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TMI Blog2020 (5) TMI 427X X X X Extracts X X X X X X X X Extracts X X X X ..... declared as sick Company under the BIFR and draft rehabilitation scheme was also under consideration. Thus, the act of the Appellant nos. 5 and 6 cannot be equated with corporate raiders trying to circumvent the provision of Regulation in order to seek control of the target Company. They were already promoters of the target Company and they had acquired the shares beyond the limits permitted by the creeping acquisition method. In the circumstances, the direction of the WTM cannot be sustained. - Appeal Nos. 443 And 444 of 2018 - - - Dated:- 29-1-2020 - Dr. C.K.G. Nair, Member And M.T. Joshi, Judicial Member For the Appellant : P.N. Modi, Sr. Adv., Ms. Kalpana Desai and Rajesh Khandelwal, Advs. For the Respondent : Pradeep Sancheti, Sr. Adv. and Vivek Shah, Adv. ORDER M.T. JOSHI, JUDICIAL MEMBER. 1. Aggrieved by the direction of the Whole Time Member of respondent Securities and Exchange Board of India (hereinafter referred to as 'SEBI') dated 17th September, 2018 vide the impugned order directing all the present appellants in both the appeals to jointly and severally make a public announcement to acquire the shares of SBEC Sugar Ltd. (herei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than five per cent of the voting rights, unless the acquirer makes a public announcement of an open offer for acquiring shares of such target company in accordance with these regulations: Provided that such acquirer shall not be entitled to acquire or enter into any agreement to acquire shares or voting rights exceeding such number of shares as would take the aggregate shareholding pursuant to the acquisition above the maximum permissible non-public shareholding. Explanation.-For purposes of determining the quantum of acquisition of additional voting rights under this sub-regulation,- (i) gross acquisitions alone shall be taken into account regardless of any intermittent fall in shareholding or voting rights whether owing to disposal of shares held or dilution of voting rights owing to fresh issue of shares by the target company. (ii) in the case of acquisition of shares by way of issue of new shares by the target company or where the target company has made an issue of new shares in any given financial year, the difference between the pre-allotment and the post- allotment percentage voting rights shall be regarded as the quantum of additional acquisition. (3) For th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant period. 4. The WTM held that in view of the fact that no rehabilitation scheme was formulated there cannot be any exemption from the SAST Regulations as claimed by the appellant. It was therefore held that the acquisition of the shares were against Regulation 3(2) of the SAST Regulations. 5. As regards the liability of all the appellants, the WTM held that other appellants being promoters of the target Company would be persons acting in concert with appellant nos.5 and 6 as explained in Regulation 2(1)(q) as defined in the SAST Regulations, 2011. The relevant provision is as under:- (q) persons acting in concert means,- (1) 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 co-operate for acquisition of shares or voting rights in, or exercise of control over the target company. (2) Without prejudice to the generality of the foregoing, the persons falling within the following categories shall be deemed to be persons acting in concert with other persons within the same category, unle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be persons acting in concert, all the present appellants would be liable to make offer as detailed supra. It was observed that these provisions would raise rebuttable presumption. However, as the appellant failed to place any evidence that they were acting independent of each other except taking a plea, the presumption does not stand rebutted. Hence the WTM eventually concluded that all the appellants were acting in concert and, therefore, all of them would be liable. 7. In Appeal no.443 of 2018 the learned counsel for the appellant SBEC Systems (India) Ltd. i.e one of the promoter of the target Company submitted that the WTM failed to take note of the fact that the appellant is a Company. The intention of the Company of acting in concert with some of the appellants in Appeal no.444 of 2018 in acquiring additional shares could have been gathered only through the resolution or through the act of Board of Directors of the present appellant Company. He further submitted that to rebut the presumption, the appellant Company cannot place any material except claiming that it has not taken part in acquisition of additional shares as thought process of the appellant Company could be visi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present appellant Company. Merely because the present appellant is a promoter of the target Company of which additional shares were acquired by two other appellants, would not mean that the present appellant would be a person acting in concert with them. The learned WTM had rightly held that the presumption raised vide different provision is rebuttable, but failed to take into consideration the above facts. In the case of Diachii cited supra in para 47 the Supreme Court observed as under:- 47. Then what does the deeming provision do? The deeming provision simply says that in case of nine specified kinds of relationships, in each category, the person paired with the other would be deemed to be acting in concert with him/it. What it means is that if one partner in the pair makes or agrees to make substantial acquisition of shares etc. in a company it would be presumed that he/it was acting in pursuance of a common objective or purpose shared with the other partner of the pair. For example, if a company or its holding company makes or agrees to make a move for substantial acquisition of shares etc. of a certain target company then it would be presumed that the move is in pursu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ares. It is their case that since their borrower failed to repay the amount of loan lent to them, these appellants were required to accept the shares of the Company in lieu of the repayment. Their further case is that for infusion of funds into the Company for the purpose of keeping it operational the repayment of loans was demanded. The letters dated 15th July, 2014 and 16th July, 2014 from the borrowers in this regard were filed on record. In the circumstances according to all the appellants there was no meeting of minds or acting in concert with each other in acquisition of shares. 13. The impugned order however would show that as all the present appellants are the promoters of the appellant Company, by invoking the principle of presumption the order came to be passed against all the present appellants also. The above fact however would clearly show that acquisition of the shares by Appellant Nos.5 6 was their individual action forced by the circumstances and as such Appellant Nos.1 to 4 in Appeal no.444 of 2018 cannot be called as persons acting in concert with the rest of the appellants. It is however an admitted fact that the Appellant Nos.5 and 6 had acquired the add ..... X X X X Extracts X X X X X X X X Extracts X X X X
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