Mr. Victor Fernandes And Anr. vs Sebi

BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI Order Reserved On: 07.03.2016 Date of Decision : 13.04.2016

Appeal No. 55 of 2015

1.

Mr. Victor Fernandes B-604 Gill-Haze Apts, Lourdes Colony Orlem, Malad West, Mumbai-400 064

2. Ms. Sangeeta Fernandes B-604 Gill-Haze Apts, Lourdes Colony Orlem, Malad West, Mumbai-400 064 ...Appellants

Versus

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

2. Independent Media Trust Through its trustee Sanchar Content Private Limited's Director, Mr. L.V. Merchant 3rd Floor, Maker Chambers IV, 222 Nariman Point, Mumbai- 400 021

3. Reliance Industrial Investments and Holdings Limited Through its Director, Mr. Hital R. Meswani 3rd Floor, Maker Chambers IV, 222 Nariman Point, Mumbai- 400 021

4. Reliance Industries Limited Through its Chairman and Managing Director, Mr. Mukesh D. Ambani 3rd Floor, Maker Chambers IV, 222 Nariman Point, Mumbai- 400 021 2

5. JM Financial Institutional Securities Limited Through its Director, Mr. Nimesh N. Kampani 7th Floor, Cnergy, Appasaheb Marathe Marg, Prabhadevi, Mumbai- 400 025

6. Network 18 Media & Investments Limited Through its Director, Mr. Raghav Bahl 503, 504 and 507, 5th Floor, Mercantile House, 15, Kasturba Gandhi Marg, New Delhi- 110 001 ...Respondents

Mr. Victor Fernandes, Appellant in Person for Appellants.

Mr. Fredun Devitre, Senior Advocate with Mr. Mihir Mody, Mr. Harekrishna Ashar and Mr. Saurabh Bachhawat, Advocates i/b K. Ashar & Co. for the Respondent No. 1

Mr. Rafique Dada, Senior Advocate with Mr. Rohan Rajadhyaksha, Advocate i/b AZB & Partners for Respondent Nos. 2.

Mr. Janak Dwarkadas, Senior Advocate with Mr. Vaidhyanathan Iyer, Mr. Shwetank Ginodia and Mr. Dhirajkumar Totala, Advocates, i/b AZB Partners for Respondent No. 5.

Mr. Rohan Rajadhyaksha, Advocate with Ms. Gulnar Mistry, Advocate for Respondent No. 3, 4 & 6.

CORAM: Justice J.P. Devadhar, Presiding Officer Jog Singh, Member

Per: Justice J.P. Devadhar

1. Although appellants have raised several questions in this appeal,

principle question to be considered herein is, whether the Securities and

Exchange Board of India ("SEBI" for short) by its communication dated

17.11.2014 was justified in permitting respondent no. 2 to 4 ('acquirers'

for convenience) to acquire shares of respondent no. 6 i.e. Network 18

Media & Investments Limited ('target company' for convenience) at an 3

open offer price of ` 41.04 per share as against the open offer price of

` 5,68,430.32 per share claimed by the appellants. It is not in dispute that

in implementation of SEBI communication dated 17.11.2014 the

acquirers have acquired the shares of the target company at an open offer

price of ` 41.04 per share from the public investors of the target company

and the entire open offer process has been completed on 26.12.2014. It is

also not in dispute that instead of participating in the open offer by

offering to sell the shares of the target company to the acquirers without

prejudice, the appellants have chosen to file the present appeal inter alia

with a view to challenge the communication of SEBI dated 17.11.2014.

2. Under the Securities and Exchange Board of India (Substantial

Acquisition of Shares and Takeovers) Regulations, 2011 ("Takeover

Regulations, 2011" for short) when any indirect acquisition of shares or

voting rights in, or control over the target company triggers open offer

obligation, then the open offer price shall be the highest negotiated price

per share of the company for any acquisition under the agreement

attracting the obligation to make a public announcement of an open offer.

In the present case, appellants submit that the highest negotiated price per

share of the target company as per the Share Purchase Agreement

("SPA" for short) dated 29.05.2014 which triggered the obligation to

make public announcement of an open offer comes to ` 5,68,430.32 per

share of the target company and therefore this Tribunal must set aside the

communication of SEBI dated 17.11.2014 which permitted the acquirers

to acquire the shares of the target company in open offer at ` 41.04 per

share. Appellants further seek an order directing the acquirers to pay to 4

the appellants ` 568,43,03,200/- jointly and severally, for the 10,000

shares of the target company which the appellants want to tender to the

acquirers at a price of ` 5,68,430.32 per share which according to the

appellants is the highest price paid by the acquirers for acquisition of the

shares of the target company under the SPA dated 29.05.2014.

3. Facts relevant for the present appeal are as follows:-

a) Appellants are shareholders of the target company.

The shares of the target company are listed on the

Stock Exchanges.

b) Respondent no. 5, a Merchant Banker, was the Lead

Manager to the public offer made by the acquirers

(respondent no. 2 to 4) for the purpose of acquiring

the shares of the target company in the open offer.

c) Mr. Raghav Bahl and his wife Ritu Kapur ("Bahl

group' for convenience) were the promoters of the

following six companies viz;-

i) Adventure Marketing Pvt. Ltd.

ii) Colorful Media Pvt. Ltd.

iii) Watermark Infratech Pvt. Ltd.

iv) RRB Mediasoft Pvt. Ltd.

v) RB Mediasoft Pvt. Ltd.

vi) RB Media Holding Pvt. Ltd. 5

Each of these six companies had issued 10,000 equity

shares and the entire 60,000 shares issued by the six

companies were held the Bahl Group. These six

companies 100% owned and controlled by the Bahl

group are hereinafter referred to as 'six holding

companies'.

d) The six holding companies along with another

company promoted by Bahl Group held 48.30%

shares of the target company. As a result of holding

100% shares of the six holding companies, the Bahl

Group apart from having 100% direct control over

the six holding companies, had indirect control over

48.30% shares of the target company (through the six

holding companies).

e) Respondent no. 2 is a Trust set up under a Trust Deed

dated 22.11.2011. Mr. L.V. Merchant was the 'settlor'

of the Trust with Nirlab Consultancy Pvt. Ltd. as the

first trustee of the Trust. The name of Nirlab

Consultancy Pvt. Ltd. was later on changed as Digital

Content Pvt. Ltd. ('DCPL' for short). 100% shares of

DCPL were held by the Bahl Group. Under the Trust

Deed respondent no. 4 is the sole beneficiary of the

Trust and respondent no. 3 is the protector of

respondent no. 2 Trust.

6

f) Respondent no. 2 Trust held 1.85% shares of the

target company. As per the Trust Deed, the trustee

(DCPL) had the power to vote on behalf of respondent

no. 2 Trust. Thus, the aggregate indirect control of

Bahl Group over the target company was 50.15% (i.e.

48.30% indirect control through six holding

companies + 1.85% indirect control as a trustee of

respondent no. 2 Trust). It is not in dispute that in

view of certain employee welfare trusts which also

had shares of the target company, the aggregate

control of the Bahl Group in the target company

exceeded 51% as stipulated under Guidelines framed

by the Ministry of Information and Broadcasting. The

target company in turn held 51.23% shares of TV18

Broadcast Ltd., ("TV 18" for short). Thus, TV 18 was

a subsidiary of the target company.

g) On 27.02.2012 an Investment Agreement was entered

into by and between the aforesaid six holding

companies, respondent no. 2 and the Bahl Group. As

per the said agreement, the respondent no. 2 Trust was

to invest amounts in the six holding companies by

subscribing to the Zero Coupon, Optionally and fully

Convertible Debentures ("ZOCD" for convenience).

The investment agreement dated 27.02.2012 is

hereinafter referred to as the 'ZOCD agreement'. 7

Maturity period for each ZOCD under the ZOCD

agreement was 10 years from the completion date i.e.

the date on which allotment of the ZOCDs were

completed.

h) As per the ZOCD agreement, the amounts invested by

respondent no. 2 in the six holding companies by

subscribing to the ZOCD's were to be utilized for

acquiring the shares of the target company and TV 18

under the rights issue and the respondent no. 2 had the

option either to seek refund of the amount invested

without interest or seek conversion of ZOCD's into

equity shares of the six holding companies to the

extent specified under the ZOCD agreement. The

option for conversion of ZOCD's into equity shares

could be exercised by the respondent no. 2 at any time

during the period from the date of issuance of ZOCDs

till maturity of the ZOCDs issued under the ZOCD

agreement.

i) In implementation of the ZOCD agreement, the

respondent no. 2 invested ` 2211.80 crore in the six

holding companies by subscribing to 22,11,79,894

ZOCD's. It is not in dispute that the respondent no. 2

could opt for conversion of ZOCD's at any time and

on such option being exercised, the six holding 8

companies were required to issue 221,17,98,940

equity shares in favour of respondent no. 2 and in that

event, the total shares issued by six holding

companies would be 221,18,58,940 shares out of

which 221,17,98,940 shares (99.997%) would be with

respondent no. 2 and the balance 60,000 shares

(0.003%) would be with the Bahl Group. In other

words, on respondent no. 2 opting for conversion of

ZOCDs issued under the ZOCD agreement, the 100%

shareholding of Bahl Group in six holding companies

was to get automatically reduced to 0.003% (approx.)

It is a matter of record that at no point of time the

respondent no. 2 has sought conversion of ZOCD's

and hence, the question of the six holding companies

issuing equity shares in favour of respondent no. 2 did

not arise at all. Consequently, the Bahl Group holding

60,000 shares of the six holding companies continued

to be 100% shareholders of the six holding companies

with 100% voting rights and the respondent no. 2

continued to be holder of ZOCDs issued under the

ZOCD agreement.

j) It is not in dispute that the six holding companies have

utilized the amount of ` 2211.80 crore received from

respondent no. 2 for subscribing to the shares of the

target company and TV 18 under the rights issue. As 9

a result of acquiring the shares of the target company

under the rights issue, the shareholding of the

companies promoted by the Bahl Group in the target

company increased from 48.30% shares to 71.25%

shares i.e. total 74,61,88,987 shares.

k) By resolutions dated 12.11.2012 and 20.05.2014,

Mr. Atul S. Dayal, Mr. P.M.S. Prasad and Sanchar

Content Pvt. Ltd. ('SCPL' for short) were inducted as

additional trustees of respondent no. 2 Trust.

l) On 29.05.2014 a Share Purchase Agreement ("SPA"

for short) was entered into by and between the Bahl

Group, respondent no. 2, six holding companies and

RB Holdings Pvt. Ltd. ("RBHPL" for short).

Admittedly, 100% shares of RBHPL were held by the

Bahl Group. As per the said SPA, the respondent no.

2 was to acquire 100% equity shares of six holding

companies held by the Bahl Group (i.e. 60,000 shares)

as also 100% equity shares of RBHPL which were

also held by the Bahl Group. The purchase

consideration payable by respondent no. 2 Trust to the

Bahl Group for acquiring 100% equity shares of six

holding companies was ` 705,95,68,376/- and ` 1

crore for acquiring 100% shares of RBHPL. Apart

from the above, SPA dated 29.05.2014 records the

following transactions:-

10

i) Clause 3.1 of SPA provides that the

respondent no. 2 Trust shall provide loan

of ` 43,08,26,586 to the six holding

companies as per details set out in

schedule 3 and Clause 4.1 of the SPA

provides that the said loan shall be

utilized by the six holding companies to

repay their liabilities to the entities

specified in Schedule 5.

ii) Clause 3.2 of the SPA provides that the

respondent no. 2 shall provide loan to

RBHPL under the head 'RBH loan

Amount' which is defined under Clause

1.1 of the SPA to mean loan of

` 304,94,08,453/- payable by the

respondent no. 2 to RBHPL. Clause 4.2

of the SPA provides that the aforesaid

loan received from respondent no. 2 shall

be utilized by RBHPL for discharging its

liabilities to the extent specified and to

the entities specified in Schedule 6.

m) Acquiring 100% shares of the six holding companies

and 100% shares of RBHPL from the Bahl Group

amounted to the respondent no. 2 indirectly acquiring 11

71.25% shares of the target company from the Bahl

Group. Regulation 3 read with regulation 5 of the

Takeover Regulations, 2011, provide that where an

acquirer acquires shares or voting rights in the target

company which entitle them to exercise 25% or more

of the voting rights in such target company, then, such

acquisition triggers open offer obligation. In the

present case, since indirect acquisition of the shares of

the target company under the SPA was in excess of

25%, the respondent no. 2 was required to make an

open offer for acquiring the shares of the target

company in accordance with the Takeover

Regulations, 2011. Accordingly, on 29.05.2014, the

respondent no. 2 along with respondent no. 3 & 4 as

persons acting in concert ("PAC" for short) made a

public announcement through respondent no. 5

(manager to the offer) under Chapter III of the

Takeover Regulations, 2011 offering to purchase up

to 22,99,46,996 shares of the target company from the

public shareholders at an offer price of ` 41.04 per

share. It is relevant to note that as per the valuation

report submitted by the valuer appointed by

respondent no. 2 viz. Ernst & Young Merchant

Banking Services Pvt. Ltd. on 29.05.2014, the fair

value per equity share of the target company as on

29.05.2014 was ` 40.50 per share. However, the 12

acquirers/manager to the offer considered that the

highest negotiated price of the shares of the target

company ought to be ` 41.04 per share, which is

higher than the price determined by the above valuer

appointed by respondent no. 2.

n) On 11.06.2014, the acquirers viz the respondent no. 2

to 4 filed draft letter of offer with SEBI together with

requisite disclosures relating to the public offer as

contemplated under the Takeover Regulations, 2011.

o) In the meantime, the appellant no. 1 had sent an

E-mail to the respondent no. 5 on 09.06.2014

requesting respondent no. 5 to ensure that the

proposed open offer is in compliance with all

applicable statutory provisions. After the draft letter

of offer was filed by respondent no. 5 on behalf of the

acquirers, the appellant no. 1 made another

representation to the respondent no. 5. In that

representation it was stated that the open offer

obligation got triggered more than two years ago on

execution of ZOCD agreement and the claim made in

the letter of offer that SPA dated 29.05.2014 triggered

open offer obligations besides being gross

misrepresentation of facts amounts to harming the

interest of investors.

13

p) On 12.06.2014, respondent no. 5 submitted its due

diligence certificate to SEBI stating that the acquirer

has duly discharged its responsibility for the

correctness, adequacy and disclosure of all relevant

information in the draft letter of offer. On 18.06.2014

the respondent no. 5 addressed a letter to the appellant

no. 1 wherein all issues raised in the E-mail dated

09.06.2014 were refuted. There upon, the appellant

no. 1 on 25.06.2014 filed a complaint before SEBI

inter alia alleging various violations in the draft open

offer submitted by the acquirers. One of the grievance

made in the complaint was that the highest negotiated

price paid by the acquirer to the sellers under the SPA

was in fact ` 5,68,430.32 per share, whereas, in the

draft letter of offer the acquirers have sought to

acquire shares of the target company at ` 41.04 per

share which is in violation of regulation 8(1) and 8(2)

of the Takeover Regulations, 2011. In the said

complaint SEBI was requested to direct the acquirers

under regulation 32(f) of the Takeover Regulations,

2011 to revise the offer price and make an open offer

for acquiring shares of the target company at

` 5,68,430.32 per share instead of ` 41.04 per share

as stated in the draft letter of offer.

14

q) On receipt of the draft letter of offer, SEBI sought

various clarifications and particulars from the lead

manager and on 17.11.2014 subject to compliance of

the requirements set out therein gave its

observations/comments to the draft letter of offer. In

other words, subject to compliance of the

requirements set out in the letter dated 17.11.2014,

SEBI granted its approval to the acquirers to acquire

shares of the target company at an open offer price of

` 41.04 per share.

r) The acquirers complied with the observations

contained in SEBIs letter dated 17.11.2014 and

submitted their final letter of offer to SEBI on

21.11.2014. Thereafter, the public offer process was

conducted in accordance with the Takeover

Regulations, 2011 and the public offer was completed

on 26.12.2014. Admittedly, appellants did not

participate in the public offer by offering to sell the

shares of the target company to the acquirers.

s) On 29.12.2014 the appellants have filed the present

appeal before this Tribunal.

t) During the pendency of the appeal, SEBI by its

communication dated 09.02.2015 rejected all

contentions raised in the complaint filed by the 15

appellant no. 1 on 25.06.2014. Appellants have not

challenged the said communication of SEBI dated

09.02.2015.

4. Mr. Victor Fernandes, (appellant no. 1) appearing in person made

oral submissions and also tendered written submissions on behalf of the

appellants. Mr. Devitre, Mr. Dwarkadas, Mr. Dada, learned Senior

Advocates made oral submissions and also tendered written submissions

on behalf of respondent no. 1, respondent no. 5 and respondent no. 2

respectively. Mr. Rajadhyaksha learned advocate appearing on behalf of

respondent nos. 3,4 & 6 has adopted the submissions made by counsel for

respondent no. 2.

5. Crux of the arguments advanced by Mr. Fernandes on behalf of

appellants (orally and by way of written submissions) may be

summarized as follows:-

a) In the draft letter of offer submitted by the acquirers it is

stated that only the following transactions were the

transactions to be executed under the SPA dated

29.05.2014, namely,

i) ` 706.96 crore being the purchase consideration payable to Bahl Group for acquiring 100% equity shares of the six Holding Companies and RBHPL;

ii) ` 43.08 crore being the loan to be paid by respondent no. 2 to the six holding companies so as to enable the six holding companies to repay their outstanding liabilities to the parties specified under Schedule 5 of the SPA.

16

i) ` 304.94 crore being the loan to be paid by respondent no. 2 to RBHPL so as to enable RBHPL to repay its outstanding liabilities to the parties specified in Schedule 6 of the SPA.

Thus, in the draft letter of offer it is stated that the

transactions under the SPA were for ` 1054.98 crore

(` 706.96 Cr + ` 43.08 Cr + ` 304.94 Cr). However,

as per the disclosures made in the draft letter of offer,

it is seen that the transaction consideration under the

SPA has been enhanced from ` 1054.98 crore to

` 3266.78 crore by including the amount of ` 2211.80

crores which was invested by respondent no. 2 in the

six holding companies in October 2012 as per the

terms of the ZOCD Investment Agreement dated

27.02.2012. Appellants submit that SEBI failed to

appreciate that indirect acquisition of 71.25% shares

of the target company was effected by the acquirers

on the basis of two distinct agreements namely, the

ZOCD agreement dated 27.02.2012 and SPA dated

29.05.2014. Therefore, the acquirers were not justified

in including the consideration amount of ` 2211.80

crore paid under the ZOCD agreement while

determining the highest negotiated price paid by

respondent no. 2 under the SPA dated 29.05.2014.

b) By subscribing to the ZOCD's under the ZOCD

agreement dated 27.02.2012, the acquirers had 17

effectively acquired 99.997% shares of the six holding

companies and therefore, even though the SPA dated

29.05.2014 refers to acquisition of 100% of the

outstanding shares of the six holding companies, in

reality, the outstanding shares that could be acquired

by respondent no. 2 from the Bahl Group under the

SPA was only to the extent of 0.003% of the fully

diluted share capital of the six holding companies.

Since 99.997% of the fully diluted share capital i.e.

99.997% of the economic interest of the six holding

companies were already held by the acquirers even

prior to entering in to the SPA, SEBI was not justified

in approving the decision of the acquirers to include

the amount invested under the ZOCD agreement dated

27.02.2012 while determining the highest negotiated

price per share paid under the SPA dated 29.05.2014.

c) Admittedly, the amounts paid by respondent no. 2

under the ZOCD agreement dated 27.02.2012 have

been utilized by the said six holding companies for

acquiring the shares of the target company and TV 18

under the rights issue and as a result of such

acquisition the shares of the target company held by

the six holding companies and RBHPL rose from

48.30% to 71.25%. Since respondent no. 2 had

entered into two agreements for indirectly acquiring 18

71.25% shares of the target company from the six

holding companies and RBHPL, to determine the

acquisition prices paid by the acquirers under each of

the two agreements and the related transactions

needed to be separately identified and independently

evaluated in order to determine at each stage (one) the

amounts paid by the acquirers (two) the economic

interest acquired by the acquirers in each of the six

holding companies and (three) the corresponding

economic interest acquired by the acquirers in the

shares of the target company. Since SEBI has failed to

consider each of the two agreements independently,

the impugned decision of SEBI cannot be sustained.

d) According to SEBI, SPA dated 29.05.2014 attracted

the obligation to make public announcement of an

open offer. As per the SPA, the acquirers were to

acquire 100% of the outstanding shares of each of the

six holding companies. Since each of the six holding

companies held shares of the target company, it was

necessary for SEBI to determine the effective price

paid by the acquirers for indirect acquisition of the

shares of the target company (through the six holding

companies) under the ZOCD agreement, before

ascertaining the highest price paid by the acquirers for 19

the indirect acquisition of the shares of the target

company under the SPA dated 29.05.2014.

e) SEBI has failed to evaluate individually, the

acquisition of shares of the target company by each of

the six holding companies. Instead, SEBI has only

considered the total number of shares i.e. 74.619 crore

shares of the target company held by the six holding

companies while determining the offer price at

` 41.04 per share of the target company. SEBI has

also committed an error in including the amount of

` 2211.80 crore paid by the acquirer under the ZOCD

agreement in October 2012, while computing the open

offer price, despite knowing that the

transactions/acquisitions under the ZOCD agreement

were independent transactions unconnected with the

SPA. In order to determine the highest price paid for

any acquisition by the acquirer under regulation 8(2)

(a) of the Takeover Regulations, 2011, SEBI ought to

have considered only those transactions that were

executed under the agreement attracting the open offer

obligation. In the present case, since the SPA dated

29.05.2014 triggered open offer obligation, the

aggregate amount of ` 1054.98 crore paid thereunder

alone ought to have been considered for determining

the offer price. By including the amount of ` 2211.80 20

crore paid under the ZOCD agreement, SEBI has

wrongly considered the amount of ` 3266.78 crore as

the total consideration paid by respondent no. 2 for

indirect acquisition of the shares of the target

company and TV 18 from the six holding companies.

After deducting the amount of ` 204.42 crore paid for

acquisition of TV 18 shares, balance amount of

` 3062.36 crore has been wrongly considered to be

the price paid for indirect acquisition of 74,61,88,987

shares of the target company which according to SEBI

amounts to indirectly acquiring the shares of the target

company at the rate of ` 41.04 per share.

f) Regulation 8 (8) of the Takeover Regulations, 2011

provides that where an acquirer has acquired or

agreed to acquire any shares or voting rights in the

target company during the offer period, at a price

higher than the offer price, then the offer price shall

stand revised to the highest price paid or payable for

any such acquisition. In the present case, indirect

acquisition of the shares of the target company and

TV 18 under the SPA were completed on 07.07.2014

for an aggregate amount of ` 1054.98 crore during the

offer period. As the provisions of regulation 8(8) got

triggered during the offer period, SEBI ought to have

taken into account the consideration paid per share of 21

the target company under the transactions executed on

07.07.2014 while determining the offer price. If SEBI

had prudently reviewed the transactions executed on

07.07.2014, SEBI would have easily understood and

appreciated that the total amount paid by the acquirer

for the said transaction was ` 1054.98 crore and not

` 3266.78 crore. Therefore, to ensure compliance with

regulation 8(8), if the amount of ` 1054.98 crore paid

for direct acquisition of the shares of the six holding

companies and indirect acquisition of the shares of the

target company and TV 18 from the Bahl Group were

methodically reviewed, it would lead to the clear

conclusion that the highest price paid by respondent

no. 2 to the Bahl Group on 07.07.2014 would be

` 5,68,430.32 per share of the target company. The

said price being the highest price, SEBI could not

have approved the offer price of ` 41.04 per share as

claimed by the acquirers.

g) To determine the highest negotiated price, it was

necessary for SEBI to split the indirect acquisition of

74,61,88,987 shares of the target company by the

acquirers through the six holding companies under

two agreements i.e. firstly, investment of ` 2211.80

crore under the ZOCD agreement dated 27.02.2012

and secondly, investment of ` 1054.98 crore under the 22

SPA dated 29.05.2014. According to the appellants,

indirect acquisition of the shares of the target

company by respondent no. 2 has to be worked out in

the following manner:-

i) Under the ZOCD agreement, the respondent no.

2 had invested ` 2211.80 crore in six holding

companies by subscribing to the ZOCDs and

the amounts so invested were to be utilized for

acquiring the shares of the target company and

TV 18 under the rights issue. On acquiring the

shares of the target company and TV 18 under

the rights issue, the total number of shares held

by the six holding companies in the target

company and TV 18 were 74,61,88,987 shares

and 6,77,33,486 shares respectively.

ii) If the respondent no. 2 were to opt for

conversion of ZOCD's, then, the six holding

companies would have been required to issue in

all 221,17,98,940 equity shares in favour of

respondent no. 2. In that event, the fully diluted

equity shares of the six holding companies

would be 221,18,58,940 shares (i.e.

221,17,98,940 shares issued by six holding

companies to the respondent no. 2 + 60,000

shares originally issued by six holding 23

companies to the Bahl Group). Thus, on

conversion of ZOCD's, into equity shares the

respondent no. 2 would hold 99.997% shares

/economic interest and the Bahl Group would

0.003% shares/economic interest in the six

holding companies. Consequently, respondent

no. 2 would have 99.997% indirect economic

interest in the shares of the target company held

by the six holding companies and the Bahl

Group would have 0.003% indirect economic

interest in the shares of the target company held

by the six holding companies. In other words,

since the shares of the target company and TV

18 held by the six holding companies were

74,61,88,987 shares and 6,77,33,486 shares

respectively, as a result of ZOCD agreement,

out of 74,61,88,987 shares of the target

company held by six holding companies

respondent no. 2 would have indirect economic

interest in 74,61,68,627 shares (99.997%) and

the Bahl Group would have indirect economic

interest in 20360 shares (0.003%). Similarly,

out of 6,77,33,486 shares of TV 18 held by six

holding companies, respondent no. 2 as a result

of ZOCD agreement would have indirect

economic interest in 6,77,31,750 shares and the 24

Bahl Group would have indirect economic

interest in 1736 shares (0.003%). Thus, on

execution of the ZOCD agreement, the direct

and indirect economic interest of the Bahl

Group in the six holding companies and the

target company/TV 18 would got reduced from

100% to 0.003%, whereas, the direct and

indirect economic interest of respondent no. 2

in the six holding companies and the target

company / TV 18 would be 99.997%

respectively.

iii) By executing SPA dated 29.05.2014,

respondent no. 2 acquired from the Bahl Group

60,000 shares of the six holding companies

which amounts to acquiring 0.003% direct

economic interest in six holding companies and

consequently amounts to acquiring 0.003%

indirect economic interest in the target

company and TV 18. Since 0.003% indirect

economic interest in the target company comes

to 20360 shares it is evident that for acquiring

those indirect economic interest in the target

company as also 0.003% indirect economic

interest in TV 18 the respondent no. 2 has paid

under the SPA ` 1054.98 crore which 25

effectively works out to acquiring each share of

the target company at ` 5,68,430.32 per share.

That being the highest negotiated price SEBI

ought to have determined the open offer price at

` 5,68,430.32 per share.

iv) Takeover Regulations, 2011 is based on the

recommendation of the Takeover Regulations

Advisory Committee report ('TRAC report' for

short) dated 19.07.2010. As per the Takeover

Regulations, 2011, it is mandatory for an

acquirer to make disclosures to the investors

and/or the target company in specified form as

also in the letter of offer disclosing the pre and

post offer shareholding pattern of the target

company. The shareholding information,

especially that of the promoter group and

acquirers to be disclosed to the shareholders of

the target company has to be as on the date of

the letter of offer and for that purpose the

percentage holding has to be taken on the basis

of diluted share capital as defined in the

Takeover Regulations, 2011. The expression

diluted share capital is defined under the

Takeover Regulations, 2011 to mean the total

number of shares in the target company 26

assuming full conversion of the outstanding

convertible securities into equity shares of the

target company. Therefore, in the facts of the

present case, even though the ZOCD's were not

opted to be converted into equity shares, for the

purposes of making disclosures under Chapter

V and also for the purposes of open offer

process contained in Chapter III, the diluted

equity capital ought to have been taken into

consideration. Regulation 28(2), 29(2), 30(1)

and 30(2) contained in Chapter V of the

Takeover Regulations, 2011 in fact mandate

disclosure of shareholding on the basis of

diluted share capital and for the purposes of

disclosures the acquisition and holding of any

convertible security be regarded as shares. As

the diluted share capital has not been taken into

consideration in computing the offer price, the

respondent no. 2 as also SEBI violated the

provisions contained in the Takeover

Regulations, 2011.

h) Regulation 5(2) of the Takeover Regulations, 2011

stipulates the circumstances under which the indirect

acquisition attracting the provisions of regulation 5(1)

shall be regarded as direct acquisition. Applicability 27

of regulation 5(2) to the facts of present case is not in

dispute. Therefore, fact of indirect acquisition of the

shares of the target company (through the six holding

companies) ought to have been considered for all

purposes of the Takeover Regulations including those

related to pricing and compliance (including

disclosure) requirements for the open offer in the

same manner as set out in regulation 28(2) of the

Takeover Regulations, 2011 which stipulates that the

acquisition and holding of any convertible security

shall also be regarded as shares and disclosures of

such acquisitions and holdings shall be made

accordingly. To put it simply, in view of regulation

5(2) read with regulation 28(2), the acquisition and

holding of ZOCD's must necessarily be regarded as

holding shares of each of the six holding companies to

the extent permissible under the ZOCD agreement and

accordingly compute the acquisition of the economic

interest in the shares of the target company by the

respondent no. 2 from the six holding companies.

i) The computation of the economic ownership of a

shareholder i.e. the shareholder's effective economic

interest in a company and its underlying assets/

investments is not a subjective parameter and has to

be computed in the same manner, whether for the 28

holding company or for the target company and

irrespective of whether the company is private or

listed. If the effective economic interest of the

acquirer held indirectly through the six holding

companies is computed without considering the

ZOCD's, then the very purpose for the disclosure

obligation related to shareholding in a company to

include and consider convertible securities as shares

would be negated and would tantamount to giving a

free reign to acquirers to circumvent and void the

regulatory intent, purpose and underlying philosophy

of the Takeover Regulations. In support of the above

contentions, reliance is placed on the decision of the

Apex Court in case of Nirma Industries Ltd. vs SEBI

in (2013) 8 SCC 20.

j) In the past, in respect of a transaction between the

acquirer group and the target company group, the

economic interest held indirectly by the acquirer

group (through the holding company Equator) in a

step-down company (Prism) has been disclosed by

both the acquirer as well as the target company (in its

Rights Issue Offer Document) as equivalent to the

acquirer's diluted shareholding (%) in the holding

company Equator multiplied by equator's diluted

shareholding (%) in its step down company prism 29

(held in the form of equity shares and convertible

securities). Since SEBI has approved the open offer

price by taking diluted shareholding in the aforesaid

case, even in the present case, SEBI ought to have

approved the open offer price by taking the diluted

shareholding of the target company acquired under

SPA dated 29.05.2014.

k) With the help of a chart, the appellants sought to

demonstrate that if the gross amount of ` 1054.98

crore paid by the acquirers under the SPA dated

29.05.2014 is segregated, then it would reveal that for

indirect acquisition of the diluted share capital of the

target company (through the six holding companies)

the acquirers have paid ` 5,68,430.32 per share of the

target company.

l) Appellants submit that the concept of 'economic

interest' cannot be restricted to Chapter V of the

Takeover Regulations, 2011. The expression

'shareholding' is not defined under regulation 2(1)

however, the expression 'shareholding' is used in

regulation 2(1)(e) & 2(1)(o) of Chapter I, regulations

3,6,7 & 10 of Chapter II, regulation 16 in Chapter III

and regulation 32 under Chapter VI. Since the

expression 'shareholding' is not defined under the 30

Takeover Regulations 2011, it becomes necessary to

review and understand that expression within the

overall frame work of the Takeover Regulations,

2011. Regulation 28(2) clearly provides that

acquisition and holding of any convertible security

shall also be regarded as shares and disclosures of

such acquisitions and holdings shall be made

accordingly. It would mean, that within the

framework of the Takeover Regulations, an acquirer

could have a shareholding (economic interest) in a

company even if the acquirer does not hold any

outstanding shares in the said company. Therefore, the

concept of economic interest being a relevant criteria

for open offer process in Chapter III, while

determining the open offer price per share of the

target company the said criteria ought to have been

applied in the present case.

m) The format for the letter of offer prescribed by SEBI

under regulation 16(1) in Chapter III titled 'open offer

process' mandates that the 'pre and post offer

shareholding pattern of the target company' in the

table format specified by SEBI be disclosed as on the

date of letter of offer. The note below the specified

table format states that 'The percentage holding shall

be taken on the basis of diluted share capital as 31

defined in the SAST Regulations, 2011'. Since none

of the regulations in the Takeover Regulations define

the expression 'diluted share capital' referred to in the

above note and that expression is defined in the

format prescribed by SEBI under regulation 29(1) in

Chapter V it is apparent that the expression 'diluted

share capital' used in the format prescribed under

regulation 29(1) in Chapter V, would apply to the

provisions contained in Chapter III. Therefore, the

argument of respondents that the concept of 'diluted

share capital' in Chapter V would not apply to

Chapter III is without any merit. In support of the

above submission reliance is placed on the decision of

the Apex Court in case of R.B.I. vs Peerless General

Finance & Investment Co. Ltd. reported in AIR 1987

S.C. 1023.

n) As per the TRAC Report on the basis of which the

Takeover Regulations, 2011 is framed, the disclosure

obligations under the Takeover Regulations are fairly

critical and form an important component of the legal

regime governing substantial acquisition of shares and

takeovers. Hence, the respondents are not justified in

contending that the provisions contained in Chapter V

have no relevance to the provisions of Chapter III of

the Takeover Regulations, 2011.

32

o) Disclosure obligations and economic interest,

irrespective of whether dealt with under Chapter V or

elsewhere in the Takeover Regulations, 2011 form an

integral part of the legal regime governing substantial

acquisition of shares and takeovers. Therefore, if the

effective economic interest of the acquirer held

indirectly through the six holding companies is

computed without considering the ZOCDs, then the

very purpose for the disclosure obligation would be

defeated and would tantamount to giving a free reign

to acquirers to circumvent and void the regulatory

intent, purpose and underlying philosophy of the

Takeover Regulations, 2011.

p) The format prescribed under regulation 16(1),

mandates the acquirers to ensure that the minimum

disclosure requirements are contained in the letter of

offer including the shareholding pattern as on the date

of letter of offer. In the present case, the pre and post

offer shareholding pattern of the target company have

not been disclosed and hence the disclosures are not in

compliance with the format prescribed. If the pre and

post offer shareholding pattern of the target company

was disclosed as per the prescribed form, then there

would not have been any difficulty in ascertaining the

offer price per share of the target company. 33

q) By subscribing to the ZOCD's under the ZOCD

agreement the acquirers had acquired economic

interest in 99.997% of the 71.25% shareholding in the

target company and therefore, fact that the respondent

no. 2 has not sought conversion of ZOCDs into equity

share would not result in any change in the economic

interest held by the acquires in the target company.

r) In para 59 of its affidavit in reply SEBI has admitted

that while processing the draft letter of offer dated

11.06.2014 it is noticed that the respondent no. 2 had

acted in concert with the promoter and promoter

group of the target company, but the same was not

disclosed under clause 35 of the listing agreement as

part of the quarterly shareholding statements to be

furnished to the stock exchange and therefore, issue of

violation of clause 35 of listing agreement is being

looked into by SEBI from the enforcement angle.

Thus, the prima facie view of SEBI is that the

disclosures made in the draft letter of offer were not in

accordance with the provisions contained in the

Takeover Regulations, 2011. In such a case, where the

disclosures made in the draft letter of offer do not

depict true picture the economic interest

(shareholding) in the target company, SEBI was not 34

justified in approving the offer price at ` 41.04 per

share of the target company.

s) As per clause 1.1.22 of the ZOCD agreement dated

27.02.2012 the expression 'Equity Securities' would

inter alia include the ZOCDs. Thus, by investing in

the ZOCD's, the respondent no. 2 has acquired

99.997% economic interest in the 71.25%

shareholding in the target company held by the six

holding companies. Therefore, the argument of the

respondents that in commercial parlance, the ZOCDs

are primarily understood as mere borrowings cannot

be accepted.

t) In the draft letter of offer it is stated that in terms of

SPA, the respondent no. 2 has agreed to buy and the

sellers have agreed to sell 100% of the outstanding

equity shares of the six holding companies. Thus,

SEBI had complete knowledge that the 'diluted share

capital' of the six holding companies was definitely

not the same as their 'outstanding share capital'. Since

the holding in a company is determined on the basis

of its diluted share capital, SEBI is not justified in

contending that by executing SPA, the respondent no.

2 acquired 100% shares of the six holding companies

held by the Bahl Group. By subscribing to the

ZOCD's, the respondent no. 2 had acquired from Bahl 35

Group 99.997% economic interest in six holding

companies and by executing SPA what could be

acquired by respondent no. 2 from the Bahl Group

was only 0.003% direct economic interest in the six

holding companies and consequently 0.003% indirect

economic interest in the shares of the target company

held by the six holding companies.

u) It is not in dispute that the transactions under the SPA

were completed on 07.07.2014 i.e. during the offer

period which was extended to 26.12.2014. Therefore,

the transactions completed on 07.07.2014 necessarily

needed to be taken into consideration while

determining the highest negotiated price under

regulation 8(8) as the said transactions were effected

during the offer period.

v) Irrespective of the date on which the acquirers

obligation to make a public announcement for the

open offer got triggered, in the facts of present case,

the acquisitions completed by the acquirers on

07.07.2014 would attract the provisions of offer price

related regulation 8(8) as the said transactions were

executed within the offer period. If the offer price was

computed in accordance with regulation 8(8) then the

open offer price would have been revised to the

highest price paid by the respondent no. 2 on 36

07.07.2014 i.e. ` 5,68,430.32 per share of the target

company.

w) Whether the appellants have participated in the open

offer or not, the appellants are entitled to challenge

the decision of SEBI in approving the offer price at

` 41.04 which is in contravention of the provisions

contained in the Takeover Regulations, 2011. The

appellants unwillingness to tender shares in the open

offer at offer price of ` 41.04 cannot be construed as

an unwillingness to tender shares in the open offer at

an offer price of ` 5, 68,430.32 per share. Since the

open offer did not provide for any conditional

acceptance by the shareholders of the target company,

the appellants could not have participated in the open

offer by contending that determination of the open

offer price at ` 41.04 is in violation of the Takeover

Regulations, 2011. Thus, the appellants who are

aggrieved by open offer price approved by SEBI have

legal right to agitate the same before this Tribunal,

even though the appellants have not participated in the

open offer. In support of the above contention reliance

is placed on a decision of this Tribunal in case of

Subramanian R. Venkat & Anr. vs SEBI & Ors.

(Appeal No. 111 of 2010 decided on 03.05.2011)

which is upheld by the Apex Court.

37

x) The respondent no. 5 failed in its duty to protect

interest of investors. The respondent no. 5 has

knowingly and willfully acted contrary to the code of

conduct prescribed for Merchant Bankers by SEBI

and also acted in violation of Takeover Regulation,

2011. In support of above contention reliance is

placed on facts set out in Table 'E', para 33 of the

affidavit in rejoinder filed by the appellants. By

relying on a decision of this Tribunal in case of Ena m

Securities Pvt. Ltd. vs SEBI (Appeal No. 39 of 2011

decided on 15.02.2012) it is contended that by failing

to disclose all facts relating to open offer as

contemplated under the Takeover Regulations 2011,

the respondent no. 5 has failed to protect the interest

of investors.

6. Counsel for the respondents, on the other hand, supported the

decision of SEBI in approving the open offer price at ` 41.04 per share of

the target company. Their main contention is that, in case of convertible

securities having no fixed date of conversion, the public announcement

obligation under the Takeover Regulations, 2011, get triggered on the

date on which the option to convert such securities into shares is

exercised. In the present case, the option for conversion of ZOCDs has

not been exercised by respondent no. 2 and therefore, the six holding

companies have not issued equity shares in favour of respondent no. 2. In

the absence of acquiring equity shares, the respondent no. 2 could not 38

exercise any voting rights or control over the six holding companies by

merely being a ZOCD holder. Thus, subscribing to the ZOCDs under the

ZOCD agreement did not confer on respondent no. 2 any voting rights or

control over the six holding companies and consequently respondent

no. 2 could not be said to have indirectly acquired shares or voting rights

in, or control over the target company. In such a case, it cannot be said

that on subscribing to the ZOCDs under the ZOCD agreement the

respondent no. 2 was obliged to public announcement of an open offer. It

is only when the respondent no. 2 entered into SPA dated 29.05.2014 for

acquiring 60,000 shares of the six holding companies which constituted

acquisition of 100% shares of the six holding companies, the public

announcement obligation under the Takeover Regulations, 2011 got

triggered. Accordingly, public announcement was made on 29.05.2014

by offering to purchase shares of the target company from the public

shareholders at ` 41.04 per share being the highest negotiated price per

share of the target company. It is further contended by the respondents

that the entire open offer process has been carried out in accordance with

law and the appellants who have not participated in the open offer

process are not entitled to any relief in the present appeal.

7. We have carefully considered the rival submissions.

8. At the outset it is relevant to note that the entire dispute in the

present case commenced with the appellant no. 1 filing a complaint

before SEBI on 25.06.2014 wherein it was inter-alia alleged that the open

offer obligation got triggered on execution of ZOCD agreement and not

on execution of SPA as wrongly stated in the open offer document. It was 39

further alleged in the said complaint that there are various infirmities in

the open offer process carried out by respondent no. 2 through respondent

no. 5 and therefore appropriate action be taken against the acquirers and

respondent no. 5. Apart from the above, it was alleged that in the facts of

present case, the open offer price ought to have been determined at

` 5,68,430.32 per share instead of ` 41.04 per share of the target

company. SEBI, after considering the complaint initially issued a

communication on 17.11.2014, thereby granting its approval to the open

offer price at ` 41.04 per share instead of ` 5,68,430.32 per share as

claimed by the appellants. Subsequently, by its communication dated

09.02.2015 SEBI rejected various allegations made in the complaint filed

on 25.06.2014 for the reasons recorded therein.

9. Even before receiving the communication of SEBI dated

09.02.2015, appellants had filed the present appeal on 29.12.2014 to

challenge the communication of SEBI dated 17.11.2014. However, on

receipt of communication dated 09.02.2015, the appellants have neither

chosen to amend the present appeal so as to challenge the communication

of SEBI dated 09.02.2015 nor the appellants have filed any independent

appeal to challenge the communication of SEBI dated 09.02.2015

whereby various allegations made in the complaint filed by the appellants

have been rejected as having no merit in it. Without challenging the

communication of SEBI dated 09.02.2015, appellants are not justified in

agitating the issues which have been rejected by SEBI by its

communication dated 09.02.2015. Accordingly, we refrain from

considering various issues raised in this appeal relating to the alleged 40

violation of the provisions contained in the Takeover Regulations, 2011

as well as the violations allegedly committed by respondent no. 5 as lead

Manager to the open offer made by the acquirers viz. respondent nos. 2 to

4. Thus, the only issue that falls for consideration in this appeal is,

whether SEBI by its communication dated 17.11.2014 was justified in

approving the open offer price at ` 41.04 per share of the target company

offered by the acquirers as against the open offer price claimed by the

appellants at ` 5,68,430.32 per share of the target company.

10. Open offer obligations under the Takeover Regulations, 2011

arise when any acquirer acquires shares or voting rights or control in a

target company in excess of the limits prescribed under the said

Regulations. As per regulation 3(1) of the Takeover Regulations, 2011 no

acquirer shall acquire shares or voting rights in a target company which

taken together with shares or voting rights, if any, held by him and by

persons acting in concert with him in such target company, entitle them

to exercise 25% or more of the voting rights in such target company

unless the acquirer makes a public announcement of an open offer for

acquiring shares of such target company in accordance with the said

regulations. Regulation 4 provides that irrespective of acquisition or

holding of shares or voting rights in a target company, no acquirer shall

acquire, directly or indirectly, control over the target company, without

making a public announcement of an open offer. Regulation 5 provides

for public announcement of an open offer in case of indirect acquisition

of shares or voting rights in, or control over the target company.

Regulation 7 deals with open offer size and regulation 8 deals with the 41

open offer price. Since strong reliance is placed by appellants on

regulation 5, we quote regulation 5 of the Takeover Regulations, 2011 (to

the extent relevant) herein below:-

"Indirect acquisition of shares or control.

5. (1) For the purposes of regulation 3 and regulation 4,

acquisition of shares or voting rights in, or control over, any

company or other entity, that would enable any person and

persons acting in concert with him to exercise or direct the

exercise of such percentage of voting rights in, or control

over, a target company, the acquisition of which would

otherwise attract the obligation to make a public

announcement of an open offer for acquiring shares under

these regulations, shall be considered as an indirect

acquisition of shares or voting rights in, or control over the

target company.

(2) Notwithstanding anything contained in these regulations,

in the case of an indirect acquisition attracting the

provisions of sub-regulation (1) where,--

(a) the proportionate net asset value of the target

company as a percentage of the consolidated

net asset value of the entity or business being

acquired;

(b) the proportionate sales turnover of the target

company as a percentage of the consolidated 42

sales turnover of the entity or business being

acquired; or

(c) the proportionate market capitalisation of the

target company as a percentage of the

enterprise value for the entity or business being

acquired;

is in excess of eighty per cent, on the basis of the most recent

audited annual financial statements, such indirect

acquisition shall be regarded as a direct acquisition of the

target company for all purposes of these regulations

including without limitation, the obligations relating to

timing, pricing and other compliance requirements for the

open offer."

11. In the present case, it is not in dispute that prior to the ZOCD

agreement, the Bahl Group consisting of Mr. Raghav Bahl and his wife

Mrs. Ritu Kapur were the promoters holding 100% shares (60,000

shares) of the six holding companies. The six holding companies

promoted by the Bahl Group along with RBHPL also promoted by the

Bahl Group held 48.30% shares of the target company. It is on record

that the six holding companies have been declared as promoters of the

target company and TV 18 in the stock exchange declarations for the

quarter ending on December 31, 2011. Thus, at the relevant time, the

Bahl Group were the promoters of six holding companies and the said six

holding companies were the promoters of the target company and TV 18.

Since the six holding companies (promoted by Bahl Group) and RBHPL 43

(also promoted by Bahl Group) held 48.30% shares of the target

company, under the Takeover Regulations 2011, the Bahl Group would

be deemed to have 48.30% indirect shareholding in the target company.

12. The respondent no. 2, by executing the ZOCD agreement on

27.02.2012 agreed to invest funds in the six holding companies by

subscribing to the ZOCDs (valid for 10 years) with a condition that the

amounts so invested shall be utilized by the six holding companies for

subscribing to the shares of the target company and TV 18 under the

rights issue. The ZOCDs so subscribed were liable to be converted into

equity shares of the six holding companies as and when opted by

respondent no. 2 without making any further payment. It is not in dispute

that as per the ZOCD agreement the respondent no. 2 has invested

` 2211.80 crore by subscribing to the ZOCDs and the said amount has

been utilized by the six holding companies for acquiring the shares of the

target company and TV 18 under the rights issue. It is also not in dispute

that till date the respondent no. 2 has not exercised its option either to

seek refund of ` 2211.80 crore invested under the ZOCD agreement or

seek conversion of ZOCD's into equity shares as provided under the

ZOCD agreement. As a result of subscribing to the shares of target

company and TV 18 under the rights issue, the direct shareholding of the

six holding companies and RBHPL promoted by the Bahl Group in the

target company rose from ` 48.30% to 71.25% and consequently, the

indirect shareholding of the Bahl Goup in the target company (through

the companies promoted by the Bahl group) rose from 48.30% to

71.25%.

44

13. Regulation 13(2)(b) of the Takeover Regulations 2011, provides

that where an acquirer acquires shares or voting rights in or control over

the target company upon converting the convertible securities without a

fixed date of conversion, then the open offer obligation gets triggered on

the date on which the option to convert such securities into shares of the

target company is exercised. Thus, in the ordinary course, when a person

subscribes to the ZOCDs under a ZOCD agreement without a fixed date

for conversion of ZOCDs into equity shares, then that person is said to

have acquired shares of that company only on the date on which the

option for conversion of ZOCDs into equity shares is exercised and the

open offer obligation, if any, gets triggered on the date on which such

option is exercised.

14. In the present case, the acquirers contend that the open offer

obligation got triggered on execution of SPA dated 29.05.2014.

However, while determining the open offer price at ` 41.04 the acquirers

have taken into account the amount invested by respondent no. 2

under the ZOCD agreement dated 27.02.2012 and hence we deemed it fit

to look into the clauses contained in the said ZOCD agreement.

15. On perusal of the ZOCD agreement dated 27.02.2012 we were

surprised to find that although the parties to the said agreement were the

six holding companies, the respondent no. 2 and the Bahl Group

consisting of Mr. Raghav Bahl and his wife Mrs. Ritu Kapur, the ZOCD

agreement is signed only by Mr. Raghav Bahl and his wife Mrs. Ritu

Kapur on behalf of all parties. While Mr. Raghav Bahl and Mrs. Ritu 45

Kapur have signed the ZOCD agreement as 100% shareholders of six

holding companies, Mr. Raghav Bahl has also signed the ZOCD

agreement as Director of each of the six holding companies and has also

signed the ZOCD agreement as authorized representative of respondent

no. 2.

16. Apart from the above, following clauses in the ZOCD agreement

prima facie give an impression that the Bahl Group by signing the ZOCD

agreement has agreed that on execution of the ZOCD agreement, the

respondent no. 2 without giving any consideration to the Bahl Group

shall be entitled to exercise control over the six holding companies and

consequently exercise control over the target company and TV 18, even

before the respondent no. 2 exercised option to seek conversion of

ZOCDs into equity shares of the six holding companies. The said unusual

clauses in the ZOCD agreement are as follows:-

a) Clause 5.5 & 5.6 of the ZOCD agreement records that

if the costs of the shares of the target company & TV

18 to be acquired by the six holding companies under

the rights issue is more than the amount paid by

respondent no. 2 under the ZOCD agreement, then the

respondent no. 2 shall make good the differential

amount and if the cost of the said shares is less than

the amount paid by respondent no. 2 under the ZOCD

agreement, then the six holding companies shall

refund the differential amount to the respondent no. 2.

This clause indicates that the sole object of the 46

respondent no. 2 in executing the ZOCD agreement

was not to advance loan to the six holding companies

but to invest requisite amount for acquiring the shares

of the target company and TV 18 under the rights

issue through the six holding companies.

b) Clause 6.1 of the ZOCD agreement records that from

the date of the ZOCD agreement till completion date

i.e. the date on which allotment of ZOCDs are

completed, the six holding companies and the Bahl

Group shall ensure that the six holding companies

shall conduct their business only in the ordinary

course of business. From this clause it is apparent that

from the date of ZOCD agreement restriction is

imposed on the Bahl Group while carrying on the

business of the six holding companies. Very fact that

the said restriction is only till the allotment of ZOCDs

are complete, prima facie shows that after the

allotment of ZOCDs the business of the six holding

companies were to be conducted by respondent no. 2

as respondent no. 2, at its will, was entitled to receive

equity shares amounting to 99.997% shareholding of

the six holding companies.

c) Clause 7.1 of the ZOCD agreement records that the

respondent no. 2 is entering into the ZOCD agreement 47

by relying on the shareholder warranties given by the

Bahl Group as more particularly set out in Schedule 2

to the ZOCD agreement. Schedule 2 to the ZOCD

agreement records that the Bahl Group inter alia

agrees that on the respondent no. 2 opting for

conversion of ZOCDs, the six holding companies

shall issue requisite equity shares in favour of

respondent no. 2. Since the ZOCDs issued under the

ZOCD agreement could be converted into equity

shares at any point of time, by giving warranties under

the ZOCD agreement, the Bahl Group have assured

respondent no. 2 that control over the six holding

companies and consequently control over the target

company and TV 18 could be exercised by respondent

no. 2 at any time under the ZOCD agreement, without

the Bahl Group receiving any consideration from

respondent no. 2. It is inconceivable that the Bahl

Group would agree to such a clause in the ZOCD

agreement, which had the effect of divesting direct

and indirect control of the Bahl Group over the six

holding companies and the target company/TV 18

respectively without the Bahl Group receiving any

consideration.

d) Clause 9 of the ZOCD agreement records that the

Bahl Group as shareholders of the six holding 48

companies shall not transfer any equity securities of

the six holding companies or transfer any right, title or

interest in the six holding companies without the prior

written consent of respondent no. 2. Thus the Bahl

Group apart from confirming that at any time after

execution of the ZOCD agreement, their shareholding

in the six holding companies could be reduced from

100% to 0.003% thereby divesting the control over

the six holding companies as well as control over the

target company and TV 18 from the Bahl Group to the

respondent no. 2 without the Bahl Group receiving

any consideration, the Bahl Group further represented

to the respondent no. 2 under clause 9 of the ZOCD

agreement that they shall not transfer the shares of the

six holding companies held by them without the prior

written consent of respondent no. 2.

e) Clause 11.1 of the ZOCD agreement records that the

Bahl Group shall procure from the target company &

TV 18 that they shall not issue any equity securities of

any type or class to any person whether by way of

rights issue or otherwise, unless first offered to the six

holding companies and if the six holding companies

elect to subscribe to such shares, then the respondent

no. 2 and/or its Affiliates shall have the sole discretion

to fund the six holding companies for subscribing to 49

those shares. This clause prima-facie belies the

contention of the respondents that the ZOCD

agreement was mere a loan agreement. On the

contrary from this clause, prima facie, it appears that

by executing the ZOCD agreement, the respondent no.

2 not only exercised control over the Bahl Group but

the respondent no. 2 through the Bahl Group

exercised control over the six holding companies as

well as the target company & TV 18.

f) Clause 11.4 read with clause 1.1.42 of the ZOCD

agreement provides that the Bahl Group shall ensure

that the promoter group entities listed in Part A, Part

B & Part C of Schedule 6 shall not transfer any equity

securities or any right, title or interest of the target

company & TV 18 without giving a right of first

refusal to the respondent no. 2. This clause further

demonstrates that by executing the ZOCD agreement

the respondent no. 2 not only sought to acquire

control over the shares of the target company and TV

18 held by the Bahl Group (through the six holding

companies) but also sought to acquire control over the

shares of the target company and TV 18 held by the

Bahl Group (through other promoter group entities)

set out in Schedule 6 to the ZOCD agreement. 50

g) Clause 12.1 of the ZOCD agreement records that each

party to the said agreement shall not, without the prior

written consent of the other party, disclose the terms

and conditions of the ZOCD agreement to any third

party. As noted earlier, the Bahl Group alone being

signatories to the ZOCD agreement there was no

question of either keeping the terms of the agreement

as secret or disclosing it to third parties with the

consent of the other party. In any event, if the ZOCD

agreement was a mere loan agreement, then there was

no reason to keep the terms and conditions of the

ZOCD agreement confidential. Very fact that the

terms of the ZOCD agreement were sought to be kept

confidential, clearly shows that it was not a loan

agreement executed in the ordinary course of

business.

h) Clause 13.1 of the ZOCD agreement provides that the

six holding companies shall remain as private limited

companies and passive strategic investment

companies and shall not carry on any other activity.

This clause read with clause 6.1, clearly show that on

execution of the ZOCD agreement, respondent no. 2

conducted the business of the six holding companies

in the manner desired by respondent no. 2 and that too 51

before the respondent no. 2 exercised its option to

seek conversion of ZOCDs into equity shares.

i) Clause 14.1 of the ZOCD agreement provides that

Mr. Raghav Bahl undertakes to own and control the

companies listed in Part A of Schedule 6 and shall

continue to remain the Trustee of trusts listed in

Part B of Schedule 6. Clause 14.2 provides that the

Bahl Group shall ensure that no member of the

promoter group transfers any equity securities of the

target company, TV 18 and each of their respective

subsidiaries and Affiliates without the prior written

consent of respondent no. 2. Clause 14.3 provides that

the promoters shall validly execute and deliver the

Single Unit Agreement and shall procure that the six

holding companies and each member of the promoter

group shall validly execute and deliver the 'Single

Unit Agreement'. The expression 'Single Unit

Agreement' as per clause 1.1.54 of the ZOCD

agreement means an agreement to act as a Single Unit

as required under the Ministry of Information and

Broadcasting Guidelines among the target company

and the promoters of the six holding companies

(including the six holding companies, Mrs. Ritu

Kapur & Mr. Raghav Bahl) for managing the matters

of the target company & TV 18 and to appoint 52

majority of the Board of Directors of the target

company & TV 18. All these sub-clauses in clause 14

of the ZOCD agreement read with the expression

'control' defined under regulation 2(1)(e) of the

Takeover Regulations, 2011 prima facie, show that by

the ZOCD agreement, the Bahl Group not only

permitted respondent no. 2 to exercise control over the

six holding companies as well as the target company

and TV 18 but also permitted respondent no. 2 to

exercise control over the shares of the target company

held by other entities promoted by the Bahl Group.

j) Apart from the above, it is relevant to note that

Mr. Raghav Bahl and his wife Mrs. Ritu Kapur have

given warranties on behalf of six holding companies

and RBHPL (see clause 8.11 in Schedule 7 to the SPA

dated 29.05.2014) to the effect that none of those

companies have any employees. Thus it is evident that

all activities of the six holding companies were

executed by the Bahl Group and the Bahl Group for

the reasons best known to it agreed to divest control

over the six holding companies and consequently

agreed to divest control over the target company and

TV 18 without receiving any consideration. 53

17. As the aforesaid clauses in the ZOCD agreement, in our opinion

prima facie demonstrate, that the respondent no. 2 through Bahl Group

exercised direct control over the six holding companies and indirect

control over the target company & TV 18 even before respondent no. 2

exercised its option to seek conversion of ZOCDs into equity shares, we

called upon the respondents to explain the motive behind executing such

ZOCD agreement.

18. Counsel for respondent no. 2 by his oral (as also by written

arguments) submitted that the ZOCD agreement in question was

executed in the ordinary course of business. It is submitted that since the

Bahl Group did not have the requisite resources to subscribe to the shares

of the target company and TV 18 under the rights issue and the only asset

of the six holding companies were the shares of the target company &

TV 18 valued at ` 2450 crore (approx.) against the value of ZOCDs of

about ` 2211.80 crore, it was negotiated and agreed that although as per

the terms of the ZOCD agreement respondent no. 2 had the ability to

convert the ZOCDs into equity shares of the six holding companies at

any time, Mr. Raghav Bahl and his team would continue to have full

operational and management control over the target company and TV 18.

It is also submitted that no conversion was possible without the

concurrence of Mr. Raghav Bahl who was in control over one of the

trustees of respondent no. 2 viz. Nirlab Media Pvt. Ltd. (now DCPL). It is

further submitted that the restriction imposed on transfer of shares held

by Bahl Group was to ensure that the control of the target company

remains with Mr. Raghav Bahl and even after execution of ZOCD 54

agreement Mr. Raghav Bahl continues to control and manage the target

company as agreed between the parties.

19. Counsel for SEBI on instruction submitted that SEBI has already

looked into the allegations made in the complaint filed by appellant no. 1

and found that there is no merit in those allegations.

20. It is relevant to note that in the complaint filed by appellant no. 1

on 25.06.2014 it was specifically alleged (at para 103) that the open offer

obligation in the present case got triggered on execution of the ZOCD

agreement dated 27.02.2012 and not on execution of SPA dated

29.05.2014. The said allegation was rejected by SEBI vide

communication dated 09.02.2015 (see para 10 and 11 thereof) by merely

recording that the respondent no. 2 has not acquired any voting rights,

shares or control over the six holding companies by subscribing to the

ZOCDs and therefore, the question of respondent no. 2 exercising or

directing the exercise of voting rights in the shares of the target

companies held by six holding companies under the ZOCD agreement

does not arise. Admittedly, the appellants have chosen not to challenge

the said communication of SEBI dated 09.02.2015, hence it would not be

open to the appellants to contend in the present appeal that the open offer

obligation got triggered on execution of the ZOCD agreement. However,

fact that the appellants have chosen not to challenge the decision of SEBI

dated 09.02.2015, does not preclude this Tribunal from directing SEBI, in

public interest, to investigate the matter afresh especially when the

decision of SEBI contained in its communication dated 09.02.2015 does 55

not even remotely deal with the aforesaid unusual clauses contained in

the ZOCD agreement. Accordingly, we direct SEBI to reinvestigate

matter to find out as to whether the respondent no. 2 in the guise of

entering into ZOCD agreement acquired direct control over the six

holding companies and indirect control over the target company from the

Bahl Group so as to trigger open offer obligation under the Takeover

Regulations, 2011 and if so, take appropriate action for not complying

with the said obligation so that such instances do not occur again in the

future.

21. As noted earlier, the only question that falls for consideration in

the present appeal is, whether SEBI is justified in approving the open

offer price at ` 41.04 per share of the target company.

22. First contention of the appellants is that the shares of the target

company held by the six holding companies were acquired by respondent

no. 2 under two agreements, namely, ZOCD agreement dated 27.02.2012

and SPA dated 29.05.2014. The appellants submit that in the draft letter

of offer having stated that the transactions under the SPA were for

` 1054.98 crore, in the disclosures made in the draft letter of offer, the

transaction consideration under the SPA could not have been enhanced

from ` 1054.98 crore t o ` 3266.78 crore by including the amount of

` 2211.80 crore which was invested by the respondent no. 2 in the six

holding companies under the ZOCD agreement dated 27.02.2012. There

is no merit in this contention because, adding any amount to the

consideration paid under SPA dated 29.05.2014 would obviously 56

enhance the price paid per share of the six holding companies under SPA

dated 29.05.2014 and since the appellants contend that price per share of

the target company paid under the SPA dated 29.05.2014 should be much

more than the price approved by SEBI, appellants cannot find fault

merely because the amount invested under the ZOCD agreement has

been added to the price paid under SPA dated 29.05.2014 while

determining the open offer price.

23. Second argument of the appellants is that by subscribing to the

ZOCDs under the ZOCD agreement dated 27.02.2012 the acquirers had

acquired 99.997% shares of the six holding companies and, therefore,

even though the SPA dated 29.05.2014 refers to acquisition of 100% of

the outstanding shares of the six holding companies from the Bahl Group,

in reality acquiring 60,000 shares from the Bahl Group amounts to

acquiring 0.003% of the fully diluted shares capital of the six holding

companies. In such a case, it is submitted by the appellants that once

99.997% of the fully diluted share capital or economic interest in the six

holding companies have been acquired under ZOCD agreement, then it is

apparent that the amount paid under the SPA was only with a view to

acquire 0.003% diluted share capital or economic interest in the six

holding companies. There is no merit in the above contentions, because,

under the Takeover Regulations, 2011 when an acquirer acquires shares

or voting rights in, or control over the target company upon converting

convertible securities without a fixed date of conversion, the obligation to

make public announcement of an open offer, if any, arises on the date on

which option for conversion of such securities into shares of the target 57

company is exercised. In the present case, no such option is exercised and

hence it cannot be said the respondent no. 2 has acquired 99.997% shares

of the six holding companies. As on the date of ZOCD agreement and as

on date of SPA, the total shares issued by the six holding companies was

only 60,000 shares and all those 60,000 shares were held by the Bahl

Group. In such a case, acquiring 60,000 shares of the six holding

companies from the Bahl Group would mean acquiring 100% shares and

not acquiring 0.003% shares of the six holding companies as wrongly

contended by the appellants. At this stage, we would like to make it clear

that the question as to whether the respondent no. 2 in the guise of

entering into ZOCD agreement had acquired control over the six holding

companies as well as control over the target company is not the question

that falls for consideration in this appeal. In fact by choosing not to

challenge the decision of SEBI contained in its letter dated 09.02.2015,

appellants are precluded from agitating the above question in the present

appeal. However, fact that this Tribunal has directed SEBI to

reinvestigate the matter cannot be a ground to uphold the contention of

the appellants that on execution of ZOCD agreement, 99.997% shares of

the six holding companies stood vested in respondent no. 2.

24. Argument of the appellants that for determining the highest

negotiated price, amounts paid under each of the two agreements and the

related transactions needed to be separately identified is without any

merit because, the very basis of the argument of the appellants that the

respondent no. 2 has acquired the shares of the six holding companies

under two agreements is faulty because, respondent no. 2 has not opted 58

for conversion of ZOCDs into equity shares under the ZOCD agreement

and consequently no equity shares have been issued to the respondent

no. 2 under the ZOCD agreement. In such a case, it cannot be said any

voting rights or shares have been acquired by respondent no. 2 by

subscribing to the ZOCDs under the ZOCD agreement.

25. If the argument of the appellants that on execution of the ZOCD

agreement, 99.997% interest in the shares of the six holding companies

vested in respondent no. 2 and consequently 99.997% interest in the

shares of the target company held by the six holding companies stood

vested in respondent no. 2 is accepted then it would mean that on

execution of SPA only 0.003% shares or economic interest in the shares

of six holding companies and consequently 0.003% shares of the target

company held by the six holding companies have been acquired by

respondent no. 2. In such a case, acquiring 0.003% shares of the target

company would not trigger open offer obligation and consequently

determining the highest negotiated price paid per share of the target

company under SPA dated 29.05.2014 does not arise at all.

26. Argument of the appellants based on regulation 5(2),8(2)(a) and

regulation 8(8) of the Takeover Regulations is mutually contradictory.

The deeming fiction of regarding indirect acquisition as direct acquisition

under regulation 5(2) comes into operation only in the circumstances set

out therein. None of those circumstances set out in regulation 5(2) of the

Takeover Regulations, 2011 exist in the present case and hence

regulation 5(2) would not be applicable to the present case. Similarly, 59

reliance placed by appellants on regulation 8(2)(a) and regulation 8(8) of

the Takeover Regulations, 2011 is misplaced, because, what was

acquired by respondent no. 2 from the Bahl Group under the SPA dated

29.05.2014 was the entire 60,000 shares representing 100% of the shares

issued by the six holding companies. In such a case, determining the

highest negotiated price per share on the basis of the amount paid under

SPA dated 29.05.2014 for acquiring 60,000 shares would be much less

than ` 41.04 per share. Therefore, no fault could be found with SEBI in

determining the highest negotiated price at ` 41.04 per share by including

the amount invested by respondent no. 2 under the ZOCD agreement.

27. Argument of appellants that acquisition of shares of the six holding

companies by respondent no. 2 from the Bahl Group under SPA dated

29.05.2014 amounted to acquisition of 0.003% of shares of the target

company held by the six holding companies could be accepted only if it

is accepted that by subscribing to the ZOCDs under the ZOCD agreement

the respondent no. 2 had acquired 99.997% interest in the shares of the

target company held by the six holding companies even before the option

for conversion of ZOCDs into equity shares is exercised. As noted

earlier, specific plea raised to that effect in the complaint dated

25.06.2014 was refuted by SEBI perfunctorily vide communication dated

09.02.2015 and the appellants have chosen not to challenge the said

decision of SEBI contained in communication dated 09.02.2015.

Therefore, the argument of the appellants that under SPA dated

29.05.2014, acquisition of 60,000 shares of the six holding companies

from the Bahl Group by respondent no. 2 represented acquisition of 60

0.003% interest in the diluted share capital of the six holding companies

cannot be accepted because, as on the date of SPA, the option for

conversion of ZOCDs into equity shares was not exercised by respondent

no. 2 and acquisition of 60,000 shares represented acquisition of 100%

shares of the six holding companies from the Bahl Group.

28. To overcome the above difficulty, appellants rely on the format for

disclosures prescribed by SEBI under regulation 30(1) and 30(2) of the

Takeover Regulations, 2011 wherein, the expression 'Diluted

share/voting capital' is stated to mean the total number of shares in the

target company assuming full conversion of the outstanding convertible

securities/warrants into equity shares of the target company. No doubt,

that the format for the letter of offer prescribed by SEBI under regulation

16(1) in Chapter III titled 'open offer process' mandates that the 'pre and

post offer shareholding pattern of the target company' in the table format

specified by SEBI be disclosed as on the date of letter of offer and the

note below the specified table format states that 'The percentage holding

shall be taken on the basis of diluted share capital as defined in the SAST

Regulations, 2011'. Relying on the aforesaid formats it is contended by

the appellants that under the Takeover Regulations, 2011 open offer price

has to be determined by considering the shares that are liable to be issued

under the ZOCD agreement even though option for conversion of

ZOCDs into equity shares have not been exercised. We see not merit in

the above contentions, because, the expression 'diluted share capital' is

not defined under any of the regulations framed in Takeover Regulations

and that expression defined in the format prescribed under the Takeover 61

Regulations, 2011 is restricted for the purpose of disclosures only. Even

regulation 28(2) contained in Chapter V, of the Takeover Regulations,

2011 provide that for the purposes of the said Chapter relating to

disclosures of shareholding and control, the acquisition and holding of

any convertible security shall also be regarded as shares and disclosures

of such acquisitions and holdings shall be made accordingly. Therefore,

fact that some of the formats set out in the Takeover Regulations, 2011,

provide that for the purposes of disclosures the acquisition and holding of

any convertible security shall be regarded as shares, cannot be a ground

to hold that while determining the highest negotiated price, it must be

presumed as if option for conversion is exercised and the shares are

issued. Accepting such a contention would mean extending the deeming

fiction beyond the scope for which it is created which is not permissible

in law.

29. Apart from the above, when regulation 13(2)(b) of the Takeover

Regulations specifically provides that the date on which option for

conversion of ZOCDs into equity shares is exercised shall be the date for

triggering the open offer process, it would be improper on the basis of the

format set out in the Takeover Regulations, 2011 to hold that even if

option is not exercised open offer obligation get triggered on execution of

convertible securities. It is well established in law, that even if there is

any conflict between the regulation and the format prescribed thereunder,

then the regulation shall prevail. Therefore, in view of the specific

provision contained in regulation 13(2) (b) of the Takeover Regulations

2011, it is not possible to hold that the deeming fiction created for the 62

purposes of disclosures in the format prescribed in the Takeover

Regulations, 2011 has to be applied while determining the highest

negotiated price for the purposes of open offer under the Takeover

Regulations, 2011.

30. Reliance placed by the appellants on various decisions of the Apex

Court as also decisions of this Tribunal are misplaced, because, in none

of those decisions it is held that the deeming fiction created for a

particular purpose can be extended beyond the purpose for which it is

created and therefore, all those decisions being distinguishable on facts

have no relevance to the facts of the present case.

31. In the result we pass the following order:-

a) Appellants while challenging the decision of SEBI

dated 17.11.2014 have deemed it fit not to challenge

the decision of SEBI dated 09.02.2015, wherein,

various allegations made by the appellants against the

acquirers (respondent no. 2 to 4) and respondent no. 5

have been rejected. Without challenging the decision

of SEBI dated 09.02.2015 appellants are not justified

in making grievances against the acquirers and

respondent no. 5 which are covered under the decision

of SEBI dated 09.02.2015. In these circumstances,

we decline to consider grievances of the appellants

against the acquirers and respondent no. 5 which are

covered in the decision of SEBI dated 09.02.2015. 63

b) Argument of the appellants that SEBI by its

communication dated 17.11.2014 ought to have

approved the open offer price at ` 5,68,430.32 per

share of the target company instead of approving the

open offer price at ` 41.04 per share of the target

company is without any merit. Under SPA dated

29.05.2014 acquisition of 60,000 shares of the six

holding companies by respondent no. 2 from the Bahl

Group constituted acquisition of 100% shares of the

six holding companies, because as on that date the six

holding companies had not issued any equity shares

under the ZOCD agreement on account of respondent

no. 2 not exercising its option to seek conversion of

ZOCDs into equity shares of the six holding

companies. Since acquisition of 100% shares of the

six holding companies amounted to the respondent

no. 2 indirectly acquiring the shares of the target

company from the Bahl Group (through the six

holding companies) which entitled the respondent

no. 2 to exercise voting rights in the target company in

excess of twenty-five percent, obligation to make

public announcement of an open offer under the

Takeover Regulations, 2011 got triggered. In such a

case, if the gross amount paid under the SPA dated

29.05.2014 for acquisition of the shares of the six 64

holding companies and RBHPL and consequently

acquiring shares of the target company and TV 18

from the Bahl Group (through six holding companies)

is segregated, it is seen that the respondent no. 2,

under the SPA dated 29.05.2014 has paid much less

than ` 41.04 per share of the target company.

Therefore, in the facts of present case, decision of

SEBI in approving the open offer price at ` 41.04 per

share, by taking into consideration the amount

invested under the ZOCD agreement cannot be

faulted.

c) Decision of the acquirers to consider the amount

invested under the ZOCD agreement while

determining the open offer price, led us to consider

the clauses contained in the ZOCD agreement. Perusal

of various clauses contained in the ZOCD agreement

as more particularly set out in para 16 above, led us to

believe, prima facie, that by executing ZOCD

agreement on 27.02.2012 the Bahl Group sought to

divest its control over the six holding companies and

consequently sought to divest control over the target

company and TV 18 without receiving any

consideration which is rather strange and unusual to

say the least.

65

d) In our opinion, divesting the control over the target

company in the facts of present case, prima facie falls

within the meaning of the word 'control' defined

under regulation 2(1)(e) of the Takeover Regulations,

2011. In such a case, whether the obligation to make a

public announcement of an open offer under the

Takeover Regulations, 2011 has triggered or not is a

question which needs consideration. Although SEBI

claims to have considered that question in its

communication dated 09.02.2015, there is nothing in

the said communication to suggest that various

clauses contained in the ZOCD agreement have been

considered by SEBI. In any event, since SEBI has

failed to give reasons as to why various clauses

contained in the ZOCD agreement do not amount to

divesting control over the target company from the

Bahl Group to the respondent no. 2, we in public

interest direct SEBI to reinvestigate the question as to

whether the respondent no. 2 in the guise of executing

ZOCD agreement, indirectly acquired control over the

target company without following the procedure

prescribed under the Takeover Regulations, 2011 and

if so, take appropriate action against the concerned

person or persons for violating the provisions

contained in the Takeover Regulations, 2011 so that

such violations are not committed again.

66

e) SEBI is directed to complete the reinvestigation and

submit the action taken report to this Tribunal within

six months from today.

32. Appeal is disposed of in the above terms with no order as to costs.

Sd/-

Justice J.P. Devadhar Presiding Officer

Sd/-

Jog Singh Member 13.04.2016 Prepared & Compared By: PK