Case: Kosha Investments Ltd Vs. Securities &amp; Exchange Bd Of India

exceed 25 per cent.6. It will be relevant at this stage to extract Regulations 11(1), 13, 14(1) and 14(2) in order to appreciate the submissions.These read as follows : “11. (1) No acquirer who, together with persons acting in concert with him, has acquired, in accordance with the provisions of law, 15 per cent or more but less than fifty five per cent (55%) of the shares or voting rights in a company, shall acquire, either by himself or through or with persons acting in concert with him, additional shares or voting rights entitling him to exercise more than 5 per cent of the voting rights, in any financial year ending on 31st March unless such acquirer makes a public announcement to acquire shares in accordance with the regulations.12. …. …. …. ….13. Before making any public announcement of offer referred to in regulation 10 or regulation 11 or regulation 12, the acquirer shall appoint a merchant banker in Category I holding a certificate of registration granted by the Board, who is not an associate of or group of the acquirer or the target company.14. (1) The public announcement referred to in regulation 10 or regulation 11 shall be made by the merchant banker not later than four working days of entering into an agreement for acquisition of shares or voting rights or deciding to acquire shares or voting rights exceeding the respective percentage specified therein:Provided that in case of disinvestment of a Public Sector Undertaking, the public announcement shall be made by the merchant banker not later than 4 working days of the acquirer executing the Share Purchase Agreement or Shareholders Agreement with the Central Government or the State Government as the case may be, for the acquisition of shares or voting rights exceeding the percentage of shareholding referred to in regulation 10 or regulation 11 or the transfer of control over a target Public Sector Undertaking.(2) In the case of an acquirer acquiring securities, including Global Depository Receipts or American Depository Receipts which, when taken together with the voting rights, if any already held by him or persons acting in concert with him, would entitle him to voting rights, exceeding the percentage specified in regulation 10 or regulation 11, the public announcement referred to in sub-regulation (1) shall be made not later than four working days before he acquires voting rights on such securities upon conversion, or exercise of option, as the case may be.” 7. A careful reading of the aforesaid Regulations discloses that the public announcement should not be delayed beyond four working days of the agreement or decision to acquire the requisite number of shares or voting rights. We are in agreement with the finding of the Tribunal on this issue and find no merit in the contentions of the appellant. If the plea of appellant will be accepted then an acquirer can keep on violating Regulation 11(1) with impunity on as many occasions as he/it wants and avoid letting the public have the required knowledge through public announcements by simply making subsequent sale or transfer to another entity so as to reduce the so-called net acquisition in a financial year to within 5%. This interpretation will defeat the purpose of Regulation 11(1) and shall also render Regulation 14(1) otiose. The concept of permitting creeping acquisitions by permitting not more than 5% of the shares or voting rights in a company limits the period for such acquisition to a financial year ending by 31st March. But such concept does not dilute the requirement of making a public announcement within the time mentioned in Regulation 14(1) if the acquisition even if only once made and divested, is of more than 5% of shares or voting rights in the target company. In other words, even if such acquisition is followed by sale in the same financial year, the liability of making the public announcement would remain unaffected and shall attract action, as in this case. 8. Hence, the main contention advanced on behalf of the appellant is found to be without any merit. The other contention is that Regulation 14(2) of the Regulations of 1997 postpones the time for required public announcement to acquisition of voting rights when purchased securities are actually converted. According to the contention, only when securities or shares are converted by the acquirer into voting rights by getting it registered or upon exercise of option to acquire voting rights, the liability of making public announcement can be fastened.9. Aforesaid plea has been rightly countered by learned Senior Advocate for SEBI, Mr. C.U. Singh by pointing out that in case of acquisition of shares or voting rights the appropriate applicable provision is Regulation 14(1) and not Regulation 14(2) which applies only when the acquisition is of other securities including Global Depository Receipts, American Depository Receipts. It is only such securities which require conversion or exercise of option which is contemplated by Regulation 14(2). He also pointed out that no such plea was raised before the SEBI or the Tribunal and rightly because in the present case only Regulation 14(1) is applicable as it covers acquisition of either the shares or the voting rights or both which are the subject matter of Regulation 11(1). Mr. Singh has also referred to a judgment of this Court in the case of Swedish Match AB and Another vs. Securities & Exchange Board of India and Another, (2004) 11 SCC 641. This judgment in paragraphs 90 onwards considered the purpose and effect of Regulations 10, 11 and 12 of the Regulations of 1997 and in paragraph 102 held them to be mandatory statutory provisions. However this judgment needs no elaborate consideration because no plea has been raised on behalf of appellant that the Regulations are directory or do not require compliance.10. We find that the plea that the matter at hand relates to Regulation 14(2) was not raised before the original authority or the Tribunal. We also find that it is a plea of desperation and undeserving of acceptance.

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

Explanation:
0[ds]8. Hence, the main contention advanced on behalf of the appellant is found to be without any merit. The other contention is that Regulation 14(2) of the Regulations of 1997 postpones the time for required public announcement to acquisition of voting rights when purchased securities are actually converted. According to the contention, only when securities or shares are converted by the acquirer into voting rights by getting it registered or upon exercise of option to acquire voting rights, the liability of making public announcement can be fastened.9. Aforesaid plea has been rightly countered by learned Senior Advocate for SEBI, Mr. C.U. Singh by pointing out that in case of acquisition of shares or voting rights the appropriate applicable provision is Regulation 14(1) and not Regulation 14(2) which applies only when the acquisition is of other securities including Global Depository Receipts, American Depository Receipts. It is only such securities which require conversion or exercise of option which is contemplated by Regulation 14(2). He also pointed out that no such plea was raised before the SEBI or the Tribunal and rightly because in the present case only Regulation 14(1) is applicable as it covers acquisition of either the shares or the voting rights or both which are the subject matter of Regulation 11(1). Mr. Singh has also referred to a judgment of this Court in the case of Swedish Match AB and Another vs. Securities & Exchange Board of India and Another, (2004) 11 SCC 641.  This judgment in paragraphs 90 onwards considered the purpose and effect of Regulations 10, 11 and 12 of the Regulations of 1997 and in paragraph 102 held them to be mandatory statutory provisions. However this judgment needs no elaborate consideration because no plea has been raised on behalf of appellant that the Regulations are directory or do not require compliance.10. We find that the plea that the matter at hand relates to Regulation 14(2) was not raised before the original authority or the Tribunal. We also find that it is a plea of desperation and undeserving of acceptance.