Anil B. Vedmehta vs Sebi

Date of Decision: 04.08.2017

Appeal No. 188 of 2016

Anil B. Vedmehta, Dariyalal CHS Ltd., 3 Silversand, Juhu Tara Road, Mumbai- 400 049 ...Appellant

Versus

Securities and Exchange Board of India, SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051 ...Respondent

Dr. S. K. Jain, Practicing Company Secretary for the Appellant.

Mr. Aditya Chitale, Advocate with Ms. Vidhi Jhawar and Mr. Pulkit Sukhramani, Advocates i/b The Law Point for the Respondent.

CORAM: Justice J.P. Devadhar, Presiding Officer Dr. C.K.G. Nair, Member

Per: Justice J.P. Devadhar (Oral)

1.

This appeal is filed to challenge the order passed by the Whole

Time Member ("WTM" for short) of Securities and Exchange Board of

India ("SEBI" for short) on 05.04.2016. By the said order the promoter

group of Mobile Telecommunications Limited ("Target Company" for

convenience) which includes the appellant is directed to make public

announcement to acquire the shares of the Target Company in

accordance with the provisions of the Securities and Exchange Board of

India (Substantial Acquisition of Shares and Takeovers) Regulations, 2

2011 ("2011 Regulations" for short) and pay the consideration amount

with interest at the rate of 10% per annum from 07.06.2013 to the date of

payment of consideration to the shareholders who were holding shares in

the Target Company on the date of violation and whose shares are

accepted in the open offer, after adjustment of dividend paid, if any.

2. Facts relevant for the purposes of the present appeal are as

follows:-

a) The appellant is Promoter/ Chairman/ Managing

Director of the Target Company.

b) As on 31.03.2012 the shareholding of the then

promoter group of the Target Company was 51.26%

shares. On 20.03.2013 the appellant acquired certain

shares through open market transactions and

32,10,000 shares through an off market transaction

from his ex-wife Ms. Priyanka Mehta. As a result of

the said acquisitions, the shareholding of the promoter

group increased by 5.56% during the Financial Year

2012-2013, which triggered the requirement of

making public announcement for an open offer under

regulation 3(2) of the 2011 Regulations.

c) As no open offer was made, show cause notice was

issued to the promoter group including the appellant

and after giving an opportunity of hearing the

impugned order was passed on 05.04.2016 directing 3

the promoter group to make an open offer in terms of

the 2011 Regulations and also interest as stated

hereinabove.

3. Mr. S. K. Jain, Learned Authorised Representative of the appellant

submitted that the impugned order is ex-facie erroneous and deserves to

be quashed and set aside for the following reasons:-

a) By a Gift deed dated 26.04.2011 Ms. Priyanka Mehta

wife of the appellant who was also a part of the

promoter group gifted 32,10,000 shares in favour of

the appellant. By an order dated 05.08.2011 the

Family Court at Bandra disposed of the Divorce

Petition filed by the wife of the appellant in terms of

the consent terms arrived at between Ms. Priyanka

Mehta and the appellant wherein the obligation to

transfer the shares in the name of Ms. Priyanka Mehta

to the name of the appellant have also been recorded.

In terms of the Gift deed dated 26.04.2011, it is

submitted that 32,10,000 shares were actually

transferred to the name of the appellant on

20.03.2013. Since the transfer of the shares was

between the promoter wife and promoter husband it

was an inter se transfer between the promoters and, in

such a case, open offer obligation contained in the

2011 Regulations are exempted and therefore the

promoters including the appellant could not be 4

directed to make an open offer. Moreover, the WTM

of SEBI failed to consider the consent order passed by

the Family Court at Bandra on 05.08.2011 wherein

the above facts are recorded. Accordingly, it is

submitted that the impugned order is liable to be

quashed and set aside.

b) Even though Ms. Priyanka Mehta, ceased to be the

wife of the appellant pursuant to the decree of Divorce

granted by the Family Court at Bandra on 05.08.2011

Ms. Priyanka Mehta continued to be a promoter of the

Target Company and therefore acquisition of

32,10,000 shares by the appellant from his ex-wife

being a transfer from one promoter to another, the

WTM of SEBI is not justified in holding that on

account of above transfer, open offer obligation

contained in the 2011 Regulations got triggered.

4. We see no merit in the above contentions.

5. Argument of the appellant that 32,10,000 shares of the Target

Company were transferred by the ex-wife to the appellant on 20.03.2013

pursuant to the Gift deed dated 26.04.2011 was not the case put forth by

the appellant before the WTM of SEBI. Neither in the affidavit in reply

to the initial show cause notice nor in the Memorandum of Appeal the

appellant has pleaded that acquisition of 32,10,000 shares of the Target

Company on 20.03.2013 was pursuant to the Gift deed dated 26.04.2011. 5

Thus, the appellant is not justified in introducing an altogether new case

by annexing a copy of the alleged Gift deed to the Memorandum of

Appeal. Argument advanced on behalf of the appellant that a copy of the

Gift deed dated 26.04.2011 was furnished to the WTM of SEBI after the

conclusion of the argument cannot be accepted, because, if the Gift deed

was furnished to the WTM of SEBI and the same was not considered in

the impugned order, then the appellant would have made a grievance to

that effect in the Memorandum of Appeal. Very fact that no such

grievance is made in the Memorandum of Appeal clearly falsifies the

case sought to be put forth by the appellant before this Tribunal. In any

event, even the consent terms filed in the Divorce petition filed before the

Family Court do not indicate that the appellant was entitled to receive

32,10,000 shares from Ms. Priyanka Mehta under the Gift deed dated

26.04.2011.

6. Similarly, argument of the appellant that even after the decree of

Divorce was granted by the Family Court on 05.08.2011, Ms. Priyanka

Mehta continued to be the promoter of the Target Company, is without

any merit, because, in the shareholding pattern declared by the Target

Company for the quarter ended December 2012 and March 2013,

Ms. Priyanka Mehta, is not declared as a promoter of the Target

Company. Moreover, it is not the case of the appellant that the above

declaration made by the Target Company was erroneous. Thus, it is

apparent that the date on which the appellant acquired 32,10,000 shares

of the Target Company from Ms. Priyanka Mehta, even according to the

Target Company in which the appellant is the Chairman /Managing 6

Director/, Ms. Priyanka Mehta was not a promoter of the Target

Company. In such a case, the WTM of SEBI is justified in rejecting the

contention of the appellant that acquisition of 32,10,000 shares of Target

Company by the appellant was the inter se transfer between the

promoters.

7. In the result, we see no merit in the appeal and the same is hereby

dismissed with no order as to costs.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Dr. C.K.G. Nair Member 04.08.2017 Prepared & Compared By: PK