SEBI Vs. MAHINDRA HOLDINGS & FINANCE LIMITED
LAWS(SB)-2003-2-5
SECURITIES APPELLATE TRIBUNAL
Decided on February 28,2003

Appellant
VERSUS
Respondents

JUDGEMENT

G.N.Bajpai, - (1.) 0 Mahindra Holdings & Finance Limited (hereinafter referred to as the `Acquirer') proposes to acquire 1,52,41,885 equity shares constituting 49.28% of the equity capital of Mahindra Ugine Steel Company Limited (hereinafter referred to as the `Target company') from Mahindra & Mahindra Limited (hereinafter referred to as `Transferor'). As a result of the proposed acquisition the shareholding of the Acquirer in the Target company will increase from 0% to 49.28% and will trigger the provisions of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as "the Regulations"). 1.2 The shares of the Target company are listed at The Stock Exchange, Mumbai, The National Stock Exchange of India Limited, The Stock Exchange, Ahmedabad. The Calcutta Stock Exchange Association Ltd, The Delhi Stock Exchange Association Ltd. & Madras Stock Exchange Ltd.
(2.) 0 The Acquirer made an application dated February 10, 2003 under subregulation (2) of regulation 4 of the Regulations to the Securities and Exchange Board of India (hereinafter referred to as "SEBI") seeking exemption from regulation 10 and compliance with the provisions of Chapter III of the Regulations. N the aforesaid applicatioN, the Acquirer, iNter-alia, submitted the followiNg: 3.1 The proposed acquisitioN is a case of iNter se traNsfer of shares of group compaNies falliNg uNder regulatioN 3(1)(e)(i) of the RegulatioNs. 3.2 The Acquirer is a subsidiary of the TraNsferor. The TraNsferor is holdiNg 99.99% shares iN the Acquirer compaNy. The Target compaNy is aN associate compaNy of the TraNsferor. 3.3 The Acquirer has beeN a subsidiary of the TraNsferor siNce the year 1995 aNd the Acquirer status as such subsidiary is beiNg disclosed by the TraNsferor iN its ANNual Report siNce 1995. Further, as required uNder SectioN 212 of the CompaNies Act, 1956, the accouNts of the Acquirer were also aNNexed to the ANNual Report of the TraNsferor siNce 1995 aNd have beeN coNsolidated by the TraNsferor iN the coNsolidated fiNaNcial statemeNts prepared by the TraNsferor for the year eNded 31.03.2002 iN accordaNce with the accouNtiNg staNdard 21. 3.4 The traNsactioNs of the TraNsferor compaNy with the Acquirer have beeN disclosed as a part of the related party traNsactioNs disclosure, i.e., parties where coNtrol exists is disclosed by TraNsferor's ANNual Report for the year eNded 31.03.2002. Therefore, the Acquirer aNd the TraNsferor beloNg to or are part of the same group for the purposes of regulatioN 3(1)(e)(i) of the RegulatioNs. 3.5 The said RegulatioNs were ameNded oN 09.09.2002 whereby the words "where persoNs coNstitutiNg such group have beeN showN as group iN the last published ANNual Report of the Target compaNy" were added at the eNd of the said RegulatioNs 3(1)(e)(i).The ameNdmeNt iNserted iN the RegulatioNs oN 09.09.2002 caNNot be read to apply to ANNual Reports of CompaNies prior to the date of the AmeNdmeNt. 3.6 The ANNual accouNts of the Target compaNy for the year eNded 31.03.2002 were approved oN 18.06.2002, i.e., before the ameNdmeNt dated 09.09.2002 came iN to force aNd therefore, there is No such disclosure about the Group compaNies made iN the said ANNual Report. The ameNdmeNt iNserted iN the RegulatioNs oN 09.09.2002 caNNot be read to apply to ANNual Reports of the CompaNies prior to the date of ameNdmeNt. Besides there is No requiremeNt uNder Schedule VI of the CompaNies Act, 1956 to disclose the list of group compaNies aNd as such there was No occasioN for the Target compaNy to make aNy disclosure iN the ANNual Report for the year eNded 31.03.2002. 3.7 The TraNsferor compaNy has complied with the provisioNs of regulatioNs 6(3) aNd 8(2) of the RegulatioNs. 3.8 The proposed acquisitioN will Not result iN chaNge iN coNtrol as the shares are beiNg traNsferred from a holdiNg compaNy to its subsidiary compaNy.
(3.) 0 The said application for exemption dated February 10,2003 was forwarded to the Takeover Panel on February 11,2003 in terms of sub-regulation(4) of regulation 4 of the Regulations. The Takeover Panel vide its report dated February 14, 2003 has recommended, inter alia, as under: "On the facts stated in the application but for the amendment of the Takeover Code effective from 9th September, 2002, the Acquirer would have been entitled for automatic exemption. In view of the fact that the Acquirer is a subsidiary of transferor company and the transferor company and the Acquirer belong to and are a part of the same group for the purposes of Regulation 3(1)(e)(i) of the Takeover Code, grant of exemption as sought is recommended.";


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