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TMI Blog2019 (2) TMI 1044X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) (g) of the SAST Regulations, 2011. As needed in terms of Regulation 16 of SAST Regulations, 2011, LIC through its Merchant Banker i.e. ICICI Securities Limited, filed a draft letter of offer with SEBI on which SEBI issued its observation letter on 7.12.2018 in terms of Regulations 16 (4) of the SAST Regulations. Thus, the price to be paid to the shareholders of the target company for acquisition of their shares in the open offer made by the LIC, has been determined in terms of Regulation 8 of the SAST Regulation, 2011. It appears that the case of the petitioner proceed on the premise that in terms of the provisions of LIC Act, 1956 and resultant disclosure made by the LIC in clause 4.5 of the letter of offer, to the effect that LIC is wholly owned by the Central Government, therefore, the Central Government is the 'person acting in concert' with LIC within the meaning of Regulation 2 (q) of the SAST Regulations, 2011, for the purpose of present acquisition of control of the target company by the LIC. On this assumption, the petitioner is of the view that since on 25.5.2018, the Government of India acquired 1,09,73,26,649 number of shares of the target company at the price of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of IDBI Bank Ltd., has filed the present writ petition under Article 226 of the Constitution of India with the following reliefs : a) To issue a writ, order or direction in the nature of certiorari quashing the Final Observation made by Respondent no.1 SEBI dated : 07.12.2018 whereby to open offer and display on the website done in pursuance of Public Announcement dated : 04.10.2018 made by the Respondent no.2 whereby Offer Price of ₹ 61.73 per Share has been offered upon exist from IDBI Bank Limited, upon its acquisition by Life Insurance Corporation of India. (b) Issue an appropriate writ, direction or order in the nature of Mandamus directing the regulator SEBI Respondent no.1 revise the offer price in terms of the Regulation 8 (2) (c) SAST regulations, 2011 to an amount of ₹ 71.82 per share; (c) issue such other order or direction, which this Hon'ble Court may deem, fit and proper under the facts and circumstances of the case, in favour of the petitioner. (d) Allow the writ petition with cost (3) Shorn off unnecessary details, the relevant facts of the case are that in the year 2015-2016, due to the poor performance of IDBI Bank Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f control in IDBI by LIC was conveyed to the IDBI vide letter dated 6.8.2018. On 8.8.2018, IDBI had communicated the said decision towards 'No Objection/Approval' to the acquisition control by the LIC to the NSE and BSE . (5) It has been averred in the writ petition that the IDBI Bank through a publication in the Newspaper dated 11.10.2018 and in their tentative schedule of activity, mentioned that December 14, 2018 is the offer closing date. In these backgrounds, the LIC and the Central Government are the Acquirers/Person Acting in Concert. Furthermore, as per the letter dated 25.5.2018, by the Company Secretary of IDBI, addressed to NSE and BSE, 1,09,73,26,649 number of Equity Shares were issued to the Government of India at a price of ₹ 71.82 per share. Thus, the price of ₹ 71.82 per share is confirmed. According to the petitioner, the present offer is being made by the Acquirer pursuant to Regulations 3 (1) and 4 of the Substantial Acquisition of Shares and Takeovers (SAST) Regulations, 2011 (hereinafter referred to as SAST Regulations, 2011 ). (6) Petitioner contends that as per Regulation 8 (c) of SAST Regulations, 2011, the price of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarding take over of IDBI by the LIC as well as seeking permission from the Government of India. Subsequently, the Government of India had approved the LIC to acquire 51% controlling stake in the IDBI. His submission is that as per Regulation 8 (c) of SAST Regulations, 2011, the price of ₹ 71.82/- per share is the actual price but on 4.10.2018, a public announcement has been made, holding therein the offer price per equity share as ₹ 61.73/-. (10) Learned Counsel for the petitioner has submitted that as per Regulation 2 (1) (a) of SAST Regulations, 2011, 'Acquirer' means any person who, directly or indirectly, acquires or agrees to acquire whether by himself, or through, or with persons acting in concert with him, shares or voting rights in, or control over a target company. As per Regulation 2 (1) (b) of SAST Regulations, 2011, 'acquisition' means, directly or indirectly, acquiring or agreeing to acquire shares or voting rights in, or control over, a target company. Regulation 2 (1) (q) (1) of SAST Regulations, 2011 provides that persons acting in concert means, persons who, with a common objective or purpose of acquisition of shares or voting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said writ petition was disposed off vide order dated 2.11.2018, whereby the Delhi High Court while observing that the petitioner had an alternate remedy of filing a complaint with SEBI, directed SEBI to treat the said petition as a complaint and to take an appropriate decision on the said complaint. In compliance of the aforesaid order dated 2.11.2018, SEBI had considered the issues raised by the petitioner of the aforesaid writ petition No. 11974 of 2018 and has disposed of the complaint of the said petitioner vide letter dated 15.11.2018. (14) Learned Counsel for the SEBI has further submitted that as per information available on the website of Apex Court, it appears that the petitioner of writ petition No. 11974 of 2018 had challenged the order dated 2.11.2018 passed by the Delhi High Court as also the aforesaid letter dated 15.11.2018 issued by the SEBI before the Apex Court by filing a Special Leave Petition vide Diary No. 44980 of 2018, which was dismissed by the Apex Court on 14.12.2018. (15) Learned Counsel for the SEBI has further pointed out that another writ petition bearing No. 8842 of 2018 : All India IDBI Officers' Association Vs. Union of India and others ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all or any matters arising therefrom. His submission is that the petitioner has sought quashing of the final observation made by the SEBI with respect to open offer and public announcement dated 4.10.2018 and has further sought a mandamus for the SEBI to revise the offer price in terms of Regulation 8 of the SATS Regulations. In the event petitioner is aggrieved in any manner, he cannot rush directly to this court by passing the efficacious remedy by approaching the Manager to the open offer i.e. ICICI Securities Ltd. or the Registrar to the open offer i.e. Karvy Fintech Private Ltd. Besides that Clause-5.19 of the Letter of Officer provides that an investor may also approach the Compliance Officer of the target company i.e. IDBI who shall attend to all investor grievances of the target company. Further, if the shareholder is not satisfied or does not receive a satisfactory response to his/her grievance, he can very well approach SEBI through online SEBI Complaint Redressal System (SCORES) at www.scores.gov.in. (19) It has also been urged by the Learned Counsel for the LIC that in case during the open offer or before the starting of the open offer, any investor has any com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present petition have taken place at Maharastra and all the respondents are based at Maharashtra, except the respondent No.4 i.e. Union of India at Delhi, then, how the writ petition is maintainable before this Court at Lucknow. (24) As regards allotment of 1097326649 equity shares to the Government of India at the price of ₹ 71.82 per share, aggregating ₹ 7881 Crore by the IDBI, learned counsel for the LIC has submitted that those equity shares have been issued by the IDBI through preferential issue to raise equity capital and since the Central Government is not a person acting in concert, the said price cannot be taken for any reference under Regulation 8 (2) (c) of SAST Regulations, 2011. His submission is that 'preferential issue' has been provided under Chapter VII of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 and pricing of the equity shares has been provided under Regulations 76 and 76A of the said Regulations, 2009. (25) Mr. Kuldeep Pati Tripathi, learned Counsel for the respondent No.3 while adopting the arguments advanced by the learned Counsel for the SEBI and learned Counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. (4) On receipt of an appeal under sub-section (1), the Securities Appellate Tribunal may, after giving the parties to the appeal, an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against. (5) The Securities Appellate Tribunal shall send a copy of every order made by it to [the Board], [ or the Insurance Regulatory and Development Authority or the Pension Fund Regulatory and Development Authority, as the case may be] the parties to the appeal and to the concerned Adjudicating Officer. (6) The appeal filed before the Securities Appellate Tribunal under subsection (1) shall be dealt with by it as expeditiously as possible and endeavour shall be made by it to dispose of the appeal finally within six months from the date of receipt of the appeal. (30) A bare perusal of the aforesaid section reveals that any person aggrieved by an order of the Board or by an order made by an Adjudicating Officer under this Act can prefer an Appeal to the SAT. In the present case, the petitioner has sought quashing of the Final Observation made by the SEBI with respect to the open offer and the publ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y established as a Development Financial Institution in the name of Industrial Development Bank of India under the appellation 'Industrial Development Bank of India Act, 1964'. Subsequently, the Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003 was passed and it repealed the Industrial Development Bank of India Act, 1964 for the purpose of transforming the erstwhile Development Financial Institution into a banking company, on September 27, 2004. Accordingly, the Target Company is carrying on the business of banking under the statutory dispensation like public sector banks and the Target Company is not required to obtain a license under Section 22 of the Banking Regulation Act. Further, by way of a letter dated 15.4.2005 issued by the RBI, the Target Company has been classified as a Government owned bank under the category of 'Other Public Sector Bank'. The Target Company was incorporated as Industrial Development Bank of India Ltd. on 27.9.2004 under Companies Act, 1956. The name of the Target Company was changed to IDBI and it received a fresh Certificate of Incorporation from RoC on May 7, 2008. The Target Company is engaged in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'relevant date' for the Preferential issue was 8.10.2018 and accordingly, the price at which each Equity share will be issued has been calculated to be '60.73' that aggregates up to ₹ 2,02,28,47,14,614 in relation to the issuance and allotment of 3,33,08,86,129 Equity Shares. (35) After careful scrtuiny, we are of the considered opinion that it is wrong to say that LIC and Central Government are persons acting in concert. For being covered under the definition of 'persons acting in concert' , there should be common objective for purpose of acquisition of shares or for exercising control over a target company pursuant to an agreement or understanding, however in the present case the Central Government vide its letter dated 6.8.2018 has expressly not only relinquished it's shareholding to below 50% and has agreed to the acquisition of the controlling stake by LIC as promoter in IDBI through preferential allotment/open offer of equity. Not only this, the Central Government vide it's letter dated 3.12.2018 has conveyed that it will not participate in the offer and the same has been mentioned at point number 4 in the pre-offer advertisement dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and takeover of companies. First such regulations were framed by SEBI in the year 1994 which were replaced by the Regulations of 1997. Presently, the regulations governing substantial acquistition of shares and takeovers of companies is SAST Regulations, 2011. iii. The SAST Regulations, 2011 applies to substantial acquistion of shares or voting rights or control in a company having its shares listed on a recognized stock exchange. The SAST Regulations, 2011 provides that acquistion of shares or voting rights by an acquirer beyond certain thresholds as specified in Regulation 4 of the SAST Regulations, 2011, attracts obligation of such acquirer to make public announcement of an open offer to acquire at least 26% shares from the shareholders of the concerned target company. The acquisition of shares or voting rights or control in a target company can be solely by an acquirer or by an acquirer along with persons acting in concert with him as defined in Regulation 2 (1) (a) and Regulation 2 (1) (q), respectively. The SAST Regulations, 2011, in Regulation 8 also provides for computation of the offer price, for shares to be acquired by such acquirer in such an open offer. iv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the effect that LIC is wholly owned by the Central Government, therefore, the Central Government is the 'person acting in concert' with LIC within the meaning of Regulation 2 (q) of the SAST Regulations, 2011, for the purpose of present acquisition of control of the target company by the LIC. On this assumption, the petitioner is of the view that since on 25.5.2018, the Government of India acquired 1,09,73,26,649 number of shares of the target company at the price of ₹ 71.82/- per share, thus, the said price of ₹ 71.82/- per share paid by the Government of India being 'person acting in concert' of LIC will fall within Regulation 8 (2) (c). The petitioner is of the view that price of ₹ 71.82/- per share, being highest amongst all parameters laid down in Regulation 8 (2) (a) to (f) should be the price of open offer. (42) The concept of PAC and its applicability to Regulation 20 (4) (b) of the SAST Regulations, 2011 was considered by the Apex Court in M/s Daiichi Sankyo Company Ltd. Vs. Jayaram Chigurupati others : [(2010) 157 Comp. Case 380 (SC)]. The relevant extract of the report is reproduced hereinbelow : Regulation 2(1)(e)(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncert , the Apex Court has observed that the deeming provision does not provide that the mere existence of a holding-subsidiary relationship is sufficient to create this relationship. The Apex Court further held that the deeming provision does not dispense with the requirement that the parties must have cooperated for the common objective or purpose of substantial acquisition of shares, and held further that this must be established as a matter of fact, on an analysis of the conduct of the parties. In addition, the Apex Court found the relationship of persons acting in concert must exist not at the time of the public announcement, but at the time of acquisition, for the purposes of Regulation 20(4)(b) of SAST Regulations, 2011. (44) On applying the aforesaid ratio to the facts of the present case, it can easily be inferred that Union of India cannot be term as 'person acting in concert' with LIC and consequently, Regulations 8 (2) (c) of the SAST Regulations, 2011 has been applied correctly in the present case and the Offer Price of ₹ 61.73 per share, as being offered by the LIC is correct as per the justification given at para 6.1.5 and 6.1.6 of the Letter ..... 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