PRAMOD JAIN AND OTHERS versus SECURITIES AND EXCHANGE BOARD OF INDIA
[2016] 9 S.C.R. 178, Supreme Court of India, 2016
Outcome: Dismissed (Dismissed)
Segment: Facts
A 
B 
[2016] 9 S.C.R. 178 
PRAMOD JAIN AND OTHERS 
v. 
SECURITIES AND EXCHANGE BOARD OF INDIA 
(CivilAppealNo.9103 of2014) 
NOVEMBER 07, 2016 
[ANIL R. DAVE AND ADARSH KUMAR GOEL, JJ.) 
Securities Exchange Board of India (Substantial Acquisition 
of Shares and Takeovers) Regulations, 1997 - s.27 - Hostile 
takeover of shares - Public Offer - Withdrawal of - On the ground 
that due to delay on the part of SEBI in taking decision on the draft 
C letter of offer (DLO), the target company siphoned off its coffers, 
depleted its valuable fixed assets and eroded its net worth 
substantially and thereby the very object of the offer got defeated -
SEBI rejected the application for withdrawal - Securities Appellate 
Tribunal upheld the order of SEBI - On appeal, held: There was 
D 
undue delay on the part of SEBI in dealing with DLO - But the 
delay by itself is not enough to justify withdrawal of the offer unless 
the case falls under regn.27 - The present case, does not fall under 
regn. 27 - Under the scheme of the Regulations there is no bar on 
the target company to take decision about its assets, if the statutory 
procedure has been complied with and if the decision is otherwise 
E 
valid - Thus there is no justification for automatic withdrawal from 
public offer without clearprejudice to the acquirer to the extent of 
rendering the carrying out of public offer impossible - In the facts 
of the present case, the request for withdrawal from public offer 
was not justified. 
F
Dismissing the appeal, the Court 
HELD: 1. There was undue delay on the part of the 
Securities Exchange Board of India (SEBI) in dealing with the 
draft letter of offer (DLO). No doubt, in a given case timeline 
prescribed under the Securities Exchange Board of India 
G (Substantial Acquisition of shares and take over) Regulations, 
1997 may not be adhered to when the SEBI justifiably takes time 
in dealing with the complaints. However, mere upholding of finding 
of Securities Appellate Tribunal (SAT) on the aspect of delay on 
the part of SEBI is not enough to hold that the appellants are 
entitled to withdrawal of the public offer. The withdrawal has to 
H 
178
PRAMOD JAIN AND OTHERS v. SECURITIES AND 
EXCHANGE BOARD OF INDIA 
be dealt with under Regulation 27 of Securities and Exchange 
Board of India (Substantial Acquisition of Shares and Takeovers) 
Regulations, 1997. The general principle is that public offer once 
made cannot be withdrawn. Exception to the rule is the specifit:d 
situations under the Regulation. In the present case, though 
SEBI was not justified in causing delay in giving its comments on 
public offer, this by itself is not enough to justify withdrawal from 
public offer so long as the case does not fall under Regulation 27. 
[Para 26] (203-A-D) 
2. Under the scheme of the Regulations of 1997, public offer 
has to be made after due diligence (Regulation 22). Obligation of 
the board of directors under Regulation 23 against alienation of 
assets, issuance of unissued securities carrying voting rights or 
entering into material contracts is applicable only if approval of 
general body of shareholders is not obtained. It is clear from the 
scheme of the regulations that there is no absolute bar for the 
target company to take decision about its assets, subject to 
compliance with statutory procedure and subject to the decision 
being otherwise valid. There is no doubt that against any ma/a 
fide, illegal or unjustified decision of the target company, remedies 
at appropriate fora are available to the aggrieved parties. Thus, 
there is no justification for automatic withdrawal from public offer 
without clear
prejudice to the acquirer to the extent of rendering 
the carrying out of public offer impossible. In the present case, 
ex post facto approval of the general body has since been obtained. 
Moreover, SEBI had observed that this aspect of the matter will 
be separately enquired into. SEBI as well as the SAT have 
concurrently held that public offer is capable of being carried out 
and has not become impossible. The assets are available with 
the target company. Finding has also been recorded about the 
circumstances preceding the public offer and the conduct of the 
acquirer which is based on record. T!te steps for development of 
the property had already been initiated and the acquirer had taken 
remedies before the Company Law Board against the decision of 
the target company and had settled the matter with the target 
company. Thus, in the facts of the present case, there is no ground 
to interfere with the concurrent finding of the SEBI and the SAT 
that request for withdrawal from public offer was not justified. 
[Para 27) (203-E-H; 204-A-D] 
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SUPREME COURT REPORTS 
[2016] 9 S.C.R. 
A 
Nirma Industries Limited v. Securities and Exchange 
Board of India 2013 (3) SCR 662 : (2013) 8 SCC 20; 
Securities and Exchange Board of India vs. Mis. Akshya 
Infrastructure Pvt. Ltd. (2014) 11 SCC 112 - relied on. 
B 
29~3 (3) SCR 662 
(7014) 11 sec 112 
Case Law Reference 
relied on 
relied on 
Para9 
Para9 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 9103 
of2014. 
C 
From the Judgment and Order dated 06.08.2014 of the Securities 
Appellate Tribunal, Mumbai in Appeal No. 111 of2012. 
C. A. Sundaram, Gopal Jain, Sr. Advs., Ms. Rohini Musa, Raj 
Panchmatia, Peshwan Jehangir, Prateek Kumar, Aditya Gan ju, (for Ml 
s. Khaitan & Co.), Advs., for the Appellants. 
D 
Ms. Surekha Raman, Anuj Sarma, Ms. Niharika, Ms. Titisha 
Mukherjee, (For Mis. K. J. John & Co.), Advs., for the Respondents. 
The Judgment of the Court was delivered by 
ADARSH KUMAR GOEL, J. I. This appeal has been 
preferred under Section 15 Z of the Securities and Exchange Board of 
E 
India Act, 1992 (the Act) against order dated 61h August, 2014 passed 
by the Securities Appellate Tribunal, Mumbai (the SAT) in Appeal 
No.I I I of2012. The SAT upheld the order of Securities and Exchange 
Board oflndia (SEBI) dated l3 1h April, 2012 rejecting the application of 
the appellants for withdrawal of the public offer to acquire shares of the 
Golden Tobacco Ltd. in terms of public announcement (PA) dated 
F 
November 12, 2009 under the provisions ofSEBI (Substantial
Acquisition 
of Shares and Takeovers) Regulations, 1997 (the Takeover Regulations). 
FACTS: 
2. Golden Tobacco Limited (the target company) is a company 
G having its registered office at Tobacco House, S.V. Road, Vile Parle 
(West), Mumbai - 400 056. The equity shares of the target company 
are listed on the Bombay Stock Exchange Limited (BSE) and the National 
Stock Exchange of India Limited (NSE). 
3. On November 12, 2009, Mr. Pramod Jain and Pranidhi Holdings 
H Private Limited (the acquirers) along with J.P. Financial Services Private
PRAMOD JAIN AND OTHERS v. SECURITIES AND 
EXCHANGE BOARD OF INDIA [ADARSH KUMAR GOEL, J.] 
Limited (the person acting in concert (PAC) made PA through VC 
Corporate Advisors Private Limited (the merchant banker) in accordance 
with regulations 10 and 12 read with regulation 14. As on the date of the 
PA, the acquirers and PAC collectively held 11, 39, 002 equity shares 
(6.47%) of the target company. The PA was voluntarily made by the 
acquirers and the PAC to acquire 44, 02, 201 equity shares (25%) of the 
target company from its equity shareholders at a price ofRs.101/-(the 
offer price) per equity share. At that time, market price of the target 
company shares was Rs. l 09/-per share. Networth of the target company 
as on 31" March, 2009 was Rs.42.44 crores. Net current assets were 
Rs. I 34.4 crores and gross sales were Rs.173.68 crores. The offer was 
for hostile takeover of the target company. The PA mentioned that the 
prime object of the offer was to acquire substantial shares/voting rights 
accompanied with the change and control of the management of the 
target company. The acquisition was in the nature of strategic investment 
for diversification and growth and to reap the benefit of corporate 
opportunities. The draft letter of offer also mentioned that.the PAC had 
advanced loan against shares of the target company and on account of 
default, it acquire·:~ the said shares representing 5.05% of the equity 
share capital. The acquirers and the PAC had also
acquired 71034 
equity shares at highest and average price of Rs. I 00.15 and Rs.89.13 
respectively. Thus, the acquirers and the PAC had 6.47 % of the issue 
of equity share capital as on the date of PA. The background of the 
acquirers mentioned in the DLO was that Mr. Pramod Jain was prime 
Director of PHPL and had experience in financial and consultancy 
services. 
4. The acquirers and PAC, through the merchant banker, filed the 
draft letter of offer (DLO) with SEBI on November, 26, 2009. During 
examination of the DLO, certain complaints were received by SEBI 
against the acquirers and PAC as well as against the target company 
and its promoters. The appellants (the acquirer) in their complaints to 
SEBI and other proceedings including petition under Section 397/398 of 
the Companies Act before the Company Law Board and a suit before 
the Civil Court inter alia questioned the transaction for joint development 
ofVile Parle Property in terms of Memorandum ofUnderstanding(MoU) 
dated 26
1h September, 2009 with Sheth Developers and Suraksha Realty 
Ltd. Various correspondences were exchanged between SEBI and the 
merchant banker, acquirers, PAC, the target company and certain other 
entities in respect of such complaints. 
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SUPREME COURT REPORTS 
[2016] 9 S.C.R. 
5. The appellants vide application dated 8th October, 2011 sought 
permission to withdraw the offer undef°Regulation 27( 1 )( d). The stand 
of the appellants in the said letter was that the SEBI had not taken any 
decision on the DLO in two years during which period the management 
of the target company had systematically siphoned off its coffers, depleted 
its valuable fixed assets and eroded its net worth substantially with the 
intention of making it a shell company. This has defeated the very object 
of the offer, without any fault on the part of the acquirers. The 
management had availed huge high cost borrowing from banks and 
financial institutions against its property, including 18. 7 per cent shares 
out of the promoters' shareholdings. Disputes were pending before the 
arbitrator arising out of default in payments. Most valuable assets of the 
target company had been encumbered in violation of SEBI regulations 
and against the interest of minority shareholders and the acquirers. Since 
the date of PA, financial position of the target company had deteriorated 
substantially. 
D ORDER OF SEBI 
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6. The SEBI vide order dated JJth April, 2012 declined to permit 
withdrawal of the PA but observed that alleged violation of Regulation 
23 by the target company shall be investigated. It was held that as per 
Regulation 23(1 ), the target company was entitled to dispose of its assets 
with the approval of the
shareholders even after the PA. Correspondence 
which the SEBI had with the acquirers was-referred to, with a view to 
explain the delay in deciding the DLO. It was observed that the SEBI 
had informed the merchant banker of the appellants on 3'd February, 
20 I 0 that it was not competent to administer the authenticity of the process 
of Resolution in the General Body Meeting (GBM) dated 18th January,· 
20 I 0. The merchant banker vide letter dated 5th May, 20 I 0 informed 
the SEBI that the acquirers had reached a settlement with the target 
company and withdrawn their petition before the Company Law Board 
(CLB) against the Resolution dated 18th January, 2010. SEBI had also 
advised the merchant banker that it had not been provided any material 
in support of the allegation of violation ofRegulation 23 by the target 
company in selling its assets. The merchant banker informed the SEBI 
vide letter dated J 9th May, 2011 that the acquirers had filed a suit for 
restraining the target company from creating any third party interest in 
the assets of the target company. The SEBI had also received complaints 
against the acquirers and the PAC which were being looked into when
PRAMOD JAIN AND OTHERS v. SECURITIES AND 
EXCHANGE BOARD OF INDIA [ADARSH KUMAR GOEL, J.) 
the PAC vide letter dated 2nd August, 2011 sought permission to withdraw 
the PA. Vide letter dated 91h August, 2011, the acquirers requested that 
the process of open offer be kept in abeyance. SEBI vide e-mail dated 
9'h September, 2011 responded to the merchant banker, seeking tabulated 
list of the allegations of the acquirers and the PAC but instead of doing 
so, the merchant banker forwarded request for withdrawal ofthe PA. 
It was observed that in the circumstances there was no delay on the 
part of the SEBI. It was further observed that the acquirers had 
challenged the Resolution of the Extra Ordinal)' General Meeting (EGM) 
and had also filed a suit. The acquirers entered into an amicable settlement 
before the CLB. SEBI had no jurisdiction in the matter. Referring to 
Regulation 22, it was observed that the acquirers could make PA only 
after most careful consideration and must ensure that it is able to 
implement the offer. Referring to Regulation 27, it was observed that 
public offer once made could not be withdrawn except in the 
circumstances provided in the said Regulation which had to be construed 
strictly. Unchecked automatic withdrawal of offer was capable of being 
misused. It was also observed that the acquirers should have used due 
diligence with regard to the allegation in FIR dated 251h July, 2009 about 
personal borrowings by promoters of the target company
by sale of 
prime properties as the PA was much after the FIR. The acquirers and 
the PAC had already purchased substantial shares of the target company 
and thus, could not make PA without exercising due diligence regarding 
the financial condition and quality of management of the target company. 
The acquirers were not strangers to the target company. They had 6.47 
per cent shares. Discoveiy of adverse effects pertaining to financial 
health subsequent to the PA could not be a ground to withdraw the PA. 
Doing so will jeopardize the interests of the shareholders. The takeover 
regulations laid down a self-contained code and withdrawal of public 
offer was not governed by principles of withdrawal of an offer under 
the Contract Act, 1872. 
ORDER OF SAT 
7. The above view has been affirmed by the SAT in its impugned 
order (by majority). As regards the time line stipulated in Regulation 18, 
it was observed that under the second proviso thereto, the SEBI could 
take time in making inquiiy on a complaint and thereafter could call for 
a revised letter of offer with or with.out re-scheduling the date of opening 
or closing the offer. However, it was observed that in the present case, 
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[2016] 9 S.C.R. 
SEBI was wholly unjustified in taking more than two years for offering 
its comments on the letter of offer submitted by the appellants. This, 
however, did not constitute a ground to permit withdrawal of the PA. As 
regards the contention that the public offer was frustrated and became 
impossible of implementation on account of encumbering of the most 
valuable property of the target company in violation of Regulation 23 
and other steps of the promoters making the target company a shell 
company, it was observed that the target company had taken decision to 
develop its Vile Parle property even before the PA. Appellant No. I had 
given his offer for joint development of the said property on 291h 
September, 2008 but the said offer was rejected and Sheth Developers 
were short! isted for the purpose. It was thereafter that the appellants 
decided to make hostile takeover public offer to frustrate the decision of 
the target company to develop the property with Sheth Developers. It 
will be appropriate to refer to the findings of the SAT in this regard: 
"14. We see 110 merit in the above contentions. Admittedly, 
GTL had decided to develop the Vile-Parle property even 
before public offer was made by appellants on Nove111ber I 2, 
2009. In fact Appellant No. I had 111ade an offer to GTL on 
September 29, 2008 for joint development of Vile-Parle 
property by offering · 150 crores as non refundable a111ount
and had suggested profit sharing in the joint venture at a 
ratio 50:50. However, GTL rejected the offer 111ade by 
appellants and on recommendation of Ernst & Young 
shortlisted Sheth Developers as best 20 bidder for joint 
development of Vile-Parle property. Thereupon appellants 
decided to 111ake hostile public offer on November I 2, 2009 
with a v.iew to frustrate decision of GTL to develop the Vile-
Parle proper~y jointly with Sheth Developers. Although object 
of the proposal to acquire 25% shares of GTL at Rs. 1011-
per share as against the market price of Rs.1091- per share, 
as stated in the public offer was to obtain substantial stake/ 
voting rights of GTL, it is not in di5pute that appellants were 
basically interested in developing the Vile-Parle property. Thus, 
it is evident that appellants beingfi'ustrated in their endeavour 
to develop the Vile-Parle property, had resorted to the 
mechanism of public offer with a view to frustrate the decision 
of GTL in jointly developing the Vile-Parle property with Sheth 
Developers. Therefore, appellants having made public offer
PRAMOD JAIN AND OTHERS v. SECURITIES AND 
EXCHANGE BOARD OF INDIA [ADARSH KUMAR GOEL, J.] 
out of .frustration on account of not being able to develop the 
Vile-Parle property, are not justified in alleging that entrusting 
the development of Vile-Parle property to Sheth Developers 
has frustrated the public offer made by appellants. 
15. Ad111ittedly, after making public offe1; appellants had filed 
Company Petition No. 3 of 2010, wherein specific grievance 
was made to the effect that GTL had entered into MOU with 
Sheth Developers without disclosing all material facts to the 
shareholders and without the approval of shareholders which 
was in gross violation of regulation 23 of SAST Regulatio71s, 
1997. It was also alleged in the Company Petition that the 
promoters of GTL have been mismanaging the affairs of the 
company and have siphoned of huge amounts fro111 the 
company. as a result whereof. there has been deep decline in 
the pe1formance and profitability of the company. Appellants 
had also sought an order restraining GTL from holding EGM 
which was scheduled to be held on Januaiy 18, 2010. 
16. Company Law Board in its order dated January 19, 2010, 
recorded statement made by counsel for GTL that in the EGM 
held on January 18, 2010 requisite resolutions have been 
passed in relation to development of Vile-Parle property and 
in implementation of the said resolution third party rights have 
been created. By that order Company Lmv Board directed that 
during the
pendency of Company Petition No. 3 of 20 JO GTL 
shall not act upon resolution dated .January 18, 2010 any 
furthe1: From aforesaid order passed by Company Lmv Board 
it is clear that in view of resolution passed in the EGM held 
on .Januaiy 18, 2010, violation of regulation 23 commilted 
by GTL in relation to development of Vile-Parle property stood 
rectified. Dispute, if any in relation to passing of resolution 
on .January 18, 2010 was to be considered at the hearing of 
Company Petition No. 3 of 2010. 
17. However, on February 8, 2010, appellants withdrew 
Company Petition No.3 of 2010 by merely recording that the 
parties have amiably settled the matter without any further 
claims against each other. Having settled the dispute relating 
to development of Vile-Parle property with the promoters/ 
management of GTL on the basis of undisclosed reasons and 
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having withdrawn Company Petition No. 3 of 2010 
unconditionally, it is not open to appellants to allege that 
their public offer is frustrated on account of GTL entering 
into MOU with Sheth Developers for development of Vile-
Par/e property. 
18. Similarly, having settled the dispute relating to siphoning 
of funds by GTL during 2009-2010 which plea was 
specifically raised in Company Petition No. 3 of 2010, 
appellants are not justified in agitating the very same issue 
before SEBJ on ground that GTL has siphoned of its funds 
during the year 2009-2010 and 2010-2011. In other words, 
since the plea of siphoning of funds by GTL during the year 
2009-2010 and prior thereto having been specifically raised 
in Company Petition No. 3 of 2010 and that issue having 
~een settled by appellants with the promoters/ management 
of GTL for undisclosed reasons, the appellants are not 
iustified in reagitating the very same issue before SEBI in 
relation to siphoning of f1,mds either during 2009-2010 ot 
during 2010-2011. 
21. It is relevant to note that appellants, subsequent to 
withdrawal of Company Petition No. 3 of 2010 in February 
2010, have filed S. C. Suit No. 817 of 2011 in April 2011 
before the City Civil Court at Mumbai, alleging for the first 
time that the Company Petition No. 3 of 2010 was withdrawn 
011 account of oral assurance given by promoters of GTL that 
Vile-Parle property would be developed
dnly after holding 
public auction and that the promoters of GTL have committed 
breach of that oral assurance. 
· 
22. Admittedly, City Civil Court at Mumbai has. granted ad-
interim relief in favour of appellants on April 26, 2011 and 
that ad- interim order continues to be in operation till date . . 
Therefore, irrespective of the fact that SEBJ was not justified 
in taking more than two. years for approving the draft letter 
of offer, in the facts of present case, grievance of appellwits 
that the public offer is frustrated and has become impossible 
of performance cannot be accepted, because, both grounds 
based on which appellants had sought withdrawal of public 
offe1; were in fact settled by appellants on .the basis of oral
PRAMOD JAIN AND OTHERS v. SECURITIES AND 
187 
EXCHANGE BOARD OF INDIA [ADARSH KUMAR GOEL, J.] 
assurance given by promoters of GTL and further, for the 
A 
alleged breach of oral assurance, appellants have filed Suit 
in the Bombay City Civil Court and obtained stay of 
development of Vile-Parle property and that stay is admitted 
operating till date. 
23. Strong reliance was placed by counsel for appellants on 
B 
decision of SEEi dated February 14, 2014 wherein penalty 
of '1 crore has been levied against the promoters of GTL 
interalia for violating regulation 23 of SAST Regulations, 
1997. No doubt that entering into an MOU by GTL with Sheth 
Developers on November 26, 2009 without obtaining approval 
of general body of shareholders was in violation of regulation · C 
23 of SAST Regulations, 1997. However, admittedly on 
January 18, 2010 the general body of shareholders has 
authorized GTL to enter into Joint Development Agreement is 
in respect of Vile-Parle property. In view of approval granted 
by the general body of shareholders on January 18, 2010, 
D 
grievance of appellants that Vile-Parle property has been 
encumbered in violation of regulation 23 does not survive at 
least from January 18, 2010. 
26. Apart from above, as late as on August 9, 2011 appellants 
had addressed a letter to SEEi requesting them to keep the 
process of open offer in abeyance, because, in the 
proceedings pending before the City Civil Court at Mumbai, 
GTL had filed an affidavit stating
that in the board resolution 
dated May 25, 2011 company has decided not to proceed 
further with the MOU dated November 26, 2009 (wrongly 
stated therein as December 26, 2009) entered with Sheth 
Developers and instead take necessary steps to develop the 
Vile-Parle property by the company of its own. By the said 
letter dated August 9, 2011 appellants called upon SEBI to 
investigate about the exact legal status of the Vile-Parle 
property, investigate regarding possession of the original title 
deeds of Vile-Parle property and investigate regarding 
possession of the original title deeds of Vile-Parle property, 
investigate regarding usage of funds etc. It was further stated 
i11 the said letter until appellants are assured of their concern 
on the above issues, SEBI should keep the process of open 
offer in abeyance. 
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27. Aforesaid letter dated August 9, 2011, clearly falsifies 
the case of appellants that the actions taken by promoters of 
GTL during the course of two years has frustrated the public 
offer, because, if public offer was frustrated, appellants would 
not have asked SEBI to keep the process of public offer in 
abeyance. Having asked SEBI on August 9; 201.1 to keep the 
process of public offer in abeyance, appellants were not 
;ustified in filing application on October 11, 2011 seeking 
permission to withdraw the open offer on ground that 
inordinate. delay has frustrated the open offer. " 
8. We have heard learned counsel for the parties. 
CONTENTIONS OF THE APPELLANTS 
9. Main contention raised on behalfofthe appellants is that there 
is no justification for long delay on the part of the SEBI in granting 
approval to the offer of the appellant and situation having changed to the 
prejudice of the appellant, the appellants are entitled to withdraw their 
offer. Since under the scheme of the regulations, the appellants could 
not withdraw the offer once made except in circumstances mentioned 
in Regulation 27, the reg\!!ation should be read as creating an obligation 
on the part of the SEBI to take speedy decision and if there was 
unexplained delay resulting in prejudice to the appellants-acquirers, the 
appellants are entitled to be absolved of the liability to honour the offer. 
GTL had become a BIFR company
on account of siphoning off funds by 
the pronioters. It was submitted that in absence of obligation to approve 
the offer within reasonable time, the promoters could take steps to siphon 
the funds or dispose of the assets which could prejudice the interests of 
the acquirer. Thus, it could not be held that the acquirer was indefinitely 
bound by the offer. Reference was also made to the timeline provided 
in Regulation 22and the provisions of Regulation 23. It was submitted 
that while normal ups and downs in the market may not be a ground to 
permit withdrawal of offer, unilaterai action of the promoters resulting in 
transfer of assets could certainly be the ground to permit withdrawal of 
G offer. The object of binding an acquirer to the offer is to protect the 
interest of the shareholders but this was required to be balanced with 
the interest of the acquirer. If the assets arc unduly transferred by the 
promoters after the PA, the acquirer was entitled to be relieved from the 
offer. SEBI in its capacity as regulator has to adopt an approach which 
H 
is fair to all. In the facts of present case, the decisions of this Court ih
PRAMOD JAIN AND OTHERS v. SECURITIES AND 
EXCHANGE BOARD OF INDIA [ADARSH KUMAR GOEL, J.] 
Nirma Industries Limited vs. Securities and Exchange Board of 
India' and Securities and Exchange Board of India vs. Mis. Aksltya 
Infrastructure Pvt. Ltd. 1 relied upon in the impugned order are not 
applicable. Even if clause (d) ofregulation 27 is read ejusdem generis 
so as to apply only in situations where it is impossible forthe acquirerto 
perform the public offer, it cannot exclude situations where SEBI itself 
is satisfied that serious prejudice was caused to the acquirer by 
intervening actions of the promoters in alienating or encumbering the 
assets of the company, rendering it inequitable to require the acquirerto 
be bound by its offer. Thus, the obligation of the acquirer cannot be 
divorced from the conduct of the promoters in the intervening period. 
Apart from distinguishing the judgment in Nirnut Industries Limited 
(supra) which has been followed in the impugned order, the judgment in 
Mis. Aksltya Infrastructure Pvt. Ltd (supra) was also sought to be 
distinguished as being limited to cases where delay by SEBI does not 
cause any serious prejudice to the acquirer. 
I 0. Thus, the submissions of the appellants are two fold: 
(i) The SEBI failed to adhere to ihe timeline prescribed under the 
Takeover Code which rendered it impossible for the appellants 
to conclude their open offer. Adherence to time line prescribed 
under Regulations.18(2), 22(2), (3) and (4) are
critical und.er 
the Takeover Code, the Bhagwati Committee Report and the 
International Practice. The time is of essence in cases of 
hostile takeover. 
(ii) The existing promoters should not be given an opportunity to 
administer a poison pill to defeat the offer of the potential 
acquirers. This principle is recognized under Regulation 23. 
11. Adverting to the facts it was submitted that first complaint 
against the appellants was received on 8'" January, 20 I 0 i.e. 2 I days 
after the PA. Complaints against the appellants were frivolous. The 
appellants duly responded to the complaints in timely ma1111er. The 
complaints were made at the behest of the promoters. The appellants 
pointed out various illegal acts of the promoters but the SEBI failed to 
take any action. The appellants requested the SEBI to keep the open 
offer in abeyance till action was taken against the promoters. This justifies 
the prayer of the appellants to withdraw the open offer. 
I (2013)8SCC20 
'(201~) 11sec112 
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SUPREME COURT REPORTS 
[2016] 9 S.C.R. 
12. Shri C.A. Sundaram, learned senior counsel for the appellants 
submitted that all the members of the SAT (majority as well as minority) 
have held the delay by SEBI to be unjustified but still, on erroneous 
interpretation, right of the appellants to withdraw the public offer has not 
been upheld. Reference was made to the complaint about transfer of 
valuable property of the Company which was un-encumbered at the 
time of PA. The funds raised from the transaction have been siphoned 
off. One of the key promoters was arrested by the Economic Offences 
Wing of the Police and remained in jail for one and a half years. 
Chargesheet was filed against him. The financial ratio of the target 
company reflects manner in which financial position quickly deteriorated 
after the PA. The petition filed by the acquirers before the Company 
Law Board was withdrawn on the assurance of the promoters that the 
assets will not be encumbered without the public auction. Thereafter, 
the matter was pending in the civil suit. Thus, there was a breach of 
Regulation 23. 
· 
13. Shri Sundaram submitted that open offer was not a concluded 
contract but mere invitation to the public to offer their shares. The result 
ofnot allowing the offer to be withdrawn will be that the promoters will 
be able to sell their shares at the price specified in open offer even when 
the value of the shares was far lower. This will be against the policy
of 
law underlying the Takeover Regulations. Moreover, the 11ction of the 
SEBI was required to be fair, reasonable and consistent with Article 14 
of the Constitution. 
14. Shri Sundaram sought to distinguish the judgments of this Court 
in Nimw Industries Limited (supra) and Mis. Aksltya Infrastructure 
Pvt. Ltd. (supra) by submitting that unlike the said cases, in the present 
case, there was undue delay on the part of the SEBI and prejudice was 
caused to the acquirers for reasons not attributable to them. He submitted 
that doctrine of frustration under Section 56 of the Contract Act will 
clearly apply. As a regulator, th_e SEBI is duty bound to protect the 
interest of the acquirer and also to ensure that a genuine attempt by an 
G 
acquirer is not defeated by the promoters by their unilateral action. 
H 
RESPONSE BY THE SEBI 
15. Shri Arvind P. Datar, learned senior counsel for the SEBI 
opposed the above submissions, he submitted that adverse finding against 
SEBI on the issue of delay wa,.s unjustified, but even if the said finding
PRAMOD JAIN AND OTHERS v. SECURITIES AND 
EXCHANGE BOARD OF INDIA [ADARSH KUMAR GOEL, J.] 
was upheld, the withdrawal of open offer was not permissible under 
Regulation 27(1)(d) of the Takeover Regulations. The acquirers held 
6.47% share and had lent Rs.8.5 crores to the target company. They. 
had purchased shares worth Rs.63.33 lakhs before making the PA. The 
first appellant was aware of the acts of mismanagement by the promoters 
of the target company. The PA was made with the intention of curbing 
fraudulent and the illegal practices of the promoters and for the target 
company's benefit. The appellants approached SEBI tO investigate the 
illegalities knowing fully well that SEBI's role was only to regulate the 
security market. For mismanagement or other ill~galities, remedy was 
under Section 397 /398 of the Companies Act which remedy the appellants 
had taken. The appellants reached an amicable settlement with the target 
company and thereafter approached the civil court. It was wrong to 
state that the target company had become defunct. The target company 
continued to own the Vile Parle property worth Rs.2000 crores. 
16. Shri Datar submitted that more than 43 complaints/letters were 
received which were to be dealt with by SEBI. In such circumstances, 
it could not be held that there was undue delay on the part of the SEBI 
in dealing with the DLO. 
17. It was submitted that the appellants ought to have exercised 
due diligence before making the PA. The
appellants were not strangi;irs 
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and had 6.47% shares. They had advanced loan of Rs.8.5 crores and 
E 
acquired shares worth Rs.66.33 lakhs before the PA. They were awart"'-
of the FIR and alleged acts of mismanagement they had resorted to 
public offer out of frustration against the decision of the target company 
developing the Vile Parle property with Sheth Developers. They settled 
the matter before the Company Law Board with the target company 
and also approached the civil court for alleged breach of settlement and 
F 
obtained stay of development of the Vile Parle property. In these 
circumstances, the plea of frustration could not be allowed to be raised 
by the appellants. The PA could not be allowed to be withdrawn merely 
on the ground that the acquirers find it not to be a prudent decision. 
Moreover, the company still owns assets and was not a shell company 
G 
and no prejudice was suffered by the acquirers. Referring to the penalty 
levied by SEBI on the target company for entering into a MoU without 
approval of the General Body, it was submitted that this could not furnish 
a ground for withdrawal of the PA. Appellants had raised the issue before 
the CLB and settled the matter. 
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[2016] 9 S.C.R. 
A QUESTIONS 
B 
c 
18. The rival submissions require us to determine the following 
questions: 
(i) To what extent is the timeline laid down under the Takeover 
Regulations required to be adhered to and effect of delay by 
SEBI in the present case? 
(ii) To what extent unilateral action of the target company in 
dealing with the property of the company after a hostile public 
offer is made furnish cause of action to the acquirers to 
withdraw the public offer and whether in the present case, 
decision not permitting withdrawal of public offer is justified? 
THE TAKEOVER REGULATIONS 
19. Needless to mention that mergers and takeovers are well known 
processes in the corporate world. Acquisition of controlling interest ofa 
company can be friendly or hostile. In a friendly acquisition, management 
D of the target company sells its controlling shares to the acquirer. Where 
management of the target company is unwilling to negotiate with an 
acquirer, the acquirer can directly approach the shareholders by making 
an open offer which is called Hostile takeover. A Hostile takeover helps 
E 
F 
to unlock the hidden value of the shares and puts pressure on the 
management to work efficiently. On the other hand, it has potential of 
unduly upsetting the nonnal functioning of a target company. Thus, there 
is an undoubted need to regulate the process of acquisition and takeovers 
in post- liberalisation era after 1991. It is well known that
takeover attempt 
being unpleasant for the target company is normally met with defence 
strategies such as 'Poison Pills' (makingtakeoverunviable fortheacquirer 
by making the cost of acquisition unattractive), 'Shark Repellents' 
(measures to repel an unwanted takeover) sale of valuable assets, etc. 
20. Justice P.N. Bhagwati Committee was appointed in November, 
1995 to review the existing framework of regulations and to suggest 
amendments in the interest of investors and all parties concerned in the 
G 
acquisition process. The Committee kept in mind the following principles: 
"i. Equality of treatment and opportunity to all shareholders. 
ii. Protection of interests of shareholders. 
iii. Fair and truthful disclosure of all material information by the . 
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acquirer in all public announcements and offer documents.
PRAMOD JAIN AND OTHERS v. SECURITIES AND 
193 
EXCHANGE BOARD OF INDIA [ADARSH KUMAR GOEL, J.] 
iv. No information to be furnished by the acquirer and other parties 
A 
to an offer exclusively to any one group of shareholders. 
v. Availability of sufficient time to shareholders for making 
informed decisions. 
vi. An offer to be announced only after most careful and 
responsible consideration. 
vii. The acquirer and all other intermediaries professionally involved 
in the offer, to exercise highest standards of care and accuracy 
in preparing offer documents. 
viii.Recognition by all persons connected with the process of 
substantial acquisition of shares that there are bound to be 
limitations on their freedom of action and on the manner in 
which the pursuit of their interests can be carried out during 
the offer period. 
ix. All parties to an offer to refrain from creating a false market 
in securities of the target company. 
x. No action to be taken by the target company to frustrate an 
offer without the approval of the shareholders." 3 
The Committee made various recommendations including 
B 
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requirement of disclosure by the acquirers, procedure for public 
E 
announcements, obligations of the acquirers and the target company. 
This led to the adoption of the 1997 Takeover Regulations. 
21. We may reproduce some of the Regulations which are 
necessary for the decision of controversy in the case before us : 
" Acquisition of fifteen per cent or more of tile shares
or 
voti11g rig/its of any compa11y. 
JO.No acquirer shall acquire shares or voting rights which 
(taken together V.1ith shares or voting rights, if any, held 
by him or by persons acting in concert with him), entitle 
such acquirer to exercise fifteen per cent or more of the 
voting rights in a company, unless such acquirer makes a 
public announcement to acquire shares of such company 
. in accordance with the regulations. 
'Justice P.N. Bhagwati Committee Report on Takeovers 
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Acquisition of control over a company. 
12.Irrespective of whether or not there has been any 
acquisition of shares or voting rights in a company, no 
acquirer shall acquire control over the target company, 
unless such person makes a public announcement to 
acquire shares and acquires such shares in accordance 
with the regulations .... 
Timing of the public announcement of offer. 
14.(1) The public announcement referred ta in regulation JO 
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 .... 
Submission of letter of offer to the Board. 
18. (1) Within fourteen days from the date of public 
announcement made under regulation JO, 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 despatched 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 Page 35 of 75 under 
any obligation to do so), the merchant banker and the
acquirer shall carry out such changes before the letter of 
offer is despatched 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
PRAMOD JAIN AND OTHERS v. SECURITIES AND 
195 
EXCHANGE BOARD OF INDIA [ADARSH KUMAR GOEL, J.] 
filing of such revised letter of offer. 
A 
(3) The acquirer shall, while filing the draft letter of offer 
with the Board under sub-regulation (1), pay a fee as 
mentioned in the following table, by bankers ' cheque or 
demand draft drawn in favour of the 'Securities and 
Exchange Board of India'.... 
B 
General Objections of the acquirer. 
22. (/} The public announcement of an ·offer to acquire the 
shares of the target company shall be made only when the 
acquirer is able to implement the offer. 
(2) Within 14 days of the public announcement of the offer, 
the acquirer shall send a copy of the draft letter of offer to 
the target company at its registered office address, for being 
placed before the board of directors and to all the stock 
exchanges where the shares of the company are listed. 
(3) The acquirer shall ensure that the letter of offer is sent 
to all the shareholders (including non-resident Indians) of 
the target company. whose names appear on the register 
of members of the company as on the specified date 
mentioned in 1 Inserted by the SEBI (Substantial Acquisition 
of Shares and Takeovers) (Second Amendment) 
Regulations, 2002, w.e.f 9-9-2002. Page 47 of 75 the 
public announcement, so as to reach them within 45 days 
from the date of public 
announcement .... 
General obligations of tile board of directors of tl1e target 
company. 
23.(1) Unless the approval
of the general body of shareholders 
is obtained after the date of the public announcement of 
offer, ·the board of directors of the target company shall 
not, durinK the offer period,-
(a) sell, transfer, encumber or otherwise dispose of or enter 
into an agreement for sale, transfer, encumbrance or for 
disposal of assets otherwise, not being sale or disposal of 
assets in the ordinary course of business, of the company 
or its subsidiaries; or 
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[2016] 9 S.C.R. 
(b) issue 2 [or allot} any authorised but unissued securities 
carrying voting rights during the offer period; or 
(c) enter into any material contracts. 
Witltdrawal of offer. 
B 
27. (1) No public offer, once made, shall be withdrawn except 
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under the following circumstances:-
(a) [***} 
(b) the statutory approval(s) required have been refused; 
(c) the sole acquirer, being a natural person, has died; 
(d) such circumstances as in the opinion of the Board merit 
withdrawal. 
Board's rif(ht to investif(ate. 
38. The Board may appoint one or more persons as 
investigating officer to undertake investigation for any of 
the followinf; purposes, namely:-
( a) to investigate into the complaints received ji-om the 
investors, the intermediaries or any other person on any 
matter having a bearing on the allegations of substantial 
acquisition of shares and takeovers ; 
(b) to investigate suo motu upon its own knowledge or 
information, in the interest of the securities market or 
investors' interest, for any breach of the regulations; 
(c) to as9ertain whether the provisions of the Act and the 
regulations are being complied with for any breach of the 
regulations." 
22. In Nirma Industries Limited (Supra), the acquirer after 
making PA sought withdrawal therefrom on the ground of embezzlement 
of funds by the target company. SEBI rejected the application with the 
observation that the acquirer ought to have used
due diligence prior to 
making the public offer. Rejecting the plea that the embezzlement and 
siphoning off of funds by the target company could not have been found 
by third party even after exercising diligence, this Court held under the 
scheme of the takeover code public offer once made could not be 
withdrawn so as to deprive the shareholders of tht.ir valuable right to
PRAMOD JAIN AND OTHERS v. SECURITIES AND 
EXCHANGE BOARD OF INDIA [ADARSH KUMAR GOEL, J.) 
have exit option and also to ensure that public announcement is not made 
by way of speculation. The scheme of takeover code was held to be as 
follows: 
" 59. A conspectus of the aforesaid Regulations would show 
that the scheme of the Takeover Code is: {a) to ensure that 
the target company is aware of the substantial acquisition; 
{b) to ensure that in the process of the substantial acquisition 
or takeover, the security market is not distorted or 
111a11ipulated; and (c) to ensure that the small investors are 
given an option to exit, that is, they are offered a choice to 
either offload their shares at a price as determined in 
accordance with the Takeover Code or to continue as 
shareholders under the new dispensation. In other words, the 
Takeover Code is meant to ensure fair and equal treatment of 
all shareholders in relation to substantial acquisition of shares 
and takeovers and that the process does not take place in a 
clandestine manner without protecting the interest of the 
shareholders. It is keeping in view the aforesaid aims and 
objects of the Takeover Code that we shall have to interpret 
Regulation 27(1)." 
23. As regards the scheme of Regulation 27, it was further 
observed: 
''62. A bare perusal of the aforesaid Regulations shows that 
Regulation 27(1) states the general rule in negative terms. It 
provides that no public offer, once made, shall be withdrawn.
Since clause (a) has been omitted, we are required to interpret 
only the scope and ambit of clauses (b), (c) and (d). The three 
sub-clauses are exceptions to the general rule and, therefore, 
have to be construed very strictly. The exceptions cannot be 
construed in such a manner that would destroy the general 
rule that no public offer shall be permitted to be withdrawn 
after the public announcement has been made. Clause (b) 
would permit a public offer to be withdrawn in case of legal 
impossibility when the statutory approval required has been 
refused. Clause (c) again provides for impossibility when the 
sole acquire1; being a natural person, has died. Clause (b) 
deals with a legal impossibility whereas clause (c) deals with 
a 11atural disaster. Clearly clauses (b) and (c) are within the 
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same genus of impossibility. Clause (d) also being an exception 
to the general rule would have to be naturally construed in 
terms of clauses (b) and (c). Mr. Divan has placed a great 
deal of emphasis on the expression "such circumstances" and _ 
"in the opinion" to indicate that the Board would have a wide 
discretion to permit withdrawal of an offer even though it is 
not impossible to perform. We are unable to accept such an 
interpretation. 
67. Applying the aforesaid tests, we have no hesitation in 
accepting the conclusions reached by SAT that clauses (b) 
and (c) referred to circumstances which pertain to a class, 
category or genus, that the co111111on thread which runs through 
them is the impossibility in carrying out the public offer. 
Therefore, the ter111 "such circu111stances" in clause (d) would 
also be restricted to a situation which would make it impossible 
for the acquirer to perform the public offer. The discretion 
has been left to the Board by the legislature realising that it is 
impossible to anticipate all the circumstances that may arise 
111aking it i111possible to complete a public offer. Therefore, 
certain a111ount of discretion has been left with the Board to 
determine as to whether the circumstances fall within the realm 
of impossibility as visualised under clauses (b) and (c). In the 
present case, we are not satisfied that circumstances are such 
which would make it
impossible for the acquirer to perform 
the public offer. The possibility that the acquirer would end-
up making losses instead of generating a huge profit would 
not bring the situation within the realm of impossibility. 
70. M1: Venugopal, in our opinion, has rightly submitted that 
the Takeover Regulations, which is a special law to regulate 
''substantial acquisition of shares and takeovers" in a target 
company lays down a self-contained code for open offer; 
and also that interest of investors in the present case required 
that they should be given an exit route when the appellants 
have acquired substantial chunk of shares in the target 
company. He has correctly emphasized in his submissions that 
the orderly development of the securities market as a whole 
requires that public offers once made ought not to be allowed 
to be withdrawn on the ground of fall in share price of the
PRAMOD JAIN AND OTHERS v. SECURITIES AND 
EXCHANGE BOARD OF INDIA [ADARSH KUMAR GOEL, J.] 
target company, which is essentially a business misfortune or 
a financial decision of the acquirer having gone wrong. SEBI 
as well as SAT have correctly concluded that withdrawal of 
the open offer in the given set of circumstances is neither in 
the interest of investors nor development of the securities 
market. 
90. We are inclined to agree with the submission made by Mr 
Venugopal that the appellants cannoi 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 that-
"24. (l)(a) the acquirer is able to implement the offer; 
(b) the provision relating to escrow account referred to in 
Regulation 28 has been made; 
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(c) firm arrangements for funds and money for payment 
through verifiable means to fulfil the obligations under 
E 
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
of F 
offer." 
91. 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 
G 
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. 
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[2016] 9 S.C.R. 
A 
the public announcement. In such circumstances, in our 
opinion, the judgments cited by Mr Shyam Divan are of no 
re I evance. " 
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c 
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G 
24. As regards the effect of delay on the part of SEBI, it was 
observed: 
"94. 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 8-8-
2005 to 20-3-2006. We have already notice</ 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(J)(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. " 
25. In Mis. Akshya Infrastructure Pvt. Ltd. (supra), this Court 
H held that SEBI is not justified in causing delay in dealing with the issuance
PRAMOD JAIN AND OTHERS v. SECURITIES AND 
EXCHANGE BOARD OF INDIA [ADARSH KUMAR GOEL, J.] 
of its comments on a letter of offer as delay can lead to controversy as 
to whether the belated action was bona fide exercise of statutory power. 
However, delay by itself may not vitiate action of the SEBI. The SEBI 
has to be guided by the overall interest of the shareholders in dealing 
with the prayer for withdrawal from the public offer. The economic 
unviability is no ground to justify prayer for such withdrawal. The relevant 
observations are: 
""30. With regard to delay, we do not find much substance in 
the submission of Mr C. U. Singh. Mr Singh has sought to 
explain the delay on the ground that information sought by 
the appellant was not given by the respondent. In our opinion, 
this was no ground for the appellant to delay the issuance of 
comments on the letter of offer, especially not for a period of 
13 months. Jn the event the information was not forthcoming, 
the appellant had the power to refuse the approval of the 
public offe1: It is true that under Regulation 18(2), SEBI was 
required to dispatch the necessary letters to the shareholders 
within a reasonable period. it is a matter of record that the 
comments were not offered for 13 111911ths. Such kind of delay 
is wholly inexcusable and needs to be avoided. It can lead to 
avoidable controversy with regard to whether such belated 
action is bona fide exercise of statutory power by SEBI. By 
adopting such a
lackadaisical, if not callous attitude, the very 
object for which the Regulations have been framed is diluted, 
if not frustrated. It must be remembered that SEBI is the 
watchdog of the securities market. It is the guardian of the 
interest of the shareholders. It is the protective shield against 
unscrupulous practices in the securities market. Therefore, 
SEBI like any other body, which is established as a watchdog, 
ought not to act in a lackadaisical manner in the performance 
of its duties. The time-frame stipulated by the Act and the 
Takeover Regulations for performing certain functions is 
required to be maintained to establish the transparency in the 
functioning of SEBI. 
31. Having said this, we are afraid such delay is of no 
assistance to the respondent. It will not result in nullifying the 
action taken by SEBI, even though belated. Ultimately, SEBI 
is charged with the duty of ensuring that every public offer 
made is bona fide for the benefit of the shareholders as well 
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as acquirers. In the present case, SEBI has found that 
permitting the respondent to withdraw the public offer would 
be detrimental to the overall interest of the shareholders. The 
only reason put forward by the respondent for withdrawal of 
the offer is that it is no longer economically viable to continue 
with the offer. Mr Nariman has referred to a tabular statement 
and data to show that there is no substantial variation in the 
share prices that ensued making of the public offer. Having 
seen the Table, we find substance in the submission of Mr 
Nariman that there is hardly any variation in the shares of 
the target company from 20-10-2011 till 30-11-2011. The 
variation seems to have been between Rs 78.10 (on 24-11-
2011) and Rs 87.60 (on 20-10-2011). Such a variation cannot 
be said to be the result of the public offer. But this will not 
detract from the well-known phenomena that public 
announcement of the public offering affects the securities 
market and the shares of the target company. The impact is 
immediate. 
35. We are also not impressed by the submission of Mr Nariman 
that it has now become economically impossible to give effect 
to the public offer. This very submission has been rejected in 
Nirma Industries Ltd. We reiterate our opinion in Nirma 
Industries Ltd. that under Regulations 27(l){b), (c) and (d), 
a public offer, once made, can only be permitted to be 
withdrawn in
circumstances which make it virtually impossible 
to perform the public offer. In fact, the very purpose for 
deleting Regulation 27(l)(a) was to remove any 
misapprehension that an offer once made can be withdrawn 
if it becomes economically not viable. We are of the considered 
opinion that the distinction sought to be made by Mr Nariman 
between a voluntary public offer and a triggered public offer 
is wholly misconceived. Accepting such a submission would 
defeat the very purpose for which the Takeover Code has 
been enacted. " 
OUR FINDINGS 
Re. Question (i) 
26. Applying the decisions of this Court to the facts of the present 
H case, we are in agreement with the finding recorded by the SAT that
PRAMOD JAIN AND OTHERS v. SECURITIES AND 
EXCHANGE BOARD OF INDIA [ADARSH KUMAR GOEL, J.] 
there was undue delay on the part of the SEBI in dealing with the DLO. 
No doubt, in a given case timeline prescribed under the Regulations may 
not be adhered to when the SEBljustifiably takes time in dealing with 
the complaints, as rightly submitted by Shri Datar, in the present case, 
the stand of the SEBI itself is that it could not go' into the complaints for 
which the right forum was CLB. As regards the time taken in dealing 
with the complaints against the acquirers, the SEBI could have promptly 
proceeded with the matter. However, mere upholding of finding of SAT 
on the aspect of delay by SEBI is not enough to hold that the appellants 
are entitled to withdrawal of the public offer. The withdrawal has to be 
dealt with under Regulation 27, as held by this Court. The general 
principle is that public offer once made cannot be withdrawn. Exception 
to the rule is the specified situations under the Regulation as laid down 
by this Court in above decisions particularly in Nirma Industries Limited 
(Supra)'. In the present case, though SEBI was not justified in causing 
delay in giving its comments on public offer, this by itselfis not enough to 
justify withdrawal from public offer so long as the case does not fall 
under Regulation 27. First question is answered accordingly. 
Re. Question (ii) 
27. As already observed above, under the scheme of the regulations 
public offer has
to be made after due diligence (Regulation 22). Obligation 
of the board of directors under Regulation 23 ,against alienation of assets, 
issuance of unissued securities carrying voting rights or entering into 
material contracts is applicable only if approval of general body of 
shareholders is not obtained. We are not dealing with validity ofimposition 
of fine on the target company for its decision in dealing with Vile Parle 
property, without approval of the general body as this issue is not before 
us. The fact remains that ex post facto approval of the general body 
has since been obtained. Moreover, SEBI had observed that this aspect 
of the matter will be separately enquired into. It is clear that under the 
scheme of Regulation 23, there is no bar to a decision with the approval 
of the general body of shareholders, if otherwise valid. The question 
whether unilateral decisions of the target company have rendered the 
carrying out of the public offer possible, is a question to be decided on 
facts of each case. In the present case, the SEBI as well as the SAT 
have concurrently held that public offer is capable of being carried out 
and has not become impossible. The assets are available with the target 
• (2013) 8 sec 20 para 67 
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[2016] 9 S.C.R. 
company. Finding has also been recorded about the circumstances 
preceding the public offer and the conduct of the acquirer which is based 
on record. The steps for development of the Vile Parle property had 
already been initiated and the acquirer had taken remedies before the 
CLB against the decision of the target company and had settled the 
matter with the target company. It is clear from the scheme of the 
regulations that there is no absolute bar for the target company to take 
decision about its assets, subject to compliance with statutory procedure 
and subject to the decision being otherwise valid. There is no doubt that 
against any malafide, illegal or mtjustified decision of the target company, 
remedies at appropriate fora are available to the aggrieved parties. Thus, 
there is no justification for automatic withdrawal from public offer without 
clear prejudice to the acquirer to the extent ofrendering the carrying out 
of public offer impossible. In the facts of the present case, we do not 
find any ground to interfere with the concurrent finding of the SEBI and 
the SAT that request for withdrawal from public offer was not justified. 
Question (ii) is answered accordingly. 
28. In view of the above, we do not find any merit in this appeal 
and the same is accordingly dismissed. There shall be no order as to 
costs. 
Kalpana K. Tripalhy 
Appeal dismissed.