ORDER
UNDER RULE 5(1) OF THE SEBI (PROCEDURE FOR HOLDING ENQUIRY AND IMPOSING PENALTY BY THE ADJUDICATING OFFICER) RULES, 1995
AGAINST
SHAPOORJI PALLONJI & CO. LTD.
STERLING INVESTMENT CORPORATION PVT. LTD AND
CYRUS INVESTMENTS LTD.
1. These proceedings stand directed against M/s Shapoorji Pallonji & Co. Limited, M/s Sterling Investment Corporation Private Limited and M/s Cyrus Investments Limited (for brevity’s sake, hereinafter collectively referred to as the acquirers) consequent to the order dated August 31, 2004 of the Whole Time Member, SEBI for the delay on the part of the acquirers in complying with the provisions of Regulations 10 and 12 read with Regulation 14(1) and 14(3) of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997 (Takeover Regulations) in the context of the public offer made by them to acquire 20% of the shares of FAL Industries Ltd (FIL).
2. The essential facts of this case leading upto these proceedings are as follows:-
(i) Consequent upon acquiring control of Forbes Gokok Ltd (FGL), the acquirers in question, made an open offer on October 15, 2001 to the shareholders of the said company. It appears that as a consequence thereof as also the subsequent purchases made during the offer period, the acquirers also indirectly acquired the control of FIL, resulting in a change of control of the said company which therefore necessitated an open offer also being made by the acquirers to the shareholders of FIL under the provisions of the Takeover Regulations on the same date when the open offer was made to the shareholders of FGL i.e. October 15, 2001. As the same was not done, SEBI issued a notice dated May 29, 2003 to the acquirers for their failure to make a public announcement to acquire the shares of FIL as required under the provisions of the Takeover Regulations. The acquirers vide their reply dated June 30, 2003 denied violating any of the provisions of the Takeover Regulations and inter alia contended that the violation if any was technical in nature and due to a bonafide belief that they were not required to make any open offer. Notwithstanding the same, in the interim period, the acquirer made a ‘voluntary’ public announcement on October 11, 2003 to acquire 20% of the shares of FIL.
(ii) Subsequently, while taking cognizance of the voluntary’ public announcement on October 11, 2003 to acquire 20% of the shares of FIL, as also the delay in complying with the regulatory requirement, SEBI vide the impugned order dated August 31, 2004 directed the initiation of adjudicating proceedings against the acquirers, on the ground that the said public offer was not made within the time specified in the Regulations, but only after almost 2 years of delay i.e. after the issuance of the show cause notice and initiation of regulatory proceedings by SEBI.
3. In view thereof, adjudicating proceedings were initiated by the issuance of notices, all dated December 7, 2004 to the acquirers along with the relevant documents annexed thereto in terms of Rule 4 of the SEBI (Procedure for holding enquiry and imposing penalty by the Adjudicating Officer) Rules, 1995 (Rules) with an advice to show cause within 14 days of the receipt of the notice, as to why proceedings should not be initiated against them in terms of the said Rules and why the penalty as prescribed therein should not be levied upon them. The acquirers were also advised to indicate whether they were desirous of a personal hearing.
4. In reply to the same, M/s. Gagrat & Co., acting on behalf of the said acquirers, vide their letter dated December 23, 2004 averred that the acquirers had challenged the initiation of the present proceedings before the Securities Appellate Tribunal by filing Appeal Nos.388/2004, 388A/2004 and 388B/2004) and that the Hon’ble Tribunal had vide their order dated December 15, 2004 admitted the said Appeals and directed stay of further proceedings in the adjudication proceedings pending disposal of the Appeals .
5. Thereafter, the Hon’ble Tribunal vide their order dated September 5, 2005, set aside the impugned order of SEBI dated August 31, 2004 on the ground that there was no need to proceed against the acquirers by way of adjudication proceedings since they had already complied with the requirement of making the open offer and had also paid 15% interest to all the shareholders of FIL with effect from October 15, 2001.
6. Challenging the decision of the Tribunal, SEBI filed Civil Appeal Nos. 1-3/2006 before the Supreme Court of India. However, the Hon’ble Supreme Court vide their order dated January 13, 2006 were pleased to dismiss the said Appeals.
7. In view of the order of the apex court, the subject matter becomes infructuous and no further question arises for determination. Hence, I in exercise of the powers conferred upon me under Rule 5 of the SEBI (Procedure for Holding Enquiry and Imposing Penalty by the Adjudicating Officer) Rules, 1995, am inclined to dispose of the case accordingly.
| PLACE: MUMBAI |
G. BABITA RAYUDU |
| DATE : JULY 19, 2006 |
ADJUDICATING OFFICER |