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TMI Blog2012 (8) TMI 747X X X X Extracts X X X X X X X X Extracts X X X X ..... ame. The shares to be allotted was of the numbers considered adequate to meet the obligation incurred by Tech Mahindra to AT&T in exercise of its option. The applicant as adopted process did not result in any avoidance of tax. If it had been a case of allotment of shares by Tech Mahindra to AT&T as per the option available to AT&T, that allotment would not have attracted capital gains tax since an allotment by a company was not a sale of shares. Hence, the constitution of the applicant had no motive of tax avoidance. The issue of capital gains has now arisen only because the applicant after getting the allotment of shares is selling them resulting in a gain giving rise to a question of chargeability to tax of that gain. The aim was to sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares therein were to be held by M M and 40% to be held by BT. The total initial share capital was to be 20,000 equity shares of the value of Rs. 10 per share. The name of Mahindra-British Telecommunication Ltd. was altered to Tech Mahindra Limited (TM). It is now a public limited company, the shares of which are quoted in the stock exchange. Presently, M M holds 43.96% of the shares therein and BT holds 31% and about 17% of the shares are held by the Indian public. 2. On 28.12.2004, Mahindra British Telecommunication (now Tech Mahindra) and SBC Services Incorporated, a US company (now AT T Limited) entered into a software and professional services agreement. Thereunder, MBT (now Tech Mahindra) was to provide to SBC Services, (now, AT T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... garding the issue of the shares. On the other hand an agreement dated 23.6.2005 entered into between the applicant and Tech Mahindra is produced to show that the applicant agreed to invest in Tech Mahindra. The document recites that the applicant desired to subscribe and Mahindra British Telecom (now Tech Mahindra) agrees to issue fresh equity shares to the investor on a partly paid basis to be made fully paid in the manner described thereunder. It is to be noted that the multiparty agreement dated 10.5.2005 referred to earlier, was prior in point of time. 4. Learned Senior Counsel for the applicant explained that Tech Mahindra wanted to have a public issue of shares and that would not have been possible if it was obliged to AT T to all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the way of a public issue. Incidentally, the public issue was in the year 2006. Whether this ruse to circumvent the Guideline would stand in the way of this Authority giving Rulings in this case, I shall consider after I consider the relevant terms of the multiparty agreement. 5. The multiparty agreement dated 10.5.2005, referred to as the 'Option Agreement', provides that SBC (now AT T) will be granted options over the shares representing 8% of the enlarged fully diluted ordinary share capital of Mahindra British Telecommunication (now, Tech Mahindra) as at the date of that agreement on condition that certain specified milestones relating to commercial frame work agreement entered into by Mahindra-British Telecom and SBC Services a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital gains has now arisen only because the applicant after getting the allotment of shares is selling them resulting in a gain giving rise to a question of chargeability to tax of that gain. The aim was to speed up the public issue. The public issue by Tech Mahindra was in the year 2006. If the route now adopted had not been adopted, Tech Mahindra would have had to wait till the year 2010 before it could come out with a public issue. 8. When I put it to learned counsel as to why should not this Authority refuse a ruling to the applicant because of the blatant circumventing of the SEBI Guidelines issued in the interests of the general public, the learned counsel submitted that it was not for this Authority to consider that aspect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et and for matters connected therewith. Section 11 of the Act by sub-section (1) provides that it shall be the duty of the Board to protect the interests of investors in securities and to promote the development of and to regulate the securities market, by such measures as it thinks fit. Clause (b) of sub-section (2) specifically refers to regulating substantial acquisition of shares and take over of companies. Section 11A contemplates disclosure by companies. By Regulations, the Board can specify for disclosure regarding matters relating to issue of share capital, transfer of securities and other incidental matters and the manner of disclosure. Section 11B confers the power to issue directions. Penalties are also provided under section 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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