sebi:C/264/2002/FITTC/TO

SEBI · SEBI · 1998-09-09 · G.N. Bajpai, Chairman

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Facts / Headnote

Show cause notice issued for alleged violations of Regulations 10, 12, 14(1) and 14(3) of the Takeover Regulations; final disposition not stated in the excerpt

Provisions invoked

• s. 11B

Regulations

• Reg. 4
• Reg. 13
• Reg. 11
• Reg. 3
• Reg. 2(1)(c)
• Reg. 9
• Reg. 2(1)
• Reg. 10
• Reg. 12
• Reg. 14
• Reg. 14(1)
• Reg. 14(3)
• Reg. 44
• Reg. 45
• Reg. 3(1)(j)
• Reg. 2
• Reg. 22
• Reg. 3(1)
• Reg. 3(4)
• Reg. 3(3)

Parties

• Acquirer / EBITO

Holding

SEBI held that the Acquirer's acquisition of indirect control over the Target company through EBITO's capital restructuring under Swiss law did not fall within the exemption under Regulation 3(1)(j)(ii), and that the Acquirer prima facie violated Regulations 10 and 12 read with 14(1) and 14(3) by not making a public announcement.

Full text

letter dated March 11, 1998 forwarded a report inter alia recommending as follows : "On consideration of the application of the Applicant along with annexures thereto and additional information furnished by the Applicant vide the letter dated 26th February, 1998, the Takeover Panel is of the view that the exemption as sought by the Applicant may not be granted since so for as the Indian company viz. the Target company is concerned, it is pure and simple case of purchase of entire 50.1 percent of its total equity share capital so far held by Hoechst AG by the applicant. Hence, keeping the objective intended to be achieved by the Takeover Code, the grant of exemption as sought is not recommended". 3.0Based on the recommendation of Takeover Panel as stated above and after taking into consideration the facts of the case, SEBI vide its order dated 9/9/1998 while rejecting the application of the Acquirer seeking exemption from the making of an open offer in the matter of the acquisition of 50.1% of the equity capital of the Target company, directed the Acquirer to make a public offer as required under the Regulations if they are desirous of acquiring the proposed equity capital of the Target company. 4.0Against the aforesaid Order of SEBI dated 09.09.1998, the Acquirer preferred an appeal before the Appellate Authority with Central Government . Appellate Authority while upholding SEBI’s order mentioned in its order dated 20.11.1998, inter alia that : "…We do not find this scheme pe

Authority and to avoid the open offer obligations.  (ii)the claim of the Acquirer that the acquisition of shares of Target Company is covered under regulation 3 (1)(j)(ii) does not appear to be correct as the aforesaid scheme per se does not appear to be under any law or regulation but a scheme voluntarily agreed to between two companies for which they might have obtained necessary approvals under various laws including under Swiss law.  (iii)On February 23, 2001, when EBITO became the 100% subsidiary of the Acquirer, the Acquirer acquired the 50.1% of the Target company which was held by EBITO and triggered the provisions of regulation 10. Further, with the said acquisition, the Acquirer has acquired the control over EBITO and with the result, it has acquired control over the Target company as well in terms of regulation 2 (1)(c) and triggered the provisions of regulation 12. (iv)a public announcement to acquire a minimum of 20% shares from the shareholders of the Target company was required to be made by the Acquirer in terms of the regulations, within 4 working days from the date of 26.11.97, in conformity with regulation 14(1) read with 14(3) of the said Regulations.  (v)the Acquirer have acquired the said shares/voting rights and control of the Target company in the aforesaid manner without making a public announcement as required by the provisions of the regulations and therefore, have prima-facie violated the provisions of regulations 10 & 12 read with 14(1) & 14 (3) o

contention, an application dated 26th November 1997 was made to the Chairman, SEBI for exemption under Regulation 4 read with Regulation 3(1)(l) of the Takeover Regulations ; 9.1.3SEBI Chairman by an order dated 9th September 1998 rejected the request for exemption under Regulation 3(1)(j)(ii) and Regulation 4. While rejecting the request for exemption, SEBI passed an

Source: SecMarx — sebi:C/264/2002/FITTC/TO. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.