|
IN THE SECURITIES APPELLATE TRIBUNAL MUMBAI
Appeal
No:�������� 33/2003
Appeal
No:�������� 34/2003
Appeal
No:�������� 35/2003
Appeal
No:�������� 36/2003
Appeal
No:�������� 37/2003
Appeal
No:�������� 38/2003
Appeal
No:�������� 39/2003
Appeal
No:�������� 40/2003
Appeal
No:�������� 41/2003
Appeal
No:�������� 42/2003
Appeal
No:�������� 43/2003
Appeal
No:�������� 44/2003
Appeal
No:�������� 45/2003
Appeal
No:�������� 46/2003
Appeal
No:�������� 47/2003
CORAM ��������� Justice
Shri Kumar Rajaratnam, Presiding Officer ��������� Dr.
B. Samal, Member ��������� Shri
N.L. Lakhanpal, Member Per:��� Shri N.L. Lakhanpal, Member 1.
These
15 appeals are being taken up together for hearing and disposal with the
consent of parties.� This is because the
facts are common in all these appeals and almost the same order has been passed
by the respondents, SEBI, in all these appeals with requisite changes in names
and dates in different orders.� All the
appellants in these 15 appeals had acquired shares in excess of 15% in
different, though seemingly related, targeted companies, through preferential
allotment.� The charge against almost all
of them is violation of or inadequate compliance with Regulation 3(1)(c)(ii) of
the Securities and Exchange Board of India (Substantial Acquisition of Shares
and Takeovers) Regulations, 1997 (hereinafter referred to as �the
Regulations�). The penalty of Rs. 5 lakhs has been imposed against each of the
appellants for this violation.� Another
common feature of these 15 matters under appeal is that shares in each of the
four target companies, namely, Mantra Online Limited, Herald Commerce Limited,
Arihant Limited and Twenty First Century India Limited were acquired by the
same set of entities in different combinations and in some cases the target
companies also became part acquirers of same other companies in the same group.
By way of illustration, shares in Herald Commerce Limited were acquired by
Silicon Valley Infotech Limited, CMS Infotech Limited, Mantra Online Limited
and ATN International Limited, but Herald Commerce Limited itself acquired
shares in Twenty First Century India Limited and Mantra Online Limited itself
become a target company for acquisition by Silicon Valley Infotech Limited,
Twenty First Century India Limited, Arihant Limited and ATN International
Limited.� Although nothing is known on
record but it seems that all these are group companies related somehow or the
other to each other and these acquisitions happened by way of some
restructuring plan.� For all these
reasons we have decided to pass a single order instead of repeating the same
order 15 times by changing names and dates. The parties to these appeals have
also urged and agreed to this course of action. It needs to be added here that
there is no allegation by the Respondents that any of these entities acted in
concert for these acquisitions and that is not the issue before us for
determination. 2.
Regulation
10 of the Regulations forbids acquisition of shares or voting rights in excess
of 15% except by making a public announcement.�
This regulation reads as under: �10.���� No
acquirer shall acquire shares or voting rights which (taken together with
shares or voting rights, if any, held by him or by persons acting in concert
with him), entitle such acquirer to exercise fifteen per cent or more of the
voting rights in a company, unless such acquirer makes a public announcement to
acquire shares of such company in accordance with the regulations.� 3.
However,
Regulation 3(1)(c), at the relevant time exempted acquisitions made by way of
preferential allotment from the requirements of Regulation 10. Regulation
3(1)(c) reads as under: �3.(1)� Nothing contained in regulations 10,11, and 12 of these
regulations shall apply to: (a)������ ��.. (b)������ ��.. (c)������ preferential allotment, made in pursuance
of a resolution passed under section 81(1A) of the Companies Act, 1956 (1 of
1956): ����������� Provided that,- ����������� (i)� board
resolution in respect of the proposed preferential allotment is sent to all the
stock exchanges on which the shares of the company are listed for being
notified on the notice board; ����������� (ii) full disclosures of the identity of the class
of the proposed allottees(s) is made, and if any of the proposed allottee(s) is
to be allotted such number of shares as would increase his holding to 5 per
cent or more of the post issued capital, then in such cases, the price at which
the allotment is proposed, the identity of such person(s), the purpose of and
reason for such allotment, consequential changes, if any, in the board of
directors of the company and in voting rights, the shareholding pattern of the
company, and whether such allotment would result in change in control over the
company are all disclosed in the notice of the general meeting called for the
purpose of consideration of the preferential allotment;� 4.
It
is common ground that this exemption was available to the appellant acquirers
at the relevant time subject to the satisfaction of conditions stipulated in
Regulations 3(1)(c). It is also common ground that the requisite resolutions
under Section 18(1)(a) of the Companies Act, 1956 were duly passed by the
respective General Meetings in respect of all these acquisitions. These
resolutions were also sent to the respective Stock Exchanges. The Respondents
have also not alleged any violation of Regulation 3(1)(c)(i). However, in
respect of Regulation 3(1)(c)(ii) above relating to specific disclosures in the
notice of the General Meeting called for the purpose of consideration of the
preferential allotment, the identity of the persons to whom the allotment was
to be made was not disclosed with their names and addresses, and they were described
only as �promoters, their friends, associates or associated companies or any
other entity belonging to the promoters�. This was therefore treated by the
Respondent SEBI as non-disclosure of vital information which could have
affected the ability of the shareholders to take informed decisions. The matter
was therefore referred to the adjudicating officer who has passed the impugned
order imposing penalty of Rs. 5 lakhs on each of the appellants.� The learned adjudicating officer has relied
on the definition of the term identity in the Dorling Kindersley Illustrated
Oxford Dictionary as �the quality or condition of being a specified person or
thing� and has come to the conclusion that mere description of the acquirers as
promoters, etc., without mentioning their names and addresses is tantamount to non-compliance
with the vital disclosure requirement. 5.
At
the time of hearing of the appeal the learned Counsel for the appellants argued
that the sequence of events showed that the appellants had never sought to hide
anything from the shareholders or from the stock exchanges or from the
Respondents SEBI. It was his argument that the only lapse, if at all, was in
the case of the notice for the General Meeting, over which the acquirers had no
control because it was the target company which was supposed to send these
notices for the meeting.� The learned
Counsel further argued that even if the appellants were finally determined in
the appeal to have failed to fulfill the requirement regarding mention of names
and addresses, this was a fit case for showing leniency in determining the
quantum of penalty because the appellants had acted in the genuine belief that
describing the acquirers as promoters and further saying that there would be no
change in control or voting rights amounted to full and adequate compliance
with the Regulations. As against this the learned Counsel for the Respondents
argued that the exemption under Regulation 3 was available subject to full
compliance with the stipulations contained in Regulation 3(1)(c)(i) and (ii)
and that the adjudicating officer had therefore rightly adjudged the issue. 6.
We
have carefully gone into the records of all the appeals, the orders passed by
the adjudicating officer as well as the arguments of the learned counsel on both
sides. We are inclined to agree with the learned Counsel for the appellants
that the omission has taken place purely due to misreading of the requirements
of Regulation 3(1)(c)(ii) and that the penalty of Rs. 5 lakhs on each of the
acquirers as adjudged by the adjudicating officer is grossly disproportionate
to the irregularity / violation of the regulation. Accordingly we uphold the
order of the adjudicating authority but modify the amount of penalty to Rs.
10,000/- (Rupees Ten Thousand only) on each of the 15 appellants. These appeals
are disposed of accordingly.� There shall
be no order as to cost.
Place: Mumbai Date:9.8.2004 */as |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||