SEBI’s order directing legal heir of deceased MD of target-co. to make open offer after 12 yrs was to be quashed

Case details: Rajeev Bhanot v. Securities and Exchange Board of India - [2021] 130 taxmann.com 26 (SAT - Mumbai)

Judiciary and Counsel Details

• • Justice Tarun Agarwal, Presiding Officer and M.T. Joshi, Judicial Member.
  • Somasekhar Sundaresan, Adv., Ms.Yugandhara Khanwilkar, Anshuman Sungla, Arihant Agarwal and Ms.Tanya Gupta Advs. for the Appellant.
  • Shyam Mehta, Sr. Adv., Manish Chhangani, Anubhav Ghosh and Ravishekhar Pandey, Adv. for the Respondent.

Facts of the Case

In the year 2005, the Chairman/Managing Director of the target company acquired its shares in excess of the threshold limit of five percent without making an open offer and thus, violated regulation 11 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. On the other hand, said the acquisition was in the public domain and was known to the stock exchange as well as to SEBI.

The Market Regulator, SEBI, however, did not raise any query for several years. In meantime, said acquirer died. After a delay of more than 12 years, SEBI initiated proceedings for the alleged violation and by impugned order directed his legal heirs to make an open offer.

The Impugned order was passed without impleading legal heirs and without giving them the opportunity of hearing. Since the purpose of making an open offer is to bring relief to shareholders on creeping acquisition and such relief is required to be made at the earliest opportune moment.

SAT Held

However, said purpose in the instant case was lost as steps were taken after 12 years. Therefore, the impugned order of SEBI directing legal heirs to make an open offer was not appropriate in the circumstances of the case and, thus, was to be quashed.

Case Review

• • SEBI v. Akshya Infrastructure (P.) Ltd. [2014] 44 taxmann.com 444/126 SCL 125 (SC) (para 17) distinguished.

List of Cases Referred to

• • Rajesh Toshniwal v. SEBI [2012] 23 taxmann.com 144/114 SCL 366 (SAT) (para 14)
  • Ram Piari v. SEBI [Appeal No. 484 of 2015, dated 20-11-2017] (para 14)
  • SEBI v. Akshya Infrastructure (P.) Ltd. [2014] 44 taxmann.com 444/126 SCL 125 (SC) (para 14)
  • Ashok Shivlal Rupani v. SEBI [Appeal No. 417 of 2018, dated 22-8-2019] (para 18)
  • SEBI v. Ashok Shivlal Rupani [Civil Appeal No. 8444-8445 of 2019, dated 15-11-2019] (para 19).