1. Home
  2. / Subject
  3. /Business Regulations (SEBI ; SARFAESI ; PMLA etc)

SEBI V. AKSHYA INFRASTRUCTURE PVT. LTD. (2014)

SEBI V. AKSHYA INFRASTRUCTURE PVT. LTD. (2014)

 

FACTS:

 

  • On 20th October, 2011 respondent (Akshya) made a voluntary open offer through a public announcement, under regulation 11of takeover Regulations wherein the target company given an opportunity to exit at an offer price of Rs.91/- per equity share.

 

  • Respondent contend to SEBI that the open offer in question had become outdated due to unjustified delay by SEBI in taking a decision as to whether to approve the draft letter of offer has rendered the entire open offer exercise academic and meaningless, thus the same ought to be permitted to be withdrawn.

 

  • Appeal before the Security Appellant Tribunal (SAT) was made, which give impugned judgement in favour of respondent, SEBI has filed the present civil appeal.

 

ISSUE:

  1. Whether an open offer voluntarily made through a public announcement can be permitted to be withdrawn at a time when the voluntary open offer has become uneconomical to perform?
  2. As SEBI made an unjustifiable and inexplicable delay on issuing comments on draft letter is justified?
  3. Is there any difference between a mandatory public offer and a voluntary open offer?
  4. Whether breach of right of natural justice is sufficient to withdrawn the offer?
  5. Whether the ratio of law declared in Nirma Industries Ltd. Would be applicable to the facts and circumstances of this case?

 

REFERRED CASE LAW:

  • Nirma Industries Ltd. &Anr. V. Securities and Exchange Board of India.

 

OBSERVATION:

  • Regulation 27 (1) makes it patiently clear that Regulation 27(1) reads “ no public offer, once made, shall not be withdrawn except under the following circumstances of (b),(c) and (d).
  • Regulation 27(1)(a) before its deletion permitted the public offer to be withdrawn, consequent upon any competitive bid.
  • Clause (b) permitted a public offer to be withdrawn in case of legal impossibility when the statutory approval required has been refused. Clause (c) deals with a natural disaster and clause (d) also being an exception to the general rule would have to be naturally construed in terms of clauses (b)and (c). Board would have a wide discretion to permit withdrawal of an offer even though it is not impossible to perform.

 

DECISION:

  • The conclusion that an open offer once made can only be withdrawn in circumstances stipulated under Regulation 27(1)(b)(c) and (d). Accepting such a submission (permitted to be withdrawn on the ground of economically unviable) , would give a unscrupulous elements in the securities market, that is precisely the reason why Regulation 27(1)(a) was deleted.

 

  • As delay is excused on the ground that information sought by the appellant was not given by the respondent. Was no ground for the appellant to delay the issuance of comments on the letter of offer, especially not for a period of 13 months. Such kind of delay is wholly inexcusable and needs to be avoided. But Delay in performance of duties by SEBI cannot be equated to refusal of the statutory approval requires from the independent bodies, such as under the RBI, Taxation law and other regulatory statutes. Thus delay by SEBI in making comments would not fall under Regulation 27(1)(b).

 

  • Court did not accept the distinction sought to be made by respondent with regard to voluntary open offer and mandatory open offer. The consequences of both kinds of offers to acquire shares in the Target Company, at a particular price, are the same. As soon as the offer price is made public, the securities market would take the same into account in all transactions. Therefore, the withdrawal of the open offer will have to be considered by the Board in terms of Regulation 27(1)(b)(c) and (d).

 

  • In the Court opinion, the respondent has failed to place on the record either before Security Appellant Tribunal or before this Court the prejudice that has been caused by not observing Rules of Natural Justice. It is by now settled proposition of law that mere breach of Rules of Natural Justice is not sufficient. This reasoning is supported by a number of cases.Natwar Singh v. Director of Enforcement &Anr., held that “there must also have been caused some real prejudice to the complainant; there is no such thing as a merely technical infringement of natural justice”.

 

  • The Conclusion that an open offer once made can only be withdrawn in circumstances stipulated under Regulation 27 (1) (b), (c) and (d) . And is already conclude that the delay in offering comments by the Boards on the letter containing voluntary open offer, though undesirable, but is not fatal to the decision ultimately taken by board. Therefore, Court reiterates its conclusion in Nirma Industries. The ejusdem generis principle is fully applicable for the interpretation of Regulation 27 as there is a common genus of impossibility.

 

  • Last but not least, Court is not able to approve the approach adopted by SAT, for interpreting the provisions contained in Regulation 27 of the Takeover Regulations it must be interpreted by correlating to the provisions of SEBI Act. Hence the impugned order passed by SAT is set aside and the appeal is allowed.