REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 6041 OF 2013 Secur !

e" #$% E&c'#$(e B)#r% )* I$% # A,,e--#$! VERSUS M.". A/"'0# I$*r#"!ruc!ure P1!. L!%. ..Re",)$%e$! JUD2MENT SURINDER SIN2H NIJJAR3 J. 1. This appeal under Section 15Z of the Securities and +

Exchange Board of India Act, 1992 the !SEBI Act"# is directed against the $udg%ent and final order of the Securities Appellate Tri&unal, 'u%&ai &, '.s. A/sh,a SAT# dated 19th (une, 2)1* 0ri1ate 2i%ited 3 the rendered in Appeal +o.* of 2)1*, &, -hich the appeal filed Infrastructure respondent herein against the directions issued &, SEBI on *)th +o1e%&er, 2)12 has &een allo-ed. 2. The funda%ental issue -hich arises in this appeal is

-hether an open offer 1oluntaril, %ade through a 0u&lic Announce%ent for purchase of shares of the target co%pan,

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can &e per%itted to &e -ithdra-n at a ti%e -hen the 1oluntar, open offer has &eco%e unecono%ical to &e perfor%ed. *. In this case, the respondent herein, '.s A/sh,a

Infrastructure 01t. 2td., is a part of the 0ro%oter 4roup of 'A54 2i%ited !the Target 6o%pan,"#. 7or the ,ears 2))89 ):, 2)):9); and 2)1)911, the gross ac<uisition &, the 0ro%oter 4roup of shares in the Target 6o%pan, -as as under = >7inancial ?ear 2))89): 2)):9); 2)1)911 0ercentage 1A.*AB 5.8AB :.11B @ate triggered on *).)*.2)): 12.1).2)): 19.)2.2)11C

As a conse<uence of the foregoing ac<uisitions, the ac<uirers &reached the 5B creeping ac<uisition li%it and -ere re<uired to co%pl, -ith the pro1isions of 5egulation 11 of the SEBI Su&stantial Ac<uisition of Shares and Ta/eo1ers# 5egulations, 199: hereinafter referred to as the >Ta/eo1er 5egulationsC#. A. Dn 2)th Dcto&er, 2)11, the respondent %ade a

voluntary open offer through a 0u&lic Announce%ent in %a$or +ational +e-spapers, under 5egulation 11 of the Ta/eo1er 5egulations -herein the pu&lic shareholders of the Target 6o%pan, -ere gi1en an opportunit, to exit at an
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offer price of 5s.91.9 per e<uit, share. This price represents a pre%iu% of 1).*B o1er the a1erage %ar/et closing price for the t-o -ee/s preceding the 0u&lic Announce%ent. The tendering period -as scheduled to co%%ence on 1 st @ece%&er, 2)11 and conclude on 2) th @ece%&er, 2)11. The consideration for the tendered shares -as to &e paid on or &efore Ath (anuar,, 2)12. As on the date of the open offer, the list of 0ro%oters.0ro%oter 4roup Entities -as as under=9 Sl. +o. 1. 2. *. A. 5. 8. :. ;. 9. +a%e 'r. 4.5E. 5edd, 'r. 4. 5agha1a 5edd, 's. F.0. 5a$ini 5edd, 'r. 4. 'adhusudan 5edd, 45E 5edd, G 6ons HI7# '.s. 4lo&al Infoser1e 2td. '.s. 'arg 6apital 'ar/ets 2i%ited '.s. Exe%plarr Jorld-ide 2i%ited '.s. 'arg 0ro$ects and Infrastructure 2i%ited for%erl, 1). 5. 'arg Holdings and 7inancial Ser1ices 2i%ited# '.s. A/sh,a Infrastructure 0ri1ate 2i%ited

Ho-e1er, due to certain e1ents, -hich ha1e &een 29th 'arch, 2)12 through '.s. 'otilal Ds-al

highlighted &, &oth the parties, the respondent &, letter dated In1est%ent Ad1isors 0# 2td., the 'anagers to the Issue

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hereinafter <uestion

referred &eco%e

to

as

the

>'erchant there&,

Ban/erC#, its

addressed to SEBI, sought to contend that the open offer in had outdated, outli1ing necessit, and, therefore, the sa%e ought to &e per%itted to &e -ithdra-n. It -as also contended that the a%ount of 5s.1:.A8 crores deposited &, the respondent in an escroaccount to-ards the open offer ought to &e allo-ed to &e -ithdra-n. The letter e%phasiKes that the pu&lic announce%ent -as in nature of a voluntary open offer under 5egulation 11 of the Ta/eo1er 5egulations for consolidation of shareholding of the 0ro%oter 4roup in the Target 6o%pan,. The offer price of 5s.91.9 per e<uit, share of the Target 6o%pan, -as ai%ed at presenting a co%%erciall, reasona&le opportunit, to the pu&lic shareholders to exit and at the sa%e ti%e it -as %eant to consolidate the shareholding of the pro%oter in the Target 6o%pan,. It -as further stated that due to the un$ustified dela, &, SEBI in ta/ing a decision as to -hether to appro1e the draft letter of offer has rendered the entire open offer exercise acade%ic and %eaningless. It -as clai%ed that the transaction en1isaged &, the respondent is no longer $ustifia&le on an, ground, including the grounds of econo%ic rationale and co%%ercial reasona&leness. -ithdra-al of open offer The respondent sought the %ade under the pu&lic

announce%ent in ter%s of 5egulation 2: of the Ta/eo1er 5egulations. The exact pra,er %ade &, the respondent -as

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as follo-s=9 >6onse<uentl,, -e here&, see/ -ithdra-al of the open offer %ade under the pu&lic announce%ent in ter%s of 5egulation 2: of the Ta/eo1er 5egulations the &enefit of -hich continue to accrue to us in ter%s of 5egulation *5 2# of the SEBI Su&stantial Ac<uisition of Shares and Ta/eo1ers# 5egulations, 2)11 >+eTa/eo1er 5egulationsC#. 5egulation 2* 1# d# of the +e- Ta/eo1er 5egulations e<uall, e%po-ers -ithdra-al of an open offer.C 8. The appellant &, letter dated *) th +o1e%&er, 2)12

con1e,ed its co%%ents in ter%s of the pro1iso to 5egulation 18 A# of the Ta/eo1er 5egulations on the draft letter of offer. 6ertain infor%ation -as sought in the aforesaid letter. +o reference -as %ade in this letter -ith regard to the re<uest %ade &, the respondent for per%ission to -ithdrathe open offer. 5ather it -as stated as under = >0lease note that failure to carr, out the suggested changes in the letter of offer as -ell as 1iolation of pro1isions of the 5egulations -ill attract appropriate action. 0lease also ensure and confir% that apart fro% a&o1e, no other changes are carried out in the letter of offer su&%itted to us.C The aforesaid co%%ents of SEBI -ere challenged &, the respondent &efore SAT in Appeal +o.* of 2)1*. :. The respondent clai%ed that the i%pugned directions,

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ostensi&l, in the for% of co%%ents and o&ser1ations on the draft letter of offer, re$ect the plea of the petitioner that the dela, caused &, SEBI in clearance of the draft letter of offer, no- renders the open offer un1ia&le and acade%ic. 7urther, the i%pugned directions purport to &ind the appellant and there&, constitute an order &, -hich the respondent -as aggrie1edL and necessitated the appeal &efore the SAT. ;. In the appeal &efore SAT, the respondent clai%ed that

the directions contained in the i%pugned letter of SEBI dated *)th +o1e%&er, 2)12, incorrectl, allege that pri%a facie re<uire%ent to %a/e an open offer -as triggered &, the pro%oters and the pro%oter group entities of the Target 6o%pan, 0ro%oter 4roup# under 5egulation 11 1# of the Ta/eo1er 5egulations on three past occasions, 1iK. 'arch *), 2)):, Dcto&er 12, 2)): and 7e&ruar, 19, 2)11 Alleged Triggers#. It -as further clai%ed that the directions to re1ise the offer price, on account of the re<uire%ent to %a/e open offers pursuant to the alleged triggers -as illegal and -ithout $urisdiction. It -as also clai%ed that the directions contained in the i%pugned letter has caused se1ere ci1il conse<uences to the respondent. It -as also clai%ed that the su&%issions on the issues presented &, the respondent &efore the appellant ha1e neither &een considered nor appreciated.

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9.

The appeal -as contested &, the appellant &, filing a

detailed affida1it on 12th April, 2)1*. As noticed a&o1e, the aforesaid appeal has &een allo-ed &, SAT in ter%s of pra,er clause a#, &# and c# of 0ara : of the appeal filed &, the respondent, -hich are as under=9 > a# That this Hon"&le Tri&unal &e pleased to set aside the I%pugned @irectionL &# That this Hon"&le Tri&unal &e pleased to order and direct the respondent to allo- the appellant to -ithdra- the open offer -ithout an, ad1erse orders or directions against the appellants or the 0ro%oter 4roupL c# That this Hon"&le Tri&unal &e pleased to order and direct the respondent to allo- the appellant to -ithdra- the a%ount of 5s.1:.A8 crores deposited in escro- in lieu of the Dpen Dffer.C 1). It -as, ho-e1er, %ade clear that SAT has not %ade an, o&ser1ation on the %erits of the issue regarding the three alleged triggers and the contentions of the parties in this regard -ere /ept open. Aggrie1ed &, the aforesaid i%pugned $udg%ent, SEBI has filed the present 6i1il Appeal. 11. Je ha1e heard the learned counsel for the parties at length.

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12. 'r. 6.I. Singh, learned senior counsel appearing for the appellant, has su&%itted that the issues raised &, the appellant herein are s<uarel, co1ered against the respondent &, an earlier $udg%ent of this 6ourt in N r4# I$%u"!r e" L!%. 5 A$r. Fs. Secur ! e" #$% E&c'#$(e B)#r% )* I$% #1. 1*. At this stage, 'r. 5.7. +ari%an, learned senior counsel appearing for the respondent, has raised certain preli%inar, o&$ections -ith regard to the %aintaina&ilit, of the appeal. He su&%its that the directions issued &, the SEBI are &ased on a %isconception of the la- applica&le to the peculiar facts of this case. He su&%its that firstly= this is a case -here the respondent had %ade voluntary open offer. It -as not a case of an open offer %ade &ecause of a triggered mechanism under the Ta/eo1er 5egulationsL secondly= since the open offer -as a pure and si%ple voluntary offer, no pre$udice has &een caused to an, shareholderL thirdly= the present case does not fall -ithin the a%&it of 5egulation 2: of Ta/eo1er 5egulations. According to 'r. +ari%an, 5egulation 2: ought to &e read in a %anner that it -ould onl, go1ern mandatory open offers and not voluntary open offers; fourthly= SEBI has -ithout an, $ustification inter%ingled ac<uisition of shares &, the respondent on the three earlier occasions in 2))89):, 2));9)9 and 2))991)L
1

2)1*# ; S66 2)

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fifthly= SEBI un$ustifia&l, and ar&itraril, too/ 1* %onths to offer co%%ent s# on the draft letter of offer. E1en then the clarification sought &, the appellant pertained to the past alleged triggers -hich had no connection -ith the voluntary open offer. It is su&%itted that e1en if the case of the respondent falls -ithin the a%&it of 5egulation 2:, the -ithdra-al is per%issi&le in such circu%stances -hich in the opinion of SEBI the Board# %erit -ithdra-alL sixthly= the $udg%ent in N r4# I$%u"!r e" 6"u,r#7 is distinguisha&leL lastly= the $udg%ent in N r4# I$%u"!r e" 6"u,r#7 is incorrect and needs reconsideration. 1A. 'r. 6.I. Singh, learned senior counsel appearing for the appellant, has su&%itted that the correspondence exchanged &et-een the parties -ould sho- that the dela, in consideration of the letter of offer -as caused &, the respondent &, not gi1ing the necessar, infor%ation. He relies on the 1olu%inous correspondence &et-een the parties in support of his su&%ission -hich, if necessar,, shall &e considered later. His second su&%ission is that the re<uest for -ithdra-al of open offer is to &e considered strictl, under the pro1ision of 5egulation 2: of the Ta/eo1er 5egulations. 15. The respondent had %ade a 0u&lic Announce%ent on 2)th Dcto&er, 2)11 -hich clearl, infor%ed the pu&lic

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shareholders of the Target 6o%pan, that the, -ere &eing gi1en an opportunit, to exit at an offer price of 5s.91.9 per e<uit, share, -hich represented a pre%iu% of 1).*B o1er the a1erage %ar/et closing price for the t-o -ee/s preceding the 0u&lic Announce%ent. This 0u&lic Announce%ent and the 0u&lic Dffer -as sought to &e -ithdra-n on 29th 'arch, 2)12. He points out that in the aforesaid letterL the re<uest for -ithdra-al is specificall, %ade under 5egulation 2: of the Ta/eo1er 5egulations. Therefore, 'r. +ari%an cannot &e per%itted to, no-, su&%it that 5egulation 2: is not applica&le to the open offer in the present case. 18. 'r. 6.I. Singh then su&%its that the respondents ha1e consciousl, proceeded -ith an open offer and the, ha1e rightl, not &een per%itted to -ithdra- the sa%e &, the appellant. The next su&%ission of 'r. 6.I. Singh is that 5egulation 2: deals -ith onl, -ithdra-al of !0u&lic Dffer" and not -ithdra-al of !0u&lic Announce%ent". In an, e1ent, according to learned senior counsel, su&%ission -ith regard to -ithdra-al of 0u&lic Announce%ent has &een %ade, onl,, at the ti%e of argu%ents &efore this 6ourt. It -as neither pleaded nor raised &efore the SEBI.SAT, nor e1en in the counter affida1it &efore this 6ourt. He next su&%itted that under the pro1isions of 5egulation 2:, pu&lic offer is a rule and withdrawal is an exception. 5el,ing on the interpretation

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of 5egulation 2: in N r4# I$%u"!r e" L!%.6"u,r#7, he su&%its that an offer can &e per%itted to &e -ithdra-n onl, if it &eco%es 1irtuall, i%per%issi&le to carr, out. 0er%itting pu&lic offers once %ade to &e withdrawn on the ground that it has &eco%e unecono%ical -ould co%pro%ise the integrit, of the Securities 'ar/et. This -ould &e contrar, to the sche%e of the Ta/eo1er 6ode. 'r. 6.I. Singh then su&%its that there is no distinction under 5egulation 2: &et-een the voluntary open offer and mandatory open offer -hich is the result of a triggered acquisition. 5el,ing on 5egulations 11 to 1A of the Ta/eo1er 5egulations, he su&%its that all the different t,pes of open offers are set out therein. Each one of the open offers has the sa%e effect on shareholders and the %ar/et. Therefore, the pro1isions contained in 5egulation 2: ha1e to &e strictl, adhered to in considering the re<uest for -ithdra-al of the open offer. It is further su&%itted that the appellant had fixed the offer price under the rele1ant regulations and in accordance -ith the la- laid do-n &, this 6ourt in C-#r #$! I$!er$#! )$#- L!%. 5 A$r. Fs. Secur ! e" 5 E&c'#$(e B)#r% )* I$% #2.

1:. According to 'r. 6.I. Singh, in nor%al circu%stances, -ithdra-al can onl, &e %ade under 5egulation 2: 1# &#, c# and d#. He su&%its that in the letter dated 29 th 'arch, 2)12, the respondent clai%s that the offer has &eco%e >outdated
2

(2004) 8 SCC 524

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due to the sheer efflux of ti%eC. The second reason gi1en is the dela, in clearance of open offer fro% SEBI. The letter also indicates that the respondent does not agree -ith the 1ie-s of the SEBI on the fact situation. Another reason gi1en is that >e1en if the SEBI -ere to appro1e the draft letter of offer toda,, the open offer exercise -ould &e entirel, acade%ic and %eaningless.C Another reason gi1en is that >the transaction then en1isaged &, us is no longer $ustifia&le on an, ground including grounds of econo%ic rationale and co%%ercial reasona&leness.C All these factors, according to 'r. 6.I. Singh, -ill not &e co1ered &, an, of the clauses in 5egulation 2: 1# &# c# d#. He then su&%itted that e1en if there is a dela, &, SEBI, the ordinar, in1estor in shares of the Target 6o%pan, should not &e %ade to suffer. According to 'r. 6.I. Singh, the contro1ers, raised in the appeal is s<uarel, co1ered against the respondent &, $udg%ent of this 6ourt in N r4# I$%u"!r e" L!%. 6"u,r#7. 1;. 'r. +ari%an has re&utted the aforesaid su&%issions of 'r. 6.I. Singh. He su&%its that the single %ost i%portant distinction &et-een N r4# and this case is that it pertains to a voluntary public offer. This 6ourt had no occasion to deal -ith a voluntary public offer in N r4# I$%u"!r e" L!%. 6"u,r#7. In repl, to the other su&%issions %ade &, 'r. 6.I. Singh, 'r. +ari%an has also relied on so%e correspondence. He has also relied upon a ta&le to

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su&stantiate the su&%ission that the la- laid do-n in N r4# I$%u"!r e" -ould not &e applica&le in the facts and circu%stances of this case. @ealing -ith the issue of dela,, it is su&%itted &, 'r. +ari%an that there -as an un$ustifia&le and inexplica&le dela, &, SEBI in issuing its co%%ents on the draft letter of offer. In support of this su&%ission, he has relied on so%e correspondence. 19. He relies on letter dated Dcto&er 2), 2)11, -here&, the respondent %ade a voluntary 5egulation open 11 offer of the &, 0u&lic Announce%ent under Ta/eo1er

5egulations. He points out that 6lause 11.A of the 0u&lic Announce%ent clearl, states that 1oluntar, open offer can &e withdrawn &, the respondent at an, ti%e. He then points out that on 25th Dcto&er, 2)11, SEBI called upon the respondent to pro1ide infor%ation on the changes in shareholding and capital &uild up of the Target 6o%pan,, along -ith co%pliance of the SEBI 5egulations. He su&%its that although the infor%ation sought pertains to the earlier ac<uisition it -as dul, pro1ided on +o1e%&er A, 2)11 and +o1e%&er ;, 2)11. 'r. +ari%an su&%its that under 5egulation 1; 1# of the Ta/eo1er 5egulations, the draft letter of offer is re<uired to &e filed -ith SEBI -ell -ithin 1A da,s fro% the date of the 0u&lic Announce%ent. Dnce the letter of offer is filed, SEBI -as re<uired to dispatch the sa%e to the shareholders i%%ediatel, after 21 da,s. @uring 21 da,s,

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SEBI is per%itted to stipulate the changes re<uired to &e %ade in the letter of offer -hich the 'erchant Ban/er and the Ac<uirer shall incorporate in the letter of offer, &efore it is dispatched to the shareholders. In case, SEBI recei1es a co%plaint or it initiates an en<uir, or in1estigation in respect of pu&lic offer, it can call for a re1ised letter of offer. In this case, he su&%its that the draft letter of offer -as gi1en on Dcto&er 2;, 2)11 -ell -ithin 1A da,s period stipulated under 5egulation 1; 1#. But SEBI did not issue its co%%ents on the draft letter of offer -ithin 21 da,s, as re<uired. +ot onl, there -as a non9co%pliance of 5egulation 1; 1# &ut there -as no occasion to in1o/e pro1iso to 5egulation 1; 2#. SEBI did not infor% or ad1ise the respondent to re1ise the draft letter of offer on account of an, inade<uac, in the disclosure %ade &, the respondent in the draft letter of offer in respect of the 1oluntar, offer. All the <ueries -ere related to the past alleged triggers. These alleged triggers -ere -holl, unrelated to the 1oluntar, open offer for -hich the draft letter of offer -as filed -ith the appellant. He then pointed out that &, letter dated 1: th +o1e%&er, 2)11, the appellant again sought the sa%e clarification on the alleged triggers, as stated in its letter dated +o1e%&er 11, 2)11. He su&%itted that the 'erchant Ban/er and the respondent pro1ided all explanation regarding these ac<uisitions on +o1e%&er 2;, 2)11. The letter dated +o1e%&er 2A, 2)11 of the respondent -as for-arded to the appellant &, the

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'erchant Ban/er on +o1e%&er 2;, 2)11. This letter ga1e date -ise explanation on all the issues raised as to -h, no open offer -as %ade pertaining to the alleged triggers, as there -as no 1iolation of 5egulation 11 1# and 11 2# of the Ta/eo1er 5egulations. This explanation -as reiterated on @ece%&er 1A, 2)11 &, the respondent.0ro%oters &ut there -as no response fro% the appellant to an, of the aforesaid letters. This led the respondent to a reasona&le &elief that the explanation had &een accepted. Su&se<uentl,, there -as a telephonic re<uest &, the appellant to pro1ide the sa%e infor%ation on the alleged triggers in 1arious for%ats. The respondent dul, re9arranged the sa%e infor%ation in the desired for%at and pro1ided the sa%e to the appellant on (anuar, 1*, 2)12, (anuar, 18, 2)12 and 7e&ruar, *, 2)12. Inspite of all this, still there -ere no co%%ents fro% the SEBI. 'r. +ari%an e%phasiKed that the un$ustifia&le, inexplica&le and inordinate, dela, on the part of the appellant in issuing co%%ents on the draft letter of offer created a situation -herein it -as impossible for the respondent to i%ple%ent the voluntary open offer. B, that ti%e, the underl,ing decision to consolidate shareholding had &eco%e infructuous &, sheer efflux of ti%e. It -as under these circu%stances that the respondent inti%ated its decision to -ithdra- its voluntary open offer and sought -ithdra-al of the sa%e in ter%s of the 5egulation 2: of the Ta/eo1er 5egulations.

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2). It -as pointed out &, 'r. +ari%an that the respondent specificall, and expressl, sought opportunit, of a personal hearing on the aforesaid re<uest for -ithdra-al, the appellant did not re1ert on the re<uest. The respondent once again furnished the sa%e infor%ation on the alleged triggers in different for%ats as re<uired &, the appellant through co%%unications dated April 12, 2)12L April 2), 2)12L 'a, 1), 2)12L 'a, 21, 2)12L (une 8, 2)12 and (ul, 5, 2)12. After a period of %ore than 1* %onths, fro% the date of filing of the draft letter of offer and after %ore than ; %onths fro% the date of re<uest for -ithdra-al, the appellant issued the i%pugned letter dated +o1e%&er *), 2)12. 'r. +ari%an points out that the directions issued in the i%pugned letter are -holl, un$ustified. He points out to the follo-ing t-o directions =9 a# 4o ahead -ith the 1oluntar, open offer on account of so%e alleged triggers for creeping ac<uisitions under 5egulation 11 of the Ta/eo1er 6ode, 199:# in the past i.e. 2))89):L 2)):9); and 2)1)911. &# %a/e an open offer -ith up-ard re1ision in price per share. The share prices offered &, the respondent in 2))9 -ere 5S.91.)) per e<uit, share and as on date the prices is 5S.*15.9) per e<uit, share.

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21. 'r. +ari%an su&%itted that SAT -ithout going into the %erits and de%erits of the alleged earlier ac<uisitions, has left it open for SEBI to ta/e appropriate action in accordance -ith la- -ith regard to the aforesaid three ac<uisitions. Therefore, clearl, the aforesaid three ac<uisitions ha1e no connection -hatsoe1er -ith the voluntary offer under consideration in these proceedings. 22. The next su&%ission of 'r. +ari%an is the foundation of all his other su&%issions. According to 'r. +ari%an, there is a funda%ental difference &et-een a mandatory public offer and a voluntary open offer. It cannot &e placed on the sa%e pedestal. %andator, According pu&lic to offer learned there senior exists counsel, an in a underl,ing

transaction -hich triggers the Ta/eo1er 6ode under -hich the shareholders o&tain a right to exit fro% the co%pan,. Ho-e1er, in a voluntary open offer, no such right accrues to the shareholders to exit the co%pan,, since the offer is not the result of a triggered acquisition. In the present case, the action of SEBI, according to 'r. +ari%an, is contrar, to 5egulation 1;. The letter of offer -as not dispatched to the shareholders as per 5egulation 1; 1#. 5egulation 15 A# dee%s that the offer is %ade on the date on -hich the 0u&lic Announce%ent has appeared in an, ne-spaper. But according to 'r. +ari%an, this dee%ing fiction is for the purpose of price fixation for the offer. It has nothing to do

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-ith 5egulation 1; -hich is to dispatch the actual offer to the shareholders. Therefore, according to 'r. +ari%an, reliance placed &, 'r. 6.I. Singh on the expression >offer once %adeC in 5egulation 2: is %isconcei1ed. This expression has to &e understood in ter%s of 5egulation 1;. Since 5egulation 1; had not &een co%plied -ith and there -as no dispatch of the letter of offer to the shareholders, there -as no <uestion of an, pre$udice &eing caused to the interest of the shareholders. 'r. +ari%an then su&%its that &ecause of the inaction on the part of SEBI, the respondent -ould &e s<uarel, co1ered under 5egulation 2: 1# &#. The appro1al of the letter of offer &, the appellant is statutor, in nature. Since it had not &een granted -ithin the stipulated period of ti%e, the respondent -as entitled to assu%e that it had &een refused. According to 'r. +ari%an, it has &een erroneousl, su&%itted &, 'r. 6.I. Singh that the clai% of the respondent is not co1ered under 5egulation 2: 1# &#. 'r. +ari%an then su&%its that the $udg%ent in N r4# I$%u"!r e" is not applica&le in the facts and circu%stances of this case. 7inall,, he has su&%itted that the $udg%ent in N r4# I$%u"!r e" 6"u,r#7 re<uires reconsideration. In support of this su&%ission, he su&%its that 5egulation 2: has to &e interpreted &, /eeping in %ind the earlier 5egulation 2: 1# a#. In N r4# I$%u"!r e", this 6ourt has held that 5egulation nature of i%possi&ilit,. 2: &#, c# and d# are all in the 'r. +ari%an %ade a

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%ention a&out 5egulation 2: 1# a# -hich -as o%itted &, the SEBI Su&stantial Ac<uisition of Shares and Ta/eo1ers# Second A%end%ent# 5egulations, 2))2 -ith effect fro% Septe%&er 9, 2))2. 0rior to deletion, it read as under = >9 a# the -ithdra-al is conse<uent upon an, co%petiti1e &id,C Based on this, he su&%its that econo%ic 1ia&ilit, of pu&lic offer -as the genus of 5egulation 2:. The facts of this case -ould clearl, place the re<uest of the respondent for -ithdra-al of the public offer in the real% of i%possi&ilit,. 'r. +ari%an has su&%itted that for the interpretation of 5egulation 2:, the ejusdem generis principle -ould not appl, as there is no co%%on genus &et-een 6lauses 2: 1# &# c# and d#. 2*. 'r. 6.I. Singh in re$oinder has su&%itted that in 1ie- of the la- laid do-n in N r4# I$%u"!r e", the pu&lic offer %ade &, the respondent cannot &e per%itted to &e -ithdra-n. Earlier incidence of the alleged triggers can &e relied upon. According to hi%, the price has to &e fixed on the &asis of the pu&lic announce%ent.offer. He su&%its that 5egulation 1; 1# tal/s of 1A da,s of the 0u&lic Announce%ent. 7urther%ore, pu&lic offer cannot &e said to &e %ade onl, on dispatch of the letter of offer to the indi1idual shareholders. The i%pact on the securities %ar/et -ould follo- the pu&lic announce%ent . He reiterates that
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e1en the -ithdra-al letter see/s per%ission to -ithdra- the 0u&lic Dffer under 5egulation 2:. 7inall,, he su&%its that the interpretation of 5egulation 2: rendered in N r4# I$%u"!r e" L!%. 6"u,r#7 is correct. does it re<uire reconsideration. 2A. Je ha1e considered the su&%ission %ade &, the learned counsel for the parties. 25. 7actuall,, it cannot &e denied that in the ,ears 2))89 ):, 2)):9); and 2)1)911, the respondent had ac<uired shares in excess of 5B -hich &reached the 5B creeping ac<uisition li%it. In our opinion, the respondent -as re<uired to The co%pl, -ith 5egulation ad%ittedl, 11 not and ha1ing %a/e a 0u&lic -ith Announce%ent to ac<uire shares in accordance -ith la-. respondent co%plied 5egulation 11, in our opinion, the appellant -as perfectl, $ustified in ta/ing the non9co%pliance into consideration -hilst considering the feasi&ilit, of the pu&lic offer %ade on 2)th Dcto&er, 2)11. 28. Jith regard to dela,, -e do not find %uch su&stance in the su&%ission of 'r. 6.I. Singh. 'r. Singh has sought to explain the dela, on the ground that infor%ation sought &, the appellant -as not gi1en &, the respondent. In our opinion, this -as no ground for the appellant to dela, the
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It full, applies to the

facts of the present case. It is neither distinguisha&le nor

issuance of co%%ents on the letter of offer, especiall, not for a period of 1* %onths. In the e1ent the infor%ation -as not forthco%ing, the appellant had the po-er to refuse the appro1al of the pu&lic offer. It is true that under 5egulation 1; 2#, SEBI -as re<uired to dispatch the necessar, letters to the shareholders -ithin a reasona&le period. It is a %atter of record that the co%%ents -ere not offered for 1* %onths. Such /ind of dela, is -holl, inexcusa&le and needs to &e a1oided. It can lead to a1oida&le contro1ers, -ith regard to -hether such &elated action is &ona fide exercise of statutor, po-er &, SEBI. B, adopting such a lac/adaisical, if not callous attitude, the 1er, o&$ect for -hich the regulations ha1e &een fra%ed is diluted, if not frustrated. It %ust &e re%e%&ered that SEBI is the watchdog of the Securities 'ar/et. It is the guardian of the interest of the shareholders. It is the protecti1e shield against unscrupulous practices in the Securities 'ar/et. Therefore, SEBI li/e an, other &od,, -hich is esta&lished as a watchdog, ought not to act in a lac/adaisical %anner in the perfor%ance of its duties. The ti%e fra%e stipulated &, the Act and the Ta/eo1er 5egulations for perfor%ing certain functions is re<uired to &e %aintained to esta&lish the transparenc, in the functioning of SEBI. 2:. Ha1ing said this, -e are afraid such dela, is of no assistance to the respondent. It -ill not result in nullif,ing

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the action ta/en &, SEBI, e1en though &elated. Ilti%atel,, SEBI is charged -ith the dut, of ensuring that e1er, pu&lic offer %ade is &ona fide for the &enefit of the shareholders as -ell as ac<uirers. In the present case, SEBI has found that per%itting the respondent to -ithdra- the pu&lic offer -ould &e detri%ental to the o1erall interest of the shareholders. The onl, reason put for-ard &, the respondent for -ithdra-al of the offer is that it is no longer econo%icall, 1ia&le to continue -ith the offer. 'r. +ari%an has referred to a ta&ular state%ent and data to sho- that there is no su&stantial 1ariation in the share prices that ensued %a/ing of the pu&lic offer. Ha1ing seen the ta&le, -e find su&stance in the su&%ission of fro% 2)th Dcto&er, 2)11 till 2A.11.2)11# and 5s. ;:.8) 'r. +ari%an that there is *) th +o1e%&er, 2)11. on 2).1).2)11#. Such a hardl, an, 1ariation in the shares of the Target 6o%pan, The 1ariation see%s to ha1e &een &et-een 5s. :;.1) on 1ariation cannot &e said to &e the result of the pu&lic offer. But this -ill not detract fro% the -ell /no-n pheno%ena that 0u&lic Announce%ent of the pu&lic offering affects the securities %ar/et and the shares of the Target 6o%pan,. The i%pact is i%%ediate. 2;. Je are una&le to agree -ith the su&%ission of 'r. +ari%an that 5egulation 2: -ould not &e applica&le to a voluntary public offer. A perusal of 5egulation 2: 1# %a/es it

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patentl, clear that 5egulation 2: 1# reads >no pu&lic offer, once %ade, shall not &e -ithdra-n except under the follo-ing circu%stances.C Accepting 'r. +ari%an"s su&%ission -ould &e to reconstruct the aforesaid pro1ision. This 6ourt, or an, other court, -hilst construing the statutor, pro1ision cannot reconstruct the sa%e. The plain reading of the aforesaid regulation %a/es it clear that no public offer -hether it is 1oluntar, or triggered &, 5egulation 11 can &e -ithdra-n, unless it satisfies the circu%stances set out in 5egulation 2: 1# &#, c# and d#. There can &e no distinction &et-een a triggered pu&lic offer and a voluntary pu&lic offer. Both ha1e to &e considered on an e<ual footing. Je find su&stance in the su&%ission %ade &, 'r. 6.I. Singh that 5egulation 1; 2# has no rele1ance to the case pro$ected &, the respondents ha1ing singularl, failed to gi1e the necessar, infor%ation to SEBI -ith regard to the earlier three ac<uisitions. 29. Je also do not agree -ith 'r. +ari%an that

5egulation 2: has to &e read in the context of the 5egulation as it existed -hen it -as first enacted. As noticed earlier, 5egulation 2: 1# a# &efore its deletion on Septe%&er 9, 2))2 per%itted the pu&lic offer to &e -ithdra-n, conse<uent upon an, co%petiti1e &id. Je see no reason to differ fro% the 1ie- ta/en in N r4# I$%u"!r e" L!%. 6"u,r#7 -herein -e ha1e o&ser1ed as follo-s=

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>82. A &are perusal of the aforesaid 5egulations sho-s that 5egulation 2: 1# states the general rule in negati1e ter%s. It pro1ides that no pu&lic offer, once %ade, shall &e -ithdra-n. Since clause a# has &een o%itted, -e are re<uired to interpret onl, the scope and a%&it of clauses b#, c# and d#. The three su&9clauses are exceptions to the general rule and, therefore, ha1e to &e construed 1er, strictl,. The exceptions cannot &e construed in such a %anner that -ould destro, the general rule that no pu&lic offer shall &e per%itted to &e -ithdra-n after the pu&lic announce%ent has &een %ade. 6lause b# -ould per%it a pu&lic offer to &e -ithdra-n in case of legal i%possi&ilit, -hen the statutor, appro1al re<uired has &een refused. 6lause c# again pro1ides for i%possi&ilit, -hen the sole ac<uirer, &eing a natural person, has died. 6lause b# deals -ith a legal i%possi&ilit, -hereas clause c# deals -ith a natural disaster. 6learl, clauses b# and c# are -ithin the sa%e genus of i%possi&ilit,. 6lause d# also &eing an exception to the general rule -ould ha1e to &e naturall, construed in ter%s of clauses b# and c#. 'r @i1an has placed a great deal of e%phasis on the expression >such circu%stancesC and >in the opinionC to indicate that the Board -ould ha1e a -ide discretion to per%it -ithdra-al of an offer e1en though it is not i%possi&le to perfor%. Je are una&le to accept such an interpretation.C

*). The su&%ission -ith regard to the non9applica&ilit, of

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ejusdem

generis

for

interpretation

of

the

Ta/eo1er

5egulations has &een considered and re$ected in N r4# I$%u"!r e" L!%. 6"u,r#7 0aragraphs 8* to :1#. *1. Je are also not i%pressed &, the su&%ission of 'r. +ari%an that it has no&eco%e econo%icall, i%possi&le to gi1e effect to the pu&lic offer. This 1er, su&%ission has &een re$ected in N r4# I$%u"!r e" L!%. 6"u,r#7. Je reiterate our opinion in N r4# I$%u"!r e" L!%. 6"u,r#7 that under 6lause 2: 1# &# c# and d#, a Public Offer, once %ade, can onl, &e per%itted to &e -ithdra-n in circu%stances -hich %a/e it 1irtuall, i%possi&le to perfor% the 0u&lic Dffer. In fact, the 1er, purpose for deleting 5egulation 2: 1# a# -as to re%o1e an, %isapprehension that an offer once %ade can &e -ithdra-n if it &eco%es econo%icall, not 1ia&le. Je are of the considered opinion that the distinction sought to &e %ade &, 'r. +ari%an &et-een a voluntary public offer and a triggered public offer is -holl, %isconcei1ed. Accepting such a su&%ission -ould defeat the 1er, purpose for -hich the Ta/eo1er 6ode has &een enacted. *2. Je also do not find an, %erit in the su&%ission of 'r. +ari%an that the dela, of 1* %onths &, SEBI in issuing the i%pugned directions -ould per%it the respondent to -ithdra- the 0u&lic Dffer under 5egulation 2: 1# &#. The consideration &, SEBI is as to -hether a 0u&lic Dffer is in
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confor%it, -ith the pro1isions of the SEBI Act and the Ta/eo1er 5egulations. @ela, in perfor%ance of its duties &, SEBI can not &e e<uated to refusal of the statutor, appro1al re<uires fro% other independent &odies, such as under the 5BI, Taxation 2a-s and other regulator, statutes including 7oreign Exchange 5egulations. @ela, &, SEBI in ta/ing a final decision in %a/ing its co%%ents on the letter of offer -ould not fall under 5egulation 2: 1# &#. **. This no- &rings us to the su&%ission of 'r. +ari%an that there -as a &reach of 5ules of +atural (ustice. It is %atter of record that the respondent had as/ed for an opportunit, of hearing &ut none -as granted. But the <uestion that arises is as to -hether this is sufficient to nullif, the decision of SEBI. In our opinion, the respondent has failed to place on the record either &efore SAT or &efore this 6ourt the pre$udice that has &een caused &, not o&ser1ing 5ules of +atural (ustice. It is &, no- settled proposition of la- that %ere &reach of 5ules of +atural (ustice is not sufficient. Such &reach of 5ules of +atural (ustice %ust also entail a1oida&le pre$udice to the respondent. This reasoning of ours is supported &, a nu%&er of cases. Je %a,, ho-e1er, refer to the la- laid do-n in N#!8#r S $(' Fs. D rec!)r )* E$*)rce4e$! 5 A$r.,3 -herein it -as held that >there %ust also ha1e &een caused so%e real pre$udice to the co%plainantL there is no such
3

2)1)# 1* S66 255

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thing as a %erel, technical infringe%ent of natural $ustice.C *A. All the infor%ation sought &, SEBI related to the three earlier ac<uisitions -hen the creeping li%it for ac<uisition has &een &reached for triggering the %andator, Ta/eo1er 5egulations. In appeal, SAT has left the <uestion -ith regard to the earlier three ac<uisitions open and to &e decided in accordance -ith la-. Therefore, clearl, no pre$udice has &een caused to the respondent.

*5. 7inall,, -e are una&le to accept the su&%ission of 'r. +ari%an that the ratio of la- as declared in N r4# I$%u"!r e" L!%. supra# -ould not &e applica&le to the facts and circu%stances of this case. As pointed out earlier, -e do not accept the distinction sought to &e %ade &, 'r. +ari%an -ith regard to voluntary open offer and mandatory open offer -hich is the result of a triggered ac<uisition. The conse<uences of &oth /inds of offers to ac<uire shares in the Target Company, at a particular price, are the sa%e. As soon as the offer price is %ade pu&lic, the securities %ar/et -ould ta/e the sa%e into account in all transactions. Therefore, the -ithdra-al of the open offer -ill ha1e to &e considered &, the Board in ter%s of 5egulation 2: 1# &# c# and d#. 7urther, the deletion of 5egulation 2: 1# a# does not, in an, %anner, ad1ance the case of the respondent. It rather reinforces the conclusion that an open offer once %ade can onl, &e
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-ithdra-n in circu%stances stipulated under 5egulation 2: 1# &# c# and d#. Je also do not agree -ith 'r. +ari%an that voluntary open offer %ade &, the respondent ought to &e per%itted to &e -ithdra-n under 5egulation 2: 1# &# for the reasons alread, stated. Je ha1e alread, co%e to the conclusion that the dela, in offering co%%ents &, the Board on the letter containing 1oluntar, open offer, though undesira&le, is not fatal to the decision ulti%atel, ta/en &, the Board. Je, therefore, reiterate our conclusion in N r4# I$%u"!r e" supra#.

*8. Je also do not find su&stance in the su&%ission of 'r. +ari%an that the $udg%ent in N r4# I$%u"!r e" supra# needs reconsideration. In our opinion, the ejusdem generis principle is full, applica&le for the interpretation of 5egulation 2: 1# &# c# and d# as there is a co%%on genus of impossibility. This impossibility en1isioned under the aforesaid regulation -ould not include a contingenc, -here voluntary open offer once %ade can &e per%itted to &e -ithdra-n on the ground that it has no&eco%e econo%icall, un1ia&le. Accepting such a su&%ission, -ould gi1e a field day to unscrupulous ele%ents in the securities %ar/et to %a/e 0u&lic Announce%ent for ac<uiring shares in the Target Company, /no-ing perfectl, -ell that the, can pull out -hen the prices of the shares ha1e &een inflated,

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due to the pu&lic offer. Such speculati1e practices are sought to &e pre1ented &, 5egulation 2: 1# &# c# and d#, that is precisel, the reason -h, 5egulation 2: 1# a# -as deleted. 'erel, &ecause there has not &een an, su&stantial change in the price of shares in this particular case, -ould not, in an, %anner, in1alidate the conclusion reached in N r4# I$%u"!r e" supra#.

*:. 2ast &ut not least, -e are not a&le to appro1e the approach adopted &, SAT in adopting the Issue of 6apital and @isclosure 5e<uire%ents 5egulations, 2))9 I6@5# 5egulation for interpreting the pro1isions contained in 5egulation 2: of the Ta/eo1er 5egulations. The regulations in Ta/eo1er 6ode ha1e to &e interpreted &, correlating these regulations to the pro1isions of the SEBI Act.

*;. In 1ie- of the a&o1e, the appeal is allo-ed. The i%pugned order passed &, the SAT dated 19 th (une, 2)1* in Appeal +o.* of 2)1* is set aside and the directions issued &, the appellant in the letter dated *) th +o1e%&er, 2)12 are restored.

++++++++++++.J. 9Sur $%er S $(' N ::#r;

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++++++++++++..J. 9A.<.S /r ; Ne8 De-' = A,r - 2>3 2014.

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