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TMI Blog2020 (2) TMI 386X X X X Extracts X X X X X X X X Extracts X X X X ..... ; for short) read with Regulation 32 and 35 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 ('Takeover Regulations 2011' for short) in the matter of acquisition of shares of Parsoli Corporation Ltd. (hereinafter referred to as the 'Target Company') by the appellants Baader Bank Aktiengesellschaft (hereinafter referred to as 'Baader') and Gulf Investment Services Holding Co.(hereinafter referred to as 'GIS'). 3. By the said order, the WTM directed the appellants to make a public announcement to acquire shares of the target Company in accordance with the provisions of Takeover Regulations 1997 within a period of 45 days from the date of the order. Further, the appellants were directed to pay the consideration amount along with interest @ 10% per annum with effect from October 30, 2006 to the date of payment to the shareholders who were holding shares in the Target Company after adjustment of dividend paid, if any. 4. The facts leading to the filing of the present appeals are that the appellant Baader is a licensed Bank regulated by the Bundesanstalt fur Finanzdienstleistungsaufsicht (BaFin) in Germany and is one of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as to why suitable directions under Section 11 and 11B of the SEBI Act read with Regulation 44 and 45(6) of the Takeover Regulations 1997 should not be issued against them. 11. Initially, the appellants did not file any reply to the show cause notice and instead filed an application for settlement under Section 15JB of the SEBI Act which application was rejected on May 6, 2011. Thereafter replies were filed. The WTM, after considering their replies and, after giving an opportunity of hearing, passed the impugned order. 12. We have heard Shri Somasekhar Sundaresan, the learned counsel for the appellant and Shri Kumar Desai, the learned counsel for the respondent. 13. It was urged that the promoters of the Company had wrongly misrepresented to the appellants that the application seeking exemption from making an open offer was to be made to the BSE Limited ('BSE' for short) where the shares of the Target Company were listed. It was contended that the promoters represented to the appellants that BSE after seeking appropriate clearances from SEBI would issue the exemption and thereafter would list the shares. The promoters also represented that they would obtain the necessa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aader Bank and GIS could consider an application under Regulation 4 of the Take Over Code for exemption from making an open offer to the public on the grounds that post acquisition of shares by Baader Bank and GIS, the public shareholding (excluding the shares to be held by Baader Bank and GIS) in the Company will be 6.92% which is much below the prescribed minimum shares to be acquired under the Take Over Code." 16. Inspite of the aforesaid opinion, the appellants neither made any attempt to make an open offer nor applied for exemption before the relevant authority. The appellants were informed by their legal team that the application for exemption was required to be made directly to SEBI. Inspite of this information, the appellants failed to make any application for exemption. 17. The defense that the promoters of the Target Company had misrepresented the appellants that they would obtain exemption from making an open offer from BSE cannot be believed. The appellants had a legal opinion with them and knew fully well that the application for exemption was required to be filed before SEBI and not before BSE. The appellants for reasons best known to them failed to file any applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company and Sareshwalas restraining them from accessing the securities market in any manner for a period of 7 years for transferring 80,800 fake shares to the promoters and to the front entities. The promoters were further restrained from holding any position of a director in any listed Company for a period of 7 years. Further, the promoters/Shareshwala's group were directed to make a public offer through a merchant banker to acquire shares from the public shareholders and if after acquisition, if the public shares comes below the minimum requirement, in which case the Target Company would be compulsorily delisted. The said directions were subsequently affirmed by this Tribunal as well as by the Supreme Court. It was further contended that since the aforesaid order was not complied by the Target Company and its promoters, SEBI passed another order dated June 22, 2018 imposing a penalty of Rs. 25 lakh. 22. The learned counsel, thus, contended that when the promoters of the Target Company had played such a serious fraud manipulating the register of members with its integrity being foundationally undermined, the direction of SEBI to make an open offer would only benefit the Sares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic shareholders by paying them the value determined by the valuer in the manner prescribed in Regulation 23 of the SEBI (Delisting of Equity Shares) Regulations, 2009 and acquire the shares offered in response to the public offer, within three months from the date of this Order; (d) direct BSE to facilitate valuation of shares to be purchased as at (c) above, and compulsorily delist Parsoli Corporation Ltd., if the public shareholding reduces below the minimum level in view of aforesaid purchase." 27. The said direction was challenged and dealt with by the Tribunal in its order dated August 12, 2011 wherein the Tribunal held:- "The learned senior counsel for the appellants has raised three contentions. Firstly, he has very strenuously challenged the directions issued by the whole time member in paragraph 12(c) and (d) of the impugned order by which the two directors of Parsoli namely, Zafar Yunus Sareshwala and Uves Yunus Sareshwala have been directed to make a public offer through a merchant banker to acquire shares from public shareholders by paying them the price as determined in the manner prescribed in regulation 23 of the delisting regulations framed by the Board. The di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... market. Had the appellants made the open offer within a period of 4 days from the date of acquisition in accordance with the Takeover Regulations 1997 and complied with the time line specified therein, the formalities could have been complied by October 2006, i.e. from the date of making the public announcement. But alas, the same has not been done till date. In Nirvana Holding (P.) Ltd. v. SEBI (Appeal No. 31 of 2011, dated 8-9-2011), this Tribunal held:- 'It must be remembered that whenever an acquirer violates Regulation 10, 11 or 12 of the takeover code by not making a public announcement, he should be directed to comply with the provision by making a public offer. The words "unless such acquirer makes a public announcement" appearing in Regulations 10 and 11(1) make these provisions mandatory and a public announcement has to be made. Similar words appear in Regulation 12 as well. These provisions make the acquisition conditional upon a public announcement being made. The primary object of the takeover code is to provide an exit route to the public shareholders when there is substantial acquisition of shares or a takeover. This right to exit is an invaluable right and th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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