IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 174 OF 1998 Harinarayan G. Bajaj, ] of Mumbai Indian Inhabitant, ] residing at 24/25, Bharatiya Bhavan, ] 72, Marine Drive, Mumbai 400 020 ] ... Petitioner V/s. 1. Union of India, ] through Secretary, Ministry of Finance, ] Department of Economics Affairs, ] North Block, New Delhi ] 2. The Chairman, ] Securities & Exchange Board of India, ] having his office at Mittal Tower, ] 1st Floor, Nariman Point, ] Mumbai 400 021 ] 3. Sesa Goa Limited, ] a Company incorporated under ] the Companies Act, 1956 having its ] registered office at Sesa Ghore, ] 20-EDC Block, Patto, Panjim, ] Goa 403 001 ] 4.Finsider International Company ] a Company incorporated under ] the English Companies Act and ] having its registered office at ] Ghill House, 1, Little Street, London, ] United Kingdom, and having its ] liaison office at Mitsui & Company, ] 1 17th Floor, Mittal Court, B-Wing, ] Nariman Point, Mumbai 400 021 ] 5. Mitsui & Company ] a Company incorporated under ] the laws of Japan and having its ] registered office at 2-1, Ohtemamachi, ] 1-Chome, Chiyoda Ku Tokyo, 110-91, ] Japan, and also its liaison office at ] 17th Floor, Mittal Court, B-Wing, ] Nariman Point, Mumbai 400 021 ] 6. The Stock Exchange, Bombay ] having its office at Jeejibhoy Tower, ] 25th Floor, Dalal Street, Fort, ] Mumbai 400 023 ] ... Respondents Mr. F.E. D'Vitre, Senior Advocate, with Mr. Aspi Chinoy, Senior Advocate, Mr. Zal Andyarujina and Ms. Krishna Raja i/by M/s. Dhru & Co. for the Petitioner Mr. Y.R. Mishra with Mr. Y.S. Bhate for Respondent No. 1 Mr. R.A. Dada, Senior Advocate, with Mr. Kumar Desai i/by M/s. Maneksha & Sethna for Respondent No. 2 Mr. Phiroze Palkhivala and Mr. Ravi Gandhi i/by M/s. Kanga & Co. for Respondent No. 3 Mr. I.M. Chagla, Senior Advocate, with Mr. N.H. Seervai, Senior Advocate, Mr. Shyam Mehta, Ms. Ruchi Narula, Mr. M.C. Arvind, Ms. Dimple Shah, Mr. Kersi Dastur and Mr. Firdaus Parsi i/by M/s. Mulla & Mulla and Craigie Blunt & Caroe for Respondent No. 5 Mr. P.N. Modi with Mr. Sagar Divekar i/by M/s. Wadia Gandhy & Co. for Respondent No. 6. 2 WITH NOTICE OF MOTION NO. 256 OF 2002 CORAM: J.N. PATEL AND A.A. SAYED, J Reserved on: July 3, 2007 Pronounced on: November 26 , 2007 Judgment (Per J.N. Patel, J.) :- 1. We have heard the learned counsel for the parties. 2. This Writ Petition filed by the petitioner challenges the decision of the Appellate Authority under Section 20 of the Securities and Exchange Board of India Act, 1992, which dismissed the appeal preferred by the petitioner against the order dated 6th March, 1997 passed by the Securities and Exchange Board of India (S.E.B.I.) in the case of SESA Goa, which rejected the complaint lodged by the petitioner in the matter of acquisition of Sesa Goa Co. Ltd. by MITSUI & Co. of Japan through Finsider International Co. Ltd. It was the case of the petitioner that the said acquisition was in 3 violation of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1994 (hereinafter referred to as “the Regulations of 1994”) and in violation of the provisions of Clauses 40-A and B of the Listing Agreement of the Stock Exchange. 3. In a nutshell, the facts of the case are that respondent No. 4, Finsider International Company (FINCO), held 51% share- holding in respondent No. 3, which is called “M/s. SESA Goa Limited” (SESA Goa). Respondent No. 4 is a 100% subsidiary of EARLY GUARD, which, in turn, is a 100% subsidiary of respondent No.5, Mitsui & Company (MITSUI). Before respondent No. 4 became a 100% subsidiary of EARLY GUARD, it was a 100% subsidiary of LIVA, which was owned by a consortium of companies held by RIVA Group. In the course of time, the share-holding of respondent No. 4 changed hands from LIVA to EARLY GUARD. The control and management of respondent No. 3, therefore, passed on from RIVA Group to the MITSUI Group, and, therefore, the MITSUI Group now controls respondent No. 4. At the relevant time, the petitioner filed an application on 5th November, 1996, before 4 respondent No. 2 challenging the acquisition of respondent No. 3 by respondent No. 5 through respondent No. 4 on the ground that the same was in violation of Regulations of 1994 and was also in violation of the provisions of Clauses 40-A and B of the Listing Agreement of the Stock Exchange. As there was no response from respondent No. 2, the petitioner moved this Court in its Writ Jurisdiction, and by order dated 17th December, 1996 in Writ Petition No. 2385 of 1996, respondent No. 2 was directed to decide all questions arising out of the complaint, and pass final order after hearing all the concerned parties. It is pursuant to the order dated 17th December, 1996 passed by this Court that the petitioner and others were heard by the Chairman of respondent No. 2, who by his order dated 6th March, 1997 held that the provisions of the Takeover Regulations of 1994 would not be applicable in the facts and circumstances of the case, as the said Regulations did not contemplate any concept of change in the control and management requiring public offer. The Chairman of respondent No. 2 further held that the provisions of Clauses 40-A and B could not be applied in this case, as there is no change in the position regarding the control of respondent No. 4 vis-a-vis respondent No. 3. This order 5 dated 6th March, 1997 was challenged by the petitioner by way of appeal before the Appellate Authority constituted under Section 20 of the Securities and Exchange Board of India Act, 1992. By order dated 15th December, 1997, the Appellate Authority disallowed the appeal preferred by the petitioner, and held that the acquisition of respondent No. 4 by respondent No. 5 from the RIVA Group had not resulted in a change in control of respondent No. 3 insofar as the Indian share-holders of respondent No. 3 were concerned; and thus, the provisions of the Regulations of 1994 were not attracted. 4. It is the case of the petitioner that Regulation 9(1) required an acquirer to make a public offer if he / persons acting in concert with him acquired or agreed to acquire shares whereby he would be entitled to more than 10% of the voting rights of the target company (Sesa Goa Ltd. in this case). It is contended that the pre-requisite for attracting Regulation 9(1) is not necessarily the acquisition of shares in the target company, but if the acquirer acquires any share which would give him more than 10% voting rights in the target company, then the obligation to make the public announcement / offer is triggered. Therefore, even if MITSUI 6 through EARLY GUARD acquired shares of FINSIDER whereby it acquired 51% voting rights in the target company, provisions of Regulation 9(1) of the Regulations of 1994 would be attracted. It is the contention of the petitioner that SEBI in its impugned order failed to appreciate that the provisions of Regulation 9(1) would be triggered by way of acquisition of shares of any body corporate if, as a result of such acquisition, the acquirer acquires more than 10% voting rights in the target company, and, therefore, SEBI erred in holding that merely because no shares of target company were acquired, the said Regulation would not be attracted. 5. Another contention of the petitioner is that Regulation 9 (3) is triggered when an acquirer acquires securities which would entitle him to more than 10% of the voting rights of the target company, i.e., SESA Goa. It is his contention that the term 'securities' as defined in Section 2(h)(i) of the Securities Contract and Regulations Act, 1956 includes 'the shares' in a body corporate; and a body corporate would include any company incorporated outside India. Thus, Regulation 9(3) would be triggered if MITSUI through EARLY GUARD acquires and/or agrees to acquire shares of 7 Finsider International (which would be a body corporate), as a result of which it acquires more than 50% of the voting rights of a company, and, therefore, it is the contention of the petitioner that the authorities failed to appreciate that the aforesaid interpretation of the Regulation is itself wrong, holding that the Take Over Regulations are not attracted merely because there is no direct acquisition of shares of the target company, and, therefore, the whole object of the Take Over Regulations is to give a fair deal to the investing public in the case of the take over by the raider company, which was over-ruled. 6. It is contended by the petitioner that the investor protection requires that even indirect take over of the target company could attract the provisions of the take over code if, in effect, substantial management, control and voting rights are acquired by a raider company as a result of such an indirect acquisition, and, therefore, it is his case that the whole purpose of MITSUI in acquiring FINSIDER was to acquire 51% share-holding in SESA Goa and thereby its management control; and, according to the petitioner, the Listing Agreement, which, inter alia, contains 8 clauses 40-A and 40-B pertaining to take over, has statutory force by virtue of Section 21 of the Securities Regulations Act and compliance thereof is binding on SESA Goa as well as MITSUI. 7. It is the case of the petitioner that the authorities have failed to appreciate that as a result of acquisition of shares / securities of FINSIDER, MITSUI has in effect acquired substantial voting rights, management and control of SESA Goa, and, therefore, the Listing Agreement, which has statutory force, must be held to be arising on any acquirer which, in effect, proposes to take over an Indian listed company, whether such acquirer is a foreign company or not. Therefore, the authorities failed to appreciate that clause 40-B(2)(b) casts an obligation on the target company, SESA Goa, in the present case, apart from the raider to make a public offer in the event of a take over bid, and, therefore, they ought to have held that SESA Goa has acted in concert or colluded with MITSUI in violating the provisions of the Listing Agreement; and that the transaction was nothing but in violation of the Regulations of 1994 and clauses 40-A and 40-B of the Listing Agreement, as it was binding upon a raider, and it cannot be said that mainly because the 9 raider is located outside India and/or he acquires securities of a body corporate outside India so as to, in effect, take over an Indian Company. 8. It is contended by the petitioner that the authorities have failed to take into consideration that there is, in substance, a take over of a listed Indian Company, i.e., SESA Goa, by MITSUI, in total violation of the Regulations of 1994 and the Listing Agreement, and the authorities, by not taking action against the target company and the raider company, have failed to protect the interests of the investors, which is the whole object created by the Regulations of 1994 read with Clauses 40-A and B of the Listing Agreement, and, therefore, the impugned order is illegal and void, and deserves to be quashed and set aside. 9. The respondents submitted that respondent No. 4 is a holding company of respondent No. 3, and respondent No. 4 holds 51% share of the share capital of respondent No. 3. Respondent No. 4 is incorporated in U.K., and has Registered Office in U.K. It is their case that the capital of respondent No. 4 has been 10 acquired by EARLY GUARD, a Company incorporated in U.K., and having its Registered Office in U.K. EARLY GUARD, which is a subsidiary of MITSUI Group of Companies, has not been made a party to this petition. Neither EARLY GUARD nor respondent No. 5 has acquired any shares in respondent No. 3. Respondent No. 4 has also not acquired any further shares in respondent No. 3 in addition to what it has been holding, viz., 51% of the share capital of respondent No.3. Consequently, there has been no change in the control or management of respondent No. 3, which continues to vest in its holding company, respondent No.4, and the whole-time Directors or Manging Director of respondent No. 3 continued even after the acquisition of respondent No. 4 by EARLY GUARD. It is their case that the issue raised by the petitioner is whether under the SEBI Take Over Regulations of 1994 and the Listing Agreement between respondent No. 3 and the Sock Exchanges, there has been “take over” of respondent No.3 by reason of acquisition of share capital of respondent No. 4 (a U.K. Company) by EARLY GUARD (another U.K. Company), even though there has not been any acquisition of shares of respondent No. 3 by EARLY GUARD or respondent No. 5 or by anyone else, which is based on 11 misconstruction of the SEBI Regulations of 1994 and clauses 40-A and B of the Listing Agreement between respondent No. 3 and the Stock Exchange. It is their case that having regard to the definition of shares and non-application of the Regulations to shares which are not quoted in Indian Stock Exchanges, the Regulation ought to include sub-clause (3) thereof which can only come into operation if there is any acquisition of shares in respondent No. 3. Respondent No. 3 has not issued any security which would entitle the holder to receive shares with voting rights in respondent No. 3. Also, the securities of respondent No. 3 which are registered under the Securities Contract (Regulation) Act with the Indian Stock Exchanges are its shares and not other securities. Therefore, it is their case that the petitioner' s contention that MITSUI and EARLY GUARD have acted in concert or acquired voting rights in respondent No. 3 is not tenable. 10. It is the case of respondent No. 3 that there has been no contravention of clauses 40-A and B of the Listing Agreement signed by respondent No. 3 with the Stock Exchange. It is their contention that the Listing Agreement is required for listing of 12 securities by the listed company; and the recital provides that it is the requirement of the Stock Exchange that the Company should enter into this Agreement to qualify for the admission and continuance of its securities to be listed on the Stock Exchange; and insofar as clause 40-A is concerned, it shall not be applicable to an acquisition by a person who has announced his firm intention to make an offer to the Company and also notified the Stock Exchange. Further, the expression 'securities' or 'voting capital' in clause 40-B(2) can only refer to the same being of the listed Company. Hence, clause 40-B(2) has no application to this case, and these expressions cannot refer to shares / securities in other companies than the listed company concerned, much less to body corporates situated outside and not listed in India. 11. It is submitted that the Securities Contract Regulation Act under which the Stock Exchanges have to be recognised is intended “to prevent undesirable transaction in securities by regulating the business of dealing therein by prohibiting options and by providing for certain other matters connected therewith”. The Securities Contract Act, therefore, is to regulate the business of 13 securities marketed on recognised Stock Exchanges in India. The Listing Agreement in schedule thereof provides for the securities which are listed. Therefore, it is the case of the respondents that the securities registered are respondent No. 3' s own shares and not the securities of any other Company. Therefore, when interpreting clauses 40-A and 40-B of the Listing Agreement, the securities in respondent No. 3, viz., its shares, will only attract the provisions of clauses 40-A and 40-B, and in the present case, there is no acquisition of the securities in respondent No. 3-Company, viz., the shares of respondent No.3, and, therefore, neither clause 40-A nor 40-B is attracted. The acquisition of shares of respondent No. 4 by EARLY GUARD does not attract either clause 40-A or 40-B. Further, clause 40-B can only come into operation if there is a take over offer to or by respondent No.3. Therefore, according to them, in this case, there has been no take over offer to respondent No. 3 or take over offer by respondent No. 3. Hence, clause 40-B has no application. The securities in respondent No. 3, i.e., shares of respondent No. 3, have not been acquired, and hence, there has been no 'take over' within the meaning of clauses 40-A and 40-B. It is further submitted that the concept of “persons acting 14 in concert” under the Takeover Regulations cannot be imported into the Listing Agreement and even such concept is inapplicable on the facts of this case. It is the case of the respondents that the position in law is clear that the control of respondent No. 3 is vested and continues to vest in respondent No. 4, which holds 51% share capital of respondent No. 3 and in no other person. Therefore, the contention of the petitioner that the Takeover Regulations of 1994 should be interpreted by importing the provisions contained in the Takeover Regulations of 1997 is untenable in law. It is the case of the respondents that the petitioner's contention that one of the objects (the other being for regulation of dealings and market in securities) being the protection of the rights of the minority shareholders, the clear and unambiguous language of the Takeover Regulations 1994 and clauses 40-A and 40-B of the Listing Agreement should be disregarded, is untenable in law. 12. It is the contention of the respondents that the SEBI (Substantial Acquisition of Shares and Take Overs) Regulations, 1997 (hereinafter referred to as “1997 Take Over Regulations”) are a completely new set of Regulations, and repeal the earlier 1994 15 Take Over Regulations. These are not merely clarifications in nature nor do they explain the 1994 Take Over Regulations as contended by the petitioner or otherwise. It is their case that the petitioner based his case on a completely erroneous and ill-founded premise and has erroneously invoked the provisions of the 1994 and 1997 Take Over Regulations, both of which have no application to the facts of the transaction in question. Both the SEBI and the Appellate Authority have, vide detailed speaking orders, replied the case of the petitioner. 13. It is the case of the respondents that the Take Over Regulations of 1997 were brought into effect on 20th February, 1997, and the transaction in question took place some time in October, 1995, and it is their contention that the Take Over Regulations of 1997 have only prospective application. Further, the authorities have rightly rejected the contention of the petitioner that there has been an indirect take over of respondent No. 3 (SESA Goa) by respondent No. 5 (MITSUI) or otherwise. All this has been specifically denied by the respondents, and it is their case that the terms “Control”, “Target Company” and “Corporate Body” and the 16 very concept of Indirect Take Over were neither contemplated nor provided in the Take Over Regulations of 1994; and that the petitioner has sought to import these definitions and their applicability into the 1994 Take Over Regulations, which have no application to the present case. 14. According to the respondents, respondent No. 4 has been acquired by EARLY GUARD, a company incorporated in U.K. and having its registered office in U.K. EARLY GUARD, which is a subsidiary in the MITSUI Group of Companies, has not been made a party to this petition. Neither EARLY GUARD nor respondent No. 5 has acquired any shares in respondent No. 3; and respondent No.4 has also not acquired any further shares in respondent No. 3 in addition to its shareholding of 51% of the share capital of respondent No. 3. Thus, EARLY GUARD, a Company incorporated abroad, acquired respondent No. 4, which is also a company incorporated abroad. Therefore, the entire transaction of acquisition of respondent No. 4 by EARLY GUARD took place outside India and beyond the purview and applicability of the Indian Take Over Regulations. Therefore, it is submitted that the 17 petitioner, by his interpretation of facts and law, is seeking to extend the reach of Indian Regulations to a transaction which has taken place outside their purview. On the other hand, it is their case that both the acquirer and the acquiree companies are foreign companies, not listed in any of the specified Stock Exchanges in India. 15. According to the respondents, it is settled rule of interpretation that in construing a statute, when the language is clear and unambiguous, reference to legislative history or objects cannot be used in order to read words into the legislation which are not there; and, therefore, the impugned order of the Appellate Authority dated 15th December, 1997 suffers from no infirmity, and the petitioner is not entitled for any relief as sought by him, and the petition deserves to be dismissed with costs. 16. The key issue which arises in the matter for decision is: Whether an indirect take over of the company, by acquiring control of the corporate body, which holds a large percentage of the shares of the target company, attracts the provisions of SEBI Take Over 18 Regulations, 1994 and the Listing Agreement and makes it mandatory for the acquirer company to make public announcement / offer? 17. The complaint made by the petitioner to the Securities and Exchange Board of India (S.E.B.I.) came to be turned down by the impugned order dated 6th March, 1997 by S.E.B.I. primarily, on the ground that the provisions of the Take Over Regulations are not applicable and in the instant case, they have not been violated; and secondly, the provisions of Clauses 40-A and B of the Listing Agreement are not applicable, and in the instant case, they have not been violated; and that the Regulations are applicable if an acquirer has acquired or agreed to acquire more than 10% shares as per the provisions of Regulations 9 and 10. The Regulations prohibit any acquirer who holds less than 10% of the voting rights to acquire more than 10% of the voting rights, unless the public announcement to acquire shares from the other shareholders of the company is made. 18. Further, Regulation 9(2) prohibits an acquirer, who on the date of the commencement of these Regulations holds more 19 than 10% of the voting rights to acquire further shares, unless the public announcement is made. In other words, no investor can acquire more than 10% of the voting rights of a company without attracting the provisions of the Regulations; and, according to them, as FINCO was a shareholder of SESA Goa and even prior to the change of management from RIVA Group to MITSUI Group, FINCO' s shareholding in SESA Goa was 51%, FINCO did not acquire a single share after the notification of these Regulations; nor this has been contended by the petitioner that FINCO has acquired shares in SESA Goa. 19. S.E.B.I. turned down the contention of the petitioner that while determining whether any acquirer has acquired shares, the holding company or the subsidiary company of the acquirer company, whether incorporated in India or not, should be considered as persons acting in concert, for which they placed reliance on Sections 2(7), 4(5) and 4(6) of the Companies Act for interpreting the word 'acquirer' as defined in Regulation 2(b) to include “any person acting in concert”, which further, in turn, has been defined in Regulation 2(d) to include, inter alia, company, its 20 holding company and its subsidiary company. The petitioner contended that in the aforesaid background, S.E.B.I. took