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50. With reference to SEBI Chairman's finding that regulation 12 is not attracted to the case, Ms. Iyer submitted that the 1997 Regulations brought in the concept of change in control as a triggering event for a public offer, in regulation 12. Learned Counsel submitted that the provisions relating to take over - control over the target company - was incorporated in the regulation based on the recommendations of Justice Bhagwati Committee. Ms. Iyer submitted that as per the definition of the expression control in regulation 2(c) control, shall include the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their share holding or in any other manner. She submitted that the definition is an inclusive definition, which enables SEBI to ascertain as to the nature of control, by enquiry. In this context she referred to the observation in the Bhagwati Committee report and the scope of the regulations, discussed in detail by this Tribunal in Rhodia SA V. SEBI (2001) 34 SCL 597 that:

59. Ms. Iyer submitted that regulation 10 requires the acquirer to make a public offer if his holding along with the holdings of the persons acting in concert with him entitle him to exercise 15% or more of the voting rights in a company, that it would be against the spirit of the regulation as expressed by the Bhagwati Committee, that only because the holding was short of a fraction to be 15%, regulation 10 is not attracted and consequently denial of the benefit to the shareholders in a public offer. In support, she referred to the Bhagwati Committee Observation that "The question of defining takeovers was discussed. It was noted that though the concept of take overs was easily comprehensive, it eluded precise definition. It is perhaps for this reason why regulation in most countries have not defined it. While takeover is taken to be synonymous with acquisition of control over the company, opinions vary on what constitutes change of control. According to industrialists and professionals who have involved themselves in takeovers, management control ultimately manifests itself through control over the board of directors of the company, whatever be the manner in which such change of control may be achieved. The Committee agreed that attempting a precise definition of takeover would not only be counter productive but also limit the scope of the Regulations, and it should be left to SEBI to decide whether there has been a violation of regulations in a given situation of a takeover, through investigation if necessary, and enforce the Regulations. The Committee was of the view that the Regulations should nonetheless contain an inclusive definition of the term 'control' which would serve to indicate the circumstances when compliance with the provisions of the Regulations would be necessitated, even where there has been no acquisition of shares, so that SEBI would not be on an uncharted sea in investigating whether there has been change in control. On the issue of change in control of a company attracting the provisions for public offer, the Committee felt that control of a company is interlinked with its fortunes and any change in control could not be without impact on company's policies and business prospects and is thus linked to investors interest. And given that investor protection is a mandate of SEBI, takeover which entails change in control should necessarily be the concern of SEBI. This is all the more necessary because under clause (h) or sub section (2) of Section 11 of SEBI Act, SEBI is empowered to regulate not only substantial acquisition of shares but also takeovers. This was also the overwhelming view of all professionals, intermediaries and financial journalists who made submissions before the Committee. The Committee also noted that though the existing Regulations did not include change in control as triggering of a public offer, SEBI has placed continued reliance on Clause 40A and B of the Listing Agreement in such cases where the acquisition of shares has been less than the threshold limit of 10%. The Committee recognised that the Regulations should, as far as possible, be comprehensive and self contained and SEBI should not have to rely on outside rules and regulations to implement its objects. On the above considerations and given on the one hand that it would be difficult, if not impossible, to attempt at a precise and comprehensive definition of takeover, and on the other hand that takeover does ultimately result in change in control of the company, howsoever such control may be exercised, the Committee felt that change in control of a company, as opposed to change in management of a company, should be made a condition requiring a public offer to be made. When there is a change in control, the shareholders must be afforded an opportunity to exit from the company if they do not want to continue under the new acquirers. This will also obviate the need for SEBI to fall back upon Clause 40A & B of the Listing Agreement, which could now be repealed. The Committee originally thought that it would be advisable to refrain from defining "control of a company" and allow time and practice to craft a well accepted definition of control. The above decision of the Committee was incorporated in the draft report of the Committee. But, as already discussed in para 2.2 of this Report, the Committee received numerous comments advocating the need to define at least the parameters of control. Having regard to the feed back received, the Committee felt that a term of such critical relevance to the Regulations should not be left undefined. The Committee, therefore, agreed to define control. The Committee also felt that concept of joint control which is often seen in practice should also be recognised. The Regulations should make it explicit that cessor of any one person from joint control, thus giving the remaining person or persons sole control or taking of any person or persons in joint control by a person having sole control shall not be construed as 'change in control over the company' attracting the Regulations.

78. With reference to the Appellants' challenge on SEBI's decision that regulation 12 is not attracted to the transaction, Shri Desai submitted that SEBI has rightly taken the view in the light of the provisions of regulation 12 read with regulation 2(1)( c ). Learned Counsel submitted that the triggering point in regulation 12 is acquisition of control over a company. He referred to the definition of the expression 'control' in regulation 2(c) and submitted that in the light of the material before SEBI it was not possible for it to conclude that Tatas had control over the company and that as a result of acquisition of Tatas' holding in the company by Ambujas the control passed on to Ambujas. He submitted that neither the Articles of Association nor any other agreement empower Tatas to appoint majority of the directors on the Board of ACC. He further submitted that Tatas representatives were in minority in ACC's Board of Directors and their holding accounted for just 14.4% of the total paid up capital of ACC. In this context he referred to the finding of the Chairman recorded in the order that :

99. He submitted that Regulation 12 triggers, on acquisition of control, that the prohibition is on acquisition of control without making a public offer. According to the learned senior Counsel the Appellants have to show that Tatas had control over ACC and with the acquisition of the shareholding of Tatas in ACC, Ambujas acquired control, that it is not the Appellant's case that Ambujas acquired control independently. In this context he referred to the definition of the expression 'control' in regulation 2(c ) and submitted that though it is an inclusive definition, it is very exhaustive, that the definition clearly states the nature of control and mode of exercising the control over a company. He submitted that the words "in any other manner" used in the definition need be interpreted following the ejusdim generis principle and not be given an out of context wild meaning. In this context he also referred to para 6.3 of the Bhagwati Committee Report and stated that it has been stated therein that "The Committee agreed that attempting a precise definition of takeover would not only be counter productive but also limit the scope of the Regulation and it should be left to SEBI to decide whether there has been a violation of regulations in a given situation of a takeover through investigation if necessary, and enforce the Regulations. The Committee was of the view that the Regulations should nonetheless contain an inclusive definition of the term control which would serve to indicate the circumstances when compliance with the provisions of the Regulation would be necessitated, even where there has been no acquisition of shares, so that SEBI would not be an uncharted sea in investigating whether there has been change in control" It is thus clear that the question as to whether there is any acquisition of control is a matter to be decided by SEBI. He further referred to the Committee's observation: "on the above considerations and given on the one hand that it would be difficult, if not impossible, to attempt at a precise and comprehensive definition of takeover, and on the other hand the takeover does ultimately result in change in control of the company, howsoever such control may be exercised, the committee felt that change in control of a company, as opposed to change in management of a company should be made a condition requiring a public offer to be made". Bhagwati Committee in its report has indicated the parameters and the need for acting by SEBI in the event of change in control taking place over a company.