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TMI Blog2015 (6) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... ther prayed that the Appellant Company may be permitted to remove the names of the Respondent Nos. 1 to 7, including their transferees, from its Register of Members and accordingly the Appellant Company may be permitted to carry out rectification of its Register of Members. The Appellant Company has also sought a permanent injunction order thereby restraining the Respondents from acquiring directly or indirectly equity in the Appellant Company. 2. The facts of the case leading to filing the present appeal may be summarized as under:- 2.1 The Appellant Company is a public limited company and was incorporated on 18/11/1976 under the provisions of the Companies Act, 1956. The Respondent No.1 Company is having a paid-up capital of Rs. 6,62,59,120/- and the main business of the Appellant was growing mushrooms and manufacturing pharmaceutical products. However, the said manufacturing pharmaceutical products were sold in the year 2007 and the business of growing mushrooms has been shut as it being found not viable. The current issued paid-up and subscribed share capital of the Appellant is Rs. 12,24,00,000/- divided into 1,22,40,000 equity shares of Rs. 10/- each. 2.2 It is the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eholding of the Appellant Company. 2.8 The Respondent No.6 is having a paid-up capital of Rs. 32,76,000/-and it has acquired 4,17,663 equity shares of Rs. 10/- each of the Appellant Company. The said equity shares in the Appellant Company are representing 3.41% of the total shareholding of the Appellant Company. 2.9 The Respondent No.7 has acquired 2,92,108 equity shares of Rs. 10/- each of the Appellant Company. The said equity shares in the Appellant Company are representing 2.38% of the total shareholding of the Appellant Company, 2.10 It is stated that the Respondents herein had filed a Company Petition, being C.P. No. 111 of 2013, under Sections 397 and 398 of the Companies Act, 1956 before this Board against the Appellant Company, the Respondent No. 1 therein, and its Directors for the acts of oppression and mismanagement purportedly committed by them in the affairs of the Respondent No.1 Company. In the said Petition, the Petitioners, who are the Respondents herein, had referred to various proceedings pursuant to the complaint filed by National Agricultural Co-operative Marketing Federation of India Ltd. (NAFED), the details of which are set out in the said CP.No.111/2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondents appeared and filed their Reply. In their reply, they have challenged the maintainability of the present Appeal on a preliminary ground contending that the Company Law Board is not a competent authority to adjudicate the questions raised In this appeal by the Appellant regarding the alleged violation of the provisions of the Takeover Code. It is further submitted that the Appellant has filed this Appeal with malafide and oblique motive in order to defeat a subsequent petition, being C.P. No. 29 of 2014, filed by the Respondents against the Appellant under Section 397/398 of the Companies Act, 1956 alleging various acts of oppression and mismanagement purportedly committed by the Appellant Company and its Directors. It is further stated by the Respondents that this Appeal has been filed for the alleged violation of the provisions of the SEBI Takeover Code only after the Respondents have pointed out the acts of oppression and mismanagement committed by the Appellant and its Directors and sought redressal of the grievances from this Board. It is lastly stated in the Reply that there is no violation of the provisions of the Takeover Code, and hence, the Appeal deserves to be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osures mentioned in sub-regulations (1) and (1A), shall be made within two days of, - (a) the receipt of intimation of allotment of shares; or (b) the acquisition 01 shares or voting rights, as the case may be. (2A) The stock exchange shall immediately display the information received from the acquirer under sub-regulations (1) and (1A) on the trading screen, the notice board and also on its website. (3) Every company, whose shares are acquired in a manner referred to in sub-regulations (1) and (1A), shall disclose to all the stock exchanges on which the shares of the said company are listed the aggregate number of shares held by each of such persons referred above within seven days of receipt of information under sub-regulations (1) and (1A). SUBSTANTIAL ACQUISITION OF SHARES OR VOTING RIGHTS IN AND ACQUISITION OF CONTROL OVER A LISTED COMPANY Rule 10 Acquisition of fifteen per cent or more of the shares or voting rights of any company No acquirer shall acquire shares or voting rights which (taken together with shares or voting rights, if any, held by him or by persons acting in concert with him), entitle such acquirer to exercise fifteen per cent or more of the voting right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (1) and sub-regulation (2), acquisition of shares by any person such that the individual shareholding of such person acquiring shares exceeds the stipulated thresholds, shall also be attracting the obligation to make an open offer for acquiring shares of the target company irrespective of whether there is a change in the aggregate shareholding with persons acting in concert. DISCLOSURES OF SHAREHOLDING AND CONTROL Rule 29 Disclosure of acquisition and disposal (1) Any acquirer who acquires shares or voting rights in a target company which taken together with shares or voting rights, if any, held by him and by persons acting in concert with him in such target company aggregating to five per cent or more of the shares of such target company, shall disclose their aggregate shareholding and voting rights in such target company in such form as may be specified. (2) Any acquirer, who together with persons acting in concert with him, holds shares or voting rights entitling them to five per cent or more of the shares or voting rights in a target company, shall disclose ever acquisition or disposal of shares of such target company representing two per cent or more of the shares or vo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anagement of the company. (iii) directors of companies referred to in item (i) and (ii) of this sub-clause and associates of such directors. (iv) promoters and members of the promoter group. (v) immediate relatives, Chart-A Particulars of Shares held by the Petitioners in the CP. No. 111/2013 and 29/2014. No. of Petitioner Holding as per petition Holding as per Respondent No. 1 as on the date of Postal Ballot Holding as per Respondent No. 1 as on 06.09.2013 Firstcorp International Ltd. (P-I) 549752 549752 549752 Earthtech Enterprises Ltd. (P-2) 570000 Nil Nil Karnakhyaa Impex Pvt Ltd. (P-3) 568000 Nil Nil Firstcorp Holdings Pvt. Ltd. (P-4) 570000 Nil Nil Bayswater Enterprises Ltd. (P-5) 227363 232699 227363 Bayswater Enterprises Pvt Ltd. (P-6) 417663 109832 467663 Upasna Distributers Pvt Ltd. (P-7) 292108 292108 292108 Total 3194666 1184361 1536886 % 26.10% 9.67% 2.55% Chart - B Not reproduce here Chart - C Table reflecting the history of acquisition of shares by the Respondents: Sr. No. Year Date of Acquisition Respondents Relation between the Acquiring Respondents Common Shareholders Common Director 1. 2005 30.9.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and based on the record hereby certify that the shareholding details of following Companies in the capital of Transchem Limited as at 31st December 2014 were as follows: Sr. No. Name of Shareholder Companies Number of equity shares of Rs. 10/-each held as at 31.12.2014 % to total paid up capital of Transchem Limited 1 Firstcorp International Limited 549752 4.49 2 Earthtech Enterprises Limited 570000 4.66 3 kamakhyaa Impex Private limited 568000 4.64 4 Firstcorp Holdings Private Limited 570000 4.66 5 Bayswater Enterprises Limited 292108 2.39 6 Bayswater Enterprises Private Limited 351764 2.87 7 Upasna Distributers Privaic Limited 593826 4.85 TOTAL 3495450 28.56' 8. Now, I would like to reproduce the percentage of shareholdings of the Respondent Companies shown by the Respondents in their reply in the Appeal which is extracted below :- Chart-F Shareholding as on 2/02/2015 Sr.No. Name of the Companies No. of Shares % age 1. Bayswater Enterprises Pvt. Ltd. 292108 2.39 2. Kamakhyaa Impex Pvt. Ltd. 468000 3.82 3. Earthtech Enterprises Ltd. 570000 4.66 4. Firstcorp Holdings Pvt. Ltd. 570000 4.66 5. Firstcorp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23 SCL 52 (CLB - Mum.), wherein, Inter alia it is observed as under :- "2 .........The respondent-company, vide its letter dated October 14, 1997, conveyed the company's decision to refuse to register the transfers of the said shares alleging that the petitioners have violated the provisions of Chapters II and III of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997, by acquiring more than the stipulated percentage of shares in concert with others. ...........It is further submitted that the respondent-company has not submitted any concrete evidence as to how the above-named petitioners have violated the SEBI Take Over Code. The respondent-company has not submitted the copy of the board resolution whereat the said shares were rejected for registration of transfers. 3.......... any further acquisition of shares, if registered, would exceed the 10 per cent limit as is prescribed in regulation 10 of the said Take over Regulations,.........." 11. In the said case, after appreciation of rival contentions, the CLB further observed as under :- '11.......Therefore, when a company refuses to register transfer, the Company Law Board has to examine whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Take Over Code then under regulation 44 of the Code they are also empowered to give necessary directions to take remedial measures: b. Redwood Holdings (P.) Ltd. v. Sandesh (P.) Ltd. [2003] 41 SCL 246 (CLB - Mum.), wherein the Company Law Board, inter alia, observed as under :- 12. In view of the provisions of SEBI Act and the Regulations, any breach of the Regulations can be looked into and appropriate order passed only by the SEBI and that the jurisdiction of the CLB, so far SEBI Regulations are concerned, is barred. 13. Under the SEBI Regulations, SEBI has right to enquire and investigate suo motu, or upon complaint received for breach of regulations and for this purpose, it may appoint an investigating authority and thereafter call upon the person concerned and offer his comments on investigation report. Regulation 39 authorises the SEBI to give certain directions. It is, therefore, obvious that if any provision or regulation is breached and it appears to SEBI that the matter needs to be investigated, it may appoint an investigating authority and investigate the matter and thereafter pass an appropriate direction/order in accordance with the regulations as the Respondent Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essary remedy. The contention of the learned counsel for the plaintiffs that to merely file complaint with the SEBI is not equivalent to the right of the plaintiffs to file a suit for substantial relief cannot be accepted because the nature of the right conferred by the Takeover Regulation provides for substantial nature of remedy thereunder. The plaintiffs must therefore seek relief as per the provision of law and cannot independently invoke any common law right of rectification of the share and file a suit independent to the provision of section 15Y and 20A of the SEBI Act I am therefore of the opinion that the present suit as framed is not maintainable in this court and this court has no Jurisdiction in view of the express bar conferred under the provision of section 15Y and 20A of the SEBI Act to entertain and try the present suit. I therefore, answer the preliminary issue of Jurisdiction in Negative and I hold that this court has no Jurisdiction to entertain and try the present suit under section 15Y and 20A of the SEBI Act. 47. In the light of the aforesaid view I have taken I hold that the suit is liable to be dismissed for want of Jurisdiction and therefore dismiss the sui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therein, the names of the common shareholders and the directors of the different companies. The Ld. Sr, Advocate then took me through the reply filed on behalf of the Respondents herein and submitted that the Respondents have not disputed the fact that the Respondent Nos. 1 to 4 on 30/9/2006 had transferred all the shares to the Religare, who thereafter on 27/6/2014, had transferred 1,17,8000 shares back to the Respondent No. 3, which fact is also evident from perusal of the chart referred to above. Moreover, according to him, the Respondent Nos. 1 to 4 failed to give the beneficial notice as required in regulation of the Takeover Code. It is submitted by the Ld. Sr, Advocate for the Appellant that, on overall analysis of these facts and the shareholding pattern of the Respondents, it is well established that the Respondents had 26% shareholding at the time of filing of the previous petition and as on 31/12/2014 the shareholding of the Respondents is 28.6%. It was also argued that the Respondents have acted in concert with a view to gain control of the Appellant Company since the Appellant is an asset based and cash rich company. He further added that the Respondents are the person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of the contention of Shri Mookerjee would mean that each person acting in concert could acquire 4,99% shares without disclosure and continue to do so upto 14,99% without attracting the provisions of regulation 10 relating to public offer. Such an interpretation would defeat the very purpose of the regulations framed in the interest of the shareholders at large in Azzilfi Finlease and Investments (P.) Ltd. v. Ambalal Sarabhai Enterprises Ltd. [2000] 1 Camp LJ 118 (CLB) relied on by the learned counsel, the complaint was that persons acting in concert had acquired shares beyond 10% without making open offer as required under the regulation in force, This plea was not accepted by the Company Law Board as the company did not establish that the acquirers were acting in concert. Therefore, if persons act in concert to acquire the shares of a company, all the shares acquired by them will have to be clubbed together for the purposes of regulation 7. In this case, since on the admission of the 1st respondent himself that all the respondents were acting in concert, the aggregate holding of all the respondents will have to be considered in terms of regulation 7." b. Shrish Finance & Inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith defendants Nos. 3, 4 and 5 were acting pursuant to a plan and that the similarity of events was not accidental. Funds were advanced to all the three companies for the purchase of shares of Herbertsons Ltd., and all the three companies failed to repay with the result that they were taken over by defendant No. 11. In all the three cases, there is hardly anything to suggest that apart from major investments in the shares of Herbertsons Ltd., those companies invested any sizable amount in shares of other companies, except in one case, where some shares of one other company were purchased. It, therefore, appears that these three companies which purported to be investment companies, invested only in the shares of Herbertsons Ltd., and that too, with the aid of funds provided by defendants Nos. 1 and 11 through their concerns companies." 15. In addition to the above the following cases were also referred to and relied upon by the Petitioners" Counsel. a. Aksa Investment (P.) Ltd. v. Grob Tea Co. Ltd. [2004] 52 SCL 278 (CLB - Kol.). b. Karamsad Securities (P.) Ltd. v. Nile Ltd. [2005] 5 Comp LJ 340 (CLB). 16. I have considered the rival submissions carefully and examined the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was held that holding of all the Respondents will have to be considered in terms of Regulation 7 of the Takeover Code. In the present case, the Respondents have categorically denied that they have acted in concert. Therefore, the facts are different. 18. In so far as the case of Shirish Finance and Investments Ltd. (supra) is concerned, the facts of this case are also different. On perusal of the facts of the said case, it is apparent that the acquisition of shares was under challenge before the SEBI and certain proceedings were also pending before the CLB. In the present case, no proceedings for alleged violation of the provisions of Takeover Code, are pending before the SEBI. In view of this decision also does not assist the Appellant. 19. In the case of Aksa Investments (P) Ltd. (supra), it has been categorically held that the CLB has no power to forfeit the shares acquired in violation of the provisions of the SEBI Act or Regulations made thereunder. On the contrary, in the present case, on a perusal of the prayer clauses, it may be noted that the Appellant has also sought forfeiture of the Impugned shares. 20. In the case of Karam Prasad Securities (supra), the facts are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red 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 this regard, at the cost of repetition, I would like to rely upon the finding in para No.46 of the judgment in the case of Kesha Appliances (supra) : "46. I am, therefore, of the further opinion that the entire suit is based on the sole ground of violation and/or breach of the Take Over Regulation and no other ground has been invoked for rectification of the Share Register. The take over regulation has been enacted under the SEBI Act 1922 and the board is empowered to take cognizance of the breach thereof and therefore the right of the plaintiffs is to complain to the SEBI of such breach and seek necessary remedy. The contention of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , this petition is barred by the principles of waiver, acquiescence / abandonment? I may like to add here that as per settled law, a party who has obtained a benefit under an order, cannot claim that it was valid for one purpose and invalid for another. It is further established proposition that a party cannot approbate and re-approbate and in equity a party drawing benefit from an order, is not permitted to escape from the disadvantage, If any, flowing from it. 25. Answering to the clarifications sought by this Board, the Ld. Sr. Advocate appearing for the Appellant contended that the SEBI Regulations, 1997 and 2011 of the Take Over Code impose notice based obligation on a shareholder i.e. it is the shareholder who is obliged to give Notice of his having reached or crossed the threshold limits specified under Regulations 7 and 10 of 1997 Regulations and under Regulations 3 and 29 of 2011 Regulations, He further contended that in the transaction of Demat dealings on the Stock Exchange there is no contemporaneous knowledge to the Company of such transactions including names of persons or party to the transactions. Hence, the obligation is cast on the Shareholder to give Notice. Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after, the Ld. Counsel appearing for the Appellant attracted my attention to Clause 1 of the Consent Terms filed on 2/1/2014 in C.P.No.111 of 2013, which reads as under :- "The Petitioners and the Respondents have amicably resolved the subject matter of the Petition and based on the mutual understanding as reached between them, the Petitioners have agreed to withdraw this Petition." 28. It was, therefore, contended that the doctrine of estoppel, waiver, acquiescence and abandonment would not apply having regard to the facts of the case in hand. Lastly, it was argued that the said doctrine does not apply against the law. According to him, keeping in view the transactions are void, being contrary to the provisions of the Takeover Code, this plea does not arise. 29. 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 wou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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