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TMI Blog2013 (5) TMI 629X X X X Extracts X X X X X X X X Extracts X X X X ..... Ors. (1993 (10) TMI 310 - SUPREME COURT). The person challenging the order on the basis that it is causing civil consequences would have to prove the prejudice that has been caused by the non-grant of opportunity of hearing. In the present case, we must hasten to add that, in the letter dated 4th May, 2006, the appellants have not made a request for being granted an opportunity of personal hearing. Therefore, the ground with regard to the breach of rules of natural justice clearly seems to be an after thought. About takeover code - held that:- the takeover code is meant to ensure fair and equal treatment of all shareholders in relation to substantial acquisition of shares and takeovers and that the process does not take place in a clandestine manner without protecting the interest of the shareholders. It is keeping in view the aforesaid aims and objects of the takeover code that we shall have to interpret Regulations 27(1). Power of the board to allow withdrawal from the scheme - held that:- certain amount of discretion has been left with the Board to determine as to whether the circumstances fall within the realm of impossibility as visualized under sub-clause (b) and (c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9-5-2013 - SURINDER SINGH NIJJAR AND ANIL R. DAVE, JJ. JUDGMENT:- Surinder Singh Nijjar, J. - This statutory appeal is filed under Section 15Z of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as the 'SEBI Act') against the order dated 5th June, 2008 (impugned order) passed by the Security Appellate Tribunal (SAT) whereby SAT has dismissed the appeal filed by the appellants impugning the direction contained in the communication dated 30th April, 2007 of SEBI (SEBI order). By the aforesaid order, the request of the appellants for withdrawal of an offer to acquire the equity shares of Shree Ram Multi Tech Limited (SRMTL) under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (Takeover Code/Takeover Regulation) has been rejected. Facts : 2. On 22nd March, 2002, the Promoters (including friends, relatives and associates) of SRMTL - a listed company - borrowed a sum of Rs.48.94 crores from the appellants and pledged equity shares of SRMTL worth Rs.1,42,88,700/- (24.25% of equity capital) as security. The debt was in form of issue of Secured Optionally Fully Convertible Premium Notes by three closely held unlist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Rs.18.60/- per share, was arrived at as per Regulation 20(4) of the Takeover Code (applicable to frequently traded shares). The PA stated that SRMTL has suffered business losses and its net worth has been eroded. The PA also clearly stated that the offer may be withdrawn as per Regulation 27 of the Takeover Code. 7. The appellants further claimed that as per Regulation 18 of the Takeover Code, draft letter of offer was submitted to SEBI on August 8, 2005. According to the appellants in the aforesaid letter, it was specifically stated that details were given of the composition of Board of Directors and audited balance sheets of last three years, share holding pattern PRE-OFFER and POST-OFFER and justification of offer price. The letter further stated that "Acquirers reserve the right to withdraw the offer pursuant to Regulation 27 of the Regulation". In the meanwhile, the concurrent auditor appointed by the Lenders of SRMTL, M/s Ernst Young and the internal auditor of SRMTL, M/s. R. C. Sharma Co. in their respective audit reports for the quarter July-September, 2005, had noted certain irregularities in the operations and systems of SRMTL. The Audit Committee, therefore, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a cumulative amount of Rs.326.48 Crores had been siphoned out of/embezzled from the coffers of SRMTL by its erstwhile Promoter Directors. This conclusion was based on the reports submitted by M/s. R.C. Sharma Co. It was pointed out that the financial accounts of SRMTL revealed that it had lost its net worth. Asset Reconstruction Company (India) Limited (ARCIL) had acquired the debts and underlying rights and obligations from the secured creditors of SRMTL. ARCIL had also issued a notice dated January 25, 2006 under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) threatening action under Section 13(4) thereof. In the meantime, the High Court of Gujarat had disposed of the winding up petition filed against SRMTL by the UTI Bank and Karnataka Bank Ltd. on February 27, 2006. It had also come to the knowledge of the appellants that though the balance sheets of SRMTL disclosed a contingent liability of only Rs.15.28 Crores as on March 31, 2005, the actual value was about Rs.263.65 Crores (out of which Rs.30.65 Crores had already crystallized). The final reason given was share price of SRMTL shares had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06. Therefore, a request was made to include the clarifications in the original draft letter and include the same in the paragraph in contingent liability under special circumstances for withdrawal of the open offer. 10. In response to the aforesaid request of the appellants, the Merchant Bank applied to SEBI on September 22, 2006 requesting that the appellants be permitted to withdraw the offer. The letter also mentioned the special reasons for the withdrawal as given by the appellants in the letter dated 4th May, 2006. It is important to notice here that no request for personal hearing was made in any of the aforesaid communications. 11. The appellants further claimed that on 30th April, 2007, the application of the Merchant Bankers/appellants was rejected on the ground that the appellants ought to have conducted due diligence. The appellants pointed out that the aforesaid decision was taken by SEBI without affording any personal hearing to the appellants and without application of mind. The appellants claim that the respondent did not appreciate that the fraudulent transactions, systematic embezzlement and siphoning of funds was unearthed by special investigative audit and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portunity of hearing, it ought to be read into the regulations in view of the drastic civil consequences, which the appellants would suffer under the impugned order passed by the SEBI upheld by SAT. Mr. Divan has straightaway pointed out to the order passed by SEBI on 30th April, 2007 rejecting the request made in letter dated 22nd September, 2006 for withdrawal of the public offer. He has pointed out the observations made in Paragraph 4 of the aforesaid order, which are as under:- "We are of the view that the acquirer should have done due diligence before invocation of pledge, and refrained themselves from invoking their pledge if circumstances so warranted. Such circumstances, arising out of omission on the part of the acquirers to have taken due precaution or business misfortunes, in our opinion, are not reasons sufficient enough to merit withdrawal of the open offer." 15. The aforesaid conclusions, according to Mr. Divan, are not supported by any reasons let alone sufficient reasons. The order passed by SEBI, according to him, is non-speaking and, therefore, ought to have been quashed on that ground alone. 16. The same submission was also made before the SAT. It has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Regulations and/or permission to withdraw the draft letter of offer. The letter sets out the sequence of events leading to the acquisition, which triggered the provisions of Regulation 10. It sets out the reasons for fixing the offer price at Rs. 18.60 per share. The price had been determined at deriving the average of weekly high and low closing prices of shares of SRMTL (the target company) at Bombay Stock Exchange (BSE) during 26 weeks preceding the date of Public Announcement. In Paragraph 4 of the letter, it is mentioned as under:- "Subsequent to the Public Announcement and filing of the draft Letter of Offer, the price of the shares of SRMTL has fallen substantially due to circumstances beyond the control of the Acquirers. It has come to the knowledge of the Acquirers that subsequent to the Public Announcement and filing of the draft Letter of Offer, the financial condition of SRMTL has substantially deteriorated on account of gross mismanagement and embezzlement by the promoter directors of SRMTL. It is apparent that SRMTL has lost its substratum and that chances of its revival are negligible." 18. In Paragraph 5 of the letter, a prayer is made for permission eit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 requested SEBI to exempt the appellants from the open offer or withdraw the open offer under Regulation 27 or re-fix the price of the open offer. It appears that the Merchant Bankers had discussions with the officers of the SEBI before giving the aforesaid opinion in its letter dated 27th June, 2006. it was only thereafter the appellants were informed as under:- "We have perused the various grounds you have mentioned in your above letter to SEBI and are unable to find any of these as valid grounds in terms of the provisions of Regulation 27 of the SEBI (Substantial Acquisition of Shares Takeovers) Regulations, 1997. The fact that the market price of the target company is far below the offer price cannot be a reason for seeking withdrawal of the offer. Regulation 27(1) of the Takeover code is the only regulation permitting withdrawal of public offers and the same is reproduced below: ** ** **" 20. Still not satisfied, the appellants wrote to its Merchant Bankers on 1st July, 2006 requesting it to forward the letter dated 4th May, 2006 to SEBI for its consideration. In the letter, it was mentioned as follows:- "Meanwhile, we do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated 4th May, 2006, the appellants had given detailed reasons giving justification for seeking exemption/withdrawal/price fixation. Not being given the opportunity of oral hearing cannot always be equated to a situation, where no opportunity is given to a party to submit an explanation at all, before an order is passed causing civil consequences to it. Mr. Shyam Divan has been at pains to point out that rules of natural justice require that an opportunity of hearing should have been given to the appellants. We see no reason to read into Regulation 27 - the provision that the party seeking to withdraw from the public offer is required to be given an oral hearing before an order is passed on the request for withdrawal. We also see no merit in the submission that an oral hearing was particularly necessary in the light of the fraud, which has been perpetrated by the promoters of the target company on the innocent shareholders, which will also include the appellants. Such a submission can not be accepted either on facts or in law. The appellants had made a business decision in deliberately purchasing the shares of the target company to such an extent that it had to, under the law; ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the public offer or exemption under Regulation 27(1)(d) cannot be said to be an order causing adverse civil consequences. The appellants had made and informed business decision which unfortunately for them, instead of generating profits was likely to cause loses. In such circumstances, they wanted to pull out and throw the burden on to the other shareholders. We, therefore, fail to see what prejudice has been caused to the appellants by the order passed by the SEBI rejecting the request of the appellants. 25. In B. Karunakar Ors. (supra), having defined the meaning of "civil consequences", this Court reiterated the principle that the Court/Tribunal should not mechanically set aside the order of punishment on the ground that the report was not furnished to the employee. It is only if the Court or Tribunal finds that the furnishing of the report would have made a difference to the result in the case that it should set aside the order of punishment. In other words, the Court reiterated that the person challenging the order on the basis that it is causing civil consequences would have to prove the prejudice that has been caused by the non-grant of opportunity of hearing. In the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tire material had been collected by the predecessor of the DA. He had allowed the interested parties and/or their representatives to present the relevant information before him in terms of Rule 6(6) but the final findings in the form of an order were recorded by the successor DA, who had no occasion to hear the appellants. Therefore, it was held that the final order passed by the new DA offends the basic principle of natural justice. In the present case, the appellants did not make a formal request before SEBI for being given an opportunity of personal hearing. Thus, the reliance on the aforesaid case is misplaced. 29. Mr. Shyam Divan then relied on Darshan Lal Nagpal (Dead) by LRs. v. Government of NCT of Delhi Ors. [2012] 2 SCC 327. The Court in this case was considering whether the Government of NCT of Delhi could invoke Section 17(1) and (4) of the Land Acquisition Act and dispense with the rule of hearing embodied in Section 5A (2) for the purpose of acquiring certain land. In this context, the Court observed that the reasons given by NCT for invoking the emergency provision were not justified. It was observed that the documents produced by the parties including the noting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the principles of natural justice. In that connection, several judgments of this Court have been referred to. It need not be pointed out that under different situations and conditions the requirement of compliance of the principle of natural justice vary. The courts cannot insist that under all circumstances and under different statutory provisions personal hearings have to be afforded to the persons concerned. If this principle of affording personal hearing is extended whenever statutory authorities are vested with the power to exercise discretion in connection with statutory appeals, it shall lead to chaotic conditions. Many statutory appeals and applications are disposed of by the competent authorities who have been vested with powers to dispose of the same. Such authorities which shall be deemed to be quasi-judicial authorities are expected to apply their judicial mind over the grievances made by the appellants or applicants concerned, but it cannot be held that before dismissing such appeals or applications in all events the quasi-judicial authorities must hear the appellants or the applicants, as the case may be. When principles of natural justice require an opportunity to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellants had been condemned unheard as the entire material on which the appellants were relying was placed before SEBI. It is upon consideration of the entire matter that the offer of the appellants was rejected. This is evident from the detailed order passed by SEBI on 30th April, 2007. The letter indicates precisely the exceptional circumstances mentioned by the appellants seeking to withdraw the public announcement. Each and every circumstance mentioned was considered by SEBI. Therefore, it can not be said that the appellants have been in any manner prejudiced by the non-grant of the opportunity of personal hearing. Therefore, the submission made by Mr. Shyam Divan with regard to the breach of rules of natural justice is rejected. 33. Mr. Shyam Divan then submitted that the interpretation placed on Regulation 27(1) (d) by SEBI as well as the SAT results in restriction on the wide powers given to SEBI to regulate the securities market to further the object of the SEBI Act. He submits that the appellants are equally "an investor" in the market; therefore, the regulator also has to keep the interest of the appellants in mind. He makes a reference to Regulation 3(1) (f) whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s prevailing at the time when the application for withdrawal of open offer was made. Admittedly, the respondent failed to do so. 36. Learned senior counsel further submitted that the SAT in interpreting Regulation 27 has wrongly relied upon the principle of Ejusdem Generis. He submits that the rule of ejusdem generis applies only if the statutory provision - (i) contains an enumeration of specific words; (ii) the subjects of enumeration constitute a class or category; (iii) that class of category is not exhausted by the enumeration; (iv) the general terms follow the enumeration; and (v) there is no indication of a different legislative intent. 37. Learned senior counsel submits that in the present case none of the said requirements are met. The rule of ejusdem generis is restricted to cases where the specific words precede the general words in the language of the statute, and in totality from a singular genus along with the general words. The sub-clauses of Regulation 27 do not form a common genus of cases where it is impossible to do an open offer. Learned senior counsel submitted that the provisions contained in the Takeover Code are regulatory in nature and, therefore, have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wal. According to learned counsel, the same does not take colour from Regulations 27(1) (b) or 27(1)(c). This apart, he submits that the interpretation given to Regulation 27 by the SAT is so narrow that it leads to absurd consequences. The narrow construction of Regulation 27(1) (d) would permit withdrawal only on the same footing as the circumstances enumerated under Regulation 27(1)(b) and (c). This would leave no discretion with SEBI to approve withdrawal, "in such circumstances", which in the opinion of the Board "merit withdrawal." Finally, it is submitted that it is an accepted principle that where two interpretations are possible then such an interpretation ought to be taken which will not render any provision of a statute otiose. According to him, Regulation 27(1) (d) would be rendered meaningless if it is read ejusdem generis with Regulation 27(1) (b) and Regulation 27(1) (c). Learned senior counsel also relied on Regulation 3 of Takeover Regulations which empowers the respondent to grant a complete exemption to an acquirer from Regulations 10, 11 and 12 in certain cases. He submits that residuary power under Regulation 3(1) in addition to the specific scenario mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision is made in Regulation 7 that any acquirer, who acquires shares or voting rights which would entitle him to more than 5% or 10% or 14% shares or voting rights in a company, shall disclose at every stage the aggregate of share holding or voting rights in that company to the company and to the stock exchanges where shares of the target company are listed. Under Regulation (8), such an acquirer shall within 21 days from the financial year ending March 31, make yearly disclosures to the company, in respect of his holdings as on 31st March. Regulation 8A provides for disclosure of information with regard to pledged shares. The Board has power under Regulation 9, to call for information with regard to the disclosures made under Regulations 6, 7, and 8 as and when required by the Board. Regulation 10 mandates that no acquirer shall acquire shares or voting rights which entitle such acquirer to exercise 15% or more of the voting rights in a company, unless such acquirer makes a public announcement to acquire shares of such company in accordance with the Regulations. The Takeover Code then prescribed a detailed procedure for making a public announcement and the manner in which the of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company. Regulation 16 sets out in detail the particulars which are required to be expressly stated and the public announcement is made under Regulations 10, 11 or 12. Regulation 17 provides that the public announcement or any advertisement, circular, brochure, publicity material or letter of offer issued in relation to the acquisition of shares must not contain any misleading information. Under Regulation 18, within 14 days from the date of public announcement made under Regulations 10, 11 or 12, as the case may be, the acquirer, through its Merchant Banker, is mandated to file with SEBI the draft of the letter of offer, containing disclosures as specified by the Board. This letter of offer is to be dispatched to the shareholders not earlier than 21 days from its submission to the Board. However, the Board has the power to specify changes, if any, in the letter of offer which the merchant banker and the acquirer is required to carry out such changes before the letter of offer is dispatched to the shareholders. Regulation 20 provides that the offer to acquire share under Regulations 10, 11 or 12 shall be made at a price not lower than the price determined as per sub-regulati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as determined in accordance with the takeover code or to continue as shareholders under the new dispensation. In other words, the takeover code is meant to ensure fair and equal treatment of all shareholders in relation to substantial acquisition of shares and takeovers and that the process does not take place in a clandestine manner without protecting the interest of the shareholders. It is keeping in view the aforesaid aims and objects of the takeover code that we shall have to interpret Regulations 27(1). Regulation 27 reads as under: "Withdrawal of offer - (1) No public offer, once made, shall be withdrawn except under the following circumstances:- (a)** ** ** (b) the statutory approval(s) required have been refused; (c) the sole acquirer, being a natural person, has died; (d) such circumstances as in the opinion o the Board merits withdrawal. (2) In the event of withdrawal of the offer under any of the circumstances specified under sub-regulation (1), the acquirer or the merchant banker shall: (a) make a public announcement in the same newspapers in which the public announcement of of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber of occasions and has been reiterated in Maharashtra University of Health Sciences and Ors. v. Satchikitsa Prasarak Mandal Ors. [2010] 3 SCC 786. The principle is defined thus : "The Latin expression "ejusdem generis" which means "of the same kind or nature" is a principle of construction, meaning thereby when general words in a statutory text are flanked by restricted words, the meaning of the general words are taken to be restricted by implication with the meaning of the restricted words. This is a principle which arises "from the linguistic implication by which words having literally a wide meaning (when taken in isolation) are treated as reduced in scope by the verbal context". It may be regarded as an instance of ellipsis, or reliance on implication. This principle is presumed to apply unless there is some contrary indication [see Glanville Williams, The Origins and Logical Implications of the Ejusdem Generis Rule, 7 Conv (NS) 119]." 45. Earlier also a Constitution Bench of this Court in Kavalappara Kottarathil Kochuni v. State of Madras AIR 1960 SC 1080 construed the principle of ejusdem generis wherein it was observed as follows : " .. The rule is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offer. The rule of ejusdem generis as defined by this Court in Commissioner of Income Tax, Udaipur, Rajasthan v. McDowell and Co. Ltd. [2009] 10 SCC 755 is as follows : "The principle of statutory interpretation is well known and well settled that when particular words pertaining to a class, category or genus are followed by general words, the general words are construed as limited to things of the same kind as those specified. This rule is known as the rule of ejusdem generis. It applies when: (1) the statute contains an enumeration of specific words; (2) the subjects of enumeration constitute a class or category; (3) that class or category is not exhausted by the enumeration; (4) the general terms follow the enumeration; and (5) here is no indication of a different legislative intent." 49. Mr. Divan has sought to persuade us that clause (d) in fact carves out an exception out of the exceptions provided in clauses (b) and (c). We see no justification in moving away from the Latin maxim "noscitur a sociis", which contemplates that a statutory term is recognized by its associated words. The Latin word "sociis" means society. It was pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shareholders of the target company and the integrity of the securities market, which is wholly contrary to the intent and purpose of the takeover regulations. In such circumstances, we are unable to agree with the submission of Mr. Shyam Divan that the order passed by SEBI on 30th April, 2007 can be said to be an order causing civil consequences. The appellants wanting to withdraw the public offer merely wishes to cut its losses at the expense of the innocent shareholders, who are entitled under the Regulations to the exit option. In such circumstances, the appellants would have to buy the shares at the quoted prices of Rs.18.60 per share, placing a financial burden on the appellants. The aim of the appellants was merely to avoid such an added burden. This is patent from the plea made by the Merchant Bankers on 22nd September, 2006 on behalf of the appellants. In the aforesaid application, it is clearly mentioned as under: "Under the aforesaid circumstances, it is apparent that SRMTL has lost is substratum, has become a "sick company" and that chances of lis (sic) survival are negligible. The pledgee Acquirers while enforcing the security created earlier (invoking the pled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are unable to accept the aforesaid submission of Mr. Shyam Divan. Rather we find merit in the submission of Mr. Venugopal that Regulation 3(1) (f) (iv) (which exempts the acquisition of shares by banks and public financial institutions as pledgees, from the provisions of the Takeover Regulations), does not advance the case of the appellants any further. Under this regulation, exemption is provided to certain entities that acquire shares in the ordinary course of business. The regulation provides exemption from Regulation 10, 11 and 12 to Scheduled Commercial Banks or Public Financial Institutions acting as pledgees in the ordinary course of business, in order to facilitate their business operations. Such acquisition of shares in normal circumstances is not with the intention of taking over the target company. The shares are acquired to protect the economic interest of the banks and public financial institutions by securing repayment of the loan. Such acquisitions of shares have nothing in common with acquisition of shares by an acquirer company such as the appellants seeking to gain control in the affairs of the target company. Powers of Respondent under SEBI Act: 54. Mr. Shya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by LRs. and Ors. [1994] 1 SCC 1. The principle was explained by Kuldip Singh, J. in the following words: "Fraud avoids all judicial acts, ecclesiastical or temporal" observed Chief Justice Edward Coke of England about three centuries ago. It is the settled proposition of law that a judgment or decree obtained by playing fraud on the court is a nullity and non est in the eyes of law. Such a judgment/decree - by the first court or by the highest court - has to be treated as a nullity by every court, whether superior or inferior. It can be challenged in any court even in collateral proceedings." 59. It was further held in paragraph 5, as follows:- "5. The High Court, in our view, fell into patent error. The short question before the High Court was whether in the facts and circumstances of this case, Jagannath obtained the preliminary decree by playing fraud on the court. The High Court, however, went haywire and made observations which are wholly perverse. We do not agree with the High Court that "there is no legal duty cast upon the plaintiff to come to court with a true case and prove it by true evidence". The principle of "finality of litigation" cannot be pressed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact were deliberately withheld from the public in spite of the same being price sensitive. Therefore, according to Mr. Shyam Divan, the appellants, or for that matter, any person exercising due diligence and care, could not have and did not know the existence and nature of the fraud and embezzlements by the erstwhile promoters of the target company. If the SEBI, the capital market regulator, with all its infrastructure did not become aware of the damning indictment of a listed company permitting its controlling promoters to abuse, misuse and embezzle funds belonging to investors in the securities market, it cannot rationally be accepted that the appellants would have discovered the same by exercise of due diligence. Mr. Shyam Divan further brought to our notice the facts which were known at the time of public announcement and the facts which could not have been known even after due diligence since the same did not reflect in the balance sheet and/or financial statement of the target company. The known facts at the time of public announcement are listed as under: "SRMTL had negative net worth; * SRMTL Company was recently faced with poor financial performance; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Indian Overseas Bank v. Industrial Chain Concern 1990 1 SCC 484 which enumerates the benchmark or standards accepted from a party while performing the due diligence should be taken into account. 65. We are not much impressed by any of the submissions made by Mr. Shyam Divan on this issue. Admittedly, the appellants were aware of the litigation against Shree Ram Multi Tech Limited and its Directors. The litigation commenced in the year 2003 i.e. before the public announcement made by the appellants. In fact, the letter of offer itself refers to the pending litigation by and against the target company and its directors. 66. In Paragraph 4.17 of the said letter, the appellants mentioned the cases filed by Banks and Financial Institutions; Cases/Appeals filed by SRMTL against Banks and financial Institutions; Cases filed by the Registrar of Companies in the Court of Additional Chief Metropolitan Magistrate, Ahmedabad in the matter of non payment of dividend under Section 205 of the Companies Act, 1956 and the application filed by the company against Registrar of Companies, Gujarat in Gujarat High Court in this matter under Section 482 of the Criminal Procedure Code. The list a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d was justified in characterizing the situation that the appellants are faced with as the result of lack of due diligence and/or sheer business misfortune. They are only trying to wriggle out of a bad bargain which is not permissible under Regulation 27(1)(d) of the takeover code." 68. The aforesaid conclusion reached by SAT, in our opinion, does not call for any interference. 69. We are inclined to agree with the submission made by Mr. Venugopal that the appellants cannot be permitted to wriggle out of the obligation of a public offer under the Takeover Regulation. Permitting them to do so would deprive the ordinary shareholders of their valuable right to have an exit option under the aforesaid regulations. The SEBI Regulations are designed to ensure that public announcement is not made by way of speculation and to protect the interest of the other shareholders. Very solemn obligations are cast on the merchant banker under Regulation 24(1) to ensure that - (a) the acquirer is able to implement the offer; (b) the provision relating to Escrow account referred to in Regulation 28 has been made; (c) firm arrangements for funds and money for payment through ver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard under sub-regulation (1): Provided that if, within 21 days from the date of submission of the letter of offer, the Board specifies changes, if any, in the letter of offer (without being under any obligation to do so), the merchant banker and the acquirer shall carry out such changes before the letter of offer is dispatched to the shareholders : [Provided further that if the disclosures in the draft letter of offer are inadequate or the Board has received any complaint or has initiated any enquiry or investigation in respect of the public offer, the Board may call for revised letter of offer with or without rescheduling the date of opening or closing of the offer and may offer its comments to the revised letter of offer within seven working days of filing of such revised letter of offer.]" 72. A perusal of the aforesaid regulation clearly shows that the acquirer is required to file the draft letter of offer containing disclosures as specified by the Board within a period of 14 days from the date of public announcement. Thereafter, letter of offer has to be dispatched to the shareholders not earlier than 21 days from its submission to the Board. Within 21 days, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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