C.Achuthan, - (1.) JM Morgan Stanley Private Ltd.,(the merchant banker) on behalf of the Appellants issued a public announcement in terms of regulation 10 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (the 1997 Regulations). The public announcement was addressed to the shareholders of Larsen and Toubro Ltd., (the target company) offering to purchase 497,32,070 fully paid up equity shares, representing upto 20% of the paid up capital of the target company. The offer price was quoted at Rs. 190/- per share. The public announcement was made on 14.10.2002.
(2.) The background of the offer has been explained in the draft offer letter. On 18.11.2002, first Appellant acquired 2,50,00,000 equity shares, aggregating 10.05% of the voting share capital of the target company at a price of Rs. 306.60 per share. The acquisition was made in November 2001. First Appellant and its wholly owned subsidiary viz. Samruddhi Swastik Trading and Investments Ltd, Second Appellant, further acquired 1,11,21,540 equity shares aggregating 4.48% of the voting capital of the target company, through open market purchase at an average price of Rs. 176.75 per shares. According to the Appellants, as on the date of the public announcement, 3,59,97,798 shares and 1,23,742 shares of the target company were owned by the first and second Appellant respectively. It has been stated in the draft letter of offer that the Board of Directors of the first Appellant decided to augment the shareholding in the target company beyond 15%. The public offer is in the said context. The public announcement, as per regulation 15(1) was made in the newspapers on 14.10.2002. There were complaints relating to the said acquisition and the Respondent had dealt with same. We will come to the details a little later in this order.
(3.) SECURITIES and Exchange Board of India Act, 1992, as can be seen from the preamble, is enacted to provide for the establishment of a Board to protect the interests of investors in securities and to promote the development of and to regulate the securities market and for matters connected therewith or incidental thereto. The SECURITIES and Exchange Board of India is established for the purpose. Powers and functions of the Board have been enumerated under Chapter IV of the Act. One of the functions of the Board is regulating substantial acquisition of shares and takeover of companies. The Board (Respondent) has notified the 1997 Regulations for the purpose. As per regulation 10, referred to above "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 15% or more of the voting rights, unless such acquirer makes a public announcement to acquire shares of such company in accordance with the Regulations." Since the Appellants were holding 14.5% shares in the target company's paid up capital and they were planning to acquire upto 20% shares, public offer as required under regulation 10 warranted and accordingly the public announcement was made. In terms of regulation 13, before making any public announcement of offer, acquirer is required to appoint a merchant banker. The Appellants appointed JM Morgan Stanley Private Ltd. as the merchant banker for the purpose. Regulations provide for timing of the public announcement of offer, extent of the publicity to be made, contents of the public announcement etc. The time frame of action applicable to the instant case is as under: JUDGEMENT_311_TLSB0_20020.htm ;