Allowed

Far East Investments Limited

SAT13 Mar 2003

Case brief

AI extract

What is this about?

The Tribunal allowed an appeal against a penalty imposed for alleged violation of Regulation 7 of the Takeover Regulations. It held the appellants were not acting in concert as they were distinct entities with different beneficial owners. The Tribunal also ruled the penalty for the marginal 0.11% excess holding was unjustified as there was no deliberate defiance of the law.

What did the court decide?

The appeal is allowed and the adjudicating officer's order imposing a penalty of one lakh fifty thousand rupees is quashed and set aside.

Far East Investments Limited — Securities and Capital Markets | SAT (2003)

Allowed

Far East Investments Limited

SAT13 Mar 2003

Download

Case brief

AI extract

What is this about?

What did the court decide?

The appeal is allowed and the adjudicating officer's order imposing a penalty of one lakh fifty thousand rupees is quashed and set aside.

¶33

also a policy of the said company to appoint the same Accountant for the offshorecompanies including the Appellants to act on their behalf in Mumbai. He submitted that since both the companies are managed by one and the same management company i.e. PCL, the office premises address from which they were operating had to be common, that it was the management company and not the Appellants who were directly dealing with the brokers in India and the PCL being the management company, it was choosing brokers etc. and the reason for engaging the same broker and similarity in the pattern of arrangements is because of the involvement of PCL as the manager. Shri Khambatta reiterated that the presence of PCL as a common factor in manging the Appellants’ offshore activities should not on any account be considered to view that both the Appellants were acting in concert. Shri Khambatta submitted that the adjudicating officer has simply relied on the presence of PCL on the scene and without realising its role found commonality in matters referred to by him in para VI of his order to come to the conclusion that the Appellants acted in concert and accordingly combined the holding of both the Appellants in GTB and found the so added up holding accounting for 9.42% of the GTB’s capital and in that context held that since the combined percentage holding was more than the 5% bench mark provided in regulation 7, disclosure as per regulation 7 was required to be made. He submitted that in the light of the facts of the case it is clear that both the Appellants are distinct and independent entitities and they had no common intention to acquire the shares of GTB so as to bring them under the definition of “persons acting in concert” in regulation 2(1)(e). Learned Counsel referred to the definition of the expression ‘person acting in concert’ provided in regulation 2(1)(e) He submitted that though the Appellants had explained to the Respondent the factual position and rebutted the presumption that

¶36

35 SCL 230 (BOM) that before one “can be said to be acting in concert with the acquirer, it must be shown that he shares with the acquirer a common objective or purpose for substantial acquisition of shares or voting rights or gaining control over the target company, pursuant to an agreement or understanding and directly or indirectly co-operates with the acquirer or agrees with him to acquire shares or voting rights in the target company or control over the target company”. Shri Khambatta submitted that there was no such common objective or purpose for which the shares were acquired by the Appellants, that the shares were purchased under the PIS He also referred to the Hon’ble Court’s observation on the scope of regulation 2(1)(e) in the same judgement – “Regulation 2(1)(e) (2) also makes this clear. The persons named therein are deemed to be persons acting in concert with other persons in the same category unless the contrary is established. It therefore follows that even though there is a presumption that the persons discribed therein may be deemed to be persons acting in concert with the acquirer, the presumption is rebuttable and, therefore, in each case, the facts have to be examinecd to reach a conclusion as to whether a person is or is not acting in concert with the acquirer for the purpose of substantial acquisition of shares or voting rights or gaining control over the target company.” According to the learned Counsel European Investments, was holding only 52,30,000 shares, which worked out to 4.30% of the share capital of GTB and the said holding was within the 5% limit specified in regulation 7 of the Takeover Regulations and at no time did its holding exceed the said limit. Shri Khambatta submitted, as far as Far East is concerned, with the acquisition of 10 lacs shares of GTB on 13.2.2001 its holding in the said company increased by 0.11%, that the Appellant was unaware of the said marginal increase at that point of time and it was on 7.3.2001 the GTB Custodian informed it of the said excess holding and

Far East Investments Limited

Case brief

What is this about?

What did the court decide?

Issues for consideration

Cases cited

Parties & counsel

Coram

Case details

Similar cases

Far East Investments Limited

Case brief

What is this about?

What did the court decide?

Issues for consideration

Cases cited

Parties & counsel

Coram

Case details

Similar cases

What the court decided

A compact analysis

Statutes considered