LexKOSHA INVESTMENTS LTD. versus SECURITIES & EXCHANGE BOARD OF INDIA & ANR.
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A B [2015] 9 S.C.R. 412 KOSHA INVESTMENTS LTD. v. SECURITIES & EXCHANGE BOARD OF INDIA&ANR. (Civil Appeal No. 3219 of2006) SEPTEMBER 18, 2015 [VIKRAMAJIT SEN AND SHIVA KIRTI SINGH, JJ.] Securities & Exchange Board of India (Substantial C Acquisition of Shares & Takeovers) Regulations, 199 7 - Reg 11 (1) and 14(1) - Requirement of making public announcement - Appellant consistently bought and sold shares of target company-SIL prior to June 1999 and also after August 1999 and became one of its promoters and did D not make required public announcement - Show cause notice to appellant- SEBI held that the appellant was already holding between 15% to 75% shares of SIL and it could acquire additional shares of this company without public announcement only upto 5% of its paid up capital during the E relevant period - However, it acquired shares constituting more than 5% of the paid up capital of SIL without public announcement as required by Reg 11(1) - SEBI issuing directions to appellant to make public announcement in terms of Reg 11 ( 1) and imposed penalty for the non-compliance - F Said orders upheld by tribunal - Held: Order passed by the tribunal concurred with since if the aggregate percentage of acquisitions at any point of time during the financial year exceeds 5%, Reg 11 would get trigger mandating public announcement - Reg 14(1) discloses that public G announcement should not be delayed beyond four working days of the agreement or decision to acquire the requisite number of shares or voting rights. Dismissing the appeals, the Court H 412 KOSHAINVESTMENTS LTD. v. SECURITIES & 413 EXCHANGE BOARD OF INDIA HELD: A careful reading of the Securities & A Exchange Board of India (Substantial Acquisition of Shares & Takeovers) Regulations, 1997 discloses that the public announcement should not be delayed beyond four working days of the agreement or decision to acquire the requisite number of shares or voting rights. B If the aggregate percentage of acquisitions at any point of time during the financial year exceeds 5 per cent, the provision would get triggered. The provision of Regulation 11 mandating a public announcement will kick in at any stage whence the shareholding of the said C entity in the target company would exceed 25 per cent. Thus, the finding of the Tribunal is accepted. If the plea of apP.ellant would be accepted then an acquirer can keep on violating Reg 11(1) with impunity on as many 0 occasions by simply making subsequent sale or transfer to another entity so as to reduce the so-called net acquisition in a financial year to within 5%. This interpretation would defeatthe purpose of Reg 11(1) and render Reg 14(1) otiose. The concept of permitting E creeping acquisitions by permitting not more than 5% of the shares or voting rights in a company limits the period for such acquisition toa financial year ending by 31st March. But such concept does not dilute the requirement of making a public announcement within F the time mentioned in Reg 14(1) ifthe acquisition even if only once made and divested, is of more than 5% of shares or voting rights in the target company. Even if such acquisition is followed by sale in the same financial year, the liability of making the public announcement G would remain unaffected and shall attract action. Further, in case of acquisition of shares or voting rights the appropriate applicable provision is Reg 14(1) and not Reg 14(2) w~ich applies only when the acquisition is of other securities including Global Depository Receipts, H 414 SUPREME COURT REPORTS [2015] 9 S.C.R A American Depository Receipts. [Para 5, 7, 9) [418-H; 419- A,E; 412-C-G; 422-C) Swedish Match AB and Anr. vs. Securities & Exchange Board oflndia andAnr. (2004) 11 SCC 641: 2004 (3) Suppl. B SCR 745 - referred to. Case Law Reference 2004 (3) Suppl. SCR 745 referred to. Para 9 C CIVIL APPELLATE JURISDICTION: Civil Appeal No. D E F 3219 of 2006. From the Judgment and Order dated 08.08.2005 of the Securities Appellate Tribunal in Appeal No. 64 of 2004. WITH C.A. No. 2132 of2007. Subramonium Prasad, Naveen Chander, Alok Kr. Agarwal, Utkarsh Srivastava, Manjula Gupta for the Appellant. C.U. Singh,Anip Sachthey, Shagun Matta, Rishi Gautam, Dhawal Mehrotra, Vikas Mehta for the Respondents. The Judgment of the Court was delivered by SHIVA KIRTI SINGH, J. 1. Both the appeals have been preferred by the same appellant unde
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