The PA mentioned that the prime object of the offer was to acquire substantial shares voting rights accompanied with the change and companytrol of the management of the target companypany.
In other words, since the plea of siphoning of funds by GTL during the year 2009 2010 and prior thereto having been specifically raised in Company Petition No.
3 of 2010, appellants are number justified in agitating the very same issue before SEBI on ground that GTL has siphoned of its funds during the year 2009 2010 and 2010 2011.
The SAT upheld the order of Securities and Exchange Board of India SEBI dated 13th April, 2012 rejecting the application of the appellants for withdrawal of the public offer to acquire shares of the Golden Tobacco Ltd. in terms of public announcement PA dated November 12, 2009 under the provisions of SEBI Substantial Acquisition of Shares and Takeovers Regulations, 1997 the Takeover Regulations .
The funds raised from the transaction have been siphoned off.
One of the key promoters was arrested by the Economic Offences Wing of the Police and remained in jail for one and a half years.
Complaints against the appellants were frivolous.
Having asked SEBI on August 9, 2011 to keep the process of public offer in abeyance, appellants were number justified in filing application on October 11, 2011 seeking permission to withdraw the open offer on ground that inordinate delay has frustrated the open offer.
Reference was made to the companyplaint about transfer of valuable property of the Company which was un encumbered at the time of PA.
The acquirer shall, while filing the draft letter of offer with the Board under sub regulation 1 , pay a fee as mentioned in the following table, by bankers cheque or demand draft drawn in favour of the Securities and Exchange Board of India.
Aforesaid letter dated August 9, 2011, clearly falsifies the case of appellants that the actions taken by promoters of GTL during the companyrse of two years has frustrated the public offer, because, if public offer was frustrated, appellants would number have asked SEBI to keep the process of public offer in abeyance.
Most valuable assets of the target companypany had been encumbered in violation of SEBI regulations and against the interest of minority shareholders and the acquirers.
The merchant banker vide letter dated 5th May, 2010 informed the SEBI that the acquirers had reached a settlement with the target companypany and withdrawn their petition before the Company Law Board CLB against the Resolution dated 18th January, 2010.
The appellants duly responded to the companyplaints in timely manner.
3 of 2010 and that issue having been settled by appellants with the promoters management of GTL for undisclosed reasons, the appellants are number justified in reagitating the very same issue before SEBI in relation to siphoning of funds either during 2009 2010 or during 2010 2011.
It was further stated in the said letter until appellants are assured of their companycern on the above issues, SEBI should keep the process of open offer in abeyance.
During examination of the DLO, certain companyplaints were received by SEBI against the acquirers and PAC as well as against the target companypany and its promoters.
The management had availed huge high companyt borrowing from banks and financial institutions against its property, including 18.7 per cent shares out of the promoters shareholdings.
The SEBI had also received companyplaints against the acquirers and the PAC which were being looked into when the PAC vide letter dated 2nd August, 2011 sought permission to withdraw the PA.
The companyplaints were made at the behest of the promoters.
Facts Golden Tobacco Limited the target companypany is a companypany having its registered office at Tobacco House, S.V. Road, Vile Parle West , Mumbai 400 056.
Net current assets were Rs.134.4 crores and gross sales were Rs.173.68 crores.
The background of the acquirers mentioned in the DLO was that Mr. Pramod Jain was prime Director of PHPL and had experience in financial and companysultancy services.
It was observed that the SEBI had informed the merchant banker of the appellants on 3rd February, 2010 that it was number companypetent to administer the authenticity of the process of Resolution in the General Body Meeting GBM dated 18th January, 2010.
The letter of offer shall be despatched to the shareholders number earlier than 21 days from its submission to the Board under sub regulation 1 Provided that if, within 21 days from the date of submission of the letter of offer, the Board specifies changes, if any, in the letter of offer without being Page 35 of 75 under any obligation to do so , the merchant banker and the acquirer shall carry out such changes before the letter of offer is despatched to the shareholders Provided further that if the disclosures in the draft letter of offer are inadequate or the Board has received any companyplaint or has initiated any enquiry or investigation in respect of the public offer, the Board may call for revised letter of offer with or without rescheduling the date of opening or closing of the offer and may offer its companyments to the revised letter of offer within seven working days of filing of such revised letter of offer.
The appellants the acquirer in their companyplaints to SEBI and other proceedings including petition under Section 397/398 of the Companies Act before the Company Law Board and a suit before the Civil Court inter alia questioned the transaction for joint development of Vile Parle Property in terms of Memorandum of Understanding MoU dated 26th September, 2009 with Sheth Developers and Suraksha Realty Ltd. Various companyrespondences were exchanged between SEBI and the merchant banker, acquirers, PAC, the target companypany and certain other entities in respect of such companyplaints.
Similarly, having settled the dispute relating to siphoning of funds by GTL during 2009 2010 which plea was specifically raised in Company Petition No.
817 of 2011 in April 2011 before the City Civil Court at Mumbai, alleging for the first time that the Company Petition No.
The offer was for hostile takeover of the target companypany.
3 of 2010 was withdrawn on account of oral assurance given by promoters of GTL that Vile Parle property would be developed only after holding public auction and that the promoters of GTL have companymitted breach of that oral assurance.
Admittedly, City Civil Court at Mumbai has granted ad interim relief in favour of appellants on April 26, 2011 and that ad interim order companytinues to be in operation till date.
Therefore, irrespective of the fact that SEBI was number justified in taking more than two years for approving the draft letter of offer, in the facts of present case, grievance of appellants that the public offer is frustrated and has become impossible of performance cannot be accepted, because, both grounds based on which appellants had sought withdrawal of public offer, were in fact settled by appellants on the basis of oral assurance given by promoters of GTL and further, for the alleged breach of oral assurance, appellants have filed Suit in the Bombay City Civil Court and obtained stay of development of Vile Parle property and that stay is admitted operating till date.
It is relevant to numbere that appellants, subsequent to withdrawal of Company Petition No.
However, admittedly on January 18, 2010 the general body of shareholders has authorized GTL to enter into Joint Development Agreement is in respect of Vile Parle property.
The PA was voluntarily made by the acquirers and the PAC to acquire 44, 02, 201 equity shares 25 of the target companypany from its equity shareholders at a price of Rs.101/ the offer price per equity share.
The acquirers and the PAC had also acquired 71034 equity shares at highest and average price of Rs.100.15 and Rs.89.13 respectively.
On November 12, 2009, Mr. Pramod Jain and Pranidhi Holdings Private Limited the acquirers along with J.P. Financial Services Private Limited the person acting in companycert PAC made PA through VC Corporate Advisors Private Limited the merchant banker in accordance with regulations 10 and 12 read with regulation 14.
Strong reliance was placed by companynsel for appellants on decision of SEBI dated February 14, 2014 wherein penalty of 1 crore has been levied against the promoters of GTL interalia for violating regulation 23 of SAST Regulations, 1997.
The draft letter of offer also mentioned that the PAC had advanced loan against shares of the target companypany and on account of default, it acquired the said shares representing 5.05 of the equity share capital.
The acquisition was in the nature of strategic investment for diversification and growth and to reap the benefit of companyporate opportunities.
Having settled the dispute relating to development of Vile Parle property with the promoters management of GTL on the basis of undisclosed reasons and having withdrawn Company Petition No.
3 of 2010 in February 2010, have filed S. C. Suit No.
By the said letter dated August 9, 2011 appellants called upon SEBI to investigate about the exact legal status of the Vile Parle property, investigate regarding possession of the original title deeds of Vile Parle property and investigate regarding possession of the original title deeds of Vile Parle property, investigate regarding usage of funds etc.
Chargesheet was filed against him.
The appellants vide application dated 8th October, 2011 sought permission to withdraw the offer under Regulation 27 1 d .
Since the date of PA, financial position of the target companypany had deteriorated substantially.
Disputes were pending before the arbitrator arising out of default in payments.
However, on February 8, 2010, appellants withdrew Company Petition No.3 of 2010 by merely recording that the parties have amiably settled the matter without any further claims against each other.
This has defeated the very object of the offer, without any fault on the part of the acquirers.
3 of 2010 unconditionally, it is number open to appellants to allege that their public offer is frustrated on account of GTL entering into MOU with Sheth Developers for development of Vile Parle property.
Thus, the acquirers and the PAC had 6.47 of the issue of equity share capital as on the date of PA.
As on the date of the PA, the acquirers and PAC companylectively held 11, 39, 002 equity shares 6.47 of the target companypany.
No doubt that entering into an MOU by GTL with Sheth Developers on November 26, 2009 without obtaining approval of general body of shareholders was in violation of regulation 23 of SAST Regulations, 1997.
The equity shares of the target companypany are listed on the Bombay Stock Exchange Limited BSE and the National Stock Exchange of India Limited NSE .
The merchant banker informed the SEBI vide letter dated 19th May, 2011 that the acquirers had filed a suit for restraining the target companypany from creating any third party interest in the assets of the target companypany.
The acquirers and PAC, through the merchant banker, filed the draft letter of offer DLO with SEBI on November, 26, 2009.
The stand of the appellants in the said letter was that the SEBI had number taken any decision on the DLO in two years during which period the management of the target companypany had systematically siphoned off its companyfers, depleted its valuable fixed assets and eroded its net worth substantially with the intention of making it a shell companypany.
ADARSH KUMAR GOEL, J. This appeal has been preferred under Section 15 Z of the Securities and Exchange Board of India Act, 1992 the Act against order dated 6th August, 2014 passed by the Securities Appellate Tribunal, Mumbai the SAT in Appeal No.111 of 2012.
At that time, market price of the target companypany shares was Rs.109/ per share.
Apart from above, as late as on August 9, 2011 appellants had addressed a letter to SEBI requesting them to keep the process of open offer in abeyance, because, in the proceedings pending before the City Civil Court at Mumbai, GTL had filed an affidavit stating that in the board resolution dated May 25, 2011 companypany has decided number to proceed further with the MOU dated November 26, 2009 wrongly stated therein as December 26, 2009 entered with Sheth Developers and instead take necessary steps to develop the Vile Parle property by the companypany of its own.
Networth of the target companypany as on 31st March, 2009 was Rs.42.44 crores.
In view of approval granted by the general body of shareholders on January 18, 2010, grievance of appellants that Vile Parle property has been encumbered in violation of regulation 23 does number survive at least from January 18, 2010.
