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2. The petitioners claim to be the shareholders of the fifth respondent-company, i.e., VST Industries Ltd. (the 'VST') which is engaged in the business of manufacturing and marketing of cigarettes and of exporting tobacco. According to the petitioner, the VST is in healthy financial condition and has been making good profits and also owns several properties in Hyderabad and other places in India. Its shares are listed on the National Stock Exchange as well as on the stock exchanges of various States in India. While so, the third respondent made a public announcement on February 15, 2001, informing the shareholders of VST that it had already acquired 14.97 per cent. of the paid-up equity share capital of VST and for acquisition of further 20 per cent. of equity share capital of VST at a price of Rs. 112 per share. Subsequently, respondent No. 4 also made a public announcement on March 6, 2001, in respect of a counter offer for acquisition of 20 per cent. of the share capital of VST at a price of Rs. 115 per share. Subsequent to the said announcement, respondents Nos. 3 and 4 issued letters of offer to all the shareholders of VST on May 11, 2001, and April 23, 2001. It is further stated by the petitioners that both the letters of offer are misleading and have been issued in violation of the provisions of the SEBI Act and Takeover Regulations. The said announcement and proposed acquisition of shares by respondents Nos. 3 and 4 are illegal and detrimental to the interests of VST and investors in securities and shares of VST. Respondents Nos. 1 and 2, particularly the second respondent failed in its duties and obligations under the SEBI Act and Takeover Regulations to protect the interest of the investors and shareholders and also to regulate the securities market. Though respondents Nos. 3 and 4 submitted draft letters of offer to the second respondent in terms of the Takeover Regulations, the second respondent had permitted and allowed the offers of third and fourth respondents to be proceeded with in spite of various infractions as they failed to protect the interests of the shareholders of VST. Respondents Nos. 3 and 4 are under an obligation to make proper and adequate disclosure to the shareholders of VST in terms of the Takeover Regulations. Respondent No. 1 and respondent No. 2 are under an obligation to see that acquisition of shares of a company by public announcement is done in accordance with the Takeover Regulations. According to the petitioners, the third respondent is controlled by Shri Radhakishan S. Damani and Shri Gopikishan S. Damani and is part of a group of companies controlled by the said Damanis. The said Damanis who are acting in concert with respondent No. 3 are being investigated as part of investigations launched by the SEBI recently against various stock market operators for alleged manipulations of the stock market. A search under Section 132 of the Income-tax Act, 1961, has also been undertaken by the Income-tax Department against the said Damanis and their associate entities. The trading rights of Shri G. Damini himself and as a member of the Stock Exchange, Mumbai, have been suspended for a period of three months from April 22, 1994, to July 21, 1994, by an order passed by the SEBI under sub-regulation (3) of regulation 29 of the Takeover Regulations. In view of the same, he is not a fit person to acquire shareholding in VST or take management control thereof.

5. The third respondent filed a counter along with the vacate stay petition, inter alia, stating that the merchant banker of the third respondent made a public announcement in four newspapers on February 15, 2001, about their intention to acquire 20 per cent. equity shares in VST Industries Ltd. as required under regulations 15 and 16 of the Takeover Regulations. On March, 6, 2001, the merchant banker of the fourth respondent also made a public announcement regarding the fourth respondent's intention to acquire 20 per cent. equity shares in VST as required under the Takeover Regulations. On April 30, 2001, and May 15, 2001, the offers of the fourth respondent and third respondent opened and copies of the letters of offer have been sent to all the shareholders including the petitioners as required by the Takeover Regulations. After knowing the respective bids of the third and fourth respondents were closing on June 13, 2001, the petitioners ventured to file the present writ petition itself shows that the petitioners waited till the last moment and filed the writ petition only with a view to stall the entire process of acquisition. The petitioners are guilty of laches and they are not entitled to any discretionary relief. Apart from the same, the writ petition is not maintainable. Though they are aware of the attempts made by respondents Nos. 3 and 4 for substantial acquisition of shares, they never chose to make any complaint to the SEBI pointing out the illegalities if any and never requested for investigation in terms of regulation 38 of the Takeover Regulations. When the statutory regulations envisaged conduct of investigation by the SEBI, a specialised body constituted to safeguard the interest of investors, etc., the petitioners without availing of the said remedy available cannot complain that SEBI failed to discharge its statutory obligations and seek a mandamus to command the performance of the statutory duty. It is also denied that respondent No. 3 could not deposit 25 per cent. of the total consideration of the offer in escrow account in terms of Regulation 28(2)(a) of the Takeover Regulations. The petitioners have deliberately failed to mention that in paragraph 6.2(4) of the letter of offer issued by the third respondent, in which it has been specifically stated that the value of the escrow account has been subsequently increased to cover the entire consideration payable under the present offer. It is further stated that the offer was increased from 20 per cent. to 30 per cent. of the equity shares of VST and after the offer price was increased from Rs. 118 to Rs. 151 as final price, the third respondent made further deposits with its merchant banker to cover 100 per cent. consideration of approximately Rs. 70 crores. A copy of the letter dated June 12, 2001, addressed by the merchant banker of the third respondent confirming the deposit is enclosed along with the counter-affidavit. As against the holding of the third respondent as on the date of letter of offer, the petitioners collectively holding not more than 1,000 equity shares of VST having the aggregate value of Rs. 1,51,000, which will clearly demonstrate that the third respondent never do any act, deed, matter or thing whereby the value of the shares of VST held by the third respondent would deflate. Any such act on the part of the third respondent would jeopardize the substantial interest of the third respondent. The entire grounds on which writ petition has been based/founded have been duly and adequately disclosed by the third respondent in its letter of offer addressed to all the shareholders of VST. If the shareholders desirous of tendering their shares as also those who are not desirous of tendering their shares in response to the public offer made by the third respondent, have received complete information regarding the terms of the offer and background of the third respondent and the basis on which such public offer has been made. The writ petition is filed with mala fide intention to obstruct the third respondent in acquiring the shares of the minority shareholders at a fair value. However, after the public offer, the shares of VST have touched Rs. 150 per share thereby making the value of the shares almost double in about four months. It also reiterated that the third respondent and the persons acting in concert with the third respondent have no intention to take over the management of VST and/or to destabilise the existing management and/or to strip VST of its valuable assets as has been alleged in the writ petition. It also denied that the letter of offer and public announcement issued by it are misleading and/or are in violation of the SEBI Act and/or the Takeover Regulations. The investigation launched by the SEBI against the third respondent has been referred to in the letter of offer. In fact the SEBI has suspended the broking activities of all other stockbrokers who are under investigation but so far no steps have been taken by the SEBI against Damani Shares and Stock Brokers and Maheswari Equity Brokers or Avenue Stock Brokers. It also denied any wrongdoing, market manipulation/price rigging, short sale on its part and so far as the third respondent is concerned it is not under any investigation by the SEBI and all other allegations in para. 6(a) of the affidavit. A prohibitory order issued by the Income-tax Department under Section 132 of the Income-tax Act has been vacated, which has no bearing on the acquisition of shares and suspension of trading rights of G. S. Damani have been disclosed in the letter of offer including the investigations that are being carried out by the SEBI, BSE and NSE against the group companies of the third respondent have been duly disclosed by it to the shareholders. Thereafter, as required under Regulation 18(1) the merchant banker of the third respondent submitted draft letter of offer to the SEBI for its approval, but the SEBI returned the approved draft of the letter of offer on May 8, 2001. Only after approval of the offer of the merchant banker of respondent No. 3, respondent No. 3 opened its offer on May 15, 2001, and letters of offer were duly printed by the merchant banker and sent out to all the shareholders of VST on May 11, 2001. It is further stated that they never violated the Takeover Regulations while issuing public offer. In view of the stay granted by this court on June 8, 2001, who may want to tender their shares may not have done so. Therefore, it is prayed the court to extend the date of closing of offer suitably.

8. In support of the writ petition, one person by name Aravind claiming to be a shareholder of VST filed W. P. M. P. No. 14398 of 2001 and in opposition to the writ petition, W. P. M. P. No. 14245 of 2001 is filed by another shareholder.

9. Learned counsel for the petitioners argued that there is any amount of infraction and violation of the Takeover Regulations committed by the third and fourth respondents. The SEBI which is under an obligation to safeguard the interests of the shareholders failed to discharge its statutory obligations in spite of serious doubt about the process of takeover. In view of the same, this court under an obligation to see that the interests of the shareholders are not jeopardised and appropriate direction may be given in this regard to the second respondent. It was argued that the third respondent made a public announcement of its intention to acquire shares of VST, a target company on February 15, 2001, at the rate of Rs. 113.50 per share. Similarly, respondent No. 4 made public announcement on March 6, 2001, to acquire the shares at the rate of Rs. 115 per share. The letters of offer dated April 23, 2001, and May 11, 2001, issued by respondents Nos. 4 and 3 respectively, which are annexed to the material papers, will substantially establish about the violation of the provisions of the Takeover Regulations. The SEBI is under an obligation to prevent manipulations under Section 11B of the SEBI Act. The dates mentioned in the letter of offer, namely, posting of letter of offer to the shareholders, date of opening of the offer and date of closure are in violation of Regulations 22(3) and 22(4) of the Takeover Regulations which mandates that the letter of offer should reach within 45 days from the date of public announcement and the date of opening of offer shall be not later than the sixtieth day from the date of public announcement. Regulation 16 specifies the contents of public announcement of offer. Regulation 16(ii)(v)(ix) gives a protection to the shareholders and also obligation on the part of the acquirer to spell out what is the purpose of acquisition. It is also contended that Mr. Radha Kishan S. Damani and Gopi Kishan S. Damani are the persons acting in concert with Bright Star who are being investigated by the SEBI with regard to the alleged market manipulations. Apart from the same, the income-tax authorities made a search against Damani Estates (P.) Ltd. In view of the same, there is any amount of suppression about the intention of respondent No. 3 in issuing the letter of offer though it is stated that the reasons for offer are only to increase the shareholding of respondent No. 3. In spite of serious irregularities pointed out as mentioned in the letter of offer, the SEBI which is under an obligation to make an enquiry into the same, failed to perform its duties. Learned counsel for the petitioners contended that the stand taken by the SEBI that investigations are going on against the two associates of acquirer and persons acting in concert with the acquirer and not against the acquirer itself is a peculiar stand giving a clean chit that there is no violation of regulation and no investigation was initiated by the SEBI with regard to the open offer. The stand taken by the SEBI that the petitioners have not approached the SEBI by filing a complaint against respondent No. 3 before approaching this court cannot be said as the SEBI is underconscious of its duties. Under Regulation 38, it is the duty of the SEBI to investigate in the interest of securities market and investors. Moreover, the target company's hands are tied up in view of Regulation 23. In view of the same, this court shall issue a direction to the SEBI to act in accordance with regulations and investigate into the affairs of acquirer and the persons who are acting in concert with the acquirer. He also contended that the intention of the acquirer is only to take control of the target company, i.e., VST as it possesses considerable immovable properties in various States and the real estates value has gone up enormously. Learned counsel for the petitioner further contended that the preliminary report made by the SEBI, which was filed by the impleadment party petitioner, which is not denied by respondent No. 3, shows that a detailed investigation is required to be necessary to come to a definite conclusion with regard to Damani Estates and Finance (P.) Limited, Bright Star Investments Ltd., Krishna Securities Ltd. and Avenue Stock Brokers India (P.) Ltd. It also reveals that they are indulging in manipulative transactions which appear to have been designed to impact the fall in prices of certain key stocks. In view of the same, the information given to the shareholders is inadequate as per para 3.2.8. When a Joint Parliamentary Committee investigation is still in progress, the SEBI is under an obligation to prevent manipulations and prayed for allowing of the writ petition.

14. In order to appreciate the rival contentions of the parties, it is necessary to take notice of some of the provisions of the SEBI Act and Takeover Regulations which govern the controversy.

15. The object of the SEBI Act, as stated, is for 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 therewith or incidental thereto. Under Section 3, the Central Government may by notification appoint a Board by the name of the Securities and Exchange Board of India. The powers and functions of the Board are enumerated in Chapter IV, under which it is the duty of the Board to protect the interest of investors in securities and to promote the development of, and to regulate securities market by such measures as it thinks fit. Under section ll(h) of the SEBI, the Board will regulate substantial acquisition of shares and takeover of companies. Section 11B authorises the Board to issue directions after making or causing to be made an enquiry if it is satisfied, in the interest of investors or orderly development of the securities market, etc. Chapter VI-A deals with penalties and adjudication. In exercise of the powers conferred under Section 30 of the SEBI Act, the Board made the Takeover Regulations, 1997. Regulation 2(b) defines the "acquirer". It means any person who agrees to acquire, directly or indirectly, shares or voting rights in the target company. Regulation 2(e) defines "person acting in concert". Chapter III deals with substantial acquisition of shares or voting rights in and acquisition of control over a listed company more than 15 per cent. of shares. Regulation 10 mandates before acquisition of shares more than 15 per cent., such acquirer shall make a public announcement to acquire shares of such company in accordance with the Takeover Regulations. Regulation 13 mandates the acquirer to appoint a merchant banker in Category-I holding a certificate of registration granted by the Board who is not an associate of or group of the acquirer or the target company before making any public announcement of offer referred to in Regulations 10, 11 and 12. Regulation 14 specifies the timing of the public announcement of offer. Regulation 15 deals with public announcement of offer. Regulation 16(ii)(v) deals with information which should be published in the public announcement of offer, namely, the total number and percentage of shares proposed to be acquired from the public, identity of the acquirer and in case the acquirer is a company or companies, the identity of the promoters and the persons having control over such company. Regulation 16(ix) mandates the acquirer to specify its object and purpose of the acquisition of shares and future plans, if any, of the acquirer for the target company including the disclosures whether the acquirer proposes to dispose of or otherwise encumber any assets of the target company in the succeeding two years except in the ordinary course of business of the target company. Regulation 18 mandates the acquirer to submit draft letter of offer to the Board within 14 days from the date of public announcement. Regulation 19 deals with specified date, for the purpose of determining the names of the shareholders to whom the letter of offer should be sent. Regulation 20 deals with minimum offer price. Regulation 21 deals with minimum number of shares to be acquired. Regulation 22 specifies the general obligations of the acquirer. Regulation 22(2) specifies the acquirer to send a copy of the draft letter of offer to the target company at its registered office for being placed before the board of directors and to all the stock exchanges where the shares of the company are listed within 14 days of the public announcement of the offer. Regulation 25(7) contemplates where there is a competitive bid, the date of closure of the original bid as also the date of closure of all the subsequent competitive bids shall be the date of closure of public offer under the last subsisting competitive bid and the public offers under all the subsisting bids shall close on the same date. Regulation 27 prohibits withdrawal of offer once made except under the circumstances mentioned under the said regulation. Regulation 38 authorises the Board to investigate into the complaints received from investors or suo motu upon its own knowledge or information whether the provisions of the Act and the Takeover Regulations are complied with by acquirer company or not. If any such investigation is undertaken by the Board, Regulation 40 contemplates the acquirer, the seller, the target company, the merchant banker to produce necessary books, securities, accounts, records to the investigating officer. Regulation 44 authorises the Board to issue necessary directions prohibiting the person from disposing of any securities acquired in violation if it is found that the acquirer violated the provisions of the Takeover Regulations. Regulation 45 provides penalties for non-compliance with the regulations which includes criminal prosecution and monetary penalties.