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TMI Blog2015 (11) TMI 1493X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the time stipulated under the Takeover Regulations, then, penalty is imposable on the promoter group and the said penalty would be recoverable jointly and severally from the promoters in the promoter group who held shares or voting rights in the Target Company with their PAC’s. In all these appeals the AO’s of SEBI have not considered the question as to whether the appellants are individual promoters or they constitute ‘promoter group’ under the respective Takeover Regulations. Even in Appeal No. 385 of 2014 the AO of SEBI has not verified the correctness of the argument advanced by the appellant to the effect that they form an independent promoter group. In these circumstances, we set aside the orders passed by the AO of SEBI and restore the appeals to the file of SEBI for passing fresh order on merits and in accordance with law. - Appeal No. 280 , 281, 212, 2013, 214, 215, 216, 217, 218, 219, 220, 221, 222, 223 of 2014, Appeal No. 385 of 2014, Appeal No. 80 of 2015, Appeal No. 325 of 2015 - - - Dated:- 20-11-2015 - J.P. Devadhar and Jog Singh,JJ. For The Appellant : Mr. Somasekhar Sundaresan, Advocate with Ms. Rinku Valanju, Mr. Abishek Venkataraman and Mr. Dhava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers are pending before this Tribunal, instead of SEBI taking a definite stand, it would be in the interest of justice that this Tribunal resolves the issue by taking a view as it deems fit and proper. Thus, inspite of the fact that there are conflicting views taken by the AO s of SEBI, neither SEBI on its own has taken any steps to resolve the conflict nor SEBI is willing to clarify its stand while arguing before this Tribunal. It is improper on part of SEBI to take such indifferent attitude. Since the regulations in question are framed by SEBI, it is the duty of SEBI to ensure that there is consistency in implementing the regulations framed by it and that there is no uncertainty. It is unfortunate that SEBI wants that the orders passed by its AO s be upheld even though the said orders are mutually contradictory. 4. Although for deciding these appeals, it is not necessary to narrate facts of each case, for better appreciation of rival contentions, few facts in Appeal No. 281 of 2014 (Mr. Gopalkrishnan Raman Ors. vs. SEBI) are set out herein below:- a) In the year 1952 Mr. P.A. Raman started a printing press under a partnership firm known as Inland Printers. In the year 1978 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. for sale of the shares held by them in Inland Printers Ltd. In accordance with the regulations framed by SEBI, a letter of offer was also made by Tigerstone Trading Pvt. Ltd. for acquiring shares of Inland Printers Ltd. h) While examining the said letter of offer it was noticed by SEBI that the appellants as also Inland Printers had failed to comply with the requirements contained in the Takeover Regulations, 1997 and Takeover Regulations, 2011 within the time stipulated therein. Hence show cause notices were issued to the appellants and after giving opportunity of hearing impugned order was passed imposing penalty of ₹ 5 lac on each of the appellants under Section 15A(b) of SEBI Act. Challenging the aforesaid order appellants have filed the present appeal. 5. Mr. Somasekhar Sundaresan, Mr. Mustafa Doctor, Senior Advocate, Mr. Nimay Dave and Mr. Rajesh Khandelwal, learned counsel appearing on behalf of respective appellants have advanced oral arguments and also have tendered written submissions. Their argument in nutshell is as follows:- a) Object of the Takeover Regulations is to intimate to the public the aggregate shareholding of the promoters or persons in con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justified in imposing penalty on each promoter in the promoter group. As the AO of SEBI has failed to construe regulation 8(2)/30(2) in the proper perspective, the impugned orders are liable to be quashed and set aside. d) Relying on various provisions contained in the Takeover Regulations it is submitted that the entire scheme of the Takeover Regulations is to treat every group of persons acting in concert as one collective whole for every single purpose, save and except when persons hitherto acting in concert part ways and cease to act in concert. Since regulation 8(2) and 30(2) in the respective Takeover Regulations treat every group of persons acting in concert as one collective whole for every single purpose, AO is not justified in imposing penalty on every promoter in the promoter group. e) Contrary to the view taken in these appeals (except in Appeal No. 385 of 2014) in several cases the AO s of SEBI have taken diametrically opposite view and held that the penalty is imposable on the promoter group and has to be recovered jointly and severally from the promoters of the promoter group and not individually as has been done in the cases in hand. 6. Mr. J. J. Bhatt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulations 1997, or regulation 3 4 of Takeover Regulations, 2011, are triggered or not the promoters of a company are required to make annual disclosures under regulation 8(2)/30(2) of the aforesaid Regulations respectively. b) The obligation to make yearly disclosure under regulation 8(2) of the Takeover Regulations, 1997 is on every promoter or every person having control over the company but not on persons acting in concert with the promoter or every person having control over the company because, that obligation of the persons acting in concert has to be discharged by the respective promoter/person having control over the company. Since every promoter of a company was obliged to make yearly disclosures of shareholding to the company under the Takeover Regulations, penalty is imposable on each promoter if there is failure to comply with those obligations and hence no fault can be found with the decision of SEBI in imposing penalty on every promoter of the respective companies. c) The obligation to make a disclosure and ministerial act of filing the declaration on behalf of the persons obliged to make a declaration is not to be confused with the obligation to make a disclos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the decision of the Apex Court in case of Collector of Customs v/s M/s United Electrical Industries Ltd. reported in AIR 1999 SC 3796. i) When, the regulations in question specifically use the word promoter , appellants are not justified in reading that expression as promoter group . In interpreting a statutory provision it is not permissible to add words to the statute unless without such addition the provision of statute to be interpreted is rendered meaningless. In support of the above contention reliance is placed on decisions of the Apex Court in case of State of Maharashtra v/s Nanded- Parbhani Z.L.B. M.V. Operator Sangh reported in (2000) 2 SCC 69 and in case of Kanai Lal Sur v/s Paramnidhi Sadhukhan reported in AIR 1957 S.C. 907. j) Fact that the prescribed form permits an Authorized Representative to file a declaration for and on behalf of the person/s on whom the obligation is cast to make such disclosure does not mean that the obligation to make the declaration is on the Authorized Representative. The form cannot govern the operative part of the rule, regulation or section and in case of any conflict, rule, regulation or the section shall prevail. In support o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... promoter. The definition of the word acquirer , however, includes persons acting in concert and the definition of person acting in concert includes persons deemed to be acting in concert. Therefore, the obligation to make yearly disclosure by every promoter under the Takeover Regulations has to be discharged by each and every individual promoter of the company. o) Obligation to make a declaration under regulation 8(2) of Takeover Regulations, 1997 is cast on the promoter individually, whereas, obligation to make an open offer under regulation 10, 11, 12 of the Takeover Regulations, 1997 are on the acquirer and the persons acting in concert with him jointly and/ or severally as specified under regulation 22(19) of Takeover Regulations, 1997. Therefore, the obligation under Chapter II cannot be compared with the obligation under Chapter III of the Takeover Regulations. p) Regulation 28(1) of Takeover Regulations, 2011 provides that the declaration to be made under Chapter V shall be aggregate shareholding/voting rights of the acquirer or promoter of the Target Company or every person acting in concert with him. Regulation 28(1) does not deal with or provide as to whether the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the registered officer of the Target Company. u) In these group of matters, some appellants had made declarations individually and other appellants had made declarations as promoter group. Therefore, in some cases penalty has been imposed individually and in some cases penalty is imposed on the promoter group jointly and severally and hence no fault can be found with the decisions impugned in these appeals. v) Penalty imposed in all these cases is nominal compared to the delay in making disclosures and hence no interference is called for. Accordingly, it is submitted that all the appeals deserve to be dismissed with costs. 8. We have carefully considered the rival submissions. 9. Basic dispute in all these appeals is, where the promoters of a listed company includes a promoter group, whether under regulation 8(2) and regulation 30(2) of the 1997/2011 Takeover Regulations respectively, the obligation to make yearly disclosure is on the promoter group or the obligation is on every promoter covered under the promoter group. 10. Regulation 8(2) of the Takeover Regulations, 1997 provides that A promoter shall make yearly disclosure to the company within the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. Since the expression promoter used under the Takeover Regulations includes the promoter group , the obligation to make yearly disclosure cast on the promoter under regulation 8(2) and under regulation 30(2) of the respective Takeover Regulations would necessarily mean that the promoter group is also obliged to make yearly disclosure under the aforesaid regulations. In other words, the obligation to be discharged by the promoter would also have to be discharged by the promoter group. To illustrate, if there are five promoters in a listed company and three of them fall within the promoter group, then as per the Takeover Regulations, the obligation to make yearly disclosure would be on the two individual promoters as well as the promoter group consisting of three promoters. 14. Argument of SEBI is that in view of the General Clauses Act the word promoter in the Takeover Regulations would include promoters and therefore, the obligation to make yearly disclosure under the Takeover Regulations is on the individual promoter including the promoters included in the promoter group. In other words, the submission is that in case of a promoter group, the obligation to make ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l is held by the promoter or an immediate relative of the promoter or a firm or HUF in which the promoter or any one or more of his immediate relative is a member; (iii) any company in which a company specified in (i) above, holds 10 percent or more, of the share capital; and (iv) any HUF or firm in which the aggregate share of the promoter and his immediate relatives is equal to or more than 10 percent of the total. 16. If the argument of SEBI that under the Takeover Regulations, every promoter of a listed company is obliged to make yearly disclosure is accepted then it would mean that every person/member included within the meaning of promoter would be required to make yearly disclosure. In that event, it would mean that where the promoter is a body corporate, then, the subsidiary or holding company of that body corporate as well as other entities which are brought within the meaning of promoter would be required to make yearly disclosure even if such subsidiary or holding company or other entities do not hold any shares of the Target Company. Similarly, accepting the argument of SEBI would mean that where the promoter is an individual, then, the spouse of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also the number and percentage of shares held by the PAC of each promoter in the promoter group. Argument of SEBI that the expression promoter group cannot read into the expression promoter is ex-facie untenable in view of the fact that the expression promoter defined under the respective Takeover Regulations includes the promoter group . 19. Fact that regulation 8(2), used the word him , it cannot be inferred that the obligation to make yearly disclosure is on every promoter individually. As the said regulation commences with the word A promoter , it would be grammatically correct to use the word him in relation to the obligation to be discharged by a promoter. Since the expression promoter in the Takeover Regulations includes the promoter group, it would have to be held that in case of a promoter group the obligation to make yearly disclosure is on the promoter group and not on each promoter in the promoter group. 20. Apprehension of SEBI that for any one promoter in the promoter group to know the shareholding of other promoters in the promoter group as also the shares held by the PAC s of respective promoter in the promoter group would be difficult and ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30(2) of the Takeover Regulations, 2011. However, under both the regulations the basic object is to ensure that at the end of every financial year, the investors in the Target Company are informed about the number and percentage of shares or voting rights held by the promoter/promoter group and the object is not to make it mandatory for every promoter in the promoter group to make individual yearly disclosure even if that promoter neither held nor holds any shares of the Target Company. 23. To sum up, the obligation to make yearly disclosure under regulation 8(2) and regulation 30(2) of the Takeover Regulations framed by SEBI in the year 1997 2011 respectively is on the promoter/ promoter group. If the promoters of a listed company are individual promoters then the obligation is on the individual promoters and in case there is a promoter group then the promoter group is required to make yearly disclosure. If the promoter group fails to disclose the shares or voting rights held by the promoters in the promoter group as also their PAC s within the time stipulated under the Takeover Regulations, then, penalty is imposable on the promoter group and the said penalty would be rec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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