Order in the matter of acquisition of shares of Saurashtra Cements Limited

8/10/2019 Order in the matter of acquisition of shares of Saurashtra Cements Limited

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WTM/PS/59/CFD-DCR/DEC/2014

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

CORAM : PRASHANT SARAN, WHOLE TIME MEMBER

ORDER

I !"#$"%& '( F)* T!)+ C'.$) P!)&" L.&"+, W'* T!)+ C'.$) P!)&"

L.&"+, P)'! T!)+ C'.$) P!)&" L.&"+, F"! T!)+ C'.$) P!)&"

L.&"+ )+ T")#3!"" T!)+ C'.$) P!)&" L.&"+

I &3" .)&&"! '( )%#&' '( #3)!"# '( S)!)#3&!) C"." L.&"+

16

The Hon'ble Securities Appellate Tribunal ("Hon'ble SAT") vide Order dated March 10,

201 had set!aside the Order dated April 2, 201# passed b$ the Securities and %&chane oard

o *ndia ("S%*") and re+anded the +atter to S%* or passin resh order on +erits in

accordance ith la- The above reerred S%* Order as passed in respect o .an Tradin

/o+pan$ rivate i+ited ("F)*"), illo Tradin /o+pan$ rivate i+ited ("W'*"),

allor Tradin /o+pan$ rivate i+ited ("P)'!"), .ern Tradin /o+pan$ rivate i+ited

("F"!") and Te3ashree Tradin /o+pan$ rivate i+ited ("T")#3!""") 4all these ive entities

are collectivel$ reerred to as "the '&%""#"), in the +atter o ac5uisition o shares o

S)!)#3&!) C"." L.&"+ ("the taret co+pan$")- The S%* Order had directed the

noticees to +a6e a co+bined public announce+ent to ac5uire, 3ointl$ and severall$, the shares o

the taret co+pan$ in accordance ith the S%* (Substantial Ac5uisition o Shares and

Ta6eovers) 7eulations, 1889 (since repealed) (hereinater reerred to as "the Ta6eover

7eulations")- *t is pertinent to note that the above said S%* Order as passed in co+pliance

ith the Order dated March 0#, 2011 (in Writ Petition No. 1080 of 1999 - Fawn Trading Co. Pvt. Ltd.

vs. nion of !ndia and ot"ers) o the Hon'ble Hih /ourt o :udicature at o+ba$-

26

eore proceedin urther, it is necessar$ to note the acts o the case ;

(a)

The taret co+pan$ as incorporated under the /o+panies Act, 18- Mehta *nternational House, 19?, ac6ba$

7ecla+ation, Mu+bai ! 00 020- The shares o the taret co+pan$ are listed on the o+ba$

Stoc6 %&chane i+ited ("S%") and the =ational Stoc6 %&chane o *ndia i+ited ("=S%")-

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(b)

The taret co+pan$ convened an Annual @eneral Meetin (A@M) on ece+ber 12,

1889 inter alia to pass a resolution under section ?1(1A) o the /o+panies Act, 18


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re5uired under reulation #(1)(c)(ii) ere not disclosed in the notice callin or the @eneral

Meetin C (#) accordinl$ the reulations beco+e applicable and the noticees ere liable to +a6e

oer to the re+ainin shareholders o the taret co+pan$C () price to be in accordance ith the

Ta6eover 7eulations- *n the interests o the shareholders o the taret co+pan$ and the

securities +ar6et, S%* vide the above order had directed the noticees to +a6e a %p&'licanno&nce$ent to ac&ire s"ares fro$ t"e re$aining s"are"olders (ot"er t"an t"e pro$oters) t"eir associates and

person acting-in concert* of t"e target co$pan+ an aggregate $ini$&$ of ,0 of voting capital of t"e target

co$pan+ wit"in a period of two $ont"s of t"e rder at a price in accordance wit" t"e reg&lations'-

()

The S%* Order as challened b$ .an and the Taret /o+pan$ b$ a$ o to

separate appeals beore the /entral @overn+ent- The /entral @overn+ent (t"e appellate a&t"orit+

d&ring t"at point in ti$e) vide its Order dated April 0, 1888 re3ected the appeals and upheld the

S%* Order dated :anuar$ 1, 1888- Thereater, .an and the other noticees challened this

S%* Order b$ a$ o a rit etition (=o- 10?0 o 1888) beore the Hon'ble Hih /ourt o

:udicature at o+ba$- The Hon'ble Hih /ourt hile disposin o the said petition vide their

Order dated March 0#, 2011, observed Bdirected S%* as ollos ;

/ We "ave 'een infor$ed t"at t"is order "as also 'een confir$ed '+ t"e ppellate &t"orit+. T"is order

ad$ittedl+ was sta+ed '+ t"is co&rt in t"e +ear 1999 itself and t"at sta+ contin&es to operate till toda+.

fter "aving "eard t"e learned co&nsel appearing for 'ot" t"e sides) we find t"at d&e to passage of ti$e

and t"e circ&$stances "ave c"anged) it is for 23! to consider w"et"er even after lapse of so $an+ +ears

it still wants) t"e petitioner to $a4e offer to t"e p&'lic) as is directed '+ t"e order i$p&gned in t"e

petition. !n o&r opinion) d&e to passage of ti$e and c"ange in t"e circ&$stances) following order wo&ld

$eet t"e ends of 5&stice.

(i* T"e petitioner s"all 'e at li'ert+ to $a4e t"e representation to t"e 23! wit"in a period of si6 wee4s

fro$ toda+ see4ing appropriate reliefs fro$ 23!. !n case) s&c" a representation is $ade) t"e 23!

s"all consider it in accordance wit" law and $a4e appropriate orders. !n case) t"e representation is $ade

wit"in t"e aforesaid period) t"e interi$ order passed '+ t"is co&rt s"all contin&e to operate till 23! ta4e

a decision on t"e representation.

ii* !n case) t"e decision of 23! is adverse to t"e interest of t"e petitioner) t"e petitioner s"all 'e entitled

to adopt s&c" re$edies as $a+ 'e availa'le to t"e$ in law.

iii* ll contentions of 'ot" t"e sides are 4ept open.

7777 /



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6

ursuant to the Order o the Hon'ble Hih /ourt, .an, vide letter dated April 1, 2011,

iled representation (hich as on behal o all ive noticees) beore S%*, herein the olloin

sub+issionsBstate+ents ere inter alia +ade ;

(i)

The Taret /o+pan$ vide notice dated ece+ber 02, 1889 convened the Annual

@eneral Meetin (A@M) inter aliato consider issue o capital to the e&tent o `00 croreincludin pre+iu+ to +eet the cost o an e&pansion pro3ect- *n the A@M, the

resolution authorisin the oard o irectors o the Taret /o+pan$ to issue and allot

such nu+ber o e5uit$ shares in one or +ore tranches or an areate a+ount not

e&ceedin `00 crore at a price not less than `#0 per share, as passed-

(ii)

ursuant to the resolution, the noticees (w"o 'elong to t"e pro$oter gro&p of t"e Target

Co$pan+) applied or the allot+ent o ?0,00,000 e5uit$ shares at a price o `#0B! per

share includin `20B! per share as pre+iu+, or an areate a+ount o `200 +illion-

(iii)

On March 11, 188?, the oard o irectors o the Taret /o+pan$ resolved to issue

#,0,00,000 shares o `10B! each at a pre+iu+ o `20B! to such class o persons viE-,

inancial institutions, ban6s, orein co+panies, pro+oters etc- *n the sa+e +eetin, the

oard o irectors allotted ?0,00,000 shares, sub3ect to a loc6!in o three $ears, to the

noticees-

(iv)

The noticees are 100F subsidiar$ co+panies o :a+i *nvest+ents i+ited (a pro+oter

o the Taret /o+pan$)-

(v)

On March 19, 188?, one Auto 7iders @roup sent a notice to S%* and the Taret

/o+pan$, o their public oer proposed to be +ade on March 18, 188? throuh their

+erchant ban6ers, *nd @lobal .inance rivate i+ited- The Taret /o+pan$ observed

that the said notice as deective and invalid inter aliaor ant o ade5uate notice to the

co+pan$ and also or ailin to ta6e into account the enhanced capital structure o the

Taret /o+pan$ pursuant to the allot+ent o shares +ade on March 11, 188?-

(vi) .an Tradin iled a civil suit aainst Auto 7iders pra$in or an in3unction- The /ivil

/ourt at orbander passed an order restrainin Auto 7iders @roup ro+ actin

pursuant to or in urtherance o or on the basis o the public oer dated March 188? and

also restrainin the Taret /o+pan$ ro+ actin pursuant to the said public oer-

(vii)

Thereater, authorised b$ the shareholders resolution dated ece+ber #1, 1889,

0,00,000 shares ere resolved to be allotted to Te3ashree Tradin aainst part pa$+ent

o 10F o the issue price includin pre+iu+- ursuant to the authorit$ deleated b$ the

shareholders in the +eetin held on ece+ber #1, 1889, the /o++ittee o irectors



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resolved to issue and allot 18,0,#00 e5uit$ shares o `10B! each to .--S+itdth D /o-,

and *ndustrialisation .und or evelopin /ountries aainst re+ittance o `#0B! per

share that is received in ull-

(viii)

On April 2, 188?, the +erchant ban6er o Auto 7iders @roup +ade a co+plaint to S%*

inter alia allein violation o reulations 2#(1)(b) and #(1)(c)(ii) o the Ta6eover

7eulations, 1889, and re5uested S%* to investiate and initiate action aainst the

Taret /o+pan$- .an Tradin had ritten various letters to S%* raisin certain issues-

Thereater S%* passed the Order dated :anuar$ 1, 1888-

(i&)

The hole controvers$ in this case is that the Ta6eover 7eulations e&e+pted

preerential allot+ent ro+ the re5uire+ent o +a6in an open oer- Accordin to

reulation #(1)(c) o the Ta6eover 7eulation, preerential allot+ent ould not attract

the provisions o 7eulation 10, 11 and 12 o the Ta6eover 7eulations- Hence, the

noticees ere not re5uired to +a6e an$ oer to the public shareholders-(&) The bone o contention is reardin certain disclosures in the notice dated ece+ber 2,

1889 issued to the shareholders- The notice issued or convenin a eneral +eetin

stated that the allot+ent ill be +ade to such class o persons ! inancial institutions,

ban6s, orein co+panies, pro+oters, associates- Thereore, it has been speciicall$ stated

that the allot+ent is to be +ade, a+onst other persons, to the pro+oters- reerential

allot+ent as +ade to the noticees hich ere the subsidiaries o a pro+oter o the

Taret /o+pan$- Thereore, the ive allottees (the noticees) ere also the pro+oters o

the Taret /o+pan$- hile the disclosure reardin identit$ o class o persons ere+ade, the na+es o the pro+oters ere not +entioned in the notice- .urther, the

speciic price at hich allot+ent ould be +ade as also not +entioned-

(&i)

As the preerential issue as e&e+pt under reulation #(1)(c) ro+ the applicabilit$ o the

reulations 10, 11 and 12, the direction o S%* contained in the Order dated :anuar$ 1,

1888 to ac5uire 20F o the votin capital ro+ the shareholders is contrar$ to la- The

basis o the said direction is non!disclosure o so+e inor+ation b$ the co+pan$ in its

notice dated ece+ber 2, 1889, hich basis has no co!relation ith the nature o

direction (open oer) issued to the+-(&ii)

There as no chane in control o the Taret /o+pan$ as the old +anae+ent

continued to re+ain in control and the ac5uisition b$ the noticees in the preerential

allot+ent did not alter that position- The Ta6eover 7eulations spea6 o "Ta6eover" and



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siniicance and relevance in vie o the passae o around 1# $ears durin hich several

chanes have ta6en place- *n such circu+stances, no coercive action aainst the+ at this

point o ti+e is called or and arranted-

(&&)

The noticees cannot be rearded as havin acted in concert as the$ are separate and

independent entities- /onsiderin all o the+ as a roup is +isconceived and directinall o the+ to +a6e a 3oint oer ithout considerin their individual ac5uisition is unair

and ine5uitable-

(&&i) The purported violation o disclosures in the notice dated ece+ber 2,1889 as b$ the

Taret /o+pan$- Hoever, the Order o S%* dated :anuar$ 1, 1888 as aainst the

noticees- Thereore, there is a +is+atch o parties- The ac5uirers (noticees) cannot be

penalised or the lapse b$ the Taret /o+pan$-

*n vie o their sub+issions, the noticees souht the olloin relie ;

a) S%* does not insist or i+ple+entation o its directions o public announce+ent to

ac5uire 20F o votin capital o the Taret /o+pan$ ro+ the shareholders, i-e-, the

directions hich as issued in its Order dated :anuar$ 1, 1888 aainst the+-

b) S%* does not enorce its Order dated :anuar$ 1, 1888 aainst the+ and to ter+inate the

proceedins b$ a suitable action Border and dischare the+ in the +atter-

c)

An$ other appropriate relie in the acts and circu+stances o the case-

46

*n the hearin held on ece+ber 29, 2012, the noticees ere represented b$ Mr- :- :-

hatt, Advocate- The learned advocate reiterated the sub+issions +ade b$ the noticees in their

representation- Thereater, ritten sub+issions o the noticees ere +ade vide letter dated

:anuar$ 10, 201#- *n the ritten sub+issions, hile reiteratin +a3orit$ o the sub+issions +ade

in the representation, the noticees additionall$ sub+itted the olloin ;

a- The alleed violation o 7eulation #() is not ver$ atal and does not ta6e aa$

e&e+ption- .urther, e&e+ption is not sub3ect to the co+pliance o the conditions stated

in this provision- The re5uire+ents o 7eulation #() are procedural and disclosure

related, and applicable post ac5uisition- =on!ilin o a report does not vitiate the

allot+ent, nor ta6eaa$ the e&e+ption-

b-

*n this case, there as no violation o reulation 11, as the shares ere ac5uired throuh

preerential allot+ent, hich is auto+aticall$ e&e+pt ro+ the re5uire+ents o reulation

10, 11 and 12- The S%* Order dated :anuar$ 1, 1888 has ter+ed the alleed violation

o reulation 11(1) D (2) as h$pothetical-



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c-

.ern, illo, Te3ashree and allor ere not the shareholders o the Taret /o+pan$ as

on the date o allot+ent- Their ac5uisition o shares as not or consolidation as

consolidation presupposes so+e e&istin holdin- 7eulation 11(1) covers consolidation

o holdins b$ additional ac5uisition-

d-

There is no clarit$ in the S%* Order as to the identit$ o the persons actin in concertith the noticees- *t appears that the ive noticees (ac&irers) are treated as ersons

Actin in /oncert (A/s)- *nclusion o A/s is onl$ or the purpose o calculatin

areate shareholdin o ac5uirers and A/s beteen 1 F and 9F under 7eulation

11(1)- The Taret /o+pan$ had allotted shares to each o ive noticees separatel$ on a

standalone basis- Their ac5uisition as independent and separate and treatin all o the+

as A/s is +isconceived-

e-

The alleed violation o reulation #() and non!co+pliance ith reulation #(1)(c)(2)

cannot and ouht not result in issuance o an$ directions to the noticees-- .our o the noticees alread$ ceased to be the shareholders o the Taret /o+pan$ ith

eect ro+ .ebruar$ 28, 200? and thereore the$ could not be directed to ac5uire shares-

-

The net orth o the ive noticees as on date is in the neative- The$ do not have unds

or resources to ac5uire shares-

h-

Since 80F o the earlier shareholders have oloaded their sta6e in the co+pan$, the

public oer i +ade ill be a +ere or+alit$ and ould involve hue costs to the+-

.urther, the e5uit$ shares o the Taret /o+pan$ are traded in the de+aterialised +ode

since the $ear 2000-i-

There as no econo+ic loss caused to the then shareholders on account o the

preerential issue and ailure to +a6e an$ public oer b$ the noticees-

3-

* all the ive noticees are treated as ac5uirers and A/, then it is not clear as to ho

+uch o the 20F capital has to be ac5uired b$ each o the ive noticees-

6-

The deinition Bconcept o %Person cting in Concert% has underone chanes, reine+ent

in the course o last e $ears-

l- The Ta6eover /ode o 1889 has been repealed and the ne Ta6eover /ode o 2011

cannot be +ade applicable to their case-+-

The noticees relied upon the 3ude+ents o the Hon'ble Supre+e /ourt in the +atters o

wedis" ;atc"and Clariant !nternationaland o the Hon'ble Securities Appellate Tribunal in

the +atter o P"iro


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n- The noticees sub+itted that no useul purpose ould be served i the direction contained

in the S%* order is souht to be enorced no and thereore re5uested that the$ be

dischared ro+ the proceedin-

56

.urther to the consideration o the sub+issions o the noticees, S%* vide its Order

dated April 2, 201# had inter alia concluded that !

a)

The noticees are classiied as pro+oters and have been allotted shares in the preerential

issue-

b)

The conditions prescribed under reulation #(1)(c)(ii) o the Ta6eover 7eulations ere

not co+plied ith, and thereore the application o reulation 11 to such ac5uisition o

shares b$ the noticees as not e&e+pted-

c)

7eulation 11(1) D (2) ere thereore triered on account o the ac5uisitions (on

preerential allot+ent b$ taret co+pan$) +ade on March 11, 188? and March 29, 188?

b$ the noticees-

d)

irectin the noticees to +a6e a public oer ould be appropriate and ould +eet the

ob3ectives o the sche+e o the Ta6eover 7eulations- The noticees ere accordinl$

directed to, 3ointl$ and severall$, +a6e a public announce+ent to ac5uire shares under

the Ta6eover 7eulations-

e)

irection or pa$+ent o interest on the consideration a+ount +a$ not be reasonable as

the Hon'ble o+ba$ Hih /ourt had sta$ed the S%* Order dated :anuar$ 1, 1888-

6

The noticees had challened the above S%* Order dated April 2, 201# beore the

Hon'ble Securities Appellate Tribunal (Hon'ble SAT"), hen the Hon'ble SAT had vide Order

dated March 10, 201 set!aside the S%* Order ith the directions as +entioned in pararaph 1

above- ursuant to this Order o the Hon'ble SAT, S%* advised the noticees to clari$ as to

ho +an$ are the present shareholders o the taret co+pan$ and their co+position and out o

the current shareholders, ho +an$ shareholders ere there on the trier date and their

percentae holdin at the ti+e o trier and also their present holdin- *n response, .an, vide

letter dated Ma$ 08, 201, hile sub+ittin the Shareholdin pattern o the taret co+pan$ or

the 5uarter ended on #1-0#-201, inter alia sub+itted that assu+in the trier date to be March

11, 188? (date on hich the board o directors o the taret co+pan$ resolved to allot shares),

there ere 1,88? shareholders holdin


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.an also sub+itted "-- it is also pertinent to note t"at since 11..1998 to date) t"e s"are"olders of

TC (target co$pan+* $a+ "ave also traded in t"e s"ares of TC. t present) TC are &na'le to trace t"e ver+ old

records fro$ 11..1998 to ,:.,.,00. =owever) as per t"e records s&'$itted '+ TC) fro$ ,>.,.,00 to till

date) t"e said s"are"olders of TC "ave 'o&g"t 1)9?),0 s"ares and t"eir "olding s"o&ld "ave 'een >>)),:

s"ares) '&t as on date o&t of t"e aforesaid s"are"olders) ?0,0 s"are"olders are "olding 1)99),>9 s"ares. T"&s)t"e eligi'le s"are"olders as on 11..1998 $&st "ave traded atleast in :1):)0?> s"ares of TC (ignoring 'o&g"t

and sold d&ring t"e period*. ince t"e s"ares are de$ateriali


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co++itted b$ the Taret /o+pan$- Thereore, it is untenable that directions are passed

aainst the noticees or no ault o theirs-

)

7eulation #(1)(c)(ii) as applicable read that the allot+ent +ust result in an increase "--- to

F or +ore ---"- This as a+ended to "--- be$ond F -----" onl$ in =ove+ber 188?-

Hoever, in the present case, the shares held b$ the pro+oters ad+ittedl$ ere ?-


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it still wants) t"e petitioner to $a4e offer to t"e p&'lic) as is directed '+ t"e order i$p&gned in t"e

petition. !n o&r opinion) d&e to passage of ti$e and c"ange in t"e circ&$stances) following order wo&ld

$eet t"e ends of 5&stice.

(i* T"e petitioner s"all 'e at li'ert+ to $a4e t"e representation to t"e 23! wit"in a period of si6 wee4s

fro$ toda+ see4ing appropriate reliefs fro$ 23!. !n case) s&c" a representation is $ade) t"e 23!s"all consider it in accordance wit" law and $a4e appropriate orders. !n case) t"e representation is $ade

wit"in t"e aforesaid period) t"e interi$ order passed '+ t"is co&rt s"all contin&e to operate till 23! ta4e

a decision on t"e representation.

ii* !n case) t"e decision of 23! is adverse to t"e interest of t"e petitioner) t"e petitioner s"all 'e entitled

to adopt s&c" re$edies as $a+ 'e availa'le to t"e$ in law.

iii* ll contentions of 'ot" t"e sides are 4ept open.

7777 /

76 The Hon'ble Hih /ourt had observed that 'due to passae o ti+e' and the 'chaned

circu+stances', it is or S%* to decide hether even ater lapse o +an$ $ears, it still ants the

noticees to +a6e the public announce+ent- .urther, a readin o the Order passed b$ the

Hon'ble Hih /ourt ould indicate that the indins and observations ith respect to the

violationsBthe liabilit$ incurred b$ the noticees, as ound in the S%* Order dated :anuar$ 1,

1888 read ith the /entral @overn+ent's Order dated April 0, 1888, have not been set!aside-

Accordinl$, there is no reason or +e to reconsider or revise the vies ta6en b$ S%* or the

Appellate Authorit$ (/entral @ovt-) in respect o the indins- Thereore, in ter+s o the Order

o the Hon'ble Hih /ourt read ith the Order dated March 10, 201 passed b$ the Hon'ble

SAT, S%* is directed to onl$ consider hether even ater lapse o so +an$ $ears it still ants

the ac5uirersBnoticees to +a6e oer to the public, as directed vide S%* Order dated :anuar$

1, 1888-

%6

* note that S%* vide its Order dated :anuar$ 1, 1888 had passed the olloin

direction ;

"1?- T"erefore) in e6ercise of powers conferred &pon $e &nder t"e provisions of s&'-section (* of ection ? oft"e 23! ct) 199, read wit" reg&lation ?? of Ta4eover @eg&lations and ta4ing into consideration t"e facts)

t"e totalit+ of t"e circ&$stances in t"e interests of t"e s"are"olders of CL and t"e interest of sec&rities $ar4et) !)

A.@.;e"ta) C"air$an-23!) direct t"e five preferential allottees na$el+) Fawn Trading Co. Pvt. Ltd.) Fern

Trading Co. Pvt. Ltd.) Te5as"ree Trading Co. Pvt. Ltd.) Willow Trading Co. Pvt. Ltd. and Pallor Trading Co.

Pvt. Ltd. to $a4e a p&'lic anno&nce$ent to ac&ire s"ares fro$ t"e re$aining s"are"olders (i.e. ot"er t"an



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pro$oters) t"eir associates and persons actingin-concert* of CL an aggregate $ini$&$ of ,0 of voting capital

of CL wit"in a period of two $ont"s of t"is order at a price in accordance wit" t"e @eg&lations. "

As can be observed, the above said S%* Order dated :anuar$ 1, 1888 had directed the ive

noticees to +a6e a public announce+ent to ac5uire an areate +ini+u+ o 20F o votin

capitalBshares o the Taret /o+pan$ ro+ non!pro+oter shareholders o the Taret /o+pan$,

ithin a period o to +onths ro+ the date o the Order at a price in accordance ith the

Ta6eover 7eulations- This S%* Order has been upheld b$ the /entral @overn+ent vide its

Order dated April 0, 1888-

+6

The noticees have contended that in vie o 'passae o ti+e' and 'chaned

circu+stances' as stated b$ the Hon'ble o+ba$ Hih /ourt in their Order, this case is not a it

case or directin the noticees to +a6e an open oer- The noticees have also sub+itted that ;

(a)

The Taret /o+pan$ is reistered ith the *.7 and the *.7 is considerin a

rehabilitation sche+e or the co+pan$ and that an$ order o S%* ill have to ta6e into

account o this act-

(b) Share prices have collapsed-

(c)

%&cept allor Tradin, all the other noticees have ceased to be the shareholders o the

Taret /o+pan$ and astenin an$ obliation to ac5uire shares no is devoid o loic-

(d)The noticees do not have an$ resource to ac5uire shares ro+ the shareholders- Their

net!orth as on date is in the neative-

(e)

The S%* Order dated 1-01-1888 has lost its siniicance and relevance in vie o the

passae o ti+e and in such circu+stances, no coercive action aainst the+ is called or-

()

As 80F o the earlier shareholders have o!loaded their sta6e in the Taret /o+pan$,

the public oer i +ade ill be a +ere or+alit$ and ould involve hue costs to the+-

()There is no econo+ic loss caused to the then shareholders on account o the preerential

issue and ailure to +a6e an$ public oer b$ the noticees-

(h)

*t ould be discri+inator$ to no direct the noticees to +a6e open oer as in nu+erous

cases, S%* has i+posed +onetar$ penalt$ instead o directin an open oer-

(i)

*t is not possible to trace hich shares ere held b$ the shareholders in 188? as shares

are de+aterialised-

"6

eore dealin ith the sub+issions, it is i+portant to appreciate the siniicance o an

'open oer' as provided or under the Ta6eover 7eulations- *n this reard, the olloin

observations o the Hon'ble /ourtBTribunal are orth +entionin ;



14/28

Page 14 of 28

(i) The H'1. We are inclined to agree wit" t"e s&'$ission $ade '+ ;r. Den&gopal t"at t"e appellants cannot 'e per$itted

to wriggle o&t of t"e o'ligation of a p&'lic offer &nder t"e Ta4eover @eg&lation. Per$itting t"e$ to do so wo&ld

deprive t"e ordinar+ s"are"olders of t"eir val&a'le rig"t to "ave an e6it option &nder t"e aforesaid reg&lations. T"e

23! @eg&lations are designed to ens&re t"at p&'lic anno&nce$ent is not $ade '+ wa+ of spec&lation and to

protect t"e interest of t"e ot"er s"are"olders."



15/28

Page 15 of 28

The above order o the Hon'ble Supre+e /ourt is ith respect to an order o re3ection (b$

S%*) o an application +ade b$ the concerned ac5uirer to ithdra his open oer alread$

+ade in the $ear 200- The S%* Order as upheld b$ the Hon'ble SAT and later b$ the

Hon'ble Supre+e /ourt also in the decision reerred above- The ac5uirer thereater continued

ith his open oer and co+pleted the or+alities associated thereith durin the $ear 201- *nthe above case, as can be seen, the open oer or+alities ere co+pleted ater 8 $ears ro+ the

date o public announce+ent- =o relie as ranted to the appellant b$ the Hon'ble Supre+e

/ourt on account o 'passae o ti+e' or 'chaned circu+stances' in the above reerred case-

(ii) The H'


16/28

Page 16 of 28

noticees, in the present case are convincin enouh or S%* to deviate ro+ the nor+al rule o

open oer-

(6

*n the present case, it as the noticees ho had preerred the appeal aainst the S%*

Order dated :anuar$ 1, 1888- The /entral @overn+ent had, in the irst appeal, upheld S%*'s

Order- The indins in the S%* Order had not been reversed b$ the Hon'ble Hih /ourt o

o+ba$- * passae o ti+e is alloed as a round, then it +a$ +a6e place or ac5uirers ho

had deaulted or dela$ed in +a6in a public announce+ent o open oer to e+plo$ dela$ tactics,

ilin rivolous appeals and thereater cite the dela$ that had ensued in evadin ro+ their liabilit$

to +a6e the open oer- *t then ould be unair or the shareholders o that co+pan$ ho lose

their valuable riht to e&it- As the 'passae o ti+e' is onl$ because o the continuous litiation

pursued b$ the noticees, there should be no advantae o 'passae o ti+e' or 'chaned

circu+stances' that should accrue to the+- The noticees cannot be ter+ed as the victi+s o

dela$, rather the$ are the reason or the sa+e- ith respect to rivolous litiations and illeiti+ate

clai+s +ade b$ litiants or subvertin the leal s$ste+, * reer to the olloin observations

+ade b$ the Hon'ble Supre+e /ourt in the Order dated Ma$ 0


17/28

Page 17 of 28

6

The noticees have also contended that the S%* Order dated :anuar$ 1, 1888 has lost

its siniicance in vie o the passae o ti+e and in such circu+stances, no coercive action

aainst the+ is called or- An order directin an ac5uirer to +a6e an open oer in a case o

deault, is not a coercive order- *t is an e5uitable re+ed$ to the shareholders- Thereore, such a

direction cannot be e5uated ith a penal direction- Monetar$ penalties i+posed underad3udication proceedins or, ine or i+prison+ent i+posed in a prosecution proceedins under

section 2 o the S%* Act read ith the Ta6eover 7eulations are penal in nature-

36

The noticees have contended that their net!orth is in the neative and do not have

resources or ac5uirin the shares o the Taret /o+pan$ in an open oer- As reards such

clai+ o chaned inancial circu+stances o the noticees, it needs to be appreciated that such

rounds cannot be a valid deence- .urther, it is not the case o the noticees that the$ have been

declared as 'insolvent'- The noticees have also contended that the share price o the taret

co+pan$ is reducin in value- * note that the Hon'ble Supre+e /ourt in the +atter o =ir+a

*ndustries (reerred supra) has observed " ,:. ........... T"e appellants "ad $ade an infor$ed '&siness

decision w"ic" &nfort&natel+ for t"e$) instead of generating profits was li4el+ to ca&se loses. !n s&c" circ&$stances)

t"e+ wanted to p&ll o&t and t"row t"e '&rden on to t"e ot"er s"are"olders. We) t"erefore) fail to see w"at pre5&dice

"as 'een ca&sed to t"e appellants '+ t"e order passed '+ t"e 23! re5ecting t"e re&est of t"e appellants-"- The

ac5uirersBnoticees had ac5uired shares in a preerential allot+ent durin 188?- hen the

ac5uirers have en3o$ed such a beneit, the$ should ideall$ dischare all obliations that +a$ be

associated ith such ac5uisitions- *t is unair to sa$ that t"e co$pan+ was profita'le at t"e ti$e of non-

co$pliance '+ t"e ac&irers and it is now a sic4 co$pan+, hen such obliation to +a6e a open oer has

to be +ade in ter+s o the la- These rounds are not coent reasons or absolvin the+ ro+

their liabilit$- Accordinl$, * dis+iss such contentions-

6 The contention o the noticees that the Taret /o+pan$ is under a reerence beore the

*.7, has no bearin on the case at all- *t is the noticees ho have incurred the liabilit$ to +a6e

the public oer (w"ic" lia'ilit+ arose in view of t"e non-co$pliance wit" t"e prescri'ed conditions for availing

e6e$ption &nder t"e Ta4eover @eg&lations)- The taret co+pan$'s inancial status is not in an$

+anner related ith the open oer directed aainst the noticees-

6 Another round raised b$ the noticees is that e&cept or allor Tradin, all the other

noticees have ceased to be the shareholders o the Taret /o+pan$ and thereore astenin an$

obliation on the+ to ac5uire shares no is devoid o loic- * a+ o the vie that once a liabilit$

is incurred to +a6e an open oer, such liabilit$ is not dischared till the open oer is +ade-



18/28

Page 18 of 28

The liabilit$ shall re+ain irrespective o hether that entit$ continues or ceases to be the

shareholder-

=6

The oer price in the public announce+ent to ac5uire shares in the open oer as per the

Ta6eover 7eulations, usin the price data or 2< ee6s prior to the board resolution date, i-e-,

March 11, 188?, is calculated as `##-8B!- * have perused the price!volu+e data o the Taret

/o+pan$ or the +onths ! :anuar$ 201 ! ece+ber 201 (till 19-12-201) as available ro+ the

ebsite o S%- The sa+e is e&tracted belo;

M'&3 O$" P!%" H3 P!%" L'* P!%" C'#" P!%" N'6 '( S3)!"# N'6 '( T!)+"#

:an!1 1< 1?- 1#- 1 12#28 229

.eb!1 1 1 1#-#2 1#-


19/28

Page 19 of 28

oer price as provided under the Ta6eover 7eulations, 1889 read ith the Hon'ble Supre+e

/ourt's Order dated Auust 2, 200 in Clariant !nternational Li$ited and anot"er vs. 23! 4ppeal

(Civil* No. 18G,00J, to those shareholders ho ere holdin the shares as on the trier date

and continue to hold the sa+e and tender the shares in the dela$ed oer i +ade b$ noticees-

Ta6in into consideration the interest at the rate o 10F p-a-, the oer price co+es toappro&i+atel$ `80B!-T3# $!%" # +"(&" .'!" &3) &3" $!"#"& '&"+ #3)!" $!%" '(

&3" &)!"& %'.$) )& BSE6 T3"!"('!", '!) #3)!"3'+"!# *'+ +"(&" 7""(& 7

&3" '$" '(("! ( &3" '&%""# .)=" &3" #)." &'+)6 The above actors are deinitel$ in the

interest o the shareholdersBinvestors o the taret co+pan$-

.6 The noticees have arued that 80F o the earlier shareholders have o!loaded their sta6e

in the Taret /o+pan$, the public oer i +ade ill be a +ere or+alit$ and ould involve hue

costs to the+- The$ also contended that it is not possible to trace hich shares ere held b$ the

shareholders in 188? as shares are de+aterialised- Inder the sche+e o the Ta6eover 7eulations

and the observations +ade b$ the Hon'ble Supre+e /ourt passed in its 3ud+ent dated Auust

2, 200 in Clariant !nternational Li$ited and anot"er vs. 23! 4ppeal (Civil* No. 18G,00J, in case

o a dela$ed open oer, such open oer shall be +ade to all shareholders o the co+pan$ at an

oer price calculated in accordance ith the Ta6eover 7eulations and that the interest ould be

pa$able onl$ to those oriinal shareholders ho held on to the shares as on the trier date and

continued to hold the sa+e and tendered the+ in a dela$ed oer- An open oer shall be +ade

to all shareholders o a taret co+pan$- eter+inin the oriinal shareholders ould be relevant

onl$ or the purposes o identi$in ho ould be eliible or interest pa$+ent or the dela$ed

open oer- *n this respect, * also reer to the letter dated Ma$ 08, 201 o .an Tradin,

herein in anser to S%*'s 5uestion "--- o&t of t"e c&rrent s"are-"olders) "ow $an+ were s"are"olders on

t"e trigger date) also t"eir percentage s"are"olding at t"e ti$e of trigger and c&rrentl+", it has replied "--- 3ased

on t"is date of 11..1998) please note t"at t"ere were 1?)998 s"are"olders "olding :1):1)0>: s"ares (1.8*

o&t of w"ic" as on date) ?0,0 s"are"olders "olding 1)99),>9 s"ares (.1,* are contin&ing to "old s"ares"-

Accordinl$, as inor+ed b$ the noticees, the oer price alon ith interest ould be pa$able

onl$ to 020 shareholders (if t"eir s"ares are tendered and accepted) as these shareholders held shares

o the Taret /o+pan$ as on the trier date and continue to hold the+- The other shareholders

(if t"e+ tender s"ares and t"e sa$e are accepted) ould be eliible onl$ or the oer price calculated as

per the Ta6eover 7eulations-



20/28

Page 20 of 28

6

/onsiderin all the above actors, * a+ o the considered vie that the i+ple+entation

o the oer ould deinitel$ be in the interest o the public shareholders (both oriinal

shareholders and others), as there ould be an e&it opportunit$ to the+-

'6

The noticees have also contended that there is no econo+ic loss caused to the then

shareholders on account o the preerential issue and ailure to +a6e an$ public oer b$ the

noticees- The irst part o this sub+ission has no relevance to the sub3ect at hand and the

second part o the sub+ission cannot be accepted as it does not have an$ +erit- .ailure to +a6e

the public announce+ent and its conse5uences on the shareholders cannot be +easured in ter+s

o econo+ic losses onl$- The e&it opportunit$ is a valuable riht available to a shareholder hen

there is a substantial ac5uisition o shares or control under the Ta6eover 7eulations- .urther, it

is alread$ +entioned above that all shareholders ould beneit b$ the open oer and +ore

particularl$ the oriinal shareholders ould stand to beneit econo+icall$ as the$ ould be

eliible or the oer price ith interest-

$6

The noticees have also contended that it ould be discri+inator$ to no direct the

noticees to +a6e open oer as in nu+erous cases, S%* has i+posed +onetar$ penalt$ instead

o directin an open oer- * ould deal ith this sub+ission alon ith another ob3ection raised

b$ the senior counsel or the noticees durin the personal hearin- The learned senior advocate

had arued that durin March 188?, hen the Ta6eover 7eulations /ode as alleedl$

triered, S%* had no poer to order an open oer under reulation o the Ta6eover

7eulations- This contention as +ade on the round that a speciic direction 4in reulation

()J to order an open oer as brouht into orce onl$ on Septe+ber 08, 2002 in the Ta6eover

7eulations- rior to the a+end+ent o reulation +ade ith eect ro+ Septe+ber 08,

2002, the reulation read as ollos ;

"??. Airections '+ t"e 3oard.-T"e 3oard $a+) in t"e interests of t"e sec&rities $ar4et) wit"o&t pre5&dice to its

rig"t to initiate action incl&ding cri$inal prosec&tion &nder section ,? of t"e ct give s&c" directions as it dee$s fit

,%15+,-

(a* directing t"e person concerned not to f&rt"er deal in sec&ritiesB

('* pro"i'iting t"e person concerned fro$ disposing of an+ of t"e sec&rities ac&ired in violation of t"ese

@eg&lationsB

(c* directing t"e person concerned to sell t"e s"ares ac&ired in violation of t"e provisions of t"ese @eg&lationsB

(d* ta4ing action against t"e person concerned-"

4%+phasis suppliedJ



21/28

Page 21 of 28

The directions +entioned in clauses (a) to (d) o reulation (prior to the a+end+ent)

+entioned above are not 'e&haustive' directions hich S%* could order invo6in reulation -

The reulation uses the e&pression "includin", hich naturall$ +eans that S%* could pass

an$ directions in the interest o securities +ar6et includin those directions +entioned under

clauses (a) to (d)- $ usin the e&pression, S%* has a ide scope ith respect to the nature odirections it could pass in a +atter in the interest o securities +ar6et- *n this reard, * also reer

to the observation inter alia +ade b$ the Hon'ble Supre+e /ourt o *ndia in the +atter o Kina$

/handra Mishra 4A*7 188 S/ 2#?J, that "T"e e6pression /incl&ding/ "as 'een interpreted '+ co&rts) to

e6tend and widen t"e scope of power-"

Thereore, the above aru+ent o the noticees is ithout +erit-

* a situation or a case arrants, S%* has the poers to issue necessar$ directions includin

passin o an order directin an ac5uirer to +a6e an open oer ith conditions in order to

protect the interest o the securities +ar6et-

6 The noticees have also sub+itted certain 3ud+ents o the Hon'ble SAT- These

3ud+ents ere produced to sho that the penalt$ under section 1H(ii), as it e&isted on the

date o co++ission o the alleed oence, had to be applied to and here the Hon'ble SAT had

reduced the penalties here disclosures under reulation #(1)(c)(ii) o the Ta6eover 7eulations

ere not properl$ done- The noticees have also reerred to a later Order passed b$ S%* dated

:ul$ 2?, 200 (in t"e $atter of ac&isition of s"ares of #a+-H&s"in Li$ited '+ s"in Li$ited t"ro&g"

preferential allot$ent), and sub+itted that in this case S%* had considered the actors such as

approval o shareholders in the A@M, no chane in control or in the oard o irectors,

directions to +a6e a public oer as not iven and instead ad3udication proceedins ere

directed to be initiated or such violations in not +a6in the re5uired disclosures- * have

perused this Order o S%* and note that S%* has observed that e&e+ption ro+ applicabilit$

o reulation 11 or such ac5uisition as not available to the ac5uirer as disclosures +andated

under reulation #(1)(c)(i) D (ii) ere not +ade- *t needs to be appreciated that under the sche+e

o the S%* Act and the rules and reulations ra+ed thereunder, directions under sections 11

and 11 could be issued si+ultaneousl$ ith urther action in the nature o ad3udication or

prosecution or a co+bination o all- The aru+ent o the noticees that onl$ ad3udication

proceedins could be invo6ed or such violations is thereore +isplaced- As alread$ observed b$

the Hon'ble SAT in the +atter oNirvana =oldings) S%* need not assin an$ reason or directin

an open oer and deviation could be +ade onl$ i such a direction or open oer is not in the

interest o investors and securities +ar6et- *n this case, it is alread$ observed that



22/28

Page 22 of 28

investorsBshareholders o the taret co+pan$ ould i++ensel$ beneit ro+ an open oer i

+ade b$ the noticees no-

!6

The noticees have arued that 'passae o ti+e' is a round or not directin the open

oer- This 'passae o ti+e' had occurred on account o the noticees preerrin appeals

challenin the S%* Order dated :anuar$ 1, 1888- The sa+e cannot and should not be a

round or deviatin ro+ the nor+al rule o directin an open oer- As +entioned earlier, such

rounds i alloed ould onl$ enable ac5uirers to rile out o their liabilit$-

#6

The noticees have also contended that no useul purpose ould be served i the open

oer is directed to be +ade no and have re5uested S%* to dischare the+ ro+ the

proceedins- These sub+issions have no +erit in the liht o observations and reasons

+entioned above as to ho the shareholder o the taret co+pan$ ould beneit i the noticees

+a6e an open oer toda$- Iseul purpose ould thereore be served i an open oer as

directed vide the S%* Order dated :anuar$ 1, 1888 is e+phasised b$ S%* no on the

noticees-

&6 7eardin 'chane in circu+stance', the noticees have not sub+itted an$ particular

circu+stance hich ould aord the+ an$ beneit, e&cept or statin about the inancial

condition o the taret co+pan$, reerence to the *.7, share price collapsin, noticees' net!

orth is in the neative, that the$ do not have resource to +a6e the open oer- These eneral

sub+issions have alread$ been dealt ith and ound to be o no relevance or +erit-

6 %&it opportunit$ +andated under the Ta6eover 7eulations is a valuable riht o the

shareholders- The sa+e cannot be and should not be denied nor+all$ in the absence o other

actors i the$ eih +ore than such a conerred riht on the shareholders- The noticees ere

the subsidiaries o a +ain pro+oter o the taret co+pan$- $ virtue o the preerential

allot+ent, the pro+oter roup (throuh the noticees) had consolidated and ac5uired substantial

shareholdin in the taret co+pan$- The noticees ('eing part of t"e pro$oter gro&p) intendin to ta6e

beneit o e&e+ption ro+ the re5uire+ent o a open oer should have ensured that all the

conditions (t"e co$pliance of w"ic" wo&ld grant t"e$ t"e e6e$ption) and re5uire+ents ere co+plied

ith-

6

/onsiderin all such reasons and observations, the rounds o 'passae o ti+e' and

'chane o circu+stance' as contended b$ the noticees, cannot be ta6en as co+pellin rounds



23/28

Page 23 of 28

or not insistin the noticeesBac5uirers to +a6e the public announce+ent o open oer toda$-

Accordinl$, each o the ive noticees are 3ointl$ and severall$ responsible to +a6e the public

announce+ent, as directed vide the S%* Order dated :anuar$ 1, 1888 hich as upheld b$ the

/entral @overn+ent's Order dated April 0, 1888-

96

ith the above observations and discussions, the issue beore S%*, as per the directions

o the Hon'ble Hih /ourt and the Hon'ble SAT, has been ansered- Hoever, or

co+pleteness and a holeso+e vie o the +atter, * ould consider and +a6e +$ observations

ith respect to the other issuesBcontentions raised b$ the noticees in the +atter-

)6

The noticees have contended that the reulations 10, 11 and 12 o the Ta6eover

7eulations ould not be applicable to a 'preerential allot+ent' and that the noticees ere not

re5uired to +a6e an oer to the public shareholders- hile ad+ittin the deiciencies ith

respect to the re5uired disclosures, the noticees have contended that the non!disclosure o so+e

inor+ation b$ the taret co+pan$ has no co!relation ith the nature o the direction o open

oer issued to the+- The noticees also contended that the disclosures ere +ade b$ the taret

co+pan$, but the directions ere issued aainst the noticees, and thereore there is a +is!+atch

o parties- The$ have also contended that the breach is technical in nature- *t has been

contended that there as no chane in control o the taret co+pan$ as the old +anae+ent

continued to re+ain in control and the ac5uisition b$ the noticees did not chane that position-

*t is also contended that the noticees cannot be rearded to have acted in concert as the$ are

separate and independent entities-

76

* have considered such sub+issions- As the present +atter is ith respect to ac5uisition

o shares in a preerential allot+ent and ith reerence to reulation #(1)(c) o the Ta6eover

7eulations, * note that the said reulation as incorporated as per the reco++endations +ade

in the 7eport dated :anuar$ 1?, 1889 o the :ustice haati /o++ittee- The /o++ittee had

reco++ended that preerential issue o capital +ade ith e&press consent o the shareholders to

ho+ ull disclosures about the proposal includin the li6el$ chanes in the control o the

co+pan$, i an$, had been +ade, +a$ be e&e+pted i the said allot+ent has been +ade b$ a$o e&planator$ state+ent to the notice to the eneral +eetin in hich the proposal is bein put

up or shareholders approval-

%6

7eulation #(1)(c) o the Ta6eover 7eulations as it stood durin the relevant period, is

reproduced belo or reerence ;



24/28

Page 24 of 28

/.(1* Not"ing contained in reg&lations 10) 11 and 1, of t"ese reg&lations s"all appl+ to

777.

(c* preferential allot$ent) $ade in p&rs&ance of a resol&tion passed &nder ection 81(1* of t"e

Co$panies ct) 19: (1 of 19:*

P!'0,+"+ &3)&)(i* 3oard @esol&tion in respect of t"e proposed preferential allot$ent is sent to all t"e stoc4 e6c"anges

on w"ic" t"e s"ares of t"e co$pan+ are listed for 'eing notified on t"e notice 'oardB

(ii* f&ll disclos&res of t"e identit+ of t"e class of t"e proposed allottee (s* is $ade) and if an+ of t"e proposed allottee

(s* is to 'e allotted s&c" n&$'er of s"ares as wo&ld increase "is "olding to or $ore of t"e post iss&ed capital)

t"en in s&c" cases) t"e price at w"ic" t"e allot$ent is proposed) t"e identit+ of s&c" person(s*) t"e p&rpose of and

reason for s&c" allot$ent) conse&ential c"anges) if an+) in t"e 'oard of directors of t"e co$pan+ and in voting

rig"ts) t"e s"are"olding pattern of t"e co$pan+) and w"et"er s&c" allot$ent wo&ld res&lt in c"ange in control over

t"e co$pan+ are all disclosed in t"e notice of t"e Ieneral ;eeting called for t"e p&rpose of consideration of t"e

preferential allot$ent./ 4%+phasis suppliedJ

*n ter+s o this provision, as it stood then, reulations 10, 11 and 12 thereo ere not

applicable or preerential allot+ent i ull disclosures o the identit$ o the class o the proposed

allottees as +ade- *n case, an$ o the proposed allottee(s) is to be allotted such nu+ber o

shares as ould increase his holdin to F or +ore o the post issued capital, then in such cases,

the price at hich the allot+ent is proposed, the identit$ o such person(s), the purpose o and

reason or such allot+ent, conse5uential chanes, i an$, in the board o directors o theco+pan$ and in votin rihts, the shareholdin pattern o the co+pan$, and hether such

allot+ent ould result in chane in control over the co+pan$ are all disclosed in the notice o

the @eneral Meetin called or the purpose o consideration o the preerential allot+ent-

.urther, in order to be e&e+pted, a report in ter+s o reulation #() o the Ta6eover

7eulations as to be iled ith S%* ithin 21 da$s o the ac5uisition ivin details in respect

o the ac5uisition hich ta6en toether ith shares or votin rihts, i an$, held b$ hi+ or b$

persons actin in concert ith hi+ ould entitle such person to e&ercise 10F or +ore o the

votin rihts in a co+pan$-

+6

Thereore, as can be seen, the applicabilit$ o reulation 10, 11 and 12 (as the case +a$

be) ith respect to increase in the shareholdinBvotin rihts ould not arise i the conditions as

+entioned under the proviso to reulation #(1)(c) are co+plied ith- Hoever, such conditions

ere ad+ittedl$ not ull$ +et, thereb$ renderin the ac5uirers ineliible or clai+in the



25/28


26/28

Page 26 of 28

conditions, the conditions have to be co+plied ith- The +andator$ re5uire+ents o those

conditions +ust be obe$ed or ulilled e&actl$----"

(ii) *n P)*)! T!)+,- C'!$'!)&,' 0#6 S&)&" '( R)2)#&3) LMA=IB7HB1020B201,

the H'


27/28

Page 27 of 28

ac5uirers are holl$ oned subsidiaries o the pro+oter, ho ere in control o the taret

co+pan$ at the ti+e o issuance o notice to the shareholders- Thus, the ac5uirers throuh their

holdin co+pan$ (pro+oter) could have easil$ ensured the disclosures as per the reulations in

the notice- *n vie o such observations and reasons, the sub+ission o the noticees that 'the

violation is at the hihest a technical or venial breach and the sa+e has been co++itted b$ thetaret co+pan$ and that passin directions aainst the noticees is not tenable or no ault o

theirs', cannot be accepted-

36

The noticees have also contended that the disclosures under reulation #(1)(c)(ii) as

re5uired onl$ hen there as a chane in control o the taret co+pan$- The sub+ission is

incorrect- The provision does not state that disclosures as re5uired under reulation #(1)(c)(ii)

should be +ade onl$ i such allot+ent results in a chane o control as inor+ation ith respect

to w"et"er s&c" allot$ent wo&ld res&lt in c"ange in control over t"e co$pan+ is one o the disclosures as

re5uired under reulation #(1)(c)(ii) o the Ta6eover 7eulations-

6

The noticees had also contended that .ern Tradin, illo Tradin, Te3ashree Tradin

and allor Tradin ere not the shareholders o the taret co+pan$ as on the date o allot+ent

and their ac5uisition is not or consolidation- The noticees have also contended that there is no

clarit$ in the S%* Order dated :anuar$ 1, 1888 as to the identit$ o the persons actin in

concert- * have perused the notice or the A@M issued b$ the taret co+pan$ and also the

board o director's resolution dated March 11, 188? as cited in the S%* Order dated :anuar$ 1,

1888- The oard resolution stated that .an, .ern, illo and Te3ashree are the pro+oters o

the taret co+pan$ and have been disclosed in the ilins +ade to the stoc6 e&chanes- The

resolution also stated that the board as recentl$ inor+ed that allor has beco+e a subsidiar$

o the pro+oter and thereore is a pro+oter as deined under the Ta6eover 7eulations-

* also note that the S%* Order dated :anuar$ 1, 1888 has recorded that allor as not a

pro+oter durin the period hen the notice as issued callin or the A@M or hen the

resolution as passed or issue and allot+ent o shares in the preerential issue and that the

shareholders did not have the opportunit$ to consider hether a ne entit$ should be allotted a'lare chun6' o shares- The aoresaid S%* Order also records the +anner o increase o the

pro+oter roup's shareholdinBvotin rihts pursuant to the allot+ents +ade to the ive

noticees- /onsiderin such observations, the contentions o the noticees as +entioned above

does not have +erit-



28/28

106

*n vie o the above reasons and observations, it ould deinitel$ be in the interest o

the shareholders o the taret co+pan$ and the securities +ar6et i the noticees are directed to

+a6e the public announce+ent o an open oer no, as as directed vide the S%* Order

dated :anuar$ 1, 1888-

116

*n vie o the oreoin, in co+pliance ith the Order dated March 0#, 2011 o the

Hon'ble o+ba$ Hih /ourt and the Order dated March 10, 201 o the Hon'ble Securities

Appellate Tribunal, * hereb$ direct the noticees, na+el$, .an Tradin /o+pan$ rivate

i+ited, allor Tradin /o+pan$ rivate i+ited, .ern Tradin /o+pan$ rivate i+ited,

Te3ashree Tradin /o+pan$ rivate i+ited and illo Tradin /o+pan$ rivate i+ited, to

+a6e a public announce+ent o an open oer to ac5uire shares o the Taret /o+pan$,

Saurashtra /e+ents i+ited as directed vide S%* Order dated :anuar$ 1, 1888 as upheld b$

the Order dated April 0, 1888 o the /entral @overn+ent-

126

*n vie o the dela$ in +a6in the open oer in ter+s o the S%* Order dated :anuar$

1, 1888, the above noticees shall, alon ith the consideration a+ount, pa$ interest at the rate

o 10F per annu+, ro+ the date hen the$ incurred the liabilit$ to +a6e the public

announce+ent till the date o pa$+ent o consideration, to the shareholders ho ere holdin

shares in the Taret /o+pan$ on the date o violation and hose shares have been accepted in

the open oer, ater ad3ustin dividend, i an$, that as paid-

PRASHANT SARAN

WHOLE TIME MEMBER

SECURITIES AND EXCHANGE BOARD OF INDIA

D)&" : D"%".7"! 1#&, 2014

P)%" : M.7)

Documents

Order in the matter of acquisition of shares of Saurashtra Cements Limited