Securities Appellate Tribunal
Shilpa Amit Kotia vs Sebi on 24 August, 2022
Author: Tarun Agarwala
Bench: Tarun Agarwala
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Order Reserved On: 10.08.2022
Date of Decision : 24.08.2022
Appeal No. 337 of 2020
Rajiv R. Kotia
2/B, State Bank Staff Colony,
Near Navrang School,
Naranpura,
Ahmedabad- 380 013 ...Appellant
Versus
1. Shilpa Amit Kotia
2/B, State Bank Staff Colony,
Near Navrang School,
Naranpura,
Ahmedabad- 380 013
2. Shweta Dhaval Kotia
2/B, State Bank Staff Colony,
Near Navrang School,
Naranpura,
Ahmedabad- 380 013
3. Dhaval Ramesh Kotia
2/B, State Bank Staff Colony,
Near Navrang School,
Naranpura,
Ahmedabad- 380 013
4. Ravi Rajiv Kotia
A/73, Avani Complex,
Near Naranpura Bus Stop,
Naranpura,
Ahmedabad- 380 013
5. Securities and Exchange Board of India,
SEBI Bhavan, Plot No. C-4A, G-Block,
Bandra-Kurla Complex, Bandra (East),
Mumbai- 400 051 ...Respondents
2
Ms. Madhu Shah, Advocate i/b J.N. Jain for the Appellant.
Mr. Sumit Rai, Advocate with Mr. Manish Chhangani,
Mr. Ravishekhar Pandey and Ms. Samreen Fatima, Advocates
i/b The Law Point for Respondent SEBI.
WITH
Appeal No. 45 of 2021
Shilpa Amit Kotia
2/B, State Bank Staff Colony,
Near Navrang School,
Naranpura,
Ahmedabad- 380 013 ...Appellant
Versus
1. Securities and Exchange Board of India,
SEBI Bhavan, Plot No. C-4A, G-Block,
Bandra-Kurla Complex, Bandra (East),
Mumbai- 400 051
2. Rajiv Kotia
2/B, State Bank Staff Colony,
Near Navrang School,
Naranpura,
Ahmedabad- 380 013
3. Shweta Dhaval Kotia
2/B, State Bank Staff Colony,
Near Navrang School,
Naranpura,
Ahmedabad- 380 013
4. Dhaval Ramesh Kotia
2/B, State Bank Staff Colony,
Near Navrang School,
Naranpura,
Ahmedabad- 380 013
5. Ravi Rajiv Kotia
A/73, Avani Complex,
Near Naranpura,
Ahmedabad- 380 013 ...Respondents
3
Mr. Amit Kotia, Authorized Representative for the Appellant.
Mr. Sumit Rai, Advocate with Mr. Manish Chhangani,
Mr. Ravishekhar Pandey and Ms. Samreen Fatima, Advocates
i/b The Law Point for Respondent SEBI.
WITH
Appeal No. 46 of 2021
1. Shweta Dhaval Kotia
2/B, State Bank Staff Colony,
Near Navrang School,
Naranpura,
Ahmedabad- 380 013
2. Dhaval Ramesh Kotia
2/B, State Bank Staff Colony,
Near Navrang School,
Naranpura,
Ahmedabad- 380 013
3. Ravi Rajiv Kotia
A/73, Avani Complex,
Near Naranpura,
Ahmedabad- 380 013 ...Appellants
Versus
1. Securities and Exchange Board of India,
SEBI Bhavan, Plot No. C-4A, G-Block,
Bandra-Kurla Complex, Bandra (East),
Mumbai- 400 051
2. Rajiv Kotia
2/B, State Bank Staff Colony,
Near Navrang School,
Naranpura,
Ahmedabad- 380 013 ...Respondents
4
Mr. Amit Kotia, Authorized Representative for the Appellant.
Mr. Sumit Rai, Advocate with Mr. Manish Chhangani,
Mr. Ravishekhar Pandey and Ms. Samreen Fatima, Advocates
i/b The Law Point for Respondent SEBI.
WITH
Appeal No. 675 of 2021
Rajiv R. Kotia
2/B, State Bank Staff Colony,
Near Navrang School,
Naranpura,
Ahmedabad- 380 013 ...Appellant
Versus
1. Securities and Exchange Board of India,
SEBI Bhavan, Plot No. C-4A, G-Block,
Bandra-Kurla Complex, Bandra (East),
Mumbai- 400 051
2. Shilpa Amit Kotia
2/B, State Bank Staff Colony,
Near Navrang School,
Naranpura,
Ahmedabad- 380 013
3. Shweta Dhaval Kotia
2/B, State Bank Staff Colony,
Near Navrang School,
Naranpura,
Ahmedabad- 380 013
4. Dhaval Ramesh Kotia
2/B, State Bank Staff Colony,
Near Navrang School,
Naranpura,
Ahmedabad- 380 013
5. Ravi Rajiv Kotia
A/73, Avani Complex,
Near Naranpura,
Ahmedabad- 380 013 ...Respondents
5
Ms. Madhu Shah, Advocate i/b J. N. Jain for the Appellant.
Mr. Sumit Rai, Advocate with Mr. Manish Chhangani,
Mr. Ravishekhar Pandey and Ms. Samreen Fatima, Advocates
i/b The Law Point for Respondent SEBI.
WITH
Appeal No. 676 of 2021
Ravi Rajiv Kotia
A/73, Avani Complex,
Near Naranpura,
Ahmedabad- 380 013 ...Appellant
Versus
1. Securities and Exchange Board of India,
SEBI Bhavan, Plot No. C-4A, G-Block,
Bandra-Kurla Complex, Bandra (East),
Mumbai- 400 051
2. Rajiv Kotia
2/B, State Bank Staff Colony,
Near Navrang School,
Naranpura,
Ahmedabad- 380 013 ...Respondents
Mr. Amit Kotia, Authorized Representative for the Appellant.
Mr. Sumit Rai, Advocate with Mr. Manish Chhangani,
Mr. Ravishekhar Pandey and Ms. Samreen Fatima, Advocates
i/b The Law Point for Respondent SEBI.
WITH
Appeal No. 677 of 2021
Dhaval Ramesh Kotia
2/B, State Bank Staff Colony,
Near Navrang School,
Naranpura,
Ahmedabad- 380 013 ...Appellant
6
Versus
1. Securities and Exchange Board of India,
SEBI Bhavan, Plot No. C-4A, G-Block,
Bandra-Kurla Complex, Bandra (East),
Mumbai- 400 051
2. Rajiv Kotia
2/B, State Bank Staff Colony,
Near Navrang School,
Naranpura,
Ahmedabad- 380 013 ...Respondents
Mr. Amit Kotia, Authorized Representative for the Appellant.
Mr. Sumit Rai, Advocate with Mr. Manish Chhangani,
Mr. Ravishekhar Pandey and Ms. Samreen Fatima, Advocates
i/b The Law Point for Respondent SEBI.
WITH
Appeal No. 678 of 2021
Shilpa Amit Kotia
2/B, State Bank Staff Colony,
Near Navrang School,
Naranpura,
Ahmedabad- 380 013 ...Appellant
Versus
1. Securities and Exchange Board of India,
SEBI Bhavan, Plot No. C-4A, G-Block,
Bandra-Kurla Complex, Bandra (East),
Mumbai- 400 051
2. Rajiv Kotia
2/B, State Bank Staff Colony,
Near Navrang School,
Naranpura,
Ahmedabad- 380 013 ...Respondents
7
Mr. Amit Kotia, Authorized Representative for the Appellant.
Mr. Sumit Rai, Advocate with Mr. Manish Chhangani,
Mr. Ravishekhar Pandey and Ms. Samreen Fatima, Advocates
i/b The Law Point for Respondent SEBI.
AND
Appeal No. 679 of 2021
Shweta Dhaval Kotia
2/B, State Bank Staff Colony,
Near Navrang School,
Naranpura,
Ahmedabad- 380 013 ...Appellant
Versus
1. Securities and Exchange Board of India,
SEBI Bhavan, Plot No. C-4A, G-Block,
Bandra-Kurla Complex, Bandra (East),
Mumbai- 400 051
2. Rajiv Kotia
2/B, State Bank Staff Colony,
Near Navrang School,
Naranpura,
Ahmedabad- 380 013 ...Respondents
Mr. Amit Kotia, Authorized Representative for the Appellant.
Mr. Sumit Rai, Advocate with Mr. Manish Chhangani,
Mr. Ravishekhar Pandey and Ms. Samreen Fatima, Advocates
i/b The Law Point for Respondent SEBI.
CORAM: Justice Tarun Agarwala, Presiding Officer
Justice M. T. Joshi, Judicial Member
Ms. Meera Swarup, Technical Member
Per: Justice M. T. Joshi, Judicial Member
8
1. Aggrieved by the decisions of the learned Adjudicating
Officer ("AO" for convenience) of respondent Securities and
Exchange Board of India ("SEBI" for convenience) dated May
18, 2020 and of the learned Whole Time Member ("WTM" for
convenience) dated July 07, 2020 on the same set of facts the
present appeals are preferred.
2. All the appellants were alleged to have committed
violation of Regulation 8(3) of SEBI (Substantial Acquisition of
Shares and Takeovers) Regulations, 1997 ("SAST 1997" for
convenience) read with Regulation 35(2) of SEBI (Substantial
Acquisition of Shares and Takeovers) Regulations, 2011
("SAST 2011" for convenience). Further violations of
Regulation 3(4), 7 and 10 of the SAST Regulations, 1997 are
alleged against the appellant Rajiv Kotia while rest of the
appellants are alleged to have additionally committed violation
of Regulation 11(1) read with Regulation 21(1) of SAST
Regulations, 1997. For the sake of convenience, the facts as
stated in the earlier order i.e. the order of AO is taken into
consideration.
3. The appellant Rajiv Kotia and other appellants are related
to each other. Appellant Rajiv Kotia is the father of Ravi.
9
Appellant Dhaval Kotia is the brother of Rajiv Kotia while
appellant Shweta Kotia is the wife of appellant Dhaval Kotia
and sister in-law of appellant Rajiv Kotia.
4. The issue is regarding the alleged takeover of Sungold
Capital Limited (hereinafter referred to as "Sungold/
Company") by the present appellant in breach of the above
provisions of the SAST Regulations. The appellant Rajiv R.
Kotia was already a promoter as well as the managing director
of Sungold. SEBI conducted an investigation and found that
during the investigation period i.e. April 01, 2007 to March 31,
2008 the shareholding of appellant Rajiv Kotia increased his
shareholding from 11.96% to 15.22%. During the same period
the shareholding to two other promoters who were not party to
the proceedings had decreased. From the reply of this
appellants and the quarterly shareholding pattern collected from
BSE Limited, it was gathered by SEBI that those two other
promoters had sold their shares to this appellant. Additionally,
he also bought some shares as detailed in paragraph no. 7(b)
onward of the impugned order. As regard rest of the appellants,
they had also bought the shares in the year 2007-2008 as
detailed in table given in paragraph no. 11(b) of the impugned
order. They had purchased the shares on 14.09.2007 which
10
were dematerialized on 26.03.2008 except appellant Ravi Kotia,
who had it dematerialized on 24.04.2008. Thereafter he sold the
shares to Seema Rajiv Kotia, his wife, who is not a party to the
proceeding. The extent of the shares acquired by them as given
in the above paragraph by the learned AO, required the
appellants to make the public announcement upon acquiring
minimum 20% of the voting capital of the company in terms of
the above SAST Regulations. The appellants being near
relatives, in terms of Regulation 2(1)(e)(2)(iii) read with other
provisions were held as the persons acting in concert ("PACs")
and their cumulative acquisition triggered the above regulations.
These acquisitions were however made without making any
open offer as required by the regulations. Therefore, the show
cause notice has been issued to them.
5. The appellants submitted that they are not persons acting
in concert. The trading in the shares of the company was earlier
suspended. Therefore on different dates the shares were
acquired by them. However, only the date of dematerialization
is taken into consideration by SEBI. The learned authorities
however, did not agree with the submissions. Therefore, while
the learned AO imposed penalty as per paragraph 48 of the
impugned order in different amount against the appellants as
11
detailed therein, the learned WTM vide paragraph 26 of the
impugned order directed the appellant to make a public
announcement of a combined open offer for acquiring shares of
the company in terms of Regulation 10 and 11(1) of the SAST
1997 with interest at the rate of 10% per annum for delay in
making of open offer. Hence the present appeals.
6. We have heard Ms. Madhu Shah, the learned counsel and
Shri Amit Kotia, authorised representative of the appellants and
Shri Sumit Rai, the learned counsel for the respondent.
7. Shri Amit Kotia, the Power of Attorney Holder for the
appellants except the appellant Rajiv Kotia submitted that these
appellants had no connection with Rajiv Kotia. The appellants
were never shown as the promoters of the Company. In fact, all
of them are and were separate from each other and were
engaged in his/her own business separate from other family
members. In the case of Daiichi Sankyo Company Ltd. vs.
Jayaram Chigurupati & Ors. (2010) 7 SCC 449 the Hon'ble
Supreme Court had observed that the idea of "persons acting in
concert" is not about a fortuitous relationship coming into
existence by accident or chance. The relationship can come into
being only by design, by meeting of minds between two or more
persons to leading to the shared common objective or purpose
12
of acquisition of substantial acquisition of shares etc. to grand
name as persons acting in concert. He further submitted that the
shares were acquired by the different entities with different
persons on different time and, therefore, no order could have
been passed by the respondent SEBI.
8. The relevant provisions of Regulation 2 of SAST
Regulations, 1997, Regulation 3, 7(1),(1A), Regulation 10,11,
and Regulation 35 of SAST Regulations, 2011 are extracted
hereunder:-
Relevant extract of provisions of SAST Regulations, 1997
"Definition:
2. (1) In these regulations, unless the context
otherwise requires--
(a)......................
(b) 'acquirer' means any person who, directly
or indirectly, acquires or agrees to acquire
shares or voting rights in the target company,
or acquires or agrees to acquire control over
the target company, either by himself or with
any person acting in concert with the acquirer;
(c).....................
(e) 'person acting in concert' means, --
(1) persons who, for a common objective or
purpose of substantial acquisition of shares or
voting rights or gaining control over the target
company, pursuant to an agreement or
understanding (formal or informal), directly or
indirectly co-operate by acquiring or agreeing
to acquire shares or voting rights in the target
company or control over the target company.
(2) Without prejudice to the generality of this
definition, the following persons will be
deemed to be persons acting in concert with
13
other persons in the same category, unless the
contrary is established: ...
(iii) directors of companies referred to in sub-
clause (i) of clause (2) and their associates;
Note: For the purposes of this clause-
'associate' means,-
(a) any relative of that person within the
meaning of section 6 of the Companies Act,
1956 (1 of 1956); and
(b) family trusts and Hindu undivided families;
...
Applicability of the regulation.
3. (1) Nothing contained in regulations 10, 11
and 12 of these regulations shall apply to:
..................
(e) inter se transfer of shares amongst-- ...
(ii) relatives within the meaning of section 6 of
the Companies Act, 1956 (1 of 1956);
(iii) (a) [Qualifying Indian promoters] and
foreign collaborators who are shareholders;
(b) [qualifying promoters]:
[Provided that the transferor(s) as well as the
transferee(s) have been holding shares in the
target company for a period of at least three
years prior to the proposed acquisition.]
[Explanation.─ For the purpose of the
exemption under sub-clause (iii) the term
["qualifying promoter"] means--
(i) any person who is directly or indirectly in
control of the company; or
(ii) any person named as promoter in any
document for offer of securities to the public or
existing shareholders or in the shareholding
pattern disclosed by the company under the
provisions of the Listing Agreement, whichever
is later; and includes,
(a) where the [qualifying promoter] is an
individual,--
(1) a relative of the [qualifying promoter]
within the meaning of section 6 of the
Companies Act, 1956 (1 of 1956);
[Explanation.--
(1)......
(2) The benefit of availing exemption under this
clause, from applicability of the regulations for
14
increasing shareholding or inter se transfer of
shareholding shall be subject to such
transferor(s) and transferee(s) having complied
with regulation 6, regulation 7 and regulation
8;
..........
(4) In respect of acquisitions under clauses (a),
(b), (e) and (i) of sub-regulation (1), the
acquirer shall, within 21 days of the date of
acquisition, submit a report along with
supporting documents to the Board giving all
details in respect of acquisitions which (taken
together with shares or voting rights, if any,
held by him or by persons acting in concert
with him) would entitle such person to exercise
15 per cent or more of the voting rights in a
company.
Acquisition of 5 per cent and more shares or
voting rights of a company.
7 (1) Any acquirer, who acquires shares or
voting rights which (taken together with shares
or voting rights, if any, held by him) would
entitle him to more than five per cent or ten per
cent or fourteen per cent [or fifty four per cent
or seventy four per cent] shares or voting
rights in a company, in any manner
whatsoever, shall disclose at every stage the
aggregate of his shareholding or voting rights
in that company to the company and to the
stock exchanges where shares of the target
company are listed.]
(1A) Any acquirer who has acquired shares or
voting rights of a company under sub-
regulation (1) of regulation 11, or under
second proviso to sub-regulation (2) of
regulation 11 shall disclose purchase or sale
aggregating two per cent or more of the share
capital of the target company to the target
company, and the stock exchanges where
shares of the target company are listed within
two days of such purchase or sale along with
the aggregate shareholding after such
acquisition or sale.
15
Acquisition of fifteen per cent or more of the
shares or voting rights of any company.
10. No acquirer shall acquire shares or voting
rights which (taken together with 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.
Consolidation of holdings.
11. (1) No acquirer who, together with persons
acting in concert with him, has acquired, in
accordance with the provisions of law, 15 per
cent or more but less than fifty five per cent
(55%) of the shares or voting rights in a
company, shall acquire, either by himself or
through or with persons acting in concert with
him, additional shares or voting rights entitling
him to exercise more than 5% of the voting
rights, with post acquisition shareholding or
voting rights not exceeding fifty five per cent.,
in any financial year ending on 31st March
unless such acquirer makes a public
announcement to acquire shares in accordance
with the regulations.
Relevant extract of provisions of SAST
Regulations, 2011
Repeal and Savings.
35.(1) The Securities and Exchange Board of
India (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997, stand repealed
from the date on which these regulations come
into force.
(2) Notwithstanding such repeal,--
(a) anything done or any action taken or
purported to have been done or taken including
16
comments on any letter of offer, exemption
granted by the Board, fees collected, any
adjudication, enquiry or investigation
commenced or show-cause notice issued under
the repealed regulations, prior to such repeal,
shall be deemed to have been done or taken
under the corresponding provisions of these
regulations;
(b) the previous operation of the repealed
regulations or anything duly done or suffered
thereunder, any right, privilege, obligation or
liability acquired, accrued or incurred under
the repealed regulations, any penalty,
forfeiture or punishment incurred in respect of
any offence committed against the repealed
regulations, or any investigation, legal
proceeding or remedy in respect of any such
right, privilege, obligation, liability, penalty,
forfeiture or punishment as aforesaid, shall
remain unaffected as if the repealed
regulations has never been repealed;
(c) any open offer for which a public
announcement has been made under the
repealed regulations shall be required to be
continued and completed under the repealed
regulations."
9. It is not disputed that if the acquisitions by all the
appellants are taken cumulatively into consideration, the
necessity to make an open offer would arise. The definition of
acquirer as reproduced (supra) would show that the acquisition
of shares etc. by a person with any person acting in concert with
him is required to be taken into consideration. The definition of
"persons acting in concert" shows that there should be some
agreement or understanding either direct or indirect to co-
17
operate for acquiring the shares. However, the provision that
the person will be deemed to be persons acting in concert
includes any relative of the person within the meaning of
Section 6 of the Companies Act. Within that meaning all the
appellants would be relatives. Thus, all the appellants are
deemed to be persons acting in concert. The provision shows
that those persons are entitled to establish the facts contrary to
this deeming provision.
10. In the present case, however, except the submissions that
the appellants were not acting in concert there is nothing on
record to establish the same.
11. In the case of Daiichi Sankyo Company Ltd. vs. Jayaram
Chigurupati & Ors. (2010) 7 SCC 449 relied on by the
appellants, the parties acquiring the shares therein were not
related to each other but rather they were the corporate entities.
In those circumstances, the question had arisen as to whether
they can be termed as person acting in concert. In the fact of
that case that it was found that their intention in dealing with the
shares of a listed company was different from each other. In
those circumstances, the Supreme Court held that the persons
acquiring the shares had no common object or intention.
18
12. In the facts of the present case, as detailed (supra) the
appellants before us are deemed to be persons acting in concert
unless contrary is established. Since no facts at all are placed in
this regard by the appellants except the bare statement, no fault
with any of the orders of respondent SEBI can be found. In the
circumstances, the following order:-
ORDER
13. All the appeals are hereby dismissed with no order as to costs.
14. This order will be digitally signed by the Private Secretary on behalf of the bench and all concerned parties are directed to act on the digitally signed copy of this order. Certified copy of this order is also available from the Registry on payment of usual charges.
Justice Tarun Agarwala Presiding Officer Justice M. T. Joshi Judicial Member Ms. Meera Swarup Technical Member RAJALA Digitally signed by RAJALAKSHMI KSHMI HDate:
NAIR 24.08.2022 2022.08.29 H NAIR 10:52:26 +05'30' PK