LexSWEDISH MATCH AB AND ANR. versus SECURITIES AND EXCHANGE BOARD, INDIA AND ANR.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
SWEDISH MATCH AB AND ANR.
v.
SECURITIES ANO EXCHANGE BOARD, INDIA AND ANR.
AUGUST 25, 2004
[N. SANTOSH HEGDE, S.B. SINHA AND A.K. MATHUR, JJ.]
Substantial Acquisition of Shares and takeovers Regulations, 1997;
Regulations 2(e) and {c), JO, 11, 12, Proviso to Explanation (1) of
Regulations 12, 14, 15, 16, 23, 44 and 45 :
A
B
c
Foreign companies and Indian companies jointly acquired majority
shareholding in a company/target company-Foreign company purchased
shares from the Indian companies to take control over the target company
independently without making any public announcement thereto-SEE!
directed them to make public announcement in terms of Regulation 11 (1 )- D
Affirmed by Security Appellate Tribunal-On appeal, Held: Interest of
shareholders could be protected by means of public announcement of offer
in terms of provisions of Regulations 10, 11 and 12-Acquirer of shares
statutorily requires to make public announcement of such acquisition-
Approval in the general meeting of share holders does not sub-serve the
requirement of law-Proviso to Regulation 12 would apply only when E
change of control over the company take place by the mode other than by
acquisition of shares-Since change of control did not take place by reason
of inheritance/succession but by way of acquiring shares from another,
Regulation 11 and not Regulation 12 would be attracted-Though
Regulations 11 and 12 operate in different fields yet they may overlap- F
The acquirers in such a situation could issue a combined notice in terms
of both the Regulations-However, mandatory requirements to make
public announcement cannot be dispensed with-Though provisions under
Regulations are clear yet Rule of purposive construction would clarify the
real intent of the legislature therein-Companies Act, 1956-Section G
81{l)(A).
Securities and Exchange Board of India Act, 1994; Sections 15(H),
(J), (Z) and 24 :
Penal Provision-Interpretation of-Held: Regulation being regulatory H
745
746
SUPREME COURT REPORTS (2004] SUPP. 3 S.C.R.
A in nature, they do not deserve strict construction-Interpretation of
Statutes.
Constitution of India, 1950; Article 142-Applicabililty of-Held: It
is a fit case where Supreme Court should exercise its jurisdiction to direct
B the Board to forebear from proceedings with the adjudication proceedings
against the appellants.
Words and Phrases :
'Additional shares '-Meaning of in the context of Companies Act,
c 1956.
Appellant No. I-foreign company/holding company of four foreign
companies, including appellant No. 2, had acquired 52.11 % shares in
an Indian Company/the target company. Two Indian companies,
promoters of the target company, had acquired 24.11 % shares in the
D target company. The holding company entered into an agreement with
the Indian companies to acquire certain percentage of shares in the
target company for which it made a public announcement in terms of
provisions of Regulation 10 of the Substantial Acquisition of Shares
and Take over Regulations/SE BI Regulations. Subsequently, the target
E company allotted shares on a preferential allotment to the foreign
holding company which thereafter acquired shares to the extent of
21.89% at a price well above the market price from their counterpart
Indian companies, raising its share holding in the target company to
74% leading to sole control of the holding company over the target
F company. Later, the target company also approved the change in
control by way of resolution in the general meeting of the shareholders
and the same was brought to the notice of SEBI.
SEBI served a show cause notice upon the appellants as to why
no public announcement was made in terms of Regulations 10 and
G 11(1) of the Regulations. SEBI, upon hearing of the appellants,
observed that the acquisition of shares falling under proviso to
Regulation 12 does not automatically absolve them from making public
announcement of their taking over control of the target company.
Securities Appellate Tribunal/SAT affirmed the order of SEBI. Hence
H the present appeal.
SWEDISH MATCH AB v. SECURITIES & EXCHANGE BOARD
747
Appellants contended that although each one of the Regulations A
viz. 10, 11 and 12 stipulates making of public announcement but they
are mutually exclusive; that there was no acquisition of additional
shares since the aggregate shareholding of the parties did not increase
at all; that since shareholders in the general meetExcerpt shown. Read the full judgment & AI analysis in Lexace.