2008 (10) TMI 730 - AT - SEBI

Summary

Issues Involved:
1. Method of pricing of the public offer.
2. Reference date for computing the offer price.
3. Liability for payment of interest to shareholders.

Summary:

1. Method of Pricing of the Public Offer:
The dispute centers on the method of pricing the public offer. Both parties agree that the price should be determined in accordance with Regulation 20(4) and Explanation (ii) below Regulation 20(11) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. The appellant calculated the offer price based on the date of the Board of Directors (BoD) meeting which authorized the preferential allotment of warrants. Respondent no.1 directed the appellant to change this reference date to the date of the public announcement, which would significantly increase the offer price due to the rise in the scrip's price during the intervening period.

2. Reference Date for Computing the Offer Price:
The appellant argued that the reference date should be 16.12.2006, the date of the BoD meeting when the decision to convene an Extraordinary General Meeting (EGM) for the preferential allotment of warrants was made. Respondent no.1 contended that the reference date should be 21.6.2008, the date of the public announcement. The Tribunal concluded that the correct reference date should be 28.6.2008, the date of the BoD meeting when the shares were actually allotted upon conversion of the warrants, as this was the date when voting rights were acquired, triggering the Regulations.

3. Liability for Payment of Interest to Shareholders:
The appellant was aggrieved by the direction to dispatch the letter of offer within 10 days and open the offer within 5 days thereafter, failing which he would be liable to pay interest at the rate of 10% per annum to all shareholders for the delay in payment. The Tribunal noted this grievance but did not address it separately, as it directed respondent no.1 to issue a fresh communication incorporating the correct reference date and allowing reasonable time for the offer to open before imposing any liability for interest.

Conclusion:
The appeal was dismissed, and the impugned communication was set aside. Respondent no.1 was directed to issue a fresh communication within two weeks, using 28.6.2008 as the reference date for calculating the offer price and allowing the appellant reasonable time to open the offer before imposing any interest liability. No order as to costs.