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BEFORE THE SECURITIES
APPELLATE TRIBUNAL MUMBAI In the matter of: Appeal No. 79/2002 SMS Holdings Pvt. Ltd.�������������������������������������������������������� Appellant Vs. 1. Securities and Exchange Board of 2. Technip-Coflexip 3. 4. Institut Francais du Petrole (IFP) 5. The Takeover� Department, The Securities
& ����� Exchange Board of Appeal No. 80/2002 Pradeep Kumar Jain ������������������������������������������������ Appellant Vs. 1. Technip 2. 3. Institut Francais du Petrole (IFP) 4. Coflexip SA 5. ����� & Construction Ltd., 6.�� Securities & Exchange Board of Appeal No. 85/2002 Kishore Shah ������������������������������������������������������������ Appellant Vs. 1. Technip 2. 3. Institut Francais du Petrole (IFP) 4. Coflexip SA 5. ���� & Construction Ltd., 6.� Securities & Exchange Board of Appeal No. 91/2002 Khandwala Securities Ltd. �������������������������������������������������� Appellant Vs. 1. Technip 2. 3. Institut Francais du Petrole (IFP) 4. Coflexip SA 5. ����� & Construction Ltd., 6.�� Securities & Exchange Board of Appeal No. 104/2002 Millhill Investments Ltd. ����������������������������������������������������� Appellant Vs. 1. Technip 2. 3. Institut Francais du Petrole (IFP) 4. Coflexip SA 5. ����� & Construction Ltd., 6.�� Securities & Exchange Board of Appeal No. 105/2002 Empire International
Holdings Ltd. ������������������������ Appellant Vs. 1. Technip 2. 3. Institut Francais du Petrole (IFP) 4. Coflexip SA 5. ����� & Construction Ltd., 6.�� Securities & Exchange Board of Appeal No. 119/2002 Vikram Rathi ����������������������������������������������������������������������� Appellant Vs. 1.�� Securities and Exchange Board of 2. Technip-Coflexip 3. 4. Institut Francais du Petrole (IFP)���������������������������������� Respondents Appeal No. 01/2003 Umesh kumar G. Mehta ������������������������������������������������������ Appellant Vs. 1. Securities and Exchange Board of 2. J. P. Morgan India Pvt. Ltd., 3. Technip Coflexip 4. Coflexip Stena Offshore ( Appearance : Shri. S.P. Chinoy, Sr.Advocate��������������������������������������������������������������������������� for
Appellant� in appeal No.79/2002 Shri. S.M. MukherjeeAdvocate����������� ������������������������������������������������������������������������������������������������������� �Shri M. P. Bharucha, ������������������������������������������������������������������������������� for Appellants in Advocate������������������������������������������������������������������������������� appeal
No.80, 85, 91 & 104/2002 Shri Chirag Balsara, Advocate������������������������������������������������������������������������������� For
Appellant in ����������������������������������������������������������������������������������������������� appeal
No.105/2002 Shri. Sr. Advocate Ms. Ranjan Roy Gawai������� Advocate ������������������������������������������������������������������������������ �for Appellants in appeal No.119/2002 Shri Shyam Diwan, Advocate Shri. Umesh kumar Mehta Chartered Accountant������������ ��������������������������������������������� �for Appellant in appeal
No.01/2003 �Shri. Kumar Desai Advocate Ms. Rita Shivalkar Advocate��������������� ��������������������������������������� ���������������������������for Respondent SEBI Shri. A. M. Setalvad Sr. Advocate Shri. Garuav Joshi Advocate ��������������������������������������������������������������������������������� �for Respondent���� Technip S.A. �Shri D. Bhattacharya Advocate Shri. Shreyas Patel Advocate�������������������������������������� ���������������������������������������� ����for Respondent IFP Shri Zal T. Andhyarujina Advocate Shri. Raghenth Advocate ������������������������������������������������������������������������������ ��for Respondent J. P. Morgan India P. Ltd. ORDER
South East
Marine Engineering and Construction Ltd.,(SEAMEC) is a public limited company
registered in � �The present 8 appeals are from persons
claiming to be the shareholders of SEAMEC.�
In the appeals they have�
challenged the order dated 9.9.2002 containing� certain decisions arrived at, and directions
given, by the Securities and Exchange Board of India (SEBI). SEBI
received certain complaints relating to the acquisition/control of SEAMEC.� It had also received an application from
Technip, seeking exemption from compliance of the requirements relating to� the acquisition of shares.� SEBI�s order is a combined order dealing with
the complaints received by it with reference to the acquisition of shares/control
of SEAMEC by Technip and also the�
application made by the said Technip seeking exemption from compliance
of the requirements under Chapter III of the Securities and Exchange Board of
India (Substantial Acquisition of shares and Takeovers) Regulations, 1997 (the
Takeover Regulations) in the context of substantial acquisition of shares/control
of Coflexip,� made as a result of the
open offer made by it on 3.7.2001. With reference to the complaints alleging
failure on the part of Technip to comply with the requirements of Chapter III
of the Takeover Regulations, it has been stated �in the order that: ���..the
Technip, ISIS� and IFP were not acting in
concert for the purpose of acquiring shares/voting rights in Coflexip when
Technip acquired 29.68% shares of Coflexip from Stena on 12.4.2000 and hence
does not appear to be in violation of Regulation by Technip on 12.4.2000.� On the
application seeking exemption from complying with the requirements of Chapter
III of the Takeover Regulations it has been stated in the� order held: ��..Technip
has violated regulations 10 and 12 read with sub regulations (1) and (3) of
regulation 14, when Technip through an open offer acquired shares of Coflexip
increasing its holding to 98.36% shares in Coflexip.� Pursuant to the open offer Technip gained
control over Coflexip and SEAMEC as Technip has acquired 58.24% shares/voting
rights and control in SEAMEC without making public announcement to acquire
shares/voting rights or control of SEAMEC in accordance with the said
regulations.� In view of
the finding that Technip violated regulations 10 and 12, SEBI directed the
Acquirer to make public announcement as required under Chapter III of the
Takeover Regulations in terms of regulations 10 and 12 within 45 days of the
order taking 3.7.2001 as the reference date for calculation of offer price.� Further, Technip was also directed to pay
interest @ 15% per annum to the shareholders of SEAMEC from 1.11.2001 till the date of actual payment of consideration for the
share to be tendered and accepted in the offer to be made by Technip. Technip
decided to abide by the SEBI�s order. They have not appealed against the
order.� In fact they have� made the public offer. But the Appellants
claiming to be� aggrieved by� SEBI�s decision that there was no violation
of Takeover Regulations on 12.4.2000�
filed the present appeals.� The
Appellants� grievance is not on SEBI directing Technip to make a� public offer.�
Their grievance is on SEBI choosing 3.7.2001 as the reference date for
the purpose of calculating the offer price for the shares in terms of the
public offer directed to be made on the ground that Takeover Regulations did
not trigger on 12.4.2000, but only on 3.7.2001.�
According to the Appellants� the
date for the purpose of calculating the price should be 12.4.2000, i.e. the
date on which Technip Coflexip SA acquired 29.68% shares in Coflexip.� The reference date for the purpose of
calculating the offer price is crucial in this case.� Because, if it is found that the correct date
is 12.4.2000 for the purpose of calculating�
the offer price, the price would be substantially higher compared to the
price that would be offered by taking 3.7.2001 as the relevant date.� The Appellant in� appeal No.1/2003 has taken the stand that the
price offered vide Public Announcement issued on 11.11.2002 by Technip should
have been� the higher of two prices
taking 3.7.2001 and 11.11.2002 as the reference date, and not the one only with
reference to 3.7.2001. It is felt
that for proper appreciation of the issues involved in these appeals,� a brief idea of the status of the main
characters involved in the transactions under reference at the relevant period
is necessary.�� The impugned order and
the pleadings provide some input in this regard.� As stated earlier SEAMEC is� the target company.� It is a subsidiary company registered in
India.� It�s immediate holding company is
Coflexip Stena Offshore (Mauritius) Ltd., which held 58.24% of its voting
capital.�� Coflexip Stena Offshore
(Mauritius) Ltd., is a wholly owned subsidiary of Stena Offshore (Jersey) Ltd.,
a company incorporated in the Channel Islands.�
Stena Offshore (Jersey), in turn is a 100% subsidiary of Coflexip Stena
Offshore NV (Netherlands), which in turn is a 100% subsidiary of Coflexip SA,
France.��� Thus, the ultimate holding
company of SEAMEC at the relevant time was Coflexip SA, France.� Coflexip SA, France is a company organized
under the laws of French Republic.� It�s
two major shareholders at the relevant time were Stena International BV (Stena)
and ISIS. Coflexip SA, France is stated to be a world leader in the provision
of sub-sea development systems for the offshore oil and gas industry. Institut
Francais due Petrole (IFP) is an institution created by a decree of the French
Government, for the purpose of conducting research, imparting� professional training and information for the
oil and gas and automotive industries.�
It is stated to be a non commercial institution.� It is stated to be a developmental� institution in the petroleum sector. ����������� ISIS (i.e.
International de Services Industrials et Scientifiques) is a company organized
under the laws of the French Republic� It
was promoted by IFP in the year 1975 as its wholly owned subsidiary.� Over the years IFP�s holding was brought down
to 52.90%.� Direct public holding in its
capital was about 37%.�� ISIS was
reportedly established to manage equity holdings of IFP in� commercial companies.� IFP retained majority control of ISIS at all
times until October 2001.� On 20.6.2002
ISIS merged with Technip Coflexip. Technip
S.A. France (after October 2001 known as �Technip Coflexip�) (Technip) is also
a company organized under the laws of French Republic.� It� is
stated to be� engaged in the business of
design and construction of petroleum and petrochemical facilities. SEBI in its
order has narrated the background of the order�
with reference to the complaints it had received as follows: �In the
month of October 2001, SEBI received complaints, inter alia, stating that
Technip has on 12.4.2000, acquired shares representing 29.68% of the paid up
capital of Coflexip from Stena acting in concert with ISIS (which was holding
18.51% of shares of Coflexip) and has consequently acquired right to appoint
majority of directors on the Board of Coflexip.�
Consequently, by virtue of aforesaid acquisition of 29.68% shares of
Coflexip, Technip acquired control over SEAMEC and therefore triggered the
provisions of regulation 12 of the SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997.�
(hereinafter referred to as the �said Regulations�), since Technip and
ISIS together held 47.85% shares/voting rights and had majority of directors on
the Board of Coflexip i.e. 6 out of 11 directors on 12.04.2000 and 7 out of 12
directors on 30.05.2000. Pursuant to
the aforesaid complaint, SEBI called upon SEAMEC and Technip vide its letter
dated 31st October 2001 to provide factual information regarding
alleged violation.� In response thereto,
SEAMEC and Technip submitted their replies vide letters dated 12th
November, 2001 and 14th November, 2001, respectively.� The aforesaid submissions were considered and
were not found to be satisfactory and accordingly, a show cause notice dated
19.02.2002 was issued to� Technip, ISIS
and IFP�. The show
cause notice stated inter alia, that: (i)
On October 25, 1999, Coflexip acquired 49.85% shares
from Peerless General Finance & Investment Company Limited resulting in
increase in its shareholding from 8.39% to 58.24% of total voting capital of
SEAMEC. (ii)
Stena along with ISIS was holding collectively 47.85%
in Coflexip as on 12.4.2000, out of which 29.68% was held by Stena and 18.17%
by� ISIS.�
On April 12, 2000 Technip had�
purchased all the shares held� by
Stena (single largest shareholder of Coflexip) in Coflexip.��� After the said acquisition of 29.68% shares
of Coflexip held by Stena, Technip along with person acting in concert i.e.
ISIS enjoyed 47.85% voting rights in Coflexip and had 6 directors on the Board
of Coflexip comprising 11 directors on 12.04.2000 and were in a position to
control Coflexip. (iii)
In view of the nature of cross holdings amongst
Technip, ISIS, IFP, the composition of Board of Directors of Coflexip, Technip,
ISIS and the control exercised by ISIS along with Total Fina ELF & Gaz de
France over Technip decisions, prima facie, Technip and ISIS (Second largest
Shareholder in Coflexip) were persons acting in concert in terms of regulation
2(1)(e) of the Regulations.� Further,
Technip along with ISIS were acting in concert with the common objective of
acquiring control over Coflexip. (iv)
After the said acquisition of 29.68% shares of
Coflexip held by Stena, Technip along with person acting in concert i.e. ISIS
enjoyed� 47.85% voting rights in Coflexip
and had 6 directors on the Board of Coflexip comprising 11 directors on
12.04.2000 and were in a position to control Coflexip. (v)
Therefore, after the acquisition of shares of� Coflexip held by Stena on 12.4.2000, Technip
along with person acting in concert i.e. ISIS acquired control over 100%
subsidiary of Coflexip namely Coflexip Stena Offshore (Mauritius) Ltd. which
owned 58.23% of voting capital in SEMEC.�
As a result of the aforesaid acquisition, Technip acquired 58.23% voting
capital of SEAMEC and control over SEAMEC and triggered the provisions of
regulations 10 and 12 of the said Regulations. (vi)
As Technip along with persons acting in concert have
acquired the said shares/voting rights and control of SEAMEC in the manner as
stated above without making a public announcement as required by the provisions
of the said Regulations, Technip has, prima facie, violated the provisions of
regulations 10 & 12 read with regulations 14(1) & 14(3) of the
Regulations and therefore, Technip is liable for penal action under the
Regulations and Securities and Exchange Board of India Act, 1992 (hereinafter
referred to as �SEBI Act�) (vii)
In view of the aforesaid, Technip is called upon to
show cause as to why one or more or all action (s) under regulation 44 and
regulation 45 of the Regulations and Section 11, 11B, 15H and 24 of the SEBI
Act, should not be initiated against Technip, IFP and ISIS for violations
specified above�. The noticees
responded to the notice by filing written replies and also making oral
submissions contesting the charges.�
Complainants are also stated to have been given opportunity (inadequacy
of the same has been alleged� by some of
the Appellants) to make their submissions.�
SEBI, thereafter passed the order on 9.9.2002 ����������� This Tribunal on 25.10.2002 taking
into consideration the submissions made by the Appellants in appeal No.79, 80,
85 and 91 of 2002 (-- remaining� appeals
were filed subsequently -- ) and the Respondents, passed an Interim order.� Since the�
interim order is based on the submissions/suggestions made by the
concerned parties, and has a bearing on the outcome of the present appeals� it is�
felt necessary, for ready reference, to set out the portion relevant for
the purpose.� It is as follows: �3.������� Heard Counsel for the parties on the
prayer for interim relief. 4.�������� Shri S.N. Mukherjee, learned Counsel
appearing for the Appellants in Appeal nos. 80, 85 and 91 referred to certain
materials on record and submitted that ���������� the
referral date for making public offer should be taken as 12.4.2000.� He argued that the Appellants have a prima
facie case and that the balance of convenience is also in their favour.� He further submitted that if the order as it
is, is allowed to operate the Appellants would be put to irreparable
injury.�� ������ Learned Counsel suggested that if the Tribunal is not inclined
to grant stay as sought for, the acquirer�
be directed to proceed with the offer subject to the following conditions: i)
the offer price and the period for which interest is
payable by the Acquirer shall be subject to such revision as this Tribunal may
direct by final order passed on the Appeals; ii)
the Acquirer shall pay to shareholder who have
tendered shares pursuant to such open offer the differential amount, if any,
between the offer price of Rs.[*] and the offer price and the period for which
interest is payable in terms of the final order passed by this Tribunal on the
Appeals within such time as may be directed by such final order; iii)
shares tendered pursuant to the open offer shall be
held by the ����������� Merchant Banker in respect of the
open offer appointed by the Acquirer (the
�Merchant Banker�) in a segregated
demat account ������� (the �Escrow Demat Account�); iv)
all accretions to the shares held by the Merchant
banker in the Escrow Demat Account, otherwise than by way of dividend in cash
as may be declared by SEAMEC, shall also be credited to the Escrow Demat
account; the dividend in cash shall be deposited by SEAMEC in a segregated
account (the �Account�) to be opened
with the bank (the �Bank�) �appointed by the Acquirer in respect of the
open offer; v)
the Acquirer shall, within [*] days of the certified
copy of the final order passed by this tribunal on the Appeals being available,
deposit in the account the differential amount, if any, payable by the Acquirer
pursuant to such order; vi)
on such deposit, the Merchant Banker shall distribute
to the shareholders who have tendered shares pursuant to the public offer, the
differential amount to the concerned shareholders as per their respective
entitlement AND shall transfer to the Acquirer all shares and accretions
deposited in the Escrow Demat Account and the Account; vii)
if, however, the Acquirer shall fail to deposit the
differential amount, if any, in the Account as stipulated under (v) above, the
Merchant Banker shall immediately distribute the shares and the accretions
thereto standing to the credit of the Escrow Demat Account AND the accretions
deposited in the Account to the persons who tendered the shares pursuant to the
open offer. He
submitted that the aforesaid conditions be incorporated in the public
announcement and the offer document. 5.�������� Shri Rajendra Singhvi, learned Counsel
appearing for the Appellant in appeal ��� no.79
submitted that there is sufficient evidence to show that the correct referral
date for the purpose of public offer is 12.4.2000 and referred to certain
material forming part of the appeal in support.�
He also supported the alternative prayer made by Shri Mukherjee. 6.�������� Shri Kumar Desai, learned Counsel
appearing for Respondent SEBI submitted that this Tribunal has to take into
consideration not only the interest of the four Appellants� before the Tribunal
but the interest of the large number of other share holders also.� He did put forward certain suggestions which
according to him would protect the interest of all concerned. 7.Shri A.M.
Setalvad, learned Senior Counsel appearing for the acquirer referred to an
affidavit dated 21.10.2002 filed by the acquirer wherein it� has been stated that the present case is a
fit case where no stay ought to be granted.�
As per the said affidavit the balance of convenience is in favour of the
acquirer and no loss or injustice or prejudice would be caused to the
Appellants if stay of the impugned order dated 9th September 2002 is
refused by the Tribunal, that the Appellants herein were to finally succeed in
the matter, the Tribunal or the Court finally deciding the matter could always
direct that a higher offer price be paid to the share holders whose offer was
accepted as per the order dated 9.9.2002.�
It was submitted that it would not be just or equitable to fasten a
liability of Rs.1,50,000 per day on the acquirer for delay in making the public
offer arising out of� any interim order
of stay. 8.�������� I have carefully considered the
submissions made by Counsel for the parties. The remedial measures to protect
the interest of the Appellants and the acquirer during the pendency of the
appeals, put forth by Shri Desai and Shri Mukherjee and the suggestions made by
Shri Setalvad, have been taken ����������� into consideration.� On a careful consideration of all the
aspects, it is felt that ���� the best
course would be the one that protects the interests of all concerned �������� including� the shareholders at large.� Accordingly it is ordered: (i)�������� The acquirer
will implement the impugned order dated 9.9.2002 by making a public
announcement to acquire shares of SEAMEC in accordance with SEBI(Substantial
Acquisition of Shares and Takeovers) Regulations, 1997 on or ���������� before 15.11.2002 by taking 3.7.2001
as the reference date at a price decided as per the Regulations and make the
payment within the time limit prescribed in the regulation for the purpose. (ii)������ In the
aforesaid public announcement and letter of offer, the acquirer shall �������� make a disclosure to the effect that
four appeals being Appeal No.79/2002 � ���� M/s.
SMS Holdings P. Ltd Vs. SEBI & Ors., Appeal No.80/2002 � Pradeep Kumar Jain
Vs. SEBI & Ors., Appeal No.85/2002- Kishore Shah Vs SEBI & Ors., and
Appeal No.91/2002 � M/s. Khandalwala Securities Ltd. Vs. SEBI & Ors.
against SEBI�s order dated 9.9.2002 are pending before the Securities Appellate
Tribunal (SAT), Mumbai and that the acquirer is contesting the same.� It should also be clearly disclosed in the
public announcement and letter of offer that in the appeals the Appellants have
urged to take 12.4.2000 as the reference date and the offer price payable per
share with reference to the said date. (iii) ���� In the event this Tribunal comes to a findings that the reference date shall be� 12.4.2000 and not 3.7.2001 as directed by SEBI in its order, the price payable for the shares acquired shall be with reference 12.4.2000 and the acquirer will pay the difference between the price payable as per SEBI�s order and the price payable taking 12.4.2000 as the reference date.� The acquirer will also pay interest at such rate as may be fixed by the Tribunal on the differential amount also from such date as the Tribunal decides till the date on which payment is made to the eligible share holder of SEAMEC pursuant to the open offer, with in 30 days from the date of the final order by the Tribunal in the appeals.� Contents of this para also will be disclosed in the public �������� announcement and in the letter of offer. (iv)������ The acquirer
will strictly comply with the directions in paras (i) (ii) and (iii) above.� The appeals
on completion of pleadings were heard in two batches, i.e. Appeal nos. 79, 80,
85, 91, 104 and 1005 of 2002� in one
batch and Appeal nos.119 of 2002 and 01 of 2003 in another batch. ��������������� Shri Aspi Chinoy learned Senior
Counsel for the Appellant in appeal no.79/2002 referred to the background and
the role of each of the parties involved in the acquisition.� He submitted that Coflexip SA is the mother company
which controlled SEAMEC through its intermediary subsidiaries.� Shri Chinoy submitted that there was no
change in the controlling interest in SEAMEC till April 2000, that with the
acquisition of 29.68% shares of Coflexip from Stena, by Technip on 19.4.2000.,
the situation changed.� In this context
learned Senior Counsel� referred to the
chronology/statement of facts and stated that Technip was incorporated in 1958
by IFP to develop expertise in engineering & construction services, that
it� is involved in the design & construction
of petroleum & petrochemical facilities.�
He referred to the shareholding pattern of Technip prior to April 2000
and stated that the public shareholding in Technip was 65.00%( 52.7%� voting rights) and� ISIS holding 11.80% (17.9% voting rights) Gaz
de France��� holding 10.90% (16.8% voting
rights) Total Fina holding�� 6.40% (9.9%
voting rights) Employees & Ors holding��
5.90%�� (2.7% voting rights).� The reason for variance in the shareholdings
and voting rights was attributed to shares issued with disproportionate voting
rights. He submitted that ISIS was the single largest shareholder in Technip as
it was holding 17.9% voting rights.� He
also submitted that the� Board of
Directors of Technip comprised of 11 Directors consisting of 2� nominees of�
ISIS, and 2 nominees of Gaz de France and Total Fina.� Shri Chinoy
stated that Coflexip was founded in the year 1971 also by IFP.� It was engaged in the provision of subsea
development systems for the offshore oil & gas industry. Coflexip acquired
/ held 58.24% of the voting capital� of
SEAMEC in October 1999 through Coflexip Stena Offshore (Mauritius) Ltd.� In this context he explained the� shareholding pattern of Coflexip (prior to
April 2000) that the holding by� Public
was 48.6%, Stena 25.1%, JPM/S� 4.5%, ISIS 18.1%, Elf������� 2.7%, Employee/ Co� .7% He
submitted that on 22.9.94 Sogerap, Gaz de France, Total & ISIS
(shareholders of Technip) executed an agreement providing for preemptive
rights, representation on the Board of Directors, nomination of the Chairman of
Technip etc. Learned
Senior Counsel stated that on 2.11.94 Shareholders Agreement between Atochem,
Scor Reassurance & ISIS and Stena Intl BV was executed� providing for preemption in the event of
sale, representation on the Board of Directors, nomination/ appointment of
CEO/Chairman of Board of Directors & Managing� Director, that . Clause 7.1 of the Agreement
recites that the parties agree that they are acting in concert with respect to
their equity interests in Coflexip.���
Shri Chinoy further �submitted
that it is to be noted that� by� letter / order dt 4.11.94� the French�
Market Authority approved the Agreement Noting that it �reflects the
intention of the Parties to Jointly�
&� equitably� control�
the� company� in� the
long� term & in particular� through��
proportional� representation� on� the� Board�
of Directors" and in the SEBI order this Agreement is referred to
as a formal agreement� to control
Coflexip. On
17.12.1999 Valentine/ CEO of Coflexip made a proposal to Valot/ CEO of Technip to
consider a combination between Technip & Coflexip.� The Board of Directors of Technip authorised
Valot to approach Coflexip for the purpose of discussing a possible combination
between Coflexip & Technip as it was of the view that �integration of
Technip with a company of the Company�s (i.e. Coflexip�s) dimension would
considerably increase Technips capabilities & credibility in the offshore
market� Stena which held 29.7% of Coflexip shares� stated that it would not support a
combination of Coflexip & Technip because it was not part of Stena�s� strategy to hold equity in an engineering
& construction� company.��� Stena however offered to sell its stake to
Technip.� On 7.4.2000 Technip�s Board of
Directors approved the purchase of Stena�s holding.� On 11.4.2000 an� Agreement was executed between Stena &
Technip for the acquisitions of Stena�s holding in Coflexip. Clause� 4.1.1 in the agreement� provide that the acquisition was conditional
on the waiver of preemptive rights.� This
waiver was required to get over the preemptive rights it had. Vide letter
dated 11.4.2000 Technip wrote to Mr. Valentin (CEO),Coflexip that it intended
to proceed with the acquisition of Stena�s shareholding in Coflexip.� The letter stipulated that the acquisition
would take place provided that by 4th May Technip had received
notification of waiver or non exercise of their rights from the shareholders
having a pre emptive right.� Technip
stated that it was not acting in concert with anybody; that it had no intention
to increase its stake within 12 months.�
Coflexip & Technip issued letters dt 11.4.2000 not to acquire
interests in competing companies without the others consent.� Investment was for strategic reason, not a
mere stock market investment.� Waiver was
required by the remaining parties in terms of the 2nd November, 1994
agreement.� However, what stand ISIS took
has� not been disclosed by the
Respondents and in that context it can be safely inferred that it agreed to the
acquisition in view of the fact that� it
did not exercise its pre emptive right.� On
14.4.2000, 3 nominees of Technip were co opted as Directors on Coflexips Board
of Directors: Daniel Valot (Technips CEO), Daniel Burlin, Michel Leveque &
Rolf Rolfsen.�� It is to be noted that� these appointments were �following Technips
acquisition of an interest in the Company & pursuant to an understanding
with the Company�.� Shri chinoy submitted
that the words �pursuant to an understanding� are very ��������� important and this �understanding� indicates that it was
concerted action. On
19.4.2000� Technip acquired 29.68% shares
of Coflexip from Stena (including shares held by J.P. Morgan) for Euro 657
million in cash and on 28.4.2000, Technip notified its acquisition of 29%
shares� of Coflexip & issued a
�Statement of Intent� binding for 11 months.�
Technip stated that its acquisition was friendly acquisition and it was
not acting in concert; that it would have four directors on Coflexip�s Board;
that it had no intent to take control & that it would not increase its
shareholding for 12 months, that on 4.5.2000 the Statement /Declaration was
filed by Technip with the French Market Authorities & the same was accepted
by them by issuance of a Public Notice. On 30.5.2000 one more� Technip nominee was appointed as a Director
of Coflexip at a General Meeting of Coflexip thereby increasing its nominee
directors� number to 4. ����������� Learned Senior Counsel submitted
that the fact that at the General Meeting of Coflexip in May 2000, Technip
could cast 5,518,195 votes out of a total of 10,258,024 � i.e. more than 50% of
the votes polled� and in the General
Meeting of Coflexip held on 29.5.2001�
Technip cast 5,518,195 votes out of a total of 9,720,114 votes.� This shows that they had majority voting
rights with them in the general meetings.�
On
1.9.2000 a �Mission Statement� was�
issued regarding an upstream alliance of Coflexip / Technip intended to
combine the major skills of Technip & those of Coflexip Stena Offshore to
provide cost effective field development solutions to the offshore
Industry.� Thereafter Technips nominee
directors & ISIS nominee directors were appointed to the Strategic
Committee of Coflexip, that the Strategic Committee� is like a working committee and� a key controlling factor.� On 30.10.2000�
Coflexip acquired Deepwater Division of Aker Maritime USA with Technip�s
concurrence. Coflexip and Technip had issued letter dated 11.4.2000 not to
acquire interests in competing companies without others consent. On 3rd
July 2001 two separate open Offers were proposed by Technip for the acquisition
of shares of (i) Coflexip & (ii) ISIS. On
6th July 2001 the Board of Directors�
of Coflexip formed special committee of directors not associated with
Technip or ISIS, to review Technips offer. Four Technip directors voted against
the constitution of the Committee (Daniel Valot (Technip�s CEO), Daniel Burlin,
Michel Leveque & Rolf Rolfsen).� ISIS
and one of its nominee directors also voted with Technip against the formation
of the Committee.� One of the nominee
director�s of ISIS voted for the Committee.�
The Resolution was carried by the Chairman�s casting vote.� Learned Senior Counsel submitted that it is
very relevant to note that majority of the nominees voted with Technip. The
Committee required Technip to improve its offer and on 25.7.2001 Technip
increased its offer price to Euro 199 per�
share of Coflexip.� On the same
day� Technip�s CEO Daniel Valot wrote a
letter to Coflexips CEO� Valentin stating
that after completion of the Public Offer, Technip�s Byelaws would be altered
to provide for a two tier structure��
with a twelve� member supervisory
Board & five member Management Board and that Valentin would be appointed
as Chairman of the Supervisory Board.� He
further stated that Valot & Valentin would together nominate 9 members of
Board. According to the learned Senior Counsel this was really a formalisation
of the existing control. On
31.8.2001 CEO/Chairman of Coflexip addressed a letter to all shareholders of
Coflexip regarding the Offer of exchange of 9 Technip shares for 8 Coflexip shares
for Euro 199 per share.� It was stated
therein that�� �The US Offer & the
French Offer will be followed by the creation of a combined Group between
Coflexip & Technip� � i.e. �the
reorganization & integration of Technip & Coflexip�.� The Board of Directors had unanimously
approved & recommended US Offer.�
Technip acquired 98.36% of Coflexip.��
In July 2001 Technip made� an open
offer for ISIS shares.� The basis of the
offer was 11 Technip shares for 10 ISIS shares, that on 1.7.2001 Board of
Directors� of IFP approved the ISIS
exchange offer and on 2.7.2001�
Board� of Directors� of ISIS also approved the exchange offer� In that context IFP tendered its shares in
ISIS to Technip and as a result Technip acquired 99.04% of ISIS. ����������� Shri Chinoy submitted that in the
factual position stated above, the question as to when did Technip acquire
control of SEAMEC has to be decided.�
Whether it was in April 2000 or July 2001 is the main issue. ����������� Shri Chinoy referring� to�
SEBI�s observation in the impugned
order (para 3.2.3) that though ISIS had a stake in both the companies i.e. Coflexip and Technip and had nominated
directors in both the said companies, it was not in management or control of
either of the two companies,� submitted
that the said observation of SEBI is contrary to the position emerging from the
Shareholders Agreement dated 2.11.1994.�
In this context he specifically referred to clause 7.1 in the
shareholders Agreement� that �the
parties agree that they are hereby acting in concert (action de concert) with
respect to their equity interests in the company and ����..�� He submitted that while dealing with �intent
of the parties�, the credibility factor is very important and SEBI has ignored
this aspect while arriving at the�
conclusion.� Learned Senior Counsel� submitted that at the relevant point of time
IFP was holding 52.76% of the shares of ISIS, that it is also to be noted that
some time in April 2000, Technip acquired the entire shares held by Stena� representing 29.68% of the capital of
Coflexip. In this context he referred to the requirement of the French Company
law and the compliance thereunder by Technip as stated in the impugned
order.� Section 355-I of the French
Companies Act provides that a company holds control over another(the Target) in
the following cases � (i)the company holds directly or indirectly, title to a
number of shares granting to such holder a majority of voting rights in the
general meetings of shareholders of the Target (ii) the company holds the
majority of voting right in the Target pursuant to an agreement with a third
party (iii) the company in effect determines, through the votes it holds the
decision taken in the general meetings of shareholders of the Target [what is
known as defacto control].�� Learned
Senior Counsel submitted that it is not the case that Technip acquired
numerically majority of the shares or voting rights in Coflexip in April 2000,
that it is gaining �defacto control� which is relevant to the instant case, and
that defacto control is required to be decided on reality and� not entirely on legality, that SEBI has
failed to realise the reality of gaining defacto control over Coflexip by
Technip in April 2000, though the attendant factors already demonstrated so.� He submitted that once the control of
Coflexip is taken over, change in control over its subsidiary companies is
automatic for the purpose of triggering�
the Takeover Regulations.� Shri
Chinoy submitted that SEBI has blindly accepted the version of Technip that on
3.7.2001, it had made a public offer to take over the shares of Coflexip� inter alia, at a cost price of Euro 193, that
on 25.7.2001 the said cost price was increased to Euro 199 which resulted in
Technip making an extra payment of Euro 30 million equivalent to approximately
Rs.125 crores.� In this context he
referred to the statement by� Respondent
Technip that �on 6.7.2001, the board of directors of Coflexip met to consider
the announced offers to acquire Coflexip.�
At that meeting it was proposed by certain directors that a special
committee of the directors unaffiliated with Technip or ISIS be formed to
review the offers to acquire Coflexip.�
Significantly the board of Coflexip decided by a majority decision to
form a special committee though all
the nominees of Technip voted against the formation.� This itself indicates that Technip was not in
control of Coflexip even in July 2001�.�
Shri Chinoy submitted that SEBI, in this context has not taken note of
the fact that three nominees of� ISIS
voted with Technip, and that the very fact itself is indicative of their
togetherness.� He further submitted that
the Technip�s contention that merely because ISIS had a shareholding of 11.8%
in Technip and a shareholding of 18.17% in Coflexip did not mean that either
IFP or ISIS were in control or management of Technip or Coflexip, is not
correct, that it is an admitted fact that at the relevant time ISIS was a
subsidiary of IFP,� that IFP�s share
holding in ISIS was to the extent of 52.8%of the paid up capital of ISIS.� He further submitted that ISIS had also made
submissions on the same lines as advanced by IFP before SEBI, that IFP/ISIS was
not in control or management of Technip or Coflexip. Learned
Senior Counsel submitted that SEBI in its order had raised three issues for
consideration,� that the main issue was
that whether ISIS and/or IFP can be viewed as persons acting in concert with
Technip when Technip acquired 29.68% shares/voting rights in Coflexip on
12.4.2000.� The other two issues i.e.
whether Technip indirectly acquired control of SEAMEC and whether Technip was
under an obligation to make public announcement according to SEBI would arise
depending on the answer to the� first
issue. Learned Senior Counsel submitted that SEBI wrongly decided the first issue
and decided that it was not necessary therefore to consider the remaining two
issues. Learned Senior� Counsel submitted
that SEBI had noted that Technip had 3 directors on the Board of Coflexip on
12.4.2000 and 4 directors on the Board of Coflexip on 30.5.2000, that Technip
along with representatives of ISIS had majority of directors on the Board of
Coflexip i.e. 7 directors out of total number of 12 directors on 30.5.2000 and
jointly Technip and ISIS were holding 47.85% shares/voting rights of
Coflexip.� Shri Chinoy submitted that
SEBI in the light of the facts of the case has noted in its order that Stena,
ISIS and other major share holders of Coflexip had a formal agreement dated
2.11.1994 to control Coflexip.��� It is
evident therefrom� that the said
shareholders were acting in concert and controlling Coflexip,� Technip came in place of Stena, with the
approval of others and therefore it goes without saying that Technip also
joined the control team, in place of�
Stena.� One can not deny the
reality that no controlling group would willingly allow a person who does not
stand with it to acquire shares from one of the parties comprising the
controlling group. Learned Senior Counsel submitted that by virtue of the legal
position of the persons acting in concert in terms of regulation 2(1)(e)(2),
unless the contrary is established by one of the parties, by virtue of their
position they are persons deemed to be acting in concert, that� Technip and ISIS in terms of regulation 2 (1)(e) (2)(ii) are persons acting in
concert, and to not to consider so they have to establish that they are not
persons acting in concert.� They have to
rebut the assumption that they were otherwise acting in concert, that� they have not rebutted the said presumption
and as such they have to be considered as persons acting in concert for the
purpose. ����������� Shri Chinoy submitted that SEBI has
heavily relied on the French Company Law compliance by the parties � that is
the statement sent by Technip to Coflexip on 11.4.2000 stating inter alia that
Technip was not acting in concert with anyone with respect to Coflexip and that
it had no plan relating to any such concerted action, and Technip has no
intention to increase the interest they will take in Coflexip before April 19,
2001.� He further submitted that Technip
is stated to have issued a notification in terms of the French Company Law on
28.4.2000 for Crossing Legal Threshold by acquiring 29.68% of Coflexip�s
equity� capital.� This is a statutory obligation under French
Company Law,�� binding for 12 months in
which Technip declared that (i)acquisition of shares from Stena was a friendly
acquisition of shares which should result in the conclusion of a strategic
alliance (ii) it was acting alone (iii) it did not intend to increase its
shareholding (iv) it will be represented�
on the Coflexip board of directors by four members out of a total of 12
members (v) it does not intend to take control of Coflexip (vi) for a period of
six months it will not reassign its shareholding, except for a maximum of one
third to institutional investors, without prior consultation with
Coflexip.� SEBI has noted that such a
statement under law is binding on the party making it and that the said
document was filed with the French Market Authority and with Stock Exchange
Commission and that the French Market Authority thereafter had� issued a public notice on 4.5.2000 recording
and accepting the statement made by Technip.�
Learned Senior Counsel submitted that SEBI�s conclusion that Technip and
ISIS or IFP were not acting in concert is not based on the�� basis of the material before it but
exclusively based on the so called compliance of the French law and the
statement made thereof.� In this context
he referred to the following portion in the impugned order: �5.3.12. From the various declarations filed by Technip before French authorities that it was not acting in concert with anybody else for the purpose of� acquiring shares/voting rights/control over Coflexip and in view of the Technip�s letter dated 4/5/2000 vide which it had filed declaration of threshold crossing and� Statement of Intent with French authorities (Council of Financial Markets) declaring the objectives it intends to pursue vis-a-vis Coflexip in the twelve coming months as stated hereinbefore, and specifically that -- �
Technip is acting alone �
That it does not intend to increase its equity
interest in Coflexip �
That it shall be represented on the Board of Directors
by four directors out of a total of twelve members. �
That it does not intend to acquire control over
Coflexip It would be
difficult to hold that Technip was acting in concert with ISIS or IFP for the
purpose of acquiring control over Coflexip, when it acquired 29.68% shares from
Stena on 12.4.00� Shri Chinoy
submitted that SEBI� has drawn the
conclusion going by the declaration stated to have been made by Technip before
the French Authorities under the French Company law, little bothering to go by
the ground realities of the case as emerged from the factual position before
it.� In this context he referred to the
letter dated 11.4.2000 from Technip to Coflexip/Valentin that it intended to
proceed with the acquisition of Stena�s shareholding in Coflexip that the
letter also stipulated that the acquisition would take place provided that by 4th
May Technip had received notification of waiver or non exercise of their rights
from the shareholders having a pre emptive right.� He further stated that Technip in its
notification of the� dated 28.4.2000 had
stated that� acquisition of 29% shares in
Coflexip was a friendly acquisition and that this statement was accepted� by the French authority.� Since the French authorities had accepted the
version, SEBI held that� it was difficult
to hold that the parties acted in concert, that as if SEBI is bound to go by
the decision of French authorities without applying its mind to the facts of
the case and the relevant Indian Regulations.�
He submitted that SEBI did not on its own examine the factual position,
but relied simply on a statement made by the Technip before the French
authorities, that statement can not override the factual position showing
acquisition of control over Coflexip by Technip. Shri Chinoy
referred to the SEBI�s observation in para 5.3.15 in the order that �it is also
observed that there was no agreement between Technip and a third party or ISIS
or IFP giving Technip a majority of voting rights in Coflexip� and submitted
that SEBI has failed to understand that it is not a question of majority
shareholding, that the question is whether Technip was in a position to
exercise control over Coflexip� SEBI has
made a quantum leap only holding that �from the aforesaid it is clear that
Technip was acting alone and had no commonality of objective or community of
interest� with ISIS or IFP for the
purpose of acquiring shares/voting rights/control over Coflexip� (Para
5.3.15).� He submitted that SEBI has not
made any effort in this regard� to find
out as to whether there was really any commonality of objective or community of
interest� among Technip,� ISIS and�
IFP and jumped to the conclusion.�
Learned Senior Counsel submitted that�
the material on record, in particular the shareholding pattern,
management involvement etc. of these entities certainly demolishes the SEBI�s
said contention.� Shri Chinoy submitted
that K. K. Modi case(2002) 35 SCL 230 (Bom) referred and� relied in the order by SEBI� has no application to the present case, as in
the said case two sets of promoters were fighting with each other and one of
them �wanted to exit from the company by selling
its shares, that it is not so in the instant case as IFP/ISIS were
facilitating� the acquisition of shares
of Coflexip by Technip in the best manner they could, that the community of
interest is thus evident.��� ISIS, if it
wanted could have stopped acquiring shares by Technip in Coflexip, but actually
in Technip�s own version it facilitated the acquisition.� Shri Chinoy submitted that when one is� dealing with the defacto control, one can not
simply rely on such declarations and notifications ignoring the stark� realities.�
Shri Chinoy submitted that SEBI has not bothered to accept the realities
and the order� was passed without
application of mind. ����������� Shri Chinoy submitted that SEBI, in its order has devoted considerable space to explain the status of IFP, its activities etc. to show that it is a non commercial non profit making organisation fully devoted to promotion of oil, gas and automotives.� But SEBI has not bothered to deal in a reasonable way the status and activities of ISIS� which facilitated Technip�s acquisition of 29% shares of Coflexip.�� SEBI has ignored� the concerted action of ISIS in this regard.� Shri Chinoy submitted that SEBI has not taken into consideration the relevant facts which it has recited in the order and it� has come to a conclusion which is contrary� to such facts. �He submitted that in the light of the terms of the Agreement (pre emption right and right to nominate directors etc.) Technip could not have successfully acquired 29% shares in Coflexip in April 2000 without the co-operation of ISIS.� SEBI has totally overlooked this fact.� Even before the acquisition of shares, Technip�s 3 to 4 directors� co-option to the Coflexip Board was not possible without ISIS�s concurrence.� The acquisition of shares and� nomination of directors to the Board etc. are not mere coincidences, but part of a design evolved by ISIS and Technip.� Shri Chinoy submitted that� these three companies had controlling block of 47% shares in the company, seven out of 12 directors with them and the� strategic committee, comprising� 2 ISIS nominees and 2 Technip nominees.� With reference to� two separate offers by Technip made in July, 2001, he submitted that no such exclusion was necessary unless they were acting in concert �that� the exclusion was necessary due to� conflict of interest with Technip. He submitted that the fact that on 6.7.2001, ISIS and its nominee directors voted with Technip against the formation of the committee for revising the offer price, has to be noted in the light of the fact that by revising the offer price, as a shareholder ISIS could have been benefited, but they decided to forego the benefit and stood with Technip, for obvious reasons� He further submitted that the fact that in two general meetings of Coflexip in May 2000 and May 2001 Technip voted substantial percentage of votes � exceeding 50% of the total voting rights, would show that really Technip had more than 50% voting power at its command and consequently control over the company. ����������� Shri Chinoy in his attempt to show concerted action by the parties,� referred to the letter dated 14.10.2001, from the Chairman of Technip to the company�s shareholders stating that: �For over a
year now, we have been working on this merger, passing through a number of
necessary stages: the acquisition of 30% of Coflexip in April 2000,� the setting up in the summer of 2000 of a
strategic alliance which allowed the teams from the two companies to start
working together on a few joint projects as well as on numerous joint
proposals.� This period of
acclimatisation was invaluable: it demonstrated that our cultures were
compatible and that our teams knew how to work together in harmony.� Thus we have done everything possible, I
believe, for this coming total merger to take place in a climate of mutual
confidence. The
Institut Francais due Petrole (IFP) which was at the origin of the creation of
the two companies and which has remained through ISIS� a major shareholder of both of them, acted as
a catalyzer in their union.� By deciding
to commit its majority stake in ISIS to Technip, it greatly facilitated the
merger between Technip and�
Coflexip.� As the outcome of the
operations now underway, IFP will be, in accordance with its historical mission
one of the top shareholders in Technip Coflexip, along side of Gaz de France
and Total Fina Elf, both of which also gave their support to the creation of
the new entity.� Shri Chinoy
stated that this is a� statement from the
Chairman of Technip which� can not be
ignored, as he knew better, that he has clearly stated the factual position.� It is also to be noted that ISIS, having
played its role in the process also merged with Technip.� Shri Chinoy submitted that the fact that ISIS
and Technip acted in concert is thus�
evident from their conduct and association.� They held 47% of the shares in Coflexip, they
had seven out of 12 directors and they had equal participation in the strategic
committee with two directors from each side.�
Shri Chinoy submitted that SEBI has not dealt with� any of these issues, and it has also� not examined the relevance of the said
factual position.� It� has simply gone by the French inaction on the
declaration filed before the authorities and on the concept of person acting in
concert as provided in regulation 2(1)(e) holding wrongly that there was no
commonality of purpose among Technip, ISIS and IFP.� He submitted that SEBI as a regulator of its
own should have examined all the relevant facts instead of following the short
cut method to decide the applicability of Take over Regulations.� He submitted that the failure of SEBI in this
regard has adversely affected the interests of the other investors of the
Target company in India. ����������� Shri Chinoy in support of his
submission on the need for taking into consideration the effective control
referred to the decision of this Tribunal in Ashwin K. Doshi V SEBI (2002) 40
SCL 545) and submitted that SEBI has not taken into consideration the
observation made by the Tribunal in the said case, for the purpose of deciding
as to whether Technip actually acquired control over Coflexip in April 2000,
and consequently in the Target Company.���
����������� Shri Chinoy in his reply to the
submission made by the Respondents submitted that concerted action is required
to be established by positive evidence and not by inaction.� He submitted that regulation 2(1)(e) explains
as to who are all the persons acting in concert,� that the persons mentioned in sub clause (2)
therein� are persons deemed to be acting
in concert with other persons in the same category, unless the contrary is
established.� It is for the persons
deemed to be acting in concert by virtue of their position vide clause (2) to
rebut the presumption so as to take them out of the purview of the said sub
clause, that it is for the persons deemed to be acting in concert to bring
proof� to establish the contrary, that
they have to prove that they were not acting in concert. He submitted that in
the instant case ISIS and IFP though deemed to be persons acting in concert in
view of their relationship with Technip have not brought on record any evidence
rebutting the presumption and as such the argument that they were not acting in
concert can not� be accepted.� In this connection� Shri Chinoy stated that on the contrary the
material on record shows that ISIS was acting in concert with Technip.� In support he referred to its conduct of
inaction of� exercising the pre emptive
rights in the context of Technip acquiring 29% shares from Stena and
facilitating the co-option of the nominees of the Technip to the Board of Coflexip.� In this context he submitted that from the
conduct of the parties it is very clear��
that they were acting in concert.�
Shri Chinoy refuted the Respondent�s contention that if as alleged
Technip had already acquired control over Coflexip by acquiring 29% shares on
12.4.2000, there was no need for Technip to spend� huge amount of money to acquire further
shares of Coflexip (upto 99%).� Shri
Chinoy submitted that further acquisition of shares by people in control to
strengthen their position is not uncommon and�
Technip�s further acquisition of shares after 12.4.2000 does� not suggest that it had not acquired control
on 12.4.2000.� He submitted that it is
evident from the subsequent� development
of acquisition raising Technip�s holding to�
99% shares of Coflexip and merger of ISIS with Technip etc. that these
are all part of a structured deal.� With
reference to the concept of control referred to in regulation 12 Shri Chinoy
submitted that the scope of control has been defined in� regulation 2 (1)(c)and that it is� measured not only in terms of the right to
appoint directors, the control can be exercised in any other manner also� �exercising control� in any other manner� is to� be considered on the basis of the facts and
circumstances of each case, that in the instant case from the facts on record
it is clear that Technip alongwith ISIS�
was holding about 48% shares in Coflexip and in the Coflexip�s Board
they had majority of directors with 7 directors out of a� total of 12 members on the Board.� He submitted that� it goes without saying that anybody acquiring
control over the holding company acquires control of its subsidiary also, that
indirect acquisition of control also attracts regulation 12 and therefore, with
the acquisition of control over Coflexip by Technip, it acquired control over SEAMEC
also as its ultimate� holding company was
Coflexip SA.� Shri Chinoy submitted that
the votes cast by Technip in the AGM has to be seen in the light of the Indian
Company law and not with reference to French law, as SEBI is administering the
Takeover Regulations and not the French Company law.� He submitted that French law does not
supplant Indian law and SEBI can not take a decision based on� French law overlooking the provisions of the
Indian law on the subject, that conclusions arrived at by French authorities
under French law are not to be blindly adopted by SEBI, as has been done in the
instant case.� He submitted that from
information available on the voting right�
exercised by Technip in the Annual General meeting it is clear that
Technip had majority voting rights with it.�
����������� Shri Chinoy submitted that in para
3.2.3 of the impugned order it has been stated that ISIS was not in management
or control of either Technip or Coflexip.�
In this context Shri Chinoy pointed out that Technip had come in place
of� Stena in Coflexip.� The French Stock Exchange Council in its
letter dated 4.11.1994 Noted that Coflexip was controlled by two groups � i.e.
Stena group and the Group of ELF, ISIS an SCOR.�
Therefore, the finding that �ISIS was not in management or control of
Technip or Coflexip� is incorrect.� In
fact SEBI has accepted this correct factual position in another part of its
order (5.3.7) recording that �I have noted that Stena, ISIS and other major
shareholders of Coflexip had a formal agreement dated November 2, 1994 to
control Coflexip.� ����������� Shri Chinoy submitted that the above facts have not been disputed by the parties, and� the inference is from those undisputed facts.� The facts establish that Technip and ISIS had acted in concert and they were effectively in control of Coflexip with majority of directors and with a combined voting strength of 49% shares in Coflexip, where the majority of the other shareholders were widely dispersed and not in a position to attack enblock the decisions of the said two companies. ����������� Learned Senior counsel submitted
that with Technip on acquiring 29.68% shares of Coflexip held by Stena on
12.4.2000, the change in control over Coflexip took place and consequently
control over SEAMEC also changed, triggering the Takeover Regulations.� ����������� Shri S. M. Mukherjee, learned
Counsel appearing for the Appellants in appeal Nos.80/2002, 85/2002, 91/2002
and 104/2002 submitted that he is adopting the submissions made by Shri Chinoy
in appeal no.79/2002 and would like to supplement the same. ����������� Learned Counsel submitted that
according to SEBI, with the acquisition of 29% shares in Coflexip by Technip
from Stena, there was no change in control over Coflexip and ISIS was not
acting in concert with Technip.� He
submitted that the said view of SEBI is entirely based on a declaration made by
Technip in France under the reporting requirements under French Company
law.� It was for SEBI to enquire on its
own and then in the light of the relevant facts and in the context of the
Takeover Regulations come to the conclusion as to whether there was any change
in control over Coflexip on Technip�s acquiring shares on 12.4.2000 and whether
ISIS had acted in concert with Technip. ����������� ����������� Shri Mukherjee submitted that the relationship of the parties involved and in particular that of ISIS and Technip is a factor which was required to be taken into consideration� before arriving at the conclusion referred to above, by SEBI.� He submitted that prior to April 2000, ISIS had 11.8% shareholding in Technip which entitled it to exercise 18% of the voting right.� At that time ISIS was also in charge of the management of Technip.� In this context he referred to the shareholders� Agreement dated 22.9.1994 enabling the parties to the agreement to appoint� specific number of directors with reference to their shareholding, that ISIS had at that stage appointed 2 directors � one in corporate capacity and another as an individual nominee, that they were also directors in the target company as nominees of ISIS.� He submitted that on 17.12.1999 the Board of Directors of Technip decided to approach Coflexip for the purpose of discussing a possible combination between Coflexip and Technip.� At that time ISIS had its two directors on the board of Technip, and the said two directors did not object to the proposal mooted by the Technip�s Board on 17.12.1999.�� Learned� Counsel submitted that Technip had three committees and in two such committees ISIS was represented.� He also submitted that Technip and ISIS were in joint venture in another company viz. Ipdex SNC with Technip owning 46% interest and ISIS owning the remaining 54% interest.� Shri Mukherjee submitted that SEBI has not even noticed the close relationship that existed between Technip and ISIS. ����������� With reference to the relationship
between ISIS and Coflexip, Shri Mukherjee stated that ISIS held 18.17% shares
in Coflexip and it had the right to appoint 25% (i.e. 3 out of the total of 12
directors) � of the directors on the Board of Coflexip, that it is also to be
noted that ISIS represented in 2 out of 3 management committees of
Coflexip.� In this context he referred to
the shareholders agreement dated 2.11.1994 and the right of pre emption
available to each of them including ISIS. ����������� Shri Mukherjee also explained the
relationship between IFP and ISIS and the role of both the said parties.� He submitted that the objective of IFP and
ISIS are not the same and ISIS is a more commercial minded organisation. ����������� Learned Counsel submitted that in
the light of the inter relationship of the players involved, their conduct has
to be seen.� In this context he again
referred to the Board meeting of Technip held on 17.12.1999 referred to earlier
and also the minutes of the Board meeting of Technip held on 7.4.2000 and� cited the following paragraphs from the
minutes of the meeting appearing under the heading �Strategic Options� � �Mr. Valot
reported on a plan to acquire all of Stena International BV�s 29.7% shares held
directly or indirectly in the equity and voting rights of Coflexip�� Stena Offshore (CSO) Having made
this acquisition, Technip would become CSO�s biggest shareholder and would
propose that four persons be appointed as members of CSO Board of Directors: This acquisition should foster a strategic alliance between the two companies based on a strong business potential in the context of an offshore (especially deep sea) market where clients prefer integrated companies� �
�
�
�The price
envisaged for this acquisition is Euro 119 per share, resulting in a total of
Euro 660 million for the entire deal. Following a
period of discussion, the Board approved the acquisition of Stena International
BV�s equity stake in CSO upto a limit of�
Euro 119 per share for a maximum of Euro 660 million.� X X �Mr. Jacquard, ISIS�s permanent representative on the Board and Mr. Prevot abstained from voting since ISIS owns shares in both the companies� Shri
Mukherjee submitted that the statement that �having made this acquisition
Technip would become CSO�s biggest shareholder and would propose that four
persons be appointed as members of CSO�s Board of Directors� clearly indicated
that the acquisition will come through, though ISIS had pre emptive right.� He also submitted that ISIS nominees Mr.
Jacquard and Mr. Prevot, did� not object
to the proposed acquisition, they only abstained from voting due to technical
reasons and they did not exercise the pre emptive right to stall the
acquisition. In this context� Shri
Mukherjee referred to the following disclosure made in the Technip�s offer
document dated 30.8.2001:- �In
January 2000,� we retained J.P. Morgan
& Cie SA as our financial adviser in connection with a possible
combination, and Coflexip retained Credit Suisse First Boston Corporation as
its financial adviser.� During the period
between January and April 2000, our representatives met with representatives of
Coflexip and our respective financial and legal advisors to discuss various
aspects of a possible combination.� When
advised of these discussions, however, Dan Steno Lisson, the Chief Executive
Officer of Stena International BV the holder of approximately 29.7% of
Coflexip�s then outstanding share capital repeatedly expressed his view to
Messrs. Valentin and Valot that Stena would not support a combination of
Coflexip and Technip because it was not part of Stenas strategy to hold an
equity stake� in an engineering and
construction company. ��At a meeting
with Mr. Valot on march 31, 2000, Mr.Olsson indicated that Stena would however,
consider selling its interest in Coflexip to us so as not to be an obstacle to
a possible combination.� Mr. Valot
subsequently contacted Mr. Olsson to negotiate the purchase of Stena�s
interest.� On April 19,2000 we acquired
Stena�s interest in Coflexip for a purchase price of approximately Euro 657
million in cash� Learned
Counsel� submitted� that the above observation was also
overlooked by SEBI. ����������� Shri Mukherjee submitted that value
of shares acquired is more than the net worth and this fact has been accepted,
that part of the acquisition was funded by borrowings made by Technip.� In this context he referred to the disclosure
made in Technip�s offer document dated 31.8.2001 that �the company financed
this acquisition (i.e. acquisition of 29.7% of Coflexip�s shares) using its
cash in hand with a credit facility of Euro 180 million, related
interest rate being the Euribor � 0.20%��
The resulting good will amounts to Euro 447 million and is
amortized over 20 years.�� He submitted
that obviously the high price was paid as control premium. ����������� Shri Mukherjee referred to the
following portion in the letter dated 11.4.2000 from Mr. Daniel Valot, Chairman
of Technip to Mr. Peter Marie Valentin, Chairman and CEO of Coflexip: �We have
advised you that once the discussions with Stena International BV (Stena) were
completed which you were apprised of, we would very soon be acquiring all of
Stena�s direct and indirect equity stake in your company i.e. 5,518,195
shares.� You wanted us to know
that you were in favour of this transaction (the Acquisition) notably because
of the Acquisition. �
Preserves the basic freedom of the company and its
shareholders to formulate and execute Coflexip�s development strategy; �
Should create possibilities for commercial and
industrial co-operation between our two groups, facets we see as being
particularly important and in line with the long terms interests of companies
concerned. �
Enables Stena�s equity stake to be re-assigned. We are both in agreement with this analysis. Please
find the draft Statement of Intent which will soon release in accordance with
current regulations We
want to make clear that any inhouse or public announcements that we might
release about the Acquisition will be based on the information contained� in the Statement of Intent and with the
aforesaid reasons why you favour the acquisition. We
want to make it clear that the Acquisition will proceed as stipulated in
Article 4-1-32 of the French Financial Markets Council�s rules and regulations
and will not take place unless we have received notification by 4.5.2000 at the
least, from both shareholders having pre emptive rights on the shares belonging
to Stena, that they have renounced or not exercised this right.� Shri
Mukherjee referred to Technip�s declaration to Coflexip referred to by� SEBI in the impugned order and stated that in
the said declaration� letter Mr. Valot of
Technip had categorically stated that �I have taken note of your agreement to
appoint four Technip representatives to sit on your company�s twelve member
Board of Directors, specifically to replace those directors who represent Stena�,
that this indicates that Technip entered�
into the place of Stena which was controlling Coflexip with ISIS and
others.� He submitted that on 11.4.2000
Mr. Valentin of Coflexip wrote to Mr. Valot of Technip confirming Coflexip'�
agreement in the context of Technip�s purchase of Stena�s equity stake in
Coflexip�s share capital.� It is also on
record that by 14.4.2000, Stena�s nominees resigned from the Strategic
Committee, Audit Committee and the Nomination and Appointments Committee and
Technip�s nominees entered in their place.�
Learned Counsel submitted that SEBI can not be unaware of the induction
of 4 directors of Technip on Coflexip�s Board and nomination of Technip�s
nominees on Coflexip�s three important committees including Strategic
Committee, though Technip�s holding in Coflexip�s voting capital was only
29%.� But SEBI did not� make any enquiry to find out the actual
position.� He submitted that it is clear
with ISIS�s active co-operation Technip got what they wanted.� Learned Counsel submitted that it is an
admitted fact that at the relevant time ISIS had two directors on the board of
Technip.� He further submitted that on
September 22, 1994 ISIS, Total Fina Elf and Gaz de France entered into a
shareholders agreement with respect to the Technip shares held by each one of
them.� The shareholders agreement had an
initial term of six years and was automatically renewed for an additional three
year term.� As of September 22, 2002
Total Fina Elf ceased to be a party to the shareholders agreement.� Pursuant to the shareholders agreement each
of� ISIS, Total Fina Elf and Gas de
France: �
Granted the other parties a right of first refusal on
the Technip shares held by each one of them and agreed that each party would be
represented on the Technip�s Board of directors in proportion to their
respective voting rights in Technip. Shri
Mukherjee referred to press release dated 12.4.2000 issued by Stena in the
context of the sale of its 29.7% interest in Coflexip stating that: �Stena
International B.V. has realised its investment with intention to redirect the
proceeds toward other investment opportunities.�
Stena International B.V. is pleased to realise this disposal in a way
that is consistent with its own interests as well as Coflexips industrial and
strategic interests. The
transaction will provide Coflexip with a new strategic shareholder offering
attracting industrial prospective to the group. Commenting
on the transaction, Stena AB�s CEO Da Sten Olsson said �we are impressed with
Technip�s expertise and project management skills and we are delighted that the
realisation of our investment could coincide with the creation of a promising
industrial co-operation to pave the way for further development of
Coflexip.� Shri
Mukherjee submitted that Stena was an odd person in Coflexip and on its exit
and� with the entry of Technip all
obstacles were removed. ����������� Shri Mukherjee submitted that those
who extend co-operation� to acquire
shares or control over a company, are also considered to be persons acting in
concert, as that co-operation is for a common purpose of acquisition. ����������� Shri Mukherjee submitted that under
the French Company law (L. 233) also there is a deeming provision which is� more or less comparable to the provisions of
regulation 2 (1)(e)(2) of the Takeover Regulations.� In this context he referred to the factual
disclosure made in� Technip�s offer
document in the following paragraph: �On
December 12 and December 20, 2000 Messrs Valentin, Valot and Burlin and our
representative financial and legal advisors met again to discuss the possible
combination between Coflexip and Technip to be effective by means of an
exchange offer by Coflexip for our shares.�
At that meeting, we agreed� with
Coflexip that our respective advisors would review the issues raised by that
structure.� In early 2001, the
representative of Gimar Finance & Cil, an invest bank approached us to
inform� us that IFP had indicated a
potential interest in selling its entire interest in ISIS� He
submitted that thereafter several meetings were held by the concerned parties
and explored the feasibility of such combination which� is�
indicative of the mutual understanding and co-operation among Technip
and ISIS in the acquisition of Coflexip�s�
shares on 12.4.2000, that this�
was the beginning for the mergers which were to follow. Learned
Counsel referred to the following observation in the order that: �on 6th
July 2001, the board of Coflexip met to consider the announced offers to
acquire Coflexip.� At that meeting it was
proposed by certain directors that a special committee of directors
unaffiliated with Technip or ISIS� be
formed to review the offers�� to acquire
Coflexip.� Significantly, the Board of
Coflexip decided by a majority decision to form a special committee though all
the nominees of Technip voted against the formation of the committee.� Two out of the three nominee directors of ISS
also voted in favour of the resolution.�
This itself indicates that neither Technip nor ISIS were in control of
Coflexip even in July 2001 and that they are not acting in concert.� Shri
Mukherjee submitted that from the observation itself it is clear that two out
of 3 directors of ISIS voted with Technip, thus demonstrating that ISIS was
with Technip in the process of Technip�s acquisition of� Coflexip. ����������� Shri Mukherjee submitted that the
acquisition of Coflexip by Technip attracted�
regulation 10 and also regulation 12.�
It is on record that two groups i.e. Stena and ISIS� and others were in control of Coflexip, that
Technip acquired the entire shareholding in Coflexip held by Stena and came in
its place.� In this context it is to be
noted that ISIS was holding only 18% shares in Coflexip whereas Stena was
holding 29.68% shares and Stena had the right to appoint 4 directors against
ISIS�s right to appoint 3 directors.�
Thus it is clear that the element of control exercised by Technip is
more than that exercised by ISIS and therefore by entering Technip has resulted
in change in control.� In this connection
he referred to explanation (ii) to regulation 12(as it then existed) that �
Where any person or persons are given joint control, such control shall not be
deemed to be a change in control, so long as the control given is equal to or
less than the control exercised by person(s) presently having control over the
company�.� He submitted that in the
instant case Technip acquired more control. ����������� Shri Mukherjee submitted that SEBI
Act and the Takeover Regulations are beneficial legislations to protect the
interest of the investors� that
interpreting the provisions of the same, should be in tune with the objective
of the legislation� and not to frustrate
the objective.� Shri Mukherjee cited the
following authorities in support of his propositions.� He referred to the following paras� in Guinness PLC, The Distillers Company PLC
(Panel hearing on 25th August 1987 and 2nd September 1987
� Reasons for decisions of the Panel), in support of his proposition of acting
in concert. ����������� The issue before the Panel, which
came before it on a reference by the Executive was in the context of the
successful offer in 1986 by Guinness in competition with Argyll for all the
shares in Distillers.� The issue that was
to be decided was whether at a critical stage of the bid, Pipetec AG, a
subsidiary of Bank Leu, in purchasing approximately 10. mm Distillers shares
which were subsequently� assented to
Guinness� offer., was acting in concert
with Guinness.� The purchase at a total
price of some �76 million was made on
17.4.1986 at which time Guinness and persons declared to be acting in concert
with Guinness, already held 14.99 per cent of Distillers shares acquired during
the offer and within 12 months prior to its commencement.� Accordingly if the purchase by Pipetec was
made in concert, such purchase should not have been made and serious consequences
would have arisen under the code. �3.������� The reason why the Rule applies to
persons acting in concert with the offeror is that, if such persons were free
to make share purchases and yet to be regarded as independent of the offeror,
the Rule, and consequently the General Principle, could be easily and
completely circumvented.� The Code
contains a definition of acting in concert.�
It provides: �Persons
acting in concert comprise persons who, pursuant to an agreement or� understanding (whether formal or informal),
actively co-operate, through the acquisition by any of them of shares� in a company, to obtain or consolidate
control (as defined in the Code) of that company.� This
definition is supplemented by a statement of certain situations where a
presumption arises that parties are acting in concert unless the contrary is
established.� There follows a
non-exhaustive description of the application of the concert of acting in
concert in practice. 4.�������� The nature of
acting in concert requires that the definition be drawn in deliberately wide
terms.� It covers an understanding as
well as an agreement, and an informal as well as a formal arrangement, which
leads to co-operation to purchase shares to acquire control of a company.� This is necessary, as such arrangements are
often informal, and the understanding may arise from a hint.� The understanding may be tacit, and the
definition covers situations where the parties act on the basis of a �nod or a
wink.�� Unless persons declare this
agreement or understanding, there is rarely direct evidence of action in
concert, and the panel must draw on its experience and commonsense to determine
whether those involved in any dealings have some form of understanding and are
acting in co-operation with each other.�
In a typical concert party case, both the offeror and the person alleged
to be acting in concert with it are declaring that, notwithstanding the
circumstances, they have no understanding or agreement.� The Panel has to be prepared realistically to
recognise� that businessmen may not
require much by way of formal expression to create such an understanding.� It is unnecessary for the Panel to know
everything that actually passed between the parties in a take-over.� In addition, the judgement required in an
acting in concert issue must usually be made in the context of the assertions
and arguments of persons whose interests will not be served by a finding of
acting in concert � this is because such a���
finding inevitably entails consequences under the Code, often to the
benefit of offeree company shareholders, which is the object of the concept,
with a cost to the offeror. 5.�������� It is common
in the course of a bid for a broker acting for the offeror to seek to persuade
a third party to acquire shares in the offeree company and assent them to the
bid.� It is perfectly legitimate,
provided that any persuasion by the broker is limited� to encouraging the purchase on investment
grounds and no other form of incentive or hint of future co-operation is
given.� Where the contact between the
offeror and the potential purchaser goes beyond such orthodox persuasion by
brokers, the circumstances must be examined with great care. Since
there is a variety of ways� in which
parties may act in concert, no one circumstance will necessarily be determinative.� Relevant facts will be whether the offeror
himself makes direct contact with the proposed�
purchaser and, if so, why; whether there is any pre-existing
relationship between the offeror and the�
purchaser and, if so, its nature; what is the relationship, in working
and personal terms, between persons on the offeror side and the potential
purchaser, whether there is any form of inducement, or assistance, or hint of
future benefits other than by way of shareholder benefits if the� bid succeeds or fails, which might contribute
to the decision to purchase.� In order to
reflect reality, the Panel does not hesitate to draw inferences where it can
reasonably do so where the offeror and purchaser deal otherwise than through
the normal channels whereby a purchaser�
would customarily� make an
investment.� The panel in making its
judgements on the facts is not acting as a court of law but is applying the
combined experience of its members to evidence which is almost invariably
circumstantial.� Shri
Mukherjee also a cited another decision relating to the UK Takeover Code in
Phillip Morris Products Inc. & Anr. Vs Rothmans International Enterprises
Ltd.,� & Anr. (Chancery Division �
dated 19.7.2000)� He referred to the
following observations therein: �I will deal
with each of these contentions in turn and turn first to� the second of the claimants� arguments under
the first main head on construction.� I
do so because there is an issue as to what should be the proper approach of the
Court to the construction of the words �acting in concert� and �control� under
the Code as imported into the provisions of�
Clause 14.� It seems to me that
the claimant�s argument under this head can proceed on the basis that� the defendant�s contentions on the approach
to construction are correct and that, to establish control the claimants must
demonstrate that BAT controlled 30% or more of the voting rights of RIE at a
general meeting�� In my judgement the
claimants are entitled to succeed on this part of their argument notwithstanding
that the approach to construction which they contend for is not adopted.� They do so for the following reasons:- (1)
I have already set out the words defining �control� to
be found in the Code.� That definition
does not specify that the required holding or aggregate of holdings must be
held by the same individual.� It is
silent on the point.� That the required
30% of the voting rights can result from the holding of shares of one or more
persons is demonstrated by the use of the words �aggregate holdings� in the
definition of �control� and from the incorporation of the definition of �acting
in concert� into that definition.� The
definition of �acting in concert� in the Code, which again I have set out,
imports into the definition of �control� that such control can be demonstrated
where a party (�the purchaser�) who acquires shares carrying less then 30% of
the voting rights, nonetheless, as a result of an �understanding� with a second
party, who holds shares in the target company, can control that company� provided that in aggregate they both hold
shares carrying 30% or more the voting rights.�
It matters not, for the purposes of either of the definitions, that the
second party may already control the target company.� The definitions are silent on that point also.� It is important to note that the concert of
�acting in concert� has two applications to the construction of Clause 14.4; to
define the two possible entities to which Cause 14.4.1 or 14.4.2 apply and to
qualify� the words defining �control� in
the Code as incorporated into clause 14. (2)
�Whether or not
the purchaser acquiring shares carrying less than 30% of the votes acquires
control depends on the nature of the understanding with the second party, found
to exist, whether or snot that party, by himself, controls the company.� Thus the�
understanding of the second party who already holds shares carrying more
than 30%� of the votes may be that he
will not vote those shares at general meetings leaving the purchaser to control
the company at general meetings b y his holding of shares carrying less than
30% of the votes. (3)
Thus, In my judgement, contrary to� the defendant�s submissions, control of a
target company will be acquired by a �person� a stranger to that company, who
does not control that company before acquiring his shareholding and who only
acquires a shareholding having less than 30% of the voting rights at a general
meeting.� He will do so if it can be
demonstrated, as a matter of fact, that, at the time of his acquisition, he had
an understanding with another shareholder of the target company whose holding
of shares carried votes which, aggregated with those of the purchaser amounted
to 30% or more of the votes available at a general meeting. (4)
In the present case the relevant acquisition of shares
is that by BAT in indirectly acquiring RIL with its holding or ordinary shares
in RIE carrying with them 29.9% of the voting rights.� It is not in issue that control can be
acquired through a chain of subsidiaries.�
At the time when the take-over was completed the� relevant subsidiary was RIL which, as a
result of the issue of the Special Shares, had by this stage surrendered into
control of RIE but had retained the ordinary shares in that company. (5)
The question therefore becomes whether, on the
evidence adduced before me, I find that at the time BAT acquired, through
subsidiaries, all the shares in� RIL
there existed an �understanding� between BAT and Richemount SA by which BAT was
left to control RIE through RIL�s holding of ordinary shares or was to be
assisted in doing so by the favourable voting of the Special Share.� I have come to the conclusion that I should
so find. 47.
I now give my reasons for arriving at this factual
conclusion. 48.
I start with the presumption contained� in the definition in the Code of the words
�acting in concert� to be found in the second paragraph of that definition and
the first sub-paragraph.� I have already
set out these provisions.� In my
judgement, on competition of the take-over by BAT, Richemont SA must be treated
as an �associated� company of BATthrough its holding of two third of the shares
of R & R Holdings SA in turn the holder of 35% of the shares of BAT as a
result of the take-over transaction.�
Further, Richemont SA appears to have had the right to nominate one
director to the main Board of BAT.�
(Rembrandt Group Ltd with which Richemont SA shares directors and
shareholders was given a similar right � see the information set out on page 5
of the BAT circular to its shareholders to which I have already referred.) 49.
It followed�
that �unless the contrary is established� I must assume that from the
moment when BAT, through its acquisition of RIL, acquired all the ordinary
shares in RIE, it was �associated� with Richemont SA for the purposes of the
definition of �acting in concert� contained in Code.� It seems reasonable to make the same
assumption at least from the date when it was announced that BAT was to take
over the Rothmans tobacco interests which, when completed would lead to such
association. 50.
The only evidence available to the defendants to rebut
this presumption is that of their witnesses Mr. Du Plessis, Mr Gourlay and Mr
Cripps who each asserted that there were no constraints on the exercise by
Richemonth SA of the voting rights conferred by the Special Share apart from
those set out in the amended Articles of RIE and the Shareholders
Agreement.� These assertions are to be
found in their witness statements but must be contrasted with evidence given by
Mr Du Plessis and Mr Gourlay under cross-examination . 51.
Both Mr Du Plessis and Mr Gourlay accepted that there
were understandings between the BAT Group and the Rothmans/Richemont Group as
to how the BAT Group would be managed after completion of the take-over.� They both accepted that these understandings
were reached in the course of the negotiations leading to agreement. 52.
Mr Du Plessis accepted that part of those
understandings was an understanding that BAT should be responsible for managing
the Partnership. 53.
Both Mr Du Plessis and Mr Gourlay accepted that it
would have been inconsistent with those understandings for Richement SA to vote
the Special Share inconsistently with such understandings.� Mr Du Plessis was unable to indicate
circumstances when it would have been contemplated that such an independent
exercise of the votes conferred by the Special Share by Richemont SA might
arise. 54.
Mr Du Plessis accepted that the purpose of the
arrangements leading to the allotment of the Special Share to Richemont SA was
solely to retain the benefit of the Licence Agreement for that Partnership and
for no other purpose.� Mr Gourlay agreed
that the retention of the benefit of the licence Agreement was the �prima
benefit� to be achieved by the creation and allotment of the Special Share. 55.
Both Mr Du Plessis and Mr Gourlay accepted that after
the take-over was completed the interest of Richement SA in the Partnership was
in the income stream resulting from the Partnership business flowing to the BAT
Group in which Richemont SA had a substantial shareholding interest.� Mr Du Plessis accepted that Richemont SA�s
interest in RIE was, after the take-over, �highly academic�. 56.
Mr Gourlay accepted that the proforma accounts of the
BAT Group, included in the circular to shareholders to which I have referred,
treated RIE as a subsidiary company in that group and were consolidated in the
accounts accordingly. 57.
The purpose of the creation of the Special Share was
discussed in the course of a Board meeting of RI on the 10th March
1999 at which authority was given, subject to the approval of the shareholders
of RIE in general meeting, for the issue of the Special Share.� The purpose of that issue was described on
the following terms in the minutes of the meeting:- ����������������� �(B)� It was reported that there were existing
arrangements between ���������������� the� Company�
and� Philip� Morris, �under�
which Philip Morris had ����������������� licensed
the Marlboro trademark to a partnership between Rothmans ������������� Trading� Limited, a wholly-owned subsidiary of the
Company, and ������������������ subsidiaries
of Philip Morris.� Under the terms of
those arrangements, ���������������� at� completion �of the transactions referred to at (A) (the
take-over) ������������ above Philip
Morris would become entitled to terminate the Marlboro �������������� licence by virtue of the change of control of the
company. ����� ����������������� (E)� It�
was� further� reported�
that to avoid Philip Morris becoming ������������������ entitled� to terminate the Marlboro licence, it was
proposed that the ������������ company
issue a Special Share to Richemont or a subsidiary of ����������������� Richemont
carrying the rights set out in the revised Articles of �������������������������� Association then tabled before the
meeting�. 58.
RIE was the parent of Rothmans Trading Limited which
held the 65% interest of the Rothmans Group in the Partnership.� It is not in issue that the Partnership was a
valuable asset which BAT were acquiring as a result of the take-over.� Besides the income stream resulting from the
Partnership business, BAT�s control of the Partnership conferred on it the
opportunity of an entry point into the UK tobacco market at the quality end of
the market.� It gave cost saving advantages
in the promotion of BAT �s cigarette brands in the UK.� It seems highly unlikely that BAT would have
agreed to an arrangement of the voting rights of RIE which contemplated that
those rights might be exercised in a manner inconsistent with the interests of
BAT. 59.
I have already described the arrangements which, it is
accepted, were brought into existence to attempt to get round the change of
control provisions contained in Clause 14 of the Master agreement.� In my judgement those arrangements were plainly
designed to, and did in fact, strip the special Share of any economic advantage
which could have been enjoyed by Richemont SA.�
There can have no incentive to Richemeont SA for the independent
exercise of the voting rights conferred by the Special Share. 60.
Since the completion of the take-over the board of RIE
had consisted entirely of BAT employees. 61.
Finally there is a striking similarity between the
arrangements made to circumvent the control provisions of the Master Agreement
and the examples of circumstances where the Panel might find control to exist
in Notes 5 and 10 to Rule 9.1 and Note 1 to the definition section of the Code
at page C1 of the Code which I have quoted above. 62. For those reasons, in my judgment the presumption that BAT and Richemont SA have been acting in concert with relation� to the control of RIE both before and since the completion of the take-over by BAT of the Rothmans tobacco interest in not rebutted.� If I am wrong, and there is no such presumption, I would still hold that on the facts before me, the claimants have established the existence of a understanding between BAT and Richemont SA governing the exercise of the voting rights conferred by the Special Share.� Shri
Mukherjee� submitted that it is not the
percentage of the individual�s shareholding that matters.� If one is acting in concert, that is
sufficient. Learned Counsel referred to the observation of the Hon�ble Supreme Court in Commissioner of Income Tax, Bombay City I V Jubilee Mills Ltd., (1963) 48 ITR 9) and submitted that in order to decide whether a company was controlled by a group, the �test is not whether they have actually acted in concert, but whether circumstances are such that human experience tells us that it can safely be taken that they must be acting together.� It is not necessary to state the kind of evidence as will prove such concerted actings.� Each case must necessarily be decided on merits.�� The Court had said so on a point raised at the hearing that it has to be proved as a fact that the persons constituting the group, which owns the shares carrying more than seventy five per cent of the voting power, were acting in unison.� The observation was made in the context of interpreting section 23.A (1) of the Income Tax Act, as it stood at that point of time.� He also cited Commissioner of Income Tax, West Bengal V East Coast commercial co. Ltd., (AIR 1962 SC 768) and stated that �it is sufficient, if having regard to their conduct and their common interest it may be inferred that they must be acting together, evidence of actual concerted acting �is normally difficult to obtain and is not insisted upon�.� He cited the observation made by the Hon�ble Supreme Court in another case also(Commissioner of Income Tax, Patna V Sahu Jain (1976) 2 SCC 510) relating to interpretation of the provisions of section 23A(1) of the Income Tax Act, 1922 � �Having
regard to the intimate relationship of the shareholders without the least
evidence of any disconcert amongst them, the ordinary expectation for
individual profit in commercial undertakings, natural reluctance to forego the
same, the history of the company and its continued smooth working in a manner
which is normally inconsistent with anything other than full unison amongst the
shareholders in decisions about the conduct of company�s affairs in common interest
of all, this was a company of one paramount mind operating without the least
doubt.� The Board�s meetings are evidence
of a well organised, well knit, close unity of views in all affairs and which
in ordinary course of human conduct would not have been at all possible but for
a single or concerted action in the company�s management by a controlling
group.� When all the above conditions are
present in a company, the onus would be on the assessee to satisfy by some reliable
evidence that what appears on the surface is that which is real�. Shri Mukherjee countered the Respondent Technip�s submission
that persons acting in concert also must acquire shares.� He�
cited the observation made by� the
Hon�ble Bombay High Court in Shirish Finance and Investment P. Ltd. V M.
Sreenivasalu Reddy (2002) 2 Com.L.J 386 (Bom) that �it is not necessary that if
two persons act in concert with the common objective to purchase shares in a
company they can not be said to have acted in concert with each other unless
the shares are acquired either in joint names or by each of them during the
period in question.� Shri Mukherjee in support of his contention that the
provisions of regulation 12 are attracted to cases of indirect acquisition,
cited this Tribunal�s decision in Eaton Corporation V Chairman, Securities and
Exchange Board of India (2001) 43 CLA 249) that �Regulation 12 refers to
acquisition by �acquirer�.� The
expression acquirer has been defined in regulation 2(b) as any person who
directly or indirectly acquires or agrees to acquire shares in the target
company or acquires or agrees to acquire control over the target company either
by himself or with any person acting in concert with the acquirer.� On a combined reading of regulation 12 with
regulation 2(b) it is clear that the indirect acquisition of control, including
acquisition through the chain of subsidiaries as in the instant case, would
attract the� provisions of regulation
12." Learned Counsel referred to this Tribunal�s observation in
Ashwin K. Doshi & Ors. V Securities & Exchange Board of India (2002) 40
SCL 545) and submitted that the Tribunal had held in the said case that it is
not the majority shareholding alone that decides the seat of control, that
several other factors have to be taken into consideration, and further that
control need not necessarily be dejure control but it can also be defacto
control.� Learned Counsel submitted that
the Hon�ble Calcutta High Court in Hindustan Motors Ltd. V MRTP Commissison
(AIR 1973 Calcutta 450) had accepted the following observation made by Gower on
the Principles of Modern Company Law, Third Edition Chapter X p 197 that: �Control is a matter of degree, ranging from complete legal
control for all purposes over a wholly owned subsidiary to defacto control
except in the event of a major scandal, normally exercisable by the existing
management even though they may hold few or none of the shares.� It may be difficult to detect (particularly
when �pyramiding� through numerous subsidiaries and subsidiaries has been
resorted to) but it is coming to be recognized as a separate item of property,
the value of which will depend upon the degree of its completeness.� The statutory definition is undoubtedly right
to place the emphasis which it does on the power to control the board, for as
we have seen the board is the company�s head and brains.� But defacto control over the board can exist
without any legal power at all.�� Thus it
is� well known that in a company with a
large and dispersed membership a comparatively small proportion of the total
shares, if held� in one hand, may enable
actual control to be exercised.� Learned Counsel also referred to the letter dated 14.10.2001
from Technip�s Chairman to the shareholders stating inter alia that �over a
year they had been working on the merger of Coflexip with Technip passing
through a number of necessary steps such as acquisition of 30% of Coflexip in
April 2000, setting up in� the summer of
2000 a strategic alliance� etc. Shri Mukherjee referring to the letter dated 18.12.2002
relied on by Technip stated that it was a request to stock exchanges for its
views, that during the pendency of the appeal they wanted confirmation and to
which in CMF reply dated 20.12.2002 they stated on the law and did not give any
information as sought for by Technip. Shri Mukherjee submitted that Technip exercised defacto
control over Coflexip is also evident from what transpired at the two general
meetings of Coflexip share holders on May 30, 2000 and May 29,2001 when Technip
held 5518195 votes out of a total of 10258024 votes and 5518195 votes of a
total of 9720114 votes respectively, representing in each case a majority of
the voting rights at that meeting. In this context Shri Mukherjee referred to the following
articles in the French Company Law: L 233-3: �A company
shall be shall be regarded, in order to apply Sections 2 and 4 of this chapter,
as controlling another: 1.
when it directly or indirectly holds a percentage of
the capital conferring on it the majority of the voting rights in the general
meetings of this company; 2. when it
alone holds the majority of the voting rights in this company pursuant to an
agreement concluded with other members or shareholders and which is not
contrary to the interests of the company; 3. when it
actually makes, due to the voting rights which it holds, the decisions in the
general meetings of this company. II. -����� It shall be presumed to exercise this
control when it directly or indirectly holds a percentage of the voting rights
higher than 40% and when no other member or shareholder directly or indirectly
holds a percentage higher than its own. III. -���� In order to apply the same sections of this
chapter, two or more persons acting in concert shall be regarded as jointly
controlling another when they actually make, under an agreement to implement a
common policy, the decision taken in the general meetings of the latter. L 233-10: I.
� Persons who have concluded an agreement with a view
to acquiring or assigning voting rights or with a view to exercising voting
rights in order to implement a common policy with regard to the company shall
be regarded as acting in concert. II.
Such an agreement shall be presumed to exist: 1.
Between a company, the chairman of its board of
directors and its managing directors or the members of its management or its
managers; 2.
Between a company and the companies which it controls
within the meaning of Article L.233-3; 3.
Between companies controlled by the same person or
persons. 4.
Between the members of a simplified joint-stock
company with regard� to the companies
which the latter controls. III. -���� Persons acting in concert shall be jointly
and severally bound by the obligations imposed thereon by the acts and
regulations. Shri Mukherjee submitted that the legal provisions relating
�control�, �persons acting in concert� are not exactly the same under the
French law and the Indian Law and therefore, adapting the French law, ignoring
the Indian law is not permissible. Shri M. P. Bharucha, learned counsel supplementing Shri
Mukherjee�s submissions� submitted that
SEBI has wrongly decided the issues relying on the Technip�s version of the
applicability of French law and compliance of the same by the acquirers.� He submitted that the Appellant has been all
along pleading before SEBI that it is the domicile law that is� to be applied and not the foreign law, but
SEBI, ignored the said plea and without assigning any reason to come to the
conclusion that the impugned acquisition is not an acquisition in terms of the
French law.� In this context countering
the Respondents� version that the Appellant had�
not objected to the application of French law� he referred to the Appellant�s averment in
Ground (E) in the Memorandum of Appeal (80/2002) to show that the Appellant had
not at any time canvassed that the applicable law is the French law, that� it was clearly stated in the appeal that �SEBI
failed to appreciate that French or any other law is wholly irrelevant for the
purpose of the Regulations.� It is ex
facie apparent that the concept of control under French law is limited and
circumscribed as against which the Regulations envisage control in its true and
wide sense�. Shri Bharucha submitted that SEBI� should be concerned about the acquisition of
SEAMEC which is a company registered and existing in India and the
applicable� law to the acquisition of
Indian companies is the Indian law � the Takeover Regulations -- and not the French law as has been wrongly
relied on.� With reference to the
conflict of law, he referred to the decision of the Hon�ble Madras High Court
in Re Travancore National and Quilon Bank Ltd. V L Raghuraja Bharathi and
others (AIR 1939 Madras 318) wherein the Court while considering the British
Indian High Court�s power to entertain an application under section 153 of the
Indian Companies Act, 1913 had made it clear that it is the domicile law, not the foreign law that is
applicable.� The court had held that : �the application under section 153 in the case of a foreign
company can not be initiated in this court, but must only be initiated in the
court of the place where it was incorporated, at any rate, after an order for
winding up has been made by that court�. He submitted that the principle� laid down in the said case is in equal force
applicable to the instant case that any action in respect of the Indian
company�s take over should be with reference to the Indian law. On the applicability of the French law Shri Bharucha referred
to� an opinion dated 27.2.2003 from an
Advocates firm (in France) filed by the Appellant and submitted that the said
opinion has clearly stated that Technip had acquired control of SEAMEC� in April 2000.� Shri Bharucha referred to the legal opinions
of the French lawyers tendered by the Respondent Technip and submitted that
there is no uniformity in the opinions and submitted that in any case it is for
the Tribunal to decide the issue in terms of the Indian law. He
submitted that SEBI has not made available certain documents which were crucial
for deciding the issues raised before it by the complainant.� He tendered a list of �Absent documents�
identifying the documents and the contextual relevance of the same. Shri
Bharucha submitted that the Respondent has placed partial reliance on certain
documents, on a pick and choose basis that if a document is relied upon, it has
to be relied in its entirety.� In this
context he referred to the following three decisions of the Hon�ble Supreme
Court, that a document should not be dissected and considered only in part when
that part� is inextricably connected with
the other part which is not taken into consideration.� Palvinder Kaur V Rup Singh (AIR 1952 SC 354)
Dadaraao V State of Maharashtra (AIR 1974 SC 388) Hanumant Govind Nargunkar V
State of Mahdya Pradesh (AIR 1952 SC 343) Shri
Chirag Balsara., learned Counsel appearing for the Appellant in appeal no.105/2002
submitted that he was adopting the arguments advanced by Shri chinoy in appeal
no.79/2002. Shri
A. M. Setalvad, learned Senior Counsel appearing for Respondent Technip
submitted that SEBI has rightly come to the conclusion that Technip, ISIS and IFP
did not act in concert and that on acquiring 29.68% shares in Coflexip by
Technip on 12.4.2000 it did not acquire control of Coflexip.� He submitted that it was only in July 2001,
that is after 15 months of the initial acquisition of 29.68%, Technip acquired
control over Coflexip.� Learned Senior
Counsel� submitted that whether persons
acted in concert in an acquisition is a question which is to be decided on the
attendant facts and circumstances and there is no rigid legal formula to decide
the matter.� He submitted that it is on
record that Technip is engaged in complementary business and forging a
strategic alliance for the betterment of the business of each of them, can not
be considered as an acquisition of control by one over the other.� In this context learned Senior Counsel
referred to certain disclosures made in Schedule 14D � 9 by Coflexip with
Securities and Exchange Commission of USA on 31..8.2001 , that against item 3 �
�Part contracts, Transactions, Negotiations� it was stated inter alia that
�(i)on April 19, 2000 Technip acquired 5518195 shares from Stena International
B.V. representing as of that date approximately 29.7% of the voting rights of
the company.� In April 2000, the company
and Technip entered into a strategic alliance to jointly develop market
opportunities with a particular emphasis on integrated deep off shore
projects.� In a letter dated April 11,
2000 to Mr. Valentine, Technip confirmed that it was not acting in concert with
any other party with respect to the company.Technip also stated, that it had no
intention to increase its interest in the company before April 19, 2001, that
it would� not� sell or otherwise dispose of any of its
shares before October 19, 2000 and that any sale or other disposition of more
than 1839398 shares during the period between October 19, 2000 and August 19,
2001 to persons other than institutional investors would be subject to the
company�s right upon receipt of 21 days press notice to substitute a buyer of
the company�s choice (other than one of its direct competitor)�.� He submitted that �in September and October
2000 representatives of the company�s and Technip�s management and their
respective financial and legal advisors met on several occasions to discuss the
possibility of a combination of the company (i.e. Coflexip) and Technip to be
effected by means of an exchange offer for Technip shares.�� He submitted that this factual position
itself is indicative of the fact that on 12.4.2000, Technip had not taken over
Coflexip, that even in September 2000 they were talking about the possibility
of a combination.� He submitted that this
proposal did not materialise, but only the reverse happened subsequently. Shri
Setalvad submitted that� what happened in
April 2000 was only a stage in the integration process and not the final act,
that actually Technip acquired control over Coflexip only in July, 2001.� He further submitted that the shareholding in
SEAMEC by Coflexip was very insignificant compared to its total activities and
the SEAMEC acquisition in July 2001 was only an acquisition incidental to the
acquisition of Coflexip SA by Technip in July 2001, that there was no change in
the shareholding pattern of the said SEAMEC even after July, 2001.� Shri Setalvad submitted that it does not
stand to reason to hold that Technip having acquired Coflexip in April 2000
will spent huge sum of money and again acquire Coflexip in July 2001. Shri
Setalvad submitted that the Appellants have raised many new things not raise
the submitted that the Appellant�s (appeal No.80/2002)averment in the rejoinder
that �the share prices of� Coflexip
during the relevant period as would appear from the relevant quotation would
clearly show that a control premium was, in fact, paid by Technip for
acquisition of the said shareholding of Stena in Coflexip as just prior to the
said acquisition the market during the two preceding quarters was significantly
lower than the acquisition price�,� is
baseless.� In this context he referred to
the price movement from 31.3.2000 to 13.4.2000 and submitted that on 10th
April 2000 and 11th April 2000 the scrip had reached a high� of Euro 120 and Euro 118 respectively and in
that context the purchase price of Euro 119 given by Technip, by no standard
can be considered to include a control premium, as alleged. Shri
Setalvad referred to the text of regulation 10 and 12 and submitted that as a
result of the acquisition of shares on 12.4.2000 neither regulation 10 nor
regulation 12 attracted to the case of acquisition of 29.68%� shares of Coflexip.� He narrated the developments which had taken
place in the process.� He submitted that
though ISIS has a stake� in and had
nominated directors in both Technip and�
Coflexip, it was not in management or control of either of the two
companies.� He further submitted that at
all material times prior to July 2001, IFP was�
holding 52.76% and the public holding was 47.24% in� ISIS. ����������� Learned Senior Counsel further
submitted that� Institut Francais du
Petrole (French Petroleum Institute �IFP�) is an independent centre for
research and industrial development, education, professional training and
information for the oil and gas and automotive industries, that it� does not carry on industrial or commercial
activities; neither does it control or manage listed companies. �IFP is a �professional body� created by a
decree of the French government.� The
members of the Board of Administration are designated among national and
international professionals of the industrial private sector by the Ministries
of Industry, Economic Affairs that from time to time a degree of control is
exercised by the Director des Hydrocarbures, (presently known as the Direction
I�Energie et des Matieres Premieres) by a Government commissioner and by a head
of the Economic and Financial mission for petroleum and chemistry.� Its statutory purpose is to help to support
the advancement of the petroleum and oil services industry and to that aim,
it� receives a part of the proceeds of
the relevant taxes and cess and in return it is subject to the financial control
of the French Government.� IFP conducts
and funds research in various directions, all related to the oil industry, from
oil exploration and related services to development and crude oil and gas
production, down to refining and production of light, finished products (such
as petrol, lubricants, fuel oil and all raw materials of the petro chemical
industry), that it� also promotes
companies created to apply the results of its own research, thus IFP was one of
the founding shareholders of both Technip in 1958 and ����� Coflexip in 1971. IFP supervises and controls the Ecole
Nationale Superieure du Petrole et des Moteurs (National Engineering college
for Oil and Fuel Engine Studies), located on IFP grounds. ����������� ����������� He submitted that in 1975, IFP
promoted ISIS as a wholly owned subsidiary to hold its investments.� IFP retained majority control at all times
until October 2001, although ISIS became listed on Euronext Paris in 1997. ����������� Learned Senior Counsel submitted
that on or about 11th April, 2000, Technip agreed to acquire the
entire interest of Stena International BV in Coflexip amounting to 29.68%
(which ���������� included shares held
through J.P. Morgan) @ Euros 119 per share, that the said price was equivalent
to the market price prevailing around the date of the said agreement.� He submitted that no control premium was paid
as neither was control acquired or was intended to be acquired by virtue of the
aforesaid acquisition of shares from Stena. Technip had� on 11th April, 2000 forwarded a
letter to Coflexip which was a legally binding undertaking on Technip
enforceable in the French Courts.� It
stated that: � (i)� ���� Technip was not acting in concert with any
one with respect to Coflexip and ���� had
no plan relating to any such concerted action; � (ii)����� Technip
has no intention to increase the interest they will take in Coflexip ��������� before April 19, 2001; � (iii) ��� Technip
agrees not to sell or otherwise dispose of any shares before October �� 19, 2000; � (iv)� �� Technip agrees that any sale or disposition
of 1,839,398 Coflexip shares ��������� between
October 19, 2000 and August 19, 2001 to any person other than ������� investors would be subject to Coflexip�s
right upon receipt of 21 days prior ����������� notice
to substitute a purchaser of Coflexip�s choice other than a direct competitor of Technip; (v)������� Technip
informs Coflexip that these restrictions on sales and other dispositions would
not apply in the event of a public offer by any other person ���������� or Coflexip shares and would
terminate if a third party, acting alone or in concert with others, became the
owner of 20% or more of the share capital or voting rights of Coflexip or if a
reorganization of Coflexip business resulted in its current business lines
representing less than 65% of its consolidated net sales without the agreement
of Technip representatives on Coflexip�s board of directors. (vi) ����� Technip
agrees that until the earlier of August 11, 2001 and the date on which
Technip�s interest in Coflexip constituted less than 10% of the outstanding
share capital or voting rights of Coflexip, Technip would� not acquire any interest in a company with
business in subsea engineering, manufacturing or installation of underwater
equipment linked to the development of oil or gas fields without the prior
written consent of Coflexip. Shri
Setalvad submitted that in fact, when the approval was� granted by the Board of Directors of Technip
on 7th April, 2000, for purchasing the said shares held by Stena the
members appointed under the proposal of ISIS on the Board of Technip had
abstained.� The shares were transferred in
favour of Technip on 19th April 2000. On April
28, 2000 Technip issued to the Conseil des Marches Financiers (Market
Authorities): (i) ������� a Notification for Crossing Legal
Thresholds by acquiring 29.68% of Coflexip equity capital;� This was a statutory obligation under French
Company law; (ii)������� a Statement of intent, binding for 12
months in which Technip declared that: i)
this acquisition of shares from Stena International
B.V. was a friendly acquisition of shares which should result in the conclusion
of a strategic alliance; ii)
it was acting alone; iii)
it did not intend to increase its shareholding; iv)
it will be represented on the Coflexip board of
directors by four members out of a total of twelve members; v)
it does not intend to take control of Coflexip; vi)
for a period of six-months, it will not reassign its
shareholding, except for a maximum of one-third to institutional investors,
without prior consultation with Coflexip Learned
Senior counsel submitted that Section 356-1 of the French companies Act (as it
then exited and now incorporated under section 233-7 into the French Commercial
Code) made such a statement of intent, binding in law and if a breach was
committed, the person committing the breach is deprived of his voting rights
for 2 years and such penalty may be raised by the Courts to 5 years, that apart
from the aforesaid, criminal sanctions could also be incurred.� Under French law, a Statement of Intent is to
be issued on crossing the 10% and 20% limits of shareholding or voting rights
in any listed company.� On crossing 1/3
of the shares or voting rights (whether acting alone or in concert) it is
mandatory to inform the Market Authorities and a public offer has to be filed
for all the shares or any other kind of security (which may give rise to issue
of shares or confer voting rights) under Article 433.3.1 of the Commercial Code
and Article 5-5-2 (1st sub-paragraph) of the Conseil des Marches
Financiers Regulations.� The terms of the
public offer have to be acceptable to the Market Authority.� Failure to make the relevant disclosures
would result in penal sanction including fine and prosecution.� Failure to make a public offer on crossing
the threshold mentioned above would result in the Market Authorities passing
orders to make a public offer, which would be enforceable in law.� (Section 5-5-5 of the CMF General
Regulations).� Learned Senior Counsel
submitted that the Notification for crossing legal threshold and the Statement
of Intent were filed with the French Market Authority (�Conseil des Marches
Financiers�) which made them public on May 4, 2000 and with the Stock exchange
Commission (�Commission des Operations de Bourse�).� The Conseil des Marches Financiers thereafter
issued a public notice dated 4th May, 2000 recording and accepting
the statements.� Technip had complied
with the above-mentioned Statement of Intent.�
During that period Technip had only 4 directors out of 12 in the Board
of Coflexip.� Technip was not acting in concert
either with ISIS or IFP.� There was no
shareholders agreement between Technip and ISIS with respect to Coflexip,� that prior to April 2000 i.e. by a
shareholders� agreement relating to Coflexip dated 2nd November,
1994 entered into between Stena ISIS and other major shareholders of Coflexip,
the parties therein had whilst acting in concert with one another agreed to
certain pre-emptive rights being granted to one another, consultation and
control on appointment of the Chairman and managing Director as also balance
representation on the Board of Directors.�
The said agreement was valid till June 2000. After April 2000, the said
shareholders agreement continued between ISIS and Compagnie Financiere Atochem,
(part of the ELF group), but� Technip was
not a part to the said shareholders agreement nor was it an assignee or
transferee thereunder nor did it act or agree to act in concert with any party
whilst acquiring the shareholding of Stena International B.V. in Coflexip.� Even after Technip acquired the shares held
by� Stena in Coflexip, Technip did not
step into its shoes� nor was it bound by
the agreement.� The fact of the said
agreement has always been disclosed in the Annual Report published in France
and in Form 20F filed with the US Securities and Exchange commission, that the
Market Authorities also did not think that Technip was a party to or an
assignee under the agreement or any public offer was required to be made or
that Technip was acting in concert with any party.� On
September 1, 2000, Technip and Coflexip released a statement, CSO/Technip
upstream �alliance�, in which it was agreed to combine, when deemed
appropriate, on an ad-hoc and non-exclusive basis, their capabilities to
provide their customers with the most effective team to target conceptual and
detailed engineering contracts as well as Engineering, Procurement and
Commissioning (�EPC�) contracts.�� As a
result of this statement, a steering committee was set up, composed of
commercial persons representing both managements for the purpose of submitting
joint tenders and implementing the resultant contracts.� This �alliance� had resulted in some joint
bids, as both companies often do with other contractors, which resulted in the
conclusion of only two contracts.� Shri
Setalvad submitted that this alliance and steering committee would have been
wholly unnecessary had Technip already controlled Coflexip as alleged. On 11th
April 2000 a mutual agreement was entered into between Technip and Coflexip
where under Coflexip agreed to refrain from acquiring any equity stake in a
company engaged in activities of engineering and/or building super structures
and platforms for offshore oil or gas field production unless prior written
consent of Technip was obtained.�
Similarly, Technip agreed to refrain from acquiring any equity stake in
a company engaged in submarine engineering, fabrication and/or installation of
submarine equipment relating to the development or exploitation of offshore oil
and gas fields, without the prior written consent of Coflexip.� The Deep Water Division of Aker Maritime
A.S.A. and Aker Maritime Norge AS was involved in some of the aforesaid
activities.� Thus in October 2000, when
Coflexip wanted to acquire the Deep Water Division of Aker Maritime A.S.A. and
Aker Maritime Norge AS it sought and obtained the permission of Technip.� Similarly when Technip was desirous of
acquiring a company known as SEAL based in France and another company known as
UTC based in Brazil it sought the permission from Coflexip to do so.� Coflexip by its letter dated 24th
April 2001, granted permission for acquisition of UTC and did not grant
permission for SEAL.� These facts clearly
demonstrate that Technip had not acquired control of Coflexip in April
2000.� It is significant that the
transactions pertaining to SEAL were thereafter pursued and completed only in
October 2001 i.e. after Technip took over Coflexip in July/October 2001. ����������� In September/October 2000
representatives of the management of the Technip� met with the representatives of the
management of Coflexip and the respective financial and legal advisors, to
discuss the possibility of the combination of Coflexip and Technip.� What was�
discussed in the various meetings was the possibility of the acquisition
of Technip by Coflexip, that this in itself demonstrates that Technip had not
acquired control of Coflexip. On 3rd
July 2001, Technip made an unsolicited public offer to buy the shares of
Coflexip on the basis of either an exchange of shares and/or for cash (the
exchange for cash being limited to 5 million shares) the cash element being
EURO 193 per share.� The price was
significantly higher than the price paid to Stena, that if Technip already had
control of Coflexip in April 2000 (whether acting alone or in concert) there
was no reason for it to make a public offer or pay a price significantly higher
then that paid to Stena i.e. 62% higher that the higher price was paid
allegedly to gain control of Coflexip.� ����������� The Board of Directors of Coflexip
on 6th July 2001 appointed a special committee composed of
independent Directors and one of the censors to review and consider whether
they should recommend to the shareholders of Coflexip that the bid of Technip
should be accepted.� Whilst the
appointees of Technip on the board voted against the resolution to appoint the
special committee that board voted in favour thereof, which clearly
demonstrates that Technip had not acquired control over Coflexip in April 2000
(whether acting alone or in concert).�
The said special committee decided to request Technip to increase the
amount it was willing to pay for the shares of Colfexip and to reach an
agreement on the strategy and organization of the combined group.� Because of the said request, Technip
increased the cash part of the offer from EURO 193 to Euro 199 which involved
Technip having to pay 13 million more EUROs which was equivalent to
approximately Rs.125 crores.� The
increased offer was thereafter made and�
on 11th October, 2001 the results of the said offer were
announced and it ��������� showed an
acceptance of 98.63% of Coflexip shares owned by Technip.� Simultaneously, in July-October, 2001 Technip
made an offer to acquire ISIS that�
18.17% of the shares of Coflexip were held by ISIS that this offer was
made to facilitate the acquisition of control by Technip over Coflexip. Shri
Setalvad referred to the provisions of regulation 12 and submitted that there
was no change in the voting rights of the controlling group.� He referred to the explanation (i)and (ii) to
regulation 12and submitted that regulation does not recognize inter se change
among the persons in control as a ground for triggering regulation 12 so as to
make a public offer.� He submitted that
there was no change in control on acquisition of shares of Coflexip by Technip,
as it was jointly controlled by Stena group and ISIS and other major
shareholders and Technip was only substituting Stena.� He submitted that in view of the said factual
position the acquisition under reference is one covered under explanation (ii)
to regulation 12.� He referred to the
text of the said explanation that: �Where
any person or persons are given joint control, such control shall not be deemed
to be a change in control so long as the control given is equal to or less than
the control exercised by persons presently having control over the company.� In
this context learned Senior Counsel�
submitted that Technip� acquired
only the shares held by Stena and whatever control Stena had only come to
Technip, nothing more, nothing less. Learned� Senior Counsel referred to the definition of the expression �person acting in concert� in regulation 2(1)(e) of the regulation and submitted� that: �person acting in concert� comprises (1) persons who, for a common objective or purpose of substantial acquisition of shares or voting rights or gaining control over the target company, pursuant to an agreement or understanding (formal or informal), directly or indirectly co-operate by acquiring or agreeing to acquire shares or voting rights in the target company or control over the target company,� and that the deeming provision in clause (2) is related to the action in clause (1) and not separate or independent by itself. ����������� Shri Setalvad submitted that it is clear from sub regulation(1) of regulation 2(1)(e) that the common objective or purpose of substantial acquisition of shares or voting rights or control has to be with reference to the target company, that in the instant case the target Company is SEAMEC.� In this context he referred to the definition of the expression target Company in regulation 2(1)(o) that �it is a listed company whose shares or voting rights or control� is directly or indirectly acquired or is being acquired�.� He submitted that the Appellants have not produced any evidence to show that Technip acquired SEAMEC and ISIS acted in concert with Technip for the purpose.� He submitted that Coflexip is not the target company Technip has not acquired shares or control over target company i.e. SEAMEC and therefore the question of Technip acting in concert with ISIS vis-�-vis SEAMEC does not arise.� Shri Setalvad submitted that in the absence of any evidence to show that ISIS and Technip acted in concert, the theory put forth by the Appellants� that Technip and ISIS acted in concert can not be sustained.� In this connection he referred to the authorities cited by Shri Mukherjee and submitted that inference should be in relation to fact, that Shri Mukherjee has not brought on record any evidence sufficient to draw any inference� He submitted that� the submission that ISIS did not use its pre emptive right or that it did not object to the nomination of Technip�s directors etc. is not a ground to draw inference that ISIS was acting in concert with� Technip.� He submitted that in the absence of direct evidence or atleast strong circumstantial� evidence, such an inference that the parties acted in concert can not be drawn.�� To draw inference from a set of facts one has to objectively assess the circumstances.� Shri Setalvad submitted that on the contrary the evidence available on record shows that Technip and ISIS� had no community of interest or commonality of objective in the alleged acquisition of SEAMEC.� In this connection he referred to the statement pursuant to section 14(d) (4) of the Securities Exchange Act, 1934 made on 31.8.2001 by Coflexip with Securities Exchange commission.� He submitted that� in items 1,2 and 3 of the said statement Coflexip had clearly disclosed the basic details, past contracts, transactions, negotiations and agreements.� In this context he referred to the Solicitation� or Recommendation made by Coflexip in the context of the Technip�s exchange offer and submitted that Coflexip had made it clear therein that �following a proposal made by Pierre Marie Valentin, the Chairman and Chief Executive Officer of the company, near the end of 1999 to Daniel Valot, the Chairman and Chief Executive Officer of Technip to examine the merit of a combination between the Company and Technip, the board of directors of Technip determined as part of a continuing strategic review undertaken by Technip in December 1999 that offshore oil and gas production was a sector of particular interest to it and identified the company as an attractive opportunity within that sector�.� He submitted that thus it is clear that the intention was to act on a complementary basis and certainly not to take over Coflexip by Technip, that with this end in view in September and October 2000, representatives of the company�s and Technip�s� management and their respective financial and legal advisors met on several occasions to discuss the possibility of a combination of the Company and Technip to be effected by means of an exchange offer by the company for Technip shares.�� Shri Setalvad submitted that if Technip had taken over control over Coflexip there was no question of Coflexip considering the possibility of Coflexip making an exchange offer for Technip�s shares.� He submitted that in early January 2001, representatives of Gimar Finance and Cie,� an investment bank approached Technip to inform it that IFP had indicated a potential interest in selling its entire interest in ISIS.� He submitted that on January 4, 2001 at the request of Mr. Claude Mandil, the Chairman of IFP and Chairman of ISIS, Messrs Valot and Burlin met with Mr. Mandil and Mr. Georges Picard, the Chief Financial Officer of IFP.� On January 15, 2001 representatives of management of the company and Technip and their respective financial and legal advisors met to continue to review possible transaction structures for a combination between the company and Technip.� Shri Setalvad submitted that ISIS and IFP came to the scene only in January 2001 and not in the year 2000, i.e. after Technip acquired 29% shares on Coflexip.� He also referred to the fact that on May 9, 2001 at the request of Mr. Valentin Mr. Valot met with Mr. Valentin, Mr. Ehret and Mr. Claire Grant, Senior Executive Vice President, Finance (CFO) and Communication of the company.� Mr. Valot described his views regarding the strategic benefits of a combination of Technip and the Company.� He also expressed his interest in reaching a mutual agreement regarding a transaction and his intention if a combination were effected to support the company�s growth strategy and to establish a supervisory board management board structure with a balanced representation of the Company�s and Technip�s executives.� While all the participants agreed that a combination between the Company and Technip would be desirable Mr. Valentin indicated that he would not make any commitment regarding any such transaction before receiving a detailed proposal from Technip and that in any event such a transaction should not� be explored� before September 2001 in order to allow the company sufficient time to advance the integration of the recently acquired Deepwater Division.� Meetings between Technip�s representatives and representatives of ISIS and their respective advisors to discuss a possible combination of ISIS AND Technip continued during the month of May.� Shri Setalvad submitted that if Technip had control over Coflexip Valentin would� not have raised such a question.� He submitted that Coflexip even at that time was an independent� identity and Technip and Coflexip desired to work together and not to submit to the control of one over the other.� He further referred to the portion in the statement that �Mr. Valot telephoned Mr. Valentin on July 1 and 2, 2001 to inform him that due to the unplanned press coverage Technip had no alternative other than to proceed on an immediate basis.� Mr. Valentin objected to this course of action.� Shri Stealvad submitted that the above developments are� part of the statement filed with SEC and it has therefore evidentiary value. Shri Setalvad referred to the minutes of the Board of Directors meeting of Technip held on 7.4.2001 and submitted that ISIS representatives had abstained from voting in the meeting, that abstaining� from voting is not an affirmative action to be viewed to support the theory of acting in concert, that� abstaining from voting was an intentional decision suggesting that ISIS was not acting in concert with Technip.� With reference to the Appellant�s version that not exercising the pre-emptive rights when Technip entered in place of Stena is indicative that ISIS was acting in concert with Technip, learned Senior Counsel submitted that at the highest is a non action that regulation 2(1)(e) refers to concerted action and not to inaction.� He submitted that if ISIS had exercised the pre emptive rights then it would have required ISIS to acquire those shares costing it nearly Euro 656 million dollors and further that� the ISIS�s holding would have crossed the 30% triggering bench mark necessitating it to make a public offer spending huge funds, that this was the rationale for not exercising the pre emptive right.� With reference to the Appellants� submission that 4 nominees of Technip were appointed as directors of Coflexip even before the shares were transferred, learned Senior Counsel submitted that the 4 directors came in place of the 4 directors of Stena and ISIS had nothing to do in that matter.� In this context he referred to the following portion in the letter dated 11.4.2000 from Mr. Valot to Mr. Valentin that �you
wanted us to know that you were in favour of this transaction.� (the Acquisition) notably because the
Acquisition preserves the basic freedom of the company and its shareholders to
formulate and execute Coflexip�s development strategy; -- should create
possibilities for commercial and industrial co-operation between our two
groups, facets we see as being particularly important and in line with the long
terms interests of companies concerned. --enables Stena�s equity stake to be
re-assigned.� We are both in agreement
with this analysis��..� We want to make
clear that any inhouse or public announcements that we might release about the
Acquisition will be based on the information contained� in the Statement of Intent and with the
aforesaid reasons why you favour the acquisition.� We want to make it clear that the Acquisition
will proceed as stipulated in Article 4-1-32 of the French Financial Markets
Council�s rules and regulations and will not take place unless we have received
notification by 4.5.2000 at the least, from both shareholders having pre
emptive rights on the shares belonging to Stena, that they have renounced or
not exercised this right.� He
submitted� that the object of the parties
is thus clear,� that it is also to be
noted that Technip had set on a cut off date for the purpose i.e.
4.5.2000.� He also referred to the
following portion from� the said letter
that : �We agree,
moreover, provided that you make a similar Commitment to us concerning our
activities, in the fact that our equity stake in Coflexip excludes our
taking, under any terms whatsoever, any other new equity stake in a company
involved in sub sea engineering or the manufacture and/or installation of sub sea
equipment related to the development or exploitation of offshore oil gas
fields, except in the case where you gives us its prior written approval for
any such transaction.� This commitment
shall expire at the earliest of the following two dates: (i) the end of sixteen
(16) months starting from today (ii) the date our company reduces its equity
stake in Coflexip below the ten per cent (10%) threshold in your company�s
share capital or voting rights. We
acknowledge that the violation of any one of the stipulations in this
commitment may have significant adverse consequences on your company�s
business, and that your company would be entitled to ask us to redress for any
damages suffered. I have
taken note of your agreement to appoint four Technip representatives to sit on
your company�s twelve member Board of directors, specifically to replace �those directors who represent Stena.� Shri� Setalvad submitted that on a perusal of the
above statement in the letter it could be seen that a series of undertaking binding
a person who is alleged to have acquired the control over the company has been
provided.� These conditions are all on
Technip.� It is also to be noted that
Technip submits itself to liabilities arising out of damages � that it is even
unthinkable that an acquirer who had acquired control would subject itself to
such terms and conditions with the target company.� It is also to be noted� that entry of Technip�s representatives on
the Board of Directors of Coflexip and its committees was in place of the nominees
of Stena on its leaving.� Similar
commitment sought by Mr. Valot from Coflexip came vide Mr. Valentin�s letter
also of April 11, 2000 stating that �I am pleased to confirm Coflexip�s
agreement in the context of your company�s purchase of Stena International
B.V�s equity stake in Coflexip�s share capital ��..�� Each of the two had agreed that they won�t
take over companies in the industry when the offer was operating. Shri
Setalvad referred to the declaration of Threshold Crossing and Statement of Intent
(Section 356-I French Companies Act) made by Technip on 4.5.2000 and stated
that it has been made clear therein that: �Stena
International B V SIBV has crossed downwards the thresholds of 5% 10% and 20%
of the share capital and voting rights of Coflexip further to the sale of
TECHNIP of all of its equity interest�
viz. 5518195 shares, of which 8,50,000 previously� by the J. P. Morgan group pursuant to an
equity swap agreement which was terminated on 11.4.2000 Further to
such sale, the action in concert between SIBV, ISIS and Elf Atochem has been
terminated.� ISIS now holds 3378000
shares and voting rights being 18.17% of the share capital and 18.22% of the
voting rights of COFLEXIP and Atochem SA owns 5085521 shares and voting rights
being representing 2.73% of the share capital and 2.74% of the Voting
rights.� These latter two shareholders
remain bound by a right of first refusal until 15th June 2000. Learned
Senior Counsel� submitted that the
agreement came to an end with Stena�s exit and also the �understanding to act in concert among the
parties to the agreement.� Learned Senior
Counsel submitted that the declaration of interest filed with French Market
Committee is a statutory declaration and such declarations are published.� It is not the Appellant�s case that the
French Authorities were influenced and got the declaration published.� He submitted�
that the actual factual position can not be ignored, even if� it is found inconvenient by the Appellants. ����������� Shri Setalvad referred to the
Mission Statement � June 2000 issued by Mr. Valot and Mr. Valentin explaining
the nature of alliance between them in the following words: �The
mission of the Technip/Coflexip Stena Offshore alliance is to combine the major
skills of Technip (engineering management of large projects, surface facilities
expertise, financial engineering) and those of Coflexip Stena Offshore (sub sea
knowledge, differentiating assets, market leadership) to provide close
effective field development solutions to the offshore industry. This mission
will be delivered through regionally based teams co-ordinated on a global
basis, who will select in their solutions, products, components and services
that offer the best value to our customers irrespective of the fact that they
are provided internally by the alliance partners or externally through other
parties� Learned
Counsel submitted that if as alleged Technip had taken over Coflexip and was
exercising control over Coflexip there was no need� to seek their consent.� Learned Counsel submitted that both the
companies were acting� independently is
clear from the Technip�s letter dated 16.3.2001 to Coflexip seeking their
consent� for Technip to acquire two
companies SEAL and UTC and Coflexip�s letter dated 24.4.2000 confirming their
agreement only to the purchase of UTC�
and not SEAL, that if Coflexip had been under Technip�s control, such a
refusal would not have come. ����������� Learned Senior Counsel referred to
the following portions in the minutes of the Board of Directors meeting of
Coflexip held on 6.7.2001 to show that Coflexip was functioning not as a
controlled unit of Technip, but was functioning independently: �1. Public
offer launched by Technip to purchase Coflexip�s capital on 3 July 2001, the
Chairman of� the Board of Directors was
suddenly faced �with an unsolicited
public offer submitted to the Conseil des Marchis Financiers (French Financial
market council) from Technip to purchase the share capital of the company (the
offer).� At the same time, Technip
launched a friendly takeover bid for shares of ISIS... D. Valot
recalled that P.M. Valentin 18 months ago working towards a business
combination between Coflexip and Technip.�
D. Valot supported this idea which is clearly interesting from an
operational point of view for both organisations.� It was in this context that Technip took a
30% stake in Coflexip� in April
2000.� It was also in this context that
the two companies set up Strategic Alliance which� was worked
extremely well.� It was in this context
that Technip supported Coflexip�s acquisition of Aker�s Deepwater
Division.� The main difficulty facing
Coflexip in launching a� public offer for
Technip was to obtain the support of Coflexip's US share holders to pay a premium� to acquire an onshore engineering and
construction company in a sector different from that of Coflexip.� Under the currently planned transaction, the
share of Coflexip and ISIS will receive premium.� On 26 June the two Chairmen met and agreed to
review the two possible scenarios with a view to making a decision by the end of
August.. X X The
Chairman and D Valot explained that, although both Chairmen had been in contact
with a view to developing an alliance between the two groups, under no
circumstances had they envisaged merging. X X Coflexip�s
management will be invited to express its opinion on the offer and give a
recommendation depending on Technip�s responses to its questions.� Learned
Senior Counsel referring to the� minutes
of the said Board meeting further�
submitted that ISIS�s vote was divided on the resolution to appoint the
Special Committee, that it is not correct to say that ISIS voted with Technip
to defeat the resolution.� It was
submitted that Coflexip was objecting to the offer price offered by Technip.�� If Coflexip had been under the control� of Technip, the question of Coflexip raising
objection and requiring Technip to bear additional financial burden would not
have arisen at all.� With reference to
the majority voting rights exercised by Technip in the Annual General Meeting
of Coflexip in May 2000 and May 2001 Shri Setalvad submitted that these
meetings were not extra ordinary general meetings,, but ordinary annual general
meetings wherein routine matters are taken up for consideration.� He submitted that based on voting rights
exercised� by Technip in these two
meetings, it can not be held that Technip was holding more than� 51% shares in the Coflexip even before
Coflexip�s merger with Technip in July 2001.�
Sustained interest over a period is the important factor that exercise
of voting right in a routine annual general�
meeting is not the parameter.� It
is also to be noted that defacto control has to be tested with actual
facts,� that even the French authorities
did not raise any query based on the premises that Technip had acquired control
over Coflexip.� If Technip, as alleged
had acquired control then Technip had to make public offer to the shareholders
of Coflexip as per the French law.� But
French Regulation did not consider that Technip�s acquisition of 29.68% shares
in Coflexip warranted such a public offer. Learned
Senior Counsel submitted that French
Regulatory authorities are also statutory authorities and their findings and
response to matters relating to acquisition of shares/control are not to be
ignored. In this context Shri Setalvad referred to the letter of December 2000,
from the French Market Authority, recording the Statement of Intent/declaration
made by Technip to show that the French authorities had accepted the fact that
though Technip had acquired 29.68% shares in Coflexip it did not result in
acquisition of control by Technip over Coflexip. Shri
Setalvad referred to the letter dated 14.10.2001 of Technip�s Chairman to its
shareholders relied on by the Appellants.�
He submitted that the letter is dated 14.10.2001 i.e. after the acquisition
of 99% shares in Coflexip.� He also
referred to the following portion in the letter. �For over a
year now, we have been working on this merger, passing through a number of
necessary stages: the acquisition of 30% of Coflexip in April 2000,� the setting up in the summer of 2000 of a
strategic alliance which allowed the teams from the two companies to start
working together on a few joint projects as well as on numerous joint
proposals.� This period of acclimatisation
was invaluable: it demonstrated that our conclusions were compatible and that
our teams knew how to work together in harmony.�
Thus we have done everything possible, I believe, for this coming total
merger to take place in a climate of mutual confidence. The
Institut Francais due Petrole (IFP) which was at the origin of the creation of
the two companies and which has remained through ISIS� a major shareholder of both of them, acted as
a catalyzer in their union.� By deciding
to commit its majority stake in ISIS to Technip, it greatly facilitated the
merger between Technip and�
Coflexip.� As the outcome of the
operations now underway, IFP will be, in accordance with its historical mission
one of the top shareholders in Technip Coflexip, along side of Gaz de France
and Total Fina Elf, both of which also gave their support to the creation of
the new entity.� Learned
Senior counsel submitted that the said view does not in any way support the
Appellants� contention that Technip had acquired control over Coflexip in April
2000, that on the contrary it indicates that the control came to effect only on
merger.� This letter says that they were
working out a merger and not takeover, that the reference is to the period July
2001 and not to earlier period that IFP acted as a catalyzer for the purpose of
merger and not for any thing else.� He
submitted that IFP came into the� picture
only in January 2001,� as has been stated
in the statement in 14D-9 made by Coflexip to Securities and Exchange
Commission, USA.� He submitted that IFP
is a Statutory Board created under a decree of the French Government� not interested in acquiring control of
companies by itself or in helping others to acquire control of companies. Shri
Setalvad also referred to the opinion dated 13.11.2001 of a French Legal firm
received,� holding that �Based
on the facts made known to us as summarised above and on the applicable
provisions of the French Companies Act as at the time of that purchase, we
would conclude that the ownership of a 29.68% equity interest and the
appointment of four directors to the Board of Coflexip would not suffice to
constitute control by Technip over Coflexip, and that in the absence of other
factual elements of which we are not aware, Technip did� not in the period from April 2000 to October
2001 hold control over Coflexip within the meaning of French company law.� Shri
Setalvad submitted that Conseil des Marches Financiers (CMF) and Commission
Operations de Bourse (COB)� are
statutory� sets under the French law and
their action has to be recognised.� He submitted
that it is part of the role of the CMF to control the purchase and sale of
shares which are listed, as well as the exercise of the voting rights attached
to such shares and to analyze whether such transaction and actions are done in
accordance with the rules.� The COB is in
charge of verifying the accuracy of the financial and finance related
information given by the players on the stock exchange market.� ����������� The
fact that the Market Authorities agree to the publication of a statement or a
notice or a financial publication does not mean that the accuracy of the �������� contents of such communications is
guaranteed by them.� But it does however
mean that those professional independent bodies have professionally verified
the contents of such communications and have been satisfied with their
accuracy. If following the issuance of such communications, it is discovered
that inaccurate facts were presented or that the behaviour of the relevant
persons was not in line with their communications, the Market Authorities would
have a permanent right to step in and for instance, express ��������� an opinion that there has been or
become a concert action, etc., that it is not correct to hold� that the CMF would merely be,� a �publishing� or ������� a �printing� body which would simply �edit� without any study
or review, ��������� the communications
and notices received from companies.�
Learned Counsel stated that the particulars submitted to CMF are not
automatically accepted.� He stated that
there are cases where CMF had not accepted such statements, that in fact CMF
had even rebutted the filing.� By way of example he referred to a decision number 198 CO 923, by which
the CMF refused a company called Olipar exemption from the obligations of
filing a compulsory offer and held as a result that the company Olipar be
deprived from its voting rights in excess of one-third in the capital of the
target company Lucia that� by a decision
number 197 CO 241, the CMF dealt with the situation of the Company Teknecomp
Holding International BV. Teknecomp had acquired the control of a company
Santavaleria.� Santavalarai owned 63.64%
of the capital of a French company called Sediver. Taking in particular into
account the fact that there was full consolidation of the turnover of Sediver
into the accounts of Santavalaria, the CMF directed that a compulsory bid be
launched by Teknecomp on Sediver.� In a
prior decision no.197 CO 139, the CMF had taken note of the proposed
acquisition� and had requested further
data from Teknecomp pending its final decision.�
Learned
Senior Counsel� submitted that Article
233.3 in the French Company law clearly spells out as to when a company can be
said to be controlled by another.� He
referred to the following Article233.3 �A company
shall be shall be regarded, in order to apply Sections 2 and 4 of this chapter,
as controlling another: 1.
when it directly or indirectly holds a percentage of
the capital conferring on it the majority of the voting rights in the general
meetings of this company; 2. when it
alone holds the majority of the voting rights in this company pursuant to an
agreement concluded with other members or shareholders and which is not
contrary to the interests of the company; 3. when it
actually makes, due to the voting rights which it holds the decisions in the
general meetings of this company. II. -����� It shall be presumed to exercise this
control when it directly or indirectly holds a percentage of the voting rights
higher than 40% and when no other member or shareholder directly or indirectly
holds a percentage higher than its own. III. -���� In order to apply the same sections of this
chapter, two or more persons acting in concert shall be regarded as jointly
controlling another when they actually make, under an agreement to implement a
common policy, the decision taken in the general meetings of the latter. He submitted that in terms of the said section and based on
the material on record, it can not be said that Technip acquired control over
Coflexip in April 2000. Shri
Setalvad� referred to the order passed by
SEBI and submitted that the order has dealt with all the relevant aspects and
its conclusion, specially taking into consideration the role and status of ISIS
and IFP, that Technip, ISIS and IFP were not acting in concert for the purpose
of acquiring shares/voting rights in Coflexip when Technip acquired 29.68%
shares of Coflexip from Stena on 12.4.2000 and there was no violation of the
Takeover Regulations by Technip on 12.4.2000 is correct.� Learned
Senior Counsel, with reference to the case law cited by the Appellants submitted
that the legal proposition in those cases�
is based on the factual matrix in each case, that in the light of the
facts specific to� the present case there
is nothing to show that Technip, ISIS and IFP acted in concert, as alleged or
that Technip on acquisition of 29.68% shares acquired control of Coflexip on
12.4.2000.� He submitted that the
Tribunal�s observation in Ashwin K. Doshi�s case that control can be defacto
control also and the defacto control element would be traceable to several
facts is not under dispute.� He submitted
that in the instant case� the Appellants
have not produced evidence to draw the present case in comparison to the said
case. Shri
Setalvad submitted that the Respondent has gone on record in its reply that the
Appellants have no locus standi to file the present appeals and requested
that� the said objection be noted.� He submitted that in view of the earlier
decisions of the Tribunal holding that the shareholders of target companies are
entitled to file appeal against SEBI�s order, he is not for the time being
pressing his objections before the Tribunal.�
����������� Shri D. Bhattacharya, learned
Counsel appearing for IFP referred to IFP�s affidavit in reply in the appeal
and reiterated that the Appellants are not aggrieved persons to file appeal
against SEBI�s order dated 9.9.2002, and that on the ground itself� the appeal be dismissed. Learned Counsel submitted IFP� is a professional institute created by a decree of the French� government and is� not a commercial company interested in acquiring/controlling companies, that its purpose is to conduct research and development on hydrocarbons and their derivatives, to publish its works and to impart training.� Its participation interest in various companies is to develop and use� the results of its research, that it is not at all its� policy to manage, operate or control the composition of the Board of listed companies where it holds equity.� He submitted that this� is� evident from the fact that though it was holding 52.8% of the paid up share capital of ISIS in April 2000, it had only 3 nominees on the Board of ISIS out of a total of 9 directors, and therefore, to allege that Technip or ISIS belonged to the IFP group is too overreaching an assertion. He further submitted that although Technip was incorporated by IFP in 1958 under the French� laws with IFP� holding a 51% equity interest in the company,� that it relinquished its majority position in 1963 (i.e. nearly 40 years ago), that finally, in 1992 it transferred all of its shares in Technip to ISIS.� There was no privileges or rights granted to IFP� under the Articles of Association of Technip regarding, management, control, board representation or otherwise. Learned Counsel submitted that as� of April 2000, IFP held 52.8% of the shares in the equity capital of ISIS, and it had only 3 directors on the Board of ISIS out of a total of 9, that�� ISIS held 11.8% of the shares of Technip and had only 2 directors on the Board of Technip out of a total of 11 directors, that it is thus clear that, IFP had even no indirect control over Technip through ISIS.� Therefore, it is� far fetched to assume that Technip and ISIS acted in concert in the context of acquisition of Stena�s holding in Coflexip by� Technip. ����������� In July, 2001 Technip launched a take-over bid on Coflexip S.A.� ISIS was represented on the Board of Coflexip in its corporate capacity, which is very common in France and has no unique consequence, and had the right to propose 2 directors.� Learned Counsel submitted that the Board of Coflexip decided to form a special committee to study the offers to acquire Coflexip S.A.� According to French company law, directors are under a fiduciary duty to the company and not to the shareholders or group of shareholders which have proposed or supported their appointment to the Board, that the breach of such fiduciary duty results in personal civil liability and possible criminal liability.� One of the ISIS nominated directors of Coflexip� voted in favour of the resolution to form the special committee, while the other two directors proposed� by ISIS and all of the nominees of Technip voted against the formation of the special committee, that the votes of the ISIS nominees were not unanimous demonstrates that they were not under the control or direction of IFP, that instead, it demonstrates that they fulfilled their legal obligations by voting based on what they believed were in the best interests of Coflexip, and not what was in the best interests of ISIS or IFP. Even if it
is assumed for argument sake that IFP had control over ISIS, the following
facts prove that ISIS had no control whatsoever over Technip.� The Technip shareholders� agreement dated
September 22nd, 1994 between ISIS, Gaz de France, Total Fina and
Sogerap provided ISIS� with only 2 directors
out of 13 directors on the Board of Technip, and a pre-emptive right with
respect to Technip shares held by the shareholders party to the shareholders�
agreement.� However, it provided no
rights or privilege to ISIS with respect to the management or control of
Technip or the acquisition of the shares of another company (ie Coflexip S.A.)
by Technip.� Consequently, no control
whatsoever was granted or exercised in any way either by ISIS or by IFP under
such shareholders� agreement. Furthermore, in France, the country where Technip
and ISIS are both incorporated, elaborate provisions for the protection of
public shareholders in connection with takeover of listed companies are in
existence, that IFP had never received any notice nor has it ever been alleged
to have acted in concert with Technip for acquisition of Stena shares in
Coflexip S.A. in April 2000.� IFP played
no part in the decision-making process with regards to the acquisition by
Technip of Stena�s 29.68% stake in Coflexip S.A. in April 2000 either directly
or through ISIS.� The two directors on
the Board of Technip nominated by ISIS did not participate in the vote relating
to the acquisition by Technip of Stena�s shares in Coflexip in April 2000.� Thus, the provisions of the Takeover
Regulations are clearly not attracted on IFP as has already been held by SEBI. Learned
Counsel submitted that under the Takeover Regulations certain persons are
deemed to be acting in concert with the acquirer in which category IFP has been
impleaded in the proceedings before the Tribunal.� As has been held by the Hon�ble High Court of
Bombay in the matter of K.K. Modi Vs. Securities Appellate Tribunal (2002) 35
SCL 230 (BOM) that even though there is a presumption that the person described
under the Regulation 2(1)(e) of the Takeover Regulations may be deemed to be a
person acting in concert with the acquirer, the presumption is clearly
rebuttable and therefore, in each case, the facts have to be examined to reach
a conclusion as to whether a person is or is not acting in concert with the
acquirer for the purpose of substantial acquisition of shares or voting rights
or gaining control over the target company, that IFP has clearly
demonstrated� that it is not a person
acting in concert. IFP� does not have any shareholders, does not distribute dividends, and is endowed with proceeds of certain taxes and excises that the way in which IFP manages its affairs, and in particular use of its financial resources, is subject to review and control by the relevant State bodies. Learned Counsel submitted that to exploit the industrial outcome of IFP�s R&D technological innovations, it may take shares in industrial companies, directly or via specialized investment entities set-up for this purpose, that the� revenue earned, if any, is reinvested in new or existing ventures aimed at developing the advanced petroleum industry technologies.� He submitted that IFP cannot be said to share in any way a common objective with ISIS or Technip.� It is clear that IFP would not be affected by or have any interest in Technip�s acquisition of Colfexip�s� shares from Stena in April 2000.� Therefore, its corporate status and� lack of a common objective with ISIS and Technip is relevant because it removes any motive that IFP may have to act in concert with ISIS and Technip with respect to Technip�s acquisition of Stena�s interest in Coflexip in April 2000, that the removal of motive creates a prima facie rebuttal to the Appellant�s assertion that IFP, ISIS and Technip acted in concert.. Learned Counsel submitted that a review of the share structure and IFP�s limited involvement in Technip, Coflexip S.A. and� ISIS clearly refutes the Appellant�s allegations, that as� of April 2000 IFP was an indirect shareholder in Technip and Coflexip through ISIS, a public company in which public investors held a 47.2% interest, that IFP did not have a controlling interest in either Technip or Coflexip S.A.� ISIS held only an 11.8% share interest in Technip and it had only 2 directors on the Board of Directors of Technip out of a total of 11 directors.� IFP had no right to propose that a representative be appointed to the Board of Directors of Technip and as such, it is clear that IFP had no control over Technip, whether directly or through ISIS.� Furthermore, in April 2000, ISIS held only an 18.7% interest in Coflexip at such time and had only 3 directors on the Board of Directors of Coflexip out of a total of 11 Directors.� IFP had no right to propose that a representative be appointed to the Board of Director of Coflexip.� Therefore, it is also clear that IFP had no control over Coflexip, whether directly or through ISIS.� Learned Counsel submitted that, contrary to the allegations of the Appellant, at no time did IFP act in concert with Technip or Coflexip S.A., either directly or indirectly through ISIS, during Technip�s acquisition of the 29.68% interest in Coflexip S.A. Shri Kumar Desai, learned Counsel appearing for Respondent SEBI submitted that the Appellants� allegation that they were not given opportunity to present their case before SEBI� and SEBI passed the order without following the principles of natural justice, is baseless.� He submitted that once SEBI had heard the Appellants and proceeded against the other Respondents, the principles of natural justice were complied with.� Shri Desai stated that there was no lis between the Appellants and the other Respondents and therefore, it was not necessary for it to conduct the hearing as in an adversarial proceedings, that in a show cause notice issued to the other Respondents no person other than the noticee is entitled to a hearing, that it was sufficient that SEBI had duly taken note of the Appellant�s grievances,� initiated action by issue of show cause notice, and� addressed them while passing the impugned order.� He submitted that it is well settled that not all quasi judicial proceedings require the grant of a personal hearing and that in determining whether the principles of natural justice were complied with in a� given case, regard must be had to the facts and circumstances arising therein, the relevant statutory provisions etc.� He refuted the allegation that SEBI had not followed the principles of natural justice while passing the impugned order. Learned Counsel submitted that the Takeover Regulations do not cover takeover of foreign companies, that its scope is restricted to takeover of� Indian companies,� but indirect takeover of Indian companies is� covered by the Regulations.� Learned Counsel referred to the provisions of regulations 10,11 and 12 and submitted that the acquisition of shares/voting rights� beyond the bench mark provided in the regulations attrat compliance of the requirements in regulations 10 and 11 and acquisition of control attracts regulation 12.� The triggering events are those stipulated� in the said 3 regulations. Shri Desai referred to the facts of the case and submitted that Technip by acquiring 29.68% of Coflexip�s capital indirectly acquired control of SEAMEC� is baseless.� He submitted that if under the French law which is applicable to the acquisition of shares/control of Coflexip by Technip, the acquisition can not be considered as a takeover of control� under the Indian law as the applicable law in the matter of �acquisition of companies situated in France� is the French law.� Shri Desai also referred to the material furnished by Coflexip to Securities and Exchange Commission in Schedule 14D-9 that �(a)-(b) (ii) Background to the Offer. Following a proposal made by Pierre Marie Valentin, the Chairman and Chief Executive Officer of the company, near the end of 1999 to Daniel Valot, the Chairman and Chief Executive Officer of Technip to examine the merit of a combination between the Company and Technip, the board of directors of Technip determined as part of a continuing strategic review undertaken by Technip in December 1999 that offshore oil and gas production was a sector of particular interest to it and identified the company as an attractive opportunity within that sector�. The board of directors of Technip believed that the Company�s client relationship and expertise would complement Technip�s own client relationships and expertise and that the integration of Technip with a company of the Company�s dimension would considerably increase Technip�s capabilities and credibility in the offshore market.� Accordingly, at a meeting held on December 17, 1999, the board of directors of Technip authorized� Mr. Valot to approach the Company for the purpose of discussing the possible combination between the Company and Technip.� Following this meeting, Mr. Valot initiated contact with Mr. Valentin to discuss the merits of a combination between the Company and Technip. In January 2000,� Technip� retained J.P. Morgan & Cie SA as its financial adviser in connection with a possible combination, and Coflexip retained Credit Suisse First Boston Corporation as its financial adviser.� During the period between January and April 2000,� representatives met with representatives of Coflexip and our respective financial and legal advisors to discuss various aspects of a possible combination.� When advised of these discussions, however, Dan Sten Olsson, the Chief Executive Officer of Stena International BV the holder of approximately 29.7% of Coflexip�s then outstanding share capital repeatedly expressed his view to Messrs. Valentin and Valot that Stena would not support a combination of Coflexip and Technip because it was not part of Stenas strategy to hold an equity stake� in an engineering and construction company. ��At a meeting with Mr. Valot on march 31, 2000, Mr.Olsson indicated that Stena would however, consider selling its interest in Coflexip to us so as not to be an obstacle to a possible combination.� Mr. Valot subsequently contacted Mr. Olsson to negotiate the purchase of Stena�s interest. �On April 19,2000 Technip acquired Stena�s interest in Coflexip for a purchase price of approximately Euro 657 million in cash� He submitted that from the above information it is clear that the discussion was as to how the two companies can have combined effort to advance their causes and for the� reasons explained by Stena it left and Technip came in.� There is not even any clue that with the entry of Technip in Coflexip it gained control over it.� In this context he also referred to the discussion held on 12th and 20th December 2000 and 4th January 2001 by the concerned parties, earlier cited by Shri Setalvad and re iterated the version put forth by Shri Setalvad.� He further submitted that ISIS had no choice but to waive its pre emption right available to it under the share holders agreement for the simple reason that further acquisition of shares of Stena by it would have triggered the French law warranting public offer by ISIS and� ISIS was not interested in spending huge money and acquire shares.� Learned Counsel referred to the show cause notice dated 19.2.2002 issued to Technip, ISIS� and IFP and referred to para 2.3 therein that: �Stena International B.V. along with ISIS was holding collectively 47.85% in Coflexip as of 12.4.2000, out of which 29.68% was held by Stena and 18.17% by ISIS.� On April 12, 2000 you had purchased all the shares held by Stena International BV (Single largest shareholder of Coflexip) in Coflexip.� After the said acquisition of 29.68% shares of Coflexip held by Stena International BV you along with person acting in concert � i.e. ISIS enjoyed 47.85% voting rights in Coflexip and had 6 directors on the Board of Coflexip comprising 11 directors and were in a position to control Coflexip� It is thus clear that acquisition of control alleged in the notice was based on the then available information that Technip� had crossed 40% of the voting capital of Coflexip and also it had majority members in the Board of Coflexip that� this was based on that assumption that Technip &� ISIS� acted in concert and once it was established that they had not acted in concert the charge of taking over control over Coflexip on 12.4.2000 did not� sustain., that there was no material to show that the parties had acted in concert and accordingly the finding was� recorded in the order. ����������� Learned Counsel referred to the recitals in the shareholders agreement dated 2.11.1994 and submitted that when Stena went� out, the agreement also came to an end, that as the agreement itself ended, question of Technip entering in place of Stena does not arise.� He submitted that the evidence on record indicates that even after April 2000, till July 2001 Coflexip and Technip acted independently, that the� subsequent events, as referred to by Shri Setalvad in his arguments, demonstrate that both the companies were acting independently, that if Coflexip had been under the control of Technip, there was no need for Technip to obtain the consent of Coflexip in matters as referred to. ����������� Shri Desai submitted that the declarations/statement made under the French law, unless otherwise proved wrong before the concerned authorities, are effective. There is nothing on record to show that the statement made before the French authorities were disproved.�� He submitted that French law is relevant law to the case in as much as the relevant transactions had taken place in France, that it was therefore necessary for SEBI to consider relevant provisions of French law and their impact on transactions in question, so as to determine whether there had been any breach of the said Regulations as also the declarations and� undertakings given by the various French companies involved to the authorities.� Therefore, the facts arising, the undertakings given to, and the view taken by jurisdictional authorities (in France) was relevant for the determination of the question as to whether Technip had in fact acquired control over Coflexip on 12.4.2000 as alleged, that in the light of the declarations made/undertakings given to the jurisdictional authorities, it is not possible to hold that Technip had in fact acquired control over Coflexip on 12.4.2000.� ����� Shri Desai submitted that SEBI is entitled to rely on the materials accepted by market Regulator in France.� Learned Counsel referred to the impugned order and submitted that it was clear therefrom that SEBI had considered the position under French law (paras 5.3.17 to 5.3.20) and� the facts relied on in support of the case (para 5.3.9 to 5.3.13).� Shri Desai submitted that in April� 2000 Technip issued (i)� a Notification for Crossing Legal Thresholds by acquiring 29.68% of Coflexip, and (ii) a Statement of Intent binding for 12 months, that the said documents filed with the French market Authority were made public on May 4, 2000 and with the Stock Exchange Commission (Commission des Operations de Bourse), that the French Market Authority thereafter issued a public notice dated 4th May 2000 recording and accepting the Statement of Intent.� Shri Desai submitted that SEBI had relied on the statement in the said Statutory Statement of Intent that Technip was acting alone and French Market Authority�s acceptance of the same and SEBI has clearly come to the conclusion based on the fact that Technip was acting alone and had no commonality of objective or community of interest with ISIS or IFP for the purpose of acquiring shares/voting rights/control over Coflexip�. (Para 5.3.15) ����������� Learned Counsel submitted that SEBI has taken into consideration all the relevant factors including the role and status of IFP, ISIS and the applicable law and facts and passed the impugned order.� He referred to several paras in the impugned order including paras 5.3.21 to 5.3.23 in this regard. ����������� Shri Desai submitted that SEBI�s order is a well reasoned order and deserves to be sustained. ����������� Appeal nos.119/2002 and 01/2003 also connected to the SEAMEC�s acquisition were heard subsequently and with the consent of all the parties concerned it was decided that a common order in respect of all the 8 appeals would be passed.� ����������� Shri U. K. Choudhary, learned Senior Counsel appearing for the Appellant in appeal no.119/2002 submitted that the Respondent SEBI has come to the conclusion that Technip did� not acquire control over Coflexip on 12.4.2000 on acquiring 29.68% of the voting� capital of Coflexip, on wrong premises, that SEBI has gone by the concept of control� under the French law, ignoring the concept of control as per the Takeover Regulations.� He submitted that since the target company is situated in India, and the applicable law being the Indian law, reliance on French law by SEBI is wrong.� Learned Senior Counsel referred to the legal opinions referred to by the parties in the related appeals and the legal opinions furnished by the Appellant and submitted that there is no unanimity� in the legal opinion on the scope of the French law with reference to the facts of the case.� Learned Senior Counsel reiterated that SEBI is bound to go by the Regulations made by it and not by alien regulations.� He referred to the scheme of the Takeover Regulations and submitted that there is no scope for borrowing the concepts and definitions from the legislations in foreign countries for regulating substantial acquisition of shares and takeovers of Indian companies.� In support of his contention he referred to regulation 2(1) providing definitions of various expressions including control and� submitted that it is clear from regulation 2(2) that only Indian law is to be� relied as� could be seen from the text of the said regulation� �that all other expressions unless defined herein shall have the same meaning as have been assigned to them under the Act or the Securities Contracts (Regulation) Act, 1956 or the Companies Act, 1956 or any statutory modification or re enactment thereto as the case may.�� He submitted that legislative intent is� to go by Indian law, and in that context relying on French law for the purpose and deciding the issues discarding Indian law is inappropriate.� He submitted that SEBI can not be expected to exercise its powers and decide matters on the basis of the legal provisions in vogue in different countries, ignoring the provisions of the Indian law which it is expected to administer, that since the impugned order is based on placing reliance on� French law, the same deserves to be set aside. Shri Choudhary submitted the Coflexip SA France is the ultimate holding company of the target company with 58.24% voting capital held through its subsidiaries.� He submitted that, Coflexip Stena Offshore (Mauritius) Ltd., the immediate holding company of SEAMEC is a 100% subsidiary of Stena Offshore (Jersey) Ltd., (registered in Channel Islands) which in turn is a 100% subsidiary of Coflexip SA France.� Major shareholders of Coflexip SA are Stena International BV (holding 29.68%) and ISIS (holding 18.17%).� He submitted� that any change in the control over Coflexip SA will automatically result in change in control of its subsidiaries including SEAMEC. ����������� Learned Senior Counsel� submitted that controlling interest in Coflexip was acquired by Technip on 12.4.2000 and the other players involved are ISIS and IFP.� In this context he referred to the shareholding pattern of Technip in April 2000 and submitted that ISIS was holding in Technip 11.80%, Gaz de France 10.90%, and Total Fina Elf 6.40%.� Learned Senior Counsel submitted that it is admitted by SEBI that IFP promoted ISIS in the year 1975 and it was the same IFP which promoted Technip in the year 1958; that the relationship between IFP, Technip & ISIS is thus evident,� that they belong to the same group, that since they belong to the same group� there is a presumption that they would act in concert. He submitted that it is apparent from the show cause notice dated 19.2.2002 issued by SEBI, that it had also accepted the factual aspect of all the three entities coming under the same group, but for certain unexplained reasons it abandoned the said finding half way through,� that there is no material on record to show that as to why SEBI changed its stand and what was the material based on which such a change of view was taken especially�� when the evidence shows that Technip, ISIS and IFP acted in concert and acquired Coflexip shares. ����������� Shri Choudhary referred to the background data furnished by SEBI in its order and submitted that some of the facts stated therein are very relevant in the present context.�� He submitted that as per the information furnished by SEBI,� Coflexip SA is a world leader in the provision of sub sea development systems for the offshore oil and gas industry� and Technip� is engaged in the business of design and construction of petroleum and petrochemical facilities and IFP is a centre for research and development etc. for the oil and gas and automotive industries.� ISIS was established to manage equity holdings of IFP in commercial companies.� Learned Senior Counsel submitted that ISIS was acting as a special purpose vehicle for IFP, that it is also to be noted that ISIS ceased to be a subsidiary of IFP in October 2001.� He� submitted that the common interest of the three entities is thus evident from the areas of their business activities. Shri Choudhary referred to the definition of the expression �group� in the Monopolies and Restrictive Trade Practices Act (MRTP Act) and the concept of �companies under the same management� as� provided in Section 370(1B) (iii) of the Companies Act.�� He submitted that according to section 2(ef) of the MRTP Act �Group means a group of (i)two or more individuals, associations of individuals, firms, trusts, trustees, or bodies corporate (excluding financial institutions) or any combination thereof, which exercises, or is established to be in a position to exercise, control, directly or indirectly, over any body corporate , firm or trust; or (ii) associated persons�. � He also referred to the following provisions under section 370(1B) of the Companies Act that: �1B: For the purposes of sub sections (1) and (1A), two bodies corporate shall be deemed to be under the same management � x x x (iii) if not less than one third of the total voting power with respect to any matter relating to each of the two bodies corporate is exercised or controlled by the same individual or body corporate� Learned
Senior Counsel submitted that IFP�s shareholding through associate companies in
Technip indicates that it held control over Technip, that IFP, Technip and ISIS
belong to one group and they have interest in the same business areas, that
they wanted Coflexip to further advance their�
business activities.� ISIS was already
holding 18.17% voting capital� in
Coflexip, but Stena was holding 29.68%.�
ISIS, IFP, Technip combine� wanted
to control Coflexip and for the purpose they bought Stena�s shareholding in
Coflexip and made the acquisition through Technip, as it was not possible for
IFP to directly acquire shares and ISIS also could not acquire that much� shares as the acquisition would have resulted
in crossing� its holding above 30% bench
mark warranting public offer under French law.�
Shri Choudhary referred to the shareholders agreement dated 2.9.1994
between Stena and ISIS and other major shareholders of Coflexip and submitted
that since Stena exited there was no need for such a written agreement, as the
control came to Technip, ISIS and IFP combine.�
Learned Senior Counsel� submitted
that SEBI has failed to investigate into these aspects, and since SEBI having
failed now the Appellant has to establish the acquisition of control by Technip
ISIS and IFP combine.�� Shri Choudhary
submitted that SEBI knew the facts and it has correctly described the same in
its show cause notice dated 19.2.2002 and it has also stated clearly therein
that �after the acquisition of shares of�
Coflexip held by Stena on 12.4.2000, Technip along with person acting in
concert i.e. ISIS acquired control over 100% subsidiary of Coflexip namely
Coflexip Stena Offshore (Mauritius) Ltd. which owned 58.23% of voting capital
in SEMEC.� As a result of the aforesaid
acquisition, Technip acquired 58.23% voting capital of SEAMEC and control over
SEAMEC and triggered the provisions of regulations 10 and 12�.� He submitted�
that thus� SEBI had prima facie
come to the conclusion that Technip acquired 58.23% of voting capital of SEAMEC
and control over SEAMEC violating the provisions of regulations 10 and 12.� He submitted that the impugned order and the
show cause notice admit change in SEAMEC ownership and control.� However in the order SEBI has come to the
conclusion that the change took place only on 3.7.2001 and not on 12.4.2000,
though the correct date of change� is
12.4.2000 as is evident from the facts of the case.� In this context he submitted that in the show
cause notice the factual position has been correctly stated that Stena along
with ISIS was holding collectively 47.85% in Coflexip as on 12.4.2000, out of
which 29.68% was held by Stena and 18.17% by�
ISIS.� On 12.4.2000 Technip
had� purchased all the shares held� by Stena (single largest shareholder of
Coflexip) in Coflexip, that after the said acquisition of 29.68% shares of
Coflexip held by Stena, Technip along with person acting in concert i.e. ISIS
enjoyed 47.85% voting rights in Coflexip and with their� 6 directors on the Board of Coflexip out of
the total 11 directors on 12.04.2000�
were in a position to control Coflexip.�
The holding of 47% voting capital by Technip with ISIS is more than
sufficient to effectively control Coflexip as�
48% shares are widely dispersed among the public and there was hardly
any possibility of the said shareholders joining together to vote against
promoter holding of 47.5%.� Further,� the decision in the Board of Director�s
meetings are taken on the basis of the majority and the combine� with 6 out of 11 directors had the majority
to pass the requisite resolutions,� that
further acquisition of shares on 3.7.2001 raising Technip�s� holding in Coflexip to 99%� was only a process of consolidation of its
control � making it absolute.� He
submitted that between April 2000 to July 2001 nothing happened but control
enlarging to absolute control.� Learned
Senior Counsel submitted that in November 2001 the �nucleus� changed putting
Technip in place of IFP, that this is nothing but a restructuring �of the combine.� He submitted that Technip ISIS, IFP combine
did not bother much about the would be consequences of the acquisition of
SEAMEC as it formed only an insignificant part of the group and their focus
then was to avoid the acquisition triggering the French law that it is in that
context they missed to cover the takeover of SEAMEC and now they are trying to
extend the French law to SEAMEC�s acquisition to avoid the reach of the
Takeover Regulations. ����������� Learned Senior Counsel submitted
that SEBI�s finding that Technip, ISIS & IFP were not acting in concert is
contrary to the factual position and is baseless.� He submitted that SEBI has failed to
appreciate the correct factual position and blindly went by the submissions
made by Technip ISIS and IFP combine.� In
this context learned Senior Counsel referred to the definition of the
expression �Promoter� in regulation 2(h) that � i) ��promoter� means a person or persons who are in control of the company, or ii) person or persons named in the offer document as promoters� and submitted that IFP group is the promoter in the instant case. Learned
Senior Counsel submitted that IFP is the common promoter of ISIS and
Technip.� With reference to the SEBI�s
contention that the acquisition of 29.68% shares of Coflexip was by Technip
alone and it did not act in concert with anybody,� learned Senior Counsel referred to the
provisions of regulation 2(1)(e) and�
submitted that regulation 2 (1)(e)(1) identifies person who for a common� objective or purpose of substantial
acquisition of shares or voting rights or gaining control over the target
company, pursuant to an agreement or undertaking (formal or informal) directly
or indirectly co-operate by acquiring or�
agreeing to acquire shares/voting rights/control in the target
company.� According to the learned Senior
Counsel� regulation 2(1) (e) (1)
identifies persons acting in concert with reference to action, that regulation
2(1) (e) (2) identifies persons acting in concert with reference to their
position, that there is a presumption that the entities stated in regulation 2
(1)(e) (2) are acting� in concert and to
take the person� out of the deemed status,
it has to prove that the person is not acting�
in concert with persons in terms of regulation 2(1)(e)(1).�� In this context Shri Choudhary referred to
the factual statement in the order in para 1.19 that �ISIS is a company
organized under the laws of the French Republic.�� ISIS was promoted by IFP in 1975 as a wholly
owned subsidiary to hold its investments. ISIS was� established to manage equity holdings of IFP
in� commercial companies.� IFP retained majority control of ISIS at all
times until October 2001�� and submitted
that having said so, SEBI. based on the same set of facts, and without any
further investigation has come to a different conclusion that IFP was not
acting in concert.� He submitted that the
nature of formation, the ownership, management and the� objectives of IFP is not a factor to decide
as to whether it had acted� in concert in
terms of the Takeover Regulations.� In
this context he submitted that SEBI�s observation that �In view of the facts
and circumstances of the case including nature of functioning of IFP, a
professional body created by a decree of French Government and performing the
role of a research body, it is difficult to hold that IFP along with ISIS was
acting in concert with Technip for the purpose of acquiring shares/voting
rights/control of Coflexip so as to indirectly acquire control over SEAMEC. �It is difficult to arrive at the said
conclusion merely because IFP was the parent promoter of ISIS�.� Learned Senior Counsel submitted that there
is no clue as to how� SEBI has come to
such a� conclusion against� its own view referred to earlier, in the show
cause notice.� He� submitted that SEBI� erroneous finding is
solely based on IFP�s averments, which are contrary to the facts� on record.�
����������� With reference to the� concept of �control�, learned Senior Counsel
submitted that� control can be of two types
- dejure and defacto - that it is easy to come to a conclusion as to one
exercised dejure control over a company, but it is� not so in the case of defacto control.� The control aspect is decided on several
facts and there is no type cast formula for the purpose that it is the
circumstantial evidence that could suggest whether a person is in defacto
control of a company or not.� Shri
Choudhary submitted that there is overwhelming evidence in the instant case to
show that Technip with persons acting in concert with it was in defacto control
of Coflexip, that it is on record that the combine had 7 directors out of 12
directors on the board of Coflexip, that the strategic committee was manned by
nominees of Technip & ISIS and further that in the Annual General
meeting� of Coflexip held in May 2000,
and May 2001 Technip could exercise 54% and 57% voting rights respectively. ����������� With reference to the Respondent
Technip�s submission that if Technip had control over Coflexip, there was no
question of any� decision from Coflexip
board against the proposal mooted by Technip,�
Shri Choudhary submitted that such dissentions in the Board� meeting are not uncommon and that too in
matters involving restructuring of the group, as the beneficial interest of
other entities in the group are also involved. ����������� Shri Choudhary submitted that
regulations 10 and 12 are independent.�
He referred to regulation 10 and submitted that as per the said
regulation on Technip�s acquiring 29.68% shares in Coflexip on 12.4.2000, it
resulted� in acquisition of 17.38% of the
shares of SEAMEC as Coflexip was holding 58.24% shares in SEAMEC, that as per
regulation on acquisition of shares or voting of 15% or more of the target
company, regulation triggers.� In this
context he referred to regulation 14(1) which requires the public announcement
referred to in Regulation 10 or Regulation 11 to be made not later than four
working days of entering into an agreement for acquisition of shares or voting
rights or deciding to acquire shares or voting rights exceeding the respective
percentage specified therein. ����������� Learned Counsel submitted that even
the show cause notice states violation of Regulation 10,� but the
order is silent on the said charge, that even if the said violation is to be
abandoned, the reason for the same has to be stated in the order. Learned
Senior Counsel in support of his submissions placed reliance on the following
observation in Bhagwati Committee report on Substantial Acquisition of Shares
and Takeovers: �In the
case of acquisition of Indian listed company by virtue of acquisition of an
overseas company, the Committee� was of
the firm view that the interest of Indian shareholders should be
protected.� Such interest should not be
allowed to be compromised because the acquisition takes place through
complex/multi tier organisation structures.���
The Committee pointed out that specific amendments and explanations were
incorporated in the 1997 takeover regulations to cover such acquisitions� Learned
Senior Counsel submitted that SEBI�s order is silent on the applicability of
regulation 10 and therefore he prayed that the Tribunal decide the
applicability of Regulation 10 and pass appropriate orders.� He further�
submitted that in the light of the amendments made on 9.9.2002� to the explanation applicable to regulation
10, proportional acquisition has to be taken cognizance of.�� He referred to the provisions of regulations
10 and 12 and submitted that regulation 10 has been amended and the said
amendment explains the position clearly.�
The amendment to the explanation of regulation 11, �that for the purpose
of regulation 10 and 11 acquisition shall mean and include indirect acquisition
by virtue of acquisition of companies (need not be holding company as was
earlier ) whether listed or unlisted and whether in India or abroad�.� In support of this argument he relied on rule
in Heydon�s case (76ER 637) and�
submitted that when the material words are capable of bearing two or
more constructions the most firmly established rule for constructions of such
words of all statutes in general is the rule laid down in Heydon�s case.� He also cited State of Bihar V SK Roy (AIR
1966 SC 1995) that �It is a well recognised principle in dealing with matters
of construction that subsequent legislation may be looked at in order� to what is the proper interpretation to be
put up on the earlier Act where the earlier Act is obscure or ambiguous or
really capable of more than one interpretation�.�� Learned Senior Counsel� also cited T. Manikam & Co., V State of
Tamil Nadu (AIR 1977 SC 519) that �An amendment can be useful aid in
constructing the earlier� provision even
though such amendment is not given retrospective effect.� ����������� Learned Senior� Counsel submitted that the ratio in K. K.
Modi (2002) 35 SCL 230 (Bom) ) relied on by SEBI in its order, has no
application to the case as in the said case one promoter was seller and the
other one was an acquirer, that in the instant case it is not the case that
both promoters had a common purpose of acquiring control of Coflexip.� He referred to this Tribunal�s decision in
Ashwin K. Doshi V SEBI (2002) 40 SCL 545 (Sat) requiring SEBI to investigate
the facts so as to find out as to whether there was any change in defacto
control in the context of acquisition of 14.4% shares by the acquirer, that in
the instant case also such an investigation by SEBI was required to find� out as to whether on Technip�s acquisition of
shares in Coflexip in April 2000, there was any change in the defacto control.� He said that the Tribunal in the said case
had made it clear that �the majority holding of shares is not the decisive
factor in determining effective control.�
Such control can be had in may ways.�
If the shareholding is widely dispersed, even a factional holding of
equity can suffice to ensure control over the company.� Therefore SEBI�s finding that Ambujas with
just 14.4 per cent shareholding, not in majority were not in a position to
exercise control over the Company by itself was not a conclusive factor in that
regard.�Learned Senior Counsel submitted that in the instant case the
acquisition was 29% as against the 14% referred in the cited decision. Shri
Choudhary referred to� SEBI�s decision in
Rhodia�s case (referred to in Rhodia SA V SEBI ( (2001) 34 SCL 597) )and
submitted that it was also a case of indirect acquisition and in that case SEBI
had directed Rhodia to make a public offer to the shareholders of A & W
India and the offer price was to be calculated as per the regulations taking
the referral date as the date of acquisition of Indian company�s holding
company in U.K. ����������� Shri Choudhary also� referred to the following observation made by
the Hon�ble Bombay High Court (DB) in Shirish Finance(2002) 35 SCL 27 (citing
Kanwar Singh V Delhi Administration (1965) 1 SCR 7) that �It is the duty of the
court in construing a statute to
give effect to the intention of the Legislature.� If therefore giving a literal meaning to a
word used by the draftsman, particularly in a penal statute, would defeat the
object of a legislature which is to suppress a mischief, the court can depart
from the dictionary meaning or even the popular meaning of the word and instead
give it a meaning which will advance the remedy and suppress the mischief.� He also
referred to the following observation from the said judgement to support the
proposition that the applicable law is Indian law and� not French law. �On the
other hand, Mr. Nariman brought to our notice several American decisions only
to convince us that such orders are passed in the United States of America.� The learned Counsel for the defendants
strongly objected to our looking into those judgements which are neither
binding precedents nor had persuasive value.�
Judgements of the District Courts of the United States of American could
not be looked into by this court for determining the question whether, under
the Indian laws such a freezing order can be passed.� Mr. Chidambaram and Mr. Desai apart from
raising this objection, also sought to distinguish those judgements on
facts.� We are not persuaded to consider
those judgements, and indeed Mr. Nariman candidly submitted that those
judgements have not been produced before this court because of their binding
nature or persuasive value but for the very limited purpose of establishing
that such orders are not unprecedented, and even in other countries, such
orders are passed by the Courts�� The
Hon�ble High Court further observed that �It is not necessary for us to look
into the American Court�s decisions because the validity of such an order must
be tested by reference & law as it exists in India.� ����������� Learned Senior Counsel referred to
the Hon�ble Bombay High Court�s decision in BP Plc V SEBI (Bom) (2001) 34 SCL
469 (Bom) wherein the court �had held that the relevant date for
deciding the offer price is the date on which the acquirer decides to acquire
shares/voting rights/control and not the actual date of acquisition, that in
the instant case it is clear that the decision was taken and acted upon on
12.4.2000.� Shri Choudhary submitted that
if� SEBI�s proposition� that acquisition of foreign companies is not
to be taken cognizance of, then its observation that the Takeover regulation
triggered on 3.7.2001, is also baseless, that��
SEBI can�t take diametrically different stands on the same issue.� ����������� Learned Senior Counsel refuting� the Respondent�s allegation that the price of
SEAMEC was manipulated by few persons to benefit them,� submitted that the Appellant� is not a person who indulged in� manipulation, that� he was holding shares even before the price
hike and continued to be a shareholder even after the price fell.� ����������� Shri Choudhary referred to 2
opinions dated 15.1.2003 and 17.1.2003 from 2 French Lawyers�� filed by the Appellants in the Tribunal
and� submitted that in one of the
opinions based on detailed reasoning it�
has stated that it should be strongly inferred in the present case that
Technip did infact acquire control of Coflexip on April 19, 2000� acting both on its own, significantly through
the strategic alliance and non completion arrangements entered� into with Coflexip and other arrangements,
and also acting in concert with ISIS or other Coflexip shareholders��� that in the other opinion it has been stated
that �On and before this date (i.e. 12.4.2000) ISIS with Technip and Coflexip
were held with a �reference equity interest� in those companies by the Institut
Fracais du Petrole (French Petroleum Institute : 11.8% in Technip, 18.17% in
Coflexip and 52.4% in ISIS) which is a public entity owned by French
State.� Hence ISIS with Technip can be
held as acting de concert the latter took a 29.8% voting rights interest in
Coflexip on the 12th April 2000.�
Combination of such co-operation is decisive on Coflexip decisions since
12th April 2000 where ISIS and Technip held together 7 out of 12
members on the Board of directors.� ����������� Learned Counsel submitted that as
per the material available on record� it
is evident that SEAMEC�s control was indirectly acquired by Technip on
12.4.2000 and therefore, SEBI�s order holding the acquisition date as 3.7.2001
is untenable. ����������� The learned Counsel appearing
for� the Appellant in Appeal no.01/2003
referred to para 12 of the order passed by SEBI on 9.9.2002 and submitted that
the direction to� Technip was to make a
public announcement as required under chapter III of the Regulations� in terms of regulations 10 and 12 within 45
days of the date of the order, taking 3.7.2001 as the reference date for
calculation of offer price.� He submitted
that the public announcement� though due
by 25.10.2002� was published only on 11.11.2002. ����������� He�
referred to this Tribunal�s interim order in M. A. Sumathi Bayer
Cropscience (2003) 42 SCL 591 and�
submitted that the Tribunal therein had held that� suggestions made by SEBI to the Merchant
Banker in terms of regulation 18 is an appelable order,� that since the Appellant� is aggrieved by the said order he is entitled
to file an appeal in terms of section 15T of the Act.� In support of this contention he cited this
Tribunal�s decision in Eider E Commerce V SEBI (2001) 29 SCL 283)Grasim Industries
Ltd.,. V SEBI (2003) 42 SCL 22) and� M.A.
Sumathi V Bayer� (2003) 42 SCL 591).� Learned Counsel� referred to SEBI�s letter to J. P. Morgan
India P. Ltd., (Respondent No.2) (Morgan) dated 6.12.2002� asking them to disclose that �the offer is
made in accordance with Takeover Regulations prevailing at the time of
violation i.e. 3.7.2001.� However,
regarding provisions of withdrawal option to shareholders, disclose that�� as the same is an investor friendly measure,
the option has been provided for shareholders as detailed in the letter of
offer.� Accordingly disclose the last
date of withdrawal of acceptance in the activity schedule� Accordingly in the
public offer document it was� disclosed
that the shareholders shall have the option to withdraw acceptance tendered by
them upto three working days prior to the date of the closure of the order and
this disclosure was made in the letter of offer.� This new disclosure requirement was put in
the regulation on 9.9.2002 and not on 3.7.2001.�
He submitted that� though the
facts of the complaints received in respect of the acquisition was to be
disclosed in the offer documents, the Acquirer did not mention about the two
complaints dated 25.11.2002 and 6.12.2002 made by the Appellants, that this
omission has to be noted. ����������� The Appellant� submitted that in the public announcement
made on behalf of Technip etc.on 11.11.2002 offering to purchase 20% shares of
SEAMEC the offer price has been wrongly calculated as Rs.43.12 by taking
3.7.2001 as the reference date ignoring 11.11.2002.� In this context he referred to the interim
order passed by the Tribunal on 25.10.2002 and submitted that the Tribunal,
subject to the outcome of the appeal, had allowed the acquirer to comply with
the directions given by SEBI on 9.9.2002 subject to certain conditions and one
of such conditions was that the offer price be decided as per the
regulations.� He submitted that the
acquirer did not follow the regulations for the purpose of calculating the
price.� The Acquirer� violated the provisions of regulation 20(2)
(d) according to which the average of the weekly high and low of the closing
prices of� the target company as quoted
on the stock exchange where the shares of the company are most frequently traded
during the 26 weeks preceding the Public Announcement was to be provided, and
that the relevant public announcement on the reference SEAMEC was made on
11.11.2002 that the date of 3.7.2001 is the offer date relating to the global
acquisition.� In order to put right the
mischief of delay in public offer� by the
acquirers and to give the benefit of best price to the shareholders the
protective SEBI Regulations 1997, has clearly dealt with this by providing
regulation 20(2)(d) which puts the condition for the minimum offer price by
taking actual Public Announcement date vide amendment effected on
9.9.2002.� Thus in the cases of indirect
acquisitions whenever there is delay in public offer, higher of two prices has
to be offered taking actual public announcement and parent acquisition
dates.� This principle of higher of two
prices has been directed by SEBI in its numerous orders of indirect acquisition
viz. Castrol India Ltd., Foseco India Ltd. Albright & Wilson Ltd.,
Caprihans India Ltd., Vicker Systems International Ltd.,� and others.�
In the instant case, the parent acquisition date was July 3, 2001 and
therefore Public Announcement in India ought to have been made in the month of
July, 2001, and price would have been paid to Indian shareholders taking July
3, 2001 as the reference date. But 16 months latter the acquirers came to
Indian minority shareholders to acquire the shares stating that price will be
calculated only by taking July 3, 2001 as the reference date� totally ignoring actual Public Announcement
made 16 months later on November 11, 2002 to the� Indian minority shareholders.� This tantamounts to fixing an embargo on the
market price fluctuations subsequent� to
July 3, 2001 but in reality trading in the market does not stop and
subsequently prices can rise or fall in the course of market price
discovery.� Referring the Bhagwati
Committee intentions to factor it was submitted that� in the market price fluctuations close to the
Public Announcement for any public offer� when actual public announcement was
made,� prices were higher than price as
calculated by taking July 3, 2001 as the reference date.� Regulation 20(2)(d) clearly protect the
investors by fixing� actual Public
announcement date as one of the criteria for calculating the minimum offer
price.� Respondents are now trying to by
pass regulation 20(2)(d) and importing some meaning to regulation 20(2)(d)
which should not be allowed when the regulation is crystal clear.� In this context he referred to the sub
regulation 12 to regulation 20 brought in force on 9.9.2002 which stipulate that
�The offer price for indirect acquisition or control shall be determined with
reference to the date of the public announcement for the parent company and the
date of the public announcement for acquisition of shares of the target
company, whichever is higher in accordance with sub regulation 4 or sub� regulation 5. With
reference to BP Amoco�s judgement by Hon�ble Bombay High Court� it was submitted that if in the case of BP
Amoco the price corresponding to parent acquisition date was much higher than price
corresponding to� actual date of Public
Announcement and, therefore a case for upholding parent acquisition date
was� put up, but the facts of that case� are totally different from SEAMEC case.� In BP Amoco�
the dispute to be adjudicated was with reference to two dates of parent
company�s acquisition� viz. 14th
March, 2000 on which a conditional announcement for acquisition was made in UK
and 7th July, 2000 when all the pre-conditions were finally approved
and the offer became unconditional, that nowhere the dispute of actual date of
public announcement� was raised.�� It was further submitted that in the case of
BP Amoco price preceding 26 weeks prior to actual date of public announcement
was much lower at Rs.253 than the price preceding parent acquisition reference
date at Rs.311 or Rs.351 (as disputed).�
The dispute was between two parent acquisition dates and therefore the
judgement had to uphold either of the two parent acquisition dates and� in that circumstances the judgement was
delivered upholding the parent acquisition date.� The judgement could have never ever thought
of upholding actual date of public announcement as that price was much
lower.� However in the case of SEAMEC the
price preceding 26 weeks average prior to the�
date of actual date of public announcement is much higher at Rs.82 than
the price preceding 26 weeks average prior to the date of parent acquisition
which is Rs.43.� Therefore the facts and
disputes raised are diametrically opposite and therefore BP Amoco can not be
considered as a� precedent to� be applied to the present case of SEAMEC,
that if� some derivative principle is
imported then regulation 20 and regulation 15 will be clearly violated, that
an� interpretation which violates the
statute should never be allowed.� The following
observation made in para 6.11 of the�
Bhagwati Committee Report, which formed the very basis of 1997 Takeover
Regulations was cited. ��The Committee�
agreed that there should be a principle setting down the minimum level
of offer price as in the existing regulations.�
Laying down this minimum level of offer price was, in the opinion of the
Committee, necessary to protect the interests of investors and not discordant
with free pricing regime.��
Thus it is the intention of Justice P. N. Bhagwati Committee that there
has to be some formula to ensure atleast minimum offer price to the investors
of the Target company in order to protect the investors� interest.� This intention is incorporated in regulation
20. Thus at any point of time whenever a public offer is made� regulation 20 has to be complied with and in
the present case regulation 20(2)(d) in particular has to be complied,
that� the Respondent can not ignore the
requirement of regulation expressly provided.
It was
submitted that the amendment made in 2002 through regulation 20(12) is in the
nature of clarification/sought to remove ambiguity and that it is well
settled� that amendments can be imported
in the old regulations.� In support of
this proposition he cited the following authorities: 1)
State of Bihar V/s. S.K. Roy AIR 1966 SC 1995 pg
no.1998� (2)T. Manickam� & Co. V/s. State the T.N. AIR 1977 SC 519
pg nos 522 & 523. (3) Jeewanlal ltd, & others V/s Appellant Authority
under payment of Gratuity Act & others AIR 1984 SC 356 pg no. 364 para 11
(4) N.T. Corp Ltd., V/s. Sitaram Mills Ltd., AIR 1986 SC 1234 pg no. 1250 para
39. (5) Heydon�s Rule The
Appellant submitted that if a competitive bidder emerges, will not SEBI insist
the minimum offer price as per Regulation 20(2)(d) i.e. the price calculated as
per date of actual Public Announcement which may be somewhere in the month of
November, 2002.� In the present case the
acquirer has made the offer at Rs.43/- but the competitive bidder has to offer
minimum Rs.82/- approximately because he has to comply with regulation
20(2)(d). SEBI can not discriminate between the two in respect� of the same target company during same time.
He submitted that the guiding principle is the Equality of Treatment and
opportunity to all Shareholders as Bhagwati Committee observed. He� submitted that the Public Announcement dated
November 11, 2002 clearly states in the beginning that the Public Announcement
is made in compliance with Takeover Regulations�
and subsequent amendments thereto.�
The amended regulation 20(12) For Minimum Offer Price clearly states
that �The Offer Price for the indirect acquisition or control shall be
determined with reference to the date of the Public Announcement for the parent
company and the date of the public announcement for acquisition of shares of
the target company, whichever is higher, in accordance with sub-regulation (4)
or sub-regulation (5)�. It was also
submitted that the present case is one of indirect acquisition and SEBI has
passed the order dated� 9.9.2002 fixing
July 3, 2001 as the reference date i.e. the date of Public Announcement of the
Parent (Acquirer) for overseas acquisition.�
Regulation 20(12) requires two reference dates in case of indirect
acquisition.�� SEBI order has fixed only
one reference date i.e. the date of public announcement of the Parent
(Acquirer).� He submitted that� the Merchant Banker has erred� in the Public Announcement and has taken only
the date of Parent�s (Acquirer) Public Announcement date while they have not
considered the date of Actual Public Announcement for the Indian target Company
which is November 11, 2002.� It was
submitted that as per regulation 20(12) price of Rs.43.12 as announced
corresponds to Public announcement date of parent (Acquirer) and price of
Rs.80/- approximately which ought to have been announced� corresponds to the reference date of Actual
Public Announcement date for Indian target company, that the offer price� therefore is not as per regulations.� SEBI amended the takeover regulations with
effect from 9th September 2002. Since the Public Announcement� with reference to SEAMEC was made after that
date i.e. on November 11, 2002 it has to certainly comply with the amended
regulations.� Regulations 15(1) &
15(4) of the Takeover Regulations define that the offer shall be deemed to have
been made on the date on which the public announcement has appeared in the
newspapers that the public announcement in terms of regulation 15(1) and 15(4)
was made on 11.11.2002. Even prior
to SEBI amended the Takeover� Regulations
on 9.9.2002 it was well settled principle that in cases of indirect
acquisitions two prices of Indian target company are to be computed --� one corresponding� to Public Announcement date of the Parent
(Acquirer) and� another� corresponding to actual Public Announcement
date for Indian target company� -- and
the higher of the two prices has to be the open offer price for the
shareholders of Indian target company. The
Appellant� submitted that as per
regulation 20(12) as amended with��
effect from 9.9.2002� �the offer price
for indirect acquisition or control shall be determined with reference to the
date of the public announcement for the parent company and the date of the
public announcement for acquisition of the shares of the Target Company
whichever is higher, in accordance with sub regulation (4) or sub regulation
(5),� SEBI�s order was issued on 9.9.2002
i.e. on the same day this amendment was brought�
in force and that the public announcement for acquisition of shares of
SEAMEC was on 11.11.2002 i.e.much after the amended regulation came into
force.� He submitted that the correct
regulation to be applied in the instant case is regulation 20(12) which came
into force on 9.9.2002, and in support�
he referred to clause 5 of the General Clauses Act. ����������� It was further submitted that as per the new sub regulation 5A of regulation 22, �the shareholder shall have the option� to withdraw acceptance tendered by him upto three working days prior to the date of the closure of the offer� that�� SEBI has directed the acquirer to put this provision in the Public Announcement,� that if the provisions of regulation 5A and 20(12) are read together it is clear that referral date for the purpose of calculating the offer price to the shareholders of SEAMEC has to be 11.11.2002.� He submitted that Takeover Regulations is a beneficial legislation and therefore the provisions of the regulations are required to be interpreted keeping in view the purpose of the same. ����������� In reply to the submissions made by
the appellants in the cited two appeals, the Respondents made the following
submissions: ����������� Shri Setalvad, learned Senior
Counsel submitted that even though he is�
not giving up his objection to the locus standi of the Appellants to
file the present appeals on the ground that they are� not the aggrieved� persons in terms of section 15T and that the
SEBI�s communication dated 6.12.2002 (referred in appeal no.01/2003) is not an
appelable order, in view of the earlier decisions of the Tribunal in certain
cases referred to by the Appellants, he is not pressing before the
Tribunal� the question of locus standi,
for the time being. Shri
Setalvad referring to the Appellants� submission� that French law is inapplicable to the case,
submitted that the mergers, acquisitions and takeover of companies incorporated
in France is amenable to the French law operating in the field,� that acquisition of shares by Technip in
Coflexip, both being companies under the French jurisdiction, the applicable
law should be� the French law.� He submitted that as a result of acquisition
of 29.68% shares� of� Coflexip in April 2000 by Technip and� further acquisition� raising�
Technip�s total holding to 99% in July 2001, there was no change in the
shareholding pattern or management of the target company i.e. SEAMEC. He
submitted that the target company is
registered in India.� The events of April
2000 and July 2001 were solely in relation to French companies taken place in
France and the question involved was the internal management of Coflexip in
France, that in the said circumstances, it is incorrect to say that French law
has no application to the developments affecting the said two French
companies.� In this context he referred
to the following authorities: ����������� From the Book � Private
International Law (by Paras Diwan � former Director Indian Institute of
Comparative and Family Law and Formerly Professor and Chairman, Department of
Law, Punjab University)� ����the law
of the domicile of the company governs not only matters relating to its
constitution and dissolution and but also all other internal matters.� Thus the extent and limitations of the
liability of its members, as distinct from its own liability, what transactions
are ultravires and intravires of its powers, whether the director or some one
else would represent it in legal proceedings, its internal constitution, its
relationship with its members and relationship of members interse, powers of
alienation of its property, its merger with�
another company and like matters are governed by the law of domicile.� (emphasis supplied) He also
referred to Halbuy�s law of India (2001) in support of his submissions that the
applicable law is the French law. �[75.175] Amalgamation.
��If a foreign corporation is
amalgamated with another foreign corporation under the law of the place of
incorporation, the resultant entity will be recognised in India.� It follows as a corollary to that if the law
provides for the new corporation to succeed to the assets and liabilities of
its predecessors, it will be recognised in India as having done so.� However, the law of the place of
incorporation can not discharge the new company from the liabilities of the old
except by the law applicable to the contract giving rise to those liabilities.� [75.178] Powers
of Foreign Corporations.�� The powers
of a foreign corporation are defined and governed by its constitution as
interpreted by the law of its place of incorporation.� Its powers in relation to a particular
transaction may also be limited by the law of the country which govern the
transaction in question.� However, it
does not follow that if the transaction is ultravires the corporation, it must
be void.� The effect of this lack of
capacity on the validity of the transaction is a matter for the law which
governs the transaction in question.� Learned Senior
Counsel also referred to the Privy Council decision in Carl Zeiss Stiftung Vs.
Reyner & Keeler Ltd., (1967) AC 853: �That,
although, the German Democratic Republic is not recognized by her Majesty�s
Government, its acts should be recognized by the� English Courts as lawful, not as the acts of
a sovereign state, but as acts done by a subordinate body which the USSR set up
to act on its behalf, since a dejure governing body can not disclaim
responsibility for the acts of subordinate bodies set up by it.� �That
questions relating to the constitution of a foreign corporation should be
decided according to the law of the place where it is incorporation and since,
on the evidence every court in the Eastern Zone of Germany would hold that the
Counsil of Gera was the special board of the foundation, the courts of another
jurisdiction are debarred from deciding the question in any other way.� Shri
Setalvad referred to the opinion relied on by Shri Bharucha in the earlier
batch of appeals and submitted that in those opinions it has been clearly
stated that various laws and regulations referred to the notion of control in
France e.g. control under corporate laws, control under accounting regulations
and control under concentration law.� In
this context he referred to the following observations in the opinion: �
The mere percentage of voting stake does not itself
suffice to demonstrate the existence of defacto control.� In order to control a company (i) a
shareholder has to have decisive influence on the outcome of the vote (ii) such
influence has to be established over a period of time i.e. for several general
meetings.� Should general meeting
decisions be voted unanimously, such decisive influence would not be
established.� Since Technip�s majority at
the Coflexip�s general meeting took effect in May 2000 only, it seems that the
condition of several general meetings may not be established. �
Concert is a question of fact and such concert could
result from the information such as the minutes of the Coflexip�s board, any correspondence
(letters, e mails, fax, notes etc. exchanged between Technip and/or ISIS and
Coflexip�s management and or Coflexip�s shareholders. Shri Setalvad referred to several
other portions of the opinion also and submitted that the opinions relied on by
the Appellants do� not support their
contention on control and concerted action.�
He submitted that in the said legal opinion it has been stated that
�should the control of a listed company have consequences regarding stock
market regulations, the COB would have to bring legal proceedings in order to
ensure that the existence of control over one or more companies is recorded and
then, if necessary, would have to apply these regulations.��� The fact that COB has not taken any legal
proceedings in the matter shows that there was no change in control.� He submitted that no evidence in support of
the alleged concerted action has been produced.�
In this context learned Senior Counsel referred to the Declarations of
Threshold Crossing and Statement of Intent filed by Technip on 4.5.2000 before
the Council of Financial Markets and submitted that the Council did� not consider it necessary to take any adverse
action against Technip, that� is to be
noted that Council is an authority vested with powers and not a mere
publication set up.� In� this context he referred to the submission
made by him earlier regarding the role and authority of the Council.� He submitted that French law is manifestly
applicable and CFM and COB, are duty bound to protect the interest of investors
and if there had been any thing unacceptable in the declaration/Statement of
Intent, they would have certainly proceeded against Technip in the matter.�� He submitted that SEBI has rightly recorded
in para 5.3.11 of the order that �It is also observed that� the aforesaid documents have been filed with
the French Market Authority (Conseil des Marches Financiers) which made them
public on 4.5.2000 and with the Stock Exchange Commission (COB).� The Conseil des Marches Financiers,
thereafter issued a public notice dated 4.5.2000 recording and accepting the
statements made hereinabove.�� Learned
Senior Counsel referred to� the legal
opinion dated 24.2.2003 filed by Technip and submitted that the said opinion
has countered the view of the 2 French lawyers relied on by the Appellant.� He also referred to the conclusion arrived at
by Technip�s French Lawyers that �Based on the facts made known to us as
summarised above and on the applicable provisions of the French Companies Act
as at the time of that purchase, we would conclude that the ownership of a
29.68% equity interest and the appointment of 4 directors to the Board of
Coflexip would not suffice to constitute control by Technip over Coflexip, and
that in the absence of other factual elements of which we are not aware,
Technip did not in the period from April 2000 to October, 2001 hold control
over Coflexip within the meaning of French Company Law�. ����������� With reference to the Appellants�
version that Technip had acquired shares at a higher price than the market
price and the difference was the control premium, Shri Setalvad reiterated his
submission in the earlier appeals.� He
submitted that control premium means �a premium paid for shares carrying the
power to control a corporation.� The
control premium is often computed by comparing the aggregate value of the
controlling block of shares with the cost that would be incurred if the shares
could be acquired at the going market price per share�.� Shri Setalvad also reiterated his submissions
in the other appeals to establish that there was no change in control and
that� Technip, ISIS and IFP did not act
in concert.�� He� also referred to the averments made in this
regard in the Technip�s reply.� He
submitted that the Appellant� Counsel�s
submission that Technip and ISIS belong to IFP is based on the wrong
appreciation of the facts, and� referred
to the formation, ownership, management and objectives of� IFP�
and the French Government�s involvement and submitted that there is no
such IFP group as has been stated� by Shri
Choudhary � that IFP is an independent non commercial set up, that if
Choudhary�s contention is accepted for argument�s sake that IFP group existed
then there was no change in shareholding of Coflexip as it was all intra group
transactions.� He further submitted that
to say that the French Government and the market authorities established under
French law are not independent is very unfair and the said submission should
not be entertained at all. ����������� Learned Senior Counsel submitted
that the Counsel has brought in several matters which are not raised in the
appeal, that� a plea as not raised in the pleadings can not be taken up subsequently,
that no amount of proof can substitute pleadings which is the foundation of
claim of a litigating party.� In support
of the proposition he referred to Hon�ble Supreme court in Abubakar Abdul
Inamdar Vs. Harun Abdul Inamdar (AIR 1996 SC 112) ����������� With reference to Shri Choudhary�s
argument on the admissibility of regulation 10 and computation of acquisition
of SEAMEC shares on a prorata basis learned Senior Counsel submitted that there
is no scope for such an interpretation of the regulation� at all, that�
while putting forth the said proposition the Counsel� has ignored�
the explanation to regulation 11 that: For the
purposes of regulation 10 and regulation 11 acquisition shall mean and include: (a)
direct acquisition in a listed company to which the
Regulations apply (b)
indirect acquisition by virtue of acquisition of
holding companies, whether listed or unlisted whether in India or abroad He
submitted that in terms of clause(b) at the relevant� point of time (before the amendment effected
on 9.9.2002) for indirect acquisition holding company was required to be
acquired� that acquiring 29%� voting capitals in the present case can not
be considered as acquisition of holding company and therefore reguilation 10 is
not attracted as alleged.� ����������� Shri Setalvad referred to the
provisions of regulation 12 and submitted that the said regulation�s scope is
limited to acquisition of control over target company, that target company is
SEAMEC and there was no change in its shareholding pattern or management
pattern and so no change in control.�
Therefore it can not be said that�
Technip acquired control over SEAMEC so as to attract the provisions of
regulation 12. With
reference to Shri Choudhary�s submission that what is stated in the show cause
notice has not been rebutted, Shri Setalvad submitted that what is stated in
the show cause notice is only a broad prima facie opinion, that the notices are
drafted on the basis of the limited information available at that point of time
and on receiving further information and clarification/explanation on the same
set of facts, the authority issuing the notice is free to take a view at
variance with what was stated in the show cause notice.� SEBI on receiving the details� in response to the show cause notice
considered all the relevant facts and reached at the conclusion as recorded in
the order and therefore, the charge of non application of mind can not survive. Learned
Senior Counsel submitted that the� only
basis of the appeal no.01/2003 is that the offer price should have been
calculated under the Takeovers Regulations, as amended with effect from 9th
September, 2002, merely because the public announcement was made after that
date.� He submitted that this
submission� is untenable, as the
amendment cannot affect the liabilities incurred by Technip on 3rd
July, 2001 and the obligation of Technip to comply with the order dated 9th
September, 2002, consequent upon a show cause notice dated 19th
February, 2002, issued to Technip� and an
exemption application filed by Technip dated 26th June, 2002, all of
which were before the amendment came into force. In this connection, it was
submitted� that if the Appellant�s
argument is accepted that would amount to giving retrospective effect to the
amended Regulation as it would necessarily involve Technip being required to
do, with reference to the acquisition of Coflexip in July, 2001(much before the
amended Regulation), what they were not required to do under the 1997
Regulations (which were in force in July 2001), that whilst section 30 of the
Act empowers SEBI to make regulations, and whilst section 21 of the General
Clauses Act, 1897 empowers the SEBI� to
amend such regulations from time to time, and no power is conferred on it
either expressly or by necessary implication, to make regulations with
retrospective effect.� Consequently, SEBI
can not confer retrospective effect on any regulation.� In support of this contention the following
authorities were cited: Income
Tax Officer, Alleppey vs. M.C Ponnoose, AIR 1970 S.C.385; Cannanore spinning
& Waving Mills Ltd., Vs. Collector of Customs & Central Excise, Cochin
A.I.R. 1970 S.C. 1950.� Hukam Chand Vs.
Union of India, A.I.R. 1972 S.C. 2427; and�
Commissioner of Income-tax, U.P. vs. Bazpur Cooperative Sugar Factory
Ltd., A.I.R. 1988 S.C. 1263. It was
further submitted� that regulation 23 of
the SEBI Amendment Regulations, 2002 does not even purport to make the amendment
regulations retrospective; its effect is merely to repeal and re-enact the
earlier regulations.� In such a case, the
principle of section 6 of the General Clauses Act, 1897, applies so that any
rights acquired or liability incurred before the amendment becomes effective
and the same is not affected by the amendment. In support of this he cited� (Gajraj Singh vs. State Transport Appellant
Tribunal, A.I.R. 1997 S.C. 412, 421 and Bhagat Ram Vs. Union of India AIR 1988
SC 740).� Regulation 23 of the Takeover
Regulations Amendment merely provides that whatever had been done under the
unamended regulations would be deemed to have been done under the corresponding
provisions of the amended regulations.�
The effect of this provision in the saving clause in the Amendment
Regulations, 2002 does not affect the liabilities incurred before the amendment
became effective; such liabilities are kept alive. In support of this he
cited� P. V. Mohammad Barmay vs. Director
of Enforcement. A.I.R. 1993 S.C. 1188, 1192.�
The rights of the parties are concerned by the law as it existed at the
time the proceedings were� commenced and
amendment of the law during the currency thereof is irrelevant. This position
has been made clear in� Bakor Moti Pagi
vs Iswar Thakur A.I.R. 1935 Bom 257.�
Thus amended Regulation 20(12) of the Takeover Regulations cannot be
applied to the present case.� In so far
as the contentions of the Appellants are concerned viz. that Technip was
required even under the unamended regulation to take the higher of the two
prices, namely, that calculated with reference to 3rd July, 2001 and
that calculated with reference to11th November, 2002 the same are clearly
fallacious for the� reasons that the same
are contrary to the Order dated 9th September, 2002 passed by the
SEBI and the Order dated 25th October, 2002 passed by this Hon�ble
Tribunal that there� was no provision
under the unamended regulation requiring any acquirer to take the higher of the
two prices, namely, the price� calculated
with reference to the date of the global announcement and the Indian public
announcement.� It has been held by both
the� Tribunal as also the Hon�ble High
Court in the case of BP plc vs. SEBI that the reference date for the purpose of
determining the price of the open offer is the date on which the public
announcement ought to have been made under Regulation 14 i.e. the date of the
global public announcement.� Thus, the
price has been correctly ordered to be calculated taking 3rd July,
2001 as the reference date that the shareholders have been duly compensated by
SEBI for the delay in making the public announcement by requiring
Technip-Coflexip to pay 15% interest for the period 1st November,
2001 till the date of actual payment.�
Accordingly, interest has been paid in compliance with order of SEBI and
this� Tribunal and thus no prejudice is
caused to any shareholders as the same has been suitably compensated.� It was submitted that the illustration relied
upon by the Appellants in respect of the earlier orders passed by SEBI requiring
the acquirer to make an open offer at the higher of the two prices are clearly
misleading as the same are either orders passed before the decision of the
Bombay High Court in BP plc relating to the determination of the reference date
and the decision of the Bombay High Court in the case of BP plc. upholding the
levy of interest.� The case of Aventis
Crop Science (MA. Sumathi) referred to by the Appellants, is� the case where the acquirer voluntarily chose
to make an offer at a higher price although its was not statutorily required to
do so is clear from a mere reading of its letter of offer.� The same is wholly irrelevant to the facts of
the present case. It was submitted that in sofar as the SEBI Act being
beneficial to the shareholders is concerned, when the shareholders have been
suitably compensated by payment of interest, the Act or the Regulation cannot
be interpreted in a manner as that� would
be inconsistent with the Regulation only so as to justify a higher price.
Insofar as the directions of SEBI requiring Technip to apply the amended
Regulation 22(5A) is concerned, Technip though not bound to comply with it
agreed to do so as it was a procedural requirement and� an investor friendly measure, not having any
adverse financial implications, that the same cannot be used to apply by
analogy to the other provisions of the amended regulations or to suggest that
the amended regulations are applicable to the present case. ����������� Shri Bhattacharya, learned Counsel
appearing for IFP reiterated� his version
regarding the role, status, object etc. of IFP and ISIS and submitted that IFP
is a French Government Organization and not doing any commercial activities and
therefore� it is incorrect to say that it
was a part of the combine desiring to take over the control of a Coflexip.� He submitted that IFP by no standard can be
considered as person acting in concert with others and it did not share
commonality of objective of acquiring control over Coflexip by Technip.� He refuted Shri Choudhary�s� argument that IFP and ISIS are under the same
management and as such deemed to be acting in concert, and submitted� that such an argument is incredible in the
facts and circumstances of the case.� He
referred to the opinions from the French legal firm relied on by Shri Setalvad
and submitted that the correct legal position as recorded in those opinions be
accepted , that whether Technip acquired control over Coflexip in France is not
a matter to be decided in accordance with Indian law, that it is a matter to be
decided as per the French law.� He
referred to the opinions from the French legal firms relied on by the
Appellants and submitted that those opinions do not give any reasons and no
firm view has been expressed therein, that in any case there is nothing to show
that IFP acted in concert with Technip for acquiring shares/control of
Coflexip. He also submitted that the French Market Authority had accepted the
Technip�s statement that it had acted alone and not acted in concert with
anybody. Shri Zal T.
Andhyarujina, learned Counsel submitted that the Appellant has unnecessarily
dragged Morgan by impleading as a Respondent in appeal no.01/2003.� He submitted that the presence of the
Respondent Morgan is not necessary for the full and proper determination of the
present matter and therefore it is neither a necessary nor a proper party to
the present proceedings, that the submissions in this regard are supported by
this Tribunal�s order in M.A. Sumathi where in similar facts and circumstances
the Tribunal had held that the Merchant Banker to a public issue is not a
necessary and/or proper party to such appeals.�
He submitted that the appeal is not maintainable, that the appeal
impugnes the directions given by
SEBI in its letter dated 6.12.2002, that those directions are consequential to
SEBI�s earlier order dated 9.9.2002 and the interim order of this Tribunal
dated 25.10.2002.� He submitted� that till such time as SEBI�s earlier order
is quashed and the Tribunal�s interim order is vacated, the same remain binding
on the parties in the present appeal. The Appellant has not challenged SEBI�s
order dated 9.9.2002 and the Tribunal�s�
interim order dated
25.10.2002.� Learned Counsel submitted
that the Appellant can not be considered as a person aggrieved by SEBI�s
communication dated 6.12.2002, so as to be entitled to file an appeal under
section 15T of the SEBI Act.� Learned
Counsel submitted that in the present proceedings, the Appellant has failed to
bring out any cause of action� against
Morgan.� In this context he referred to
para 12.1 and 12.2 of SEBI�s order dated 9.9.2002 and para (i), (ii) and (iv)
of the Tribunal�s interim order dated 25.10.2002 and submitted that the
Respondent had to comply with the directions�
as per the said orders and it did effectuate those directions.� He submitted that the SEBI�s order and the
Tribunal�s� directions to Morgan was to
take 3.7.2001 as the referral date for calculating the offer price and the
Respondent did go by the said directions,�
that the Tribunal in its interim order had directed the acquirer to
strictly comply with its directions.� He
submitted that in terms of the�
order� of SEBI and Tribunal, it
was incumbent upon Technip to make the said public offer by taking 3.7.2001 as
the reference date.� He submitted that
SEBI�s directions in the communication dated 6.12.2002 is in exercise of the
powers under regulation 18 and SEBI had in the said letter cautioned the
Respondent that any failure to carry out the suggested changes in the offer
document would result in appropriate action being taken by SEBI.� Learned Counsel submitted that Morgan has
fully complied� with� SEBI�s order dated 9.9.2002 read with the
interim� order of the Tribunal dated
25.10.2002 and the consequential changes and clarification issued by SEBI by
its letter dated 6.12.2002, that Morgan has committed no breach of the
orders/directions and the concerned Regulations.� He submitted that the provisions of the
regulation 18 of the Takeover Regulations are mandatory in character and the merchant
banker is duty bound to carry out the changes and clarifications suggested by
SEBI pursuant� thereto, that any failure
and neglect to carry out� SEBI�s
directions in this regard would have resulted in penal action against the
Respondent.� He referred to this
Tribunal�s interim order in M.A. Sumathi and submitted that the Tribunal had
held that both the Merchant Banker and the Acquirer are� bound to carry out SEBI�s �suggestions� and
�directions� issued pursuant to regulation 18. Learned
Counsel submitted that the relevant regulation for the purpose of determining
the reference date and the minimum offer price in the issue is the 1997
Regulations as it stood on 3.7.2001, that the amendments made therein
subsequently pursuant to the notification�
on 9.9.2002 do not have retrospective effect and accordingly are not
relevant.� He submitted that provisions
brought in to the regulation vide amendment effected on 9.9.2002 are plain and
unambiguous and do not purport to have retrospective effect,that even if it is
assumed that it is a� beneficial legislation,
it is well settled that relevant provisions must be literally construed.� In support of the� proposition he cited Shyam Sunder & Ors.
V Ramkumar & Anr. (2001) 8 SCC 24.�
Learned counsel submitted that in any case no action lies against Morgan
and the appeal is baseless and be dismissed. Shri Kumar
Desai, referred to the provisions of regulation 20(12) and 14(4) as stood prior
to the 2002 amendments and after the amendments.� He submitted that since there were practical
difficulties in complying with the provisions of regulation 14(4) 3 months�
time has been now provided in regulation 14(4) for compliance.� He submitted that the manner of price
determination in terms of regulation 20(12) was put consequential to the
amendment effected to regulation 14(4).�
He referred to the observation in para 12.2 of the order that �The
public announcement in the instant case ought to have been made taking 3/7/01�
as the reference date is to be noted. Countering
the Appellant�s contention that the regulation as amended as on 9.9.2002 is the
applicable regulation, Shri Desai submitted that the regulation� has no retrospective application.�� The subject acquisition relates to a period prior
to 9.9.2002 and, therefore, the regulation as was in position on the date of
acquisition is the relevant one and not the one as amended on 9.9.2002.� He submitted that after Hon�ble Bombay High
Court�s order dated 8.8.2001 in B.P.plc, SEBI has been consistently taking a
stand� that the price be decided with
reference to the date on which the�
obligation to make open offer arose.��
He submitted that in the said B.P.plc case the Hon�ble High Court had
held that date on which the obligation arises to make a public offer is the
relevant date, that there is no justification to take a different date for
calculation of the price in the instant case.�
Learned Counsel submitted that offer price is decided taking a base date
and following the formula provided in the regulation and that� SEBI is not the person who decides the
prices, that the price is decided as per the regulations.� In this context he referred to prayer in
appeal no 01/2003 and submitted that the Appellant is praying for a direction
to refix the offer price.� He referred
to� the prayer seeking direction to SEBI
to initiate action against Merchant Banker under regulation 45, and submitted
that the Tribunal is not the forum to seek such a relief.� He also referred to para (f) of the prayer
that �In case the Tribunal later comes to the conclusion while adjudicating
appeal nos. 79, 80, 85, 91 all of 2002, that April 12, 2000 is the correct date
and not July 3, 2001, the said finding will only lead to shareholders receiving
further balance of offer price (since the price as per reference date of April
12, 2002 is higher than the price as per the reference date of November 11,
2000) and therefore, the question of refund will not arise.�� He submitted that this is not a prayer but a
statement.� Shri Desai submitted that the
Appellant in appeal no. 01/2003 having not challenged SEBI�s order dated
9.9.2002 in appeal, can not challenge the letter of SEBI dated 6.12.2002 which
is not an order, that if he is aggrieved by the�
interim order of the Tribunal dated 25.10.2002 then he should have
appealed against it, that since he has failed to appeal against the base
orders, he is not entitled to file the present appeal. ����������� With�
reference to Shri Choudhary�s submission that regulation 10 is
attracted, he referred to the Explanation under regulation 11 and submitted
that unless there is an acquisition of the holding company there is no indirect
acquisition triggering regulations 10 and 11, that in the instant case there
was no acquisition of� SEAMEC�s holding
company on 12.4.2000 and as such there was no acquisition of SEAMEC on that
date.� He submitted that when the
statutory authorities of France had accepted that there was no acquisition of
control, and that the transaction had taken place in France and the companies
involved are also French companies, SEBI is right in accepting� the French authorities� decision and SEBI did
so.� In this context he referred to paras
5.3.9 to 5..3.13, 5.3.17 to 5.3.20 in the impugned order and submitted that
SEBI has stated the reasons as to why it considered that the French law is
applicable and viewed that there was no acquisition of Coflexip on
12.4.2000.�� He submitted that since SEBI
has decided that Technip, ISIS and IFP were not acting in concert, it can not
be said that there is no rebuttal of the presumption that the said three
entities were acting in concert. Shri Desai
referred to regulation 12 and the definition of the expression target company
in regulation 2(o) and submitted that the expression �company� used in these
regulations is companies registered in India.�
With� reference to the amendment
to� the Explanation to regulation 12,
Shri Desai submitted that the explanation is making some thing explicit which
is otherwise implicit.� He submitted that
regulation 12 triggered only when change in control has taken place in the
target company, that there was no change in control in SEAMEC on 12.4.2000. With
reference to Shri Choudhary�s argument on proportionate acquisition of
shares� of SEAMEC, he submitted that
since there was no acquisition of SEAMEC�s holding company, the question of
acquisition of SEAMEC did not arise.� He
further submitted that there is no provision in the regulation which recognises
proportionate acquisition, as put forth by Shri Choudhary.� Shri Desai submitted that this is a new
factor being read into regulation 10 which is not permissible. He submitted
that the Appellant�s contention that IFP being a French Government sponsored
set up, the market authorities� under the
French Government did not take seriously the conduct of IFP, is without any
basis and should not be accepted and further that the Appellant has brought in
this new ground only at the time of argument which is not in the pleading. With
reference to the Appellant�s reliance on Ashwin K. Doshi�s case the learned
Counsel submitted that the Tribunal ordered further investigation in that case
to ascertain whether control was really acquired by the acquirer with reference
to certain facts, that in the instant case there is no dispute or paucity of
facts and therefore no further investigation was considered necessary by SEBI.� He submitted that the facts are now before
the Tribunal as well and a decision based thereon can be taken by the Tribunal. I have
carefully considered the arguments advanced by the Counsel for the parties and
the material available on record.� In all
the 8 appeals the main grievance of the Appellants is common.� According to them the price offered by
Technip to the shareholders of SEAMEC , the Indian target company vide the
public offer made is low.� According to
them the offer price was wrongly calculated by taking a wrong reference date,
contrary to the regulations.� It is� noted that regulation 20 of the Takeover
Regulations prescribe the manner in which the minimum price is to be calculated
when an acquirer makes a public announcement to acquire shares of the target
company, in terms of regulations 10,
11 and 12.� It is� noted that SEBI� vide its order dated 9.9.2002 had directed
Technip to make a public offer to the shareholders of SEAMEC at a price
calculated� by taking 3.7.2001 as the
reference date for the purpose. Technip was also directed to pay interest at
the rate of 15% to the shareholders of SEAMEC from 1.11.2001 till the date of
actual payment of consideration for the shares to be tendered and accepted in
the offer to be made in terms of SEBI�s direction.� Technip accepted the order and in� compliance thereof made a Public� Announcement to acquire 20% of the voting
capital of SEAMEC.� Public Announcement
for the purpose was made on 11.11.2002.�
According to the Appellants 3.7.2001 is not the relevant date for the
purpose of calculating the offer price.�
According to them it should be 12.4.2000.� One of the Appellants (appeal no 01/2003) has
taken an alternate stand that in case for any reason 12.4.2000 is not
considered as the correct relevant date, 11.11.2002 be taken as the relevant
date and the price be calculated accordingly.�
The �relevant date� is very relevant� for the purpose of calculating the offer
price in the instant case� as the offer
price per share depends on the date chosen in view of the wide fluctuation in
the market price of the scrip during the relevant periods. According to� the information furnished by the parties, if
3.7.2001 is taken as the relevant date the offer price per share would be
around Rs.43/-� If� 11.11.2002 is taken as the relevant date the
price would be around Rs.82/-�� If� 12.4..2000 is taken as the relevant date the
price would be around Rs.210/- or so.�
Further� it is also noted that the
quantum of interest to be received by the investors also has a bearing on the
choice of the relevant date as the same extends or curtails the period for
which interest is receivable.� According
to the Appellants in all respects they would benefit more on accepting
12.4.2000 as the relevant date. The short
delay involved in filing appeal nos 105/2002, 119/2002 and 01/2003, after
taking into consideration the reasons put forth by the Appellants is
condoned.� The Appellants� eligibility to
file the appeals was also questioned on the ground that they are not persons
aggrieved by the order, and the order is not directed to them.� It is not in dispute that the Appellants� are the shareholders of SEAMEC.� According to them they are aggrieved by� SEBI�s�
order in as much as the said order by choosing 3.7.2001 as the reference
date for calculating the offer price, has deprived them of their legitimate
right to get the legitimate price and exit from the target company on Technip
acquiring control over target company.�
This Tribunal in the past had admitted appeals filed by the shareholders
of target companies claiming to be aggrieved by�
SEBI�s orders (Eg. Grasim Industries Ltd.,� M. A. Sumathi and several other cases)in the
context of acquisition of shares/voting rights/control of companies.��� I do not see any reason to take a different
view in these appeals. The Tribunal had also viewed� in several cases (Eg. M.A. Sumathi) that the
directions issued by SEBI under regulation 18 are also appelable orders if as a
result of such direction the shareholders are aggrieved.� Some of the Appellants had alleged that the
impugned order was passed without following the principles of natural
justice.� This allegation in my view is
not supported by facts.� On the contrary
the evidence on record indicates that the Appellants were given opportunity to
put forth their views in the matter.� The
�Absent documents� referred to by Shri Bharucha, in my view are not that
relevant to decide the issues involved in these appeals. The
Appellants had in their appeals prayed for�
interim stay order in the context of the Respondent�s direction to
Technip to make a public offer within the time frame specified in the
order.� The prayer for interim order was
considered and an order was passed on 25.10.2002.�� Vide the said interim order the Tribunal had
allowed Technip to make a public offer subject to certain conditions.� The details of the said interim order with
the conditions stipulated therein have been set out� to in the earlier part of this order. ����������� Coflexip SA, a company organised
under the French law was the ultimate holding company of SEAMEC till Technip
acquired control over the said Coflexip SA..�
Indirectly, through its subsidiaries Coflexip SA was holding 58.24% of
the voting capital of SEAMEC.� It is
noted that there are� three intermediary
subsidiaries in between Coflexip SA and SEAMEC i.e. Coflexip Stena Offshore
(Mauritius) Ltd., which directly held 58.24% voting capital of SEAMEC. Coflexip
Stena Offshore (Mauritius) Ltd., incorporated in Mauritius is a wholly owned
subsidiary of Stena Offshore (Jersey) Ltd., which is incorporated in Channel
Islands.� Stena Offshore (Jersey) Ltd. ,
is a wholly owned subsidiary of Coflexip Stena Offshore NV (Netherlands)
incorporated in Netherlands.� The said
Netherlands company� is a wholly owned
subsidiary of Coflexip SA, France.�
Coflexip SA provides sub sea development systems for offshore oil and
gas industry.� Technip SA is also a
public limited company organised under the laws of the French Republic.� Technip is also stated to be engaged in the
business of design and construction of petroleum and petrochemical
facilities.� Coflexip and Technip have
common business interest in the petroleum sector.� In April
2000, in Coflexip SA, public share holding was 48.6%, Stena� was holding 29.6%, ISIS 18.1% Elf Atochem 2.7%
and Employees etc. 0.7%.��� On 12.4.2000
Technip acquired the entire holding (29.6%) from Stena and also appointed four
of its nominees thereafter on the Board of Coflexip comprising 12 members.� It is the said acquisition, which made the
Appellants agitate alleging that Technip acquired control over Coflexip SA and
consequently SEAMEC also, warranting Technip to make a public offer to the
shareholders of SEAMEC to purchase their shares at a price not lower than the
price calculated in terms of regulation 20, taking 12.4.2000 as the relevant
date.� But the Respondent�s stand is that
there was no change in Coflexip�s control on 12.4.2000� that actually the change in control took
place only on 3.7.2001 i.e. the date on which Technip made the open offer to the
shareholders of Coflexip SA as a result of which Technip�s holding increased
from 29.6% to 98.36% of the voting capital of Coflexip SA, that it was only on
acquisition of shares in the said public offer resulted in change in control of
SEAMEC�s holding company, warranting a public offer to be made to the
shareholders of SEAMEC to acquire their shares and for the purpose of
calculating the offer price the reference date was 3.7.2001.� The public offer to the shareholders of
SEAMEC was made on 11.11.2002.��
Appellant in appeal no.01/2003 had argued that in case 12.4.2000 is not
considered� as the� relevant date 11.11.2002 should be taken as the
relevant date being the date of public announcement made� in India by Technip,� making public offer to the shareholders of
SEAMEC. Before
proceeding further in the matter, it is felt necessary to have a look at the
governing regulatory provisions applicable to substantial acquisition of shares
and takeovers having a bearing on the�
issues involved in the present appeals.�
In terms of section 11(1)(h) of the Securities and Exchange Board of
India Act, 1992 (the SEBI Act) one of the functions of the Respondent SEBI� is regulating substantial acquisition of
shares and takeover of companies.� For
the purpose SEBI has notified the Takeover Regulations.� These Regulations provide certain ground
rules to be followed by the concerned parties in the matters relating to
substantial acquisition of shares and takeovers.� The objective of the regulation is to provide
an orderly framework within which the process of substantial acquisition of
shares/control could be conducted.� In
the Justice Bhagwati Committee Report, based on which the Regulations have been
drafted, it has been stated that the Regulations for substantial acquisition
and takeovers should operate principally to ensure fair and equal treatment of
all shareholders in relation to substantial acquisition of shares and takeovers
and� the Regulations should ensure that
such process do not take place in a clandestine manner without protecting the
interest of the shareholders. Regulations
10, 11 and 12 are core regulations.�
Regulations 10 and 11 require the acquirer acquiring the shares beyond
the prescribed limit to make a public announcement to acquire shares of the
target company from the other�
shareholders� in accordance with
the Regulations.� While regulations 10
and 11 deal with substantial acquisition of shares, regulation 12 is on the
acquisition of control over the target company.�
The applicable regulations as they stood in the year 2001 are extracted
below for ready reference. According to regulation
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 percent 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� Regulation 11 is on
creeping acquisition.� It has no
application to the instant case.� But the
explanation thereunder is relevant.�
Regulation 11 with Explanation thereto is as follows: According to regulation 11 1) ������� No acquirer
who, together with persons acting in concert with him, has acquired, in
accordance with the provisions of law, 15% or more but less than 75% of the
share or voting rights in a company, shall acquire, either by himself or
through or with persons acting in concert with him additional shares or voting
rights entitling him to exercise more than 10% of the voting rights, in any
period of 12 months unless such acquirer makes a public announcement to acquire
shares in accordance with the Regulations. (2)
No acquirer who, together with persons acting in
concert with him has acquired, in accordance with the provisions of law, 75% of
the shares or voting rights in a company, shall acquire either by himself or
through persons acting in concert with him any additional shares or voting
rights, unless such acquirer makes a public announcement to acquire shares in
accordance with regulations. (3)
Notwithstanding anything contained in regulations 10,
11 and 12, in case of disinvestment of a Public Sector Undertaking, an acquirer
who together with persons acting in concert with him, has made a public
announcement, shall not be required to make another public announcement at the
subsequent stage of further acquisition of shares or voting rights or control
of the Public Sector Undertaking provided:- (i)both
the acquirer and the seller are the same at all the stages of acquisition, and (ii)disclosure
regarding all the stages of acquisition, if any, are made in the letter of
offer issued� in terms of Regulation 18
and in the first public announcement. Explanation.�For
the purposes of regulations 10 and regulation 11, acquisition shall mean and
include,-- (a)
direct acquisition in a listed company to which the
regulations apply; (b) indirect acquisition by virtue of acquisition of holding companies, whether listed or unlisted, whether in India or abroad. According to regulation
12: �Irrespective of whether or not there has been any acquisition of shares or voting rights in a company, no acquirer shall acquire control over the target company unless such person makes a public announcement to acquire shares and acquires such shares in accordance with the regulations. Provided that nothing contained herein shall apply to any change in control which takes place in pursuance of a resolution passed by the shareholders in a general meeting. Explanation: (i) For the purpose of this regulation, where there are two or more persons in control over� the target company, the cessor of any one such person from such control shall not be deemed to be a change in control of management nor shall any change in the nature and quantum of control amongst them constitute change in control of management: Provided however, that if the transfer of joint control� to sole control is through sale at less than the market value of the shares, a shareholder meeting shall be convened to determine the mode of disposal of the shares of the outgoing share holder, by a letter of offer or by block transfer to the existing share holders in control in accordance with the decision passed by a special resolution.� Market value in such cases shall be determined in accordance with regulation 20. (ii) Where any person or persons are given joint control, such control shall not be deemed to be a change in control so long as the control given is equal to or less than the control exercised by person(s) presently having control over the company. The expression �acquirer� has been defined in regulation 2(1)(b) as follows: �Acquirer� means any person who, directly or indirectly, acquires or agrees to acquire shares or voting rights in the target company, or acquires or agrees to acquire control over the target company, either by himself or with any person acting in concert with the acquirer.� The
expression �control� has been defined in regulation 2(1) ( c) as follows: ����������� � Control� shall include the right to appoint� majority of the directors or to control the management or policy decisions exercisable, by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their share holding or management rights or share holders agreements or voting agreements or in any other manner� ��Person acting in concert� has been defined in regulation 2(1)(e) as follows: (e) �person acting on concert� comprises .� (1) persons who, for a common objective or purpose of substantial acquisition of shares or voting rights or gaining control over the target company, pursuant to an agreement or understanding (formal or informal), directly or indirectly co-operate by acquiring or agreeing to acquire shares or voting rights in the target company or control over the target company, (2) without prejudice to the generality of this definition, the following persons will be deemed to be persons acting in concert with other persons in the same category, unless the contrary is established: (i) a company, its holding company, or subsidiary or such company or company under the same management either individually or together with each other; (ii) a company with any of its directors, or any person entrusted with the management of the funds of the company; (iii) directors of companies referred to in sub-clause (i) of clause (2) and their associates; (iv) mutual fund with sponsor or trustee or asset management company, (v) foreign institutional investors with sub-account(s); (vi) merchant bankers with their client (s) as acquirer; (vii) portfolio managers with their client(s) as acquirer; (viii) venture capital funds with sponsors; (ix) banks with financial advisers, stock brokers of the acquirer, or any company which is a holding company, subsidiary or relative of the acquirers; Provided that sub-clause (ix) shall not apply to a bank whose sole relationship with the acquirer or with any company, which is a holding company or a subsidiary of the acquirer or with a relative of the acquirer, is by way of providing normal commercial banking services or such activities in connection with the offer such as confirming availability of funds, handling acceptances and other registration work; (x) any investment company with any person who has an interest as director, fund manager, trustee, or as a shareholder having not less than 2 per cent of the paid-up capital of that company or with any other investment company in which such person or his associate holds not less than 2 per cent of the paid-up capital of the latter company. Note: For the purposes of this clause �associate�, means,-- (a) any relative of that person within the meaning of section 6 of the Companies Act, 1956 (1 of 1956); and (b) family trusts and Hindu undivided families; Target company as per regulation 2(1)(o) means, �a listed company whose shares or voting rights or control is directly or indirectly acquired or is being acquired� According
to regulation 14(1): �The public
announcement referred to in regulation 10 or regulation 11 shall be made by the
merchant banker not later than four working days of entering into an agreement
for acquisition of shares or voting rights or deciding to acquire shares or
voting rights exceeding the respective percentage specified therein� According
to regulation 14(3): �The public announcement referred to in regulation 12 shall be made by the merchant banker not later than four working days after any such change or changes are decided to be made as would result in the acquisition of control over the target company by the acquirer.� According
to Regulation 18: (1) Within fourteen days from the date of public announcement made under� Regulation 10, Regulation 11 or Regulation 12 as the case may be, the acquirer shall through its merchant banker, file with the Board, the draft of the letter of offer, containing disclosures as specified by the Board (2) The letter of offer shall be despatched to the shareholders not earlier than 21 days from its submission to the Board� under sub-regulation (1). Provided� that if, within 21 days from the date of submission of the letter of offer, the Board specifies changes, if any, in the letter of offer (without being under any obligation to do so) the merchant banker and the acquirer shall carry out such changes before the letter of offer is despatched to the shareholders. Regulation
20 deals with minimum offer price. According
to Regulation 20: (1)
The offer� to
acquire shares under regulations 10,11 and 12 shall be made� at a minimum�
price which shall be payable (a)
in cash ; or (b)
by� exchange
and, or transfer of shares� of the
acquirer company, if the person seeking to acquire the shares is a listed� body corporate; or (c)
by� exchange
and, or transfer of secured instruments of acquirer company with a minimum �A�
grade rating from a credit rating agency. (d)
A combination of clauses (a), (b) or (c) : Provided
that where a payment has been made in cash to any class of shareholders for
acquiring their shares under any agreement or pursuant to any acquisition in
the open market or in any other manner during the preceding 12 months from the
date of public announcement, the offer documents shall provide that the
shareholders have the option to accept payment either in cash or by exchange of
shares or other secured instruments referred to above. �(2) For
the purposes of sub regulation (1), the minimum offer price shall be the
highest of � (a)
the negotiated price under the agreement referred to
in sub regulation (1) of regulation 14, (b) highest price paid by the acquirer or persons acting in concert with him for any acquisitions, including by way of allotment in a public or right issue, if any, during the 26 week period prior to the date of public announcement. (c) the price paid by the acquirer under a preferential allotment made to him or to persons acting in concert with him, at any time during the twelve month period upto the date of closure of the offer; (d) the average of the weekly high and low of the closing prices of the shares of the target company as quoted on the stock exchange where the shares of the company are most frequently traded during the 26 weeks preceding the date of public announcement� Explanation xxxxxx The
Appellants� in support of their
contention that there was a change in control in Coflexip have stated that
Technip and ISIS had acted� in concert
and as a result Technip ISIS combine had 47.7% shares with them and seven
directors from their side were on the 12 member board of Coflexip.� Answer to the question as to Technip and ISIS
acted in concert in the process of acquisition of shares of Coflexip by Technip
in April 2000, decides the question of applicability of regulation 10/12 to the
acquisition.� SEBI has infact identified
this as first issues for consideration�
by it, as could be seen from its order. SEBI in that part of its order
dealing with the complaints, has identified the following three issues. (in
para 5.2): (i)�������� whether ISIS
and or IFP can be termed as persons acting in concert with Technip, when
Technip acquired 29.68%� of shares/voting
rights in Coflexip on 12th April 2000 from Stena. (i)
If yes, whether pursuant to acquisition of 29.68% of
shares/voting rights in Coflexip on 12..4.2000 from Stena Technip indirectly
acquired control of SEAMEC in terms of the said Regulations. (ii)
Was Technip under an obligation to make Public
Announcement for acquisition of shares of SEAMEC. SEBI, based
on its perception came to the conclusion that �Technip
was not acting in concert with IFP or ISIS for the purposes of acquiring
control over Coflexip when Technip acquired 29.68% shares of Coflexip from
Stena on 12.4.2000 for the reasons detailed hereinbefore.� Technip did�
not indirectly acquire the control of SEAMEC in terms of the said
Regulations by virtue of such acquisition of 29.68% shares of Coflexip.� Hence there was no obligation to make a
Public Announcement for acquisition of shares of SEAMEC by Technip.� Therefore the other two issues as stated at
5.2 require no further consideration�. (para 5.3.25) It is seen
from the impugned order that SEBI, while arriving at the said conclusion had
heavily relied� on the French law and
found the same applicable to acquisition of shares/control on the ground that
Technip and Coflexip are companies registered in France and therefore matters
relating to their action in France need be viewed as per the French law.� According to SEBI for the purpose of testing
as to whether Technip acquired control over Coflexip and whether Technip
&� ISIS acted in concert, French law
should be applied and if according to French law there was no change in control
or there was no concerted action by Technip and ISIS, Takeover Regulations can
not reach� them.� The Respondent Technip had produced certain
statutory declarations and statements filed by it before the French regulatory
authorities stating that it was acting alone and that it �does not intend to
acquire control over Coflexip.�� In this
context certain observations made by SEBI in its order is worth to be noted: �I
have noted that Stena, ISIS and other�
major shareholders of Coflexip had a formal agreement dated November 2,
1994 to control Coflexip.� The
agreement provided the right of first refusal, which means that if one party
wants to opt out of the agreement then it is has to first offer the shares to
the other parties involved in the agreement and only after their refusal if
any, and with their permission, they can sell it to other party.� The permission was not required if the sale
of shares is amongst members of a group or in favour of affiliates of a member
of that group.�� Having
stated so, SEBI referred to the definition of the expression� �person acting in concert� as provided in
regulation 2(1)(e).� The text of this
regulation has already� been set out in
this order and as such the same is not reproduced here again.� Having cited the said regulation SEBI
observed: �5.3.8�� From the definition it is clear that in terms
of regulation 2(1)(e) (1) persons acting in concert comprise persons who for a
common objective or purpose of substantial acquisition of shares or voting
rights or gaining control over the target company pursuant to an agreement or
understanding (formal or informal) directly or indirectly co-operate by
acquiring or agreeing to acquire shares or voting rights in the target company. Further,
the provisions of regulations 2(1)(e)(2)�
being a deeming provision must be read in conjunction with regulation
2(1)(e)(1).� Further, persons who are
deemed to be acting in concert must together have some intention or interest in
the acquisition of shares of target company 5.3.9
It is observed that Technip prior to acquiring the
entire interest of Stena amounting to 29.68% (which included shares held
through J.P. Morgan) in Coflexip, had on 11th April 2000 forwarded a
letter to Coflexip which briefly stated the following and which was a legally
binding undertaking enforceable in the French Courts:- (i)
Technip was not acting in concert with any one with
respect to Coflexip and had no plan relating to any such concerted action; (ii)
Technip has no intention to increase the interest they
will take in Coflexip before April 19, 2001; (iii)
Technip agrees not to sell or otherwise dispose of any
shares before October 19, 2000; (iv)
Technip agrees that any sale or disposition of
1,839,398 Cofelxip shares between October 19, 2000 and August 19, 2001 to any
person other than institutional investors would be subject to Coflexip�s right
upon receipt of 21 days prior notice to substitute a purchaser of Coflexip�s
choice other than a direct competitor of Technip; (v)
Technip informs Coflexip that these restrictions on
sales and other dispositions would not apply in the event of a public offer by
any other person for Coflexip shares and would terminate if a third party,
acting alone or in concert with others, became the owner of 20% or more of the
share capital or voting rights of Coflexip or if a reorganization of Coflexip
businesses resulted in its then current business lines representing less than
65% of its consolidated net sales without the agreement of Technip
representatives on Coflexip�s board of directors. (vi)
Technip agrees that, until the earlier August 11, 2001
and the date on which Technip interest in Coflexip constituted less than 10% of
the outstanding share capital or voting rights of Coflexip, Technip would not
acquire any interest in a company with businesses in subsea engineering,
manufacturing or installation of underwater equipment linked to the development
of oil or gas fields without the consent of Coflexip. 5.3.10
It is also observed that on April 28, 2000, Technip
issued : (i)
a Notification for Crossing Legal Thresholds by
acquiring 29.68% of Coflexip equity capital; This was a statutory obligation
under French Company law; (ii)
a Statement of Intent binding for 12 months in which
Technip declared that: �
this acquisition of shares from Stena was a friendly
acquisition of shares which should result in the conclusion of a strategic
alliance; �
it was acting alone; �
it did not intend to increase its shareholding; �
it will be represented on the Coflexip board of
directors by four members out of a total of twelve members; �
it does not intend to take control of Coflexip; �
for a period of six-months, it will not reassign its
shareholding, except for a maximum of one-third to institutional investors,
without prior consultation with Coflexip. ����������� Further, as submitted by Technip, it
is observed from the documents duly ��������� certified,
that Section 356-1 of the French Companies Act makes such a �� statement, binding in law and if a breach is
committed, the person �������� committing
a breach is deprived of his voting rights for 2 years.� Under ��������� French
law a Statement of Intent is to be issued on crossing the 10% and 20% ������� limits of shareholdings or voting rights
in any listed company. 5.3.11
It is also observed that the aforesaid documents have
been filed with the French Market Authority (�Conseil des Marchds Financiers�)
which made them public on May 4, 2000 and with the Stock Exchange Commission
(�Commission des Opdrations de Bourse�).�
The Conseil des Marche�s Financiers thereafter issued a public notice
dated 4th May, 2000 recording and accepting the statements made
hereinabove. 5.3.12
From the various declarations filed by Technip before
French authorities that it was not acting in concert with anybody else for the
purpose of acquiring shares/ voting rights / control over Coflexip and in view
of the Technip�s letter dated 4/5/00 vide which it had filed declaration of
threshold crossing and statement of intent with French authorities (Counsel of
Financial Markets) declaring the objectives it intends to pursue vis-a vis
Coflexip in the twelve coming months as stated hereinbefore, and specifically
that- �
Technip is acting alone �
That it does not intend to increase its equity
interest on Coflexip �
That it shall be represented on the Board of Directors
by four directors out of a total of twelve members. �
That is does not intend to acquire control over
Coflexip It would be
difficult to hold that Technip was acting in concert with ISIS or IFP for the
purpose of acquiring control over Coflexip, when it acquired 29.68% shares from
Stena, on 12.4.00. 5.3.13
Further it is also noticed that Technip has further
undertaken to Coflexip that it shall not for the next six months sell its
interest and that it shall not for the following ten months, dispose of such
interest without prior consultation with Coflexip, subject to retaining the
right to sell shares representing less than a third of its interest to
institutional investors. ����������� ����������� Technip also specified that the
above undertakings relating to the standstill of ���� its equity interest as well as to the possible sale of such
interest shall lapse in �������� certain
circumstances, including (i) the filing of a tender offer for the shares ����������� of Coflexip and (ii) the acquisition
by a shareholder of several shareholders ������ acting
in concert, of 20% or more of the share capital or voting rights of ������� Coflexip. 5.3.14
It is also observed that there was no agreement
between Technip and a third party or ISIS or IFP giving Technip a majority of
voting rights in Coflexip.� Further under
the French Companies Act, the parties to any such agreement would have been
subject to a disclosure obligation to the French Market Authority, which
publicises such disclosures in its Official Bulletin as well as on its Internet
site since undisclosed agreements� are
unenforceable. 5.3.15
From the aforesaid it is clear that Technip was acting
alone and had no commonality of objective or community of interest with ISIS or
IFP for the purposes of acquiring shares / voting rights / control over Coflexip.� Further there was no agreement between
Technip and a third party or ISIS or IFP giving to Technip a majority of voting
rights in Coflexip. 5.3.16
It would be pertinent here to advert to Securities
Appellate Tribunal order in case of Modipon v/s SEBI & others dated July
31, 2001 (2001) 44 CLA 94 (SAT), holding inter-alia that ����������� ��.. Any person and shareholder
including the promoter will become an ��������� acquirer
or a person acting in concert with the acquirer only if he falls within �� the definition of these expressions provided
in regulation 2(b) and 2(e).� It is ����������� conduct of the party that decides
the identity�.� ����������� ����������� It may be noted that the rationale
behind clubbing the shareholding of ��� persons
acting in concert with the acquirer is that, such persons may have ���� commonality of objective and a community of
interest which could be �� acquisition of
shares or voting rights beyond the threshold limit or gaining ����� control over the company and this act of
acquiring shares or voting rights in a �������� company
must serve this common objective.�
Implicit in the concerted action ���� of
these persons must be an element of co-operation. ����������� It would also be pertinent to advert
to the order of Hon�ble High Court of �������� Bombay
in the matter of K K Modi v/s. Securities Appellate Tribunal, in ���� SEBI Appeal No.9/2001 (with Notice of
motion� no.2033 of 2001, dated ����������� November 5, 2001), (2002) 35 SCL 230
(BOM.) wherein it has been, inter ��� alia,
held that ��� there is no hard and fast rule that a promoter must �������� always be deemed to be an acquirer or a
person acting in concert with the ����������� acquirer.� On the facts, it may be held that a promoter
shares the common ������� objective or
purpose of substantial acquisition of shares with the acquirer.� It ��������� may
well be that he may not share the said common objective or purpose.� If ����������� he
does, he shall be deemed to be a person acting in concert with the acquirer, but if he does not, he cannot be deemed to be
an acquirer merely because he ��� happens
to be a promoter.� Regulation 2(1)(e)(2)
also makes this clear.� The ����������� persons named therein are deemed to
be persons acting in concert with other ��� persons
in the same category, unless the contrary is established.� It, therefore, ���������� follows that even though there is a presumption that the
persons described ����������� therein may
be deemed to be persons acting in concert with the acquirer, the ���� presumption is rebuttable, and therefore,
in each case, the facts have to be ����� examined
to reach a conclusion as to whether a person is or is not acting in ����������� concert with the acquirer for the
purpose of substantial acquisition of shares ����� or
voting rights or gaining control over the target company.� He may do so by ����� an express agreement or understanding, and the agreement or
understanding ����������� may be proved by
evidence on record.� Similarly, he may
co-operate with the �� acquirer directly
or indirectly.� What is important is that
it must be shown that ���������� he is
acting in concert with the acquirer ������ What is relevant is ����������� not whether the promoters have acted
in concert with each other in managing ��� the
target company, but whether they are acting in concert for the purpose of ����� substantial acquisition of shares or
voting rights or gaining control over the ����������� target
company.� The fact, therefore, that the
target company, MRL, has been � managed in
the past by the promoters acting in co-operation and concert with ������� each other is hardly relevant for the
determining the question whether the ������ promoters
are acting in concert in the matter of substantial acquisition of ����������� shares or voting rights in the
target company.� The mere fact, therefore,
that ���������� the acquirers, while
making the public offer, assumed and acted on the basis ����������� that Modipon Ltd. was acting in concert with them, will
not make Modipon ����� Ltd. a person
acting in concert with them���.� ����������� Thus, from the above it follows that
under regulation 2(1)(e)(2), the persons ����� named
therein are deemed to be persons acting in concert with other person ������ in the same category, unless the contrary
is established meaning thereby that ����������� its
rebuttable presumption and therefore in each case the facts have to be ��������� examined to reach a conclusion as to
whether a person is or not acting in �� concert
with the acquirer for the purpose of substantial acquisition of shares ����� or voting rights or gaining control over
the Target company.� From the facts ���������� of the instant case as discussed in
detail hereinabove, it is apparent that Technip,
IFP and ISIS were not persons acting in concert for the purposes of �� acquisition of control over Coflexip when
Technip acquired 29.68% shares of ������ Coflexip
from Stena on 12.04.2000. 5.3.17
It is also observed that: (i)
French company law compels the company, upon crossing
the equity interest level of ten per cent of share capital or voting rights in
the Target company, and again of twenty per cent of share capital or voting
rights in the Target company, to file with the French market authority (with
copy to the Target company) the abovementioned Notification for Crossing Legal
Thresholds and a Statement of Intent (Section 356-1 of French Companies Act); (ii)
pursuant to the same Section of the Companies Act,
that Statement of Intent is binding on the declaring Company for the twelve
months from� its date, and the stated
intent may only be altered in the event of a �significant� change in the
circumstances surrounding the target company, in its position or in the
shareholding of the interested parties; (iii)
the declaring shareholder who fails to abide by the
stated intent is liable to being deprived of the voting rights exceeding the
declared threshold for a period of two years. 5.3.18
As submitted by Technip, it is also observed that
under French law had Technip, acting alone or in concert with one or more other
entities acquired control of Coflexip it would have to disclose the fact to the
French market authorities and the public and to make a bid for all shares in
Coflexip not held by Technip.� Failure to
make such a disclosure or make such a bid would have deprived Technip of voting
rights.� Further, Technip neither made
any such disclosure nor made any bid for the entire shareholding of Coflexip,
establishes that in fact Technip did not acquire such control in April, 2000. 5.3.19
I also find merit in the submission of Technip that it
had filed declaration regarding acting alone before French authorities and
Technip would have faced legal action in a large number of countries throughout
the world and Technip would have had to make open offer for all the shares of
Coflexip in April 2000 itself had it been acting in concert with anybody and no
authority in the United States or Europe has alleged that by virtue of the
acquisition of shares of Coflexip in April 2000, Technip had acquired control
over Coflexip. 5.3.20
In view of the provisions of French law and the
regulatory provisions prevailing in France, it is clear that Technip was not
acting in concert with ISIS and IFP when Technip acquired 29.68% shares/voting
rights of Coflexip from Stena on 12/4/2000. 5.3.21
It is also observed that IFP is an independent centre
for research and industrial development, education, professional training and
information for the oil and gas and automotive industries.� It does not carry on industrial or commercial
activities, neither does it control or mange other companies.� IFP is a �professional body� created by a
decree of the French government.� The
members of the Board of Administration are designated by the Ministries of
Industry, Economic Affairs and Government control is exercised by the Directeur
des Hydrocarbons Government commissioner and by the head of Economic and
Financial mission for petroleum and chemistry. ����������� Its statutory purpose is to support
the advancement of the petroleum (and oil ��� services)
industry.� To that aim, it is endowed
with a part of certain petroleum �������� taxes
and excises in return, it is subject to the financial control of the French ����������� state.� IFP conducts and funds research in various
directions, all related to the �� oil
industry from oil exploration and related services to development and ���� crude oil, and gas production down to
refining and production of light, � finished
products (such as petrol, lubricants, fuel oil and all raw materials of ������ the petro chemical industry). ����������� It also promotes companies created
to apply the results of its own research ������ thus
IFP was one of the founding shareholders of both Technip in 1958 and ������� Coflexip in 1971. ����������� In 1975, IFP promoted ISIS as a
wholly owned subsidiary to hold its �� investments.� IFP retained majority control in ISIS at all
times until October ���������� 2001,
although ISISI became listed on Euro Next Paris in 1997. ����������� IFP supervises and controls the
Ecole Nationale Superiere Du Petrole et Des �� Moteurs
(National Engineering College for Oil and Fuel Engine Studies) ���������� located on IFP grounds.� From time to time, Technip has been deputing
some �� of its Engineers go give training
courses at the aforesaid college. 5.3.22
It is also observed that IFP is a professional
institute acting as a research development and education foundation and it is
not a policy of IFP to manage, operate or control the composition of the Boards
of companies where it holds equity, which is very evident from the fact that
IFP had only 3 directors on the Board of ISIS out of a total of 9 directors
even when it held 52.8% of the paid-up share capital of ISIS, as of April,
2000. ����������� 5.3.23
In view of the facts and circumstances of the case
including nature of functioning of IFP, a �professional body� created by a
decree of French Government and performing the role of a research body, it is
difficult to hold IFP along with ISIS was acting in concert with Technip for
the purpose of acquiring shares/voting rights/ control if Coflexip so as to
indirectly acquire control over SEAMEC.�
It is difficult to arrive at the said conclusion merely because IFP was
the parent/promoter of ISIS.� There was
no common objective or purpose amongst them for acquiring shares or voting
rights or gaining control over Coflexip. �Further, there was no agreement or
understanding amongst them to acquire or agree to acquire shares or voting
rights in Coflexip. In the K K
Modi�s case, Hon�ble Bombay High Court has held that ��. It therefore, follows
that the mere fact that a person is a promoter does not make him an acquirer,
unless it is shown that he either intends to acquire or is acting in concert
with the acquirer for the acquisition of shares of the target company.� Before he can be said to be acting in concert
with the acquirer, it must be shown that he shares with the acquirer a common
objective or purpose for substantial acquisition of shares or voting rights or
gaining control over the target company, pursuant to an agreement or
understanding and directly or indirectly co-operates with the acquirer or
agrees with him to acquire shares or voting rights in the target company or
control over the target company.� It is
significant that the definition of acquirer does not include a promoter, but
includes persons acting in concert with an acquirer.� The question as to whether a person is acting
in concert with the acquirer is essentially question of fact.� A promoter may not act in concert with the
acquirer, whereas a stranger might���� From the
above, it follows that the mere fact that a person is a promoter does not make
him an acquirer unless it is shown that he either intends to acquire or is
acting in concert with the acquirer for the acquisition of shares in the Target
company.� Further, before he can be said
to be acting in concert with the acquirer, it must be shown that he share with
the acquirer a common objective or purpose for substantial acquisition of
shares or voting rights or gaining control over target company pursuant to an
agreement or understanding and� directly
or indirectly co-operates with the acquirer to acquire shares or voting rights
or control over the target company.� From
the facts of the instant case, it is observed that though IFP is the
parent/promoter of Technip and ISIS, it did not share any common objective or
purpose with either Technip or ISIS to acquire shares/voting rights or control
over SEAMEC when Technip acquired 29.68% shares of Coflexip from Stena on
12.04.2000.� Further, there was no
agreement or understanding among IFP, Technip and ISIS for acquisition of
shares of Coflexip on 12.04.2000. 5.3.24
In view of the above factual position, merely because
ISIS was a major shareholder of Technip, Technip was having 2 directors on the
Board of ISIS and IFP was parent of ISIS and Technip, it is difficult to hold
that Technip, ISISI and IFP were acting in concert for the purpose of acquiring
control over Coflexip when Technip acquired 29.68% shares of Coflexip from
Stena on 12.04.2000. 5.3.25
In view of the fact that the Technip was not acting in
concert with IFP or ISIS for the purposes of acquiring control over Coflexip
when Technip acquired 29.68% shares of Coflexip from Stena on 12.04.2000, for
the reasons detailed herein before, Technip did not indirectly acquire the
control of SEAMEC in terms of the said Regulations by virtue of such
acquisition of 29.68% shares of Coflexip.�
Hence there was no obligation to make Public Announcement for
acquisition of shares of SEAMEC by Technip. ����������� Therefore the other two issues as stated at 5.2 require no further ���������� consideration.� On a
persual of� SEBI�s order it is clear that
it had noted the formal shareholders agreement dated 2.11.1994 entered into
between Stena and ISIS and other major shareholders of Coflexip to control
Coflexip.� The purpose of the said
agreement was to control Coflexip.� In
this context it is to be noted that 48.7% of the shares of Coflexip were� held by public at large � to say widely� dispersed.�
Out of the remaining 51.3%, Stena was holding 29.68% and ISIS was
holding 18.17%.� Their total holding in
Coflexip�s voting capital� accounted for
47.85%.�� They had majority number of
directors on Coflexip at all times. ����������� Before proceeding in the matter with
reference to facts, it is felt necessary to decide as to which is the
applicable law to the take over of �SEAMEC � French law or Indian law.� SEBI has viewed that since Technip and
Coflexip are French companies, matters relating to them should be decided� in accordance with French law.� To the said extent SEBI is correct.� SEBI has no jurisdiction to regulate
takeovers and acquisitions taking place outside India.� But certainly SEBI has jurisdiction to
regulate substantial acquisition and takeovers of companies in India.� Whether there is a substantial acquisition of
shares/voting rights/control of an Indian company, has to be decided according
to the Takeover Regulations.� Law
enforcement authorities outside India can not enforce their regulations in
respect of acquisitions and takeovers of Indian companies in India.� Indirect acquisition of Indian companies by
foreign companies is not outside the purview of the Takeover code.� This position can be made clear by an
illustration -- company �A� is an Indian company.� It is a subsidiary of a foreign holding
company �B�.� Said holding company �B� is
taken over by another foreign company �C� and as a result �A� becomes
subsidiary of �C�.� In such a situation
�C� is expected to comply with the requirements of Takeover Regulations.� When the applicability of Takeover
regulations is considered to such case as shown in the illustration, the
definitions, procedures etc. provided in the Takeover Regulations are to be
followed.��� It is to be noted that in
the present case SEBI is not adjudicating the question as to whether Technip
was required to make a public offer to the shareholders of Coflexip SA in
France on acquiring 29.68% voting capital of Coflexip from Stena in April 2000.
Acquisition of Coflexip shares by Technip is a matter to be considered by
French authorities under French law.�
SEBI is adjudicating the question of indirect take over of SEAMEC by
Technip as a result of acquisition of shares in SEAMEC�s ultimate holding
company.�� In my view in that context
what is required to be considered is as to whether there was a change in
control of Coflexip and that ISIS and Technip can be considered as persons
acting in concert in terms of the provisions of the Takeover Regulations.� SEBI is not supposed to go blindly by the
foreign law provisions on acquisition and takeover is evident from the Takeover
Regulations itself.� The instances as per
the foreign law are to be taken cognizance of,�
has been specifically spelt out in the Takeover Regulations as could be
seen therefrom.� In this context� the provisions of regulation 3(1)(k)
providing exemption to certain acquisitions from the scope of regulations 10,11
and 12 is to be noted.� According to the
said regulation 3(1) Nothing contained in
regulation 10,11 and 12 of these regulations shall apply to: (k)
acquisition of shares in companies whose shares are not listed on any stock
exchange Explanation:-��� The
exemption under clause (k) above shall not be applicable if by virtue of
acquisition or change in control of any unlisted company whether in India or
abroad , the acquirer acquires shares or voting rights or control over a listed
compete.� In this context the
exemption provided under regulation 3(1)(j) is also a pointer 3(1)
Nothing contained in regulation 10, 11 and 12 of these regulations shall apply
to: ����������� (j) pursuant to a scheme � (i)
framed under
section 18 of the Stick Industrial Companies (Special Provisions) Act, 1985 (ii)
of arrangement
or reconstruction including an amalgamation or merger or demerger under any
law or regulation, Indian or foreign. Takeover Regulations thus
specifically recognise �acquisition or change in control of any unlisted
company� abroad and amalgamation or merger or demerger under foreign law for
the purpose of exemption. That it is to be noted in this context that the
exemption is available only to statutory amalgamations mergers and demergers
and not to substantial acquisition of shares or acquiring control in any other
manner. Yet another case of such
specific recognition could seen in the following Explanation to regulation 11: ��������������� Explanation.�For
the purposes of regulation 10 and regulation 11, acquisition shall mean and
include,-- (a)
direct acquisition in a listed company to which the
regulations apply; (b) indirect acquisition by virtue of acquisition of
holding companies, whether listed or unlisted, whether in India or abroad. In this context it is also noted that by way of an amendment effected from 9.9.2002, an Explanation clause has been put under regulation 12 which is also a pointer in this regard.� According to the said Explanation � �For the� purposes of this Regulation, acquisition
shall include direct or indirect acquisition of control of target company by
virtue of acquisition of companies, whether listed or unlisted and whether
in India or abroad.� ����������� Regulation 2 provides definition of certain expressions including � control� �person acting in concert� etc. referred to in the Takeover Regulations.� The scope of these definitions cannot be abridged or enlarged for the purpose of administering the provisions of the Takeover Regulations, by borrowing the definitions from laws� in vogue in other countries.� Even for the meaning of those expressions which are not specifically defined in the regulations, recourse is to refer to the Indian legislations referred to in the regulations and not to borrow from foreign law.� On
a perusal of the scheme of the Takeover Regulations, it is clear that in the
case of substantial acquisition of shares and takeovers of Indian companies,
the applicable law is the Takeover Regulations as notified by SEBI under the
SEBI Act.� If a contrary view is taken it
may sometimes lead to absurd consequences even defeating the very objective of
the Takeover Regulations.� Take a
hypothetical case of acquisition of a foreign holding company of one Indian
target company by another foreign company, in a country where there are no
statutory regulations on substantial acquisition of shares and takeovers, and
there is no concept of control, persons acting in concert etc.� Does it mean that as a result of change taken
place in control of the� holding company
in that �unregulated� country, the change in the ownership or control of
the target company taken place should not require compliance of Takeover
Regulations by the acquirer ? In my view to take a view that in such a case no
compliance of Takeover Regulations is required is untenable.�� In my view the change in control need be
viewed from the Indian point of view.� It
is all the more relevant when the applicable provisions are not identical in
scope. In
the instant case I have considered� the
scope of �control� as provided in the French Company Law: In
article L.233-3 of the French Code de commerce provided: �I..� A company shall be regarded, in order to
apply Sections 2 and 4 of this chapter, as controlling another: 1. When it
directly or indirectly holds a percentage of the capital conferring on it the
majority of the voting rights in the general meetings of this company; 2.When it
alone holds the majority of the voting rights in this company pursuant to an
agreement concluded with other members or shareholders and which is not
contrary to the interests of the company; 3.When it
determines in fact, due to the voting rights which it holds, the decisions in
the general meetings of this company. II.� ������ It
shall be presumed to exercise this control when it directly or indirectly ����������� holds a percentage of the voting
rights higher than 40% and when no other �������� member
or shareholder directly or indirectly holds a percentage higher than ����������� its own.� III.� ���� In order to apply the same sections of this
chapter, two or more persons acting in concert shall be regarded as jointly
controlling another when they actually determine in fact the decision in
general meetings. In 1998 the Court of
Appeal of Paris (CA Paris, 20th February, 1998, ADAM Vs. CGE and
Havas) specified that regarding article L. 233-3(i) one person only has the
ability to exercise control over a company and (ii) the exercise of a control
over a company can not result from acting in concert.� Such jurisprudence was strongly contested and
in order to do away with such jurisprudence, the legislator clarified the
notion of control within the meaning of article 233.3� was clarified by modifying the said article
in 2001 and that modification is Section III cited above. ����������� It is noted that there are different definitions of
control for different purposes under the French law and I do not consider the
definition of control such as the one under accounting regulations, or under
concentration law etc. is relevant for the present purpose ����������� In the context of the scope of the expression control in
L.233.3 in the French company law� let us
see the concept of control under the Takeover Regulations.� According to�
regulations 2(c) of the Takeover Regulations: � Control shall include the right to appoint� majority of the directors or to control the management or policy decisions exercisable, by a person or persons acting individually or in concert, directly or indirectly including by virtue of their share holding or management rights or share holders agreements or voting agreements or in any other manner� The scope of the
expression control as per the Takeover Regulations is undoubtedly wider than
the scope of control under French code de Commerce (French company law).� It is to be noted that the definition in
regulation 2(c) is an inclusive regulation.�
It is open ended.� The words
�control in any other manner� leaves sufficient scope to� the enforcement authority to decide as to the
existence of defacto control.� In my view
whether Technip acquired control over Coflexip on 12.4.2000 and consequently
over SEAMEC need be tested in the light of 2(c) definition.� The concept of person acting in concert is
also very relevant for the� purpose in
view of the role of ISIS in the present case. ����������� In this context following Article L.233.10 and regulation
2(1)(e) of the Takeover Regulations also need be perused. Article L.233.10 I.��������� Persons who have concluded an
agreement with a view to acquiring or assigning voting rights or with a view to
exercising voting rights in order to implement a common policy with regard to
the company shall be regarded as acting in concert. II.
Such an
agreement shall be presumed to exist: 5.3.23.1
Between a
company, the Chairman of its board of directors and its managing directors or
the members of its management or its managers. 5.3.23.2
Between a
company, and the companies which it controls within the meaning of Article
L.233.3; 5.3.23.3
Between
companies controlled by the same person or persons. 5.3.23.4
Between the
members of a simplified joint stock company with regard to the companies which
the latter controls. III.������ Persons acting in concert shall be
jointly and severally bound by the obligations imposed thereon by the acts and
regulations� At the cost of repetition
I would again like to set out the concept of �person acting in concert� in
regulation 2(1)(e) for a comparison with the concept under French law:� Before that I would like to refer to the
relevance/importance of person acting in concert with reference to acquisition
of shares/voting rights/control.� In this
context, for the purpose, the most appropriate reference is the observation
made by Justice Bhagwati Committee based on its recommendation the Takeover
Regulations was re-enacted after repealing the Regulations notified in the year
1994.� According to the committee (1st
Report 1997) �Persons
acting in concert� have particular relevance to public offers, for often an
acquirer can acquire shares or voting rights in a company �in concert� with any
other person in a manner that the acquisitions made by him remain below the
threshold limit, though taken together with the voting rights of persons in
concert, the threshold may well be exceeded.�
It is therefore, important to define �persons acting in concert�. To
be acting in concert with an acquirer, persons must fulfill certain �bright
line� tests.� They must have commonality
of objectives and a community of interests which could be acquisition of shares
or voting rights beyond the threshold limit, or gaining control over the
company and their act of acquiring the shares or voting rights in a company
must serve this common objective.�
Implicit in the concerted action of these persons must be an element of
cooperation.� And as has been observed,
this cooperation could be extended in several ways, directly or indirectly, or
through an agreement � formal or informal.�
The
Committee was of the view that the present definition of �persons acting in
concert� in sub-clause (d) of regulation 2 needed to be strengthened by
incorporating all the ingredients discussed in the foregoing paragraph to bring
out clearly the import of acting in concert. Any
person fulfilling the �bright line� tests would be acting in concert.� But there could also be certain persons who,
by their position in relation to an acquirer or by the very nature of their
business, could be generally presumed to be acting in concert, unless proved to
the contrary.� In other words, a
rebuttable presumption of being persons in concert with burden of proof cast on
them will be raised against these persons.�
The Committee was of the view that while the net of presumption should
be cast to include all such persons, it should�
not be cast too widely so as to impinge on the freedom of any person to
carry on his normal business activities.�
In other words, there should be well defined bounds of presumption.� Regulation 2(1)(e) �person acting on concert� comprises .� (3) persons who, for a common objective or purpose of substantial acquisition of shares or voting rights or gaining control over the target company, pursuant to an agreement or understanding (formal or informal), directly or indirectly co-operate by acquiring or agreeing to acquire shares or voting rights in the target company or control over the target company, (4) without prejudice to the generality of this definition, the following persons will be deemed to be persons acting in concert with other persons in the same category, unless the contrary is established: (xi) a company, its holding company, or subsidiary or such company or company under the same management either individually or together with each other; (xii) a company with any of its directors, or any person entrusted with the management of the funds of the company; (xiii) directors of companies referred to in sub-clause (i) of clause (2) and their associates; (xiv) mutual fund with sponsor or trustee or asset management company, (xv) foreign institutional investors with sub-account(s); (xvi) merchant bankers with their client (s) as acquirer; (xvii) portfolio managers with their client(s) as acquirer; (xviii) venture capital funds with sponsors; (xix) banks with financial advisers, stock brokers of the acquirer, or any company which is a holding company, subsidiary or relative of the acquirers; Provided that sub-clause (ix) shall not apply to a bank whose sole relationship with the acquirer or with any company, which is a holding company or a subsidiary of the acquirer or with a relative of the acquirer, is by way of providing normal commercial banking services or such activities in connection with the offer such as confirming availability of funds, handling acceptances and other registration work; (xx) any investment company with any person who has an interest as director, fund manager, trustee, or as a shareholder having not less than 2 per cent of the paid-up capital of that company or with any other investment company in which such person or his associate holds not less than 2 per cent of the paid-up capital of the latter company. Note: For the purposes of this clause �associate�, means,-- (c) any relative of that person within the meaning of section 6 of the Companies Act, 1956 (1 of 1956); and (d) family trusts and Hindu undivided families; On a comparison of the provisions relating to persons acting in concert in the Takeover Regulations and the French law, it is clear that the scope of regulation 2(1)(e) is wider than Article L-233.10. I do not consider it necessary, to give any weightage to the legal opinions procured from law firms in France and produced in the present proceeding, as those opinions are based on the legal position prevailing in France.� In my view it is� not proper to go simply by the declarations and Statement of Intent made by the companies under French law and decide that in the light of those statements/declarations that Technip acted alone and that there was no change in control on 12.4.2000.� I am not saying that the statements made by them in France are not correct.� Those statements might have been made as per the� law prevailing in France and the French Authorities obviously accepted and recorded the same.� They are� not concerned about the applicability of the Takeover Regulations to the facts with reference to the takeover of SEAMEC in India. French law does not operate in India� as Indian law does not operate in France.� I am not for a moment even suggesting that the information furnished by Technip before the French Authorities were not correct or that the French Authorities had not examined those statements before taking them on record/notifying� those information.� In this context I may state th7at I have examined the authorities cited by Shri Setalvad to buttress his argument that the applicable law in the present case is French law.� I regret my inability to endorse his view for the simple reason that we are not dealing with the takeover of a company situated outside India.� We are testing SEAMEC�s case in the light of the facts relating to acquisition of shares/control of Coflexip by Technip, as to whether there was any change, viewed from the Indian angle.�� In that context what is required to be seen is that whether� the facts suggest any change in control as provided in the Takeover Regulations and ISIS can be considered as having acted in concert with Technip as per the Indian law.� For the purpose the facts available on record, assumes importance. ����������� It is an admitted fact that there was shareholders agreement� dated 2.11.1994 between Stena group on one side and ISIS and others on the other to control Coflexip.� From the management pattern of Coflexip � majority on the board of Coflexip � it is clear that these two groups were in control of Coflexip.��� In this context it is also to be noted that Coflexip had considerable interest in the petroleum sector.� Technip also had interest in the same sector.� It is evident from the material on record that Technip and Coflexip were interested to combine and move forward.� It was in that context Technip acquired 29.68% shares held by Stena in Coflexip.� 29.68% is not an insignificant portion in the share capital of Coflexip as 47% of its capital was with the public widely dispersed.� It is also to be noted that Technip did� not acquire shares to begin with beyond 30%, because such acquisition would have required Technip to make a public offer to the shareholders of Coflexip in terms of the French law in April 2000 itself.� It is also noted from the shareholding pattern of Technip, Coflexip and ISIS that IFP was having common interest.� In Coflexip, ISIS the subsidiary of IFP held 18.17% shares.� In Technip ISIS held 11.8%, with two associate companies of ISIS i.e. Gas de France and Total Fina ELF, ISIS�s holding was around 29.1%� of Technip�s capital.� Again, it is not a coincidence that the holding rested at 29.1%.� It was capped a shade below 30% apparently to avoid the requirement of public offer under French law.� It is noted that in ISIS, IFP was� holding 52.76% as against the public holding of 47.34%.� It is also to be noted that Technip, was formed in the year 1958 by IFP.� Coflexip was also promoted by IFP in the year 1971 and ISIS was also promoted by IFP in the year 1975.� In fact when ISIS was floated it was a wholly owned subsidiary of IFP.� Whether these companies belonged to one �group� or that they were �companies under the same management� may be in dispute.� But no one can dispute that they belonged to one family in the real sense.��� The �affinity� of these entities is� very clear.� In this context it is also to be noted that IFP, though created under a decree of the French Government and not a profit motivated commercial set up by itself, is interested in developing the petroleum sector.� Coflexip and Technip are having interest in the Petroleum sector.� Obviously, IFP could be� interested in these 2 entities joining together and forming a combine strong enough to meet the competition in the field.�� It is in this context the observation made by Justice Bhagwati Committee be noted ��implicit in the concerted action of these persons must be an element of co-operation�.� �The Committee also recognized that the process of takeover is complex and is inter related to the dynamics of the market place.� It would therefore be impracticable to device regulations in such detail as to cover the entire range of situations which could arise in the process of substantial acquisition of shares and takeovers�� In my view the spirit of the regulation has to be recognised.� It is not technicalities, but realities that should be the touch stone while deciding as to a person was acting in concert with another. It is sufficient, if having regard to their common interest, it may be inferred that they must be acting together.� Intimate relationship of the parties is a pointer in the normal course towards their common interest.� In this context the following observation in Guinners relied on by Shri Mukherjee is considered very relevant: ��The nature of acting in concert requires that the definition be drawn in deliberately wide terms.� It covers an understanding as well as an agreement, and an informal as well as a formal arrangement, which leads to co-operation to� purchase shares to acquire� control of a company.� This is necessary, as such arrangements are often informal, and the understanding may arise from a hint.�� The understanding may be tacit, and the definition covers situations where the parties act on the basis of a �nod or a wink�.� Unless persons declare this agreement or� understanding, there is rarely direct evidence of action in concert, and the panel must draw on its experience and commonsense to determine whether those involved� in any dealings have some form of understanding and are acting in co-operation with each� other.� In a typical concert party case, both the offeror and the person alleged to be acting in concert with it are declaring that, notwithstanding the circumstances, they have no understanding or agreement.�� The Panel has to be prepared realistically to recognise that businessmen may not require much by way of formal expression to creaate such an understanding.� It is unnecessary for the Panel to know everything that actually passed between the parties in a take-over.� In addition, the judgement required in an acting in concert issue must usually be made in the context of the assertions and arguments of persons whose interests will not be served by a finding of acting in concert � this is because such a finding inevitably entails consequences under the code, often to the benefit of offeree company shareholders which is the object of the concept, with a cost to the offeror�. The argument that the persons acting in concert must also acquire shares with the acquirer is not correct.� In Shirish Finance, referred to earlier, Hon�ble Bombay High Court has explained the position as pointed out by the Appellants. It is in this context the message conveyed by Mr. Daniel Valot the Chairman of Technip (letter dated 14.10.2001)� to the shareholders of Technip need be taken note of.� In the said letter he had stated that: ��������������� �For
over a year now, we have been working on this merger, passing through a number
of necessary stages: the acquisition of 30% of Coflexip in April 2000,� the setting up in the summer of 2000 of a
strategic alliance which allowed the teams from the two companies to start
working together on a few joint projects as well as on numerous joint
proposals.� This period of
acclimatisation was invaluable: it demonstrated that our cultures were
compatible and that our teams knew how to work together in harmony.� Thus we have done everything possible, I
believe, for this coming total merger to take place in a climate of mutual
confidence. The
Institut Francais due Petrole (IFP) which was at the origin of the creation of
the two companies and which has remained through ISIS� a major shareholder of both of them, acted as
a catalyzer in their union.� By
deciding to commit its majority stake in ISIS to Technip, it greatly
facilitated the merger between Technip and�
Coflexip.� As the outcome of the
operations now underway, IFP will be, in accordance with its historical mission
one of the top shareholders in Technip Coflexip, along side of Gaz de France
and Total Fina Elf, both of which also gave their support to the creation of
the new entity.� (emphasis supplied) It
is evident from the Technip Chairman�s letter that they� were ultimately planning to take over
Coflexip and they �were on this merger, passing through a number of necessary
stages: which included �the acquisition of 30% of Coflexip in April 2000, the
setting up in the summer of 2000 of a strategic alliance� etc.,�� It is to be noted that Mr. Daniel Valot is
none other than the Chairman and Chief Executive Officer of Technip.� He has also stated therein addressing the
Shareholders that, �A new major step in the development of Technip, thanks to
the takeover of Coflexip, your group, which will be called Technip � Coflexip,
will rank among the world�s leading integrated engineering and oil services
companies�.� The argument that the said
letter is after the acquisition made in the public offer made on 3.7.2001, in
my view does� not make any difference, as
far as Technip�s objective is concerned.���
Exactly with this object Technip had acquired shares from Stena, IFP
through ISIS facilitated the ultimate merger as setting up/creating such an
integrated strong world leader in engineering and oil services companies is in
tune with the goal� of developing
petroleum sector undertaken by IFP�.� The
Respondents had argued at length to show that IFP is not a commercial set up
and it is not interested in acquiring control��
or assisting somebody else in acquiring control of companies and that it
is� not a profit motivated set up.��� But they have not denied the fact that ISIS
is an arm of IFP and ISIS is managing IFP�s commercial� investments.�
It may not be the mandate of IFP to invest in companies with profit
motive or to interfere in the management of the companies in which it has
invested.� But ISIS is not bound by any
such restrictions and it is an admitted fact that ISIS looks after the
commercial aspects of the investments of IFP�
and IFP uses ISIS as a medium to make investments.� That is the reason why in the shareholders
agreements executed for the purpose of controlling the entities, instead of
IFP, ISIS comes as a party.� It is� noted that IFP stated to be a Government
funded set up is perhaps, subject to
several restrictions.� But ISIS is not
so.�� It is evident that ISIS is even
involved in the management of companies in which it holds shares � e.g. it had� its representative in the strategic committee
in Coflexip.�� I have noted that ISIS has
also restricted its investment in companies (Eg. Technip) upto 30% only.� This could be only� to avoid the requirement of making public
offer under the provisions� of the French
Company Law.� ISIS does not appear to be
outside the purview of the regualtory provisions of the French Company
Law.�� In fact in Technip its holding
with the associated companies is just 29%. Gas de France is also one of its
associate companies. ��ISIS has its
nominees on the Board of Technip.� ISIS
has its nominees of Coflexip.� SEBI in
para 5.3.6 of its order has stated that �ISIS and Gas de France had disclosed
at the time of admission of listing of the Technip shares on the Paris Bourse
(September 1994) that they were acting in concert with regard to their interest
in Technip pursuant to a shareholders Agreement between ISIS and� Gas de France which provided that (i) in the
event of either ISIS or Gas de France wanting to sell their shares in Technip
the same would have to be offered to the other party (ii) each party were to be
represented on Technip board of directors in proportion to their respective
voting rights.�� In para 5.3.7 of the
order it has been recorded that �I have noted that Stena, ISIS and other major
shareholders of Coflexip had a formal agreement dated November 2, 1994 to
control Coflexip.� The agreement provided
for the right of first refusal, which means that if one party wants to opt out
of the agreement then it has to first offer the shares to the parties
involved� in the agreement and after
their refusal, if any, and their permission, they can sell it to the other
party.� The permission was� not required if the sale of shares is amongst
members of a group or in favour of affiliates of a member of that group.�� The involvement of ISIS in these two
companies is thus clear.� It is to be
noted that it was Technip who came in place of Stena in Coflexip.� Stena is a rank outsider and its exit paved
the way for the requisite combination. ����������� From the material available on record there is every
justification to infer that the plan was to combine Technip and Coflexip and
form a strong combined entity to be a business leader in the petroleum sector
and that it was with this end� in view Technip
in which ISIS had interest acquired Coflexip in which also ISIS had
interest.� It is to be noted that Stena
is an outsider and it was coming in the way of the proposed integration� of Technip and Coflexip and Stena on getting
the right price for its investment, as Stena stated, moved out allowing the
entry of Technip.� In this context the
following observation made by Technip�s Chairman in his letter dated 11.4.2000
is to be noted.� � �With the Swedish
group Stena proposing to sell its stake in CSO�s capital Technip seized the
opportunity on the one hand to achieve one of its strategic priorities which
consists in increasing its activity in the petroleum upstream sector�.
(emphasis supplied)� Why Technip would
acquire Coflexip has also been explained in the same letter: �CSO
(Coflexip SA) is the world leader in subsea technologies and services related
to oil and gas field development.� It
holds a 30% world wide market share of sub sea construction and a 75% world
wide market share in the manufacturing of sub sea flexible pipelines and
umblicals for offshore platforms.� CSO
boasts extensive industrial assets, a fleet of 15 ships for the construction
and installation of subsea piping, manufacturing plants for flexible piping and
control of umblicals in France, Great Britain �. Through
the acquisition Technip and CSO forge a strategic alliance that will position
both companies to take advantage of the fast growing offshore and deep water
oil services market�..� The Respondents had
submitted that the shareholders agreement dated 2.9.1994 ceased to be operative
with the exit of Stena, and as a result the agreement providing for control of
Coflexip also ceased.� But this in my
view is only partially correct.� Stena
ceased to be a part of the controlling group.��
In the absence of any evidence brought on record to show that Stena
assigned its right and obligations� under
the agreement it is difficult to accept that the written agreement continued to
operate after Stena�s exit.� But after
Stena�s exit no such written agreement as such was required, as Technip, ISIS
and IFP had one lineage � the common parenthood in IFP.� ISIS/IFP�s participation in shareholding,
management, common interest in the petroleum sector etc. clearly demonstrates
their invovement in the process of acquisition from day one i.e. 12.4.2000 to
the final act on 3.7.2001.� Mr. Daniel
Valot in his letter dated 14.10.2001 had rightly stated that �for a year
now� we have been working on this merger,
passing through a number of necessary stages, the acquisition 30% of
Coflexip in April; 2000, �the setting
up in the summer of 2000 of a strategic alliance.� The process of
acquisition started with Technip acquiring 29.68% shares.� It is also noted that ISIS group had not
exercised its pre emptive right to block Technip�s entry.� In fact Technip had 4 directors and ISIS had
3 directors on the Board of Coflexip and the total holding of these two
companies were around 47%, sufficient enough to control Coflexip in view of its
48% shares widely held by public.� It is
also noted that in fact in the annual general meeting of coflexip held in May
2000 and May 2001 (before the merger effected on 3.7.2001) Technip had
exercised 54% and 57% of the voting rights, that this itself is indicative of
the fact that Technip had more than 50% voting rights at its command, even
though on record it was holding only 29%.�
Mr. Daniel Valot in his letter dated 14.10.2001 referred to above, has
acknowledged the fact that �IFP which was at the origin of the creation of the
two companies and which has remained through ISIS a major shareholder of both
of them, acted as a catalizer in their�
union.� By deciding to commit its
majority stake in ISIS to� Technip, it
greatly facilitated the merger between Technip and Coflexip�� He had also acknowledged the support from Gaz
de France and Total Fina Elf � both associated with IFP family.��� The whole idea as could be seen was to make
Technip, the controller of Coflexip and ISIS rendered� full co-operation in the process to Technip
to acquire the shares.� It is to be noted
that ISIS, one time shareholder in Coflexip�
merged with Technip, on Coflexip merging with Technip in July,
2001.� ISIS�s Merger with Technip is not
a coincidence.� It was because by that
time Technip had acquuired 99% equity in�
Coflexip� and ISIS involvement
vis-�-vis Coflexip had become redundant.�
It is to be noted that on Technip acquiring 29.6% shares it got 4 of its
nominees on the Board of Coflexip.� ISIS
who acted� in concert with Technip had 3
of its nominees.� Thus in a 11 member
Board of Coflexip Technip ISIS combine had a majority.� It is also noted that Technip and ISIS
nominees had 2/3 majority in the Strategic Committee � which is a core� committee in the management of Coflexip.� ����������� The Respondent had argued that if Technip and ISIS were
acting together there was no question of ISIS voting in favour of setting up a
committee to revise the offer price put forth by Technip while making the
public offer to the shareholders, that�
Technip would not have subjected�
several restrictions on undertaking new business etc. without the
approval of Coflexip.� In this connection
it is to be noted that Coflexip is a public company.� It is a separate legal entity.� ISIS has investment in it.� ISIS objecting� to the setting up of a committee to revise
the offer price,� is but natural as an
increase in offer price was to its advantage and by doing so it was not in any
way acting against its objective of helping Technip to acquire control over
Coflexip. It is to be� noted that supporting
Technip to acquire control of Coflexip through acquisition of shares, does not
mean that ISIS should forego the monetary gains that would otherwise accrue to
it in the transaction.� It is an admitted
fact that ISIS is a commercial set up and as such it was but natural that it
would bargain for a higher price for the shares held by it.� But this does not mean that ISIS was acting
against Technip. Technip is� not a wholly
owned subsidiary of ISIS.� Adding a
little more financial burden on Technip by asking for higher offer price can
not be viewed as a hostile action from ISIS or as evidence of non
co-operation.��� Respondent has stated
that at one point of time Coflexip� was
mooting takeover of Technip and that such a proposal would not have come from
Coflexip, if it had been under the control of Technip, as is being
alleged.� The Respondents have not
produced any evidence to show� when the
proposal was made and why it was not pursued and given up. Even otherwise such
a move can not be viewed as to indicate that on 12.4.2000 Technip had not
acquired shares to control Coflexip.� The
fact is that on 3.7.2001 it was Technip which acquired 99% shares in Coflexip.
About the several binding covenants on Technip it is to be noted that in the
corporate sector such binding terms and conditions in contracts entered between
even holding companies and subsidiaries are common from the commercial angle
and legal angle. .� As long as they
remaianed two separate legal entities, inter se agreements/contracts would be
necessary.�� It is to be noted that
ultimately Technip had acquired 98% of the shares in Coflexip in July
2001.� Further that it acquired 99%
shares in ISIS is also an important factor.�
The Respondent had posed a query as to in case Technip had acquired
control on 12.4.2000 what was the necessity for it to spend huge sum of money
to acquire further shares on 3.7.2001.�
It is not uncommon in the corporate sector that a person already holding
control, especially defacto control, acquiring more shares to strengthen his
position or to gain exclusive control.�
The acquisition of shares of Coflexip through public offer by Technip
was to gain exclusive control as the combines holding in terms of the number of
shares in their possession was only 47%.��
This holding was sufficient to exercise control in a company in which
48% shares are widely distributed among the public.� But, Technip possibly wanted to strengthen
its position dejure as well with 99% and they�
acquired shares to that level through the public offer in July,
2001.� In my view the acquisition raising
the shareholding to 99% in Coflexip was the final act whereas the process
started on 12.4.2000.� The disclosure
made by Technip in the Exchange offer prospectus indicates that the acquisition
of shares on 12.4.2000 was for fructification of a plan to acquire control over
Coflexip.� In the said prospectus it has
been stated that Board of Directors of Technip believed in December 1999 that
Coflexip client relationship and expertise would complement and that integration
of Technip with a company of Coflexip dimension would considerably increase its
capacity.� Accordingly at a meeting
held� in December 1999, the Board of
Technip had authorised Mr. Valot to approach Coflexip for discussing a possible
combination between the two companies. �It is to be noted that in terms of regulation
12 an acquirer shall not acquire control over the target company unless such
acquirer makes a public announcement to acquire shares and acquires such shares
in accordance with the regulations.� In
terms of regulation 14(3)� �the public
announcement referred to in regulation 12 shall be made by the merchant banker
not later than four working days after any change or changes are decided to be
made as would result in the acquisition of control over the target
company�.� It is crystal clear from Mr.
Daniel Valot�s statement that process of acquisition of control started in
April 2000 and culminated with the public offer on 3.7.2001 and in that context
Coflexip was required in terms of regulation 14(3) read with regulation 12 to
make a public announcement offering to acquire the shares of SEAMEC as it had
decided to acquire shares of� Coflexip on
12.4.2000. It
was submitted that even in terms of regulation 12, there was no change in
control, as Technip entered only in place of Stena.� According to the Respondents� regulation 12 (ii) is applicable.� According to regulation 12 (ii) �Where any
person or persons are given joint control such control shall not be deemed to
be a change in control so long as the control given is equal to or less than
the control exercised by the persons presently having control over the
company�.� This sub regulation has no
application, as the instant case is� not
one giving joint control.� It is a
question of acquisition of control by TechnIp with persons acting in concert.
(ISIS). An argument was advanced that even if it is assumed that Technip had acquired defacto control over coflexip SA, there was no change in the ownership of SEAMEC or control over SEAMEC as a result of the alleged acquisition.� This argument in my view is feeble.�� In this context it is to be noted that regulation 12 even though does� not speak of indirect acquisition that it covers indirect acquisition as well� is implicit from the scheme of the regulation, and especially when viewed from the objective of the Regulations.� In this context it is to be noted that the� incidence for making public offer under regulation 12� is acquisition of control,� the obligation to make public offer in terms of regulation 12 is on the acquirer.� Who is an acquirer.� �Acquirer� in terms of regulation 2(b) means �any person who directly or indirectly acquires or agrees to acquire shares or voting rights in the target company or acquires or agrees to acquire control over the target company, either by himself or with any person acting in concert with the acquirer.�� This definition clears the doubt,� if any,� as to on indirect acquisition the obligation to make public offer under regulation 12 would attract or not. It is to be noted that the object of Takeover Regulations is to protect the interest of shareholders.� Regulations 10 and 11 on substantial acquisition of shares/voting rights takes care of direct and� indirect acquisitions.� In that context there is no reason to believe that if it is acquisition of control then only direct acquisition is to be taken cognizance.��� It is in this context one has to remember that Takeover Regulations is a beneficial legislation and it has to be interpreted in a manner so as to benefit the shareholders.� In fact, the intent of the regulation 12 has now been made clear� by way of an explanation added vide amendment effected on 9.9.2002 stating that regulation 12 covers direct or indirect acquisition of control.� This is only an explanation � an explanation is clarificatory in nature.�� It does not stand to reason that the investors� interest requires protection if the acquisition is direct and if it is an indirect acquisition no such protection is required. The Respondent had advanced an argument that Takeover Regulations as amended on 9.9.2002 should be applicable to the case, as the impugned order is dated 9.9.2002 and also in view of the fact that the Public Announcement in India was issued on 11.11.2002.� I have considered the authorities cited� by them in support of the same.� Shri Setalvad in this context had rightly pointed out that the SEBI Regulations can not be retrospectively applied, as SEBI has not been empowered to make regulations with retrospective effect and in the absence of clear specific power empowering to make regulations with retrospective effect, regulations can not be brought in to force with retrospective effect.� It is� not the date on which SEBI passed the order that matters.� It is the date of the cause of action that decides the applicability of the Regulation.� Cause of action in this case is acquisition of shares/control of Coflexip by Technip on 12.4.2000. Therefore, in my view , the applicable regulations having a bearing on the rights and obligations on Technip should be the one in position on 12.4.2000 and not the one brought into force on 9.9.2002. Shri Choudhary had advanced an argument that regulation 10 is attracted to the case, as Technip acquired 29.68% shares of Coflexip, and that Coflexip through its subsidiaries was holding 58.24% of the voting capital of SEAMEC, and therefore� the Technip has acquired 17% shares in SEAMEC (proportionate to 58.24%).� This argument in� my view is untenable.� First of all� the regulations do not recognise such proportionate acquisition for triggering regulation 10.� More than that, it is a well accepted principle that a shareholder is not the owner of the assets of the company in which he holds shares.� Assets are owned by the investor company.� A shareholder in terms of his holding in the investor company, has no legal right to exercise the voting rights available to the shares in which the company has invested its funds.� It is also to be noted that the dividend/bonus shares etc. if any received from such investments are not separately treated and paid to the shareholders of the investor company based on the number of shares held by each one of the shareholders of the investor company.�� The question of such a proportionate ownerhip is not recognised.� Shri Choudhary�s submission that Technip has acquired shares in SEAMEC more than 15%� for the reason stated above, is not acceptable. I have taken note of the decision of the Hon�ble Bombay High court in B. P. Amoco holding that the relevant date for deciding the offer price is the date on which the acquirer decides to aquire shares/voting rights/control and not the actual date of acquisition.� In the light of the facts and circumstances of the case, in my view Technip had decided to take over control of Coflexip and to achieve the said objective, acquired 29.68% shares of Coflexip on 12..4.2000.�� The evidence before me leads to the conclusion that ISIS had acted� in concert for the said purpose. In the light of the finding that the relevant date for calculating the offer price should be 12.4.2000, the appeal no.01/2003 has become redundant.� But I would like to make it clear that the allegation made therein that the public announcement/offer document was not drawn up in terms of this Tribunal�s interim order dated 25.10.2002 and that the Merchant Banker (Morgan) had failed in its duties, is unfounded. It is noted that Technip has already made the public offer, as per this Tribunal�s interim order dated 25.10.2002.� Technip has not contested SEBI�s direction to pay interest, the rate of interest to be paid, the persons to whom interest is to be paid and the period for which interest is to be paid.� Therefore, it is not considered necessary for the Tribunal to pass any order thereon. This Tribunal in its interim order dated 25.10.2002 had recorded that (i)�������� The acquirer
will implement the impugned order dated 9.9.2002 by making a public
announcement to acquire shares of SEAMEC in accordance with SEBI(Substantial
Acquisition of Shares and Takeovers) Regulations, 1997 on or ���������� before 15.11.2002 by taking 3.7.2001
as the reference date at a price decided as per the Regulations and make the
payment within the time limit prescribed in the regulation for the purpose. (ii)������� xxxxxxxx �(iii) ��� In the event this Tribunal comes to a findings that the reference date shall be� 12.4.2000 and not 3.7.2001 as directed by SEBI in its order, the price payable for the shares acquired shall be with reference 12.4.2000 and the acquirer will pay the difference between the price payable as per SEBI�s order and the price payable taking 12.4.2000 as the reference date.� The acquirer will also pay interest at such rate as may be fixed by the Tribunal on the differential amount also from such date as the Tribunal decides till the date on which payment is made to the eligible share holder of SEAMEC pursuant to the open offer, with in 30 days from the date of the final order by the Tribunal in the appeals.� Contents of this para also will be disclosed in the public �������� announcement and in the letter of offer�. This Tribunal has come to the conclusion that the reference date shall be 12.4.2000 and not 3.7.2001 as directed by SEBI in its order. Since this Tribunal has come to the conclusion that the reference date for calculating the offer price should be 12.4.2000, Technip is directed to pay to the SEAMEC�s hareholders for the shares accepted in the public offer the differential amount and interest at the rate� of 15% thereon as directed in para (iii) of this Tribunal�s� interim order dated 25.10.2002 from 11.8.2000 till the date on which the payment of the differential amount is made within 30 days from the date of� the order. Appeals disposed of in the above lines. ����������������������������������������������������������������������������������� Sd/- (C. ACHUTHAN) ����������������������������������������������������������������������� PRESIDING
OFFICER, Mumbai, Date: October
27 , 2003. |
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