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CASE NO.:

Appeal (civil) 3183 of 2003

PETITIONER:

Clariant International Ltd. & Anr.

RESPONDENT:

Securities & Exchange Board of India

DATE OF JUDGMENT: 25/08/2004

BENCH:

N. Santosh Hegde,S.B. Sinha & A.K. Mathur

JUDGMENT:

J U D G M E N T

With

CIVIL APPEAL NOs. 3701, 3872 of 2003

and D3952 of 2004

S.B. SINHA, J:

These appeals under Section 15Z of the Securities and Exchange

Board of India Act, 1992 (for short, 'the said Act) arise out of a judgment

and order dated 21.02.2003 passed by the Securities Appellate Tribunal,

Mumbai (for short, 'the Tribunal') in Appeal No.114 of 2002.

BACKGROUND FACTS :

Colour Chem Ltd. is a target company. Its shares are listed on the

Bombay Stock Exchange and National Stock Exchange. Appellant No.1

(Clariant) in Civil Appeal No.3183 of 2003 is a Swiss company being

subsidiary of another Swiss company, Clariant AG. Hoechst is a German

company whereas Ebito Chemiebeteiligungen AG (Ebito) is a Swiss

company. In Ebito Clariant held 49% and Hoechest 51% shares. An

agreement was entered into by and between Hoechst and Clariant pursuant

whereto and in furtherance whereof German Specialty Chemicals business

was transferred to the latter by transferring 583708 equity shares of Rs.100/-

each of the target company. On or about 21.11.1997, with a view to give

effect to the said agreement, Clariant sought for an exemption from

compliance of the requirements of making open offer to the shareholders of

the target company in terms of the provisions of the Securities and Exchange

Board of India (Substantial Acquisition of Shares and Takeovers)

Regulations, 1997 (for short, the Regulations). Such exemption, however,

was not granted. Hoechst in the aforementioned situation decided to sell off

the shares held by it in the target company to Ebito, a company which was

floated on 19.5.2000 as a special purpose vehicle. Actual transfer took place

on 13.10.2000. Ebito by reason of the aforementioned transfer became a

100% subsidiary of Clariant.

A complaint was received by the Securities and Exchange Board of

India (for short, 'the Board') to the effect that as by reason of the

aforementioned arrangement as 50.1% shares/voting rights and control in

the target company had been made without any public announcement, the

provisions of the Regulations had been violated. Upon an inquiry made in

this behalf, the Board came to the conclusion that the acquirer had actually

acquired the control over the target company on 21.11.1997. By reason of

an order dated 16.10.2002, the Board directed :

"13.1 In view of the findings made above, in exercise of

the powers conferred upon me under sub-section (3) of

Section 4 read with Section 11B SEBI Act 1992 read

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with regulations 44 and 45 of the said Regulations, I

hereby direct the Acquirer to make public

announcement as required under Chapter III of the said

Regulations in terms of regulations 10 & 12 taking

21.11.97 as the reference date for calculation of offer

price. The public announcement shall be made within

45 days of passing of this order.

13.2 Further, in terms of sub regulation (12) of

regulation 22, the payment of consideration to the

shareholders of the Target company has to be made

within 30 days of the closure of the offer. The

maximum time period provided in the said Regulations

for completing the offer formalities in respect of an

open offer, is 120 days from the date of public

announcement. The public announcement in the instant

case ought to have been made taking 21.11.97 as a

reference date and thus the entire offer process would

have been completed latest by 21.3.98. Since no public

announcement for acquisition of shares of the Target

company has been made, which has adversely affected

interest of shareholders of Target Company, it would be

just and equitable to direct the Acquirer to pay interest

@15% per annum on the offer price, the Acquirer is

hereby accordingly directed to pay interest @15% per

annum to the shareholders for the loss of interest caused

to the shareholders from 22.3.98 till the date of actual

payment of consideration for the shares to be tendered

in the offer directed to be made by the Acquirer."

An appeal was preferred thereagainst by the acquirer wherein the

primal question raised was the rate of interest for the delay involved in

making payment to the shareholders who tendered the shares in the public

offer required to be made in terms of the Regulations.

It is not in dispute that the value of the share as on 24.2.1998 was

Rs.220/-; on 22.10.2002 Rs.213/- and on the date of public announcement

i.e. on 7.4.2003 the value of the share was Rs.209/- , Rs.233/- Rs.203/- and

Rs.220/-, whereas the offer price was Rs.318/-.

The submissions of the acquirer before the Tribunal were that (i) the

rate of interest is on the higher side; (ii) the dividends having been paid in

the meantime, the same should be set off from the amount of payable

interest; and (iii) the interest is payable only to those shareholders who held

shares on the triggering date, namely, 24.2.1998.

IMPUGNED JUDGMENT :

The Tribunal by its impugned judgment while rejecting the first two

contentions raised on behalf of the acquirer accepted the third, holding :

"(i) Those persons who were holding shares of the target

company on 24.2.1998 and continue to be shareholders

on the closure day of public offer to be made in terms of

the directions given by the Respondent vide the

impugned order alone shall be eligible to receive interest

in case the shares which they were holding on 24.2.1998

are tendered in response to public offer made in terms of

the impugned order, and accepted by the Appellants.

(ii) The interest payable by the Appellants shall be at the

rate of 15% as directed by the Respondent in its order

dated 16.10.2002.

(iii) The dividend paid by the target company to its

shareholders not required to be deducted from the interest

payable to the shareholders by the Appellants."

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The acquirer has preferred Civil Appeal No.3183 of 2003, whereas

the Board has filed Civil Appeal No.3701 of 2003 against the said judgment.

Civil Appeal Nos. D3952 of 2004 and 3872 of 2003 have been filed by the

Administrator of the Specified Undertaking of the Unit Trust of India and by

one Umeshkuamr G. Mehta respectively.

Submissions :

Mr. R.F. Nariman, and Mr. D.A. Dave, learned Senior Counsel

appearing on behalf of the appellants, would submit that the intent and

purport of Regulation 44 of the Regulations, being to compensate the

shareholders for the loss suffered by them, the rate of interest payable to the

shareholders would vary from case to case. The guidelines in this regard

having been provided for in the statute, Mr. Nariman would submit, grant of

9% interest should be held to be just and proper in view the fact that the

investment was to be made for a long period, i.e., for about five years. In

support of the said contention, the learned counsel placed reliance on

Kaushnuma Begum (Smt.) and Others vs. New India Assurance Co. Ltd. and

Others [(2001) 2 SCC 9], H.S. Ahammed Hussain and Another vs. Irfan

Ahammed and Another [(2002) 6 SCC 52], United India Insurance Co. Ltd.

and Others vs. Patricia Jean Mahajan and Others [(2002) 6 SCC 281] and

DDA and Others vs. Joginder S. Monga and Others [(2004) 2 SCC 297].

It was further submitted that those shareholders who had purchased

the shares later than the date fixed by the SEBI were not entitled to receive

any compensation by way of interest as they were not the shareholders on

the said date having regard to the fact that their names did not appear in the

register of the company. As regard the findings of the Board that the amount

of dividend paid to the shareholders would not be set off against the amount

of interest, it was argued that having regard to the fact that actual date of

transfer had been fixed on 22.3.1998, by reason of a fiction created, a person

must be deemed to be a shareholder as on that date and having regard to the

fact that interest was being paid to the shareholders at the offer price from

the said date till the actual payment is made, the amount received by the

shareholders by way of dividend is liable to be adjusted from the amount to

be paid by way of interest. Our attention has further been drawn to the fact

that pursuant to the order of this Court dated 28.4.2003 a sum of Rs.111.50

crores had been deposited and invested in a nationalized bank.

Mr. Kirit Rawal, learned Senior Counsel appearing on behalf of the

Board, would, on the other hand, contend that while fixing the rate of

interest, the Board, being an expert body, exercises a discretionary

jurisdiction and, thus, the Tribunal and this Court should not interfere

therewith. The learned counsel would argue that the rate of interest fixed at

15% p.a. cannot be said to be arbitrary and in support thereof reliance has

been placed on Delhi Development Authority vs. M/s Surgical Cooperative

Industrial Estate Ltd. and Others [(1993) Supp. 4 SCC 20]. Mr. Rawal

would contend that from a bare perusal of Regulation 44(i) of the

Regulations, it would appear that all those shareholders who had opted to

sell their shares pursuant to the public offer are entitled to the payment of

interest and, thus, the finding of the Tribunal in this regard is bad in law.

It was submitted that Regulation 44 must be read with Section 11B of

the Act so as to put a proper and effective meaning thereto in terms whereof

the Board is entitled to issue any direction including those which are

specified therein..

As regard the direction issued by the Tribunal to the effect that only

those shareholders who were on the roll of the company and continued to be

so on the date of public offer alone are entitled to interest, Mr. Rawal

would contend that by reason of such construction of Regulation 44, the

free transferability of the shares which is the basic feature of the security

market would be interfered with.

Mr K.K. Rai, learned counsel appearing on behalf of the Appellant in

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Civil Appeal No. 3872 of 2003, would, inter alia, contend that transaction

being commercial in nature, interest at the rate of 15% cannot be said to be

on a high side. Reliance in support of the said contention has been placed

on State Bank of Patiala and Another vs. Harbans Singh [(1994) 3 SCC 495]

and Regional Provident Fund Commissioner vs. Shiv Kumar Joshi [(2000) 1

SCC 98].

It was contended that as shares were traded on speculation, it may not

be possible to identify the shareholders who as per direction of the Tribunal

would be entitled to interest as the shares by such time might have changed

many hands. Furthermore, the process being a complex one, Regulation 44

should be read in such a manner which may be effectually worked out.

Mr. Shrish Kr. Misra, learned counsel appearing on behalf of the

Administrator of the Specified Undertaking of the Unit Trust of India in

Civil Appeal No.D3952 of 2004 would submit that the appellants therein

should be held to be entitled to grant of interest despite the fact that it was

not a shareholder as on 11.3.1998 as would appear from the following :

A. That the Unit Trust of India was a statutory

corporation under the Unit Trust of India Act, 1963 and

was/ is the shareholders of the Target company and as on

24-2-1998 holding 1123800 shares.

B. That Unit Trust of India Act, 1963 has been repealed

by the Act of the Parliament i.e. Unit Trust of India

(Transfer of Undertaking and Repeal) Act, 2002.

C. That the said Act provides for transfer and vesting of

Undertaking (excluding Specified Undertaking) of Unit

Trust of India to a Specified Company (being UTI

Trustee Company Pvt. Ltd.) to be formed and registered

under the Companies Act 1956 as well as for transfer and

vesting of Specified Undertaking of Unit Trust of India in

the Administrator appointed by the Central Government

in the terms of section 7 of Unit Trust of India (Transfer

of Undertaking and Repeal) Act, 2002.

D. That as per section 4(1) (b) of the said Act the

Specified undertaking of the erstwhile Unit Trust of India

being all business, assets, liabilities and properties set out

in Schedule-I of the said Act stood transferred to the

vested in the "Administrator of the Specified

Undertaking of the Unit Trust of India" on and with

effect from the appointed day viz. 1-2-2003. That by

virtue of section 4(1)(a) of the said Act, the Undertaking

(excluding the Specified Undertaking) of the erstwhile

Unit Trust of India being all business, assets, liabilities

and properties set out in schedule \026 II of the said Act

stood transferred to and vested in the "UTI Trustee

Company Pvt. Ltd" on and with effect from the

appointed day viz. 1-2-2003.

E. That the 1123800 shares (considering face value of Rs.

10/- each) purchased by the erstwhile Unit Trust of India

were/are from the amount which relates to Schedule I &

II to the said Act. Therefore, the shares purchased by the

erstwhile Unit Trust of India of M/s. Colour Chem Ltd.

stands transferred to and vested in the 'Administrator of

the Specified Undertakings of the Unit Trust of India'

and the 'Specified Company' i.e. UTI Trustee Company

Pvt. Ltd. by virtue of the said Act.

F. That out of 1123800 shares the amount invested for

501100 (considering face value of Rs.10/- each as on 24-

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2-1998) shares is from the schemes which come under

schedule \026I of the said Act, as such the "Administrator of

the Specified Undertaking of the Unit Trust of India" is

the successor in holder of 501100 shares.

G. That the amount invested by the erstwhile Unit Trust

of India for the balance 622700 (considering face value

of Rs.10/- each as on 24-2-1998) shares was from the

schemes which come under the Schedule \026 II of the said

Act, as such the "UTI Trustee Company Pvt. Ltd." is the

successor in holder of those 622700 shares.

H. That as per Section 5(1) of the said Act all the assets

and liabilities including lands, buildings, vehicles, cash

balances, deposits, foreign currencies, disclosed and

undisclosed reserves, reserves fund, special reserve fund,

benevolent reserve fund, any other fund stock,

investments, shares, bonds, debentures, security, powers

authorities privileges benefits of the erstwhile Unit Trust

of India vest in "Administrator of the Specified

undertaking of the Unit Trust of India" and "UTI Trustee

Company Pvt. Ltd."

I. That as per section 5(2) of the said Act "All contracts,

deeds bonds guarantees, power of attorney other

instruments (including all units issued and unit schemes

formulated by the Trust and working arrangements)

subsisting immediately before the appointed day and

affecting the Trust shall cease to have effect or to be

enforceable against the Trust and shall be in full force

and effect against or in favour of the specified company

(UTI Trustee Company Pvt. Ltd.) or the Administrator

(Administrator of the Specified Undertaking of the Unit

Trust of India) as the case may be, in which the

undertaking or specified undertaking has vested by virtue

of the said Act and enforceable as fully and effectually as

if instead of the Unit Trust of India, the specified

company (UTI Trustee Company Pvt. Ltd) or the

Administrator (Administrator of the Specified

undertaking of the Unit Trust of India) had been named

therein or had been a party thereto.

The Relevant Statutory Provisions:

The Securities and Exchange Board of India Act, 1992 was enacted

to provide for the establishment of a Board to protect the interests of

investors in securities and to promote the development of, and to regulate,

the securities market and for matter connected therewith or incidental

thereto. Section 11 of the Act provides that inter alia the duty of the Board

is to protect the interest of investors in securities and to promote the

development of, and to regulate the securities market, by such measures as it

thinks fit, which would include in regulation of substantial acquisition of

shares and take-over of companies. Section 11B empowers the Board to

issue directions, inter alia, in the interest of investors, or orderly

development of securities market. Regulation 44 of the 1997 Regulations

reads thus :

"44. Directions by the Board. The Board may, in the

interests of the securities market, without prejudice to its

right to initiate action including criminal prosecution

under section 24 of the Act give such directions as it

deems fit including :

(a) directing the person concerned not to further deal in

securities;

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(b) prohibiting the person concerned from disposing of

any of the securities acquired in violation of these

Regulations;

(c) directing the person concerned to sell the shares

acquired in violation of the provisions of these

Regulations;

(d) taking action against the person concerned".

In terms of the said regulation, there was no express power to issue

any direction as regard grant of interest.

Regulation 44 of 1997 Regulations was substituted in the year 2002

with effect from 9.9.2002, the relevant portion of which reads thus :

"44. Directions by the Board. Without prejudice to

its right to initiate action under Chapter VIA

and section 24 of the Act, the Board may, in

the interest of securities market or for protection

of interest of investors, issue such directions as it

deems fit including: -

(i) directing the person concerned, who has

failed to make a public offer or

delayed the making of a public offer in

terms of these Regulations, to pay to the

shareholders, whose shares have been

accepted in the public offer made after the

delay, the consideration amount along with

interest at the rate not less than the

applicable rate of interest payable by banks

on fixed deposits."

As the impugned order of the Tribunal had been passed on 21.2.2003,

it is not disputed that Regulation 44 as amended in 2002 shall be attracted in

the instant case.

'Shareholder' has neither been defined in the Act nor in the

Regulations; whereas 'shares' has been defined to mean shares in the share

capital of a company carrying voting rights and includes any security which

would entitle the holder to receive shares with voting rights but shall not

include preference shares..

In terms of sub-section (2) of Section 2 of the said Act, the words and

expressions used and not defined in the Act but defined in the Securities

Contracts (Regulation) Act, 1956 (42 of 1956) or the Depositors Act, 1996

(22 of 1996) shall have the meanings respectively assigned to them in that

Act.

Clause (2) of Regulation 2 provides that all other expressions unless

defined therein shall have the same meaning as have been assigned to them

under the Act or the Securities Contracts (Regulation) Act, 1956 , or the

Companies Act, 1956, or any statutory modification or re-enactment thereto,

as the case may be. As 'shareholder' has not been defined, with a view to

bring a 'shareholder' within the provisions of the said Regulations, we have

no option but to refer to the relevant provisions of the Companies Act, 1956.

Section 41 of the Companies Act defines 'member', sub-sections (1) and (2)

whereof are as under :-

"41. (1) The subscribers of the memorandum of a

company shall be deemed to have agreed to become

members of the company, and on its registration, shall be

entered as members in its register of members.

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(2) Every other person who agrees in writing to become a

member of a company and whose name is entered in its

register of members, shall be a member of the company."

Rate of interest :

Section 11 of the Act provides that it shall be the duty of the Board to

protect the interest of investors in securities. Regulation 44 of 1997,

however, empowered the Board to issue directions only in the interest of the

securities market. The expression "in the interest of the investors" did not

occur therein. Regulation 44 of 2002 Regulations, thus, confers a wider

power upon the Board. The said power is without prejudice to its right to

initiate action under Chapter VIA and Section 24 of the Act which deals

with offences . Regulation 44 of 2002 Regulations, furthermore, empowers

the Board to issue directions both in the interest of the securities market as

well as for protection of interest of investors. Such directions may be issued

in its discretion. It, however, in its discretion may or may not issue such

directions. Regulation 44 (i) of Regulations, therefore, confers a power

upon the Board to issue directions also in the interest of the investors which

would include a direction to pay interest.

A direction in terms of Regulation 44 which was in the interest of

securities market indisputably would have caused civil or evil consequences

on the defaulters. Clause (i) of Regulation 44, however, does not provide for

any penal consequence. It provides for only a civil consequence. By reason

of the said provision, the power of the Board to issue directions is sought to

be restricted to pay the amount consideration together with interest at the

rate not less than the interest payable by banks on fixed deposits. Both the

Board and the Tribunal have proceeded on the basis that the interest is to be

paid with a view to recompense the shareholders and not by way of penalty

or damages. Such a direction, therefore, was for the purpose of protecting

the interest of investors and not "in the interest of the securities market".

The transactions in the market are not thereby affected one way or the other.

The Board, as noticed hereinbefore, has a discretion in the matter and, thus,

it may or may not issue such a direction. The shareholders do not have any

say in the matter. As a necessary concomitant, they have no legal right.

The Board further having a discretionary jurisdiction must exercise

the same strictly in accordance with law and judiciously. Such discretion

must be a sound exercise in law. The discretionary jurisdiction, it is well-

known, although may be of wide amplitude as the expression "as it deems

fit" has been used but in view of the fact that civil consequence would

ensue by reason thereof, the same must be exercised fairly and bona fide.

The discretion so exercised is subject to appeal as also judicial review, and,

thus, must also answer the test of reasonableness.

In Kruger and Others vs. Commonwealth of Australia, reported in

1997 (146) Australian Law Reports, page 126, it is stated :

"Moreover, when a discretionary power is statutorily

conferred on a repository, the power must be exercised

reasonably, for the legislature is taken to intend that the

discretion be so exercised. Reasonableness can be

determined only by reference to the community

standards at the time of the exercise of the discretion

and that must be taken to be the legislative

intention\005."

The discretionary jurisdiction has to be exercised keeping in view the

purpose for which it is conferred, the object sought to be achieved and the

reasons for granting such wide discretion. [(See Narendra Singh Vs.

Chhotey Singh and Another, (1983) 4 SCC 131]

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A discretionary jurisdiction, furthermore, must be exercised within the

four-corners of the statute. [See Dr. Akshaibar Lal and Others Vs. The

Vice-Chancellor, Banaras Hindu University and Others, (1961) 3 SCR 386

and also para 9-022 of De Smith, Woolf and Jowell's Judicial Review of

Administrative Action, 5th Edition, page 445]

Interest can be awarded in terms of an agreement or statutory

provisions. It can also be awarded by reason of usage or trade having the

force of law or on equitable considerations. Interest cannot be awarded by

way of damages except in cases where money due is wrongfully withheld

and there are equitable grounds therefor, for which a written demand is

mandatory.

In absence of any agreement or statutory provision or a merchantile

usage, interest payable can be only at the market rate. Such interest is

payable upon establishment of totality of circumstances justifying exercise

of such equitable jurisdiction. [See Municipal Corporation of Delhi vs.

Sushila Devi (Smt.) and Others \026 (1999) 4 SCC 317 \026 Para 16].

In Executive Engineer, Dhenkanal, Minor Irrigation Division, Orissa

and Others vs. N.C. Budharaj (Deceased) by Lrs. And Others [(2001) 2 SCC

721], Raju, J. speaking for the majority held that a person deprived of the

use of money to which he is legitimately entitled has a right to be

compensated for the deprivation by whatever name it may be called, namely,

interest, compensation or damages.

In Black's Law Dictionary, the word 'compensation' has been defined

as under :

"money given to compensate loss or injury".

In a given case where the liability arises during pendency of a

litigation, doctrine of restitution can be invoked. In South Eastern

Coalfields Ltd. vs. State of M.P. and Others [(2003) 8 SCC 648], it was

observed :

"\005In law, the term "restitution" is used in three senses

(i) return or restoration of some specific thing to its

rightful owner or status; (ii) compensation for benefits

derived from a wrong done to another; and (iii)

compensation or reparation for the loss caused to another

(See Black's Law Dictionary, 7th Edn., p. 1315). The

Law of Contracts by John D. Calamari & Joseph M.

Perillo has been quoted by Black to say that "restitution"

is an ambiguous term, sometimes referring to the

disgorging of something which has been taken and at

times referring to compensation for injury done:

"Often, the result under either meaning of the term

would be the same\005.Unjust impoverishment as well as

unjust enrichment is a ground for restitution. If the

defendant is guilty of a non-tortious misrepresentation,

the measure of recovery is not rigid but, as in other cases

of restitution, such factors as relative fault, the agreed-

upon risks, and the fairness of alternative risk allocations

not agreed upon and not attributable to the fault of either

party need to be weighed."

When a bench-mark is fixed by a statute, the question as to whether a

discretion has been judicially or properly exercised or not will have to be

determined in the context of the facts of the particular case. [See Irrigation

Department vs. G.C. Roy, (1992) 1 SCC 508]. When a bench-mark is fixed

or the court grants interest at the agreed rate, it may not be necessary to give

reasons but where interest is granted at a higher or lessor rate, some reasons

are required to be assigned.

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By reason of Regulation 44, as substituted in 2002, the discretionary

jurisdiction of the Board is curtailed. It in terms of Regulations 1997 could

award interest by way of damages but by reason of Regulation 2002, its

power is limited to grant interest to compensate the shareholders for the loss

suffered by them arising out of the delay in making the public offer. The

courts of law can take judicial notice of both inflation as also fall in bank

rate of interest. The bank rate of interest both for commercial purpose and

other purposes had been the subject-matter of statutory provisions as also the

judge-made laws. Even in cases of victims of motor vehicles accidents, the

courts have upon taking note of the fall in the rate of interest held that 9%

interest to be reasonable. [See Kaushnuma Begum (supra), and H.S.

Ahammed Hussain (supra) and Patricia Jean Mahajan (supra)]

The statutory changes brought about must be noticed by the court

keeping in view the fact that the nature of jurisdiction by the Board has been

changed. The mischief rule also in this case should be applied. Furthermore

while construing such provisions, the courts must take into consideration

the provisions of the law as had been interpreted by courts prior thereto.

By way of an example we may notice that the proviso appended to

sub-sections (1) and (2) of Section 34 of Code of Civil Procedure provides

for the grant of rate at which moneys are lent or advanced by nationalized

banks in relation to commercial transactions.

In DDA vs. M/s Surgical Cooperative Industrial Estate Ltd. and

Others [(1993) Supp.4 SCC 20] whereupon Mr. Rawal has placed reliance,

15% interest was directed to be paid only in favour of those members who

had already been allotted plots and made some payments, on a suggestion

made by the court, as would appear from the following :

"\005At the rate of 15% interest the amount would be

considerably less yet we suggested to the learned counsel

for these members to ascertain from their clients if they

would be willing to purchase the plots at 50% of the price

realised in the last auction. They conveyed their

willingness to pay that price i.e. 50% of Rs. 10,756 per

square metre. Mr. Arun Jaitley, the learned counsel for

the Delhi Development Authority submitted that

although he had no instructions from his clients in the

matter his clients would abide by any just, reasonable and

fair order that this Court would make in the facts and

circumstances of the case\005."

The said decision, therefore, has no application to the fact of the

present matter.

We also do not agree with the contention that the payment of interest

for delay in making the public offer is a commercial transaction.

While determining the cases of commercial transaction also, fall in

rate of interest has been taken note of by this Court in Citibank N.A. etc. vs.

Standard Chartered Bank and Others etc. [(2004) 1 SCC 12, Para 62] and

Citibank N.A. vs. Standard Chartered Bank etc [(2004) 6 SCC 1, para 54].

It is at this stage relevant to note that the rate of interest at the rate of

15% as directed by the Board has been affirmed by the Tribunal stating :

"\005Even on applying the said test, it does not appear to

me that the 15% interest directed to be paid to the

shareholders as compensation for the delay involved in

making the payment in the Appellants' case is unjust. In

this context it is to be noted that the payment was to be

made, in case the offer had been made according to the

provisions of the Takeover Regulations, by 22.3.1998

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and the amount to be so paid remains unpaid till date.

Therefore, in my view the interest rate applicable should

be that rate which was prevailing on 22.3.1998 and not

the one prevailing on the date of the impugned order.

According to the information furnished by the Appellants

the rate of interest payable on deposits for a period of 3

years and above by nationalized banks was around 12%

at that point of time. In this context one should not fail to

note that the interest is directed to be paid to the

shareholders to compensate the loss. Had the shareholder

received the money on due date, in the normal course

what return he would have received by effectively

investing that money has to be taken into consideration.

The amount was due on 22.3.1998. The then existing

rate of 12%, if calculated on quarterly rest basis, at the

end of 2002 works out to more than 15% and therefore,

even if the interest is worked out in relation to the rate of

interest payable on deposit by nationalized banks, the

rate of interest payable by the Appellants fixed at 15%

p.a. by the Respondent in the instant case cannot be

considered unjust, and the same is also not contrary to the

view held by the Hon'ble Supreme Court in Kaushnuma

Begum's case or against the provisions of regulation

44(i)\005."

The observation of the Tribunal was on a wrong premise as the rate of

interest in a case of fixed deposit in a nationalized bank was not to be

calculated on quarterly rest basis. Furthermore, the bank rate of interest

which was prevailing in 1998 had also fallen down.

The rate of interest at the relevant time as was payable by Syndicate

Bank, a nationalized bank, is as under :

"FIXED DEPOSIT INTEREST RATES

FOR THREE YEARS AND ABOVE

FROM SYNDICATE BANK

Sl.No.

From

To

Percentage

1.

02.07.1996

30.04.1997

13%

2.

01.05.1997

31.08.1997

12%

3.

01.09.1997

31.10.1997

11%

4.

01.11.1997

21.12.1997

10%

5.

22.12.1997

14.01.1998

11%

6.

15.01.1998

21.01.1998

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11.5%

7.

09.02.1998

11.10.1998

12%

8.

12.10.1998

14.03.1999

11.5%

9.

15.03.1999

04.04.1999

11.25%

10.

05.04.1999

30.04.1999

11%

11.

01.05.1999

22.08.1999

10.5%

12.

23.08.1999

11.11.1999

10.25%

13.

12.11.1999

09.04.2000

9.75%

14.

10.04.2000

31.08.2000

9%

15.

01.09.2000

15.10.2000

9.5%

16.

16.10.2000

31.12.2000

10%

17.

01.01.2001

11.02.2001

9.75%

18.

12.02.2001

14.03.2001

10%

19.

15.03.2001

09.07.2001

9.5%

20.

10.07.2001

14.09.2001

9.25%

21.

15.09.2001

15.12.2001

8.75%

22.

16.12.2001

20.01.2002

8.50%

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23.

21.01.2002

07.04.2002

8.25%

24.

08.04.2002

06.08.2002

7.75%

25.

07.08.2002

27.10.2002

7.50%

"

While awarding interest, it is required to bear in mind that interest

would be payable on the maximum price of the share which was Rs.318/-

and not on Rs.220/- which was not the prevailing price in 1998, as a result

whereof not only a shareholder would be getting a higher price but would

also be getting interest thereupon.

So far as the contention regarding the applicability of dynamics of the

market or its being a volatile one is concerned, the same, in our opinion, has

nothing to do with rate of interest inasmuch both the Board and the Tribunal

proceeded on the basis that the shareholders are to be compensated by way

of interest for delayed payment. In that view of the matter, the relevance of

rate of interest payable for the period it is payable and the persons who are

entitled to be compensated were required to be determined. Rate of interest

should be a reasonable one as the same became payable for the delay in

making the payment, subject of course to the statutory provision contained

in the Regulations. As noticed hereinbefore, the discretion of the Board vis-

`-vis the Tribunal had been curtailed. There is a change even in relation to

the nature of discretion of the Board. The Board and the Tribunal , thus,

failed to apply the correct principles of law in determining the rate of interest

payable in this case.

To whom interest is payable:

It is not in dispute that the acquirer contravened Regulation 12 while

acquiring the control of the target company. Regulation 14(3) provides that a

public announcement referred to in Regulation 12 is required to be made by

the merchant banker not later than four working days after any such change

or changes are decided to be made as would result in the acquisition of

control over the target company by the acquirer. Clause 4 of Regulation 15

provides that the offer under these Regulations shall be deemed to have been

made on the date on which the public announcement appeared in any of the

newspapers referred to in clause (1). The announcement of offer in terms of

Regulation 16(xi) is to contain that date by which individual letters of offer

would be posted to each of the shareholders. Regulation 20 provides for the

minimum offer price. In terms of clause (1) of Regulation 21, the public

offer is required to be made by the acquirer to the shareholders of the target

company to acquire from them an aggregate minimum 20% of the voting

capital of the company.

The Board arrived at an inference that the acquirer had acquired the

control of the target company as the special vehicle company on 19.5.2000.

The liability of the acquirer to pay interest should be judged in the

aforementioned context.

Shareholder :

To become a shareholder, a person has to fulfill two conditions,

namely, he must agree in writing to become a member of a company and

whose name should be entered in its register of members. The members

holding equity share capital of company and whose names are entered as

beneficial owner in the records of the depository shall be deemed to be the

members of the concerned company.

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In Palmer's Company Law, 23rd Edn. at page 154, para 12-07, it is

stated :

"12-07 Subscribers as members \026 The subscribers of the

memorandum are deemed to have agreed to become

members of the company, and on its registration shall be

entered as members in its register of members (1948 Act,

s. 26(1))."

It is further stated :

"49.04. Other members \026 In the case of members other

than the subscribers to the memorandum two essential

conditions have to be satisfied to constitute a person a

member:

(1) an agreement to become a member; and

(2) entry on the register.

These two conditions are cumulative: unless they are

both satisfied, the person in question has not acquired the

status of member.

Thus, an agreement to become a member alone does not

create the status of membership; it is a condition

precedent to the acquisition of such status that the

shareholder's name should be entered on the register.

Conversely, the company is not entitled to place a

person's name on the register without his having agreed

to become a member; a person improperly registered

without his assent is not bound thereby and may have his

name removed from the register."

In M/s Howrah Trading Co., Ltd. vs. The Commissioner of Income

Tax, Calcutta [(1959) Supp.(2) SCR 448], the law is stated thus :

"The question that falls for consideration is

whether the meaning given to the expression

"shareholder" used in section 18(5) of the Act by

these cases is correct. No valid reason exists why

"shareholder" as used in section 18(5) should mean

a person other than the one denoted by the same

expression in the Indian Companies Act, 1913. In

In re Wala Wynaad Indian Gold Mining Company

Chitty, J., observed :

"I use now myself the term which is common in

the courts, 'a shareholder', that means the holder of

the shares. It is the common term used, and only

means the person who holds the shares by having

his name on the register.""

[See also Balkrishan Gupta and Others vs. Swadeshi Polytex Ltd. and

Another [(1985) 2 SCC 167]]

The rights of a shareholder are purely contractual and would be such

which are granted to him by Company's Memorandum or Articles of

Association together with the statutory rights conferred on him by the

Companies Act.

A shareholder having regard to the direction issued by the Tribunal

must be one who was a shareholder on the triggering date. Purpose and

object of creating a legal fiction is well-known. Once a fiction is created

upon imagining a certain state of affairs, the imagination cannot be

permitted to be boggled when it comes to the inevitable corollaries thereof.

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[See Dipak Chandra Ruhidas vs. Chandan Kumar Sarkar [(2003) 7 SCC

66]], ITW Signode India Ltd. Vs. CCE, [(2004) 3 SCC 48], and Ashok

Leyland Ltd. Vs. State of Tamil Nadu, (2004) 3 SCC 1].

Directions by the Board are required to be issued for the purpose of

protecting the interest of the investors which would imply that such

protection be extended to the persons who are entitled thereto and not any

other shareholder who would get the same by windfall. The shareholders

contemplated under clause (i) of Regulation 44 must be those shareholders

whose shares have been accepted upon public announcement of offer and

who have suffered loss owing to blockage of amount by not being able to

sell the shares held by them. The object of the said provision is to protect the

interest of such shareholders who had suffered a loss for delay in making the

public announcement and, thus, may have to be compensated. The very fact

that the bench-mark as regard the rate of interest has been fixed is also a

pointer to the fact that the interest is to be paid to such investors who had

suffered some loss.

While compensating a person, the court should see that he is not

unjustly enriched. Interest is directed to be paid on the default of the

acquirer occasioning loss suffered by an investor of his money. The

question of paying interest by way of compensation to persons who had not

suffered any loss, thus, would not arise.

Interest was, therefore, payable only to such persons who were

shareholders of target company as on the triggering date.

Deposits made by the Appellants in this Court \026 Effect :

It is not in dispute that the appellants pursuant to an order of this

Court dated 28th April, 2003 have deposited a sum of Rs.111.50 crores

which has been calculated on the following basis :

"

1.

Total paid-up capital of Colour-Chem Ltd.

(By number of shares)

11,650,000

2.

No. of shares to be acquired through open

offer

2,330,000

3.

Estimated number of shares available for offer

having eligibility for interest as per SAT Order

(as of 25.4.2003)

3,724,224

4.

Ratio of acceptance as per Regulation 21(6)

40%

5.

No. of shares likely to be acquired as per

Regulation 21(6) from the lot eligible for

Interest

1,489,690

6.

Balance to be acquired from the lot of shares

not eligible for interest

840,310

7.

Total price consideration @ Rs.318/- per share

740,940,000

8.

Total interest payable in respect of shares at Sl.

No.5 above \026 As per the Open Offer - @ 15%

p.a. for the period 22.3.1998 to 21.6.2003

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(1918 days) Rs.250.65/share)

Rs.373,390,799

TOTAL AMOUNT TO BE DEPOSITED AS

PER SUPREME COURT ORDER OF 28TH

APRIL, 2003

Rs.1,114,330,799

ROUNDED OFF TO :

Rs.111.50 crores

"

The estimated number of shares available as per order of the Tribunal

as on 25.4.2003 would be about 60% of the total shareholders, who would

be benefitted.

We have hereinbefore noticed that the offer price of Rs. 318/- per

equity share would be payable as on 24.2.1998 although the market price

thereof at the relevant time was only Rs.220/-.

We may notice the difference on monetary terms on the amount

payable to the investors on public announcement of offer, as would appear

from the following chart :

TOTAL PAID-UP CAPITAL

OF COLOUR-CHEM LTD. : 1,16,50,000 EQUITY SHARES

FACE VALUE : RUPEES 10/- EACH

OPEN OFFER PRICE : RUPEES 318/- PER SHARE

NO.OF SHARES TO BE

ACQUIRED IN THE OPEN

OFFER : 20% OF THE PAID-UP

CAPITAL \026 23.30 LAKHS SHARES

TOTAL CONSIDERATION : RUPEES 7409.40 LAKHS

Interest Rate per

Annum

Period 24.2.1998

to 20.6.2003

Interest per Share (Rs.)

A

B

C

15%

5916.35

253.92

14%

5521.93

237.00

13%

5127.51

220.07

12%

4733.08

203.14

11%

4338.66

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186.21

10%

3944.24

169.28

9%

3549.81

152.35

8%

3155.39

135.42

The difference of amount calculated on the basis of interest at the rate

of 10% and 15% would be about Rs.85 per equity share. If shareholders are

to be compensated owing to the act of delay on the part of the acquirer in

making the public announcement, in a case of this nature, an attempt should

be made to strike a delicate balance. The bank rate of interest payable by the

nationalized banks on a fixed deposit for the period from 1998 to 2003 was

around 9%. This fact has been accepted by the Tribunal. It has also been

accepted by the Tribunal that the decisions of this Court relating to rate of

interest payable by nationalized banks on fixed deposits and on the

compensation amount fixed under the Motor Vehicles Act would be 9% p.a.

The Tribunal has applied the said test but, as discussed hereinbefore,

committed two apparent errors, namely, it did not think fit to calculate the

mean of the rate of interest payable by the banks and; it thought that

quarterly rests is payable on the deposits made by an investor in a bank.

Quarterly rests are only payable in commercial transactions when a bank

grants loans.

When any criteria is fixed by a statute or by a policy, an attempt

should be made by the authority making the delegated legislation to follow

the policy formulation broadly and substantially and in conformity thereof.

[See Secretary, Ministry of Chemicals & Fertilizers, Government of India

vs. Cipla Ltd. and Others \026 (2003) 7 SCC 1 - Para 4.1]

The rate of interest fixed by the Board and the Tribunal, thus, in our

opinion, was not correct.

Effect of Board being an expert body:

The modern sociological condition as also the needs of the time have

necessitated growth of administrative law and administrative tribunal.

Executive functions of the State calls for exercise of discretion. The

executive also, thus, performs quasi judicial and quasi legislative functions

and, in this view of the matter, the administrative adjudication has become

an indispensable part of the modern state activity.

Administrative Tribunals may be called a specialized court of law,

although it does not fulfil the criteria of a law court as is ordinarily

understood inasmuch as it cannot like an ordinary court of law entertain suits

on various matters, including the matter relating to the vires of legislation.

However, such a Tribunal like ordinary law courts are bound by the rules of

evidence and procedure as laid down under the law and are required to

determine the lis brought before it strictly in accordance with the law.

O. Hood Phillips in his 'Constitutional and Administrative Law',

Eight Edition, at page 686 under the Chapter "Tribunals" has stated as

follows :-

"These are independent statutory tribunals whose

function is judicial. The tribunals are so varied in

composition, method of appointment, functions

and procedure, and in their relation to Ministers on

the one hand and the ordinary courts on the other,

that a satisfactory formal classification is

impossible."

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Reasons for creating special tribunals, according to the learned author,

are:

(i) Expert knowledge

(ii) Cheapness

(iii) Speed

(iv) Flexibility

(v) Informality

At para 30-021 at page 692 of the said treatise, it is stated :

"Appeals from tribunals

A party to proceedings before most statutory

tribunals, who is dissatisfied with the tribunal's

decision on a point of law, may either appeal to the

High Court or require the tribunal to state a case

for the opinion of the High Court. Appeal lies by

leave of the High Court or of the Court of Appeal

to the Court of Appeal, and thence to the House of

Lords (section 11)."

In 'Environmental Enforcement: The Need for a Specialist Court' by

Robert Carnwath published in (1992) Journal of Planning and Environment

Law at page 799, the requirements of having an environment court in place

of the ordinary courts were highlighted. The author had submitted a report

known as "Enforcing Planning Control" and on referring thereto, it was

noticed:

"Most of the report's substantive recommendations

for reform of the planning enforcement system

were adopted by the Government and incorporated

in the Planning and Compensation Act 1991.

There was no formal response to the suggestions

for a unified court system. This was hardly

surprising, since reform of the court system is not

within the remit of the Department of the

Environment.

Last year, however, the idea was given a new

impetus from an unexpected quarter. Sir Harry

Woolf gave his Garner lecture to U.K.E.L.A. on

the theme "Are the Judiciary Environmentally

Myopic?" He commented on the problems of

increasing specialization in environmental law;

and on the difficulty of the Courts, in their present

form, moving beyond their traditional role of

detached "Wednesbury" review. He went on to

discuss the benefits of:

"\005having a Tribunal with a general

responsibility for overseeing and enforcing

the safeguards provided for the protection of

the environment\005The tribunal could be

granted a wider discretion to determine its

procedure so that it was able to bring to bear

its specialist experience of environmental

issues in the most effective way."

A key feature of this Tribunal would be flexibility.

Possible innovations would be the involvement of

expertise from other professions (architects,

surveyors, etc.); "multidisciplined adjudicating

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panels"; broad discretion over rights of

appearance; power to instruct independent counsel

on behalf of the Tribunal or members of the

public; resources for direct investigation by the

Tribunal itself; and incorporation into the Tribunal

of the existing inspectorate to deal with "cases of a

lesser dimension."

The Board is indisputably an expert body. But when it exercises its

quasi judicial functions; its decisions are subject to appeal. The Appellate

Tribunal is also an expert Tribunal. Only such persons who have the

requisite qualifications are to be appointed as members thereof as would

appear from Sub-section 2 of Section 15M of the said Act which reads

thus:-

"15.M Qualification for appointment as Presiding Officer

or Member of the Securities Appellate Tribunal. \026

(2) A person shall not be qualified for appointment as

Member of a Securities Appellate Tribunal unless he is a

person of ability, integrity and standing who has shown

capacity in dealing with problems relating to securities

market and has qualification and experience of corporate

law, securities laws, finance, economics or accountancy:

Provided that a member of the Board or any person

holding a post at senior management level equivalent to

Executive Director in the Board shall not be appointed as

Presiding Officer or Member of a Securities Appellate

Tribunal during his service or tenure as such with the

Board or within two years from the date on which he

ceases to hold office as such in the Board."

The conflict of jurisdiction between an expert tribunal vis-`-vis the

courts in the context of the doctrine of separation of powers poses a problem

even in other countries. [For a detailed discussion see the Article 'Powers of

the Takeovers Panel and their Effect upon ASIC and the Court' by Barbara

Mescher \026 [ 2002 (76) Australian Law Journal, p.119].

In Australia, the takeover Panel has also a function of identifying and

notifying the third parties who are affected by a decision. Takeover panel

created under the Corporate Law Economic Reform Programme Act, 1999,

as amended by the Corporation Act, 2001, is also an expert panel.

Throughout the world, specialized adjudicators are performing

numerous roles. There are diverse specialized tribunals in America as also

in the Commonwealth countries. In certain States, statutes have been

enacted authorizing appeals to the Administrative Division which

jurisdiction used to be exercised by the High Court alone. The appeals range

from questions of law to selected questions of fact, to full rehearing of all

issues. [See Stephen Legomsky's 'Specialized Justice].

Had the intention of the Parliament been to limit the jurisdiction of the

Tribunal, it could say so explicitly as it has been done in terms of Section

15Z of the Act whereby the jurisdiction of this Court to hear the appeal is

limited to the question of law.

The jurisdiction of the appellate authority under the Act is not in any

way fettered by the statute and, thus, it exercises all the jurisdiction as that

of the Board. It can exercise its discretionary jurisdiction in the same manner

as the Board.

The SEBI Act confers a wide jurisdiction upon the Board. Its duties

and functions thereunder, run counter to the doctrine of separation of

powers. Integration of power by vesting legislative, executive and judicial

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powers in the same body, in future, may raise a several public law concerns

as the principle of control of one body over the other was the central theme

underlying the doctrine of separation of powers.

Our Constitution although does not incorporate the doctrine of

separation of powers in its full rigour but it does make horizontal division of

powers between the Legislature, Executive and Judiciary. [See Rai Sahib

Ram Jawaya Kapur and Others Vs. The State of Punjab, AIR 1955 SC 549].

The Board exercises its legislative power by making regulations,

executive power by administering the regulations framed by it and taking

action against any entity violating these regulations and judicial power by

adjudicating disputes in the implementation thereof. The only check upon

exercise of such wide ranging power is that it must comply with the

Constitution and the Act. In that view of the matter, where an expert

Tribunal has been constituted, the scrutiny at its end must be held to be of

wide import. The Tribunal, another expert body, must, thus, be allowed to

exercise its own jurisdiction conferred on it by the statute without any

limitation.

In Cellular Operators Association of India and Others vs. Union of

India and Others [(2003) 3 SCC 186], this Court observed :

"TDSAT was required to exercise its jurisdiction in terms

of Section 14A of the Act. TDSAT itself is an expert

body and its jurisdiction is wide having regard to sub-

section (7) of Section 14A thereof. Its jurisdiction

extends to examining the legality, propriety or

correctness of a direction/order or decision of the

authority in terms of sub-section (2) of Section 14 as also

the dispute made in an application under sub-section (1)

thereof. The approach of the learned TDSAT, being on

the premise that its jurisdiction is limited or akin to the

power of judicial review is, therefore, wholly

unsustainable. The extent of jurisdiction of a court or a

Tribunal depends upon the relevant statute. TDSAT is a

creature of a statute. Its jurisdiction is also conferred by

a statute. The purpose of creation of TDSAT has

expressly been stated by the Parliament in the Amending

Act of 2000. TDSAT, thus, failed to take into

consideration the amplitude of its jurisdiction and thus

misdirected itself in law".

The court noticed the celebrated book on "Judicial Review of

Administrative Law" by H.W.R. Wade and C.F. Forsyth and held :

"The rule as regard deference to expert bodies applies

only in respect of a reviewing court and not to an expert

tribunal. It may not be the function of a court exercising

power of judicial review to act as a super-model as has

been stated in Administrative Law by Bernard Schwartz,

3rd edition in para 10.1 at page 625; but the same would

not be a case where an expert tribunal has been

constituted only with a view to determine the correctness

of an order passed by another expert body. The remedy

under Section 14 of the Act is not a supervisory one.

TDSAT's jurisdiction is not akin to a court issuing a writ

of certiorari. The tribunal although is not a court, it has

all the trappings of a Court. Its functions are judicial.

In 'Jurisdiction and Illegality' by Amnon

Rubinstein a judicial power in contrast to the reviewing

power is stated thus:

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"A judicial power, on the other hand, denotes a

process in which ascertainable legal rules are

applied and which, therefore, is subject to an

objectively correct solution. But that, as will be

seen, does not mean that the repository of such a

power is under an enforceable duty to arrive at that

solution. The legal rules applied are capable of

various interpretations and the repository of power,

using his own reasoning faculties, may deviate

from that solution which the law regards as the

objectively correct one."

The regulatory bodies exercise wide jurisdiction.

They lay down the law. They may prosecute. They may

punish. Intrinsically, they act like an internal audit.

They may fix the price, they may fix the area of

operation and so on and so forth. While doing so, they

may, as in the present case, interfere with the existing

rights of the licensees".

In West Bengal Electricity Regulatory Commission vs. CESC Ltd.

[(2002) 8 SCC 715], a Bench of this Court, (in which one of us Santosh

Hegde, J. was a member), observed :

"\005From s.4 of the 1998 Act, we notice that the Central

Electricity Regulatory Commission which has a judicial

member as also a number of other members having

varied qualifications, is better equipped to appreciate the

technical and factual questions involved in the appeals

arising from the orders of the Commission. Without

meaning any disrespect to the judges of the High Court,

we think neither the High Court nor the Supreme Court

would in reality be appropriate appellate forums in

dealing with this type of factual and technical matters.

Therefore, we recommend that the appellate power

against an order of the state commission under the 1998

Act should be conferred either on the Central Electricity

Regulatory Commission or on a similar body. We notice

that under the Telecom Regulatory Authority of India

Act 1997 in chapter IV, a similar provision is made for

an appeal to a special appellate tribunal and thereafter a

further appeal to the Supreme Court on questions of law

only. We think a similar appellate provisions may be

considered to make the relief of appeal more effective."

The provisions of the 1992 Act and the Regulations framed thereunder

squarely apply to the observations made by this Court in West Bengal

Electricity Regulation Commission (supra).

We may furthermore notice that in Part XI of the Electricity Act,

2003, an expert appellate tribunal for electricity in the light of the

observations made by this Court has been constituted.

Dividend: Effect of

In view of our findings aforementioned, we are of the opinion that

while calculating the amount of interest, the amount of dividend paid to the

shareholders should be excluded. The shareholders who by reason of

default on the part of acquirer have been deprived of interest payable on the

difference of the offer price and market price would be entitled to interest as

direction to pay interest being not penal in nature, they cannot make double

gains. The Tribunal, in our opinion, has committed an error in holding that

the dividend being a participatory benefit available to a shareholder and

being distinct from interest, the same should not be taken into consideration.

The regulation fixes a benchmark as regard rate of interest. If any amount

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has been received by the shareholders by keeping the shares till a public

offer was made, the amounts so received by him by way of dividend should

be set off. We would reiterate that the shareholders did not have any right

to get interest and in effect and substance they were only to be compensated

for the loss of interest and nothing more. On the same analogy, if they had

received some gains by holding the shares fairly for a long period of five

years, the amount of dividend cannot be permitted to be retained by them.

The amount of dividend should, thus, be adjusted towards the interest

payable to them.

Conclusion:

We, therefore, direct, having regard to the peculiar facts and

circumstances of the case, that the interest of justice would be sub-served, if

the rate of interest is directed to be paid at 10% per annum from March 1998

till 2003.

The interest at the rate of 10% per annum is directed in stead and

place of normal 9% having regard to the fact that the Appellants themselves

in their Memorandum of Appeal filed before the Tribunal had contended that

the Board should have granted interest at the rate of 10% per annum instead

of 15%.

If any dividend was paid during the said period, the same shall be

adjusted with the amount of interest.

The appellants had deposited a total amount of 111.50 crores which

sums have been invested. The interest accruing thereupon shall enure to the

benefit of those shareholders who were entitled to the payment of interest for

the period during which the said amount remained invested in terms of the

order of this Court..

We uphold that part of the decision of the Tribunal whereby it was

held that those persons who were the shareholders till 24.2.1998 and

continued to be shareholders on the closure day of public offer alone would

be entitled to interest.

The case of the Administrator of the Specified Undertaking of the

Unit Trust of India, however, stands on a different footing. The facts of the

matter, as noticed hereinbefore, clearly go to show that in effect and

substance, the Appellants are the successors of the U.T.I. They being the

statutory beneficiary, are entitled to interest irrespective of the fact that it

came into being after 1998.

For the reasons aforementioned, Civil Appeal Nos.3183 of 2003, filed

by the Acquirer and D3952 of 2004 filed by the Administrator of the

Specified Undertaking of the Unit Trust of India, are allowed; whereas Civil

Appeal No.3701 of 2003 filed by SEBI and Civil Appeal No. 3872 of 2003

filed by Umeshkumar G. Mehta are dismissed. No costs.