Securities Appellate Tribunal
Ramprasad Somani vs The Chairman, Securities And Exchange ... on 27 September, 2002
JUDGMENT
C. Achuthan, Presiding Officer
1. The Bank of Rajasthan Ltd (the Bank) is a company engaged in banking business. It's shares are listed on stock exchanges at Mumbai, Calcutta, Delhi etc and also permitted to be traded on the National Stock Exchange.
2. Respondent No.1 (SEBI) received few complaints, including one from the Appellant, alleging violation of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (the 1997 Regulations) by Respondent No.2 (Shri Tayal) alongwith persons acting in concert with him in regard to acquisition of shares /voting rights/control of the said Bank. SEBI forwarded copies of the complaints to Shri Tayal etc (Tayal group) seeking their comments on the allegations leveled therein. Tayal group responded to the same. In the light of the allegations made by the complainants and the reply thereto from Tayal group, SEBI, on 10.4.2001 issued a show cause notice to Shri Tayal etc. The notice, alleged inter alia that:
* Tayal group acquired shares/voting rights of the Bank in violation of regulation 10 of the 1997 Regulations.
* Increase in share holding of Tayal group in the Bank from 2.46% to 24.53% through rights issue was in violation of the 1997 Regulations.
* Tayal group acquired control over the management and business of the Bank.
* Tayal group did not comply with the provisions of regulation 7.
3. Tayal group vide letter dated 28.4.2001 replied to the show cause notice denying the charges. Subsequently, the representatives of Tayal Group and the complainants were heard by SEBI. Thereafter further submissions were made by them. SEBI, after the enquiry came to the conclusion that there was no violation of the provisions of regulations 10 and 12 by Tayal group and no public offer was required to be made. However SEBI held that Tayal group did not comply with the requirement of reporting as per regulations 3(4) and 7. In that context vide its order dated 16.1.2002 SEBI decided to refer the said violations for adjudication in terms of section 15A of the Securities and Exchange Board of India Act, 1992 (the Act).
4. The Appellant claiming to be aggrieved by SEBI's order that regulations 10 & 12 did not attract to the acquisition and takeover has preferred the present appeal inter alia praying to set aside the order. Pending final decision on the appeal interim order has also been sought that (1) Tayal group be restrained from alienating/dealing in any manner their shares in the Bank and (2) they be restrained, from exercising the majority control in the Board of Directors of the Bank.
5. When the Appellant's prayer for interim order was taken up for consideration, it was submitted on behalf of some of the Respondents that they would file their reply early and as such the appeal itself can be disposed of early, thereby obviating the need for any interim stay order. The learned counsel for the Appellant, in the said context did not press the prayer for interim order. The appeal was posted for disposal on 5.7.2002.
6. When the appeal was taken up for consideration some of the Respondents present, contended that the appeal was not maintainable as the Appellant being not a person aggrieved by the order is not entitled to prefer the appeal, in terms of section 15T of the Act. They submitted that the question of maintainability of the appeal be considered and decided first. Accordingly they were heard on the issue.
7. Shri Aspi Chinoy, learned Senior counsel appearing for Respondent No.2 pioneering the challenge, submitted that in terms of section 15T of the Act only a person aggrieved by an order of SEBI is entitled to prefer an appeal before the Tribunal. He read out section 15T and submitted that the Appellant's entitlement to prefer the present appeal requires to be tested with reference to the said section. In this context he submitted that the Appellant's claim that he is entitled to prefer the appeal has been explained in para 4(b) of the Appellants rejoinder of 28th June, 2002 that "the Appellant being a holder of 600 shares in the Bank of Rajasthan is an investor and entitled to file a complaint within the meaning of regulation 38. Further more the 1st Respondent himself has appreciated the position of the Appellant as such investor and recognized and accepted the locus standi of the Appellant and in view thereof the Appellant was issued notices of hearing and was given an opportunity of being heard. Once the Appellant was a party to the proceedings of investigation he has a locus standi and right of appeal as provided under section 15T of the SEBI Act as the Appellant being a party to the said hearing he can be treated as a party aggrieved if he has a grievance against the order passed by the 1st Respondent. The Securities Appellate Tribunal (Procedure) Rules 2000, by clause 16 thereof provide for the right of the Appellant being heard. In such circumstances there is no substance in the contention that the Appellant has no locus standi. ................. Appellant being a shareholder of the Bank of Rajasthan limited, if any attempts are made by any person to takeover the management of the said Bank in breach and or violation of the provisions of the takeover code, the Appellant has all rights to file a complaint and the question of any damage to Appellants' pecuniary or property rights does not arise. There is an injury to the Appellant as he is a share holder of the Bank."
8. Shri Chinoy submitted that the Appellant's claim that he has locus standi to prefer an appeal for the reason that he is a share holder of the Bank and that in the proceedings before SEBI he was heard, is unfounded. He submitted that complainants, informants etc have no right of appeal irrespective of whether they were heard or not in the proceedings before SEBI. He further submitted that, even if the Appellant is a share holder, his legal or proprietary right as a shareholder is not affected by the impugned order entitling him to prefer an appeal under section 15T, that it is settled law that persons whose rights are not affected can not be considered as aggrieved persons.
9. Shri Chinoy in support of his contention cited extensively from the decision of the Hon'ble Supreme Court in Adi Pherozshah Gandhi V. H.M. Seervai, Advocate General, Mumbai (1970)(2) SCC 484:
"6. The expression 'person aggrieved' is not new, nor has it occurred for the first time in the Advocates' Act. In fact it occurs in several Indian Acts and in British Statutes for more than a hundred years. In the latter a right of appeal to a 'person aggrieved' is conferred in diverse contexts. It occurs in the Ale House Act, the Bankruptcy Acts, Copyright Act, Highway Act, Licensing Acts, Milk and Dairies (Amendment) Act, Rating and Valuation Act, Summary Jurisdiction Act, Union Committee Act, Local Acts, in certiorari proceedings and the Defence of Realm Regulations to mention only a few. The list of Indian Acts is equally long.
7. As a result of the frequent use of this rather vague phrase, which practice, as Lord Parker pointed out in Ealing Corporation v. Jones (L.R. (1959) 1 QBD 384) has not been avoided, in spite of the confusion it causes, selections from the observations of judges expounding the phrase in the context of these varied statutes were cited before us for our acceptance. The observations often conflict since they were made in different contexts and involved the special standing of the party claiming the right of appeal. Yet these definitions are not entirely without value for they disclose a certain unanimity on the essential features of this phrase, even in the diversity of the contexts. The font and origo of the discussion is the well-known definition of the phrase by James L.J. In Re Sidebotham Ex p. Sidebotham ((1880) 14 Ch D 458 CA). It was observed that the words 'person aggrieved' in Section 71 of the Bankruptcy Act of 1869 meant:
"not really a person who is disappointed of a benefit which he might have received if some order had been made. A 'person aggrieved' must be a man who had suffered a legal grievance, a man against whom a decision has been pronounced which had wrongfully deprived him of something, or wrongfully refused him something or wrongfully affected his title to something."
The important words in this definition are 'a benefit which he might have received' and 'a legal grievance' against the decision which 'wrongfully deprives him of something' or affects 'his title to something'.
8. The definition was held in later cases to be not exhaustive and several other features of the phrase were pointed out. Thus under the Bankruptcy Acts, where the Board of Trade summoned to support the validity of the appointment of a trustee, went before the judge, and failed, it was considered a 'person aggrieved' on the principle that a person who is brought before the Court to submit to its decision, but not a person who is heard in a dispute between others must be treated as a 'person aggrieved' (see In Re Lamb, Ex p. Board of Trade per Lord Esher ((1894) 2 QBD 805 at 812). Here again the words to notice are 'brought before the court to submit to its decision', that is to say, a person who is in the nature of a party as contra-distinguished from a person who is next described as 'a person who is heard in a dispute between others'. To distinguish between these two positions I may refer to a few more decisions. In Re Kitson, Ex p. Sugden (Thomas) and Sons Ltd ((1911) 2 KB 109 at 112-114), it was further explained that "the mere fact that an order is wrongly made does not of itself give a grievance to a person not otherwise aggrieved."
(per Phillimore, J.) It was added that a person deprived of the fruits of litigation which he had instituted in the hope for them, is a 'person aggrieved'. Similarly, a creditor who did not wish an adjudication order to be made was held not to be a 'person aggrieved' -See In Re Brown Ex.p. Debtor v. Official Receiver ((1943) Ch D 177). The utmost that this series of cases goes is to be found in the observations of James, L.J. in Ellis Ex.p. Ellis ((1876) 2 Ch D 797) that even a person not bound by the order of adjudication must be treated as a 'person aggrieved' if the order embarrasses him. In a latter case (in res Woods Ex.p. Ditton ((1879) 40 LT 297 CA) Cotton L.J., held that even so the person must be aggrieved by the very order and not by any of the consequences that ensue. This was clarified in R.v. London County Keepers of the Peace and Justices, ((1890) 20 QBD 357 at 361) by lord Coleridge, C.J., while dealing with the Highway Act, denying the right of appeal in these words:
"Is a person who cannot succeed in getting a conviction against another a 'person aggrieved'? He may be annoyed at finding that what he thought was a breach of the law is not a breach of law; but is he aggrieved because some one is held not to have done wrong? It is difficult to see that the section meant anything of the kind. The section does not give an appeal to anybody but a person who is by the direct act of the Magistrate 'aggrieved'- that is who has had something done or determined against him by the Magistrate."
These observations again show that the person must himself suffer a grievance, or must be aggrieved by the very order because it affects him.
9. Two cases which may usefully be seen in the same context, may next be mentioned. In Fennings v. Kelly ((174) AC 206) in relation to the Government of Ireland Act, 1920, Lord Wright did say that if a person was treated in certiorari proceedings as a competent party and notice was served on him as being a proper party he would be a 'person aggrieved'. The point to bear in mind is that the person must be treated as a party. However the force of the observation was considerably weakened because the party there was ordered to pay costs and the right of appeal was held to be available on that limited ground. Further qualification is to be found in In Re Riviere, (1884) 26 Ch D 48 where Lord Selborne observed:
"....... it must be legal grievance, it must not be a stet pro ratione voluntas; the applicant must not come merely saying "I do not like this thing to be done', it must be shown that it tends to his injury, or to his damage, in the legal sense of the word."
The locus standi of the person aggrieved must be found from his position in the first proceedings and his grievance must arise from that standing taken with the effect of the order on him.
10. These cases are of course far removed from the one before me and as Bramewell, L.J., observed in Robinson v. Currey ((1881) 7 QBD 465 CA at 470) the expression is nowhere defined and, therefore, must be construed by reference to the context of the enactment in which it appears and all the circumstances. He pointed out that "the words are ordinary English words, which are to have the ordinary meaning put upon them."
11. From these cases it is apparent that any person who feels disappointed with the result of the case is not a 'person aggrieved'. He must be disappointed of a benefit which he would have received if the order had gone the other way. The order must cause him a legal grievance by wrongfully depriving him of something. It is no doubt a legal grievance and not a grievance about material matters but his legal grievance must be a tendency to injure him. That the order is wrong or that it acquits some one who he thinks ought to be convicted does not by itself give rise to a legal grievance. These principles are gathered from the cases cited and do not, as I shall show later, do violence to the context in which the phrase occurs in the Advocates' Act. Although I am aware that in Seven Oaks Urban District Council v. Twynam ((1929) 2 KB 440 at 443) Lord Hewart, C.J., uttered words of caution, against emphasised by Lord Parker, C.J., in Ealing Corporation v. Fones (supra), in applying too readily the definitions given In relation to other statutes but I do not think I am going beyond what Lord Hewart, C.J. , said and what Lord Parker, C.J., did in the case. Lord Parker observed:
"...............As Lord Hewart, C.J., pointed out in Seven'oaks Urban District Council v. Twynam: 'But as has been said again and again there is often little utility in seeking to interpret particular expressions in one statute by reference to decisions given upon similar expressions in different statutes which have been enacted alio intuitu. The problem with which we are concerned is not, what is the meaning of the expression 'aggrieved' in any one of a dozen other statutes, but what is its meaning in this part of this statutes? Accordingly, I only look at the cases to which we have been referred to see if there are general principles which can be extracted which will guide the court in approaching the question as to what the words 'person aggrieved' mean in any particular statute."
If I may say respectfully I fully endorse this approach. I am now in a position to examine the Advocates' Act but before I do so I must refer to a case near in point to this case, than any considered before."
10. Shri Chinoy also cited the following paras:
"12. The Queen v. The Keepers of the Peace and Justices of the Country of London (25 QBD 357, 361.) was a case of an appeal by an informant against the judgment of a justice of the peace upon the hearing of an information or complaint by the vestry of the parish against a person for unlawfully and willfully obstructing the free passage of a certain highway. The relevant section provided :
"If any person shall think himself aggrieved by .... Any order, conviction, judgment, or determination made, or by any matter or thing done by any justice or other person in pursuance of this Act..... such person may appeal to quarter sessions."
11. In holding that an informant had no right of appeal Lord Coleridge , C.J. said:
"is a person who cannot succeed in getting a conviction against another a person aggrieved? He may be annoyed at finding that what he thought was a breach of law is not a breach of law; but is he 'aggrieved' because, some one is held not to have done wrong? It is difficult to see that the section meant anything of that kind."
12. In Rex v. London Quarter Sessions Ex parte Westminister Corporation (1951 (2) KB 508) a borough council whose cancellation of the registration of a street trader had been reversed by a magistrate on appeal by the trader concerned under Section 25 of the London County Council (General Powers) Act, 1947, was held not to be a person aggrieved by an order of a court of a summary jurisdiction within the meaning of Section 64 of the Act. The argument advanced on behalf of the corporation was that it had a public administrative duty to perform in the regulation of the streets and having been interfered with in the execution of that duty by the decision of the magistrate, they were persons aggrieved by his order. One of the grounds for refusal of the application by Lord Goddard, C.J., was that the order made did not directly affect the borough council in such a way as to make them " a person aggrieved" within the meaning of the section. According to the learned Chief Justice what the statute did was "to substitute the opinion of the magistrate for the opinion of a borough council". It was said that the court of summary jurisdiction had to take into account the same matters as the borough council had to take into account, and if the court thinks that the cancellation of the licence is not justified, it can restore the licence to the street trader. If the court of summary jurisdiction refuses to grant a licence, then the street trader is a person aggrieved, because his livelihood is affected, or an order is made directly affecting him.
13. The case of Sevenoaks Urban District Council v. Twynam (1929 (2) KB 440 at 444) was relied upon by counsel appearing for the Advocate-General of Maharashtra to support his argument that even a person who had no proprietary or pecuniary interest in the subject-matter of the litigation might be a person aggrieved so as to give him a right to appeal. The statute in this case was however worded very differently from the statutes which came up for consideration in the cases noted earlier. Section 68(1) of the Public Health Act, 1925, laid down that:
"Where for the purpose of relieving or preventing congestion of traffic it appears to the local authority to be necessary to provide within their district suitable parking places for vehicles."
Then that authority may, subject to certain conditions, provide those parking places and might acquire land suitable for use as parking place. The proviso to the section however laid down that no such order shall authorize the use of any part of a street so as unreasonably to prevent access to any premises adjoining the street, or the use of the street by any person entitled to the use thereof, or so as to be a nuisance, or be made in respect of any part of a street without the consent of the authority or person responsible for the maintenance of the street. Sub-section (2) of the section provided that where a local authority proposes to acquire land for the purpose of using it as a parking they are to give notice of the proposal specifying the land and notify the date within which any objection is to be sent to them and the notice is to state that a right of appeal was conferred by the section.. Sub-section (3) provided that before carrying into effect any proposal of which notice was required to be given the local authority shall consider any objection which was sent to them in writing. There was no limit there as to the kind of person making the objection or the kind of objection which might be raised. The respondent, a rate payer, duly gave notice under sub-section (3) on various grounds but he did not allege the infringement of any personal legal right and he objected in his capacity as a rate-payer and as a member of the public on grounds common to them all. The urban council considered the objection and informed him of their decision to proceed with the scheme. The respondent appealed to petty sessions which allowed his objection. The appellant appealed to quarter sessions and took the preliminary objection that the respondent was not a person aggrieved because he had alleged no infringement of any legal right personal to him.
14. Referring to the dicta of James, L.J., Esher, M.R. and Lopes, L.J., in the above cases Lord Hewart, C.J., observed:
"I think this respondent did ask for a decision 'for which he had a right to ask. He did give notice of an objection of which he was entitled to give notice, ......... but the person making the objection is not to have an appeal unless he satisfies two conditions: (1) that he is the author of the objection, and (2) that he is aggrieved by the refusal in the sense that he has a special and individual right infringed. It seems to me that upon the fair construction of this sub-section, which is by no means a common kind of statutory provision, what is meant is that a person may make an objection and is entitled to a decision upon it, and if the decision is adverse to him, he may, if he thinks fit and subject to the usual consequences, appeal from it to a petty sessional court, and so appealing, may, in consequence of other statutory provisions, appeal, if need be, to the court of quarter sessions."
According to Avory, J.:
"There is no limit there [in sub-section (3)] of the kind of person or the kind of objection which may be made. It proceeds that after so considering the objection, they are to give notice of their decision to the person by whom the objection was made, and any person who is aggrieved by such decisions may appeal. I cannot help thinking that on the plain words of that statute it was intended to give a right of appeal to any person who has made an objection to the proposal and has received notices that that objection has been overruled."
15. In Ealing Corporation v. Fones, (1959 (1) QB 384 at 390) Lord Parker, C.J., remarked that it was easier to say what will not constitute a person aggrieved than it was to say what "person aggrieved" included. He observed that a person was not aggrieved when being a public body it had been frustrated in the performance of one of its public duties. He amplified this by saying that:
"If costs have been awarded in a case against a local authority, it is clear on the authorities that the local authority would be an aggrieved person, equally, if the result of the decision has been to put some legal burden on the public body concerned, that has been held to make it a person aggrieved."
According to Donovan, J., in the same case:
"The word 'aggrieved' connotes some legal grievance, for example, a deprivation of something, an adverse effect on the title to something, and so on, and I cannot see that this is so here. The local planning authority has simply been told that it cannot enforce the discontinuance of the present use of this land by the appellant by means of an enforcement notice under Section 23."
16. If one is to be guided merely by the provisions of the Advocates Act it is difficult to see how the Advocate-General can be a person aggrieved because the State Bar Council takes the view, whatever be its reasoning, that an advocate on its roll has not been guilty of any misconduct. The entertaining of complaints, the inquiry into them and the punishment to be meted out to the advocate are all concerns of the Bar Council. The advocate-General no doubt is entitled to a hearing if the complaint is not rejected summarily. The statute expects him to take a fair and impartial attitude. He has to render all assistance to the Bar Council so that a proper decision may be arrived at. His role is not that of a prosecutor; nor is he a defence counsel on behalf of the advocate. He is not interested in getting the advocate punished any more than he is interested in seeing that the character of a fellow member of the Bar is cleared even if his conduct be unworthy of an advocate. The Act does not make it obligatory on him to take part in the proceedings where he thinks that the facts of the case are so plain that his assistance is not called for. It is only when he feels that a case requires a careful investigation and proper elucidation of the facts or the exposition of the law on the subject that he is called upon to render all assistance in the proceedings. When he chooses to do so, he does his duty by appearing at the hearing and putting before the disciplinary committee the facts in their proper perspective and advancing the proper inference to be drawn therefrom. Once he does so there is an end of the matter so far as he is concerned. He cannot have any grievance because the decision of the Bar Council is against his submission or not to his liking."
17. According to Shri Chinoy, as per the provisions of the Act and the Regulations made there under for regulating substantial acquisition of shares and takeovers, the regulatory powers are vested in SEBI, that the 1997 Regulations provide for investigation of complaints and the nature of action to be taken by SEBI. The Regulations provide for notice to the acquirer etc. Further the obligations of the acquirer, seller, target company, and merchant banker etc., are provided in the Regulations in an investigation by SEBI, that the Regulations also provide for communication of findings of the investigation officer to the acquirer, seller, target company, merchant banker etc. He reiterated the version that there is no locus standi for a complainant or informant as a party to the regulatory proceeding, that he may or may not be heard, that it is only a proceeding between SEBI and the person proceeded against. Shri Chinoy submitted that if a person is not entitled to be heard in the proceedings before SEBI, he cannot be heard in an appeal before the Tribunal. He submitted that if the Appellate Tribunal is to take up the role of SEBI then the Appellate proceedings will become the original proceeding that the scheme of the Act does not provide for the same. Shri Chinoy submitted that to come under the ambit of section 15T, one must be a party who is directly affected by the order. He submitted that it is possible that an order of SEBI may affect the target company and its shareholders, but if a view is taken that their legal rights are affected, then the order itself will get vitiated for the reason of not having followed the principles of natural justice in as much as opportunity to all the share holders to put forth their views in the enquiry proceeding was not given, that it would be practically impossible to do so, in view of the fact that the number of shareholders in listed companies normally would be large. He submitted that precisely it is for that reason the Regulations do not provide for hearing the shareholders in the proceedings and for any reason if a person is heard that by itself does not give him the right of appeal. Shri Chinoy submitted that the expression "any person aggrieved" used in section 15T has to be understood as the one who has suffered under the order, that injury to the legal rights of the person is the test. Shri Chinoy submitted that the Appellant being not a person aggrieved by the order, the appeal filed by him is not maintainable and not to be proceeded further.
Shri Kumar Desai, learned counsel appearing for SEBI submitted that SEBI is not an alternate dispute resolution forum. It's role with reference to the administration of the Takeover code is to consider whether the regulatory provisions required to be complied with by the persons under the Regulations have been complied with or not, that the investigation in this regard and consequential action therein is a matter left to SEBI. In this context he referred to para 8.1 of the impugned order where in it has been stated "pursuant to the show cause notice dated 10/4/01 an opportunity of personal hearing was granted to the acquirer on September 21, 2001. However, during the course of the aforesaid hearing it was felt that the complainants may also be called for the hearing which was objected to by the acquirer. However it was decided to give the hearing to the acquirer as well as complainants so that necessary assistance could be offered by them." Shri Desai submitted that from the said observation of SEBI it is clear that the Appellant was allowed to participate in the proceedings, so as to take assistance from him and his participation did not give him any other rights, that for the only reason that he attended the proceedings he cannot be considered as a party to the proceedings, that in any case he cannot be considered as a person aggrieved. In this context Shri Desai referred to the Appellant's complaint dated 23.1.1999 addressed to the President of the Jaipur Stock Exchange Ltd and copy thereof marked to several others including SEBI and stated that therein the submission made and action sought was at a macro level pointing out the irregularities involved in acquiring the shares/control of the Bank by Tayals, and the request was to take appropriate action in the matter. Shri Desai further submitted that the Appellant was not a noticee and he was called only to assist SEBI. He submitted that the proceedings before SEBI, are based on several other factors. He further submitted that the Appellant should not be allowed to make use of the Appellate forum for vindictive purposes. Shri Desai submitted that the Appellant's contention that he is a share holder of the Bank and as such entitled to prefer the compliant, is untenable, as the order has not in any way affected adversely his rights as a shareholder, that in case he feels that his right as a share holder has been affected as a result of the acquisition of shares/control of the Bank, he has other avenues to seek the remedy.
18. Shri Shyam Divan, learned counsel appearing for Respondent Nos.3 & 4 also adopted Shri Chinoy's submissions and further stated that the Appellant is not a person entitled to prefer an appeal is clear from the provisions of section 15T itself, as the sub-section (3) to section 15T stipulates that the appeal shall be filed within a period of forty five days from the date on which the order is received by the person aggrieved. He submitted that thus it is clear that only those persons who are entitled to receive the order and if that order is adverse to their interest the recepient of the order is entitled to prefer an appeal that there is no provision in the regulation to serve a copy of the order on the complainant or informant or the shareholder on conclusion of inquiry by SEBI. Shri Divan submitted that none of the grounds adduced by the Appellant in support of his locus standi - that he is a complainant, a share holder, and participant in the proceedings, he was heard by SEBI etc does not support his claim. In this context he referred to the meaning of the expression "aggrieved party" given in Blacks Law Dictionay (7th Edn) that - "a party whose personal, pecuniary or proprietary rights have been adversely affected by another person's actions or by a Court's decree or judgment - Also termed party aggrieved, person aggrieved". Shri Divan submitted that a complaint is only a triggering factor of a proceeding that it is with the issue of the show cause the proceeding before SEBI commences. He further submitted that the regulator issues the show cause notice and on completion of the adjudication an order is passed against some one to whom the show cause notice was issued, that if such an order is adverse to the noticee, he could be considered as a person aggrieved and none else, that SEBI has not taken any action against the Appellant, so as to consider him as an aggrieved person entitled to prefer an appeal as per section 15T. Shri Divan submitted that it is for the Appellant to establish that he is aggrieved by the order and as such entitled to prefer an appeal, that he has failed to establish the same and therefore his appeal is not maintainable.
19. Shri Paras Kuhad, learned counsel appearing for Respondent Nos 6 & 7 supplemented the arguments put forth by the counsel for Respondent Nos.1,2,3 & 4. He referred to the provisions of the 1997 Regulations relating to the scheme of investigation and stated that a complaint could be one of the purposes to undertake investigation and once SEBI seizes of the matter raised in the complaint, complainant has no locus standi in the proceedings before SEBI. He referred to the provisions of regulation 39 and submitted that it is clear from the said regulation as to who are all the persons entitled to the notice, that a complainant based on whose complaints the investigation was ordered is not one among them. He also referred to regulation 42, which enumerates the persons who are entitled to have a copy of the investigation report, that a complainant is not one among them. He submitted that the complainant has no right even to participate in the investigation proceedings before SEBI, unless SEBI permits him to participate and that participation is only to assist SEBI in its investigation and not for any other purpose, that he gets only a restricted role of participation. Learned Counsel submitted that wherever the complainants are to be given recognition as a party to the proceedings, law provides for the same as has been done in the Monopolies and Restrictive Trade Practices Act, 1969. Learned Counsel submitted that the scope of investigation is restricted by the show cause notice and not by a complainant. Shri Paras Kuhad submitted that the scope of section 15T is restricted to those who are entitled to get a copy of the order and those who are entitled to get a copy of the order are those referred to in regulation 42. Learned Counsel, in support of his contention that the complainant has no locus standi to file an appeal as an aggrieved person cited Hon'ble Madras High Court in Official Receiver V. PLSL Chellappa Chettiyar (AIR (38) 1951 Madras 935) that :- "A person against whom a decision has been pronounced which has wrongfully refused him something which he had a right to demand would be an aggrieved person. The grievance may not be personal or pecuniary and may yet be a legal grievance. A creditor or receiver who is under the provisions of the Act empowered to make and who makes an application to the Insolvency Court for a relief or who is brought before the Court to submit to its decision is, if the decision goes against him, thereby an aggrieved person. However, not every person who has suffered some disappointment or whose expectations have not been realized as a result of the decisions or order of an insolvency Court can claim to be an aggrieved person".
20. Shri Paras Kuhad also referred to the observation in Adi Phiroz Shah Gandhi's case (supra) cited by Shri Chinoy, in support of his contention that the Appellant is not a person aggrieved by the impugned order as the order has not caused him any legal grievance. He submitted that section 38 of the Advocates Act was amended subsequently to overcome the difficulty arisen as a result of the decision in Gandhis case. Learned Counsel submitted that right of appeal is not an unrestricted right, that an investor, if he feels aggrieved as a result of substantial acquisition or takeover, is entitled to bring the matter to the notice of SEBI and it is for SEBI to investigate and take action, if considered necessary, against the errant acquirer and the complainant shareholder cannot be said to be aggrieved by an order made by SEBI in case that order is not to the liking of the complainant or is short of his expectation.
21. Shri S.R.Mishra, learned counsel appearing for the Appellant submitted that the Appellant is not a mere complainant simplicitor as is being projected by the Respondents, that he is a shareholder of the Bank, having vested legal interest, that the Respondent's order has caused injury to him. According to the learned counsel, the Appellant is an interested party and his legal rights have been taken away by the impugned order. Learned Counsel submitted that he was not an alien to the proceedings before SEBI, that the Appellant's complaint was taken cognizance of and he was given notice, that he participated in the proceedings, and that, that participation also gave him a right to be considered as a party to the proceedings and SEBI has also accepted him as a party to the proceedings. Shri Mishra submitted that since the Appellant's complaint has not been properly investigated and by holding that Tayal group is not required to make a public offer, the Appellant has been denied of the benefit arising as a result of the public offer. He submitted that section 15T of the Act and regulation 46 of the 1997 Regulations enable any person aggrieved by an order to prefer an appeal, that the said right cannot be restricted only to selected entities mentioned in regulation 39 or 41, that the Appellant being aggrieved by the order, is entitled to prefer the appeal.
22. I have carefully considered the submissions made by the counsel for the parties on the maintainability of the appeal and my views thereon are as under:
It is not in dispute that the Appellant is a shareholder in the Bank. He is holding 600 shares. The Appellant had complained to SEBI about Tayal group's substantial acquisition of shares/ control in the Bank in violation of the provisions of the 1997 Regulations and also had requested SEBI to investigate into the matter and take appropriate action. In this context, the two regulations which would attract the acquisition/takeover in the light of the allegations, viewed from the investor benefit point of view are, regulations 10 and 12. In terms of regulation 10, applicable to acquisition of shares or voting rights "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 entitles such acquirer to exercise fifteen percent - (prior to 28.10.98 it was ten percent) 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 regulation." (emphasis supplied)
23. Regulation 12 is applicable to cases of takeover of control over a company.
According to Regulation12 -"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". (emphasis supplied).
24. In terms of regulation 21, the public offer is required to be made to the share holders of the target company to acquire from them an aggregate minimum of twenty percent of the voting capital of the company at the price worked out in the manner provided in regulation 20. The minimum price in "frequently traded shares" for the purpose as per regulation 20 shall be the highest of:-
"(a) the negotiated price under the agreement referred to in sub-regulation (1) of regulation 14.
(b) highest price paid by the acquirer or persons acting in concert with him for any acquisitions, including by way of allotment in a public or rights issue if any, during the 26 week period prior to the date of public announcement.
(c) The price paid by the acquirer under a preferential allotment made to him or to person acting in concert with him at any time during the twelve months period up to the date of disclosure of the offer.
(d) The average of the weekly high and low of the closing prices of the shares of the target company as quoted on the stock exchange where the shares of the company are more frequently traded during the 26 weeks preceeding the date of public announcement."
25. It could be seen from the pricing formula stated above, that it is meant to protect the interest of investors who prefer to exit from the company in the context of substantial acquisition of shares/takeovers and they are assured of a fair price even if the acquisition is underpriced.
26. It is to be noted that 1997 Regulations were framed based on the recommendations of an expert committee. The object of the Regulations is clear from the committee's following words-" The Committee was of the view that the Regulations for substantial acquisition of shares and takeovers should operate principally to ensure fair and equal treatment of all share holders in relation to substantial acquisition of shares and takeovers". The Committee has set out certain general guiding principles for the purpose of interpretation and operation of the Regulations which include -"(i) equality of treatment and opportunity to all shareholders, (ii) protection of interest of shareholders."
27. In this context it is to be noted that regulation 38 empowers SEBI to appoint one or more persons as investigating officer to undertake investigation for certain purposes including "the complaints received from the investors, the intermediaries or any other person on any matter having a bearing on the allegations of substantial acquisition of shares and takeovers." In terms of regulation 42, on conclusion of the investigation SEBI is empowered "to call upon the persons referred to therein to take such measures as" the Board may deem fit in the interest of securities market and for due compliance with the provisions of the Act and the Regulations. It is therefore well with in the powers of SEBI to ask the acquirer to make a public offer, in the case of substantial acquisition of shares or takeover attracting the provisions of regulations 10/12, if the acquirer of his own has failed to make the requisite public offer.
28. It is to be noted that the requirement of public offer to the existing shareholders in a target company by an acquirer is to protect the interest of the investors. It enables the share holder to exit from the company by selling his shares to the acquirer at a price beneficial to him. It is a right flowing from the Regulations. Since it is a right under the law it cannot be said that in the event of denial of that right he cannot be considered as an aggrieved person and cannot seek appropriate relief under this Act.
29. In this context it is to be noted that in terms of regulation 15T any person aggrieved by an order made by SEBI or the Adjudicating Officer under the Act is entitled to prefer an appeal to the Tribunal.
Section 15T is extracted below:-
15T. (1) Save as provided in sub-section (2), any person aggrieved,-
(a) by an order of the Board made, on and after the commencement of the Securities Law (Second Amendment) Act, 1999, under this Act, or the rules or regulations made thereunder; or
(b) by an order made by an adjudicating officer this Act, may prefer an appeal to a Securities Appellate Tribunal having jurisdiction in the matter.
(2) No appeal shall lie to the Securities Appellate Tribunal from an order made-
(a) by the Board on and after the commencement of the Securities Laws (Second Amendment) Act, 1999;
(b) by an adjudicating officer, with the consent of the parties.
(3) Every appeal under subsection (1) shall be filed within a period of forty-five days from the date on which a copy of the order made by the Board or the Adjudicating Officer, as the case may be is received by him and it shall be in such form and be accompanied by such fee as may be prescribed:
Provided that the Securities Appellate Tribunal may entertain an appeal after the expiry of the said period of forty-five days if it is satisfied that there was sufficient cause for not filing it within that period.
(4) On receipt of an appeal under sub-section (1), the Securities Appellate Tribunal may, after giving the parties to the appeals, an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against.
(5) The Securities Appellate Tribunal shall send a copy of every order made by it to the Board, the parties to the appeal and to the concerned Adjudicating Officer.
(6) The appeal filed before Securities Appellate Tribunal under sub-section (1) shall be dealt with by it as expeditiously as possible and endeavour shall be made by it to dispose of the appeal finally within six months from the date of receipt of the appeal."
30. The words "person aggrieved" is no where defined in the Act/Regulations and therefore must be, construed by reference to the context in which it appears The meaning of the words "person aggrieved" may vary according to the context of the statute and that even a stranger may be found to have locus standi although he may not have any personal interest of his own, provided he is not a busy body or meddlesome interloper, and although a stranger, he moves the court for a right in common with the general public (Seetha lakshmi Ammol V State AIR 1993 Mad 1 at 5, See Nahan Singh V. Manohar Kumar, AIR 1993 J& K 69 AT 72). Courts have given a very wide meaning to the said words as could be seen from the following extracts from such a few decisions. While interpreting the scope of the words "person aggrieved" the following observations made by Krishna Iyer J. in PSR Radhakrishnan V. Arunachalam AIR 1980 SC 856 has to be kept in mind. He had observed that "the narrow limits set in vintage English Law into the concept of "person aggrieved" and "standing" need liberalization in our democratic situation. Access to justice to every bonafide seeker is a democratic dimension of remedial juris prudence even as public interest litigation, class action. probono proceedings are". "A spacious construction, functionally informed by the social conscience and the statutory purpose of the enactment must illumine the judicial effort (Krishan Iyer J. in Bar Council of Maharashtra M.V. Dhabolkar ((1975) 2 SCC 702). Hon'ble Supreme Court in J.M. Desai V. Roshan Kumar AIR 1976 SC 578: (1976) 1SCC 671 had observed that however the expression aggrieved person "denoted an elastic and, to an extent an elusive concept. Its scope and meaning depend on diverse variable factors such as the content and intent of the statute of which contravention is alleged, the specific circumstances of the case, the nature and extend of the petitioners interest, and the nature and extent of the prejudice or injury suffered by him. The court has to consider whether any of his rights or interest recognized by the general law has been infringed. If the answer is in the negative he is not an aggrieved person." (emphasis supplied)
31. Hon'ble Supreme Court in Bar Council of Maharashtra V. M.V. Dhalbolkar (1975) 2 SCC 702 had observed -" The words 'person aggrieved' are found in several statutes. The meaning of the word 'person aggrieved' will have to be ascertained with reference to the purpose and the provisions of the statute. Some times it is said that the words 'person aggrieved' correspond to the requirement of locus standi which arises in relation to judicial remedies.
32. Where a right of appeal to courts against an administrative or judicial decision is created by statute, the right is invariably confined to a person aggrieved or a person who claims to be aggrieved. The meaning of the words " a person aggrieved" may vary according to the context of the statute. One of the meanings is that a person will be held to be aggrieved by a decision if that decision is materially adverse to him." Krishan Iyer J. in his concurring judgment in the Dhabolkar (supra) had observed that "Each statute has a personality and a message. Judicial interpretation is not blood less and sterile exercise in spinning subtle webs, some times cobwebs out of words and phrases otherwise simple, but to uphold the scheme of the legislation insight fully, sense its social setting and read the plain intendment".
33. Lord Denning in Attorney General of the Gambia V. Pierre Sarr N' jie (1961 AC 617) had observed :
"The words person aggrieved are of wide import and shall not be subjected to a restrictive interpretation. They do not include, of course, a mere busy body who is interfering in things which do not concern him; but they do include, a person who has a genuine grievance because an order has been made which prejudicially affects his interest." (emphasis supplied)
34. In Adi Phirozshah Gandhi (supra), the authority relied on by Shri Chinoy, the Hon'ble Supreme Court was considering an appeal against an order of the disciplinary committee of Bar Council of India. The back ground of the said appeal was as under:
35. On the basis of a news item in the Times of India of August 27, 1966, the Bar Council of Maharashtra in exercise of its power under section 35 of the Advocates Act 1961, issued a notice to Shri A.P. Gandhi to face an inquiry into his conduct by its disciplinary committee. The said committee exonerated him of the charge levelled against him and held that he was not guilty of any misconduct, professional or otherwise. Relying on the provisions of section 37 of the said act, the advocate General of Maharashtra who had appeared before the said committee, preferred an appeal to the Bar Council of India. The Disciplinary Committee of the Bar Council of India disagreed with the findings of the disciplinary Committee of the Bar Council of Maharashtra observing that the conduct of Shri Gandhi which was investigated into before the State Bar Council was quite undeserving of an advocate and directed his suspension from practice for a period of one year. Shri Gandhi preferred an appeal to the Hon'ble Supreme court and urged a preliminary point that the appeal by the Advocate General to the Bar Council of India was incompetent and the finding and order of the disciplinary committee of the said body ought to be set aside on that ground alone without the court going into the facts of the case: In the said case the majority view was that the Advocate General of the State was not competent to file an appeal to the Bar Council of India. The Hon'ble Court also viewed that the Advocate General had no locus standi to file the appeal even in a case where the statute only gives him an opportunity of appearing at a hearing and making submissions. In the said case the Hon'ble Court had viewed that to be considered as an aggrieved person, by an order, the order must cause him a legal grievance by wrongfully depriving him of something. The ratio in the Official Receiver (Supra) relied by Shri Paras Kuhad is also the same. The Hon'ble Madra High Court in the said case had held " a person against whom a decision has been pronounced which has wrongfully refused him some thing which had a right to demand would be an "aggrieved person". The grievance may not be personal or pecuniary and yet be a legal grievance". It is noticed that in both the cases relied on by the Respondents Courts had accepted that a person who has been deprived of a right which was available to him under law, is an aggrieved person. The position of the Advocate General in Gandhi's case and Official receiver in the other case cited by counsel is not comparable to the position of the Appellant as is evident from the facts of the cases.
36. I agree with the Shri Chinoy's submission that by virtue of making a complaint to SEBI or by assisting SEBI in a proceeding by itself will not entitle a person to challenge an order of SEBI in an appeal under section 15T. The right of appeal is not linked to participation in the proceedings itself. The test is the effect of the order on the person- that is whether he has suffered any grievance because of the order. As the Hon'ble Court in the Adi Phirozshah Gandhi (supra) case had observed that "...... any person who feels disappointed with the result of the case is not a person aggrieved. He must be disappointed of the benefit which he would have received if the order had gone the other way. The order must cause him a legal grievance by wrongfully depriving him of something".(emphasis supplied). If it is established that he is a person aggrieved by the order, then he is entitled to prefer an appeal under section 15T of the Act. It is not necessary that statute should specifically confer such a right on the complainant. It would suffice if he establishes that he is a person aggrieved by the order, Section 15T would be available to him. Such a right as otherwise available to him will not become unavailable for the reason that he is a complainant.
37. It is noticed from the copy of the Appellant's complaint forming part of the appeal book that he as a share holder of the Bank was aggrieved as a result of the alleged acquisition of shares/takeover of the Bank by Tayal group. He wrote to SEBI to investigate the matter and take appropriate action. The "appropriate action" which he requested SEBI to take can not be considered to exclude a direction from SEBI to the Tayal group to make public offer so as to enable the Appellant to exit from the Bank by tendering his shares to the acquirers in the public offer at a price most beneficial to him. SEBI, by holding that the acquisition of shares/takeover of the control of the Bank did not attract the provisions of regulation 10/12 in effect has denied the Appellant his right to exit from the company availing the benefit of the public offer which the acquirers (Tayal group) are required to make as per the Regulations. The order deprives of the Appellant's right to exit from the Bank availing the public offer route. In that view of the matter, it can not be said that wrongful deprivation of his right to exit from the Bank is not a legal grievance and he is not a person aggrieved by SEBI's order. In this context one should not forget the objective of the 1997 Regulations, as stated in the expert committee's report referred in the earlier part of this order, the scheme of the Regulations, and in particular the provisions of Chapter III thereof.
38. The mandatory requirement of making public announcement to acquire shares from the other share holders in the target company at a predetermined price provided in regulations 10, 11 & 12, is intended to benefit the shareholders in the context of substantial acquisition of shares/takeovers of the target company. Therefore, the argument that SEBI is the regulator entrusted with the task of regulating substantial acquisition of shares and takeovers of companies and as such any decision taken by SEBI relating to substantial acquisition of shares or takeover of companies, having adverse effect on the investors is immune from challenge in an appeal by the affected investor is unacceptable.
39. As already mentioned above, the words "person aggrieved" used in section 15T have to be given a purposeful meaning. The meaning has to be ascertained with reference to the purpose for which the Act is made. The purpose of the Act is discernible from the preamble to the Act, which states that it is "An Act to provide for the establishment of a Board to protect the interests of investors in securities and to promote the development of, and to regulate, the securities market and for matters connected there with or incidental thereto" (emphasis supplied).
40. It is thus evident that the core purpose of the Act is to protect the interests of investors. Section 11 of the Act mandates SEBI to function for the said purpose by taking such measures as it thinks fit. It is in that context the words "person aggrieved" need be understood and not in any restricted sense. I do not consider that the legislative intent in the section 15T of the Act and regulation 46 is that if the interest of investor(s) is adversely affected as a result of an order made by SEBI, that adversely affected investor(s) should suffer silently without resorting to any recourse under the Act to get his grievance redressed. In my view appeal provision under section 15T of the Act and regulation 46 should be available to him. Appellant indisputably is a shareholder of the Bank. As a result of SEBI's decision that the provisions of regulations 10 and 12 are not applicable to the alleged acquisition of shares/takeover of control of the Bank, the Appellant has been deprived of his legal right to exit from the Bank and in the said context in my view the Appellant is a person aggrieved by the impugned order and as such entitled to prefer an appeal. This is not the first time that a shareholder claiming to be aggrieved by an order depriving him of participation in public offer approaching the Tribunal challenging such order in an appeal under section 15T. In Punjab State Industrial Development Corporation V. SEBI & Others (2001) 32 SCL 631; Ashwin Doshi V. SEBI (appeal No.44/2001) the appeals filed by the shareholders of the target companies were entertained by the Tribunal, recognizing them as persons aggrieved, by SEBI's order.
41. For the reasons stated above, I am of the view that the present appeal is maintainable. Order accordingly.
42. The Registry will post the appeal early for disposal.