Securities Appellate Tribunal
Jitendra M. Tolia vs Sebi on 7 November, 2023
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Date of Hearing : 03.11.2023
Date of Decision : 07.11.2023
Appeal No. 354 of 2022
Anupam D. Dighe
3/207, Mehta Park,
Bhagoji Keer Road,
Mahim, Mumbai - 400 016. ..... Appellant
Versus
1.Securities & Exchange Board of India SEBI Bhavan, Plot No. C-4A, G Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051.
2. India Star (Mauritius) Ltd.
C/o. Intercontinental Trust Ltd.
Level 3, Alexander House, 35, Cyber City, Ebana, Port Louis, Mauritius.
C/o Mr. Shamik Shirishbhai Sanjanwala B-7, Basement, Nizamuddin East, New Delhi 110013.
3. General Insurance Corporation of India 'SURAKSHA' 170, J. Tata Road, Churchgate, Mumbai - 400 020.
4. Sycamore Management Corporation 731, Alexnder Road, Suite 303, Princeton, New Jersey, United States of America. ... Respondents 2 Mr. Hamza Lakhani, Advocate with Mr. Riz Khan, Advocate i/b India Law Alliance for the Appellant.
Mr. Vyom Shah, Advocate with Mr. Bhushan Shah, Mr. Aditya Sarangrajan, Ms. Daksha Kasekar, Advocates i/b Mansukhlal Hiralal & Co. for the Respondent Nos. 1 (SEBI).
None for the Respondent Nos. 2 (India Star). None for the Respondent Nos. 3 (General Insurance Corporation of India).
None for the Respondent Nos. 4 (Sycamore Management).
With Appeal No. 355 of 2022 Mr. Manoj Mittal 501-A, The Capital, C-70, G Block, Bandra Kurla Complex, Bandra East, Mumbai - 400 051. ..... Appellant Versus Securities & Exchange Board of India SEBI Bhavan, Plot No. C-4A, G Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051. ... Respondent 3 Mr. P. N. Mody, Senior Advocate with Mr. Neville Lashkari, Mr. Abhishek Aggarwal, Advocates and Mr. Manoj Mittal, Appellant in person for the Appellant.
Mr. Vyom Shah, Advocate with Mr. Bhushan Shah, Mr. Aditya Sarangrajan, Ms. Daksha Kasekar, Advocates i/b Mansukhlal Hiralal & Co. for the Respondent.
With Appeal No. 356 of 2022 Vijay N. Bhatt 2, Palacimo CHS Road, Plot No. 47/48, Indranaryan Road, Santacruz West, Mumbai - 400 054. ..... Appellant Versus Securities & Exchange Board of India SEBI Bhavan, Plot No. C-4A, G Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051. ... Respondent Mr. Abhishek Aggarwal, Advocate for the Appellant. Mr. Mustafa Doctor, Senior Advocate with Mr. Bhushan Shah, Mr. Aditya Sarangrajan, Ms. Daksha Kasekar, Advocates i/b Mansukhlal Hiralal & Co. for the Respondent.
With Appeal No. 357 of 2022 4 Jitendra M. Tolia 203, Jaisigh Landmargue, Azad Road, Vile Parle (East), Mumbai 400 057. ..... Appellant Versus Securities & Exchange Board Of India SEBI Bhavan, Plot No. C-4A, G Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051. ... Respondent Mr. Abhishek Aggarwal, Advocate with Mr. Jitendra M. Tolia, appellant in person for the Appellant.
Mr. Mustafa Doctor, Senior Advocate with Mr. Bhushan Shah, Mr. Aditya Sarangrajan, Ms. Daksha Kasekar, Advocates i/b Mansukhlal Hiralal & Co. for the Respondent.
CORAM : Justice Tarun Agarwala, Presiding Officer Ms. Meera Swarup, Technical Member Per : Justice Tarun Agarwala, Presiding Officer
1. These four appeals have been filed against a common order dated March 31, 2022 whereby the complaints of the appellants have been rejected by the Whole Time Member (hereinafter referred to as 5 'WTM') of Securities and Exchange Board of India (hereinafter referred to as 'SEBI').
2. For facility, the facts enumerated in Appeal No. 355 of 2022 Mr. Manoj Mittal vs. SEBI are being taken into consideration.
3. On November 6, 2007, the acquirer, a public shareholder of Global Offshore Services Ltd. (previously known as "Garware Offshore Services Ltd.) (hereinafter referred to as 'target company'), acquired 22,72,727 equity shares representing 9.54% of the paid-up equity share capital of the target company, through conversion of 25,00,000 Unsecured Optionally Convertible Debentures (hereinafter referred to as 'OCDs') resulting in the increase in the shareholding of the acquirer from 12.02% to 20.42% of the paid-up voting equity share capital of the target company, triggering Regulations 10 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as 'SAST Regulations') .
4. The acquirer made an open offer vide public announcement dated November 7, 2007 to acquire 20% of the share capital of the target company through HSBC Securities and Capital Markets 6 (India) Pvt. Ltd. (hereinafter referred to as "the Merchant Banker / the manager"). This offer had opened on March 19, 2008 and closed on April 7, 2008. The final offer price was determined at Rs. 234.67 including interest of Rs. 4.67. As against the offer to acquire 20% shares, only 10.06% were tendered by the shareholders. It is submitted that none of the appellants have tendered shares pursuant to letter of offer dated March 12, 2008. The post offer announcement was made on May 26, 2008 thereby completing the open offer process by May 26, 2008, by payment of offer price for the tendered shares.
5. A complaint was filed by Mr. Barot in the year 2011 through M/s Prism Partners, following the representations dated January 16, 2012 before the respondent wherein it was alleged that the acquirer and the merchant banker had failed to disclose material information with regard to the background of the acquirer and past experience of its director Mr. Ravi Pratap Singh, as contemplated under the standard letter of offer forming part of SEBI circular dated August 3, 2004. There were also several other complaints received by the respondent which were duly examined and disposed of vide communication dated June 8, 2012. The said communication was 7 impugned before this Tribunal in Appeal No. 157 of 2012. This Tribunal vide its order dated September 3, 2013 had set aside the said communication dated June 8, 2012 and directed the respondent to reconsider the complaint of Mr. Barot afresh and to pass appropriate orders as it deems fit. It is pertinent to mention that in the Tribunal's order dated September 3, 2013, this Tribunal had not expressed any opinion on the merit of the case.
6. Pursuant to the directions of this Tribunal, the then learned WTM of the respondent passed an order dated November 21, 2014, inter-alia, observing that a direction ordering the acquirer to make another public offer was not warranted for the reasons mentioned therein. This order dated November 21, 2014 was not challenged by any of the parties and, therefore, had attained finality. However, vide the said order, the acquirer and the merchant banker were reprimanded for failing to reach the standard of disclosure.
7. The appellant, Vijay Bhatt made a complaint on September 6, 2013 requesting SEBI to direct the acquirer to make a fresh open offer. Appellant Jitendra Tolia also made a complaint on April 29, 2014. Similarly, appellant Manoj Mittal made a complaint on February 15, 2016 and appellant Anupam Dighe made a complaint 8 on April 6, 2016. These appellants alleged in their complaints that relevant facts had been suppressed fraudulently in the open offer documents filed in the year 2008. It was alleged that Sycamore Management Corporation (hereinafter referred to as 'SMC') respondent nos. 3 was the ultimate party controlling the acquirer i.e. India Star (Mauritius) Ltd. respondent nos. 2. It was contended that the acquirer had violated the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as 'SEBI Act') and Regulations and had suppressed material facts which amounted to a violation of takeover code and if the same had been disclosed, the appellants would have offered their shares in the open offer in the year 2008. It was, thus, urged that SEBI should direct the acquirer to make a fresh offer.
8. In this regard, a total of 41 complaints were received by SEBI including that of the appellants. The complaints of the appellants were disposed of by SEBI in terms of the earlier order of the WTM dated November 21, 2014. The appellants being aggrieved filed Appeal No. 2 of 2017 and other connected appeals which were allowed by the order of this Tribunal dated February 2, 2018. The impugned communication was set aside and the complaints of all the 9 appellants were restored for fresh decision on merits. This Tribunal further directed that while deciding the complaint, SEBI would not be influenced by the decision of the WTM dated November 21, 2014. This Tribunal further held that once it was found by SEBI that the letter of offer issued by the acquirer did not represent a true and fair representation of the persons having control over the acquirer, then merely reprimanding the acquirer and the merchant banker was putting gross injustice to the investors and, accordingly, remitted the matter for a fresh decision.
9. Against the order of this Tribunal dated February 2, 2018, SEBI filed a Civil Appeal before the Hon'ble Supreme Court which was dismissed by the judgment dated December 1, 2021. Thereafter, the impugned order dated March 31, 2022 was passed disposing of the complaints of the appellants holding that SMC respondent nos. 3 was not in control of the acquirer respondent nos. 2 and that the disclosures made by the acquirer in the letter of offer were sufficient to discharge their disclosure obligation. The WTM further found that the acquirer respondent nos. 2 has become defunct and, therefore, no further directions can be issued to make a fresh open offer. 10
10. We have heard Mr. P. N. Mody, the learned senior counsel with Mr. Neville Lashkari, Mr. Abhishek Aggarwal, Mr. Hamza Lakhani and Mr. Riz Khan, the learned counsel for the appellants and Mr. Mustafa Doctor, the learned senior counsel with Mr. Vyom Shah, Mr. Bhushan Shah, Mr. Aditya Sarangrajan, Ms. Daksha Kasekar, the learned counsel for the respondent.
11. It was contended that the WTM in its earlier order of November 21, 2014 had clearly held that SMC controlled the acquirer and that the disclosures made in the letter of offer did not represent a true and fair representation of the persons having control over the acquirer. It was contended that by the impugned order, the WTM has taken a summersault in holding that SMC was only acting as an investment adviser and was only handling in the capacity of a professional investment advisor and, therefore, was not in the control of the acquirer.
12. Without going into the facts as to whether SMC controlled the acquirer or not, we are of the opinion that the appellants are not entitled for any relief in as much as their complaints are a misuse of the process of court.
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13. The appellants have sought directions that a fresh open offer should be made by the acquirer as they had concealed material facts while making the open offer in the year 2008. We find that a General Notice No. 443 of 2020 dated March 10, 2020 has been issued by the director of the Insolvency Service Mauritius indicating that respondent nos. 2, the acquirer, has been dissolved with effect from January 29, 2020. Thus, at this stage, even if we accept the submission of the appellants, no direction can be issued to the acquirer to make a fresh offer.
14. At the time when the open offer was made by the acquirer in 2008, admittedly, the appellants did not tender their shares in the open offer nor did they object to the post offer public announcement made on May 26, 2008. The appellants have filed their complaints only after a period of 5 to 8 years since the completion of the open offer process and, therefore, at this stage no directions can be issued directing the acquirer to make a fresh offer again. Further, since the acquirer has already become defunct, any direction to the acquirer for giving a fresh open offer is untenable in law.
15. In Shiromani Sugar Mills Ltd. vs. Debi Prasad [AIR (1950) Allahabad 508], the Hon'ble High Court held that once the company 12 has started the process of winding up, the shareholders cannot claim rescindment of contract on the ground of misrepresentation in the prospectus especially when the shareholders had not taken any active steps to avoid the contract during the working of the company. The said decision is squarely applicable in the instant case.
16. We also find that after the open offer was completed, the share prices of the target company went up. The appellants could have sold the shares on the exchange platform if they really wanted to exit from the target company. The price of the scrip of the target company fluctuated from Rs. 44.3/- in October 2013 to a maximum of Rs. 864.9/- in February 2015. During this period, the appellants could have off-loaded its shares and could have exited from the target company. It is only when the price of the scrip started falling that the appellants started making complaints which shows that their intention and their bonafide were doubtful.
17. In this regard, we find that the appellant Mr. Manoj Mittal had filed his complaint on February 15, 2016 after a lapse of 8 years when the price of the scrip had started falling. The appellant Mr. Bhatt had filed complaint in September 2013 after a lapse of 5 years when the price of the scrip was around Rs. 60/-. Appellant Mr. Tolia 13 had submitted his complaint in May 2014 after a lapse of 6 years when the scrip has fallen from Rs. 314.65/- to Rs. 300.45/- on May 6, 2014.
18. We also find that when SEBI passed an order in 2014 rejecting the complaints the closing price of the scrip was Rs. 586.10/-. Thereafter, the price of the scrip reached a high of Rs. 864.9/- on February 3, 2015 which was greater than the price quoted in the open offer. But no efforts were made by the appellants to off- load their shares. It is only when the price of the scrip started declining that the appellants made complaints.
19. The learned counsel for the appellant Anupam Dighe in Appeal No. 354 of 2022 submitted that his complaint is different to the complaint of the other appellants. He submitted that he was not a shareholder in 2008 and only became a shareholder in 2010. The learned counsel submitted that there was deemed trigger for making an open offer in 2015, based on which he filed a complaint on April 6, 2016. He submitted that the impugned order does not consider the allegations made in his complaint. Be that as it may. We are of the opinion that since the acquirer has been dissolved, no relief can be granted to the appellant at this stage.
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20. In our view, the appellants (except Anupam Dighe) have not filed the complaints with clean hands and their conduct does not entitle the discretionary jurisdiction given to the Tribunal
21. We are of the view that in view of the inordinate delay in the filing of the complaints, coupled with the fact that the acquirer company has been dissolved, we are of the view that no relief can be granted to the appellants. All the appeals fail and are dismissed with no order as to costs.
Justice Tarun Agarwala Presiding Officer Ms. Meera Swarup Technical Member PRAMILA Digitally by PRAMILA signed 07.11.2023 PTM TANAJI TANAJI MISAL Date: 2023.11.07 MISAL 16:26:00 +05'30'