Page 1 REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 6041 OF 2013

Securities and Exchange Board of India …

Appellant

VERSUS

M/s. Akshya Infrastructure Pvt. Ltd.

..Respondent

J U D G M E N T

SURINDER SINGH NIJJAR, J.

1.This appeal under Section 15Z of the Securities and

Exchange Board of India Act, 1992 (the ‘SEBI Act’) is directed

against the judgment and final order of the Securities

Appellate Tribunal, Mumbai (SAT) dated 19

th

June, 2013

rendered in Appeal No.3 of 2013, by which the appeal filed

by M/s. Akshya Infrastructure Private Limited – the

respondent herein against the directions issued by SEBI

on 30

th

November, 2012 has been allowed.

2.The fundamental issue which arises in this appeal is

whether an open offer voluntarily made through a Public

Announcement for purchase of shares of the target company

1

Page 2 can be permitted to be withdrawn at a time when the

voluntary open offer has become uneconomical to be

performed.

3.In this case, the respondent herein, M/s Akshya

Infrastructure Pvt. Ltd., is a part of the Promoter Group of

MARG Limited (‘the Target Company’). For the years 2006-

07, 2007-08 and 2010-11, the gross acquisition by the

Promoter Group of shares in the Target Company was as

under :

“Financial Year Percentage Date triggered on

2006-07 14.34% 30.03.2007

2007-08 5.64% 12.10.2007

2010-11 7.11% 19.02.2011”

As a consequence of the foregoing acquisitions, the

acquirers breached the 5% creeping acquisition limit and

were required to comply with the provisions of Regulation 11

of the SEBI (Substantial Acquisition of Shares and Takeovers)

Regulations, 1997 (hereinafter referred to as the “Takeover

Regulations”).

4.On 20

th

October, 2011, the respondent made a

voluntary open offer through a Public Announcement in

major National Newspapers, under Regulation 11 of the

Takeover Regulations wherein the public shareholders of the

Target Company were given an opportunity to exit at an

2

Page 3 offer price of Rs.91/- per equity share. This price represents

a premium of 10.3% over the average market closing price

for the two weeks preceding the Public Announcement. The

tendering period was scheduled to commence on 1

st

December, 2011 and conclude on 20

th

December, 2011. The

consideration for the tendered shares was to be paid on or

before 4

th

January, 2012. As on the date of the open offer,

the list of Promoters/Promoter Group Entities was as under:-

Sl. No.Name

1. Mr. G.RK. Reddy

2. Mr. G. Raghava Reddy

3. Ms. V.P. Rajini Reddy

4. Mr. G. Madhusudan Reddy

5. GRK Reddy & Cons (HUF)

6. M/s. Global Infoserve Ltd.

7. M/s. Marg Capital Markets Limited

8. M/s. Exemplarr Worldwide Limited

9. M/s. Marg Projects and Infrastructure Limited

(formerly Marg Holdings and Financial

Services Limited)

10. M/s. Akshya Infrastructure Private Limited

5.However, due to certain events, which have been

highlighted by both the parties, the respondent by letter

dated 29

th

March, 2012 through M/s. Motilal Oswal

Investment Advisors (P) Ltd., the Managers to the Issue

3

Page 4 (hereinafter referred to as the “Merchant Banker”),

addressed to SEBI, sought to contend that the open offer in

question had become outdated, thereby outliving its

necessity and, therefore, the same ought to be permitted to

be withdrawn. It was also contended that the amount of

Rs.17.46 crores deposited by the respondent in an escrow

account towards the open offer ought to be allowed to be

withdrawn. The letter emphasizes that the public

announcement was in nature of a voluntary open offer under

Regulation 11 of the Takeover Regulations for consolidation

of shareholding of the Promoter Group in the Target

Company. The offer price of Rs.91/- per equity share of the

Target Company was aimed at presenting a commercially

reasonable opportunity to the public shareholders to exit and

at the same time it was meant to consolidate the

shareholding of the promoter in the Target Company. It was

further stated that due to the 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. It was claimed that the transaction

envisaged by the respondent is no longer justifiable on any

ground, including the grounds of economic rationale and

commercial reasonableness. The respondent sought the

withdrawal of open offer made under the public

announcement in terms of Regulation 27 of the Takeover

Regulations. The exact prayer made by the respondent was

4

Page 5 as follows:-

“Consequently, we hereby seek withdrawal of

the open offer made under the public

announcement in terms of Regulation 27 of

the Takeover Regulations (the benefit of

which continue to accrue to us in terms of

Regulation 35(2) of the SEBI (Substantial

Acquisition of Shares and Takeovers)

Regulations, 2011 “New Takeover

Regulations”). Regulation 23(1)(d) of the

New Takeover Regulations equally empowers

withdrawal of an open offer.”

6.The appellant by letter dated 30

th

November, 2012

conveyed its comments in terms of the proviso to Regulation

16(4) of the Takeover Regulations on the draft letter of offer.

Certain information was sought in the aforesaid letter.

No reference was made in this letter with regard to the

request made by the respondent for permission to withdraw

the open offer. Rather it was stated as under :

“Please note that failure to carry out the

suggested changes in the letter of offer as

well as violation of provisions of the

Regulations will attract appropriate action.

Please also ensure and confirm that apart

from above, no other changes are carried out

in the letter of offer submitted to us.”

The aforesaid comments of SEBI were challenged by

the respondent before SAT in Appeal No.3 of 2013.

7.The respondent claimed that the impugned directions,

5

Page 6 ostensibly in the form of comments and observations on the

draft letter of offer, reject the plea of the petitioner that the

delay caused by SEBI in clearance of the draft letter of offer,

now renders the open offer unviable and academic. Further,

the impugned directions purport to bind the appellant and

thereby constitute an order by which the respondent was

aggrieved; and necessitated the appeal before the SAT.

8.In the appeal before SAT, the respondent claimed that

the directions contained in the impugned letter of SEBI dated

30

th

November, 2012, incorrectly allege that prima facie

requirement to make an open offer was triggered by the

promoters and the promoter group entities of the Target

Company (Promoter Group) under Regulation 11(1) of the

Takeover Regulations on three past occasions, viz. March 30,

2007, October 12, 2007 and February 19, 2011 (Alleged

Triggers). It was further claimed that the directions to revise

the offer price, on account of the requirement to make open

offers pursuant to the alleged triggers was illegal and

without jurisdiction. It was also claimed that the directions

contained in the impugned letter has caused severe civil

consequences to the respondent. It was also claimed that

the submissions on the issues presented by the respondent

before the appellant have neither been considered nor

appreciated.

6

Page 7 9.The appeal was contested by the appellant by filing a

detailed affidavit on 12

th

April, 2013. As noticed above, the

aforesaid appeal has been allowed by SAT in terms of prayer

clause (a), (b) and (c) of Para 7 of the appeal filed by the

respondent, which are as under:-

“(a)That this Hon’ble Tribunal be pleased to set

aside the Impugned Direction;

(b)That this Hon’ble Tribunal be pleased to order

and direct the respondent to allow the

appellant to withdraw the open offer without

any adverse orders or directions against the

appellants or the Promoter Group;

(c)That this Hon’ble Tribunal be pleased to order

and direct the respondent to allow the

appellant to withdraw the amount of Rs.17.46

crores deposited in escrow in lieu of the Open

Offer.”

10.It was, however, made clear that SAT has not made any

observation on the merits of the issue regarding the three

alleged triggers and the contentions of the parties in this

regard were kept open. Aggrieved by the aforesaid

impugned judgment, SEBI has filed the present Civil Appeal.

11.We have heard the learned counsel for the parties at

length.

7

Page 8 12.Mr. C.U. Singh, learned senior counsel appearing for the

appellant, has submitted that the issues raised by the

appellant herein are squarely covered against the

respondent by an earlier judgment of this Court in Nirma

Industries Ltd. & Anr. Vs. Securities and Exchange

Board of India

1

.

13.At this stage, Mr. R.F. Nariman, learned senior counsel

appearing for the respondent, has raised certain preliminary

objections with regard to the maintainability of the appeal.

He submits that the directions issued by the SEBI are based

on a misconception of the law applicable to the peculiar facts

of this case. He submits that firstly: this is a case where the

respondent had made voluntary open offer. It was not a

case of an open offer made because of a triggered

mechanism under the Takeover Regulations; secondly: since

the open offer was a pure and simple voluntary offer, no

prejudice has been caused to any shareholder; thirdly: the

present case does not fall within the ambit of Regulation 27

of Takeover Regulations. According to Mr. Nariman,

Regulation 27 ought to be read in a manner that it would

only govern mandatory open offers and not voluntary open

offers; fourthly: SEBI has without any justification

intermingled acquisition of shares by the respondent on the

three earlier occasions in 2006-07, 2008-09 and 2009-10;

1

(2013) 8 SCC 20

8

Page 9 fifthly: SEBI unjustifiably and arbitrarily took 13 months to

offer comment(s) on the draft letter of offer. Even then the

clarification sought by the appellant pertained to the past

alleged triggers which had no connection with the voluntary

open offer. It is submitted that even if the case of the

respondent falls within the ambit of Regulation 27, the

withdrawal is permissible in such circumstances which in the

opinion of SEBI (the Board) merit withdrawal; sixthly: the

judgment in Nirma Industries (supra) is distinguishable;

lastly: the judgment in Nirma Industries (supra) is

incorrect and needs reconsideration.

14.Mr. C.U. Singh, learned senior counsel appearing for the

appellant, has submitted that the correspondence

exchanged between the parties would show that the delay in

consideration of the letter of offer was caused by the

respondent by not giving the necessary information. He

relies on the voluminous correspondence between the

parties in support of his submission which, if necessary, shall

be considered later. His second submission is that the

request for withdrawal of open offer is to be considered

strictly under the provision of Regulation 27 of the Takeover

Regulations.

15.The respondent had made a Public Announcement

on 20

th

October, 2011 which clearly informed the public

9

Page 10 shareholders of the Target Company that they were being

given an opportunity to exit at an offer price of Rs.91/- per

equity share, which represented a premium of 10.3% over

the average market closing price for the two weeks

preceding the Public Announcement. This Public

Announcement and the Public Offer was sought to be

withdrawn on 29

th

March, 2012. He points out that in the

aforesaid letter; the request for withdrawal is specifically

made under Regulation 27 of the Takeover Regulations.

Therefore, Mr. Nariman cannot be permitted to, now, submit

that Regulation 27 is not applicable to the open offer in the

present case.

16.Mr. C.U. Singh then submits that the respondents have

consciously proceeded with an open offer and they have

rightly not been permitted to withdraw the same by the

appellant. The next submission of Mr. C.U. Singh is that

Regulation 27 deals with only withdrawal of ‘Public Offer’

and not withdrawal of ‘Public Announcement’. In any event,

according to learned senior counsel, submission with regard

to withdrawal of Public Announcement has been made, only,

at the time of arguments before this Court. It was neither

pleaded nor raised before the SEBI/SAT, nor even in the

counter affidavit before this Court. He next submitted that

under the provisions of Regulation 27, public offer is a rule

and withdrawal is an exception. Relying on the interpretation

10

Page 11 of Regulation 27 in Nirma Industries Ltd .(supra), he

submits that an offer can be permitted to be withdrawn only

if it becomes virtually impermissible to carry out. Permitting

public offers once made to be withdrawn on the ground that

it has become uneconomical would compromise the integrity

of the Securities Market. This would be contrary to the

scheme of the Takeover Code. Mr. C.U. Singh

then submits that there is no distinction under Regulation 27

between the voluntary open offer and mandatory open offer

which is the result of a triggered acquisition. Relying on

Regulations 11 to 14 of the Takeover Regulations,

he submits that all the different types of open offers are set

out therein. Each one of the open offers has the same effect

on shareholders and the market. Therefore, the provisions

contained in Regulation 27 have to be strictly adhered to in

considering the request for withdrawal of the open offer. It is

further submitted that the appellant had fixed the offer price

under the relevant regulations and in accordance with the

law laid down by this Court in Clariant International Ltd.

& Anr. Vs. Securities & Exchange Board of India

2

.

17.According to Mr. C.U. Singh, in normal circumstances,

withdrawal can only be made under Regulation 27(1)(b), (c)

and (d). He submits that in the letter dated 29

th

March, 2012,

the respondent claims that the offer has become “outdated

2

(2004) 8 SCC 524

11

Page 12 due to the sheer efflux of time”. The second reason given is

the delay in clearance of open offer from SEBI. The letter

also indicates that the respondent does not agree with the

views of the SEBI on the fact situation. Another reason given

is that “even if the SEBI were to approve the draft letter of

offer today, the open offer exercise would be entirely

academic and meaningless.” Another reason given is that

“the transaction then envisaged by us is no longer justifiable

on any ground including grounds of economic rationale and

commercial reasonableness.” All these factors, according to

Mr. C.U. Singh, will not be covered by any of the clauses in

Regulation 27(1)(b)(c)(d). He then submitted that even if

there is a delay by SEBI, the ordinary investor in shares of

the Target Company should not be made to suffer.

According to Mr. C.U. Singh, the controversy raised in the

appeal is squarely covered against the respondent by

judgment of this Court in Nirma Industries Ltd. (supra).

18.Mr. Nariman has rebutted the aforesaid submissions of

Mr. C.U. Singh. He submits that the single most important

distinction between Nirma and this case is that it pertains to

a voluntary public offer. This Court had no occasion to deal

with a voluntary public offer in Nirma Industries Ltd.

(supra). In reply to the other submissions made by Mr. C.U.

Singh, Mr. Nariman has also relied on some

correspondence. He has also relied upon a table to

12

Page 13 substantiate the submission that the law laid down in Nirma

Industries would not be applicable in the facts and

circumstances of this case. Dealing with the issue of delay,

it is submitted by Mr. Nariman that there was an unjustifiable

and inexplicable delay by SEBI in issuing its comments on

the draft letter of offer. In support of this submission, he has

relied on some correspondence.

19.He relies on letter dated October 20, 2011, whereby the

respondent made a voluntary open offer by Public

Announcement under Regulation 11 of the Takeover

Regulations. He points out that Clause 11.4 of the Public

Announcement clearly states that voluntary open offer can

be withdrawn by the respondent at any time. He then points

out that on 25

th

October, 2011, SEBI called upon the

respondent to provide information on the changes in

shareholding and capital build up of the Target Company,

along with compliance of the SEBI Regulations. He submits

that although the information sought pertains to the earlier

acquisition it was duly provided on November 4, 2011 and

November 8, 2011. Mr. Nariman submits that under

Regulation 18(1) of the Takeover Regulations, the draft letter

of offer is required to be filed with SEBI well within 14 days

from the date of the Public Announcement. Once the letter of

offer is filed, SEBI was required to dispatch the same to the

shareholders immediately after 21 days. During 21 days,

13

Page 14 SEBI is permitted to stipulate the changes required to be

made in the letter of offer which the Merchant Banker and

the Acquirer shall incorporate in the letter of offer, before it

is dispatched to the shareholders. In case, SEBI receives a

complaint or it initiates an enquiry or investigation in respect

of public offer, it can call for a revised letter of offer. In this

case, he submits that the draft letter of offer was given on

October 28, 2011 well within 14 days period stipulated under

Regulation 18(1). But SEBI did not issue its comments on the

draft letter of offer within 21 days, as required. Not only

there was a non-compliance of Regulation 18(1)

but there was no occasion to invoke proviso to Regulation

18(2). SEBI did not inform or advise the respondent to revise

the draft letter of offer on account of any inadequacy in the

disclosure made by the respondent in the draft letter of offer

in respect of the voluntary offer. All the queries were related

to the past alleged triggers. These alleged triggers were

wholly unrelated to the voluntary open offer for which the

draft letter of offer was filed with the appellant. He then

pointed out that by letter dated 17

th

November, 2011, the

appellant again sought the same clarification on the alleged

triggers, as stated in its letter dated November 11, 2011.

He submitted that the Merchant Banker and the respondent

provided all explanation regarding these acquisitions on

November 28, 2011. The letter dated November 24, 2011 of

the respondent was forwarded to the appellant by the

14

Page 15 Merchant Banker on November 28, 2011. This letter gave

date wise explanation on all the issues raised as to why no

open offer was made pertaining to the alleged triggers, as

there was no violation of Regulation 11(1) and 11(2) of the

Takeover Regulations. This explanation was reiterated on

December 14, 2011 by the respondent/Promoters but there

was no response from the appellant to any of the aforesaid

letters. This led the respondent to a reasonable belief that

the explanation had been accepted. Subsequently, there was

a telephonic request by the appellant to provide the same

information on the alleged triggers in various formats. The

respondent duly re-arranged the same information

in the desired format and provided the same to the appellant

on January 13, 2012, January 16, 2012 and February 3, 2012.

Inspite of all this, still there were no comments from the

SEBI. Mr. Nariman emphasized that the unjustifiable,

inexplicable and inordinate, delay on the part of the

appellant in issuing comments on the draft letter of offer

created a situation wherein it was impossible for the

respondent to implement the voluntary open offer. By that

time, the underlying decision to consolidate shareholding

had become infructuous by sheer efflux of time. It was under

these circumstances that the respondent intimated its

decision to withdraw its voluntary open offer and sought

withdrawal of the same in terms of the Regulation 27 of the

Takeover Regulations.

15

Page 16 20.It was pointed out by Mr. Nariman that the respondent

specifically and expressly sought opportunity of a personal

hearing on the aforesaid request for withdrawal, the

appellant did not revert on the request. The respondent once

again furnished the same information on the alleged triggers

in different formats as required by the appellant through

communications dated April 12, 2012; April 20, 2012;

May 10, 2012; May 21, 2012; June 6, 2012 and July 5, 2012.

After a period of more than 13 months, from the date of

filing of the draft letter of offer and after more than 8 months

from the date of request for withdrawal, the appellant issued

the impugned letter dated November 30, 2012. Mr. Nariman

points out that the directions issued in the impugned letter

are wholly unjustified. He points out to the following two

directions :-

(a) Go ahead with the voluntary open offer on

account of some alleged triggers (for creeping

acquisitions under Regulation 11 of the Takeover

Code, 1997) in the past i.e. 2006-07; 2007-08 and

2010-11.

(b) make an open offer with upward revision in

price per share. The share prices offered by the

respondent in 2009 were RS.91.00 per equity

share and as on date the prices is RS.315.90 per

equity share.

16

Page 17 21.Mr. Nariman submitted that SAT without going into the

merits and demerits of the alleged earlier acquisitions, has

left it open for SEBI to take appropriate action in accordance

with law with regard to the aforesaid three acquisitions.

Therefore, clearly the aforesaid three acquisitions have no

connection whatsoever with the voluntary offer under

consideration in these proceedings.

22.The next submission of Mr. Nariman is the foundation of

all his other submissions. According to Mr. Nariman, there is

a fundamental difference between a mandatory public offer

and a voluntary open offer. It cannot be placed on the same

pedestal. According to learned senior counsel, in a

mandatory public offer there exists an underlying

transaction which triggers the Takeover Code under which

the shareholders obtain a right to exit from the company.

However, in a voluntary open offer, no such right accrues to

the shareholders to exit the company, since the offer is not

the result of a triggered acquisition. In the present case, the

action of SEBI, according to Mr. Nariman, is contrary to

Regulation 18. The letter of offer was not dispatched to the

shareholders as per Regulation 18(1). Regulation 15(4)

deems that the offer is made on the date on which the Public

Announcement has appeared in any newspaper. But

according to Mr. Nariman, this deeming fiction is for the

purpose of price fixation for the offer. It has nothing to do

17

Page 18 with Regulation 18 which is to dispatch the actual offer to

the shareholders. Therefore, according to Mr. Nariman,

reliance placed by Mr. C.U. Singh on the expression “offer

once made” in Regulation 27 is misconceived. This

expression has to be understood in terms of Regulation 18.

Since Regulation 18 had not been complied with and there

was no dispatch of the letter of offer to the shareholders,

there was no question of any prejudice being caused to the

interest of the shareholders. Mr. Nariman then submits that

because of the inaction on the part of SEBI, the respondent

would be squarely covered under Regulation 27(1)(b). The

approval of the letter of offer by the appellant is statutory in

nature. Since it had not been granted within the stipulated

period of time, the respondent was entitled to assume that it

had been refused. According to Mr. Nariman, it has been

erroneously submitted by Mr. C.U. Singh that the claim of

the respondent is not covered under Regulation 27(1)(b). Mr.

Nariman then submits that the judgment in Nirma

Industries is not applicable in the facts and circumstances

of this case. Finally, he has submitted that the judgment in

Nirma Industries (supra) requires reconsideration. In

support of this submission, he submits that Regulation 27

has to be interpreted by keeping in mind the earlier

Regulation 27(1)(a). In Nirma Industries, this Court has

held that Regulation 27 (b), (c) and (d) are all in the

nature of impossibility. Mr. Nariman made a

18

Page 19 mention about Regulation 27(1)(a) which was omitted by the

SEBI (Substantial Acquisition of Shares and Takeovers)

(Second Amendment) Regulations, 2002 with effect from

September 9, 2002. Prior to deletion, it read as under :

“-(a) the withdrawal is consequent upon any

competitive bid,”

Based on this, he submits that economic viability of

public offer was the genus of Regulation 27. The facts of this

case would clearly place the request of the respondent for

withdrawal of the public offer in the realm of impossibility.

Mr. Nariman has submitted that for the interpretation of

Regulation 27, the ejusdem generis principle would not apply

as there is no common genus between Clauses 27(1)(b)(c)

and (d).

23.Mr. C.U. Singh in rejoinder has submitted that in view of

the law laid down in Nirma Industries, the public offer

made by the respondent cannot be permitted to be

withdrawn. Earlier incidence of the alleged triggers can be

relied upon. According to him, the price has to be fixed on

the basis of the public announcement/offer. He submits that

Regulation 18(1) talks of 14 days of the Public

Announcement. Furthermore, public offer cannot be said to

be made only on dispatch of the letter of offer to the

individual shareholders. The impact on the securities market

would follow the public announcement . He reiterates that

19

Page 20 even the withdrawal letter seeks permission to withdraw the

Public Offer under Regulation 27. Finally, he submits that the

interpretation of Regulation 27 rendered in Nirma

Industries Ltd. (supra) is correct. It fully applies to the

facts of the present case. It is neither distinguishable nor

does it require reconsideration.

24.We have considered the submission made by the

learned counsel for the parties.

25.Factually, it cannot be denied that in the years 2006-

07, 2007-08 and 2010-11, the respondent had acquired

shares in excess of 5% which breached the 5% creeping

acquisition limit. In our opinion, the respondent was required

to comply with Regulation 11 and make a Public

Announcement to acquire shares in accordance with law.

The respondent admittedly not having complied with

Regulation 11, in our opinion, the appellant was perfectly

justified in taking the non-compliance into consideration

whilst considering the feasibility of the public offer made on

20

th

October, 2011.

26.With regard to delay, we do not find much substance in

the submission of Mr. C.U. Singh. Mr. Singh has sought to

explain the delay on the ground that information sought by

the appellant was not given by the respondent. In our

opinion, this was no ground for the appellant to delay the

20

Page 21 issuance of comments on the letter of offer, especially not

for a period of 13 months. In the event the information was

not forthcoming, the appellant had the power to refuse the

approval of the public offer. It is true that under Regulation

18(2), SEBI was required to dispatch the necessary letters to

the shareholders within a reasonable period. It is a matter of

record that the comments were not offered for 13 months.

Such kind of delay is wholly inexcusable and needs to be

avoided. It can lead to avoidable controversy with regard to

whether such belated action is bona fide exercise of

statutory power by SEBI. By adopting such a lackadaisical, if

not callous attitude, the very object for which the regulations

have been framed is diluted, if not frustrated. It must be

remembered that SEBI is the watchdog of the Securities

Market. It is the guardian of the interest of the shareholders.

It is the protective shield against unscrupulous practices in

the Securities Market. Therefore, SEBI like any other body,

which is established as a watchdog, ought not to act in a

lackadaisical manner in the performance of its duties. The

time frame stipulated by the Act and the Takeover

Regulations for performing certain functions is required to be

maintained to establish the transparency in the functioning

of SEBI.

27.Having said this, we are afraid such delay is of no

assistance to the respondent. It will not result in nullifying

21

Page 22 the action taken by SEBI, even though belated. Ultimately,

SEBI is charged with the duty of ensuring that every public

offer made is bona fide for the benefit of the shareholders as

well as acquirers. In the present case, SEBI has found that

permitting the respondent to withdraw the public offer would

be detrimental to the overall interest of the shareholders.

The only reason put forward by the respondent for

withdrawal of the offer is that it is no longer economically

viable to continue with the offer. Mr. Nariman has referred to

a tabular statement and data to show that there is no

substantial variation in the share prices that ensued making

of the public offer. Having seen the table, we find substance

in the submission of Mr. Nariman that there is

hardly any variation in the shares of the Target Company

from 20

th

October, 2011 till 30

th

November, 2011.

The variation seems to have been between Rs. 78.10 (on

24.11.2011) and Rs. 87.60 (on 20.10.2011). Such a

variation cannot be said to be the result of the public offer.

But this will not detract from the well known phenomena

that Public Announcement of the public offering affects the

securities market and the shares of the Target Company.

The impact is immediate.

28.We are unable to agree with the submission of

Mr. Nariman that Regulation 27 would not be applicable to a

voluntary public offer. A perusal of Regulation 27(1) makes it

22

Page 23 patently clear that Regulation 27(1) reads “no public offer,

once made, shall not be withdrawn except under the

following circumstances.” Accepting Mr. Nariman’s

submission would be to reconstruct the aforesaid provision.

This Court, or any other court, whilst construing the statutory

provision cannot reconstruct the same. The plain reading of

the aforesaid regulation makes it clear that no public offer

whether it is voluntary or triggered by Regulation 11 can be

withdrawn, unless it satisfies the circumstances set out in

Regulation 27(1)(b), (c) and (d). There can be no distinction

between a triggered public offer and a voluntary public offer.

Both have to be considered on an equal footing. We find

substance in the submission made by Mr. C.U. Singh that

Regulation 18(2) has no relevance to the case projected by

the respondents having singularly failed to give the

necessary information to SEBI with regard to the earlier

three acquisitions.

29.We also do not agree with Mr. Nariman that

Regulation 27 has to be read in the context of the Regulation

as it existed when it was first enacted. As noticed earlier,

Regulation 27(1)(a) before its deletion on September 9, 2002

permitted the public offer to be withdrawn, consequent upon

any competitive bid. We see no reason to differ from the

view taken in Nirma Industries Ltd. (supra) wherein we

have observed as follows:

23

Page 24 “62. A bare perusal of the aforesaid

Regulations shows that Regulation 27(1)

states the general rule in negative terms. It

provides that no public offer, once made,

shall be withdrawn. Since clause (a) has been

omitted, we are required to interpret only the

scope and ambit of clauses (b), (c) and (d).

The three sub-clauses are exceptions to the

general rule and, therefore, have to be

construed very strictly. The exceptions

cannot be construed in such a manner that

would destroy the general rule that no public

offer shall be permitted to be withdrawn after

the public announcement has been made.

Clause (b) would permit a public offer to be

withdrawn in case of legal impossibility when

the statutory approval required has been

refused. Clause (c) again provides for

impossibility when the sole acquirer, being a

natural person, has died. Clause (b) deals

with a legal impossibility whereas clause (c)

deals with a natural disaster. Clearly clauses

(b) and (c) are within the same genus of

impossibility. Clause (d) also being an

exception to the general rule would have to

be naturally construed in terms of clauses (b)

and (c). Mr Divan has placed a great deal of

emphasis on the expression “such

circumstances” and “in the opinion” to

indicate that the Board would have a wide

discretion to permit withdrawal of an offer

even though it is not impossible to perform.

We are unable to accept such an

interpretation.”

30.The submission with regard to the non-applicability of

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Page 25 ejusdem generis for interpretation of the Takeover

Regulations has been considered and rejected in Nirma

Industries Ltd. (supra) (Paragraphs 63 to 71).

31.We are also not impressed by the submission of

Mr. Nariman that it has now become economically

impossible to give effect to the public offer. This very

submission has been rejected in Nirma Industries Ltd .

(supra). We reiterate our opinion in Nirma Industries Ltd.

(supra) that under Clause 27(1)(b)(c) and (d), a Public

Offer, once made, can only be permitted to be withdrawn in

circumstances which make it virtually impossible to perform

the Public Offer. In fact, the very purpose for deleting

Regulation 27(1)(a) was to remove any misapprehension

that an offer once made can be withdrawn if it becomes

economically not viable. We are of the considered opinion

that the distinction sought to be made by Mr. Nariman

between a voluntary public offer and a triggered public offer

is wholly misconceived. Accepting such a submission would

defeat the very purpose for which the Takeover Code has

been enacted.

32.We also do not find any merit in the submission of

Mr. Nariman that the delay of 13 months by SEBI in issuing

the impugned directions would permit the respondent to

withdraw the Public Offer under Regulation 27(1)(b). The

consideration by SEBI is as to whether a Public Offer is in

25

Page 26 conformity with the provisions of the SEBI Act and the

Takeover Regulations. Delay in performance of its duties by

SEBI can not be equated to refusal of the statutory approval

requires from other independent bodies, such as under the

RBI, Taxation Laws and other regulatory statutes including

Foreign Exchange Regulations. Delay by SEBI in taking a

final decision in making its comments on the letter of offer

would not fall under Regulation 27(1)(b).

33.This now brings us to the submission of Mr. Nariman

that there was a breach of Rules of Natural Justice. It is

matter of record that the respondent had asked for an

opportunity of hearing but none was granted. But the

question that arises is as to whether this is sufficient to

nullify the decision of SEBI. In our opinion, the respondent

has failed to place on the record either before SAT 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. Such breach of Rules of Natural

Justice must also entail avoidable prejudice to the

respondent. This reasoning of ours is supported by a number

of cases. We may, however, refer to the law laid down in

N atwar Singh Vs. Director of Enforcement & Anr. ,

3

wherein it was held that “there must also have been caused

some real prejudice to the complainant; there is no such

3

(2010) 13 SCC 255

26

Page 27 thing as a merely technical infringement of natural justice.”

34.All the information sought by SEBI related to the three

earlier acquisitions when the creeping limit for acquisition

has been breached for triggering the mandatory Takeover

Regulations. In appeal, SAT has left the question with regard

to the earlier three acquisitions open and to be decided in

accordance with law. Therefore, clearly no prejudice has

been caused to the respondent.

35.Finally, we are unable to accept the submission of

Mr. Nariman that the ratio of law as declared in Nirma

Industries Ltd. (supra) would not be applicable to the facts

and circumstances of this case. As pointed out earlier, we do

not accept the distinction sought to be made by Mr. Nariman

with regard to voluntary open offer and mandatory open

offer which is the result of a triggered acquisition. 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). Further,

the deletion of Regulation 27(1)(a) does not, in any manner,

advance the case of the respondent. It rather reinforces the

conclusion that an open offer once made can only be

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Page 28 withdrawn in circumstances stipulated under Regulation

27(1)(b)(c) and (d). We also do not agree with Mr. Nariman

that voluntary open offer made by the respondent ought to

be permitted to be withdrawn under Regulation 27(1)(b) for

the reasons already stated. We have already come to the

conclusion that the delay in offering comments by the Board

on the letter containing voluntary open offer, though

undesirable, is not fatal to the decision ultimately taken by

the Board. We, therefore, reiterate our conclusion in Nirma

Industries (supra).

36.We also do not find substance in the submission of

Mr. Nariman that the judgment in Nirma Industries (supra)

needs reconsideration. In our opinion, the ejusdem generis

principle is fully applicable for the interpretation of

Regulation 27(1)(b)(c) and (d) as there is a common genus

of impossibility. This impossibility envisioned under the

aforesaid regulation would not include a contingency where

voluntary open offer once made can be permitted to be

withdrawn on the ground that it has now become

economically unviable. Accepting such a submission, would

give a field day to unscrupulous elements in the securities

market to make Public Announcement for acquiring shares in

the Target Company, knowing perfectly well that they can

pull out when the prices of the shares have been inflated,

28

Page 29 due to the public offer. Such speculative practices are

sought to be prevented by Regulation 27(1)(b)(c) and (d),

that is precisely the reason why Regulation 27(1)(a) was

deleted. Merely because there has not been any substantial

change in the price of shares in this particular case, would

not, in any manner, invalidate the conclusion reached in

Nirma Industries (supra).

37.Last but not least, we are not able to approve the

approach adopted by SAT in adopting the Issue of Capital

and Disclosure Requirements Regulations, 2009 (ICDR)

Regulation for interpreting the provisions contained in

Regulation 27 of the Takeover Regulations. The regulations

in Takeover Code have to be interpreted by correlating these

regulations to the provisions of the SEBI Act.

38.In view of the above, the appeal is allowed. The

impugned order passed by the SAT dated 19

th

June, 2013 in

Appeal No.3 of 2013 is set aside and the directions issued by

the appellant in the letter dated 30

th

November, 2012 are

restored.

……………………………… .J.

[Surinder Singh Nijjar]

29

Page 30 ………………………………..J.

[A.K.Sikri]

New Delhi;

April 25, 2014.

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