Mr. Joseph Verghese & Anr. vs Sebi

BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI Date of Decision: 23.09.2016

Appeal No. 399 of 2015

1.

Mr. Joseph Verghese Elenjikal Madom, XIV/377, Metro Nagar, Vallikkat Road, Marudu, Kundanoor, Cochin, Kerla- 682 304

2. Mr. George Verghese 18/1384, Palluruthy, Cochin, Kerla- 682 006 ...Appellants

Versus

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

Mr. Ramesh Mishra, Practicing Company Secretary with Mr. Loknath Mishra, Advocate for Appellants.

Mr. Kumar Desai, Advocate with Mr. Tomu Francis and Ms. Bhavya Bhandari, Advocates i/b ELP for the Respondent.

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

Per: Justice J.P. Devadhar (Oral)

1. Appellants are aggrieved by the order passed by the Whole Time

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

("SEBI" for short) on May 29, 2015. By the said order the appellants are

directed to disinvest 1,38,000 shares of TCM Limited through sale to

parties not connected/related to them in small lots in tranches on the 2

Bombay Stock Exchange Limited ("BSE" for short) ensuring that such

sale does not disturb the market equilibrium and the appellants are further

directed to transfer the entire proceeds of such sale of shares to the

Investor Protection and Education Fund established under the Securities

and Exchange Board of India (Investor Protection and Education Fund)

Regulations, 2009.

2. Appellants along with Mr. T. Thirugananam constitute promoter

group of TCM Limited. Counsel for the appellants fairly states that the

appellants have violated the provisions contained in the Securities and

Exchange Board of India (Substantial Acquisition of Shares and

Takeovers) Regulations, 1997 ("Takeover Regulations, 1997" for short).

However, it is contended that the impugned order suffers from two

infirmities namely; (One) in the impugned order it is erroneously held

that the shares of TCM Limited acquired by the appellants in violation of

regulation 11(1) of the Takeover Regulations, 1997 comes to 1,38,000

shares whereas the actual number of shares acquired by the appellants in

violation of regulation 11(1) of the Takeover Regulations, 1997 comes to

42,488 shares. (Two) the appellants are directed to disinvest the shares of

TCM Limited acquired in violation of regulation 11(1) of the Takeover

Regulations, 1997 without giving an opportunity to the appellants to

demonstrate that in the facts of present case, it would be just and proper

to direct the appellants to make an open offer as contemplated under the

provisions of the Takeover Regulations, 1997 instead of directing the

appellants to disinvest the shares-acquired in violation of the regulation

11(1) of the Takeover Regulations, 1997.

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3. With reference to the first contention, counsel for the appellants

states that on March 31, 2009 TCM Limited had erroneously informed

the BSE that the promoter group held 8,96,038 shares of TCM Limited.

Hence by a letter dated May 07, 2010 the appellants had informed the

BSE that the shares held by the promoter group of TCM Limited was

9,91,362 shares constituting 29.17% of the total shares issued and not

8,96,038 shares constituting 26.36% of the total shares as wrongly

intimated to SEBI by TCM Limited on March 31, 2009. Inspite of the

above letter and various other letters addressed by the appellants to BSE,

the BSE has not rectified the error on its website. Therefore, the WTM

of SEBI is not justified in taking into account the shareholding of the

promoter group as disclosed on the BSE website instead of the

shareholding disclosed by the appellants.

4. Although, the appellants had not brought any material on record

before the WTM of SEBI to demonstrate that the shareholding of the

promoters was to the extent of 9,91,362 shares and not 8,96,038 shares,

in the proceedings before us the appellants have brought on record the

statements issued by the Depository Participants to establish that the

appellants in fact held 9,91,362 shares (29.17%) of TCM Limited. On

perusal of the said documents counsel for SEBI fairly stated that as the

said documents were not placed on record, the WTM of SEBI was

justified in relying on the materials available on the BSE website.

However, in view of the documents now furnished by the appellants, it is

apparent that the shares of TMC Limited acquired by the appellants in

violation of regulation 11(1) of the Takeover Regulations, 1997 would be 4

42,488 shares. Thus, the findings recorded by the WTM of SEBI that

1,38,000 shares of TMC Limited have been acquired by the appellants in

violation of regulation 11(1) of the Takeover Regulations, 1997 cannot

be sustained.

5. Now, turning to the second question, it is true that in the show

cause notice, the appellants were specifically called upon to show cause

as to why any of the directions specified under regulation 44 and 45 of

the Takeover Regulations, 1997 should not be imposed on the appellants.

In their reply to the show cause notice, the appellants had not advanced

any argument that for the violations committed, the appellants may be

directed to make an open offer instead of disinvesting the shares.

Therefore, the WTM of SEBI for the reasons set out in the impugned

order deemed it fit to direct the appellants to disinvest the shares acquired

in violation of regulation 11(1) of the Takeover Regulations, 1997.

6. In the facts of present case, since the order of WTM of SEBI

determining the quantum of shares acquired by the appellants in violation

of the Takeover Regulations, 1997 is required to be varied and in view of

the fact that the appellants had no opportunity to put forth their views as

to why the appellants should be permitted to make an open offer instead

of disinvestment, we deem it proper to set aside the impugned order and

direct the WTM of SEBI to pass fresh order on merits and in accordance

with law.

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7. No doubt that in the impugned order the WTM of SEBI has given

the reasons for directing the appellants to disinvest the shares instead of

making an open offer. However, in view of the peculiar facts of present

case, where the WTM of SEBI had no opportunity to consider the views

of the appellants on making open offer, we set aside the impugned order

and restore the matter to the file of WTM of SEBI for fresh decision on

merits and in accordance with law.

8. Appeal is disposed of in the aforesaid terms with no order as to

costs.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Jog Singh Member

Sd/-

Dr. C.K.G. Nair Member 23.09.2016 Prepared & Compared By: PK