBI has exclusive jurisdiction over breaches of the Takeover Code. 2. Alleged Violation of the SEBI Takeover Code: The appellant claimed that the respondents acquired shares in violation of the Takeover Code, specifically exceeding the threshold limits without making a public announcement or open offer. The appellant sought the forfeiture of these shares and rectification of its Register of Members. The CLB noted that the respondents denied acting in concert and acquiring shares in violation of the Takeover Code. 3. Whether the Respondents Acted in Concert: The appellant argued that the respondents acted in concert, citing common shareholders and directors among the respondent companies. The CLB observed that determining whether parties acted in concert requires a detailed investigation, which falls under SEBI's purview. The CLB referenced the definition of "persons acting in concert" under Section 2(q) of the Takeover Code and concluded that such matters should be investigated by SEBI. 4. Validity of the Shares Acquired by the Respondents and Their Forfeiture: The appellant sought a declaration that the shares acquired by the respondents were illegal and should be forfeited. The CLB held that it does not have the authority to declare shares void or order their forfeiture based on alleged violations of the Takeover Code. This responsibility lies with SEBI, which can investigate and take appropriate action if a violation is established. 5. Rectification of the Register of Members: The appellant requested rectification of its Register of Members to remove the names of the respondents. The CLB stated that rectification under Section 59(4) of the Companies Act, 2013, is permissible only if the acquisition of shares is ex-facie illegal. Since the respondents denied acting in concert and the alleged violation required investigation by SEBI, the CLB concluded that it could not order rectification without SEBI's findings. 6. Principles of Waiver, Acquiescence, and Abandonment: The respondents argued that the appellant's delay in raising the issue and its previous consent to the respondents' shareholding indicated waiver and acquiescence. The CLB noted that the appellant had not raised the issue in earlier proceedings, including a previous petition where consent terms were agreed upon. The CLB held that the appellant's failure to assert its rights earlier suggested waiver and acquiescence, further supporting the dismissal of the petition. Conclusion: The CLB dismissed the petition, holding that it lacked jurisdiction to adjudicate on the alleged violations of the Takeover Code and that SEBI is the competent authority to investigate such matters. The petition was deemed premature, and the appellant was advised to approach SEBI for appropriate relief. The principles of waiver and acquiescence were also considered, reinforcing the dismissal of the petition. The order included the dismissal of the petition, vacation of any ad-interim orders, and no order as to costs.
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