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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 ..... ance of Public Announcement dated : 04.10.2018 made by the Respondent no.2 whereby Offer Price of Rs. 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 Rs. 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. (hereinafter referred to as "IDBI") and the negative returns generated by the said entity, the Government of India had announced its intent to privatize IDBI in order to infuse funds in a debt-ridden company and to meet its financial obligations. On 16.8.2017, IDBI allotted 24,74,92,510 number of equity shares to the Life Insurance Corporation of India (hereinafter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivity, 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 Rs. 71.82 per share. Thus, the price of Rs. 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 Rs. 71.82/- per share is the actual price which ought to be offered to the minority shareholders. However, in utter disregard to the aforesaid provision, the Securities & Exchange Board of India (hereinafter referred to as "SEBI") had issued a final observation dated 7.12.2018, whereby open offer and display on the website done in pursuance of Public Announcement dated 4.10.2018 made by the LIC was Rs. 61.73/- p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as Rs. 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 rights in, or exercising control over a target company, pursuant to an agreement or understanding, formal or informal, directly or indirectly cooperate for acquisition of shares or voting rights in, or exercise of control over the target company. (11) In these backgrounds, while drawing attention towards paragraph-4.5 of Letter of Offer contained in Annexure No.CA-7 of the counter affidavit filed on behalf of the SEBI, Mr. Aarohi Bhalla, learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 has also been filed before the Delhi High Court, challenging therein the whole process of acquisition of IDBI by LIC. The said writ petition was also dismissed by the Delhi High Court vide order dated 17.12.2018, which order was assailed by All India IDBI Officers' Association by filing LPA No. 732 of 2018. The Delhi High Court, vide judgment and order dated 21.12.2018, dismissed the said Letter Patent Appeal. (16) In these backgrounds, submission of the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffer 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 comment/complaint about the disclosure given by the Acquirer in Public Announcement or in Detailed Public statement or in draft Letter of offer information, he can write to Corporate Finance Department, Division of Corporate Restructuring at SEBI Bhavan, Plot No. C4-A, 'G' Block, Bandra Kurla Complex, Bandra (E), Mumbai-400 051. (20) It has been stated by the LIC that under Regulations 31 (1) of SAST Regulations, 2011, SEBI has power to direct the Acquirer to make an open offer for acquir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 for the LIC has also contended that the present writ petition is not maintainable in view of the fact that the petitioner is having remedy to approach SAT as provided under Section 15-T of the Act, 1992. (26) We have examined the submissions of the learned Counsel for the parties and gone through the record. (27) Before dealing with the submissions of the learned Counsel for the parties, we would like to mention here that though counter affidavits have been filed on behalf of LIC and SEBI but learned Counsel for the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicating 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 public announcement dated 4.10.2018. The petitioner has also sought a mandamus for the SEBI to revise the offer price in terms of Regulation 8 of the SATS Regulations, 2011. (31) According to the LIC, the ICICI Securities Ltd. is the Manager of the Open Offer, whereas Karvy Fintech Private Limited is the Registrar of the Open Offer. Clause 5.19 of the Letter of Offer 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsation 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 the banking business. The acquirer-LIC had, by way of its letter dated 15.6.2018 and letter dated 26.6.2018, sought permission from the IRDA in relation to it being permitted to acquire up to 51% of the shareholding of the Target Company. The IRDA by way of its letter dated 4.7.2018, permitted the Acquirer to acquire upto 51% of the shareholding of the Target Company subject to certain conditions. Further, the Acquirer sent a letter dated 16.7.2018 to the Target Company wherein the acquirer expressed it's interest in acquiring up to 51% of the shareholding of the Target Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares 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 dated 21.12.2018. (36) The Central Government cannot be termed as the Acquirer of the Target Company nor is person acting in concert with LIC, for the reason that the definition of 'Acquirer' as provided in Regulation 2 (1) (a) of SAST Regulations, 2011, says that '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. In the present case, the Central Government is not acquiring shares of the target company i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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. Once an acquirer makes acquisition as contemplated in Regulation 3 or 4, such an acquirer is required to make public announcement of an open offer to acquire at least 26% shares from the shareholders of the concerned target company. For making acquisition of shares in an open offer, an acquirer is required to send a letter of offer to the shareholders of the target company, in terms of Regulation 18 (2). Before sending such a letter of offer to the shareholders, acquirer is required to file the draft letter of offer with SEBI, through its merchant banker, in terms of Regulation 16 (1), SEBI gives its observat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f LIC will fall within Regulation 8 (2) (c). The petitioner is of the view that price of Rs. 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) defines "person acting in concert". It is a deeming provision. It has to be read in conjunction with regulation 2(1)(e)(1) which states that person acting in concert comprises of persons who in furtherance of a common objective or purpose of substantial acquisition of shares or voting rights or gaining control over the target company, pursuant to an agreement or understanding (formal or informal), directly or indirectly cooperate by acquiring or agreeing to acquire shares or voting rights in the target company or to acquire control over the target company. The word "comprises" in regulation 2(1)(e) is significant. It applies to regulation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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