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1.8 On 14.03.2002, SEBI issued a reminder advising the merchant banker to the offer to determine the offer price in terms of the provisions of the regulations taking into consideration the parameters suggested in SEBI's letter dated 10/12/01. The merchant banker was also advised by SEBI to submit a revised draft offer document on or before 21/3/02 failing which SEBI will be constrained to take action against them in terms of the Regulations and/or SEBI Act, 1992.

1.9 The merchant banker vide letter dated 01.04.02 inter alia requested permission to withdraw the offer under regulation 27(1)(d). In response SEBI vide letter dated 19/4/02 advised the merchant banker that the offer made by the Acquirers was obligatory in terms of regulation 11(1) {wrongly referred as regulation 11(2) in the draft offer document} of the Regulations and cannot be withdrawn under the circumstances stated in their letter dated 01.04.02. The merchant banker was further advised to ensure the implementation of the offer and comply with the Regulations.

2. SHOW CAUSE NOTICE 2.1 Since the offer price in terms of the Regulations could not be justified, a show cause notice was issued to the Acquirers on 05.08.02, inter alia stating -

2.2 that in the draft offer document the offer price was Rs.5.50 whereas the book value per share as per the audited financial results as on 31.03.2001 was Rs.86.04. (book value almost 16 times the offer price) 2.3 the shares were stated to be frequently traded in terms of explanation to Regulation 20(3) [prior to the amendment dated 9.9.2002 to the Regulations] as the annualised trading turnover is 3.12% in ICSE and infrequently traded in CSE and MSE. Therefore, offer price is required to be justified under regulation 20(2) & 20(3) [prior to the amendment dated 9.9.2002 to the Regulations] but the same is justified only under regulation 20(2).

4.6 In the public announcement and also in the Letter of Offer (Draft filed with SEBI) they had proceeded on the basis that the offer is made by them under Regulation 11(2). In the Draft Letter of Offer in para 2.1, it was stated that "this offer is made by the Acquirers under regulation 11(2) for consolidating their holding in KML".
4.7 If regulation 11(2) was a mistake and is wrong, the draft offer document was itself defective. It is note-worthy that they have not made any offer under regulation 11(1) which as per SEBI's notice under reply is the provision that is triggered.

6.2.4. I have noted the contention of the Acquirers that the agreements dated 14.11.2001 specifically stated the agreement shall not be acted upon by either of the parties to the agreement in case of non compliance with the regulations. Further, it was submitted that the occasion to trigger public offer consequent to proposed acquisition of additional shares in excess of 75% does not exist and has ceased to exist because the proposed public offer was not pursued in compliance with SEBI communication dated 10th December 2001, advising not to proceed with the offer. Further it was submitted that, if regulation 11(2) was a mistake and is wrong, then the Draft Offer Document was itself defective and therefore they have not made any offer under regulation 11(1) which as per the show cause notice is the provision which has triggered the public offer. Further, they had not made any offer under regulation 11(1) and the proposed acquisition of 2.34% pursuant to the Agreements is well within the permissible 10% limit in regulation 11(1). If it is construed that the permissible 10% limit in a period of 12 months is available only up to 75%, it follows that above 75%, it is only regulation 11(2) which, at all can apply, which you have held is not however applicable. The aforesaid contention of the Acquirers is not tenable. In this regard, it is observed that in the public announcement dated 19.11.2001, it was ,inter alia, stated that the offer was being made by the Acquirers pursuant to the agreements dated 14.11.2001 with Shri D Ramakrishnan and Shri V Palaniswamy for acquisition of 2.34% shares of the Target company and the same was being issued in compliance with the provisions of the Regulations. Further, no specific mention of any of the regulations 10, 11 or 12 was made in the public announcement. Further, when the Draft Letter of Offer was submitted to SEBI, then it was stated that the Letter of Offer is being sent to the shareholders under regulation 11(2). The wrongful quoting of the aforesaid provision by the merchant banker in the Draft Letter of Offer was pointed out by SEBI in the show case notice dated 5.08.02. In view of the foregoing, the Acquirers cannot take the stand that since they had wrongly mentioned regulation 11(2) in the Draft Letter of Offer, therefore the Letter of Offer became defective and thus there was no public offer made to the shareholders of the Target company because the offer in terms of regulation 2(1)(f) commenced from the date of making of public announcement and the same was stated to have been made in pursuance of the Regulations generally and no specific mention of any of the regulations, i.e, 10, 11 or 12 was made. Further , the subsequent wrongful mentioning of regulation 11(2) by the Acquirers in the draft letter of offer, which was submitted to SEBI and was yet to be cleared by SEBI before sending the same to the shareholders of the Target company cannot vitiate the offer validly made on 19.11.2001. Further, it is well settled that no wrong mention of a provision of regulation does not vitiate an action if such action can be validated if there is provision of the regulation where such action can be traced. Further, one cannot take advantage of such wrong mentioning of regulations. Therefore, for the aforesaid reasons, I do not find any merit in these submissions.