SEBI Vs. IND SWIFT LTD
LAWS(SB)-2003-3-9
SECURITIES APPELLATE TRIBUNAL
Decided on March 28,2003

Appellant
VERSUS
Respondents

JUDGEMENT

G.N.Bajpai, - (1.) IND Swift Ltd, Essix Financial Services Ltd, Mukur Pharmaceutical Co. Pvt Ltd and Swift Formulations Ltd(hereinafter collectively referred to as the `Acquirers) propose to acquire 20,00,000 equity shares of IND Swift Laboratories Ltd (hereinafter referred to the `Target company) by way of preferential allotment. The Acquirers are a part of promoter group of the Target company and alongwith other promoters hold 23.23% equity share capital of the target company. As a result of the proposed acquisition, the Acquirers have to make an open offer to the public shareholders of the Target company in terms of sub regulation (1) of regulation 11 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as "the Regulations"). 1.1 The shares of the Target company are listed at the Mumbai Stock Exchange, Delhi Stock Exchange, Ludhiana Stock Exchange and The National Stock Exchange.
(2.) The Acquirers made an application dated 13.01.03 under sub-regulation (2) of regulation 4 of the Regulations to the Securities and Exchange Board of India (hereinafter referred to as "SEBI") seeking exemption from compliance of the provisions of sub regulation (1) of regulation 11 of the Regulations. In the aforesaid application and letter dated 6.02.03 the Acquirers, inter-alia, submitted the following: 3.1 The Acquirers propose to acquire 20 lac shares representing 15.33% of the post issued paid up capital of the Target company at the price of Rs.25/- per share by way of preferential allotment. 3.2 The Acquirers are the promoters of the Target company. After the proposed preferential allotment the shareholding of the promoter group in the Target company will increase from 46.37% to 54.59% shares in the Target company. 3.3 The Acquirers are already in control in the Target company. The proposed acquisition would amount to consolidation of shareholding. 3.4 The shareholding of the Acquirers pre and post-allotment will be as follows :- JUDGEMENT_382_TLSB0_20030.htm 5. The shares held by Punjab State Industrial Development Corporation (PSIDC) a State level financial institution will be transferred to the Acquirers pursuant to the Financial Collaboration Agreement entered into between the co-promoters in 1996. This transfer will be covered in regulation 3(1)(i) of the Regulations and the requisite report under regulation 3 will be sent to SEBI at the time of acquisition. 3.6 Being the promoters of the Target company, the Acquirers have provided funds to the Target company so that it could meet the stipulations of the Banks for sanction/ enhancement of their working capital limits. 3.7 The funds so given by the Acquirers to the Target company was reflected by it as share application money in its Books of Accounts. 3.8 That when the funds were given to the Target company, neither the number of shares to be issued in lieu of that amount nor the price of shares was contemplated. 3.9 That till date no shares have been allotted to the Acquirers against the said application money of Rs.500 lacs. 3.10 The Target company proposes to issue shares on preferential basis to the Acquirers against the sum so advanced by them. 3.11 The investment was made by the Acquirers when the acquisition of shares on preferential basis was exempt under regulation 3(1)(c) of the regulations (i.e. before the amendments made in the regulations on 9.9.02). 12. Since, the action for investment was made much before the said amendment in the regulations it is proposed that the Acquirers be allowed to acquire 15.33% shares on preferential basis.
(3.) THE above said application for exemption dated 13.01.03 was forwarded to the Takeover Panel on 17.01.2003 in terms of sub-regulation(4) of regulation 4 of the Regulations. THE Takeover Panel vide its report dated 14.02.2003 has recommended, inter alia, as under: "On the facts stated, it appears that the required formalities to reach the stage of issuance of shares on preferential basis and to make offer are yet not complied with and the acquirers are yet not qualified to make offer. In the circumstances, no recommendation to grant exemption as sought is made.";


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