BEFORE THE ADJUDICATING OFFICER

SECURITIES AND EXCHANGE BOARD OF INDIA

[ADJUDICATION ORDER NO. AP/AO-14/2006-07]

UNDER SECTION 15-I OF SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH RULE 5 OF SEBI (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES, 1995

In respect of,

BURREN ENERGY INDIA LTD AND

UNOCAL BHARAT LTD.,

AND

In the matter of acquisition of shares and control of

HINDUSTAN OIL EXPLORATION CO LTD

1. Hindustan Oil Exploration Co. Ltd. (hereinafter referred as 'HOEL or Target Company') is a company whose shares are listed in the NSE, BSE, CSE and DSE. Burren Energy India Ltd. (BEIL/acquirer) entered into a share purchase agreement (SPA) with Unocal International Corporation (UIC) on February 14, 2005 to acquire 100% equity of Unocal Bharat Ltd. (UBL/PAC), a wholly owned subsidiary of UIC. In turn, UBL held 15,281,633 shares of HOEL, constituting 26.01% of HOEL’s equity.

2. As the aforesaid constituted indirect acquisition of shares and control of HOEL, the acquirer and UBL made a public announcement on February 15, 2005 in terms of SAST Regulations to acquire 11,748,990 shares of the target company i.e., HOEL, constituting 20% of its equity. Accordingly, Ind Global Corporate Finance Pvt. Ltd, Merchant Banker, filed Letter of Offer dated August 05, 2005 before Securities and Exchange Board of India (SEBI) on behalf of the acquirer and UBL.

3. During the course of scrutiny of this filing, it was allegedly found by SEBI that UBL replaced two of its nominees on the board of Target Company with two directors who were appointed on UBL’s board on the same day i.e. February 14, 2005, which is the date of share purchase agreement, by the acquirer i.e., BEIL. Mr. Finian O’Sullivan and Mr. Atul Gupta, directors of BEIL, were appointed as directors of UBL on February 14, 2005, the date of signing of the SPA. In turn, they were appointed as directors of HOEL also, on the same day. It is alleged that since the completion of the open offer formalities pertaining to HOEL were not completed as on February 14, 2005, the acquirer or PAC were not entitled to be appointed on the board of directors of the target company, i.e., HOEL in terms of Regulation 22(7) read with 2(1) (f) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as 'SAST').

4. Accordingly the undersigned was appointed as Adjudicating Officer, under Section 15 I of SEBI Act, 1992, read with Rule 3 of SEBI (Procedure For Holding Inquiry And Imposing Penalties By Adjudicating Officer) Rules, 1995 (hereinafter referred as 'Adjudication Rules'), vide SEBI order dated April 04, 2006, to inquire into and adjudge under Section 15HB of SEBI Act, 1992, the alleged violation of Regulation 22(7) of SAST Regulations, in the indirect acquisition of shares and control of Hindustan Oil Exploration Co. Ltd.(HOEL/Target company).

5. Show Cause Notices (SCN) dated May 26, 2006 were issued to BEIL and UBL through HOEL under Rule 4(1) of Adjudication Rules, 1995, communicating the charges, as aforesaid. BEIL and UBL both filed replies to the SCN vide separate letters dated June 28, 2006. The contents and the stands taken in the replies were identical.

6. In the above circumstances the undersigned was of the opinion that an inquiry should be held in the matter and accordingly notice of inquiries both dated July 13, 2006 were issued to BEIL and UBL through HOEL, fixing the date for inquiry for August 04, 2006. Mr. Jatin Aneja, Advocate from Amarchand Mangaldas and Mr. Hywel John, Representative of the noticees appeared before me for the inquiry and reiterated the submission made vide BEIL and UBL’s letters dated June 28, 2006. Further, they submitted that it was UBL and not BEIL who had replaced these two directors on the Board of the target company in exercise of its right, as per the Annexure on Code of Best Practice for Effective Corporate Governance of HOEL annexed to the Shareholders Agreement dated October 14, 1998 and as per paragraph (II) (2) (f) at page 21, read with article 113 of the Articles of Associations of HOEL. In support of their contentions, the noticees requested for filing additional written submissions, which were filed vide their letter dated August 11, 2006.

7. I have carefully considered the submissions put forth by BEIL and UBL and all the other materials on record. Given the facts of this case it is important to have clarity on the objectives of SAST Regulations. Section 11(2) (h) of the SEBI Act, 1992 empowers SEBI to regulate substantial acquisition of shares and takeover of companies, even though these activities are in the realm of corporate domain. This was done with the specific objective of protecting the interest of the investors, especially the small investors. Small investors are typically scattered, do not have a unified common voice to protect their interest, especially when there is a change in control or management etc. To address these issues, the SAST Regulation 1994 was promulgated (subsequently replaced by the 1997 Regulations); its cardinal principles being 1) Equality of treatment and opportunity to all shareholders, 2) protection of minority interest and 3) transparency and fairness. The aforesaid are sought to be achieved through well defined procedures involving and ensuring fairness on the part of the acquirers. One of such requirement was laid down under Regulation 22(7) of SAST which prohibited acquirers and the PACs to appoint their directors on the board of the target company till the completion of the offer formalities. This provision gives mandate to the regulator to ensure a fair play by the acquirers/PAC during the pendency of an offer, and to rule out any interference by the acquirers/PAC, with the decision making of the board of the target company. If a person nominated by the acquirers/PAC is allowed to be on the Board of the target company during the pendency of the public offer, he will be more concerned with the interests of acquirers/PAC, rather than keeping and protecting the interests of existing shareholders. Therefore, the default in the instance case needs to be viewed in the aforesaid context.

8. In terms of Regulation 22(7) read with 2(1) (f) of SAST Regulation, during the offer period the acquirers and PAC were precluded from appointing their directors on the board of the target company. The said provisions read as under:

Regulation 2 (1) (f) of SAST, Regulations, 1997

"[(f) "offer period" means the period between the date of entering into Memorandum of Understanding or the public announcement, as the case may be and the date of completion of offer formalities relating to the offer made under these regulations]"

Regulation 22 (7) of SAST, Regulations, 1997

"(7) During the offer period, the acquirer or persons acting in concert with him shall not be entitled to be appointed on the board of directors of the target company :

[Provided that in case of acquisition of shares or voting rights or control of a Public Sector Undertaking pursuant to a public announcement made under the proviso to sub-regulation (1) of regulation 14, the provisions of sub-regulation (8) of regulation 23 shall be applicable:]

[Provided further that where the acquirer, other than the acquirer who has made an offer under regulation 21A, after assuming full acceptances, has deposited in the escrow account hundred per cent of the consideration payable in cash where the consideration payable is in cash and in the form of securities where the consideration payable is by way of issue, exchange or transfer of securities or combination thereof, he may be entitled to be appointed on the Board of Directors of the target company after a period of twenty-one days from the date of public announcement.]

9. What is the period of offer? To determine the period of offer in the instant matter, the date of MOU or Public Announcement (PA) will have to be ascertained. In this connection the acquirer/PAC denied signing of any MOU as contemplated in SAST and thus according to them the period of offer should start from the date of PA i.e. February 15, 2005. It is further argued by acquirer/PAC that the period of offer can not be said to have commenced from the date of the SPA i.e. February 14, 2005, as the SPA is not the Memorandum of Understanding for acquiring the shares or the voting rights of the target company. It is submitted that since the directors were appointed prior to the PA i.e. on February 14, 2005, there was no violation of the provisions of Regulation 22(7) read with Regulation 2(1) of SAST. To examine the above submission of acquirer/PAC, I need to refer to the logical meanings of the words Share Purchase Agreement (SPA/Agreement) and Memorandum of Understanding (MOU), as under;

Memorandum :

“the writing in which the terms of a transaction or contract are embodied.”(Source: Legal Glossary, By GoI)

or,

“a note or record made for future use, OR a document recording the terms of a contract.”(Source: oxford dictionary)

Understanding:

“an agreement; a thing agreed upon.” (Source: oxford dictionary)

10. As Memorandum of Understanding (MOU) is not defined at one place but reading of the meaning of the words ‘Memorandum’ and ‘Understanding’ together can make me understand the meaning of ‘Memorandum of Understanding (MOU)’. It is thus observed that Memorandum of Understanding (MOU) is an agreement/contract recorded in writing in which the terms of it (contract) are recorded. Therefore it is difficult to understand as to why acquirer/PAC is claiming that the words Share Purchase Agreement (SPA/Agreement) and Memorandum of Understanding (MOU) are different from each other. I have no reason to believe and agree to the submission of acquirer/PAC as in my opinion both the words go in same sense and legally speaking both constitutes an agreement. I therefore have no doubt that since the SPA was signed on February 14, 2005, the offer period shall commence from this date onwards.

11. Now comes the question, as to when the two directors were appointed by acquirers/PAC on the Board of Target Company? In this regard I refer to the annexure 5 of the additional written submissions of acquire/PAC vide letter dated August 11, 2006. From the perusal of said annexure, which is a copy of the letter dated February 14, 2005 addressed to the Chairman of Hindustan Oil Exploration Company Ltd. written by UBL, it is revealed that two directors namely, Mr. Atul Gupta and Mr. Finian O’Sulivan were nominated as nominee directors on the board of the target company. It is interesting to note here that same set of persons were also appointed by BEIL(acquirer) on UBL’s (PAC) board on the same day i.e., February 14, 2005, which is the date of SPA and also the first day of the offer period. In this regard the noticee has submitted that as per the terms of Shareholders Agreement (SA) dated October 14, 1998 between UBL, Hardy Oil and Gas (Netherland) N.V, ILFSL, HDFC and HOEL, UBL always had the right to appoint 2 directors on the board of HOEL (target company). I can feel that there is an attempt from the side of the acquirer to disown the decision of UBL of appointment of 2 directors which according to me is not tenable because of two reasons. Firstly, these two directors namely, Mr. Atul Gupta and Mr. Finian O’Sulivan were the director of the acquirer who in turn were appointed by it(acquirer) on the board of UBL(PAC). Later on the said persons were also appointed on the board of the target company and interestingly all this happened on February 14, 2005. It is thus clear that acquirer’s intention was to exercise and gain control over PAC and also the target company by way of appointing same set of persons on their board and that too on the same date. Lastly, when, on February 14, 2005, the acquirer had already acquired 100% equity of Unocal Bharat Ltd. (UBL/PAC), so whatever the decisions of UBL, were also the decisions of acquirer and acquirer just can not distant itself just because the decision of nominating Mr. Atul Gupta and Mr. Finian O’Sulivan on the board of target company was communicated on the letter head of UBL(annexure 5 of the additional written submissions of acquire/PAC vide letter dated August 11, 2006). One more question, which is incidental to the discussions, to be answer is, what will happen to the right of UBL in terms of SA to appoint 2 directors on the board of the target company? The answer is very simple that on February 14, 2005, the acquirer was in complete control of UBL and decision to appoint Mr. Atul Gupta and Mr. Finian O’Sulivan on the board of Target Company, can not be said to be of UBL. This is further to strengthen my view that both the said persons were the directors of acquirer. The correct approach, on the part of the acquirer, could have been that they should have stopped at the point when they first parked their directors namely Mr. Atul Gupta and Mr. Finian O’Sulivan on the board of UBL, and allowed offer period to elapsed. Further it is an established legal position that a law can not be allowed to be violated/defeated by way of claiming any right under an agreement. The law in the present case prohibits acquirer/PAC to appoint its directors on the board of the target company during the offer period.

12. Another submission which is made by the noticee is that the provision of Regulation 22(9) will apply in this case instead of Regulation 22(7) of SAST. Regulation 22(9) stipulates that if there are any existing directors representing or having an interest in the acquirer or PAC already present on the board of the target company, such directors shall recuse themselves and not participate in any matter concerning or relating to the offer including any preparatory steps leading to the offer. In my view if at all the noticee wanted to have any application of Regulation 22(9) in their case they should not have nominated/appointed their directors on the board of target company during the offer period and in view of the findings arrived at in previous paragraphs of this order, it is clear that they did it. Therefore there is no application of the provisions of Regulation 22(9) of SAST in the present case.

13. The aforesaid conduct on the part of acquirer and PAC is in violation of the provisions of Regulation 22(7) read with Regulation 2(1) of SAST, which attracts penalty under Section 15 HB of SEBI Act, 1992, which inter-alia reads as under:

"Penalty for contravention where no separate penalty has been provided.

15HB. Whoever fails to comply with any provision of this Act, the rules or the regulations made or directions issued by the Board thereunder for which no separate penalty has been provided, shall be liable to a penalty which may extend to one crore rupees.)"

14. To determine the quantum of penalty under Section 15HB, the undersigned considered the following factors as provided in the section 15J of SEBI Act, 1992 viz.(a) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default ; (b) the amount of loss caused to an investor or group of investors as a result of the default and; (c) the repetitive nature of the default. The amount of unfair gain to acquirer/PAC by the aforesaid default or loss caused to the investors as a result of the default is not computable from the material available on records. However, the nature of the default is serious as it affects the interests of the shareholders of the target company. If a person, nominated by the acquirers/PAC, is allowed to be appointed on the Board of the target company during the pendency of the public offer, he will be more concerned about the interests of acquirers/PAC, rather than keeping and protecting the interests of existing shareholders. The very purpose of a very genuine and investors friendly law has been defeated by non observance and non compliance of the provisions of Regulation 22(7) of SAST, by acquirers and PAC and it is in this context the violation by the noticee is required to be dealt firmly. This is required to give a message that any disregard to laws of the land will not be tolerated and takeovers matters which are sensitive with respect to the interests of minority shareholders, the regulator will not allow anybody to take it casually. If deterrent penalties in the matters like this are not imposed then the fear is that market players will start taking the actions of the regulator lightly and the purpose of giving powers to the regulator by the parliament will get defeated. I think it is a fit case for imposition of adjudication penalty.

15. Therefore, in exercise of the powers conferred under section 15-I (2) of the SEBI Act, 1992, read with Rule 5 of SEBI Adjudication Rules, I hereby impose adjudication penalty of Rs. 25,00,000/-(Twenty five lakhs only) each on the Burren Energy India Ltd. (Acquirer) and Unocal Bharat Ltd. (PAC) under section 15HB of SEBI Act, 1992 for violation of the provisions of Regulation 22(7) read with Regulation 2(1)(f) of SAST Regulations.

16. Burren Energy India Ltd. (Acquirer) and Unocal Bharat Ltd. (PAC) shall each pay the said amount of penalty by way of demand drafts in favour of “SEBI- Penalties Remittable to Government of India”, payable at Mumbai within 45 days of receipt of this order. The said demand drafts should be forwarded to, Shri S V Muralidhar Rao, General Manager, Division of Corporate Restructuring, Mittal Court, 1st floor, B- Wing, 224, Nariman Point, Mumbai 400 021.

17. This order of adjudication is made and passed on 25^th day of August 2006 at Mumbai.

AMIT PRADHAN

ADJUDICATING OFFICER

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BEFORE THE ADJUDICATING OFFICER SECURITIES AND EXCHANGE BOARD OF INDIA [ADJUDICATION ORDER NO. AP/AO-14/2006-07] UNDER SECTION 15-I OF SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH RULE 5 OF SEBI (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES, 1995 In respect of, BURREN ENERGY INDIA LTD AND UNOCAL BHARAT LTD., AND In the matter of acquisition of shares and control of HINDUSTAN OIL EXPLORATION CO LTD 1. Hindustan Oil Exploration Co. Ltd. (hereinafter referred as 'HOEL or Target Company') is a company whose shares are listed in the NSE, BSE, CSE and DSE. Burren Energy India Ltd. (BEIL/acquirer) entered into a share purchase agreement (SPA) with Unocal International Corporation (UIC) on February 14, 2005 to acquire 100% equity of Unocal Bharat Ltd. (UBL/PAC), a wholly owned subsidiary of UIC. In turn, UBL held 15,281,633 shares of HOEL, constituting 26.01% of HOEL’s equity. 2. As the aforesaid constituted indirect acquisition of shares and control of HOEL, the acquirer and UBL made a public announcement on February 15, 2005 in terms of SAST Regulations to acquire 11,748,990 shares of the target company i.e., HOEL, constituting 20% of its equity. Accordingly, Ind Global Corporate Finance Pvt. Ltd, Merchant Banker, filed Letter of Offer dated August 05, 2005 before Securities and Exchange Board of India (SEBI) on behalf of the acquirer and UBL. 3. During the course of scrutiny of this filing, it was allegedly found by SEBI that UBL replaced two of its nominees on the board of Target Company with two directors who were appointed on UBL’s board on the same day i.e. February 14, 2005, which is the date of share purchase agreement, by the acquirer i.e., BEIL. Mr. Finian O’Sullivan and Mr. Atul Gupta, directors of BEIL, were appointed as directors of UBL on February 14, 2005, the date of signing of the SPA. In turn, they were appointed as directors of HOEL also, on the same day. It is alleged that since the completion of the open offer formalities pertaining to HOEL were not completed as on February 14, 2005, the acquirer or PAC were not entitled to be appointed on the board of directors of the target company, i.e., HOEL in terms of Regulation 22(7) read with 2(1) (f) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as 'SAST'). 4. Accordingly the undersigned was appointed as Adjudicating Officer, under Section 15 I of SEBI Act, 1992, read with Rule 3 of SEBI (Procedure For Holding Inquiry And Imposing Penalties By Adjudicating Officer) Rules, 1995 (hereinafter referred as 'Adjudication Rules'), vide SEBI order dated April 04, 2006, to inquire into and adjudge under Section 15HB of SEBI Act, 1992, the alleged violation of Regulation 22(7) of SAST Regulations, in the indirect acquisition of shares and control of Hindustan Oil Exploration Co. Ltd.(HOEL/Target company). 5. Show Cause Notices (SCN) dated May 26, 2006 were issued to BEIL and UBL through HOEL under Rule 4(1) of Adjudication Rules, 1995, communicating the charges, as aforesaid. BEIL and UBL both filed replies to the SCN vide separate letters dated June 28, 2006. The contents and the stands taken in the replies were identical. 6. In the above circumstances the undersigned was of the opinion that an inquiry should be held in the matter and accordingly notice of inquiries both dated July 13, 2006 were issued to BEIL and UBL through HOEL, fixing the date for inquiry for August 04, 2006. Mr. Jatin Aneja, Advocate from Amarchand Mangaldas and Mr. Hywel John, Representative of the noticees appeared before me for the inquiry and reiterated the submission made vide BEIL and UBL’s letters dated June 28, 2006. Further, they submitted that it was UBL and not BEIL who had replaced these two directors on the Board of the target company in exercise of its right, as per the Annexure on Code of Best Practice for Effective Corporate Governance of HOEL annexed to the Shareholders Agreement dated October 14, 1998 and as per paragraph (II) (2) (f) at page 21, read with article 113 of the Articles of Associations of HOEL. In support of their contentions, the noticees requested for filing additional written submissions, which were filed vide their letter dated August 11, 2006. 7. I have carefully considered the submissions put forth by BEIL and UBL and all the other materials on record. Given the facts of this case it is important to have clarity on the objectives of SAST Regulations. Section 11(2) (h) of the SEBI Act, 1992 empowers SEBI to regulate substantial acquisition of shares and takeover of companies, even though these activities are in the realm of corporate domain. This was done with the specific objective of protecting the interest of the investors, especially the small investors. Small investors are typically scattered, do not have a unified common voice to protect their interest, especially when there is a change in control or management etc. To address these issues, the SAST Regulation 1994 was promulgated (subsequently replaced by the 1997 Regulations); its cardinal principles being 1) Equality of treatment and opportunity to all shareholders, 2) protection of minority interest and 3) transparency and fairness. The aforesaid are sought to be achieved through well defined procedures involving and ensuring fairness on the part of the acquirers. One of such requirement was laid down under Regulation 22(7) of SAST which prohibited acquirers and the PACs to appoint their directors on the board of the target company till the completion of the offer formalities. This provision gives mandate to the regulator to ensure a fair play by the acquirers/PAC during the pendency of an offer, and to rule out any interference by the acquirers/PAC, with the decision making of the board of the target company. If a person nominated by the acquirers/PAC is allowed to be on the Board of the target company during the pendency of the public offer, he will be more concerned with the interests of acquirers/PAC, rather than keeping and protecting the interests of existing shareholders. Therefore, the default in the instance case needs to be viewed in the aforesaid context. 8. In terms of Regulation 22(7) read with 2(1) (f) of SAST Regulation, during the offer period the acquirers and PAC were precluded from appointing their directors on the board of the target company. The said provisions read as under: Regulation 2 (1) (f) of SAST, Regulations, 1997 "[(f) "offer period" means the period between the date of entering into Memorandum of Understanding or the public announcement, as the case may be and the date of completion of offer formalities relating to the offer made under these regulations]" Regulation 22 (7) of SAST, Regulations, 1997 "(7) During the offer period, the acquirer or persons acting in concert with him shall not be entitled to be appointed on the board of directors of the target company : [Provided that in case of acquisition of shares or voting rights or control of a Public Sector Undertaking pursuant to a public announcement made under the proviso to sub-regulation (1) of regulation 14, the provisions of sub-regulation (8) of regulation 23 shall be applicable:] [Provided further that where the acquirer, other than the acquirer who has made an offer under regulation 21A, after assuming full acceptances, has deposited in the escrow account hundred per cent of the consideration payable in cash where the consideration payable is in cash and in the form of securities where the consideration payable is by way of issue, exchange or transfer of securities or combination thereof, he may be entitled to be appointed on the Board of Directors of the target company after a period of twenty-one days from the date of public announcement.] 9. What is the period of offer? To determine the period of offer in the instant matter, the date of MOU or Public Announcement (PA) will have to be ascertained. In this connection the acquirer/PAC denied signing of any MOU as contemplated in SAST and thus according to them the period of offer should start from the date of PA i.e. February 15, 2005. It is further argued by acquirer/PAC that the period of offer can not be said to have commenced from the date of the SPA i.e. February 14, 2005, as the SPA is not the Memorandum of Understanding for acquiring the shares or the voting rights of the target company. It is submitted that since the directors were appointed prior to the PA i.e. on February 14, 2005, there was no violation of the provisions of Regulation 22(7) read with Regulation 2(1) of SAST. To examine the above submission of acquirer/PAC, I need to refer to the logical meanings of the words Share Purchase Agreement (SPA/Agreement) and Memorandum of Understanding (MOU), as under; Memorandum : “the writing in which the terms of a transaction or contract are embodied.”(Source: Legal Glossary, By GoI) or, “a note or record made for future use, OR a document recording the terms of a contract.”(Source: oxford dictionary) Understanding: “an agreement; a thing agreed upon.” (Source: oxford dictionary) 10. As Memorandum of Understanding (MOU) is not defined at one place but reading of the meaning of the words ‘Memorandum’ and ‘Understanding’ together can make me understand the meaning of ‘Memorandum of Understanding (MOU)’. It is thus observed that Memorandum of Understanding (MOU) is an agreement/contract recorded in writing in which the terms of it (contract) are recorded. Therefore it is difficult to understand as to why acquirer/PAC is claiming that the words Share Purchase Agreement (SPA/Agreement) and Memorandum of Understanding (MOU) are different from each other. I have no reason to believe and agree to the submission of acquirer/PAC as in my opinion both the words go in same sense and legally speaking both constitutes an agreement. I therefore have no doubt that since the SPA was signed on February 14, 2005, the offer period shall commence from this date onwards. 11. Now comes the question, as to when the two directors were appointed by acquirers/PAC on the Board of Target Company? In this regard I refer to the annexure 5 of the additional written submissions of acquire/PAC vide letter dated August 11, 2006. From the perusal of said annexure, which is a copy of the letter dated February 14, 2005 addressed to the Chairman of Hindustan Oil Exploration Company Ltd. written by UBL, it is revealed that two directors namely, Mr. Atul Gupta and Mr. Finian O’Sulivan were nominated as nominee directors on the board of the target company. It is interesting to note here that same set of persons were also appointed by BEIL(acquirer) on UBL’s (PAC) board on the same day i.e., February 14, 2005, which is the date of SPA and also the first day of the offer period. In this regard the noticee has submitted that as per the terms of Shareholders Agreement (SA) dated October 14, 1998 between UBL, Hardy Oil and Gas (Netherland) N.V, ILFSL, HDFC and HOEL, UBL always had the right to appoint 2 directors on the board of HOEL (target company). I can feel that there is an attempt from the side of the acquirer to disown the decision of UBL of appointment of 2 directors which according to me is not tenable because of two reasons. Firstly, these two directors namely, Mr. Atul Gupta and Mr. Finian O’Sulivan were the director of the acquirer who in turn were appointed by it(acquirer) on the board of UBL(PAC). Later on the said persons were also appointed on the board of the target company and interestingly all this happened on February 14, 2005. It is thus clear that acquirer’s intention was to exercise and gain control over PAC and also the target company by way of appointing same set of persons on their board and that too on the same date. Lastly, when, on February 14, 2005, the acquirer had already acquired 100% equity of Unocal Bharat Ltd. (UBL/PAC), so whatever the decisions of UBL, were also the decisions of acquirer and acquirer just can not distant itself just because the decision of nominating Mr. Atul Gupta and Mr. Finian O’Sulivan on the board of target company was communicated on the letter head of UBL(annexure 5 of the additional written submissions of acquire/PAC vide letter dated August 11, 2006). One more question, which is incidental to the discussions, to be answer is, what will happen to the right of UBL in terms of SA to appoint 2 directors on the board of the target company? The answer is very simple that on February 14, 2005, the acquirer was in complete control of UBL and decision to appoint Mr. Atul Gupta and Mr. Finian O’Sulivan on the board of Target Company, can not be said to be of UBL. This is further to strengthen my view that both the said persons were the directors of acquirer. The correct approach, on the part of the acquirer, could have been that they should have stopped at the point when they first parked their directors namely Mr. Atul Gupta and Mr. Finian O’Sulivan on the board of UBL, and allowed offer period to elapsed. Further it is an established legal position that a law can not be allowed to be violated/defeated by way of claiming any right under an agreement. The law in the present case prohibits acquirer/PAC to appoint its directors on the board of the target company during the offer period. 12. Another submission which is made by the noticee is that the provision of Regulation 22(9) will apply in this case instead of Regulation 22(7) of SAST. Regulation 22(9) stipulates that if there are any existing directors representing or having an interest in the acquirer or PAC already present on the board of the target company, such directors shall recuse themselves and not participate in any matter concerning or relating to the offer including any preparatory steps leading to the offer. In my view if at all the noticee wanted to have any application of Regulation 22(9) in their case they should not have nominated/appointed their directors on the board of target company during the offer period and in view of the findings arrived at in previous paragraphs of this order, it is clear that they did it. Therefore there is no application of the provisions of Regulation 22(9) of SAST in the present case. 13. The aforesaid conduct on the part of acquirer and PAC is in violation of the provisions of Regulation 22(7) read with Regulation 2(1) of SAST, which attracts penalty under Section 15 HB of SEBI Act, 1992, which inter-alia reads as under: *"Penalty for contravention where no separate penalty has been provided.* 15HB. Whoever fails to comply with any provision of this Act, the rules or the regulations made or directions issued by the Board thereunder for which no separate penalty has been provided, shall be liable to a penalty which may extend to one crore rupees.)" 14. To determine the quantum of penalty under Section 15HB, the undersigned considered the following factors as provided in the section 15J of SEBI Act, 1992 viz.(a) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default ; (b) the amount of loss caused to an investor or group of investors as a result of the default and; (c) the repetitive nature of the default. The amount of unfair gain to acquirer/PAC by the aforesaid default or loss caused to the investors as a result of the default is not computable from the material available on records. However, the nature of the default is serious as it affects the interests of the shareholders of the target company. If a person, nominated by the acquirers/PAC, is allowed to be appointed on the Board of the target company during the pendency of the public offer, he will be more concerned about the interests of acquirers/PAC, rather than keeping and protecting the interests of existing shareholders. The very purpose of a very genuine and investors friendly law has been defeated by non observance and non compliance of the provisions of Regulation 22(7) of SAST, by acquirers and PAC and it is in this context the violation by the noticee is required to be dealt firmly. This is required to give a message that any disregard to laws of the land will not be tolerated and takeovers matters which are sensitive with respect to the interests of minority shareholders, the regulator will not allow anybody to take it casually. If deterrent penalties in the matters like this are not imposed then the fear is that market players will start taking the actions of the regulator lightly and the purpose of giving powers to the regulator by the parliament will get defeated. I think it is a fit case for imposition of adjudication penalty. 15. Therefore, in exercise of the powers conferred under section 15-I (2) of the SEBI Act, 1992, read with Rule 5 of SEBI Adjudication Rules, I hereby impose adjudication penalty of Rs. 25,00,000/-(Twenty five lakhs only) each on the Burren Energy India Ltd. (Acquirer) and Unocal Bharat Ltd. (PAC) under section 15HB of SEBI Act, 1992 for violation of the provisions of Regulation 22(7) read with Regulation 2(1)(f) of SAST Regulations. 16. Burren Energy India Ltd. (Acquirer) and Unocal Bharat Ltd. (PAC) shall each pay the said amount of penalty by way of demand drafts in favour of “SEBI- Penalties Remittable to Government of India”, payable at Mumbai within 45 days of receipt of this order. The said demand drafts should be forwarded to, Shri S V Muralidhar Rao, General Manager, Division of Corporate Restructuring, Mittal Court, 1st floor, B- Wing, 224, Nariman Point, Mumbai 400 021. 17. This order of adjudication is made and passed on 25^th day of August 2006 at Mumbai. AMIT PRADHAN ADJUDICATING OFFICER