SEBI Vs. TATA SONS LIMITED
SECURITIES APPELLATE TRIBUNAL
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(1.) TATA Sons Limited (hereinafter referred to as the 'Acquirer') proposes to acquire 9,74,975 equity shares constituting 11.02% of the equity capital of TATA Honeywell Limited (hereinafter referred to as the 'Target company') from TATA Industries Limited (hereinafter referred to as the 'Transferor'). As the proposed acquisition is more than the creeping limit of 5% as per sub regulation (1) of regulation 11 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as `the Regulations') , the Acquirer will have to make an open offer to the public shareholders of the Target company in terms of sub regulation (1) of regulation 11 of the Regulations.
1.1 The shares of the Target company are listed at the Mumbai Stock Exchange and Pune Stock Exchange.
(2.) The Acquirer made an application dated 20.12.2002 and submitted further information vide letter dated 07.01.2003 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 Chapter III of the Regulations for making public announcement under sub regulation (1) of regulation 11 of the Regulations.
In the aforesaid application, the Acquirer, inter-alia, submitted the following:
i. the Target company is a joint venture between Tata Group and Honeywell Inc., USA. The current shareholding pattern of the Target company is as follows :-
It would be noted from the above table that the holding of the Indian promoter group in the equity capital of the Target company stands at 35,91,225 equity shares representing 40.62% of its issued and paid up capital. The Transferor holds 9,74,975 equity shares being 11.02% shares in the Target company.
ii. As a part of the reorganization of the investment portfolio of the Group Companies, the Acquirer proposes to acquire 974,975 equity shares of the Target company from the Transferor in one or more tranches at prevailing market price on a spot delivery basis and in accordance with Explanation (1) to regulation 3(1)(e) of the Regulations .
iii. The Acquirer is a promoter of the Transferor and therefore the proposed acquisition is in the nature of inter se transfer of shares amongst the promoters and it would not result in a change in control nor would it effect the public shareholding of the Target company. Further, it would not amount to an acquisition of any additional shares by the Indian promoter group in the Target company.
iv. The Acquirer may be granted exemption from the provisions of Chapter III of the Regulations for the proposed acquisition of 9,74,975 equity shares of the Target company from the Transferor.
(3.) THE aforesaid application for exemption dated 20.12.02 and further information submitted vide letter dated 07.01.2003 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 January 23,2003. has recommended, inter alia, as under:
"On the basis of the statement of Tata Sons Ltd that Tata Sons Ltd. is the promoter of Tata Industries Ltd. and hence, falls in the Indian Promoter Griup of Tata Honeywell Ltd., the proposed acquisition would be in the nature of an inter se transfer of shares amongst the promoters under Regulation 3(1)(iii)(b) of the Takeover Code. However, it appears that Tata Sons Ltd, the transferee of the said shares is not holding shares in Tata Honeywell Ltd for a period of atleast three years prior to the proposed acquisition as required by the proviso to the said Regulation. Since, Tata Sons Ltd and Tata Industries Ltd fall within the definition of 'group' defined in the Monopolies and Restrictive Trade Practices Act, 1969, the grant of exemption is recommended.";
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