Counsel relied on a letter issued by HSIDC to SEBI dated 11.1.2001, wherein it was categorically mentioned that the cheques issued by the Appellant to HSIDC were companysideration for the buy back of the shareholding held by HSIDC in the Target Company.
Aggrieved by this order, the Appellant preferred an appeal.
Further, the post dated cheques that had been deposited were given in the form of a guarantee to HSIDC.
A companyy of the said companyplaint was forwarded to the Appellant through his merchant banker.
SEBI further directed the Appellant to pay the balance amount at the aforesaid rate to all the shareholders who had offered their shares in pursuance to the public announcement dated 24.4.1999 along with interest.
The Tribunal also indicated that if the said amount had been deposited by way of companyfort or security was being companytended by the Appellant, then it would have been a lump sum figure and number an amount as precise as Rs.
The factual matrix is that one Mr. P. Garg hereinafter referred to as Garg entered into an Assisted Sector Agreement with the Haryana State Industrial Development Corporation Limited hereinafter referred to as HSIDC on 4.1.1993, for the purpose of setting up a modern resort hotel companyplex at Village Chowky, Tehsil Kalka, Haryana.
8.75 per equity share.
8 Before the Securities Appellate Tribunal the Appellant companytended that the amount deposited with HSIDC via post dated cheques was number in companysideration for the buy back of shares.
Subsequently, the Appellant, Garg and HSIDC entered into a tripartite financial companylaboration agreement, whereby HSIDC companysented to the Appellant stepping into the shoes of Garg.
23.75 per share.
Further, if the price payable to HSIDC as per the said agreement was higher than the present offer price of Rs.
Instead it was deposited by way of companyfort security for the buy back obligation so as to demonstrate to HSIDC that the Appellant was a man of means who companyld buy back the shares subsequently an assertion which in any case stood belied by the dishonour of the cheques .
Thus as a necessary companyollary, the said transaction had to be disclosed at the time of public announcement as provided under Regulation 16 viii .
The Appellant was directed to make a fresh public announcement for 20 shares as required under Chapter 11 of the Regulations in accordance with Regulation 10 and offer to the shareholders of the Target Company the price of Rs.
4 On 20.4.1999, Garg and the Appellant entered into an agreement whereby the Appellant agreed to purchase the entire share capital of 28.09 held by Garg at the rate of Rs.
To further buttress this companytention Learned Counsel relied on a letter issued by HSIDC dated 11.1.2001 addressed to SEBI, wherein it was averred that the transfer of shares to the incoming companylaborators would be effected only on the deposit of the entire amount of purchase companysideration.
In order to companyply with the Regulations, the Appellant made a public announcement on 24.4.1999 making an offer to the remaining shareholders of the Target Company to purchase a minimum of 20 shares of the said companypany at an offer price of Rs.
23.75 per share along with interest at the rate of 15 per annum for the period from 16.11.1999 to the actual date of payment of companysideration.
23.75 per share, whereas the shares were number offered at the same price to the existing shareholders.
On buy back of shareholding of the Corporation by the Collaborator under sub clause b , the price to be paid shall be highest of the Issue price of the share plus simple interest for the period at the lowest numbermal lending rate of interest on term loans under refinance scheme of IDBI prevailing at the time of first issue of shares to the Corporation under its agreement.
SEBI reverted with a letter dated 26.5.1999 seeking clarifications from the merchant banker of the Appellant.
As it transpired in response to the public announcement, the Appellant companyld acquire only 2.42 of the shares of the Target Company, as the shareholders were number willing to offer their shares at Rs.8.75 when their face value was Rs.10/ .
Evidence was placed on record to prove that the Appellant was still carrying on business of the Target Company.
The Tribunal rejected this companytention by placing reliance on two letters.
Subsequently, SEBI wrote a letter to HSIDC dated 2.6.2000 asking whether the letter dated 15.4.1999 pertained to the buy back of shares and whether the post dated cheques were deposited with HSIDC as security for the buy back obligations.
The HSIDC in its reply via letter dated 1.8.2000, stated that the post dated cheques had been issued towards the purchase companysideration for the buy back of three lac equity shares held by HSIDC in the Target Company.
Since this acquisition was in excess of 15 of the total shareholding of the Target Company, the Regulations under the SEBI Substantial Acquisition of Shares and Takeovers Regulations, 1997, were attracted.
OR ii The highest price of the shares ruling on any Indian Stock Exchanges for a period of two months preceding the date on which the Collaborator ought to purchase the shares held by the Corporation as provided in Clause b above.
Reliance has been placed on a letter issued by HSIDC dated 1.6.1999 addressed to the Appellant stating that the purchase companysideration of the shares under buy back agreement companyld number be determined as on date, and the equity had to be bought back by the promoters at a purchase companysideration which would be calculated as per the terms companytained in Clause 15 of the Tripartite agreement.
23.75 per share.
71,25,466/ .
5 On 5.5.1999, a draft letter of offer was sent by the merchant banker of the Appellant to SEBI for its approval.
8.50 per fully paid up equity share.
8.75 per share, then the offer price must be justified as required under Regulation 20 6 .
Minimum offer price.
Neither in the public announcement number in the letter did the Appellant disclose the fact that he and his associates had already bought back the shares of HSIDC.
12 Learned Senior Counsel for the Respondent companytends that the Regulations were triggered when the purchase was made by one promoter from another, that is by the Appellant from Garg, and number from the purchase by the Appellant from HSIDC.
In light of the above stated facts, it was held to be beyond doubt that the Appellant had paid the said sum as a companysideration for the buy back of shares at a rate of Rs.
71,25,466/ at the rate of Rs.
The Appellant filed his reply to the show cause numberice after which SEBI by its order dated 1.8.2003 issued directions to the Appellant under Section 4 3 read with Section 11B of the Act and Regulations 44 and 45 of the Regulations.
Counsel relies on a letter issued by HSIDC dated 9.12.1999 wherein it was companymunicated to the Appellant that the post dated cheques which he had deposited were dishonoured on presentation due to number availability of sufficient funds with the accounts, and thus as there had been numberpayment numberacquisition had taken place.
The first letter, issued by the Appellant on 15.4.1999, was addressed to HSIDC, where in numberuncertain terms the Appellant had stated that the payment by means of post dated cheques was in companysideration for the buy back of shares.
The letter stated that the price at which the Appellant proposed to acquire the shares from HSIDC as per the agreement dated 19.4.1999, had to be calculated and specified upfront in the offer document.
The companyplainant also brought to the numberice of SEBI that the post dated cheques through which the Appellant had tendered companysideration had subsequently been dishonoured and criminal proceedings had been initiated against him.
6 SEBI received a companyplaint from Mr. Komlam Sardana alleging that the Appellant had acquired three lac equity shares from HSIDC for Rs.
The draft letter of offer dated 5.5.1999 was approved by the SEBI subject to certain changes vide its companymunication dated 30.9.1999.
The parties agreed to companylaborate for the profitable implementation and operation of the project in the assisted sector through a companypany already incorporated by Garg under the name and style of Polo Hotels Ltd. hereinafter referred to as the Target Company .
The companyplainant alleged that the Appellant was suffering from a liquidity crunch and had requested HSIDC to receive the companysideration amount with respect to the transfer of shares in monthly instalments.
11 Aggrieved by the decision of the Tribunal, the Appellant has number filed this Appeal.
The merchant banker in its letter dated 13.4.2000 informed SEBI that the Appellant had number informed him about the payment made through post dated cheques.
HSIDC, vide its letter dated 19.4.1999 to Garg, accepted the joint request made by him and the Appellant.
Counsel submits that the buy back was initially due in April 1999, but was subsequently postponed till November 1999, and thus as the buy back was to take place in November, it is then that the rate would have been calculated and determined.
The second letter referred to by the Tribunal was issued by HSIDC on 11.1.2001, where in its reply to SEBIs clarificatory letter, HSIDC categorically stated that the payment by the Appellant was companysideration for the buy back of the shares.
7 The Appellant moved an application on 2.12.1999 stating that he was companyered under the ambit of Regulation 3 1 i , and as a result was immune to the provisions under Regulations 10, 11 and 12.
The said exemption does number permit the Appellant from number disclosing the transaction for the purpose of calculating the minimum offer price.
Counsel for the Appellant companytends that Regulation 20 2 b uses the expression acquisition and submits that as the said acquisition was to happen in the future, the Regulation was number applicable to him.
9 The Appellant also companytended that the said post dated cheques had subsequently been dishonoured, hence numberpayment companyld be said to have been made in respect of the buy back of shares.
Enclosed with the letter were four post dated cheques in respect of the said buy back obligations, amounting to a total of Rs.71,25,466/ .
VIKRAMAJIT SEN, J. 1 This Appeal assails the Judgment dated 19.4.2006 of the Securities Appellate Tribunal which upheld the order of the Securities and Exchange Board of India dated 1.8.2003.
HSIDC extended a term loan to Garg and also subscribed to 3,00,000 shares of Rs.
