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(viii) Even the Takeover Regulations use the expression "persons acting in concert" in the context of a mere holding of shares without acquisition;

(ix) FTIL and MCX continue to act in unison with a common object of continuing to hold equity shares of the Petitioner in excess of the limit specified in Regulation 8: (a) In response to a letter of PNB offering to purchase shares of the Petitioner if a buy back was provided, FTIL wrote to PNB offering a buy back; (b) MCX sold shares of the Petitioner to IL&FS for which a buy back was entered into between IL&FS and La-Fin. However, on 26 March 2010 when VBC 54 wp213.11 IL&FS exercised its right under the buy back arrangements, the warrants were purchased by MCX instead of La-Fin. FTIL controls MCX. Control has a wide meaning and means effective control;

66. There are two aspects in relation to the buy back agreement upon which there is a dispute. The first relates to the non-disclosure of the buy back agreement. The second relates to whether the buy back agreement is a forward contract in violation VBC 91 wp213.11 of the provisions of the SCRA.

X : Duty of disclosure

67. The fact that the buy back agreement was not initially disclosed to SEBI is not in dispute. The submission which has been urged on behalf of the Fourth Respondent is that the non-

disclosure of the buy back arrangement had no effect on the decision and the existence of such an arrangement was an irrelevant factor in the determination.

68. We are unable to accept the submission that a fair, candid and complete disclosure to SEBI would not require a disclosure in respect of the buy back arrangement. The object and purpose of the divestment of shares of the promoters was to ensure compliance with Regulation 8 of the MIMPS Regulations. If in the process of divestment, the promoters were under an obligation to offer to buy back the shares on the completion of a period stipulated, that is a matter which ought to have been brought to the notice of SEBI. The submission which has been urged on behalf of the promoters is that the buy back would not necessarily VBC 92 wp213.11 result in the promoters exceeding the shareholding limit of five per cent in the equity capital of the Petitioner. It was submitted that, for instance, it would be open to the promoters to ensure continued compliance with the MIMPS Regulations despite the exercise of the option under the buy back agreements by (i) increasing the equity capital; or (ii) causing the purchase of shares to be effected by an independent nominee. Hence, it was urged that the buy back agreements would not foreclose the possibility of MIMPS compliance in the future despite the exercise of the buy back option. That, in our view, did not absolve the Petitioner to make a full disclosure before SEBI that while compliance with Regulation 8 was being fulfilled by a divestment of shares, yet buy back agreements were entered into. The basic purpose underlying Regulation 8 is to ensure that no resident should own whether directly or indirectly with any other persons acting in concert, more than five per cent of the equity capital of a recognised stock exchange. Where the promoters hold more than five per cent of the equity capital, the divestment of their excess holding, so as to bring them in compliance with Regulation 8, must be genuine. The fact that the divestment of the shares held by a promoter in a stock VBC 93 wp213.11 exchange is accompanied by a buy back agreement is a material circumstance which must be disclosed to SEBI. On 21 July 2010, SEBI addressed a letter to the Petitioner adverting to a news article published on 19 July 2010, stating that the promoters of the Petitioner had entered into buy back agreements with the Banks who are shareholders of the Petitioner. In a reply dated 2 August 2010, the Petitioner informed SEBI that FTIL, as its promoter, had issued a letter of comfort dated 12 August 2009 to PNB without entering into a formal binding buy back agreement or shareholding agreement. It was stated that once the Scheme of Reduction was approved, the letter addressed by FTIL to PNB became infructuous and irrelevant. The Petitioner stated that it has complied with the MIMPS Regulations by virtue of the Scheme as approved and the shareholding of FTIL and MCX stood reduced to five per cent with no right to acquire even a single share in violation of limit prescribed by MIMPS Regulations. Even at that stage, there was no reference to the buy back agreement which was entered into with IL&FS. On this aspect of the matter, we are unable to accept the contention of the Petitioner and of the Third and Fourth Respondents that the existence of the buy back agreements was a VBC 94 wp213.11 circumstance which was irrelevant and was not required to be disclosed to SEBI.

- on the ground of these being forward contracts - does not find support in the oral submissions urged by the Learned Additional Solicitor General or in the written submissions.

74. Now, it is in this background that the finding of illegality in the impugned order must be assessed. The buy back agreements furnish to PNB and IL&FS an option. The option constitutes a privilege, the exercise of which depends upon their unilateral volition. In the case of PNB, the buy back agreements contemplated a buy back by FTIL after the expiry of a stipulated period. But, in the event that PNB still asserted that it would continue to hold the shares, despite the buy back offer, FTIL or its nominees would have no liability for buying back the shares in future. In the case of IL&FS, La-Fin assumed an obligation to offer to purchase either through itself or its nominee the shares which VBC 99 wp213.11 were sold to IL&FS after the expiry of a stipulated period. In both cases, the option to sell rested in the unilateral decision of PNB and IL&FS, as the case may be.