IN THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
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Date
of Hearing
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10/01/2005
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Date
of Decision
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27/01/2005
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Appeal
No: 131 of 2004
In
the matter of
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Appellant � Represented by:
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B.B.
Singal
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Mr. Vinay Chauhan, Advocate
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Versus
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Securities & &
Exchange Board of India
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Respondent- Represented by
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Mr. Dipan Merchant, Advocate
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Appeal
No: 131A of 2004
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Appellant � Represented by:
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Kishori
Lal HUF
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Mr. Vinay Chauhan, Advocate
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Versus
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Securities & &
Exchange Board of India
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Respondent- Represented by
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Mr. Dipan Merchant, Advocate
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Appeal
No: 131B of 2004
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Appellant � Represented by:
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Sanjay
Singal
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Mr. Vinay Chauhan, Advocate
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Versus
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Securities & &
Exchange Board of India
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Respondent- Represented by
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Mr. Dipan Merchant, Advocate
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Appeal
No: 131C of 2004
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Appellant � Represented by:
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Sanjay
Singal - HUF
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Mr. Vinay Chauhan, Advocate
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Versus
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Securities & &
Exchange Board of India
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Respondent- Represented by
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Mr. Dipan Merchant, Advocate
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Appeal
No: 131D of 2004
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Appellant � Represented by:
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Neeraj
Singal
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Mr. Vinay Chauhan, Advocate
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Versus
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Securities & &
Exchange Board of India
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Respondent- Represented by
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Mr. Dipan Merchant, Advocate
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Appeal
No: 131E of 2004
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Appellant � Represented by:
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Shanti
Devi
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Mr. Vinay Chauhan, Advocate
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Versus
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Securities & & Exchange
Board of India
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Respondent- Represented by
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Mr. Dipan Merchant, Advocate
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Appeal
No: 131F of 2004
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Appellant � Represented by:
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Uma
Singal
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Mr. Vinay Chauhan, Advocate
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Versus
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Securities & &
Exchange Board of India
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Respondent- Represented by
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Mr. Dipan Merchant, Advocate
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Appeal
No: 131G of 2004
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Appellant � Represented by:
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Aarti
Singal
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Mr. Vinay Chauhan, Advocate
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Versus
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Securities & &
Exchange Board of India
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Respondent- Represented by
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Mr. Dipan Merchant, Advocate
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Appeal
No: 131H of 2004
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Appellant � Represented by:
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Archana
Mittal
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Mr. Vinay Chauhan, Advocate
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Versus
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Securities & &
Exchange Board of India
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Respondent- Represented by
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Mr. Dipan Merchant, Advocate
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Appeal
No: 131-I of 2004
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Appellant � Represented by:
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Radhika
Singal
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Mr. Vinay Chauhan, Advocate
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Versus
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Securities & &
Exchange Board of India
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Respondent- Represented by
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Mr. Dipan Merchant, Advocate
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Appeal
No: 131J of 2004
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Appellant � Represented by:
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Rail
Track India Limited
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Mr. Vinay Chauhan, Advocate
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Versus
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Securities & &
Exchange Board of India
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Respondent- Represented by
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Mr. Dipan Merchant, Advocate
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Appeal
No: 131K of 2004
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Bhushan
Capital & Credit Services
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Appellant � Represented by:
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������� Pvt. Ltd.
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Mr. Vinay Chauhan, Advocate
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Versus
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Securities & &
Exchange Board of India
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Respondent- Represented by
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Mr. Dipan Merchant, Advocate
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Appeal
No: 131L of 2004
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Appellant � Represented by:
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Jawahar
Credit & Holdings Pvt. Ltd.
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Mr. Vinay Chauhan, Advocate
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Versus
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Securities & &
Exchange Board of India
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Respondent- Represented by
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Mr. Dipan Merchant, Advocate
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CORAM
��������� Justice
Kumar Rajaratnam, Presiding Officer
��������� Dr.
B. Samal, Member
��������� N.L.
Lakhanpal, Member
Per:��� Justice Kumar Rajaratnam, Presiding Officer
1.
The
appeals are taken up for final disposal through this common order with the
consent of parties.
2.
The
appellants are twelve out of a total thrity promoters of Bhushan Steel &
Strips Limited (hereinafter referred to as �the company�). The shares of this
company at the relevant time were listed at the Delhi Stock Exchange, Mumbai
Stock Exchange, Ahmedabad Stock Exchange and the Calcutta Stock Exchange. As on
20th September, 2001 the paid up equity capital of this
company was Rs. 33,03,96,000/- divided into 3,30,39,600 equity shares of Rs.
10/-. Out of this, the promoters group held 1,47,76,772/- equity shares
constituting 44.72% of the total paid equity capital of the company while the
remaining 1,82,62,828 equity shares constituting 55.28% were held by the
public. On September 20, 2001 the promoters decided to reallocate their share
of the equity capital amongst themselves resulting in interse transfer of
90,88,533 shares constituting 27.50% of the paid up equity capital of the
company.� The total holding of the
promoters, however, remained at the same level of 44.72% of the share capital
of the company. Intimation about this interse transfer was duly sent as
required under Regulation 8 of the Securities and Exchange Board of India
(Substantial Acquisition of Shares and Takeovers) Regulations, 1997. The facts
outlined above are admitted up to this point on both sides. The appellants,
however, claim that in addition to the intimation under Regulation 8, they had
also sent information under Regulation 3(3) to the Stock Exchanges on 15th
September, 2001 i.e., at least 4 days in advance of the actual interse transfer as
required under Regulation 3(3). In support of their contention the appellants
have furnished copies of the RPAD receipts from the postal department addressed
to all the 4 Stock Exchanges. The respondent, Adjudicating Officer, Securities
and Exchange Board of India, however, dismisses this contention on the basis of
the letters received from three of these Exchanges to the effect that they had
not received any such letter dated 15/09/2001. The adjudicating officer has
therefore considered it as a violation of Regulation 3(3) as well as Regulation
3(4) and has imposed a penalty of Rs. 5 lakhs on the acquirers and PACs
(persons acting in concert) jointly and severally.� Being aggrieved, the appellants have filed
the present appeals.
3.
The
appellants have challenged the impugned order dated May 31, 2004 on two grounds. The appellants have
argued that the adjudicating officer has wrongly interpreted Regulation 3(3)
which grants exemption to certain categories of acquisition of shares in the target
company and one such exempted category under Regulation 3(1)(e)(iii)(b) relates
to interse transfer of shares amongst promoters. It is the contention of the
appellants that Regulation 3 comes into play only if a violation of the
substantive clauses 10, 11 or 12 is first established because the very first
sentence of Regulation 3 reads �nothing contained in Regulations 10, 11 and 12
of these Regulations shall apply to ���.� According to the appellants, therefore
Regulation 3 is totally in applicable in the present case because neither the
show cause notice nor the impugned order alleges any violation of Regulation 10
or 11 of 12. Nevertheless, they have argued that they did send the intimation
to all the Stock Exchanges on 15th September, 2000 by way of abundant caution and have
produced the receipts from the Departments of Posts and Telegraphs as proof of
dispatch of the relevant information.�
They have thus argued that there was nothing more they could have done
in the matter and that there is no other evidence they can be reasonably
expected to produce in support of their contention and also that it is not
their fault if the Stock Exchanges have not been able to locate the receipt of
this information in their records at this distance of time. The learned counsel
for the respondent on the other hand argued that the exemption in the Regulation
3 was available to the appellants only subject to fulfillment of requirements
under Regulation 3(3) and 3(4) and that it is therefore a clear case of
infringement of the Regulations warranting imposition of an appropriate
penalty. Regarding proof of dispatch the learned counsel for the respondent
argued that while wording a communication dated May 24, 2003 to the Manager, Takeover Division,
SEBI the appellants had stated that the communication under Regulation 3(3) was
being submitted while during the adjudication proceedings they had produced the
RPAD receipts. According to the learned counsel the Adjudicating Officer had
sought verification from the Stock Exchanges because of this conflicting stand
taken by the appellants on this vital aspect of the matter. The appellants�
explanation in this regard is that at the time of sending information to SEBI
on May 24, 2004 the promoters were themselves not sure whether the requisite
information had been filed with the Stock Exchanges or not and that when the
show cause notice was received they searched the records and found the RPAD
receipts. The learned counsel for the appellants further argued that it was established
law that if there was documentary proof of dispatch there would be a reasonable
presumption that the communication shown to have been dispatched had been
received at the other end. The learned counsel further argued that the fact
that the receipt showed the date as 15/09/2001 when the communication as
required under the Regulation to be dispatched and the fact that the RPAD
receipts pertained to all the 4 Stock Exchanges where the company�s share were
listed, constituted substantive evidence of the bonafides of the company.
4.
We
have carefully gone into the rival contentions and the submissions made by the
learned counsel on both sides. We have also carefully applied our minds to the
basic framework of the Securities and Exchange Board of India (Substantial
Acquisition of Shares and Takeovers) Regulation, 1997.� On a careful reading of these regulations we
find that it is Regulations 10, 11 and 12 which require an acquirer to make a
public announcement if his acquisition exceeds the norms and parameters laid
down in these Regulations 10, 11 and 12.�
Thus while Regulation 10 requires a public announcement if the
acquisition exceeds 15% of the shares or voting rights of any company,
Regulation 11 requires the acquirer along with persons acting in concert with
him to make the public announcement if he holds 15% or more but less than 75%
shares or voting rights in the company and acquirers additional 10% or voting
rights in any financial year. Regulation 12 deals with acquisition or control
in a company irrespective of whether or not there has been any acquisition of
shares or voting rights in a company. Regulation 3 provides exemption from
public announcement necessitated under Regulation 10, 11 or 12 in certain
categories of acquisitions which include all acquisitions achieved through
interse transfer of shares amongst promoters. We are therefore in agreement
with the appellants that before imposition of any penalty under Regulation 3 a
prima facie case has to be established for violation of Regulation 10, 11, and
12.� Unfortunately, however, the impugned
order does not even remotely allege any violation of Regulation 10 or 11 or 12
which would have necessitated a public announcement by the acquirers.� Thus, if there is no requirement of a public
announcement, Regulation 3 is not at all attracted and there is no question of
imposition of any penalty.
5.
However,
since we are not inclined to set aside an order just because it suffers from a
technical flaw of non-mention of violation of Regulations 10, 11 or 12 we have also
tried to examine if there has indeed been a violation of any of these
Regulations. �Unfortunately, neither the
impugned order nor the show cause notice provides us with any assistance in
this regard as well. Amongst the documents on record, however, we find a chart
at page 104 of the memorandum of appeal which was admitted by both sides to be
part of the records before the Adjudicating Officer. We find from this record
that there are as many as 30 individuals shown as promoters of this company.
Out of these 30 promoters, serial numbers 27 to 30 neither bought nor sold any
shares during the relevant time.� Those
shown at serial numbers 18 to 26 had only sold and had not acquired any shares
even from within the group. We are thus left only with promoters shown at
serial numbers 1 to 17 of the table shown below:
PROPOSED
INTERSE � TRANSFER OF SHARES AMONG PROMOTERS
|
S. No.
|
Promoters
|
PRE
|
ACQUISTION
/ DISPOSAL � INTERSE
|
POST
|
|
Before Acquisition
|
Acquisition
|
Disposal
|
After Acquisition
|
|
No.
|
%
|
No.
|
%
|
No.
|
%
|
No.
|
%
|
|
1.
|
Kishorilal HUF
|
0
|
0.00
|
21400
|
0.06
|
0
|
0
|
21400
|
0.06
|
|
2.
|
Sh. B.B. Singal
|
288845
|
0.87
|
699091
|
2.12
|
-244345
|
-0.74
|
743691
|
2.25
|
|
3.
|
Sh B.B. Singal HUF
|
62000
|
0.19
|
0.01
|
2000
|
-49200
|
-0.15
|
14600
|
0.04
|
|
4.
|
Sh. Sanjay Singal
|
539980
|
1.83
|
1034550
|
3.13
|
-357080
|
-1.08
|
1217450
|
3.68
|
|
5.
|
Sh. Sanjay Singal HUF
|
0
|
0.00
|
2100
|
0.01
|
0
|
0.00
|
2100
|
0.01
|
|
6.
|
Sh. Neeraj Singhal
|
553700
|
1.68
|
772280
|
2.34
|
-178220
|
-0.54
|
1147760
|
3.47
|
|
7.
|
Smt.Shanti Devi
|
282080
|
0.85
|
288249
|
0.87
|
-80000
|
-0.24
|
490329
|
1.48
|
|
8.
|
Smt. Uma Singal
|
493680
|
1.49
|
1095880
|
3.32
|
0
|
0.00
|
1589560
|
4.81
|
|
9.
|
Smt. Aarti Singal
|
407200
|
1.23
|
293855
|
0.89
|
-134220
|
-0.41
|
566835
|
1.72
|
|
10.
|
Smt. Ritu Singal
|
455600
|
1.38
|
262983
|
0.80
|
-327400
|
-0.99
|
391183
|
1.18
|
|
11.
|
Smt. Archana Mittal
|
1122540
|
3.40
|
33700
|
0.10
|
0
|
0.00
|
1166240
|
3.50
|
|
12.
|
Ms. Radhiak Singal
|
127500
|
0.39
|
172742
|
0.52
|
-120600
|
-0.37
|
179642
|
0.54
|
|
13.
|
Rail Track India Ltd.
|
24196
|
0.07
|
0
|
0.00
|
0
|
0.00
|
24196
|
0.07
|
|
14.
|
PC Investments Pvt.Ltd.
|
410365
|
1.24
|
136409
|
0.41
|
-292500
|
-0.89
|
254274
|
0.77
|
|
15.
|
Adhunik Investments P.Ltd.
|
876786
|
2.65
|
114861
|
0.35
|
-719861
|
-2.18
|
271786
|
0.82
|
|
16.
|
Bhushan Cap. & Credit
Ser. P.Ltd.
|
0
|
0.00
|
83800
|
0.25
|
0
|
0.00
|
83800
|
0.25
|
|
17.
|
Jawahar Credit &
Holdings P.Ltd.
|
0
|
0.00
|
0
|
0.00
|
0
|
0.00
|
0
|
0.00
|
|
|
Total (a)
|
5644472
|
17.08
|
5013900
|
15.18
|
-2503428
|
-7.58
|
8154946
|
24.88
|
|
18
|
Ms. Priyanka Singal
|
127500
|
0.39
|
0
|
0.00
|
-127500
|
-0.39
|
0
|
0.00
|
|
19.
|
Gaindamal Chiranjilal Ltd.
|
394683
|
1.19
|
0
|
0.00
|
-393783
|
-1.19
|
900
|
0.00
|
|
20.
|
Bhushan Information Tech
Ltd.
|
209600
|
1.19
|
0
|
0.00
|
-3000
|
-0.01
|
200800
|
0.83
|
|
21
|
Evergrowing Iron & Finvest
Ltd.
|
494675
|
1.50
|
0
|
0.00
|
-417000
|
-1.26
|
77875
|
0.24
|
|
22
|
Flawless Holding & Ind.
Ltd.
|
557450
|
1.72
|
0
|
0.00
|
-505000
|
-1.53
|
62450
|
0.19
|
|
23.
|
Kishorilal Construction Ltd
|
493525
|
1.49
|
0
|
0.00
|
-376000
|
-1.14
|
117525
|
0.36
|
|
24.
|
D�cor Investment & Fin
Pvt Ltd
|
58388
|
0.18
|
0
|
0.00
|
-58388
|
-0.18
|
0
|
0.00
|
|
25
|
Essenn Investments Pvt. Ltd.
|
502483
|
1.52
|
0
|
0.00
|
-158000
|
-0.47
|
346463
|
1.05
|
|
26.
|
ASL Investments Pvt. Ltd.
|
595577
|
1.80
|
0
|
0.00
|
-473803
|
-1.43
|
121774
|
0.37
|
|
|
Total (b)
|
3444061
|
10.42
|
0
|
0.00
|
-2510474
|
-7.60
|
933687
|
2.83
|
|
27
|
Paragon Securities P.Ltd.
|
1137648
|
3.44
|
0
|
0.00
|
0
|
0.00
|
1137648
|
3.44
|
|
28
|
Parakeet Securities P. Ltd.
|
1137648
|
3.44
|
0
|
0.00
|
0
|
0.00
|
1137648
|
3.44
|
|
29.
|
Perpetual Capital Services
P.Ltd.
|
2275295
|
6.89
|
0
|
0.00
|
0
|
0.00
|
2275295
|
6.89
|
|
30
|
Marsu Capital Services P.
Ltd.
|
1137848
|
3.44
|
0
|
0.00
|
0
|
0.00
|
1137848
|
3.44
|
|
|
Total (C)
|
6888239
|
17.22
|
0
|
0.00
|
0
|
0.00
|
5688239
|
17.22
|
|
(A)
|
PROMOTERS TOTAL
|
14776772
|
44.72
|
5013900
|
16.18
|
-5013900
|
-15.18
|
14776772
|
44.72
|
|
(B)
|
PUBLIC
|
18262828
|
55.28
|
|
|
|
|
18262828
|
55.28
|
|
(C)
|
OTHERS
|
0
|
0.00
|
|
|
|
|
0
|
0.00
|
|
(D)
|
GRAND TOTAL
|
33039600
|
100.00
|
|
|
|
|
33039600
|
100.00
|
|
|
TOTAL VOTING CAPITAL OF THE
COMPANY
|
330396000
|
|
|
|
6.
Basically,
therefore, we believe that if we are talking of persons acting in concert we
have to necessarily talk about all 30 of them because all of them have been
shown as promoters and persons acting in concert by the company in all their
communications with all the statutory authorities. In that case there would be
no question of any acquisition because the shareholding of the persons acting
in concert has not changed or increased even by a fraction. Even if we narrow
down the group of persons acting in concert to those who bought and sold at the
relevant time i.e., serial number 1 to 17, it is seen that this group as a
whole acquired 15.18% of the shares and disposed of 7.68% of the shares leading
to a net acquisition of only about 7%. The change in the holding of any of
these 17 persons supposed to have acted in concert exceeds the minimum of 5%
prescribed under the Regulations.� Besides
we find that Jawahar Credit and Holdings Pvt. Ltd., shown as one of the persons
acting in concert in the show cause notice had not bought or sold even a single
share.� We also find that the persons in
this group shown at serial number 3, 10, 14 and 15 were net sellers and cannot
therefore be considered as having gone in for any acquisition.� In fact the impugned order merely talks of
persons acting in concert without even mentioning their names. It is therefore
not clear from the impugned order as to which persons are supposed to have acted
in concert and to what extent and in violation of which particular regulation.
We thus find it total lack of application of mind to the facts of the case on
the part of the Adjudicating Officer. What the Adjudicating Officer seems to
have done is that he has merely totalled up the acquisition of some of these 30
promoters closing his eyes even to the disposal of their holdings by the very
same persons, thus coming to the conclusion that the acquisition was more than
15% requiring intimation under Regulation 3(3) and 3(4). The impugned order
states that these persons are, admittedly, persons acting in concert (PACs). We
do not find any such admission in the records. What is admitted is the fact
that all thirty persons shown in the chart are promoters and can therefore be
considered as acting in concert. And the interse transfers taken together for
the group of thirty promoters have not resulted in any acquisition. There
cannot thus be a group of promoters within the entire promoter group formed for
the purpose of acquisition or takeover. And if there be such a group, it has to
be established by independent evidence including that leading to a meeting of minds
for a common purpose. There is not even an allegation to that effect. The
charge of violation of SEBI (SAST) Regulations, 1997 is thus nothing more than
an arithmetic chicanery
7.
Similarly
in the matter of dispatch of letters to the Stock Exchanges on the due date,
reliance has been placed on letters from the appellants to the Stock Exchanges
and RPAD receipts which tally with the dates as have been produced before the
respondent. However, the respondent relied on certain statements made by the
Stock Exchanges that the intimation had not been received. In one case, with
respect to Calcutta Stock Exchange, they had said that they had received the
intimation but later resiled from it.�
All these casts considerable doubt in the matter and the benefit of
doubt must go to the appellant in the facts and circumstances of this
case.�
8.
In
any event, looked at either way from the point of view of the interse changes
in the portfolio of the promoters, no case is made out that there ahs been a
violation of the regulation. There has been no application of mind on the part
of the respondent in respect of the chart, which has been produced and the
contents of the chart as extracted at page 9 of our order, have not been denied
by the respondent� In that view of the
matter the impugned order is set aside and the appeals are allowed. Any payment
made by the appellants to the respondent pursuant to the interim order passed
by this Court shall be refunded by the respondent to the appellants as
expeditiously as possible.
9.
No
order as to costs.
|
�(Justice Kumar Rajaratnam)
Presiding
Officer
|
|
(Dr. B. Samal)
Member
|
(N.L. Lakhanpal)
Member
|
Place: Mumbai
Date:
27/01/2005
*/as
