Case: Swedish Match Ab  Vs. Securities &amp; Exchange Board,India

Act having set up a trap for them, the logical consequences would ensue. 102. In the Seksaria Cotton Mills Ltd. (supra) the Court was dealing with the activities of a welfare agent vis-a-vis the meaning of possession in the relevant Act. The Court found: The facts are truly and accurately given according to the popular and natural meaning of the words used: nothing was hidden. The goods did reach the quota-holder in the end, or rather his proper agent, and we cannot see what anyone could stand to gain in an unauthorised way over the very natural mistake, which occurred owing to what seems to have been a time-bag in the consequences of a change of agency. So, even if there was a technical breach of the law, it was not one which called for the severe strictures which are to be found in the trial courts judgment and certainly not for the savage sentences which the learned Magistrate imposed. In the High Court also we feel a nominal fine would have met the ends of justice even on the view the learned Judges took of the law." 103. In the aforementioned backdrop only, it was held: "In a penal statute of this kind it is our duty to interpret words of ambiguous meaning in a broad and liberal sense so that they will not become traps for honest, unlearned (in the law) and unwary men. If there is honest and substantial compliance with an array of puzzling directions, that should be enough even if on some hypercritical view of the law other ingenious meanings can be devised." 104. This is a case of non-compliance of mandatory statutory provisions and not of substantial compliance. It is also not a case involving unlearned or unwary men. 105. In Bhagirath Sharma (supra) the question which fell for consideration was whether tube is included within the expression tyre. Keeping in view the provisions of the Essential Commodities - Prices and Stocks (Display and Control) Order, 1967, this Court applied the rule of strict construction. 106. Regulations being regulatory in nature, the intent and object sought to be achieved thereby must be firmly applied with. In this view of the matter, we are of the opinion that Regulations do not deserve strict constructions so as to hold that even a public offer was not necessary. Another Facet of the Case: 107. Having held so, would it be proper for this Court to direct the Board not to take any penal action against the Appellants? 108. The Board is an expert body. As a legislature, it makes the regulations, as an executive, it implements the legislation and in case of a breach it takes upon a quasi-judicial function. While functioning in its judicial capacity, it ha wide discretion. It can initiate criminal proceedings in terms of Section 24 of the Act, issue directions in terms of Section 11-B and Regulation 44 as also take recourse to penal provisions as contained in Section 24 and Chapter VI-A of the Act. Its decision is final subject to the decision of the Tribunal. But the sequences of events, as noticed hereinbefore, clearly go to show that even the Board was not sure of the legal position. 109. It in no uncertain terms held: "As the said change from joint to sole control took place in pursuance to a resolution passed by the shareholders in general meeting, the same would not trigger Regulation 12, same being covered under proviso to Regulation 12." 110. The Board even did not think it fit to apply the Explanation appended to Regulation 12 in its proper perspective. 111. It is only the Tribunal at a later stage came to a clear finding that proviso appended to Regulation 12 will have no application and Explanation would. 112. Before us also the Counsel read the regulations in question over and over again. Focus on certain words was placed differently at different times. It is only after considering the matter from different angles, we have been able to arrive at a definite conclusion. 113. In Trustees of Sir John Airds Settlement (supra) upon taking into consideration several alternative arguments on construction of the Finance Act 1975 Schedule 5 para 6(7) as originally enacted, the Court preferred the one based on the unglossed literal meaning. 114. The adversarial system prevailing in India allows a counsel to put forward construction of the enactment in question relying on several alternative arguments and the Court may ultimately base its judgment on unglossed literal meaning. (See Example 149.5 of Francis Bennions Statutory Interpretation Fourth Edition, page 371. 115. In the aforementioned, backdrop, this Court thought it fit to consider as to whether in exercise of its jurisdiction under Article 142 of the Constitution of India a direction should be issued directing the Board to forbear from proceeding under Section 15H of the Act against the Appellant. 116. It is accepted that once a public offer is made the investors would be entitled to elect to transfer their shares their shares at a higher price which may be offered by the acquirer with a view to acquire control over the target company. The investors would also be entitled to interest at such rate as the Board may determine. The provisions of Section 15H of the Act mandates that a penalty of rupees twenty-five crore may be imposed. The Board does not have any discretion in the matter and, thus, the adjudication proceeding is a mere formality. Imposition of penalty upon the Appellant would, thus, be a forgone conclusion. Only in the criminal proceedings initiated against the Appellants, existence of mens rea on the part of the Appellants will come up for consideration.117. We, therefore, are of the opinion that it is a fit case where this Court should exercise its jurisdiction under Article 142 of the Constitution to direct the Board to forbear from proceedings with the adjudication proceeding against the Appellants. This may not, however, be treated to be a precedent.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]45. Establishment of independent regulatory agencies and need for expert regulation were long felt primarily as a response to the growing complexity in human affairs and trade and business in particular. It was felt that a regulator who was aware of the realities of that field should be ready to regulate that field. Demand for regulators who were not mere Government officials but people who are experts in the fields came up. Regulations framed by an expert body like SEBI was felt to be an effective substitute for government regulation. The evolution in respect whereof can be traced back to the Great Depression of 1930s. As a part of the new deal, several expert bodies were established like the Federal Communications Commission and Securities Exchange Commission. In the Indian context, this rationale was invoked for the establishment of an expert body to regulate the securities market after the Securities Scam in 1992.It is aprinciple of law that where wordings of a statute are absolutely clear and unambiguous recourse to different principles of interpretations may not be resorted to but where the words of a statute are not so clear and unambiguous, the other principles of interpretation should be resorted to.Regulations 10, 11 and 12operate in three different fields. They seek to control creeping acquisition, which may lead to substantial acquisition and ultimately total control of the company. There may, however, be a case where control of the company is sought to be taken over by transfer of share only i.e. by a single transaction, in which event Regulations 11 and 12 both may apply.Situation, however, would be different when the transfer of joint control to sole control takes place through sale at a price which is higher than the market value of the shares leading to change in control over the target company, which cannot be done pursuant to a resolution passed by the shareholders in a general meeting in terms of the first proviso. In other words, in the event, the change in control is sought to be achieved by sale of shares at a price higher than the market value of the share, Regulation 12 will clearly be attracted marking public announcement imperative. Such public announcement evidently is required to be made having regard to the fact that the interest of investors is required to be protected; pursuant whereto and in furtherance whereof the shareholder would be informed of the value of the share at which the transfer of control would take place so as to enable him to exercise his option to sell his shares at the price offered by the acquirer or continue to keep the same.59. A general meeting of the shareholders of the target company had taken place but the same does notthe requirements of law inasmuch as, it would bear repetition to state, when transfer of control over the target company takes place by reason of acquisition of shares at a price higher than the market price the acquirer has a statutory obligation to make the public announcement. Such a statutory requirement is not capable of being waived by the majority shareholders. In this case, the records reveal that the shareholders were not informed that although the market value of the share was about Rs. 9.55, Jatia Group was offered the price of Rs. 35/per equity share. It was merely disclosed that such acquisition would not be at a price lower than the market price. If such transfer was to take place at a price less than the market price, the second proviso appended to Regulation 12 would have been attracted. It was, therefore, obligatory on the part of the acquirer to furnish correct information as regard the price which was being offered to Jatia Group.The Explanation was inserted evidently with a view to clear the obscurity occurring in Regulation 12 as regard a class of cases of cessation of joint control to sole control.69.It is true that Regulation 12 could have better worded but the application of Regulations 11 and 12 in a case of this nature is free from doubt. This is not a case where having regard to the explanations in the provisos and reading the provision in the manner we have done, it stands obscure. The Explanations (i) and (ii) are not Explanations to the provisos but the main part thereof.72. It would, therefore, be not correct to contend that where there is a mere cessor of control by one out of two persons already in control or where any person or persons are given joint control and the combined degree of control is not greater than being presently exercised, a Resolution in general meeting wouldthe purpose, is devoid of any merit as change in control has taken place by reason of acquisition of shares from another person in control. Having regard to the fact that the price offered to Jatia Group was higher than the market price, a public announcement was imperative so as to enable the shareholders to elect as to whether to sell their shares held by them or not. No exemption from public announcement has been carved out by reason of the proviso appended to Regulation 12 as in terms of the Explanation, Regulation 12 would have no application.Regulation 11, therefore, contemplates both situations, namely, where substantial acquisition of shares may result in change of control and where it does not. Only because in a case where acquisition of additional shares may result in change of control, the same by itself would not exempt the acquirer from complying with the statutory requirement of Regulation 11. Primarily,Regulations 10, 11 and 12operate in different fields which is manifested from a plain reading of Regulations 14, 15 and 16. We may, however, hasten to add that there may be a situation where Regulations 11 and 12 may overlap with each other, in which event, it would be open to the acquirer to issue a combined notice fulfilling the requirement of both Regulations 11 and 12.82. Indisputably, the purport and object of which a regulation is made must be duly fulfilled. Public announcement is at the base ofRegulations 10, 11 andExcept in a situation which would bring the case within one or the other exception clause, the requirement of complying with the mandatory requirements to make public announcement cannot be dispensed with.83. Admittedly in this case no public announcement has been made.84. It may be true that the Board in its impugned order dated 4th June, 2002 proceeded on a wrong premise that having regard to the proviso appended to Regulation 12, Regulation 12 would be attracted. But the SAT, in our opinion, rightly construed the provisions of Regulations 11 and 12 in arriving at a finding that Regulation 11 would be attracted and Regulation 12 would not be. The Tribunal was entitled to take a different view of the matter from that of the Board with a view to sustain the ultimate result in the appeal in exercise of its appellate power. Such a power in the appellate court/ tribunals is akin to or analogous to the principles contained in Order 41 Rule 33 of Code of Civil Procedure. Even otherwise before us the judgment of the Tribunal is in question, this Court is required to consider the correctness or otherwise of the Tribunal. In any event, the reasoning of the tribunal shall prevail over the Board.Although we do not find any difficulty in construing the provisions of Regulations 11 and 12 but assuming Regulations 11 and 12 are not clear, the rule of purposive construction should be taken recourse to.86. It is now trite that when an expression is capable of more than one meaning, the Court would attempt to resolve that ambiguity in a manner consistent with the purpose of the provisions and with regard to the consequences of the alternative constructions.The said decision, thus, runs counter to the submissions of Mr. Nariman. In this case also conditions are imposed in the matter of acquisition of shares. If the conditions have not been complied with, the Act having set up a trap for them, the logical consequences would ensue.Regulations being regulatory in nature, the intent and object sought to be achieved thereby must be firmly applied with. In this view of the matter, we are of the opinion that Regulations do not deserve strict constructions so as to hold that even a public offer was not necessary.The Board is an expert body. As a legislature, it makes the regulations, as an executive, it implements the legislation and in case of a breach it takes upon afunction. While functioning in its judicial capacity, it ha wide discretion. It can initiate criminal proceedings in terms of Section 24 of the Act, issue directions in terms of Sectionand Regulation 44 as also take recourse to penal provisions as contained in Section 24 and ChapterVIA of theAct. Its decision is final subject to the decision of the Tribunal. But the sequences of events, as noticed hereinbefore, clearly go to show that even the Board was not sure of the legal position.d that once a public offer is made the investors would be entitled to elect to transfer their shares their shares at a higher price which may be offered by the acquirer with a view to acquire control over the target company. The investors would also be entitled to interest at such rate as the Board may determine. The provisions of Section 15H of the Act mandates that a penalty of rupeescrore may be imposed. The Board does not have any discretion in the matter and, thus, the adjudication proceeding is a mere formality. Imposition of penalty upon the Appellant would, thus, be a forgone conclusion. Only in the criminal proceedings initiated against the Appellants, existence of mens rea on the part of the Appellants will come up for consideration.117. We, therefore, are of the opinion that it is a fit case where this Court should exercise its jurisdiction under Article 142 of the Constitution to direct the Board to forbear from proceedings with the adjudication proceeding against the Appellants. This may not, however, be treated to be a precedent.