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TMI Blog2017 (7) TMI 748X X X X Extracts X X X X X X X X Extracts X X X X ..... period is computed. This being the case, three years had not elapsed on 9/10th July, 2014, which was the date on which the earlier purchase of shares had taken place. Holding companies and their subsidiaries are treated as one group subject to control over such companies being exclusively held by the same persons. This shows that it has been statutorily recognized in sub regulation (iii) that in a given situation viz holding subsidiary relationship, the corporate veil would be lifted. When we come to sub regulations (iv) and (v), it is clear that these two sub regulations follow the pattern contained in sub regulation (ii) in as much as when it comes to persons acting in concert, the period should be not less than three years prior to the proposed acquisition, and disclosed as such pursuant to filings under the listing agreement. Also, when it comes to shareholders of a target company who have been persons acting in concert for a period of not less than three years prior to the proposed acquisition and are disclosed as such pursuant to filings under the listing agreement, the corporate veil is not lifted. In the facts of the present case, the target company is clearly de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 012. The appellant acquired 18% of the equity share holding of the target company at a price of ₹ 6.30 per share some time in July, 2014. It made certain other purchases with which we are not concerned, because the price paid for those acquisitions was less than ₹ 6.30 per share. On 20 th October, 2015 Laurel and Arbutus Consultancy LLP along with various other entities, who were persons acting in concert, made a public announcement under Regulation 15(1) of the SEBI Substantial Acquisition of Shares and Takeover Regulations, 2011 when an open offer was made for acquisition of 35,93,90,094 equity shares of the Target Company from the equity shareholders of the Target Company at the price of ₹ 3.20 per share. Necessary formalities were observed thereafter, but by a letter dated 4th December, 2015, SEBI observed that the exemption provisions contained in Regulation 10 would not apply to the 2014 acquisition, as a result of which the price of ₹ 3.20 per share was not accepted and the higher price of ₹ 6.30 was stated to be an amount that would have to be paid to the equity shareholders of the Target Company. By a letter dated 5th May, 2016, contain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a particular business entity, notwithstanding that it may ultimately change form. His argument was that had no demerger taken place, it would be clear that the promoters of IBREL, having been promoters for over three years, would be exempt from the Takeover Regulations, in which case the 2014 purchases could not be taken into account for the purpose of the present open offer. He has also taken us through the various judgments of this Court dealing with analogous situations in which a mere change in form from a partnership firm into a limited company would not necessarily lead to the conclusion that, under various State Rent Acts, a sub-tenancy had taken place. According to him, these judgments would apply on the facts of the present case inasmuch as, at no point of time, have the promoters of the power business of IBREL and now of Rajiv Rattan ever changed. As against the said arguments, Shri Arvind P. Datar, learned senior counsel appearing on behalf of the respondent SEBI, has argued before us that there is no necessity to interfere with the well reasoned Appellate Tribunal judgment, which according to him ought not to be interfered with unless found to be perverse under 15- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en stressed by Shri K.V. Vishwanathan, learned senior counsel for the appellant, is that the acquisition must be pursuant to inter se transfer of shares amongst qualifying persons who, for our purposes, are persons who are promoters of a particular entity. On a plain reading of the provision, it is clear that persons must be named as promoters in the shareholding pattern filed by the Target Company . The Target Company is separately defined by the 2011 Regulations in paragraph 2(z) thereof as follows: 2(z) target company means a company and includes a body corporate or corporation established under a Central legislation, State legislation or Provincial legislation for the time being in force, whose shares are listed on a stock exchange; In so far as the facts of the present case are concerned, the definition that we are concerned with is that of a company, and not any other corporate entity. For the purpose of the present case, the Target Company, therefore, means a company whose shares are listed on a Stock Exchange. This would mean, on the facts of the present case, the Rattan Company, whose shares are listed on the two Stock Exchanges as mentioned above. Coming back ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the existing shareholder with substantial holding. There was a strong feeling that in such cases of transfers, there should be a requirement of compulsory open offer. Finally, the Committee recommended that as regards inter se transfers amongst promoters, the existing provisions may continue. Indeed, therefore, there is no difference in the Regulations of 1997, and the Regulations of 2011 so far as transfers among promoters is concerned, especially after the explanation that was added to Regulation 3 in 2005. It is significant to notice that the Committee did not positively state that Regulation 3 should be construed in any particular manner, except to state that there is no cause for concern in respect of inter se transfer within the group if control continues to remain within the group. Coming to the Achuthan Committee Report of 2010, this Committee noted : In respect of inter-se transfers amongst certain qualifying parties as listed and defined under the Takeover Regulations, the Committee recommends that, in order to curb the abuse of introduction of new entities as qualifying parties, in most cases a requirement of pre-existing relationship of at least three y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement. Also, when it comes to shareholders of a target company who have been persons acting in concert for a period of not less than three years prior to the proposed acquisition and are disclosed as such pursuant to filings under the listing agreement, the corporate veil is not lifted. The difference between sub regulations (ii), (iv) and (v) on the one hand, and sub regulation (iii) on the other, again shows us that it is impermissible for the court to lift the corporate veil, either partially or otherwise, in a manner that would distort the plain language of the regulation. Where the corporate veil is to be lifted, the regulation itself specifically so states. For this reason also, it is a little difficult to accept Mr. Vishwanathan's argument that a reading of the other sub regulations contained within regulation 10 (1) (a) would further his argument in this case. We now come to the two judgments of this Court which were cited before us in the context of Rent Acts. Chronologically, the first of these judgments is Madras Bangalore Transport Co. (West) Vs. Inder Singh And Others reported in (1986) 3 SCC 62. In this case, the paragraph relied upon by Mr. Vishwanathan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Utkal Contractors and Joinery (P) Ltd. And others vs. State of Orissa reported in 1987 (Supp) SCC 751, a similar argument was turned down in the following terms : 11.Secondly, the validity of the statutory notification cannot be judged merely on the basis of Statement of Objects and Reasons accompanying the Bill. Nor it could be tested by the government policy taken from time to time. The executive policy of the government, or the Statement of Objects and Reasons of the Act or Ordinance cannot control the actual words used in the legislation. In Central Bank of India v. Workmen, S.K. Das, J. said : ...The Statement of Objects and Reasons is not admissible, however, for construing the section; far less can it control the actual words used. 12. In State of West Bengal v. Union of India, Sinha, C.J. observed : ...It is however, well settled that the Statement of Objects and Reasons accompanying a Bill, when introduced in Parliament, cannot be used to determine the true meaning and effect of substantive provisions of the statute. They cannot be used except for the limited purpose of understanding the background and the antecedent state of affairs leading up to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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