PRAMOD JAIN AND OTHERS versus SECURITIES AND EXCHANGE BOARD OF INDIA

Citation: [2016] 9 S.C.R. 178 · Decided: 07-11-2016 · Supreme Court of India · Bench: ANIL R. DAVE · Disposal: Dismissed

Judgment (excerpt)

A 
B 
[2016] 9 S.C.R. 178 
PRAMOD JAIN AND OTHERS 
v. 
SECURITIES AND EXCHANGE BOARD OF INDIA 
(CivilAppealNo.9103 of2014) 
NOVEMBER 07, 2016 
[ANIL R. DAVE AND ADARSH KUMAR GOEL, JJ.) 
Securities Exchange Board of India (Substantial Acquisition 
of Shares and Takeovers) Regulations, 1997 - s.27 - Hostile 
takeover of shares - Public Offer - Withdrawal of - On the ground 
that due to delay on the part of SEBI in taking decision on the draft 
C letter of offer (DLO), the target company siphoned off its coffers, 
depleted its valuable fixed assets and eroded its net worth 
substantially and thereby the very object of the offer got defeated -
SEBI rejected the application for withdrawal - Securities Appellate 
Tribunal upheld the order of SEBI - On appeal, held: There was 
D 
undue delay on the part of SEBI in dealing with DLO - But the 
delay by itself is not enough to justify withdrawal of the offer unless 
the case falls under regn.27 - The present case, does not fall under 
regn. 27 - Under the scheme of the Regulations there is no bar on 
the target company to take decision about its assets, if the statutory 
procedure has been complied with and if the decision is otherwise 
E 
valid - Thus there is no justification for automatic withdrawal from 
public offer without clearprejudice to the acquirer to the extent of 
rendering the carrying out of public offer impossible - In the facts 
of the present case, the request for withdrawal from public offer 
was not justified. 
F 
Dismissing the appeal, the Court 
HELD: 1. There was undue delay on the part of the 
Securities Exchange Board of India (SEBI) in dealing with the 
draft letter of offer (DLO). No doubt, in a given case timeline 
prescribed under the Securities Exchange Board of India 
G (Substantial Acquisition of shares and take over) Regulations, 
1997 may not be adhered to when the SEBI justifiably takes time 
in dealing with the complaints. However, mere upholding of finding 
of Securities Appellate Tribunal (SAT) on the aspect of delay on 
the part of SEBI is not enough to hold that the appellants are 
entitled to withdrawal of the public offer. The withdrawal has to 
H 
178 
PRAMOD JAIN AND OTHERS v. SECURITIES AND 
EXCHANGE BOARD OF INDIA 
be dealt with under Regulation 27 of Securities and Exchange 
Board of India (Substantial Acquisition of Shares and Takeovers) 
Regulations, 1997. The general principle is that public offer once 
made cannot be withdrawn. Exception to the rule is the specifit:d 
situations under the Regulation. In the present case, though 
SEBI was not justified in causing delay in giving its comments on 
public offer, this by itself is not enough to justify withdrawal from 
public offer so long as the case does not fall under Regulation 27. 
[Para 26] (203-A-D) 
2. Under the scheme of the Regulations of 1997, public offer 
has to be made after due diligence (Regulation 22). Obligation of 
the board of directors under Regulation 23 against alienation of 
assets, issuance of unissued securities carrying voting rights or 
entering into material contracts is applicable only if approval of 
general body of shareholders is not obtained. It is clear from the 
scheme of the regulations that there is no absolute bar for the 
target company to take decision about its assets, subject to 
compliance with statutory procedure and subject to the decision 
being otherwise valid. There is no doubt that against any ma/a 
fide, illegal or unjustified decision of the target company, remedies 
at appropriate fora are available to the aggrieved parties. Thus, 
there is no justification for automatic withdrawal from public offer 
without clear prejudice to the acquirer to the extent of rendering 
the carrying out of public offer impossible. In the present case, 
ex post facto approval of the general body has since been obtained. 
Moreover, SEBI had observed that this aspect of the matter will 
be separately enquired into. SEBI as well as the SAT have 
concurrently held that public offer is capable of being carried out 
and has not become impossible. The assets are available with 
the target company. Finding has also been recorded about the 
circumstances preceding the public offer and the conduct of the 
acquirer which is based on record. T!te steps for development of 
the property had already been initiated and the acquirer had taken 
remedies before the Company Law Board against the decision of 
the target company and had settled the matter with the target 

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