LexSECURITIES AND EXCHANGE BOARD OF INDIA versus SUNIL KRISHNA KHAITAN AND OTHERS
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A B C D E F G H 987 [2022] 18 S.C.R. 987 987 SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL KRISHNA KHAITAN AND OTHERS (Civil Appeal No. 8249 of 2013) JULY 11, 2022 [SANJIV KHANNA AND BELA M. TRIVEDI, JJ.] SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 –Regulation 10 – Interpretation of Regulation 10 of the SEBI Regulations, 1997 – Held: Regulation 10 states that no ‘acquirer’ shall acquire voting rights, which taken together with the shares or voting rights held by him or by a ‘person acting in concert’ would entitle the ‘acquirer’ to exercise 15% or more of the voting rights in the company, unless such ‘acquirer’ makes public announcement to acquire shares in accordance with the regulations –The word ‘acquirer’ used in Regulation 10 takes its meaning from the definition clause (b) to Regulation 2(1), which refers to the shareholder as an individual and also ‘person acting in concert’ with the him, which expression has been very widely defined vide clause (e) to Regulation 2(1) of the Takeover Regulations 1997 – Regulation 10 does not apply when the ‘acquirer’ already holds more than 15% shares or voting rights in the target company – The ‘acquirer’, for the purpose of the said Regulation, not only means the individual person but also the ‘person acting in concert’ with the individual person. SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 –Regulation 44 and 45 –Regulation 11 and the penalty under regulations 44 and 45 of the Takeover Regulations 1997 – Held:Use of the word ‘may’ and not ‘shall’ in Regulation 44 is significant – It is not mandatory that in case of every violation and breach of Regulations 10, 11 and 12, direction under Regulation 44 shall be issued – The Board, therefore, when it decides to exercise its power under Regulation 44 and issues directions under the said Regulation has to keep the two facets in mind, namely, (i) interest of the securities market; and (ii) protection of interest of the investors– Regulation 44 is not a strict liablity provision –Nowhere, Regulation 45 stipulates that in case of violation of Regulations 10, 11 or 12 of A B C D E F G H 988 SUPREME COURT REPORTS [2022] 18 S.C.R. the Takeover Regulations 1997, the Board must initiate action and issue directions in terms of Regulation 44. Securities and Exchange Board of India Act, 1992 (SEBI Act) – S. 15T – Power of Appellate Tribunal - The Appellate Tribunal does not have the power for the first time to initiate and thereupon, impose penalty for non-compliance of the provisions of the Regulations under Chapter VI-A of the Act while deciding an appeal against directions issued under Regulation 44 of the Takeover Regulations, 1997 – That power is vested with the authority specified in the Act or the Regulations – The Appellate Tribunal is an appellate forum and not the authority empowered to initiate penalty proceedings under Section 15-H or suo moto issue directions under Section 11, 11B or 11(4)(d) of the Act – It can uphold or set aside the direction issued, or modify and substitute the direction issued under Regulation 44 of the Takeover Regulations 1997 read with Sections 11, 11B and 11(4)(d) of the Act. Words and Phrases – Acquirer – discussed and explained. Doctrines/Principles – Principle of doubtful penalisation. Dismissing the appeals by the Board, the Court HELD: (Interpretation of Regulation 10 of the Takeover Regulations) 1.1 Regulation 10 states that no ‘acquirer’ shall acquire voting rights, which taken together with the shares or voting rights held by him or by a ‘person acting in concert’ would entitle the ‘acquirer’ to exercise 15% or more of the voting rights in the company, unless such ‘acquirer’ makes public announcement to acquire shares in accordance with the regulations. The word ‘acquirer’ used in Regulation 10 takes its meaning from the definition clause (b) to Regulation 2(1), which refers to the shareholder as an individual and also ‘person acting in concert’ with the him, which expression has been very widely defined vide clause (e) to Regulation 2(1) of the Takeover Regulations 1997. The Appellate Tribunal has, therefore, rightly held that the word ‘acquirer’, which is a term of art,25 should not be restricted to shares or voting rights of the individual shareholder as the term as defined includes the ‘person acting in concert’ with the A B C D E F G H 989 shareholder. The shareholding/voting rights of the ‘acquirer’, that is the individual sha
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