Case: Nirma Industries Ltd.  Vs. Securities &amp; Exchange Board Of India

offer are in place;(d) the public announcement of offer is made in terms of the Regulations;(e) his shareholding, if any in the target company is disclosed in the public announcement and the letter of offer. 70. Regulation 24(2) mandates that the merchant banker shall furnish to the Board a due diligence certificate which shall accompany the draft letter of offer. The aforesaid regulation clearly indicates that any enquiries and any due diligence that has to be made by the acquirer have to be made prior to the public announcement. It is, therefore, not possible to accept the submission of Mr. Shyam Divan that the appellants are to be permitted to withdraw the public announcement based on the discovery of certain facts subsequent to the making of the public announcement. In such circumstances, in our opinion, the judgments cited by Mr. Shyam Divan are of no relevance. Delay: 71. Mr. Shyam Divan has also indicated that it was because of the unexplained delay of 8 months on the part of SEBI to process the Letter of Offer of the appellants that the prices for the shares of the target company went down from Rs. 18.60 to Rs. 8.56, during this period. This would impose huge financial liability on the appellants. This submission is also wholly misconceived. The submission was not made before SAT and it has been raised for the first time, in the submissions made by Mr. Shyam Divan. In fact, the ground is not even pleaded in the grounds of appeal. The submission is mentioned only in the list of dates. Since, we are considering a statutory appeal under Section 15Z of the SEBI Act, the same cannot be permitted to be raised in this Court for the first time, unless the submission goes to the very root of the matter. This apart, even on merit, we find that the submission is misconceived. Regulation 18(1) and (2) of the SEBI Takeover Code reads thus:- "18. Submission of letter of offer to the Board –(1) Within fourteen days from the date of public announcement made under regulation 10, 11 or 12 as the case may be, the acquirer shall, through its merchant banker, file with the Board, the draft of the letter of offer containing disclosures as specified by the Board.(2) The letter of offer shall be dispatched to the shareholders not earlier than 21 days from its submission to the Board under sub-regulation (1):Provided that if, within 21 days from the date of submission of the letter of offer, the Board specifies changes, if any, in the letter of offer (without being under any obligation to do so), the merchant banker and the acquirer shall carry out such changes before the letter of offer is dispatched to the shareholders :[Provided further that if the disclosures in the draft letter of offer are inadequate or the Board has received any complaint or has initiated any enquiry or investigation in respect of the public offer, the Board may call for revised letter of offer with or without rescheduling the date of opening or closing of the offer and may offer its comments to the revised letter of offer within seven working days of filing of such revised letter of offer.]” 72. A perusal of the aforesaid regulation clearly shows that the acquirer is required to file the draft letter of offer containing disclosures as specified by the Board within a period of 14 days from the date of public announcement. Thereafter, letter of offer has to be dispatched to the shareholders not earlier than 21 days from its submission to the Board. Within 21 days, the Board is required to specify changes if any, that ought to be made in the letter of offer. The merchant banker and the acquirer have then to carry out such changes before the letter of offer is dispatched to the shareholders. But there is no obligation to do so. Under the second proviso, the Board may call for revised letter of offer in case it finds that the disclosures in the draft letter of offer are inadequate or the Board has received any complaint or has initiated any enquiry or investigation in respect of the public offer. It is important to notice that in the first proviso the Board does not have any obligation to specify any change in the draft letter of offer within a period of 21 days. In the present case, in fact, the Board had not specified any changes within 21 days. We have already noticed earlier that the letter of offer was lacking and deficient in detail. The appellants themselves were taking time to submit details called for, by their merchant bankers through various letters between 08.08.2005 to 20.3.2006. We have already noticed the repeated advice given by the merchant banker to enhance the issue size of the open offer and to comply with other requirements of the Takeover Regulations. The appellants, in fact, were prevaricating and did not agree with the interpretation placed on Regulation 27(1) (d) by the Merchant Banker. We, therefore, reject the submission of Mr. Shyam Divan that there was delay on the part of SEBI in approving the draft letter of offer. Court may direct fresh valuation: 73. Lastly, Mr. Shyam Divan has submitted that even if the appellants were not to be permitted to withdraw the public offer, the Court ought to appoint an independent valuer and direct a fresh valuation to be made on the basis of principles contained in Regulation 20(5) of the Takeover Regulations. Such a valuation, according to Mr. Shyam Divan, would be justified in the light of the foregoing submissions. We are not at all impressed by the aforesaid submission. The formula given in Regulation 20 would have no applicability in the facts and circumstances of this case. The determination of the lowest price under Regulation 20 would be at a stage prior to the making of the public announcement and not thereafter. 74. In view of the aforesaid,

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

Explanation:
0[ds]We are inclined to agree with the submission made by Mr. Venugopal that the appellants cannot be permitted to wriggle out of the obligation of a public offer under the Takeover Regulation. Permitting them to do so would deprive the ordinary shareholders of their valuable right to have an exit option under the aforesaid regulations. The SEBI Regulations are designed to ensure that public announcement is not made by way of speculation and to protect the interest of the other shareholders. Very solemn obligations are cast on the merchant banker under Regulation 24(1) to ensure thatthe acquirer is able to implement the offer;(b) the provision relating to Escrow account referred to in Regulation 28 has been made;(c) firm arrangements for funds and money for payment through verifiable means to fulfil the obligations under the offer are in place;(d) the public announcement of offer is made in terms of the Regulations;(e) his shareholding, if any in the target company is disclosed in the public announcement and the letter ofperusal of the aforesaid regulation clearly shows that the acquirer is required to file the draft letter of offer containing disclosures as specified by the Board within a period of 14 days from the date of public announcement. Thereafter, letter of offer has to be dispatched to the shareholders not earlier than 21 days from its submission to the Board. Within 21 days, the Board is required to specify changes if any, that ought to be made in the letter of offer. The merchant banker and the acquirer have then to carry out such changes before the letter of offer is dispatched to the shareholders. But there is no obligation to do so. Under the second proviso, the Board may call for revised letter of offer in case it finds that the disclosures in the draft letter of offer are inadequate or the Board has received any complaint or has initiated any enquiry or investigation in respect of the public offer. It is important to notice that in the first proviso the Board does not have any obligation to specify any change in the draft letter of offer within a period of 21 days. In the present case, in fact, the Board had not specified any changes within 21 days. We have already noticed earlier that the letter of offer was lacking and deficient in detail. The appellants themselves were taking time to submit details called for, by their merchant bankers through various letters between 08.08.2005 to 20.3.2006. We have already noticed the repeated advice given by the merchant banker to enhance the issue size of the open offer and to comply with other requirements of the Takeover Regulations. The appellants, in fact, were prevaricating and did not agree with the interpretation placed on Regulation 27(1) (d) by the Merchant Banker. We, therefore, reject the submission of Mr. Shyam Divan that there was delay on the part of SEBI in approving the draft letter of offer