Securities Appellate Tribunal
Sanjay Jethalal Soni & Ors. Vs Sebi vs Sebi on 21 March, 2022
Author: Tarun Agarwala
Bench: Tarun Agarwala
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Order Reserved On: 22.12.2021
Date of Decision: 21.03.2022
Appeal No. 758 of 2021
1. Sanjay Jethalal Soni
2. Krupa Sanjay Soni
3. J M Soni Consultancy
Through its proprietor Sanjay Jethalal Soni
36, Malay Bungalows,
Science City Road, Sola,
Ahmedabad- 380 001 ...Appellants
Versus
Securities and Exchange Board of India,
SEBI Bhavan, Plot No. C-4A, G-Block,
Bandra-Kurla Complex, Bandra (East),
Mumbai- 400 051 ...Respondent
Mr. N. K. Upadhyay, Advocate i/b Jyoti Pandey for Appellants.
Ms. Saloni Vyas, Advocate i/b. Legasis Partners for the
Respondent.
CORAM: Justice Tarun Agarwala, Presiding Officer
Justice M. T. Joshi, Judicial Member
Per: Justice M. T. Joshi, Judicial Member
1. Present appeal is filed aggrieved by the direction of the
learned Whole Time Member (hereinafter referred to as
"WTM") of the respondent, Securities and Exchange Board of
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India (hereinafter referred to as "SEBI") dated November 30,
2018 directing all the appellants to jointly and severally make a
public announcement to acquire shares of the Oregon
Commercial Limited (hereinafter referred to as "Target
Company") in accordance with the provisions of the SEBI
(Substantial Acquisition of Shares and Takeovers) Regulations,
2011 (hereinafter referred to as "Takeover Regulations, 2011)
with interest at the rate of 10% per annum within a period of 45
days from the date of the impugned order.
2. Appellant no. 1 is the proprietor of appellant no. 3. While
appellant no. 2 is his wife. Thus they form a group. In the year
2010 all these three entities periodically had acquired the shares
of the target company. According to respondent SEBI on four
occasions while buying and selling the shares during the said
period as detailed in the impugned order the appellants, while
acting in concert, had acquired more than 15% of the share
capital of the company. Therefore, in terms of Regulation 10 of
the Takeover Regulations, 1997 the appellants became liable to
make the public announcements. Regulation 10 of Takeover
Regulations, 1997 provides as under:-
"Acquisition of fifteen per cent or more of the
shares or voting rights of any company.
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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."
3. None of the appellants appeared before the learned WTM
though the show cause notice was served. They also did not
attend the learned WTM for personal hearing. The impugned
order therefore, came to be passed. The appellants had
impugned the order on five grounds as enumerated in their
appeal, rejoinder, oral arguments as well as written notes.
4. We have heard Mr. N. K. Upadhyay, the learned counsel
for the appellants and Ms. Saloni Vyas, the learned counsel for
the respondent.
5. The appellants submitted that while the alleged
acquisition of shares occurred in the year 2010-2011 the show
cause notice is dated July 24, 2017. There is a delay of around 7
years in issuing the show cause notice. This itself is a sufficient
cause to declare the show cause notice as non est. The second
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ground urged by the appellants is that self-trades between the
appellants is not taken into consideration which could have
reduce the acquisition of shares below the threshold limit as
provided by Regulation 10, making the provisions inapplicable.
Third ground taken by the appellants is, that appellant Sanjay
Soni and his proprietary concern M/s. J M Soni Consultancy i.e.
appellant no. 3 are the sub-brokers and, therefore, in view of
Regulation 3(1)(f) of the Takeover Regulations, 1997 the
provisions of the Takeover Regulations would not be applicable
to them. The last of the ground urged by the appellants is, that
the order could not have been passed by the learned WTM as
another WTM vide order dated July 31, 2019 in the matter of
Parichay Investments Ltd. against the appellants where under
they have been debarred from accessing the securities market
for a period of 5 years i.e. till July 31, 2024. Therefore, the
appellants cannot make an open offer to acquire the shares in
the present case.
6. The learned counsel for the respondent opposed all the
submissions. It was submitted that the appellants failed to
appear before the learned WTM and make out any case of
prejudice due to the delay in issuing the show cause notice. It
was further submitted that even if self-trades between the
appellants are discounted still the computation made by the
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appellants themselves would show that the limit of acquisition
of 15% of the share capital has been crossed on two occasions
out of alleged four occasions crossing the threshold and thereby
invoking the provisions of Regulation 10 of the Takeover
Regulations, 1997. It was further submitted that Regulation
3(1)(f) would not applicable to the appellants as they had
acquired the shares in proprietary trades and not for and behalf
of clients. As regard the contradictory orders it was submitted
that the same was not brought the notice of the respondent SEBI
in the present case, and in any case, in view of the declaration
made by this Tribunal in the case of M/s Nirvana Holdings
Private Limited vs SEBI Appeal No. 31 of 2011 decided on
08.09.2011 direction to make open offer is proper.
7. Upon hearing both sides, in our view the appeal is liable
to be dismissed for the following reasons:-
As regard the delay in issuing the show cause notice the
appellants failed to appear before the learned WTM to put their
case. Thus there was no submission before the learned WTM
that the delay has caused prejudice, if any in defending the case.
Not only this but also in the appeal the appellants have given all
the details of their trading in the shares of target company to
claim that self-trades as detailed in the appeal memo were not
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discounted in the impugned order. The appellants had relied on
numerous declarations of this Tribunal as well as of the
Supreme Court on the issue of delay in launching the
proceedings. Leading authority in the case of Adjudicating
Officer, SEBI vs. Bhavesh Pabari (2019) SCC Online SC 294
wherein it was held as under:-
"There are judgments which hold that when the
period of limitation is not prescribed, such
power must be exercised within a reasonable
time. What would be reasonable time, would
depend upon the facts and circumstances of the
case, nature of the default/statute, prejudice
caused, whether the third-party rights had been
created etc."
Thus, nature of default/ statute, prejudice caused etc. is required
to be taken into consideration. In the present case, no prejudice
is shown to have been caused to the appellants due to the delay
in launching the proceedings. Therefore, the submissions of the
appellants in this regard cannot be considered.
As regard the discount to be considered of the self-trades by the
appellants to find out as to whether the threshold of 15% of the
share capital was acquired by the appellants are not, the
appellants have given in their appeal memorandum the tables at
ground no. 5.12 on four different dates which according to the
learned WTM were trigger points crossing the threshold of 15%
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acquisition of the share capital. These tables would show that
on August 19, 2010 and September 06, 2010 even after discount
of the self-trades the appellants were in possession of more than
15% of the share capital. Therefore, the arguments in this
regard are devoid of any merit.
8. Next of the issue is as to whether the Takeover
Regulations is applicable to the appellants as the appellant
Sanjay Soni and appellant no. 3 JM Soni Consultancy are the
sub-brokers. Regulation 3(1)(f) of Takeover Regulations 1997
relied however provides that the Takeover Regulations would
not be applicable to a registered stock-broker in case he had
acquired the shares in the ordinary course of business on behalf
of clients. In the present case, admittedly, proprietary trades
were done and the appellants themselves had acquired the
shares and, therefore, the provision is inapplicable in their case.
9. The last of the arguments of the appellants is that another
WTM vide order dated July 31, 2019 had debarred the present
appellants from accessing the securities market for a period of 5
years and, therefore, since the period would end on July 31,
2024, the directions contained in the present impugned order to
make an open offer becomes infructuous. The appellants,
however, fails to note that the impugned order was passed on
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November 30, 2018 much before the next order was passed on
July 31, 2019. Vide the impugned order all the appellants were
directed to make an open offer within a period of 45 days from
the date of the impugned order and, therefore the next of the
order would not have come into the way in following the
directions by the appellants. Hence the following order :
ORDER
The appeal is hereby dismissed without any order as to costs.
10. 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 RAJALA Digitally signed by RAJALAKSHMI Judicial Member 21.03.2022 KSHMI H HDate:
NAIR 2022.03.28 PK NAIR 10:00:50 +05'30'