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TMI Blog2023 (8) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... concluding that the appellants were required to make an open offer in terms of Regulation 3(2) of the SAST Regulations as it failed to consider the definition of the term shares as contemplated in the SAST Regulations as well as in the 2011 SAST Regulations. The Tribunal only followed the decision in Sohel Malik [ 2008 (10) TMI 730 - SECURITIES APPELLATE TRIBUNAL, MUMBAI] and Eight Master Capital Fund [ 2009 (7) TMI 1386 - SECURITIES APPELLATE TRIBUNAL, MUMBAI] which as we have pointed out is distinguishable on facts as well as on law. In any case, it was not a case involving warrants. Further, in our view, the obligation cast on the appellants to make an open offer which was triggered under the SAST Regulations had to be made under the 2011 SAST Regulations since the SAST Regulations had been repealed. Bombay High Court in M. Sreenivasalu Reddy and Ors. vs. Kishore R. Chabbaria Ors. [ 1999 (4) TMI 570 - HIGH COURT OF BOMBAY] is squarely applicable in the instant appeal as held that a person who has acquired securities convertible into equity shares carrying voting rights prior to the coming into force of the 1994 SAST Regulations is not an acquirer under the 1994 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th regard to the warrants that was acquired in January, 1994? - As held that the obligation to make a public announcement under Regulation 11(1) is triggered at the time of acquisition of the warrants and not at the time of conversion of such warrants into equity shares with voting rights. If the appellants are directed to make a public announcement in respect of the equity shares of the Company allotted to the persons acting in concert in January, 2000 by conversion of warrants held by them then it will be a retrospective application of the SAST Regulations. Admittedly, the SAST Regulations is not retrospective in their application and there is nothing in the Regulations suggesting its application prior to its enforcement i.e. prior to 20th February, 1997. In our view, retrospective application or retroactive application of the SAST Regulations is not relevant. The Companies Act gave the warrant holders the right to receive shares carrying voting rights upon conversion of warrants without any obligation attached to such warrants. The obligation to make an open offer is a substantive obligation under the SAST Regulations and if the legislature decided to impose an obligatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directed to refund the amount of Rs. 25 crore within four weeks from today. In the circumstances of the case, parties shall bear their own costs. - Appeal No.748 of 2021 - - - Dated:- 28-7-2023 - JUSTICE TARUN AGARWALA, PRESIDING OFFICER AND MS. MEERA SWARUP, TECHNICAL MEMBER For the Appellants : Mr. Harish Salve, Senior Advocate with Mr. Somasekhar Sundaresan, Mr. Raghav Shankar, Mr. Ashwath Rau, Mr. Vivek Shetty, Ms. Ramya Suresh, Ms. Cheryl Fernandes, Ms. Praneeta Ragji and Mr. Dhaval Vora, Advocates i/b. AZB Partners and Mr. Amey Nabar, Advocate. For the Respondent : Mr. Arvind Datar, Senior Advocate with Mr. Shiraz Rustomjee, Senior Advocate, Mr. Suraj Chaudhary, Mr. Prateek Pai, Mr. Mihir Mody, Mr. Arnav Misra and Mr. Mayur Jaisingh, Advocates i/b. K Ashar Co.. PER: JUSTICE TARUN AGARWALA, PRESIDING OFFICER 1. By means of this appeal the appellants have challenged the order dated 7th April, 2021 passed by the Adjudicating Officer imposing a penalty of Rs. 25 crores to be paid jointly and severally by the appellants under Section 15H of the Securities and Exchange Board of India Act 1992 (hereinafter referred to as the SEBI Act ) for violation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng and was eventually rejected by SEBI on 18th May, 2020. Thereafter, the matter was taken up and the impugned order was passed on 7 th April, 2021. 6. The show cause notice alleged: 4.1 The Show Cause Notice alleges that the promoters of Reliance Industries Limited ( RIL ) along with the noticees, as persons acting in concert, on January 7, 2000, had collectively acquired a 6.83% stake in RIL pursuant to the exercise of options on warrants attached to nonconvertible debentures issued by RIL to the Noticees in January 1994 ( Warrants ). 4.2 Based on the disclosures made by RIL to the stock exchanges under the 1997 SAST Regulations, the Show Cause Notice alleges that the shareholding of the promoters of RIL together with the Noticees, as persons acting in concert, increased from 22.17% as on March 31, 1999 to 38.33% as on March 31, 2000. The Show Cause Notice further alleges that out of these shares, acquisition of 7.76% shares was exempt as it was acquired pursuant to a merger which was exempted under the 1997 SAST Regulations. 4.3 Notwithstanding the fact that the 1997 SAST Regulations were not in force when the Warrants were issued to the Noticees in January 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00, it triggered the obligation to make an open offer under the SAST Regulations and, therefore, the provisions of the SAST Regulations are applicable. 10. The AO further went on to hold that since the obligation to make an open offer was not made the appellants have violated Regulation 11(1) and became liable for penalty under Section 15H of the SEBI Act. The AO accordingly imposed a penalty of Rs. 25 crores to be paid jointly and severally by the appellants. 11. The AO held that there was no delay in the initiation of the proceedings. The AO held that investigations generally is a detailed process involving analysis of various data and gathering of evidence etc., which consumes considerable time and effort depending upon the number of entities involved and the complexity of the transactions. Further, the AO found that violation is in the nature of an economic offence and such economic offences are not subject to delay and, therefore, delay if any on the part of SEBI was of no consequence where public interest outweighs the requirement of adjudication. On this basis, the AO rejected the plea of delay and laches raised by the appellants. 12. The AO further found that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relying upon the definition under the Companies Act. 16. The learned senior counsel contended that the AO committed a manifest error in coming to a conclusion that the acquisition of voting rights triggered the obligation to make a public announcement for an open offer and that voting rights are acquired only upon conversion of the warrants into equity shares. The learned senior counsel contended that the impugned order holds the appellants are liable to make a public announcement for an open offer in January, 2000 when voting rights were acquired by the appellants upon conversion of warrants. 17. Shri Harish Salve, the learned senior counsel contended that the definition of the words acquirer and shares in the SAST Regulations includes any security which would entitle the holder to receive shares with voting rights. The definition of shares under the SAST Regulations includes any security which would entitle the holder to receive shares with voting rights as defined under Regulation 2(1)(k). The learned senior counsel urged that there cannot be any dispute that warrant is a security which entitles the holder to receive shares with voting rights. According to Shri Salv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, therefore, the question of applying the SAST Regulations retrospectively does not arise. 21. The learned senior counsel pointed out that Regulation 3(1)(c) of the SAST Regulations exempts preferential issue of shares including warrants provided the conditions set out therein are fulfilled and full disclosures of the identity of the proposed allottees etc., are made. It was contended that the appellants could not have known of seeking such exemption in the year 1994 when the warrants were issued as there was no such conditions prescribed nor could the appellants have predicted that such exemptions could be made available in future only if certain conditions prescribed therein are fulfilled. The learned senior counsel, thus, contended that this provision, namely, Regulation 3(1)(c) is an indicator that the SAST Regulations are prospective in nature and applies for acquisition of such shares including warrants post 20th February, 1997. 22. Shri Salve contended that the AO has committed an error in not analyzing the term shares as defined under Regulation 2(1)(k) of the SAST Regulations nor has considered the issue as to whether the SAST Regulations were applicable to the wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by 6.83% as on 31st March, 2000. This disclosure came in the public domain. However, the show cause notice was issued on 24th February, 2011 after 17 years from the date of issuance of the NCD in 1994 and 11 years after the shares were received in 2000. 26. It was contended that even though there is no period of limitation prescribed under the SEBI Act, the proceedings must be initiated and concluded within a reasonable time. It was urged that in the instant case there is an inordinate delay of 17 years, and therefore, on this short ground, the proceedings and the impugned order should be quashed. Further, the settlement application remained pending for almost 10 years thereby causing a further delay in the disposal of the case. This inexplicable and inordinate delay was wholly attributable to SEBI and the appellants were not responsible for the delay in the matter. 27. In support of his submissions, the learned senior counsel placed reliance on the following judgments: 1. Ashok Shivlal Rupani v. SEBI, 2019 SCC OnLine SAT 169. 2. Sanjay Jethalal Soni v. SEBI, 2019 SCC OnLine SAT 247. 3. Rakesh Kathotia v. SEBI, 2019 SCC OnLine SAT 74. 4. Shriram Ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... early indicated that the warrant holder did not have any voting rights. 32. According to the learned counsel, the SAST Regulations are not retrospective in their application and that the Regulation apply only to cases where the additional shares or voting rights are acquired by the acquirer which triggers the requirement of Regulation 11 of the SAST Regulations to make an open offer. It was urged that the application of the SAST Regulations and, consequently, the obligation to make an open offer is triggered either on the acquisition of additional shares or acquisition of voting rights. 33. In this regard, the learned counsel contended that under Regulation 11(1) of the SAST Regulations, no acquirer who holds more than 15% but less than 55% of the shares or voting rights in a Company shall acquire either himself or through the PACs additional shares or voting rights entitling him to exercise more than 5% of the voting rights in any financial year ending on 31st March, unless such acquirer makes a public announcement to acquire shares in accordance with the Regulations. It was urged that there is no dispute that the appellants, namely the promoters and the PACs were holding mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvertible debenture or a warrant is a security. The learned senior counsel, however, contended that Regulation 11(1) uses the words shares and does not use the word securities and, therefore, the word shares has to be understood in its ordinary meaning. It was contended that even though the word shares as defined under Regulation 2(1)(k) of the SAST Regulations includes security such as a warrant but the said definition would not apply to the word shares as provided in Regulation 11(1). It was urged that the word shares has to be understood unless the context otherwise requires as specified in Regulation 2. Shri Dattar, learned senior counsel contended that warrant only gives an option to acquire shares on payment of a price which may or may not be exercised. The warrant holder does not have an obligation to acquire the shares and, therefore, the warrants is not an agreement to acquire shares. According to the learned counsel, an agreement to acquire shares is one when both the seller and the buyer have the obligation to deliver and purchase the shares respectively and, in the event of non-performance by either of them, the other parties can enforce a specific perfo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o a preferential allotment of shares where the acquirer gets shares which entitles the acquirer to exercise voting rights. In the instant case, only warrants were issued and, therefore, the exemption under Regulation 3(1)(c) does not apply to a preferential issue of warrants. In support of his submission, the learned counsel placed reliance upon various case laws as well as the Bhagwati report which are as under: (i) Ch. Kiron Margadarsi Financiers v. Adjudicating Officer, SEBI (2001) 33 SCL 349 (sat): (ii) P.B. Jain Investment Pvt. Ltd. v. SEBI, order dated 13.11.2013 (iii) Eight Capital Master Fund Ltd. v. SEBI decided on 22nd July, 2009 (iv) Surya Pharmaceutical Ltd. v. SEBI decided on 22.12.2009 (v) Victor Fernandes v. SEBI decided on 28.09.2021 (vi) Vishvapradhan Commercial Pvt. Ltd. v. SEBI, decided on 20.07.2022 (vii) Bhagwati Committee Report (1997) (viii) SEBI v Rahkumar Nagpal, 2022 SCC Online 1119 (ix) Kingfisher Airlines Limited v. Competition Commission, 2010 SCC Online Bom 2186 (para 10 and 12). 45. Shri Dattar, learned senior counsel also argued that the conversion of warrants into shares in January, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seeking legal opinion has to be excluded and is condonable. In support of his submission, the learned counsel has relied upon a decision in Reliance Industries ltd. vs. CBI, (2010) SCC Online Delhi 3576. The learned counsel has also placed reliance on Hindustan Times Ltd.vs. UOI (1998) 2 SCC 242, Pooja Vinay Jain vs. SEBI, in SAT Appeal No.159 of 2019 decided on 17th March, 2020. 49. It was urged in the alternative, that failure to make an open offer is a continuing violation and, therefore, there is no question of any delay. 50. Having heard the learned counsel for the parties, we find that the following issues arise for consideration, namely:- (a) Whether an obligation to make an open offer is triggered under Regulation 11(1) of the SAST Regulations at the time of acquisition of such convertible securities or at the time of conversion of such convertible securities into shares carrying voting rights. (b) Whether the SAST Regulations will apply to warrants which have been acquired on January 12, 1994 and such warrants were converted into equity shares carrying voting rights on January 7, 2000. (c) Whether the acquisition of warrants by person acting in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Regulation 11(1) of the SAST Regulations 11. Consolidation of holdings- (1). No acquirer who, together with persons acting in concert with him, has acquired, in accordance with the provisions of law, [15 per cent or more but less than 75%] of the shares or voting rights in a company, shall acquire, either by himself or through or with persons acting in concert with him, additional shares or voting rights entitling him to exercise more than 5% of the voting rights, in any period of 12 months, unless such acquirer makes a public announcement to acquire shares in accordance with the Regulations. Regulation 14 of the SAST Regulations Timing of the Public announcement of offer 14. (1) The public announcement referred to in Regulation 10 or Regulation 11 shall be made by the merchant banker not later than four working days of entering into an agreement for acquisition of shares or voting rights or deciding to acquire shares or voting rights exceeding the respective percentage specified therein: (2) In case of an acquirer acquiring securities, including Global Depositories Receipts or American Depository Receipts which, when taken together with the voting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulations is applicable on the acquisition of warrants in 1994 or whether the SAST Regulations has a retrospective application or retroactive application in view of the obligation upon the appellants to make an open offer under Regulation 11(1) at the time of conversion of warrants into equity shares on 7th January, 2000 of warrants which were acquired on 12th January, 1994. 54. According to the appellants, the SAST Regulations, 1997 is prospective in nature. The respondent also does not dispute this proposition. Therefore, to cut the matter short we hold that the SAST Regulations is prospective in nature i.e. w.e.f. 20th February, 1997 when the Regulations came into force. 55. Before we embark on the question as to whether the SAST Regulations has retrospective application to an acquisition of warrants on 12th January, 1994 and whether such requisition of warrant made in 1994 when converted on 7th January, 2000 triggers the requirement to make an open offer under Regulation 11(1), it is necessary to understand the purpose, objective, intent and scope of the SAST Regulations. 56. One of the functions of SEBI under Section 11(2)(h) is regulating substantial acquisition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uire more than 5% shares or voting rights in a listed Company in a financial year under Regulation 11(1). 61. Acquirer has been defined under Regulation 2(1)(b) to mean where a person acquires or agrees to acquire shares or voting rights in the target Company. The words agrees to acquire is of some significance, namely, that it is not necessary that there is actual consideration of the acquisition. Even if there is an intention to acquire which intention is in the public domain, there it triggers the obligation to make a public announcement for an open offer under the SAST Regulations. Thus, if an acquirer agrees to acquire or decides to acquire the percentage specified in Regulation 10 or 11, then it triggers the obligation for an acquirer to make a public announcement for an open offer. 62. Regulation 2(1)(k) defines shares which includes any security which would entitle the holder to receive shares with voting rights. Section 2(h) of SCRA Act defines securities which amongst others includes debenture warrants. Thus, shares includes warrants. 63. Regulation 11(1) contemplates acquisition of shares or voting rights. It does not contemplate shares and voting rights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rying voting rights. 67. The words security which could entitle the holder to receive shares with voting rights as defined in the term shares cannot be ignored. The heart and fulcrum of the SAST Regulations is substantial acquisition of shares. The inclusive definition of shares cannot be dismissed as irrelevant or being repugnant to the words unless the context otherwise requires as provided in Regulation 2(1). Any other interpretation, in our opinion would result in complete absurdity. 68. In this regard the Supreme Court in a plethora of cases has held that when legislature attributes a particular meaning to each word in a statute and avoids unnecessary words, then the statutory words ought to be interpreted on that premise. The maxim ut res magis valeat quam pereat is wholly applicable, namely, that it is a cardinal principle rule of construction that normally no word or provision should be considered redundant or superfluous while interpreting the provisions of the statute. Thus, the contention of the respondent that the words includes any security which would entitle the holder to receive shares with voting rights as provided in the definition of the word s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontention that the words shall be made is in consonance with Regulation 11(1) and that Regulation 14(1) and Regulation 14(2) operate in different spheres and cannot be conflated is patently erroneous. 73. On a plain reading of Regulation 2(1)(b) which defines the term acquirer read with Regulation 2(1)(k) which defines the term shares read with Regulation 11(1) and Regulation 14(1) we are of the opinion that the term shares and the term acquirer have to be read and understood as defined in the Regulations. There cannot be two provisions which triggers the obligation to make an open offer, i.e. one under Regulation 14(1) and the other under Regulation 14(2). Regulation 11(1) triggers the obligation to make an open offer upon the acquisition or agreement to acquire shares carrying voting rights or securities which entitles the holder to receive shares with voting rights such as warrants and other convertible debentures or voting rights. Regulation 14 prescribes the timing of the open offer so triggered by Regulation 11(1). Regulation 14(1) prescribes that the open offer should be made within four working days of the agreement to acquire shares or decision to acquire shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words entitling him to exercise cannot be understood only as an ability to exercise voting rights in praesenti and that such voting rights should be attached to the security acquired. 77. Thus, we do not agree with the contention of Mr. Dattar that the term shares read with the words entitling him to exercise in the context of Regulation 11(1) has to be understood in the normal meaning, namely, shares carrying voting rights and not as defined under Regulation 2(1)(k). The interpretation embarked by the respondent makes the inclusive definition of the term shares redundant and entire Regulation 14(2) as a surplusage and otiose which cannot be done. 78. Reliance on paragraph 2.27 of the Bhagwati Committee report is misplaced. In our opinion, the recommendation of the Bhagwati Committee report was not incorporated in the SAST Regulations. In fact, the Bhagwati Committee report was implemented only in the 2011 SAST Regulations. The term shares as defined under Regulation 2(v) of 2011 SAST Regulations is as under: 2(v) shares means shares in the equity share capital of a target company carrying voting rights, and includes any security which entitles the holder th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s alone triggers the obligations to make an open offer under the 2011 SAST Regulations. Further, the words in Regulation 3(2) of the 2011 SAST Regulations, namely additional shares or voting rights in such target company entitling him to exercise more than 5% of the voting rights can only mean that acquiring or agreeing to acquire warrants or other convertible securities which do not carry any voting rights does not trigger an obligation to make an open offer. This is the crucial change in the definition of the terms shares in the 2011 SAST Regulations. 81. Thus, under the SAST Regulations warrants even though it did not carry voting rights were shares for the purpose of the Regulation and, consequently, there was an obligation to make a public announcement. On the other hand, the 2011 SAST Regulations defines shares to mean only securities carrying voting rights and, therefore, the obligation to make a public announcement is triggered only when voting rights are acquired or agreed to be acquired. The comparison between the SAST Regulations and the 2011 SAST Regulations is only to drive home the point that what was contemplated in the Bhagwati Committee report, namely, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... himself or with persons acting in concert with the acquirers . This Tribunal as well as the Supreme Court held that the term acquirer was required to be given the meaning under Regulation 2(1)(b) otherwise the term persons acting in concert would become nugatory. The Supreme Court further held that the term acquirer as defined under Regulation 2(1)(b) does not result in any absurdity and hence no open offer could be made under Regulation 10. 84. The Supreme Court took into consideration the 2011 SAST Regulations contending that Regulation 3(3) was enacted specifically to provide that even if individual shareholding exceeded the threshold prescribed in Regulation 3(1) and 3(3), nonetheless, the open offer was triggered. Before the Supreme Court, SEBI sought to apply the principle of individual shareholding breaching the threshold as a trigger for the open offer in a case under Regulation 10 under the SAST Regulations though this provision, namely, Regulation 3(3) of the 2011 SAST Regulations was absent in the SAST Regulations. SEBI nonetheless attempted to do this by contending that the term acquirer used in Regulation 10 should be read not as defined under Regulation 2(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory or declaratory nature. 87. We are, thus, of the opinion that the interpretation given by the respondent to Regulation 11(1) of the SAST Regulations, namely, that the open offer is triggered only upon acquisition of shares in excess of 5% has been given effect to only in the 2011 SAST Regulations by amending the definition of the term shares . 88. In B.P. Amoco Plc. and Anr. v. SEBI, Appeal no. 11 of 2001 decided on 27th April, 2001, 2001 SCC Online SAT 13 , the facts in this appeal was that the Board of BP Amoco Plc. approved the making of an offer to the shareholders of Burmah Castrol Plc. (UK) to acquire 100% of the shares of Burmah Castrol Plc. and a press release was issued on 14th March, 2000 to this effect. This offer was subject to various conditions. Castrol India Ltd., was a subsidiary of Burmah Castrol Plc. The acquisition of Burmah Castrol Plc. by BP Amoco Plc would result in BP Amoco Plc. acquiring control over Castrol India Ltd. in terms of Regulation 12 of the SAST Regulations. BP Amoco Plc. completed the acquisition of Burmah Castrol Plc. on 7th July, 2000. The question which arose for consideration was whether 14th March, 2000 or 7th July, 2000 trig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 8th August, 2001. In BP Amoco Plc. and Foseco Plc v. SEBI reported in Manu/MH/1527/2001 wherein the Bombay High Court held: In light of the above, we do not agree with the submission of Mr. Setalvad that agrees to acquire' would mean that there must be an agreement between the acquirer and the shareholders. If the above interpretation is accepted, the salutary checks contemplated by the regulations and the necessity of public announcement would be rendered useless. The aforesaid decision on facts as well as on law is squarely applicable in the instant case. 92. We may also point out that the decision of this Tribunal in B.P. Amoco (supra) was relied upon by SEBI in the case of B.P. Jhunjhunwala and Ors., (2019) SCC Online SEBI 338, in the matter of requisition of shares of First Financial Services Ltd., holding that the agreement/decision/intention to acquire shares and control of the target company by the acquirers triggers the open offer requirement under Regulations 10 and 12 of the SAST Regulations respectively. We are of the view that it is no longer open for the respondent to take inconsistent stand. 93. We are further of the view that the wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at a loss to understand as to why Regulation 3(2) was made applicable to non-voting GDR/ADR. Regulation 3(2) was amended in 2009 as under: 3(2) Nothing contained in regulation 10, regulation 11 and regulation 12 of these regulations shall apply to the acquisition of Global Depository Receipts or American Depository Receipts unless the holders thereof,- (a) become entitled to exercise voting rights, in any manner whatsoever, on the underlying shares; or (b) exchange such Depository Receipts with the underlying shares carrying voting rights. 95. A perusal of the aforesaid Regulation makes it clear that it applies only to ADR/GDR carrying no voting rights. If according to the respondent the open offer is triggered in the case of ADR/GDR under Regulation 11(1) read with Regulation 14(2) only at the time of acquisition of voting rights then where was the need for the amendment to be made in the year 2009. Thus, we are of the view that in the case of convertible securities like warrants, the obligation to make an open offer under Regulation 11(1) is triggered at the time of acquisition. 96. The respondent has relied upon the decision in Sohel Malik vs. SEBI Anr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Regulation 20(11) of the SAST Regulations and, in that context, Regulation 11(1) and 14(2) were interpreted. We further find that the definition of the term shares was neither argued nor considered in this decision. 98. On the other hand, in the instant appeal the warrants were issued prior to coming into force the SAST Regulations. The question raised in the present appeal was not considered in the case of Sohel Malik as such questions never arose. 99. Similarly, the decision in Eight Capital Master Fund Ltd. Ors. vs. SEBI decided on 7th July, 2009 cannot be relied upon and is distinguishable as it only followed the decision in Sohel Malik s case. 100. Reliance by the respondent of the decision in Ch. Kiron Margadarsi Financiers vs. AO, SEBI (2001) SCC Online SAT 25 , is erroneous. In this case, the said appellant pledged 7,67,580 shares constituting 16.24% of Aurobindo Pharma Ltd. against the loan given by the appellant to the directors of Aurobindo Pharma Ltd. 3,32,540 shares constituting 7.037% were transferred in the name of the appellant but continued as security with the pledgee to be returned to the pledgor as and when the loan was repaid. The remaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the promoters. GDR without voting rights with 6 crores underlying equity shares were allotted to non-promoters on 26th November, 2010. Upon allotment of the underlying equity shares against GDR, the shareholding of the promoter group reduced from 50.23% to 26.38% but the voting rights remained the same at 50.23% since GDRs did not carry voting rights. In the meanwhile, the SAST Regulations were repealed and the 2011 SAST Regulations came into force with effect from 27th February, 2011. The promoters thereafter converted the warrants and were allotted 5,40,00,000 equity shares on 19th December, 2011 and upon such conversion, the shareholding of the promoter group increased from 26.38% to 44.03% and the voting rights increased from 50.23% to 62.92%. 103. In view of the aforesaid, a question arose whether the promoters were liable to make a public announcement under Regulation 3(2) of the 2011 SAST Regulations. This Tribunal held that the appellants were required to make an open offer in terms of Regulation 3(2) of the SAST Regulations relying upon the decisions in Sohel Malik and Eight Capital Master Fund Ltd. 104. We are of the opinion that the Tribunal failed to conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... August, 1995. 107. It was alleged that the acquisition of 3,75,000 shares carrying voting rights pursuant to the conversions of the fully convertible debentures was in violation of Regulation 9(3) of the 1994 SAST Regulations since no public announcement was made and, therefore, the plaintiff prayed for an injunction on the exercise of voting right by the defendant on such 3,75,000 shares. The Bombay High Court held that Regulation 9(3) did not apply to 3,75,000 shares carrying voting rights allotted to the defendant on 11 th August, 1995 on which date the 1994 SAST Regulations were in force upon conversion of 75,000 fully convertible debentures acquired by it on 14th December, 1993 when there was no 1994 SAST Regulations in force. The Bombay High Court held that the plaintiff was making a grievance with respect to a breach of 1994 SAST Regulation and that the grievance of the plaintiff cannot be stretched to a point prior to the 1994 SAST Regulations coming into force and, therefore, the Bombay High Court declined to grant an injunction on the exercise of voting rights by the defendants on such 3,75,000 shares. The Bombay High Court held that no public announcement was require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion of the respondent that under Regulation 11(1) read with Regulation 14(2) an obligation to make an public announcement for an open offer is triggered under the SAST Regulations at the time of conversion of warrants into equity shares carrying voting rights is rejected. (iii) Only a person who acquires such convertible securities after coming into effect the SAST Regulations will be an acquirer within the meaning of Regulation 2(1)(b) of the SAST Regulations and only such acquisition will be an acquisition governed by the SAST Regulations. Further, a person who has acquired convertible securities before SAST Regulations coming into force will not be an acquirer for the purpose of the SAST Regulations in as much as there is no acquisition under the SAST Regulations. The right to obtain shares was vested in the appellants in 1994 when detachable warrants were issued. Such vested rights cannot be rendered nugatory on the enactment of the SAST Regulations. (iv) We further hold that the appellants who acquired the warrants on 12th January, 1994 were not acquirer within the meaning of Regulation 2(1)(b) of the SAST Regulations and that there is no acquisition by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are not acquirers under the SAST Regulations. 115. Much stress was laid as to whether the SAST Regulations had a retrospective application or a retroactive application with regard to the warrants that was acquired in January, 1994. We have already held that the obligation to make a public announcement under Regulation 11(1) is triggered at the time of acquisition of the warrants and not at the time of conversion of such warrants into equity shares with voting rights. If the appellants are directed to make a public announcement in respect of the equity shares of the Company allotted to the persons acting in concert in January, 2000 by conversion of warrants held by them then it will be a retrospective application of the SAST Regulations. Admittedly, the SAST Regulations is not retrospective in their application and there is nothing in the Regulations suggesting its application prior to its enforcement i.e. prior to 20th February, 1997. In our view, retrospective application or retroactive application of the SAST Regulations is not relevant. 116. In exercise of the statutory powers vested under Section 81(1A) of the Companies Act, 1956, the issue of warrants was approved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrants were issued in 1994. There was nothing in the Companies Act indicating that upon conversion of warrants into equity shares the warrant holders were required to make an open offer. Thus, in the absence of any provision of making an open offer under the Companies Act such right could not be taken away by SEBI through the SAST Regulations which came much later. Applying the provisions of Regulation 11(1) of the SAST Regulations would be clearly a retrospective application of the Regulations which is not warranted. We are of the opinion that no power has been accorded to SEBI by the Parliament while enacting the SEBI Act to notify Regulations which are retrospective in their application. The Supreme Court in Sunil Krishna Khaitan (supra) has categorically held that in the absence of express statutory authorization, delegated legislation in the form of rules or regulations cannot operate retrospectively. (iii) In Cabot International Capital Corporation Ltd. vs. AO, SEBI, (2001) SCC Online SAT 34, we find that the case is not relevant to the issue at hand since the case was only concerning filing of post-acquisition report with respect to acquisition of shares carrying vot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as lex prospicit non respicit: law looks forward not backward. As was observed in Phillips vs. Eyre, a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law. 29. The obvious basis of the principle against retrospectivity is the principle of 'fairness , which must be the basis of every legal rule as was observed in the decision reported in L Office Cherifien des Phosphates v. Yamashita-Shinnihon Steamship Co. Ltd. Thus, legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvious omission in a former legislation or to explain a former legislation. We need not note the cornucopia of case law available on the subject because aforesaid legal position clearly emerges from the various decisions and thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation under Regulation 11(1) of the SAST Regulations. There is no whisper that the acquisition by the persons acting in concert was beyond the threshold of 5% and hence in violation of Regulation 11(1) of the SAST Regulations. The investigation report relies on some other alleged violations. 121. We further find that reliance by the respondents on the decision in Hindustan Times Ltd. vs. Union of India, (1998) 2 SCC 242 and the decision of this Tribunal in Pooja Vinay Jain vs. SEBI, Appeal No.159 of 2019 decided on 17th March, 2020 is misplaced. All those decisions are on the peculiar facts and circumstance of those cases and was based on the fact that prejudice caused to the parties had not be pleaded. These cases do not apply as the appellants have specifically pleaded prejudice caused due to delay. 122. The learned counsel for the respondent contended that failure to make the public announcement and the open offer was a continuing violation till it was discharged. The appellant by not making a public announcement has continued to violate the provisions of Regulation 11(1) of the SAST Regulations. It was urged that so long as the acquirer holds such acquired shares wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... continued, is not sufficient to constitute it as a continuing wrong. The Supreme Court held that when the wrong is complete as a result of the act or omission which is complained of, no continuing wrong arises even though the effect or damage that is sustained may enure in the future. 126. In view of the aforesaid, we are of the view that the act of acquisition without making a public announcement is complete and over once and for all with the acquisition. The act of acquisition without making a public announcement does not continue. There is no such thing under the SAST Regulations that acquisition and holding of shares without making a public announcement is a violation. Consequently, there is no de die in diem as urged by Shri Dattar. The contention that violation of Regulation 11(1) is a continuing violation cannot be accepted and is also untenable. If the shares are acquired without making a public announcement, there is injury to the public shareholders, but the injury is once and for all. Only if there is a continuous acquisition of shares, the injury continues. 127. Thus, the contention that the proceedings are not barred by limitation because it is a continuing vio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he third-party rights had been created etc. 131. Similar view was held in Ashok Shivlal Rupani Anr. vs. SEBI (Appeal No. 417 of 2018 along with other connected appeals decided on August 22, 2019). Against the order of this Tribunal in the matter of Ashok Shivlal Rupani, SEBI filed Civil Appeal No. 8444-8445 of 2019 before the Supreme Court of India which was dismissed and the order of this Tribunal affirmed by the Supreme Court. 132. Similar view was again reiterated in the matter of Ashlesh Gunvantbhai Shah vs SEBI (Appeal No. 169 of 2019) and other connected appeals decided on January 31, 2020 (2020 SCC OnLine SAT 30) where on account of inordinate delay in the initiation of the proceedings by issuance of the show cause notice, the penalty order was quashed. 133. In the light of the aforesaid, we are of the opinion that there has been an inordinate delay in the issuance of the show cause notice. Even though there is no period of limitation prescribed in the Act and the Regulations for issuance of a show cause notice and for completion of the adjudication proceedings, nonetheless, the authorities are required to exercise its powers within a reasonable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares and takeovers. 15H. If any person, who is required under this Act or any rules or regulations made thereunder, fails to, (i) disclose the aggregate of his shareholding in the body corporate before he acquires any shares of that body corporate; or (ii) make a public announcement to acquire shares at a minimum price. he shall be liable to a penalty not exceeding five lakh rupees. 139. This provision was amended on 29th October, 2002. The amended Section 15H reads as under: 15.H. Penalty for non-disclosure of acquisition of shares and takeovers If any person, who is required under this Act or any rules or regulations made thereunder, fails to, (i) disclose the aggregate of his shareholding in the body corporate before he acquires any shares of that body corporate; or (ii) make a public announcement to acquire shares at a minimum price; or (iii) make a public offer by sending letter of offer to the shareholders of the concerned company; or (iv) make payment of consideration to the shareholders who sold their shares pursuant to letter of offer, he shall be liable to a penalty not exceeding twenty-five crore rupees or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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