Transfer of Shares by Karta to HUF is Neither an Acquisition Nor it Triggers Obligation to Make an Open Offer Under SAST

Case Details: Pooja R Tikmani v. Securities and Exchange Board of India - [2023] 154 taxmann.com 202 (SAT-Mumbai)

Judiciary and Counsel Details

• • Justice Tarun Agarwala, Presiding Officer & Ms Meera Swarup, Technical Member
  • Paritosh Gupta, Adv. for the Appellant.
  • Sumit Rai, Ravishekhar Pandey, Ms Shefali Shankar & Amarpal Singh Dua, Advs. for the Respondent.

Facts of the Case

In the instant case, during the year 2010-11, there was an increase in the shareholding of the appellant (i.e. promoter of the target company) in excess of the threshold limit prescribed under the Substantial Acquisition of Shares and Takeover Regulations, 1997 (SAST). Consequently, the appellants were obliged to make a public announcement.

The Adjudicating Officer of the SEBI had alleged violation of regulation 14(1) of the SAST Regulations on the ground that the manager responsible for opening an offer had made a public announcement in the year 2016, i.e. after a delay of 4 years and 7 months.

In response, the SEBI by the impugned order imposed a penalty of Rs. 10 lakhs on the appellants. It was noted that an open offer was made for the acquisition of additional shares of the year 2016 and not for the acquisition of shares of the year 2011.

Thus, there was no alleged delay nor there was any violation of regulation 14(1) of the SAST Regulations. Assuming that there was a possible violation of SAST Regulations as an open offer was not made in 2011, there was an inordinate delay of 10 years in the initiation of proceedings.

SAT Held

The SAT noted that acquisition if any was made in year 2011. Such transfer of shares was made known to the stock exchange and was in the public domain. Therefore, the mere fact that such acquisition came to their knowledge only when an additional offer was being made in the year 2016 was incorrect and was not a ground to initiate the proceedings nor could it condone the inordinate delay.

As a result, the SAT held that the impugned order could not be sustained and was to be quashed.

List of Cases Reviewed

• • Rajeev Bhanot v. SEBI [2021] 130 taxmann.com 26/168 SCL 287 (SAT – Mum.) (para 18) followed.

List of Cases Referred to

• • Rajeev Bhanot v. SEBI [2021] 130 taxmann.com 26/168 SCL 287 (SAT – Mum.) (para 18)
  • Ashlesh Gunvantbhai Shah v. SEBI [2021] 117 taxmann.com 416/160 SCL 242 (SAT – Mum.) (para 20)
  • Sanjay Jethalal Soni v. SEBI [2020] 11 taxmann.com 486 (SAT) (para 21).