KOSHA INVESTMENTS LTD V. SECURITIES & EXCHANGE BOARD OF INDIA & ANR 2015
FACTS:
The appellant Kosha Investments acquired shares of another company snowcem india ltd.(SIL). An investigation by SEBI found that there was an initial upward movement in the price of shares of SIL and also increase in the volume of their trade.
And the appellant made additional purchase of shares in violation of Regulation 11(1) of regulation of 1997 as it failed to make the required public announcement in terms of the said Regulation. And also a strong emphasis was laid on Regulation 14(1) which requires the public announcement under regulation 11, be made not later than four working days of the agreement or decision to acquire shares or voting rights which by itself triggers the requirement of regulation 11.
ISSUE:
- Whether kosha Investments had acquired a more than 5%shares or voting rights in respect of shares of SIL?
- Whether the kosha Investments violated the regulation 11(1) of regulation 1997?
- Whether the investigation made by SEBI is correct?
CONTENTION OF APPELLANT
Argued that Kosha Investments had been regularly purchasing and selling shares of SIL and had not acquired 5% or more in any point of time in period of 12 months therefore the provisions of Regulation did not trigger.
CONTENTION OF RESPONDENT
SEBI contended that the appellant was already holding between 15% to 75% shares of the target company SIL and it could acquire additional shares of this company through creeping acquisition mode, that is, without public announcement, hence the requirement of making public announcement in terms of Regulation 11(1) had to be met by the appellant which he failed to do.
OBSERVATION:
- In the Regulation 14(1) which requires the public announcement in 4 working days of the agreement or decision to acquire the certain number of shares or voting rights which by itself brings the requirement of regulation 11.
- It hastens that if the aggregate percentage of acquisition at any point of time during the financial year exceeds 5%, the provision would get triggered.
DECISION:
- The tribunal accepted the counter arguments advanced on behalf of the SEBI, because the appellant during the period of june 1999 to August 1999 had acquired the paid up capital of SIL which was beyond the permissible limit of 5 per cent.
- As the appellant holding shares of SIL and voting rights which is more than 5% of the weightage which is followed by mandatory regulation i.e Regulation 11 (making public announcement within 4 working days which appellant had failed to do) ; and if the plea of appellant will be accepted than an acquirer can keep on violating Regulation 11(1) with impunity as on many occasions as he wants and avoid letting the public have the required knowledge through public announcements by simply making subsequent sale or transfer to another entity so as to reduce the so-called net acquisition in a financial year to within 5%.
- The SEBI had made a careful observation to the kosha Investments, they consciously analyse the abrupt growth of their company. Thus, the investigation was correct. They have intentionally violated the mandatory regulation.
- The appellant has to pay consolidated cost to SEBI within eight weeks, hence dismissed