In the matter of:

B.P. Plc (formerly B.P.Amoco) & Foseco Plc              Appellants

Vs.

Securities & Exchange Board of India                        Respondent

APPEARANCE;

Mr. Atul M Setalvad
Sr.Advocate
I/b. Bhaishankar Kanga & Girdharlal

Mr. Shobhan Thakore
Advocate

Mr.Ramesh Chandra
Advocate
Bhaishankar Kanga & Girdharlal                                                                 for Appellants

Mr. Goolam Vahanvati
Advocate General of Maharashtra

Ms Rameeza Hakeem
Advocate

Mr.A.D.Patel
Advocate
Maneksha & Sethna

Mr. Ananta Barua
Jt.Legal Adviser, SEBI

Mr. Vinay Chauhan
Legal Officer, SEBI                                           for Respondent
 

(Appeal arising out of the order dated 19.5.2001 made by the Chairman, Securities and Exchange Board of India)

B.P. Plc. (formerly B.P Amoco Plc.) and Foseco Plc, (Appellants 1 and 2 respectively) are public limited companies incorporated in the United Kingdom. Burmah Castrol Plc is also a public limited company incorporated in the Unuited Kingdom. The said Burmah Castrol has several subsidiary companies. Appellant No.2 is one among them. Appellant No.2 has a subsidiary namely Foseco India Ltd, which is incorporated in India. The shares of the said Indian company are listed on the Stock Exchange, Mumbai and permitted for trading on the National Stock Exchange.
 

On 14.3.2000 Appellant No.1 issued a press announcement stating that subject to certain pre-conditions being met, it was prepared to make an offer in the United Kingdom for the acquisition of the entire share capital of Burmah Castrol Plc. It was also stated in the announcement that the offer would only be made if the following pre-conditions were satisfied that (i) all applicable waiting periods under the Hart-Scott Rodino Antitrust Improvement Act, 1976 and the regulations thereunder expiring, lapsing or otherwise terminating; and (ii) the European Commission issuing a decision declaring the merger to be compatible with the common market, and that if EEC or the FTC refused to grant the regulatory approvals, the offer would lapse. On receipt of the requisite approvals from the concerned authorities, Appellant No. 1, posted the first formal letter of offer to the shareholders of Burmah Castrol Plc on 8.6.2000. The offer so made was subject to certain conditions which included (i) the condition that the Appellant would be bound by the offer only if valid acceptance was received from not less than 90% of share holders of Burmah Castrol Plc, unless such requirement is waived by the Appellant (the Acceptance Condition) and (ii) no material adverse change having occurred in the business, assets, financial or trading position or profits of any member of the Burmah Castrol Group taking as a whole (the Material Adverse Change Condition). On 7.7.2000, upon receipt of acceptance from more than 50 percent of the share holders of Burmah Castrol Plc, Appellant No.1 waived the Acceptance Condition, the Material Adverse Change Condition and all other conditions and declared the offer wholly unconditional. As a result of the said acquisition of the shares of Burmah Castrol Plc, it became a subsidiary of the Appellant and consequently gained control of all the subsidiaries of Burmah Castrol Plc, including Foseco India Ltd. In that context, on 10.7.2000, Appellant No. 1 approached the Respondent, seeking exemption from the obligation of making a public offer for acquisition of upto 20% of the shares of Castrol India Ltd and Foseco India Ltd as required under the Securities and Exchange of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (the Regulations). The said exemption application was disposed of by the Respondent vide order dated 7.8.2000, by granting exemption subject to certain conditions. These conditions were not acceptable to the Appellant. The Appellant vide its letter dated 6.12.2000 informed the Respondent that it has decided to withdraw the application for exemption from making an offer for a further 20% of the shares of Castrol India and it will take steps to make public offer to the share holders of Castrol (India) Ltd. However it was mentioned in the said letter that the Appellants would be filing a separate application seeking exemption from making offer to the shareholders of Foseco India Ltd. On the same day, i.e. on 6.12.2000 itself the Appellant filed an application for the purpose. Material portion of the said application is extracted below:

The Respondent referred the matter to the Takeover Panel for its view. The panel vide its report dated 14.12.2000 observed as under:

Shri A.M.Setalvad, learned Senior Counsel appearing for the Appellants explained the background of the case and stated that the facts leading to the Appellants approaching the Respondent seeking exemption was similar to the case of acquisition of Castrol India as stated in the appeal No.11/2001, but for one distinguishable feature that the Appellants had decided to sell off the Speciality Chemicals division of Burmah Castrol which in India was carried out by Foseco India Ltd., that this material fact puts the present case on a different footing and distinct from Castrol India�s case. Learned Senior Counsel submitted that when the Appellant made a public announcement of its decision to acquire the shares of Burmah Castrol Plc, subject to the approval of the regulatory authorities and subject to the acceptance by a specified minimum number of shares, it was made clear in the announcement itself that the Appellant was contemplating disposal of the speciality chemicals business of Burmah Castrol.
 

Learned Senior Counsel stated that the assets of Foseco (India) Ltd formed an insignificant part of the total assets of Burmah Castrol Plc, being the market value of the shares of only 0.3%, its revenue merely 0.4% and net assets just 1.3%. He also stated that the Appellant did not carry out any due diligence in relation to Foseco India, as there was no intention on its part to acquire shares or control over Foseco India Ltd that the said acquisition was incidental and unintended consequence to the global restructuring of Burmah Castrol. Learned Senior Counsel stated that this is manifest in the light of the stated intention of the Appellant to dispose of the speciality chemicals division of Burmah Castrol, which includes Foseco (India). Shri Setalvad submitted that this aspect has been wholly ignored by the Respondent in dealing with the Appellants� application seeking exemption from making a public offer.
 

Shri Setalvad submitted that the Appellant had in its very application dated 10.7.2000 submitted to the Respondent seeking exemption contended that having regard to the provisions of regulation 3 (1) (j) acquisition of Burmah Castrol�s shares did not fall within the ambit of regulations 10 to 12 as the said takeover was a merger under the English Takeover Code which was the relevant legal system to the Appellant and to Burmah Castrol. Learned Senior Counsel submitted that the Appellant had never in the case of Foseco India Ltd withdrawn the said contention as claimed by the Respondent. He submitted that its claim of exemption under regulation 3 (1) (j) has been ignored by the Respondent as is evident from its order. According to learned Senior Counsel the Appellant in its application dated 10.7.2000 had sought exemption on two alternative grounds i.e., (i) that the Foseco India is proposed to be sold and (ii)provisions 3 (1) (j) are attracted. According to Shri Setalvad, the impugned order is an unreasoned one and made in violation of the principles of natural justice.
 

Learned Senior Counsel submitted that in its application dated 6.12.2000 the Appellant had specifically stated that the speciality chemicals division of Burmah Petrol is proposed to be sold and that if such sale took place and no exemption had been granted, the result would be two simultaneous open offers at different prices, one made by the Appellant and the other by the entity which acquires the said division, resulting in confusion. He further stated that if both the said offers were fully accepted the public shareholding in Foseco India would be reduced to 2% requiring delisting of the said company�s shares from the stock exchanges which could never be in the public interest. Shri Setalvad submitted that the proposed sale of chemicals division has been now confirmed and announcement in that respect has been made on 13.7.2001, that the Respondent had not considered these aspects while deciding the exemption application. The fact that the Appellant did not file an appeal against the Respondent�s order denying exemption does not mean that it has given up any of its claims and therefore the comparison of the follow up action in the aftermath of the Respondent�s order dated 7.8.2000 is of no relevance, as the cases are not identical in material aspects and that in any case it is for the Appellant to decide the course of action depending on several factors. Referring to the Appellant seeking exemption under regulation 3 (1) (l), despite the automatic exemption under regulation 3 (1) (j) (ii), Shri Setalvad submitted that it was only by way of abundant caution and there was no bar on the Appellant seeking such exemption.
 

Shri Setalvad referred to the decision of the Respondent in the case relating Rexroth (India) Ltd, which was taken over along with its foreign parent holding company, granting exemption to the acquirer from the obligation to comply with regulations 10, 11 and 12. Learned Senior Counsel stated that as per the press release issued by the Respondent, three reasons were assigned for granting exemption in the said case, namely that the assets, shareholding and revenue of Rexroth India were insignificant parts of the assets of the holding company, there was no intention to acquire control of Rexroth India; the takeover was merely incidental and there was no due diligence in the affairs of Rexroth India. Shri Setalvad submitted that each of the said reasons was directly applicable to the facts of the Appellant�s case, that the only point of distinction made in the Respondent�s order is that the proportion of public holding in the case of Rexroth India was lower compared to Foseco India�s. Shri Setalvad submitted that the said reasoning is wholly irrelevant in determining as to whether the case deserves to be given exemption. According to the learned Senior Counsel the conduct of the Respondent in granting exemption in the case of Rexroth India and denying the same in the case of the Appellant is arbitrary and discriminatory.
 

Learned Senior Counsel submitted that the Respondent in the impugned order has directed the Appellant not only to make a public offer at a price calculated by taking 14.3.2000 as the relevant date, but also to pay interest at the rate of 15% per annum from 14.3.2000 till the actual date of public announcement made. Shri Setalvad submitted that the order imposing interest is ex-facie ultra vires the provisions of the Securities and Exchange Board of India Act, 1992 (the Act) that section 15H of the said Act provides that if a person fails to make a public announcement to acquire shares at a minimum price he shall be liable to a penalty not exceeding Rs.5 lakhs and section 15I and 15J lay down how such a penalty can be imposed. He stated that the impugned order pertaining to interest has been passed without complying with the requirements of section 15I and 15J and would result in an obligation on the Appellants to pay an amount exceeding Rs. 4 crores, which is far in excess of the maximum limit of Rs. 5 lakhs imposed by section 15H. According to Shri Setalvad the provisions of section 15H by necessary implication exclude any action being taken for a default committed by a party except in the manner provided in section 15I and 15J, that the direction to pay interest in the instant case is nothing but an order in the nature of penalty for the alleged default committed by the Appellants in not making the public announcement and the direction is therefore ultra vires the provisions of the said Act. He also submitted that the Respondent has ignored the provisions of the Act as well.
 

Shri Setalvad further stated, that without prejudice to the aforesaid, the Appellants are not responsible for the alleged delay, that they applied for exemption on the 10^th July, 2000 which was within three days of the offer being accepted by the requisite number of shareholders of Burmah Castrol, that the Respondent�s order dated 7.8.2000 granting conditional exemption being contrary to the provisions of the Act and the Companies Act, the Appellant by its letter dated 13.9.2000 had requested the Respondent to delete the said conditions that on 6.12.2000 the Appellant applied for consideration of certain additional grounds and submitted further grounds thereafter that the said application was finally rejected on 19.5.2001, ShriSetalvad stated that there was no delay at all on the part of the Appellant, that in the circumstances the order for payment of interest is clearly unwarranted, that in any event, interest can only be awarded at a rate not exceeding the current rate of interest under section 3 of the Interest Act, 1978, and as such direction to pay interest at 15%, is ultra vires.
 

Shri Setalvad submitted that in a case to which the Interest Act is not applicable, or there is no specific statutory provision to pay interest, liability to pay interest is not attracted. He further stated that under the Regulations interest is payable only in the eventuality stated in regulation 22(12) and that since there is such a specific provision, levy of interest is not permissible under any other circumstances. Shri Setalvad submitted that the Act does not empower the Respondent to levy interest. According to him powers under section 11 (1) is general in nature which cannot be invoked to levy interest in view of the specific provision of regulation 22(12) made in exercise of the power under section 11(2) Shri Setalvad did not press the grounds urged in para G under the heading �Grounds� in the appeal.
 

Shri Goolam Vahanvati , learned Advocate General, appearing for the Respondent stated that the Respondent is not filing any written reply and that he is ready to argue the matter.
 

Learned Advocate General stated that the material facts relating to take over of Foseco India are identical to the facts relating to take over of Castrol India , that Foseco India and Castrol India are indirect subsidiaries of Burmah Castrol and on acquisition of the said Burmah Castrol by Appellant No.1 the subsidiaries of Burmah Castrol also became the subsidiaries of the Appellant. Appellant No.1 became the ultimate holding company of Foseco India Limited in the place of Burmah Castrol as a result of acquisition of the shares of Burmah Castrol.
 

Referring to the Appellant�s contention that the case of Foseco is different from that of Castrol India, on the ground that the Appellant had in the public announcement itself stated its intention to dispose off its share holding in Foseco India, the learned Advocate General submitted that there was no such firm commitment in the public announcement. He cited the Appellant�s statement in the public announcement in this connection, that the statement was a caveated one saying "subject to review, B.P Amoco expects to dispose of these speciality chemicals business". According to the learned Advocate General these sort of an uncertain statement cannot be construed as a commitment to sell the undertaking. In this context he also referred to the submission made by the Appellant in the application dated 10.7.2000 seeking exemption in terms of regulation 4 that "� Castrol India Ltd and Foseco India Limited are indirect subsidiaries of Burmah Castrol Plc in that Burmah Castrol Plc indirectly has 51% holding of shares in Castrol India Ltd and a 58% holding of shares in Foseco India Ltd. We understand that 49% of the issued shares in Castrol India Ltd are owned primarily by their retail shareholders and to some extent by institutional shareholders., A Burmah Castrol group structure chart is enclosed showing Burmah Castrol Plc, Foseco India Ltd and Castrol India Ltd. There will be no change in the shareholding in either Indian Company nor is there any proposal to make any material change in the existing management of either Indian Company. Similarly, at present, BP Amoco Plc. has no intention of making any significant change in the composition of the Board of Directors of Castrol India Ltd or Foseco India Ltd" (paras 4 and 5). Learned Advocate General pointed out the inconsistency in the statement made in the public announcement and the said application and stated that these statements were meant to serve different purposes.
 

Learned Advocate General stated that the Appellant knew that the case is not covered under the automatic exemption available under regulation 3(1)(j)(ii) and therefore decided to seek specific exemption under regulation 3(1)(l) and also knew that exemption would not be available in a case where assets are going to be alienated. Shri Vahanvati stated that in case the Appellant felt that the Respondent�s order dated 7.8.2000 was unreasonable or unjustified it should have appealed against the said order. The Appellant did not do so but represented to the Respondent vide letter dated 13.9.2000 to delete the conditions stipulated by the Respondent in the order and neither in the said representation nor at any time thereafter raised the question of applicability of regulation 3(1)(j)(ii). Shri Vahanvati in this context referred to the Appellant�s letter dated 6.12.2000 and submitted that therein it has been stated that it would be making a fresh application for grant of exemption from making an offer to the shareholders of Foseco India Ltd and an application was filed on the same day. The exemption was sought on the ground that the Appellant would be selling its chemicals business which in India is carried on by Foseco India Ltd. In the said application also the Appellant did not raise the applicability of the exemption under regulation 3 (1) (j) (ii). According to the learned Advocate General, from the conduct of the Appellant it is clear that it had given up its claim of exemption under regulation 3(1)(j). Learned Advocate General further submitted that the Takeover Panel considered the Appellant�s proposal to sell Foseco India Ltd, as is evident from its recommendations, and thereafter decided not to recommend exemption. Referring to the Appellant�s allegation that it was not given an opportunity of being heard in the matter, Shri Vahanvati referred to the Respondent�s letter dated 1.1.2001, wherein while communicating the Panel�s views, the Appellant was advised that in case it desires to avail an opportunity of hearing, to appear before the Chairman, SEBI on 9.1.2001.
 

Shri Vahanvati stated that the Takeover Panel in its recommendations had clearly stated that the ground adduced by the Appellant seeking exemption was not acceptable. Learned Advocate General stated that when an acquirer says that he is planning to sell off an undertaking, SEBI cannot give exemption as the sale is against the interests of investors, that such a sale being nothing but asset stripping. He pointed out that the Appellant�s apprehension that in the event of sale of Foseco India, two public offers will be required, and consequently the shares of Foseco India will have to be delisted, to the detriment of the investors, etc., is baseless. He pointed out that in case the new acquirer seeks exemption the same will be considered on merits and decision will be taken, that for the time being the issue is compliance of the regulatory provisions by the Appellant. Shri Vahanvati stated that in fact one Waterloo Project Ltd, claiming to be the acquirer of Foseco India Ltd has already filed an application (dated 18.7.2001) seeking exemption. In this context the learned Advocate General stated that the said company is not the acquirer referred to by Shri Clyde A D�mello, Associate President, B. P India, in his affidavit dated 20.7.2001 filed in the Tribunal.
 

Learned advocate General stated that the Respondent is mandated to protect the interests of the shareholders in the event of substantial acquisition of shares and takeovers of companies. He pointed out that by taking 14.3.2000 as the referral date for fixing the minimum price, the offer price would be around Rs. 226/-, that the Tribunal has already held in appeal No. 11 of 2001 that the referral date should be 14.3.2000. The referral date, as claimed by the Appellant, if applied, the offer price would be Rs.144.02, that if Waterloo Project�s request is accepted the offer price would be just Rs.88.75. Learned Advocate General urged that the Indian Shareholders right to exit provided by law cannot be denied.
 

Shri Vahanvati submitted that the Rexroth�s case and Foseco India�s case, though similar in certain aspects, materially differed on certain vital aspects. He pointed out that in Rexroth case, public holding was just 25% whereas in the case of Foseco India, public holding was around 45%. Further, in the Rexroth�s case there was an assurance that there won�t be any change in the target company, whereas Foseco India�s case the facts show that the acquirer was planning to dispose of the undertaking to some other management which would necessarily result in change in the management of the said company. Learned Advocate General stated that the Respondent decides exemption application considering all the relevant aspects including to the recommendations of the Takeover Panel which is an expert body. In the instant case also it had followed the same procedure. He refuted the allegation that Foseco India�s case was decided arbitrarily and discriminately vis-à-vis Rexroth India.
 

On the direction to pay interest, the learned Advocate General submitted that the provisions of the Interest Act is not applicable to the case as the Respondent is not a Court or a Tribunal. The Appellant has been directed to pay interest, as a measure to protect the interests of the shareholders of Foseco, and the Respondent is vested with sufficient power for the purpose in terms of section 11 (1) and also under regulation 44. In this context he cited the decision of the Hon�ble Bombay High Court in Anand Rathi v. SEBI (2001) 32 SCL 227 to reinforce his submission that the Respondent is empowered under regulation 11 (1) to take appropriate measures to protect the interest of the investors. He also submitted that regulation 22 (12) is not a bar on the Respondent directing the Appellants to pay the interest, that the said regulation 22 (12) is meant to meet only a limited situation.
 

According to the learned Advocate General 14.3.2000 has been arrived at as the day from which the obligation to pay interest arose and the outer time limit on which the obligation would cease, has also been mentioned in the order, taking into consideration the interests of the shareholders. He pointed out that the quantum of interest rate has to be decided in the Indian context and not from the global point of view. Shri Vahanvati stated that direction to pay interest @ 15% from 14.3.2001 till the actual date of public announcement, is a reasonable measure meant to protect the share holders interest. He also referred to regulation 44 of the Regulations which also according to him empowers the Respondent to direct the acquirer to pay interest for delayed payment of consideration to the shareholders of target companies.
 

On a perusal of the impugned order it is seen that it is in two parts; let us say Part A and Part B for convenience sake. Part A of the order directs the Apellants to make a public announcement to acquire shares from the shareholders of Foseco India in accordance with the relevant provisions of the regulations at an offer price computed by taking 14.3.2000 as the referral date. Part B of the order directs the Appellants to pay interest on the offer price arrived at @ 15% per annum to the shareholders of Foseco India for the loss of interest caused to them from 14.3.2000 till the actual date of public announcement. The Appellants have been asked to make the said public announcement within 45 days from the date of the impugned order.
 

It is seen from the facts before me that the Appellant No.1 had approached the Respondent through an application dated 10.7.2000 seeking exemption from the obligation to make a public offer in the context of acquisition of Burmah Castrol and the consequential indirect acquisition of Castrol India Ltd and Foseco India Ltd. The said application is a composite application seeking exemption from making public offer to the shareholders of both the companies viz. Castrol India and Foseco India. Those two companies are the subsidiaries of Burmah Castrol. Burmah Castrol indirectly has a 51% holding of shares in Castrol India and a 58% holding of shares in Foseco India Ltd. In the said application the Appellant had inter alia stated that subject to the review the Appellant expects to dispose of the chemicals business of Burmah Castrol, including the stake of Burmah Castrol in Foseco India Ltd by Easter 2001, that acquisition of Burmah Castrol Plc by the Appellant No.1 is a merger which is regulated by the U.K. Takeover Code and as such exempted under regulation 3 (1) (j) (ii) and accordingly there was no requirement of making any public offer to acquire any shares in Castrol India Ltd or Foseco India Ltd. The Appellant had further stated in the application that in the alternative it should be granted an exemption from the obligation to make an offer for 20% of the shares in Castrol India and Foseco India limited. The grounds adduced for such exemption were that there would not be any change in share holding or controlling over the companies, that the Appellant has no current intention of making significant change to the management or Board of these companies, that the acquisition of the said two Indian companies is merely an unintended consequence of the global restructuring of the Appellant, that the value of the shares of the two companies, value of their assets, revenue etc., is very insignificant in relation to that of the Burmah Castrol. It has also been stated therein that no diligence was carried out on the assets of the said companies because of their relative small value to the size of the total transaction. Respondent on receipt of the said application sought the recommendations of the Takeover Panel and on receiving the same, made its own assessment and granted exemption subject to the condition that approval of shareholders of Castrol India and Foseco India, by special resolutions would be obtained at their respective meetings, permitting voting through postal ballot there at, ratifying the change in control. I find that the order though refers to several grounds raised by the Appellants, it is silent on the Appellant�s submission that the acquisition enjoys the automatic exemption provided under regulation 3 (1) (j) (ii). This has been high lighted by the Appellants in the appeal and stated that the order is deficient as the Respondent has not given its finding on the said submission. This contention is not correct. The Respondent was not required to give a finding on the said point while disposing off the application dated 6.12.2000. To enable the Appellant to avail exemption under regulation 3 (1) (j) no endorsement from the Respondent is required. Regulation 3 enumerates the type of acquisitions exempted from the purview of regulation 10, 11 and 12. While some of these exemptions are automatic some others are subject to fulfillment of certain requirements/ conditions. As it was found difficult to provide an exhaustive list of exemptions in the Regulations, it has provided an enabling provision under which the Respondent can grant exemption in other deserving cases. This enabling power is in regulation 3 (1) (l) and regulation 4. Exemption under regulation 3 (1) (j) (ii) being a built in automatic exemption, the Respondent cannot take away the same. Therefore the applicability of regulation 3 (1) (j) (ii) was not required to be considered by the Respondent while considering the application seeking grant of exemption under regulation 3 (1) (l). When an application for exemption under regulation 3(1) (l) is made, the inference is that the case is not covered under any of the specific exemptions provided in regulation 3. In an application for exemption under the residual powers provided under regulation 3 (1) (l) the Respondent is required to consider the other grounds which would warrant exemption in terms of regulation 3 (1) (l). It is to be remembered that exemption under regulation 3 (1) (l) is to the exclusion of the automatic exemptions provided elsewhere in regulation 3 including the one at clause (j) (ii). An exemption order is made on the subjective satisfaction of SEBI formed on the basis of the material before it. In the absence of adequate reason, decision of the Respondent cannot be over turned.
 

It is seen that the Appellant vide its letter dated 13.9.2000 had made representation to the Respondent requesting to delete the condition stipulated therein requiring the holding company to abstain from voting on the special resolution at the share holders meeting of Castrol India and Foseco India. It is seen that vide letter dated 6.12.2000 the Appellant�s Counsel had informed the Respondent that with regard to the Respondent�s order dated7.8.2000 and the letter dated 13.9.2000, "having regard to the totality of circumstances and in particular SEBI�s concern for the Indian minority share holders, our client BP Amoco Plc has decided to withdraw the application for exemption from making an offer to the shareholders of Castrol India Ltd. Castrol Ltd will now make the offer for a further 20% of the shares in Castrol India Ltd. Our client BP Amoco, however, seek to request SEBI to grant the exemption to Foseco Plc from making an offer to the shareholders of Foseco India Ltd , for which a separate application for exemption is being filed". Thus it is very clear that the composite application made earlier was to be withdrawn, otherwise there was no need to refer to making a separate application in the Foseco India�s case. Further even in the subsequent application there is nothing to link it with the earlier application or consider it a supplementary one. The reference to separate application means that it is not supplementary to the earlier application. It is a separate and distinct application seeking exemption only on the grounds stated therein. The grounds adduced in its earlier application cannot be automatically imported into the new application requiring fresh consideration and decision thereon by the Respondent. In fact the Takeover Panel has made the position clear in the following words that "on 8thAugust, 2000 the Chairman of SEBI had passed the order on the said application and as such, the said application of BP Amoco Plc was disposed off. In that view of the matter, there is no question of BPAmoco Plc now withdrawing the said application which has already been considered and disposed off". (from the Takeover Panel�s report dated 14.12.2000). Therefore it is clear that the application dated 6.12.2000 is a fresh application independent of the composite application submitted earlier.
 

The separate application referred to above was filed on 6.12.2000 seeking exemption from making an offer to the share holders of Foseco India on the grounds specifically stated therein. An extract of those grounds has already been provided on page 3 of this order. On a perusal of the said application it is seen that exemption was sought on the main ground that Appellants would be disposing of their shareholding in Foseco India and the consequences that would follow in the event of not granting exemption were also stated therein. It is seen that during the pendency of the said application vide another letter dated 19.5.2001, the Appellants had brought to the notice of the Respondent the similarity of their case with the case of Rexroth India in which SEBI had granted exemption, and requested the Respondent to consider their case also in the same manner.
 

The impugned order as alleged is not unreasoned or silent on the grounds raised by the Appellant. It has dealt with the two grounds referred to in the application dated 6.12.2000. On the Appellant�s proposal to sell Foseco India, the Takeover Panel had already expressed its views and the Respondent had accepted the same and this has been referred to in the order also. Referring to Rexroth�s case the Respondent has discussed the details and expressed its views in the order as to why both the cases cannot be treated on par. Applicability of the provisions of regulation 3(1)(j) was not a matter before the Respondent and as such there was no need to comment on the same. The Respondent cannot be faulted for not discussing those points and materials which were not raised in the application dated 6.12.2000 or thereafter.
 

The Appellant�s grouse that they were not given an opportunity of being heard is baseless. The Respondent vide its letter dated 9.4.2001 addressed to the Appellant�s Counsel had advised them to appear before the Chairman, if they so desired, to putforth their views. A copy of the recommendation of the takeover Panel was also forwarded to them. It is seen from the Counsel�s letter dated 20.4.2001 that they had availed of the opportunity. Chairman passed the order thereafter on 19.5.2001. The order is self-explanatory. Therefore the allegation that the order was passed without following principles of natural justice is found baseless.
 

The Appellant�s claim that since they were planning to dispose off its shareholding in Foseco India and as such exemption is justified need be examined. As already stated above, in the public announcement made on 14.3.2000 the Appellant had not made any firm commitment to sell its holdings. The statement that appeared in the public announcement is that "subject to review, BP Amoco expects to dispose of these speciality chemicals business". It is difficult to accept in the light of such a guarded statement that the Appellant had decided to sell its holdings in Foseco India (which is its speciality chemicals unit in India). Non seriousness of this statement is further evident from the following statement in its application dated 10.7.2000 submitted to the Respondent seeking exemption, that "there will be no change in the share holding in either Indian company nor is there any proposal to make any material change in the existing management of either India company. Similarly at present, BP Amoco Plc has no intention of making any significant change in the composition of the Board of Directors of Castrol India Ltd or Foseco India Ltd". However, in the application dated 6.12.2000 the Appellant had pointed out two practical difficulties that would occur if the exemption was not granted, viz., a possibility of two simultaneous offers at two different prices and the public shareholding being reduced to 2%.
 

In this context it is to be noted that the Takeover Panel had noted the Appellants proposal and after considering the same it had declined to recommend exemption. As the learned Advocate General pointed out that the Indian minority Shareholders� right to exit provided by law cannot be denied. He had pointed out the benefit that would accrue to the Indian minority shareholders would be higher in case 14.3.2000 is taken as the date of public announcement, as the minimum offer price in that case would be Rs. 226/- whereas if Waterloo Project Ltd, the new acquirer of Foseco, is to make a public offer at the current price the shareholders would be getting only Rs. 88.75. It is not the monetary gain to the Indian shareholders, that is to be taken as the guiding factor. It is the governing legal provision, that is required be followed. If under the regulations the shareholders are entitled to benefit, it should be granted, if the regulation is not in favour, the benefit cannot be granted. Therefore the impugned order has to be tested from the legal angle.
 

It may be noted that it is not incumbent on the Respondent to grant exemption just for asking. The decision normally depends on several factors including the interests of investors. In this context it is to be noted that the public announcement was required to be made on 14.3.2000 and the entire acquisition process was to be completed immediately on the Appellant No.1 waiving the material conditions, etc. on 7.7.2000. It is also to be noted that even after lapse of one year, the shareholders of Foseco India have not been favoured with a public offer as required by law on the ground that the Appellant�s shareholding in Foseco India are proposed to be sold. I am not saying that the shares once acquired should not be sold. The acquirers are at liberty to dispose of the shares acquired and if any one acquires shares enblock in the said process crossing the bench mark provided in the regulation he will have to make a public offer unless the acquisition is covered under exemption. The disclosure of the intention to dispose of the assets of the target company in the public announcement by itself is not an excuse to skip the obligation to make the public offer. The said disclosure is in fact required to be made in the public announcement or offer letter in terms of regulation 22 (18) to avoid penal consequences as could be seen from the regulation extracted below:

I do not find any force in the Appellants submission that their case, though identical to Rexroth�s has been treated arbitrarily and discriminately by the Respondent. Each exemption is specific to the facts and circumstances applicable to the case. Regulation 3 (1) (l) empowers the Respondent to grant exemption following the procedure stated in regulation4. Sub regulation (6) of regulation 4 which provides the guidelines to SEBI in this regard is reproduced below:

From the material before me I am convinced that the Respondent had followed the requirements of regulation 4. In the light of the facts and circumstances of the case I am of the view that the Respondent�s direction to the Appellants to make a public announcement to acquire shares from the shareholders of Foseco India Ltd is legally tenable.
 

Now coming to part B of the order i.e. direction to the Appellants to pay interest, I have considered the arguments putforth thereon by the Counsel. I have weighed the legal position. In my assessment the Respondent is empowered under section 11 (1) of the Act to issue such a direction. The legal position regarding the Respondents power under section 11(1) has been stated by the Tribunal in its order in Appeal No.37/2001 decided on 5.9.2001 as under:
 

"The Appellants� contention that the direction to pay substantial sum of penalty by way of interest is contrary to section 15H of the Act is unfounded. Section 15H, no doubt provides for imposition of monetary penalty, if any person, who is required under the Act or any rules or regulations made thereunder, fails to make a public announcement to acquire shares at a minimum price. Section 15H is thus a penal provision applicable to the persons failing to comply with the statutory requirements. Monetary penalty realised thereunder is not meant for compensating the loss incurred by the investors. The provision is deterrent in nature. But levy of interest is not a penal action. It is independent of the penal action provided in section 15H. Interest in the instant case is levied with a view to compensate the shareholders to whom payment of their legitimate dues were delayed. Therefore the argument linking levy of interest and penal consequences provided in section 15H is untenable. The argument that since the Appellants were bonafide pursuing the remedies available to them under the law, the direction to pay interest for the period is unjust and unfair is also untenable. As the Hon�ble Supreme Court in Dinesh Chandra Jamnadas Gandhi v. State of Gujarat (AIR 1989 SC 1011) held " it is no defense that the accused acted on a mistaken interpretation of the statute which he honestly believed to be correct". Investors cannot be made to suffer for the reason that the Appellants had a different perception on the need to comply with the statutory requirements.

The said regulation reads as under:

It is true that the Regulations provide measures for regulating substantial acquisition of shares and takeovers. But that does not mean that the Respondent cannot take any investor protection measure with reference to a matter relatable to substantial acquisition of shares and takeovers, especially in the absence of any specific provision in the regulation. Scope of regulation 11 (1) is sufficiently wide to meet situations, for which measures are not specifically provided in the regulation. Even though Anand Rathi�s case referred to by the learned Advocate General is of no direct help in this context, there is no shortage of authorities explaining the scope of section 11. The legal position has been explained in SEBI Vs. Alka Synthetics (1999) 19 SCL 460) decided by the Division Bench of the Hon�ble Gujarat High Court. In the judgement the Hon�ble Court had observed that "so far as the authority of law in the SEBI to issue such directions is concerned, such measures as it thinks fit is clearly discernable on the basis of the provisions contained in section 11 read with section 11B of the SEBI Act. Merely because in section 11 (2) it is provided that "the measures referred to therein may provide for" cannot be taken to mean that such measures have to be laid down in advance. It is a matter of common knowledge that the SEBI has to regulate a speculative market and in case of speculative market varied situations may arise and all such exigencies and situations cannot be contemplated in advance and, therefore, looking to the exigencies and the requirement, it has been entrusted with the duty and function to take such measures as it thinks fit. Thus the measures cannot be laid down as a onetime exercise to be followed in defined cases. The SEBI has to rise to the occasion for taking appropriate measures to combat even such situations in the speculative market, which may or may not be conceived in advance. We have to therefore consider and interpret the power of SEBI under the provisions so as to see that the objects sought to be achieved by Act is fully served, rather than being defeated on the basis of any technicality. Instead of general principles of law, in such cases we have to consider the matter on first principle. The first principle is that the provisions of an Act have to be given a meaning so as to advance the object sought to be achieved by that Act. The duty and function had been entrusted to take such measures as it thinks fit and in order to discharge this duty the power is vested under section 11B. In such a situation, it cannot be said that there was no authority of law with the SEBI to take appropriate measure. Now the question arises as to whether such measures should essentially be provided and published in advance. No one can be expected to do any task which is impossible and whereas we have already observed that the measures have to be taken to meet a particular eventuality, which may or may not be conceived earlier, there is no question laying down such measures in advance and publishing the same. Thus, there is an authority under law to take the measures and merely because the measures have not been laid down in advance and published. It cannot be said that SEBI had no other authority under law to issue the directions, as contained in the impugned orders. The authority has been given under the law to take appropriate measures as it thinks fit and that by itself is sufficient to cloth the SEBI with the authority of law".
 

In this context it is also be noted that regulation 44 is not an exclusive provision debarring the Respondent taking any measures other than those mentioned in the regulation. It is therefore clear that SEBI is legally entitled to issue directions to the concerned persons to pay interest to the shareholders to whom payment of consideration against the shares acquired was delayed.
 

The argument that since regulation 22 (12) provides for levy of interest only in a particular situation, interest cannot be levied in any other situation is not correct. Substantive provision of regulation 22 (12) is not on levy of interest. Said regulation directs the acquirer within a period 30 days from the date of the closure of the offer, complete all procedures relating to the offer including payment of consideration to the shareholders who have accepted the offer. In the event the acquirer is unable to make the payment to the shareholders who had accepted the offer before the said period of 30 days due to non-receipt of the requisite statutory approvals, the Board if satisfied that non-receipt of the requisite statutory approval was not due to any willful default or neglect of the acquirer or failure of the acquirer to diligently pursue the applications for such approvals, is empowered to grant extension of time for the purpose, subject to the acquirer agreeing to pay interest to the shareholders for delay beyond 30 days, as may be specified by the Board from time to time. It could be seen that the regulation thus provides for levy of interest in a no default situation. It cannot be said that as a result of the said regulation, interest is not leviable in any other context where the acquirer had defaulted. It defies the logic to believe that the regulator is empowered to levy interest in a situation which was beyond the control of the acquirer but not empowered to levy interest in a default situation which the acquirer created on his own".
 

Therefore, I am of the view that the Respondent is empowered to issue the impugned direction. Regulation 22 (12) in my view does not put any embargo on the Respondent in exercising its power under section 11 (1).
 

The legal position regarding levy of interest and justification for levying interest @ 15% etc., have also been discussed by the Tribunal in its order in Appeal No. 37/2001, decided on 5^th September, 2001. Those findings as reproduced below are in equal force applicable to this case.

Interest being the return or compensation for the use or retention by one person of a sum of money belonging to or owed to another, the liability to pay the purchase consideration has to be ascertained first. It is therefore necessary to find out from the regulations as to when the liability to pay the money to the shareholders crystalises. In the normal course in the case of purchase of shares in response to the public offer made under the regulations, the payment is required to be made within 30 days from the closure of the offer. Total time span provided by the regulation from the date of public announcement to the date of actual payment of consideration is 120 days. Regulation 22 provides the time frame for action. The liability to pay interest arises only in the event of default or delay in making the payment by the acquirer. In any case the liability does not arise on the date on which the public announcement was made. The liability does not cease on the day the acquirer actually made the public announcement. The liability continues till such time the payment is actually made. It is seen from the order that the Respondent has identified 14.3.2000 as the date from which the Appellant should pay the interest. 14.3.2000 as the relevant date has been identified without taking into account the provisions of the regulations and the material facts. 14.3.2000 was the date on which the Appellant made a public announcement offering to purchase the shares of Burmah Castrol. There was no crystalised liability to make payment on that date.
 

However, I do not think that it will be proper for this Tribunal to embark on an exercise to decide the period to which interest is required to be paid, for the main reason that if as a result of such exercise the Appellant�s liability increases that would put the Appellants in a worse position than what he was earlier, which is not proper and permissible. It is therefore felt that the Respondent itself should consider the matter with reference to the provisions of the regulations and the material facts relevant to the case and identify the period for the purpose.
 

In the light of the above discussion the Respondent�s order directing the Appellants to make a public announcement to acquire shares from the shareholders of Foseco India Ltd is upheld. For the reasons stated above it is felt that the Respondent'� direction to the Appellants to pay interest for the period commencing from 14.3.2000 till the actual date of public announcement is untenable and as such the said direction is set aside. However, the Respondent is at liberty to re-examine and decide the period for which the Appellants can be held liable to pay interest and pass suitable order in accordance with law.

The appeal is disposed of in the above lines