Appeal No. 189 of 2011. Case: 1. Mr. Jogeshwar Rijumal Karachiwala, 2. Mr. Prabhudas Rijumal Karachiwala, 3. Mr. Avinash Purushottam Karachiwala, 4. Mr. Tarun Purushottam Karachiwala, 5. Mr. Monish Jogeshwar Karachiwala, 6. Mr. Vikram Parameshwar Karachiwala, 7. Mr. Nikhil Prabhudas Karachiwala Vs Securities and Exchange Board of India. Securities and Exchange Board of India
| Case Number | Appeal No. 189 of 2011 |
| Counsel | For Appellants: Mr. R. S. Loona, Advocate with Mr. Abhishek Borgikar, Advocate and For Respondents: Dr. Poornima Advani, Advocate with Mr. Ajay Khaire, Ms. Amrita Joshi, Advocates |
| Judges | N. K. Sodhi, Presiding Officer and P. K. Malhotra, S. S. N. Moorthy, Members |
| Issue | Companies Act, 1956 - Section 81(1A); Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 - Regulations 10, 11, 12; Securities and Exchange Board of India Act, 1992 - Section 15A(a) |
| Judgement Date | November 18, 2011 |
| Court | Securities and Exchange Board of India |
Order:
N. K. Sodhi, Presiding Officer, (At Mumbai)
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M/s Drillco Metal Carbide Limited (for short the company) is a public limited company whose shares are listed on the Bombay Stock Exchange Limited Mumbai and Pune Stock Exchange. Its total paid up share capital at the relevant time was 21,94,375 equity shares of Rs. 10/- each. The company allotted on September 29, 2000, 6,30,800 equity shares representing 28.75 per cent of its total paid up capital to the appellants on preferential basis as co-promoters after complying with the provisions of Section 81(1A) of the Companies Act, 1956. Since the acquisition by the appellants had crossed the threshold limit prescribed in Regulations 10, 11 and 12 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter called the takeover code) they were required to make a public announcement to acquire further shares. However, preferential allotment was exempt from the provisions of the takeover code as it then stood under Regulation 3(1)(c) thereof subject to the fulfillment of two conditions. The first condition was that the company sent a copy of its board resolution in respect of the proposed preferential allotment to all the stock exchanges on which the shares of the company were listed and the second condition was that full disclosures had to be made to the shareholders as specified in Regulation 3(1)(c) proviso (ii) as it then stood. Regulation 3(4) of the takeover code as it then stood required the acquirers to submit a report to the Securities and Exchange Board of India (for short Sebi) within 21 days of the date of acquisition. It is the admitted position of the parties before us that a copy of the board resolution of the proposed preferential allotment had been sent to all the concerned stock exchanges. It is also not in dispute that full disclosures as specified in the second proviso to Regulation 3(1)(c) had been made to the shareholders. What was not done by the appellants was that as acquirers they had not submitted a report to Sebi within 21 days of the allotment which was only meant to cross check whether the exemption had been properly granted. The fact that this report was not submitted is admitted by the appellants. It is, thus, clear that Regulation 3(4) of the takeover code as it then stood had been violated.
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In terms of Regulation 7(1) of the takeover code as it then stood in the year 2000, the acquirers...
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