KOSHA INVESTMENTS LTD. versus SECURITIES & EXCHANGE BOARD OF INDIA & ANR.
[2015] 9 S.C.R. 412, Supreme Court of India, 2015
Outcome: Dismissed (Dismissed)
Segment: Ratio
A 
B 
[2015] 9 S.C.R. 412 
KOSHA INVESTMENTS LTD. 
v. 
SECURITIES & EXCHANGE BOARD OF INDIA&ANR. 
(Civil Appeal No. 3219 of2006) 
SEPTEMBER 18, 2015 
[VIKRAMAJIT SEN AND SHIVA KIRTI SINGH, JJ.] 
Securities & Exchange Board of India (Substantial 
C Acquisition of Shares & Takeovers) Regulations, 199 7 - Reg 
11 (1) and 14(1) -
Requirement of making public 
announcement - Appellant consistently bought and sold 
shares of target company-SIL prior to June 1999 and also 
after August 1999 and became one of its promoters and did 
D not make required public announcement - Show cause 
notice to appellant- SEBI held that the appellant was already 
holding between 15% to 75% shares of SIL and it could 
acquire additional shares of this company without public 
announcement only upto 5% of its paid up capital during the 
E relevant period - However, it acquired shares constituting 
more than 5% of the paid up capital of SIL without public 
announcement as required by Reg 11(1) - SEBI issuing 
directions to appellant to make public announcement in terms 
of Reg 11 ( 1) and imposed penalty for the non-compliance -
F Said orders upheld by tribunal - Held: Order passed by the 
tribunal concurred with since if the aggregate percentage of 
acquisitions at any point of time during the financial year 
exceeds 5%, Reg 11 would get trigger mandating public 
announcement -
Reg 14(1) discloses that public 
G announcement should not be delayed beyond four working 
days of the agreement or decision
to acquire the requisite 
number of shares or voting rights. 
Dismissing the appeals, the Court 
H 
412
KOSHAINVESTMENTS LTD. v. SECURITIES & 
413 
EXCHANGE BOARD OF INDIA 
HELD: A careful reading of the Securities & A 
Exchange Board of India (Substantial Acquisition of 
Shares & Takeovers) Regulations, 1997 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. B 
If the aggregate percentage of acquisitions at any point 
of time during the financial year exceeds 5 per cent, the 
provision would get triggered. The provision of 
Regulation 11 mandating a public announcement will 
kick in at any stage whence the shareholding of the said C 
entity in the target company would exceed 25 per cent. 
Thus, the finding of the Tribunal is accepted. If the plea 
of apP.ellant would be accepted then an acquirer can 
keep on violating Reg 11(1) with impunity on as many 0 
occasions 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 would defeatthe purpose of Reg 11(1) and 
render Reg 14(1) otiose. The concept of permitting E 
creeping acquisitions by permitting not more than 5% 
of the shares or voting rights in a company limits the 
period for such acquisition toa financial year ending by 
31st March. But such concept does not dilute the 
requirement of making a public announcement within F 
the time mentioned in Reg 14(1) ifthe acquisition even if 
only
once made and divested, is of more than 5% of 
shares or voting rights in the target company. Even if 
such acquisition is followed by sale in the same financial 
year, the liability of making the public announcement G 
would remain unaffected and shall attract action. Further, 
in case of acquisition of shares or voting rights the 
appropriate applicable provision is Reg 14(1) and not 
Reg 14(2) w~ich applies only when the acquisition is of 
other securities including Global Depository Receipts, H
414 
SUPREME COURT REPORTS 
[2015] 9 S.C.R 
A American Depository Receipts. [Para 5, 7, 9) [418-H; 419-
A,E; 412-C-G; 422-C) 
Swedish Match AB and Anr. vs. Securities & Exchange 
Board oflndia andAnr. (2004) 11 SCC 641: 2004 (3) Suppl. 
B SCR 745 - referred to. 
Case Law Reference 
2004 (3) Suppl. SCR 745 
referred to. 
Para 9 
C 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 
D 
E 
F 
3219 of 2006. 
From the Judgment and Order dated 08.08.2005 of the 
Securities Appellate Tribunal in Appeal No. 64 of 2004. 
WITH 
C.A. No. 2132 of2007. 
Subramonium Prasad, Naveen Chander, Alok Kr. Agarwal, 
Utkarsh Srivastava, Manjula Gupta for the Appellant. 
C.U. Singh,Anip Sachthey, Shagun Matta, Rishi Gautam, 
Dhawal Mehrotra, Vikas Mehta for the Respondents. 
The Judgment of the Court was delivered by 
SHIVA KIRTI SINGH, J. 1. Both the appeals have been 
preferred by the same appellant under Section 15Z of the 
Securities & Exchange Board of India Act, 1992 (for short, 
'SEBI Act'). The main appeal is of 2006 and requires detailed 
consideration. It is directed against order dated 081h August 
G 2005 passed by the Securities Appellate Tribunal upholding 
and confirming the order of Securities & Exchange Board of 
India (SEBI) dated 2Th January 2004 directing the appellant 
to make public announcement in terms of Regulation 11 (1) of 
H the Securities & Exchange Board of India (Substantial 
Acquisition of Shares & Takeovers} Regulations, 1997
KOSHA INVESTMENTS LTD. v. SECURITIES & 
415 
EXCHANGE BOARD OF INDIA [SHIVA KIRTI SINGH, J.] 
(hereinafter referred to as 'the Regulations of 1997). The other A 
appeal is directed against orders passed by SEBI and 
confirmed by ~he Tribunal to impose penalty upon the appellant 
for non-compliance with the order which is subject matter of 
the earlier appeal. It goes without saying that the latter appeal 
will follow the fate of the main appeal. 
• 
B 
2. Before adverting to the issues of law raised on behalf 
ofthe.appellant, the essential facts may be noticed only in brief. 
The appellant, Kasha Investments Ltd., acquired shares of 
another company Snowcem India Ltd. (hereinafter referred to C 
as 'SIL') from one of the original promoters of SIL and thus 
itself became one of the promoters. An investigation by SEBI 
covered the period June 1999 to August 1999 when there was 
an initial upward movement in the price of shares of SIL and 
also substantial increase in the volume of their trade. As a D 
result of such investigation the appellant faced charges in 
another proceeding under SEBI (Prohibition of Fraudulent and 
Unfair Trade Practices relating to Securities Market) 
Regulations, 2003 and was also served with a show cause 
notice dated 14.11.2002 for alleged breach of provisions of E 
Regulation 44 and 45(6) of the Regulations of 1997 read with 
provisions of Section 11 and 11 B of the SEBI Act. The 
proposed action under Regulations of 1997 was based upon 
report of
investigation showing that appellant had consistently 
F 
bought and sold shares of SIL prior to June 1999 and also 
after August 1999. As per record it was holding 21,32,900 
shares of SIL constituting 20.29% of total paid up capital of 
SIL. The appellant made additional purchase of shares 
amounting to 10.81 % of the paid up capital of SIL in violation G 
of Regulation 11 ( 1) of the Regulations of 1997 as it failed to 
make the required public announcement in terms of the said 
Regulation. After granting personal hearing and considering 
the appellant's reply to the show cause notice, in the final order 
SEBI came to a finding that as on 31 51 March 1999 appellant H
416 
SUPREME COURT REPORTS 
[2015] 9 S.C.R. 
A 
was actually holding only 21,32,900 shares as shown by SEBI 
and not 31,84,228 shares which was claimed by the appellant 
on the ground that it had already pledged its shares to lenders 
who had lent money to SIL. The plea of pledge raised by the 
appellant was found without any substance and only an attempt 
B to conceal" subsequent purchase. Hence, SEBI came to a 
conclusion that the appellant was already holding between 15% 
to 75% shares of the target company SIL and it could acquire 
additional shares of this company through creeping acquisition 
mode, that is, without public announcement only upto 5% of its 
C paid up capital during the period of 12 months ending on 31st 
March 2000. However, by acquiring 11,36,700 shares of SIL 
during June 1999 to August 1999 it acquired shares constituting 
more than 5% of the paid up capital of SIL. For making such 
0 
acquisition, the appellant was liable to make public 
announcement as required by Regulation 11(1) of the 
Regulations of 1997 .. Since the appellant failed to do so, the 
Whole Time Member of SEBI held it guilty and issued the 
following directions on 271ti January 2004 : 
E 
F 
G 
H 
"15. In view of the findings above and in exercise of the 
powers conferred upon me under Section 19 read with 
Section 11 B of SEBI Act read with regulations, I hereby 
direct the acquirer viz., Kasha Investments Ltd. to make 
public announcement in terms of regulation 11 (1) of the
said Regulations taking June 29.1999 as the reference 
date for calculation of offer price. 
The public 
announcement shall be made within 45 days of passing 
of this order. 
16 ......... TheAcquirers are hereby accordingly directed 
to pay interest@ 15% per annum to the share holders for . 
the loss of interest caused to the shareholders from 
October 28, 1999 till the date of actual payment of 
consideration for the shares to be fl~ndered and accepted 
in the offer directed to be made by theAcquirers.
KOSHAINVESTMENTS LTD. v. SECURITIES& 
417 
EXCHANGE BOARD OF INDIA [SHIVA KIRTI SINGH, J.] 
17. It is also noted thatan order dated 3.12.03 was passed 
A 
by me restraining the Kosha Investments Ltd. from buying, 
selling or dealing in securities in any manner, directly or 
indirectly, for a period of two years for violating the 
provisions of SEBI (Prohibition of Fraudulent and Unfair 
Trade Practices Relating to· Securities Market) B 
Regulations, 1995. However, I direct the said order dated 
3.12.2003 shall not hamper the implementation of this 
order." 
3. The appellant preferred an appeal before the Securities C 
Appellate Tribunal to challenge the order dated 27th January 
2004 passed by Whole Time Member of SEBI. The main 
contention of the appellant before the Tribunal is recorded in 
paragraph 7 of the impugned judgment and is as follows : 
"Learn~d counsel for the appellant argued that KIL had 
been regularly purchasing and selling shares of SIL. He 
also argued that KIL had not acquired 5% or more than 
D 
5% shares or voting rights in respect of shares of SIL at 
any point of time in the period of 12 months. He submitted 
E 
that out of 11,36, 700 shares which were purchased during 
June, 1999 to August, 1999 during the same period KIL 
also sold number of shares of SIL. He pointed out that 
KIL was not holding more than 5% shares of SIL at any 
point during the year and therefore the provisions of F 
Takeover Code did not trigger. He further argued that even 
if
SEBI did not take into account the repurchases of 
pledged shares as return of shares, SEBI should accept 
that KIL did not acquire 5% or more shares at any point of 
time since sale and purchase of shares was being done G 
simultaneously and did not trigger the Takeover Code. He 
argued that SEBI ought to have taken into account that 
KIL also sold shares during the relevant period. He went 
on to argue that it was erroneous to determine the total 
H 
share holding of KIL at any given point of time during the
418 
A 
B 
SUPREME COURT REPORTS 
[2015] 9 S.C.R. 
investigation by completely ignoring the sale of shares 
made by it during the relevant period. He said that such a 
lopsided interpretation of Takeover Code would be 
erroneous and not maintainable. He said that determining 
the shareholding of a person without netting off would give 
a distorted picture. He therefore concluded that for the 
reason mentioned above, the provisions of Takeover Code 
were not applicable in this case and no violation of SEBI 
Regulations has taken place." 
C 
4. The Tribunal accepted the counter arguments advanced 
on behalf of the SEBI to the effect that even during the period 
June 1999 to August 1999the appellant had acquired 6,61,800 
shares which constituted 6.29% of the paid up capital of SIL 
which was beyond the permissible limit of 5% and hence the 
D requirement of making public announcement in terms of 
Regulation 11 (1) had to be met by the appellant which the 
appellant failed to do. 
5. Before the Tribunal as well as before us the main 
E contention of the appellant is that SEBI failed to consider that 
the appellant was not only a promoter having more than 15% 
shares of SIL but it was also in the business of sale and 
purchase of shares which was being done simultaneously and 
hence exceeding the limit of 5% at any one point of tims was 
F 
immaterial unless on a net accounting it could be found that 
such ceiling of 5% had been violated by appellant on account 
of its retaining
more than 5% shares of SIL at the end of a 
financial year. On the other hand SEBI have reiterated their 
stand before the Tribunal that the ceiling of making acquisition 
G of only up to 5% of the paid up capital of target company was 
no doubt to be reckoned during a period of 12 months, that is, 
a financial year but the requirement of Regulation 11(1) of the 
Regulations of 1997 of making a public announcement was 
H triggered not only on actual acquisition beyond the 5% limit
KOSHAINVESTMENTS LTD. v. SECURITIES & · 
419 
EXCHANGE BOARD OF INDIA [SHIVAKIRTI SINGH, J.] 
but even on entering into an agreement for such acquisition or A 
deciding to acquire such volume of shares of voting rights, in 
view of provisions of Regulation 14(1) of the Regulations of 
1997. A strong emphasis was laid on Regulation 14(1) which 
requires the public announcement referred to in Regulation 
10 or Regulation 11 to be made by the acquiring company B 
(through its merchant banker), not later than four working days 
of the agreement or decision to acquire the requisite number 
of shares or voting rights which by itself triggers the 
requirement of Regulation 11. (emphasis added) Let us 
conceptualize the case of an entity holding 20 per cent of C 
shareholding in a target company on 1st April of a given year. 
If it were to increase its holding by say 3 per cent and 
subsequently reduce it to 2 per cent. It at that point it intended 
to purchase 4 per cent shares again, whether by way of 0 
fractions or otherwise, it would cross the threshold of 5 per 
cent. It would then have to make compliance with Regulation 
11. We hasten to clarify that if the aggregate percentage of 
acquisitions at any point of time during the financial year 
exceeds 5 per cent, the provision would get triggered. In other E 
words, the provision of Regulation 11 mandating a public 
announcement will kick in at any stage whence the 
shareholding of the said entity in the target company would
exceed 25 per cent. 
F 
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 acquirerwho, together with persons acting in 
concert with him, has acquired, in accordance with the G 
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 H 
voting rights entitling him to exercise more than 5 per cent
420 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2015] 9 S.C.R. 
of the voting.rights, in any financial year ending on 31s1 
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
KOSHAINVESTMENTS LTD. v. SECURITIES& 
421 
EXCHANGE BOARD OF INDIA [SHIVAKIRTI SINGH, J.] 
percentage specified in regulation 10 or regulation 11, A 
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 
B 
are in agreement with the finding of the Tribunal on this issue C 
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 D 
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 
E 
· 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 do.es not dilute the requirement of
making a 
public announcement within the time mentioned in Regulation 
F 
14(1) ifthe 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 G 
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 H
422 
SUPREME COURT REPORTS 
{2015] 9 S.C.R. 
A 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, 
B · 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 
C 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 
D 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 
E 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 
F 
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 
G 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 
H and undeserving of acceptance.

KOSHA INVESTMENTS LTD. v. SECURITIES & 
423 
EXCHANGE BOARD OF INDIA [SHIVAKIRTI SINGH, J.] 
11. In the final analysis we find no merit in these appeals A 
and hence they are dismissed with consolidated cost of Rs. 
50,000/- to be paid by the appellant to SEBI within eight weeks. · 
NidhiJain 
Appeals dismissed. 
B