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TMI Blog2011 (11) TMI 623X X X X Extracts X X X X X X X X Extracts X X X X ..... capital at a price of ` 80 per share. As per the buy back scheme, the shareholders were given an option of tendering their shares to the company. The letter of offer issued in this regard specifically states that the promoters would not participate in the buy back. The buy back offer opened on March 14, 2003 and closed on April 7, 2003. When the buy back scheme was announced, the appellants (promoters of the company) held 44,64,770 equity shares representing 62.56 per cent of the paid up equity capital of the company and they were in control of the company. The buy back was successful and the company bought back 11,83,708 equity shares as a result whereof the percentage shareholding of the appellants in the company increased from 62.56 per cent to 75 per cent of the total paid up capital. This increase in the voting rights was not a consequence of any acquisition of shares or voting rights by the appellants but was only a passive increase incidental to the buy back of shares by the company. As a result of this increase, there was no change in the control of the company which was already with the appellants. The Securities and Exchange Board of India (for short the Board) did not r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em for violating the aforesaid provisions of the takeover code. This is what he said in para 9 of his order: Having held so, I note that the acquirers are the promoters of the target company having control over it and the increase in their shareholding was consequential to the buy back of shares by the target company. The said buy back took place in the year 2003. I also note that the share price of the target company was in the range of ₹ 40/- (low price in September 2002) to ₹ 77/- (high price during March 2003) as compared to the present market price which is around ₹ 134.90 as on January 25, 2010. The share prices of the target company mentioned above are as per the information provided in the website of the Bombay Stock Exchange Limited. The pricing formula as specified in the Takeover Regulations when applied to the present case, would not benefit the shareholders. Considering the case in its totality, I do not consider the present case, a fit one to direct the acquirers to make a public offer to the shareholders of the target company, as inter alia contemplated in the show cause notice. However, as the acquirers had violated the provisions of Regulation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the rival contentions of the parties it is necessary to refer to the relevant provisions of the takeover code which concern us. Regulation 2(b) defines an acquirer and regulations 3 and 4 deal with situations where regulation 11 of the takeover code would not apply. Regulation 11(1) deals with creeping acquisition and all these provisions are reproduced hereunder for facility of reference. 2. (1) In these Regulations, unless the context otherwise requires:- (a) (b) acquirer means any person who, directly or indirectly, acquires or agrees to acquire shares or voting rights in the target company, or acquires or agrees to acquire control over the target company, either by himself or with any person acting in concert with the acquirer; .. Applicability of the regulation. 3. (1) Nothing contained in regulations 10, 11 and 12 of these regulations shall apply to: (a) to (ka) (l) other cases as may be exempted from the applicability of Chapter III by the Board under regulation 4. .. Takeover panel. 4. (1) The Board shall for the purposes of this regulation constitute a panel of majority of independent persons from with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by any means, usually by one s own exertion; to get as one s own; to obtain by search, endeavor investment, practice or purchase . In this context the word acquire implies acquisition of voting rights through a positive act of the acquirer with a view to gain control over the voting rights. In the case before us, it is the admitted position of the parties that the appellants (promoters of the company) did not participate in the buy back and that there was no change in their shareholding. The percentage increase in their voting rights was not by reason of any act of theirs but was incidental to the buy back of shares of other shareholders by the company. Such a passive increase in the proportion of the voting rights of the promoters of the company will not attract regulation 11(1) of the takeover code. The argument of the learned counsel for the Board that merely because there is increase in the voting rights of the appellants, regulation 11(1) gets triggered cannot be accepted. He also referred to the definition of acquirer in regulation 2(b) of the takeover code and strenuously contended that a passive acquisition of the kind we are dealing with is indirect acquisition and, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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