Sanjay Jethalal Soni & Ors. Vs Sebi vs Sebi

BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI Order Reserved On: 22.12.2021 Date of Decision: 21.03.2022 Appeal No. 758 of 2021 1. Sanjay Jethalal Soni 2. Krupa Sanjay Soni 3. J M Soni Consultancy Through its proprietor Sanjay Jethalal Soni 36, Malay Bungalows, Science City Road, Sola, Ahmedabad- 380 001 ...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. N. K. Upadhyay, Advocate i/b Jyoti Pandey for Appellants. Ms. Saloni Vyas, Advocate i/b. Legasis Partners for the Respondent. CORAM: Justice Tarun Agarwala, Presiding Officer Justice M. T. Joshi, Judicial Member Per: Justice M. T. Joshi, Judicial Member 1. Present appeal is filed aggrieved by the direction of the learned Whole Time Member (hereinafter referred to as "WTM") of the respondent, Securities and Exchange Board of 2 India (hereinafter referred to as "SEBI") dated November 30, 2018 directing all the appellants to jointly and severally make a public announcement to acquire shares of the Oregon Commercial Limited (hereinafter referred to as "Target Company") in accordance with the provisions of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (hereinafter referred to as "Takeover Regulations, 2011) with interest at the rate of 10% per annum within a period of 45 days from the date of the impugned order.

2. Appellant no. 1 is the proprietor of appellant no. 3. While appellant no. 2 is his wife. Thus they form a group. In the year 2010 all these three entities periodically had acquired the shares of the target company. According to respondent SEBI on four occasions while buying and selling the shares during the said period as detailed in the impugned order the appellants, while acting in concert, had acquired more than 15% of the share capital of the company. Therefore, in terms of Regulation 10 of the Takeover Regulations, 1997 the appellants became liable to make the public announcements. Regulation 10 of Takeover Regulations, 1997 provides as under:- "Acquisition of fifteen per cent or more of the shares or voting rights of any company. 3 10. No acquirer shall acquire shares or voting rights which (taken together with shares or voting rights, if any, held by him or by persons acting in concert with him), entitle such acquirer to exercise fifteen per cent or more of the voting rights in a company, unless such acquirer makes a public announcement to acquire shares of such company in accordance with the regulations."

3. None of the appellants appeared before the learned WTM though the show cause notice was served. They also did not attend the learned WTM for personal hearing. The impugned order therefore, came to be passed. The appellants had impugned the order on five grounds as enumerated in their appeal, rejoinder, oral arguments as well as written notes. 4. We have heard Mr. N. K. Upadhyay, the learned counsel for the appellants and Ms. Saloni Vyas, the learned counsel for the respondent. 5. The appellants submitted that while the alleged acquisition of shares occurred in the year 2010-2011 the show cause notice is dated July 24, 2017. There is a delay of around 7 years in issuing the show cause notice. This itself is a sufficient cause to declare the show cause notice as non est. The second 4 ground urged by the appellants is that self-trades between the appellants is not taken into consideration which could have reduce the acquisition of shares below the threshold limit as provided by Regulation 10, making the provisions inapplicable. Third ground taken by the appellants is, that appellant Sanjay Soni and his proprietary concern M/s. J M Soni Consultancy i.e. appellant no. 3 are the sub-brokers and, therefore, in view of Regulation 3(1)(f) of the Takeover Regulations, 1997 the provisions of the Takeover Regulations would not be applicable to them.

The last of the ground urged by the appellants is, that the order could not have been passed by the learned WTM as another WTM vide order dated July 31, 2019 in the matter of Parichay Investments Ltd. against the appellants where under they have been debarred from accessing the securities market for a period of 5 years i.e. till July 31, 2024. Therefore, the appellants cannot make an open offer to acquire the shares in the present case. 6. The learned counsel for the respondent opposed all the submissions. It was submitted that the appellants failed to appear before the learned WTM and make out any case of prejudice due to the delay in issuing the show cause notice. It was further submitted that even if self-trades between the appellants are discounted still the computation made by the 5 appellants themselves would show that the limit of acquisition of 15% of the share capital has been crossed on two occasions out of alleged four occasions crossing the threshold and thereby invoking the provisions of Regulation 10 of the Takeover Regulations, 1997. It was further submitted that Regulation 3(1)(f) would not applicable to the appellants as they had acquired the shares in proprietary trades and not for and behalf of clients.

As regard the contradictory orders it was submitted that the same was not brought the notice of the respondent SEBI in the present case, and in any case, in view of the declaration made by this Tribunal in the case of M/s Nirvana Holdings Private Limited vs SEBI Appeal No. 31 of 2011 decided on 08.09.2011 direction to make open offer is proper. 7. Upon hearing both sides, in our view the appeal is liable to be dismissed for the following reasons:- As regard the delay in issuing the show cause notice the appellants failed to appear before the learned WTM to put their case. Thus there was no submission before the learned WTM that the delay has caused prejudice, if any in defending the case. Not only this but also in the appeal the appellants have given all the details of their trading in the shares of target company to claim that self-trades as detailed in the appeal memo were not 6 discounted in the impugned order. The appellants had relied on numerous declarations of this Tribunal as well as of the Supreme Court on the issue of delay in launching the proceedings. Leading authority in the case of Adjudicating Officer, SEBI vs. Bhavesh Pabari (2019) SCC Online SC 294 wherein it was held as under:- "There are judgments which hold that when the period of limitation is not prescribed, such power must be exercised within a reasonable time.

What would be reasonable time, would depend upon the facts and circumstances of the case, nature of the default/statute, prejudice caused, whether the third-party rights had been created etc." Thus, nature of default/ statute, prejudice caused etc. is required to be taken into consideration. In the present case, no prejudice is shown to have been caused to the appellants due to the delay in launching the proceedings. Therefore, the submissions of the appellants in this regard cannot be considered. As regard the discount to be considered of the self-trades by the appellants to find out as to whether the threshold of 15% of the share capital was acquired by the appellants are not, the appellants have given in their appeal memorandum the tables at ground no. 5.12 on four different dates which according to the learned WTM were trigger points crossing the threshold of 15% 7 acquisition of the share capital. These tables would show that on August 19, 2010 and September 06, 2010 even after discount of the self-trades the appellants were in possession of more than 15% of the share capital. Therefore, the arguments in this regard are devoid of any merit.

8. Next of the issue is as to whether the Takeover Regulations is applicable to the appellants as the appellant Sanjay Soni and appellant no. 3 JM Soni Consultancy are the sub-brokers. Regulation 3(1)(f) of Takeover Regulations 1997 relied however provides that the Takeover Regulations would not be applicable to a registered stock-broker in case he had acquired the shares in the ordinary course of business on behalf of clients. In the present case, admittedly, proprietary trades were done and the appellants themselves had acquired the shares and, therefore, the provision is inapplicable in their case. 9. The last of the arguments of the appellants is that another WTM vide order dated July 31, 2019 had debarred the present appellants from accessing the securities market for a period of 5 years and, therefore, since the period would end on July 31, 2024, the directions contained in the present impugned order to make an open offer becomes infructuous. The appellants, however, fails to note that the impugned order was passed on 8 November 30, 2018 much before the next order was passed on July 31, 2019. Vide the impugned order all the appellants were directed to make an open offer within a period of 45 days from the date of the impugned order and, therefore the next of the order would not have come into the way in following the directions by the appellants.

Hence the following order : ORDER The appeal is hereby dismissed without any order as to costs. 10. This order will be digitally signed by the Private Secretary on behalf of the bench and all concerned parties are directed to act on the digitally signed copy of this order. Certified copy of this order is also available from the Registry on payment of usual charges. Justice Tarun Agarwala Presiding Officer Justice M. T. Joshi RAJALA Digitally signed by RAJALAKSHMI Judicial Member 21.03.2022 KSHMI H HDate: