Case: Laurel Energetics Pvt. Ltd Vs. Securities Exchange Board Of India

For the purpose of disposing of the present appeals, the "Target Company" is Rattan India Infrastructure Ltd. It was originally incorporated as a wholly owned subsidiary of IBREL on 9th November, 2010 with a different name which is not material for the purpose of these appeals.4. In 2011, the Board of Directors of IBREL framed a demerger scheme by which the power business of the company would be demerged and would vest in the Target Company. The High Court of Delhi sanctioned the aforesaid demerger by its judgment and order dated 17th October, 2011. What is important for the purpose of this appeal is that on 19th July, 2012, an information Memorandum in terms of the listing agreement was filed by the Target Company, pursuant to which it was actually listed on the Bombay Stock Exchange and the National Stock Exchange on 20th July, 2012. The appellant acquired 18% of the equity share holding of the target company at a price of Rs. 6.30 per share some time in July, 2014. It made certain other purchases with which we are not concerned, because the price paid for those acquisitions was less than Rs.6.30 per share.5. On 20th October, 2015 Laurel and Arbutus Consultancy LLP along with various other entities, who were persons acting in concert, made a public announcement under Regulation 15(1) of the SEBI Substantial Acquisition of Shares and Takeover Regulations, 2011 when an open offer was made for acquisition of 35,93,90,094 equity shares of the Target Company from the equity shareholders of the Target Company at the price of Rs.3.20 per share. Necessary formalities were observed thereafter, but by a letter dated 4th December, 2015, SEBI observed that the exemption provisions contained in Regulation 10 would not apply to the 2014 acquisition, as a result of which the price of Rs. 3.20 per share was not accepted and the higher price of Rs. 6.30 was stated to be an amount that would have to be paid to the equity shareholders of the Target Company. By a letter dated 5th May, 2016, containing SEBIs Order, SEBIhas been observed that the acquisitions made through inter se transfers amongst promoters on July 9, July 10, 2014 September 5, 2014, and October 20, 2014, were not exempted from open offer obligations. You are advised to revise the Offer Price accordingly. Further, along with the consideration amount, you are advised to pay a simple interest of 10% per annum from the scheduled date of payment of consideration based on these triggering dates to the actual date of payment of consideration to the shareholders who were holding shares in the Target Company on the date of violation and whose shares are accepted in the Open Offer, after adjustment of dividend paid, if any. You are also advised to enhance the financial arrangements and the amount maintained in the escrow account in terms of the revised Offer Price and the revised Offer Size, ifthe aforesaid order, the Appellate Tribunal dismissed an appeal on 5th April, 2017, holding that Regulation 10 did not exempt the acquisitions of 2014, as a result of which the price payable per share necessarily became Rs. 6.30 instead of Rs. 3.20 per share. The correctness of the aforesaid order is now before us.

Reasoning:
11. In so far as the facts of the present case are concerned, the definition that we are concerned with is that of a company, and not any other corporate entity. For the purpose of the present case, the Target Company, therefore, means a company whose shares are listed on a Stock Exchange. This would mean, on the facts of the present case, the Rattan Company, whose shares are listed on the two Stock Exchanges as mentioned above. Coming back to Regulation 10, it is thus clear that persons named as promoters in the shareholding pattern filed by the Rattan Company in terms of the listing agreement between the two Stock Exchanges is what is to be looked at. And for this purpose persons must be promoters of the Rattan Company for not less than three years prior to the proposed acquisition in order that the exemption under paragraph 10 would apply. On the facts of this case, therefore, the information memorandum having been filed on 19th July, 2012 pursuant to which listing took place one day later, is the relevant date from which this period is computed. This being the case, three years had not elapsed on 9/10th July, 2014, which was the date on which the earlier purchase of shares had taken place.Although, it is true that this Committees recommendations do disclose that the object of the regulation is to curb the abuse of introduction of new entities as qualifying parties, this again is tempered with a later sentence which states that if schemes do not really involve or deal with a target company per se, then only would the treatment of such open offer obligations be different.When we come to sub regulations (iv) and (v), it is clear that these two sub regulations follow the pattern contained in sub regulation (ii) in as much as when it comes to persons acting in concert, the period should be not less than three years prior to the proposed acquisition, and disclosed as such pursuant to filings under the listing agreement. Also, when it comes to shareholders of a target company who have been persons acting in concert for a period of not less than three years prior to the proposed acquisition and are disclosed as such pursuant to filings under the listing agreement, the corporate veil is not lifted. The difference between sub regulations (ii), (iv) and (v) on the one hand, and sub regulation (iii) on the other, again shows us that it is impermissible for the court to lift the corporate veil, either partially or otherwise, in a manner that would distort the plain language of the regulation. Where the corporate veil is to be lifted, the regulation itself specifically so states. For this reason also, it is a little difficult to accept Mr. Vishwanathans argument that a reading of the other sub regulations contained within regulation 10 (1) (a) would further his argument in this case.It can be seen that a partnership firm became a limited company but, on facts it was found that since there was substantial identity between the limited company and the partnership firm, there was no subletting, assignment or parting with possession of the premises so as to contradict Section 14(1)(b) of the Delhi Rent Control Act.22. This case is wholly distinguishable from the present case as in the facts of the present case, the target company is clearly defined and "means" only Rattan Limited. To go behind Rattan Limited would not only be contrary to the clear language of Regulation 10(1)(a) but would also introduce a concept viz lifting the corporate veil by the Court contrary to the Regulation itself, which, as has been pointed out above, also contains sub regulation (iii) which, in the circumstances specified, lifts the corporate veil.In fact, even if we were to accept Mr. Vishwanathans argument that the object of the regulation being that promoters should not keep changing, and if on facts it is found that the same set of promoters continue, we should exempt such cases, this would not be possible for another good reason.In the factual scenario before us, having regard to the aforesaid judgment, it is not possible to construe the regulation in the light of its object, when the words used are clear. This statement of the law is of course with the well known caveat that the object of a provision can certainly be used as an extrinsic aid to the interpretation of statutes and subordinate legislation where there is ambiguity in the words used.27. As has already been stated by us, we find the literal language of the regulation clear and beyond any doubt. The language of sub regulation (ii) becomes even clearer when it is contrasted with the language of sub regulation (iii), as has been held by us above.