Supreme Court of India
SWEDISH MATCH AB AND ANR.versusSECURITIES AND EXCHANGE BOARD, INDIA AND ANR.
- Citation
- 2004 INSC 470
- Decided
- 25 August 2004
- Disposal
- Case Partly allowed
- Bench
- N SANTOSH HEGDE
Holding
Regulation 11, not Regulation 12, governs the transaction and a mandatory public announcement is required; consequently, the Supreme Court directed SEBI to forbear from adjudication proceedings.
Summary
Swedish Match AB and its associated companies acquired a 74% shareholding in Wimco Ltd., a listed Indian company, by purchasing shares from Indian promoters at a price well above market value. The acquisition was done without making a public announcement as required under Regulation 10/11 of the Substantial Acquisition of Shares and Takeovers Regulations, 1997. SEBI issued a show‑cause notice and, after an adverse order, the Securities Appellate Tribunal affirmed that Regulation 11 applied and a public announcement was mandatory. The appellants argued that Regulation 12’s proviso and a shareholders’ resolution exempted them from the announcement requirement. The Supreme Court held that Regulation 12 did not apply because the change of control was effected by share acquisition at a price above market value, so Regulation 11 governed and a public announcement could not be waived. The Court directed SEBI to forbear from initiating adjudication proceedings against the appellants, while noting that this direction was not to be treated as a precedent.
Issues considered
- The applicability of Regulations 10, 11 and 12 of the Substantial Acquisition of Shares and Takeovers Regulations, 1997 to the acquisition of shares by Swedish Match.
- Whether the proviso and explanation to Regulation 12 exempt the acquirer from making a public announcement when control passes via a shareholders’ resolution.
- Whether the penalty provisions under Section 15H of the SEBI Act, 1992 can be invoked for failure to make a public announcement.
- Whether the Supreme Court can, under Article 142, direct SEBI to forbear from proceeding with adjudication against the appellants.
Legislation cited
- Companies Act, 1956s. 81(1)(A)
- Securities and Exchange Board of India Act, 1992s. 11B, s. 15H, s. 15Z, s. 24
Subjects
Substantial acquisitionPublic announcementTakeover regulationsChange of controlRegulation 11Regulation 12SEBI penaltyStatutory interpretationPurposive constructionArticle 142
Judgment
SWEDISH MATCH AB AND ANR. A
v.
SECURITIES ANO EXCHANGE BOARD, INDIA AND ANR.
AUGUST 25, 2004
[N. SANTOSH HEGDE, S.B. SINHA AND A.K. MATHUR, JJ.] B
Substantial Acquisition of Shares and takeovers Regulations, 1997;
Regulations 2(e) and {c), JO, 11, 12, Proviso to Explanation (1) of
Regulations 12, 14, 15, 16, 23, 44 and 45 :
Foreign companies and Indian companies jointly acquired majority
c
shareholding in a company/target company-Foreign company purchased
shares from the Indian companies to take control over the target company
independently without making any public announcement thereto-SEE!
directed them to make public announcement in terms ofRegulation 11 (1 )- D
Affirmed by Security Appellate Tribunal-On appeal, Held: Interest of
shareholders could be protected by means ofpublic announcement of offer
in terms of provisions of Regulations 10, 11 and 12-Acquirer of shares
statutorily requires to make public announcement of such acquisition-
Approval in the general meeting of share holders does not sub-serve the
requirement of law-Proviso to Regulation 12 would apply only when E
change of control over the company take place by the mode other than by
acquisition ofshares-Since change ofcontrol did not take place by reason
of inheritance/succession but by way of acquiring shares from another,
Regulation 11 and not Regulation 12 would be attracted-Though
Regulations 11 and 12 operate in different fields yet they may overlap- F
The acquirers in such a situation could issue a combined notice in terms
of both the Regulations-However, mandatory requirements to make
public announcement cannot be dispensed with-Though provisions under
Regulations are clear yet Rule ofpurposive construction would clarify the
real intent of the legislature therein-Companies Act, 1956-Section G
81{l)(A).
Securities and Exchange Board of India Act, 1994; Sections 15(H),
(J), (Z) and 24 :
Penal Provision-Interpretation of-Held: Regulation being regulatory H
745
746 SUPREME COURT REPORTS (2004] SUPP. 3 S.C.R.
A in nature, they do not deserve strict construction-Interpretation of
Statutes.
Constitution of India, 1950; Article 142-Applicabililty of-Held: It
is a fit case where Supreme Court should exercise its jurisdiction to direct
B the Board to forebear from proceedings with the adjudication proceedings
against the appellants.
Words and Phrases :
'Additional shares '-Meaning of in the context of Companies Act,
c 1956.
Appellant No. I-foreign company/holding company of four foreign
companies, including appellant No. 2, had acquired 52.11 % shares in
an Indian Company/the target company. Two Indian companies,
promoters of the target company, had acquired 24.11 % shares in the
D target company. The holding company entered into an agreement with
the Indian companies to acquire certain percentage of shares in the
target company for which it made a public announcement in terms of
provisions of Regulation 10 of the Substantial Acquisition of Shares
and Take over Regulations/SE BI Regulations. Subsequently, the target
E company allotted shares on a preferential allotment to the foreign
holding company which thereafter acquired shares to the extent of
21.89% at a price well above the market price from their counterpart
Indian companies, raising its share holding in the target company to
74% leading to sole control of the holding company over the target
F company. Later, the target company also approved the change in
control by way of resolution in the general meeting of the shareholders
and the same was brought to the notice of SEBI.
SEBI served a show cause notice upon the appellants as to why
no public announcement was made in terms of Regulations 10 and
G 11(1) of the Regulations. SEBI, upon hearing of the appellants,
observed that the acquisition of shares falling under proviso to
Regulation 12 does not automatically absolve them from making public
announcement of their taking over control of the target company.
Securities Appellate Tribunal/SAT affirmed the order of SEBI. Hence
H the present appeal.
SWEDISH MATCH AB v. SECURITIES & EXCHANGE BOARD 747
Appellants contended that although each one of the Regulations A
viz. 10, 11 and 12 stipulates making of public announcement but they
are mutually exclusive; that there was no acquisition of additional
shares since the aggregate shareholding of the parties did not increase
at all; that since shareholders in the general meeting of the company
had approved the change in control over the target company, no public B
announcement was required to be made; and that in the facts and
circumstances of the case penal provisions should not have been
directed to be invoked.
Respondents submitted that the language used in Regulations 10,
11 and 12 being clear and unambiguous, the question of application C
of Regulation 12 would not arise since a transfer of control from joint
owners to a single sole owner cannot be termed as change in control;
that the opinion of the Tribunal shall prevail over that of the Board;
that no disclosure has ever been made by the Appellants that in fact
they had intended to purchase the shares belonging to one group at a D
price well below the market price of the share. On the contrary, the
stand of the Appellants was that they did not sell the shares below the
market price; that the appellants withheld a very valuable information
about the price of the share so as to take over control of the target
company from the shareholders; that a transaction may trigger both E
Regulation 11 and Regulation 12 in which event a combined notice of
public announcement of the offer could be issued; and that the penal
provisions contained in Section lSH of SEBI Act could not be invoked
in the present proceedings.
Partly allowing the appeal, the Court F
HELD : 1.1. Public announcement evidently is required to be
made having regard to the fact that the interest of investors is required
to be protected; pursuant whereto and in furtherance whereof the
shareholder would be informed of the value of the shares at which the G
transfer of control would take place so as to enable him to exercise his
option to sell shares at the price offered by the acquirer or continue
to keep the same. [768-D-E, H; 769-A]
1.2. A control over the target company may be achieved by
amending the memorandum of association or by any other mode which H
748 '.>UPREME COURT REPORTS (2004] SUPP. 3 S.C.R.
A necessitates a resolution to be passed by the shareholders in a general
meeting. The expressions "in pursuance to a resolutio11. passed by the
shareholders in a general meeting" are crucial as the proviso to
Regulation 12 of Substantial Acquisition of Shares and Take over
Regulations would apply only when the change of control over the
B target company takes place otherwise than by acquisition of shares or
voting rights. A resolution passed in the general meeting of the
shareholders of the target company does not sub-serve the requirements
of law inasmuch as, it would bear repetition to state, when transfer of
control over the target company takes place by reason of acquisition
of shares at a price higher than the market price the acquirer has a
C statutory obligation to make the public announcement. Such a statutory
requirement is not capable of being waived by the majority shareholders.
It was merely disclosed by the appellants that such acquisition of shares
would not be at a price lower than the market price. If such transfer
was to take place at a price less than the market price, the second
D proviso appended to Regulation 12 would have attracted. It was,
therefore, obligatory on the part of the acquirer to furnish correct
information as regard the price offered to the Indian group of
companies. (769-F-G; 771-A-B-C]
E 2.1. Regulations IO, II and 12 of the Regulations seek to protect
the interests of the shareholders. Public announcement of offer is one
of the modes of protecting the interests of the shareholders. Regulations
IO, II and 12 ex-facie operate in three different fields. They seek tu
control creeping acquisition which may lead to substantial acquisition
F and ultimately total control of the company. There may, however, be
a case where control of the company is sought to be taken over by
transfer of share only in which event Regulations II and 12 both may
apply. [768-D-E, G-H; 769-A[
2.2. Regulation II contemplates both situations, namely, where
G substantial acquisition of shares may result in change of control and
w~ere it does not. Only because in a case where acquisition of
additional shares may result in change of control, the same by itself
would not exempt the acquirer from complying with the statutory
requirement of Regulation I l. There may be a situation where
H Regulations 11 and 12 may overlap with each other, in which event,
SWEDISH MATCH AB v. SECURITIES & EXCHANGE BOARD 7<\9
it would be open to the acquirer to issue a combined notice fulfilling A
the requirement of both Regulations 11 and 12. The purport and object
of which a regulation is made must be duly fulfilled. Regulations 14,
15 and 16 clearly postulate that public announcement is required to
be made in relation to transfer of shares attracting Regulations 10 or
11. Public announcement is at the base of Regulations 10, 11 and 12, B
except in a situation which would bring the case within one or the other
'exception clause'. Hence, the requirement of complying with the
mandatory requirements to make public announcement cannot be
dispensed with. [776-C-D-E-F]
2.3. Regulation 12, like Regulations 10 and 11, also speaks of public C
announcement. Such public announcement is required to be made
irrespective of whether or not there has been any acquisition of shares
or voting rights in a company. In either of the cases, the acquirer is
statutorily required to make public announcement of acquisition of
shares and control of the target company in accordance with the D
regulations. The proviso appended to Regulation 12 carves out an
exception as regard necessity of making public announcement.
Explanation appended to Regulation 12, however, states that it would
have no application where a change in control takes place pursuant to
a resolution passed by the shareholders in a general meeting. The proviso E
to Regulation 12 cannot be said to have any application in the instant
case by reason of the Explanation appended thereto. (769-C-D-E]
2.4. Change of control contemplated under Regulation 12 calls for
a public announcement when the same is sought to be achieved by
acquiring shares or voting rights. A change of control in terms of F
Regulation 12 may also take place pursuant to a resolution passed by
the shareholders in a general meeting. Only in the latter case the
proviso which carves out an exception would be attracted. The effect
and purport of the first proviso may also be construed having regard
to the second proviso appended thereto. The second proviso appended G
to Regulation 12 takes within its fold a case where the joint control to
sole control is through sale at less than the market value of the share.
It, therefore, speaks of a different situation, namely control by transfer
of joint control to sole control though sale was at less than the market
value of the share·s. In a case where the second proviso is attracted, H
750 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A Explanation (1) will have no role to play. [770-C-D-E]
3.1. The present case is not a case where Regulation 3 will have
any application. However, the Appellants did not claim any exemption
in terms of Regulation 3 nor were they eligible therefore. It is also not
B a case where change in control had taken place by reason of inheritance
or succession but by reason of conscious act of transfer of shares by
one acquirer from another. In a case of this nature, thus, Regulation
12 would not apply, the logical corollary whereof would be that
Regulation 11 will apply. Proviso to Regulation 12 exempts only a
party of the main enactment. It does not take within its embargo both
C the situations contemplated under Regulation 12. [771-F-G-H; 772-E]
S. Sundaram Pillai Etc. v. V.R. Fattabiraman, AIR (1985) SC 582;
Laxminarayan R. Bhattad & Ors., v. State of Maharashtra & Ors., [2003]
5 SCC 413; Ali MK. & Ors. v. State of Kera/a & Ors., [2003] 11 SCC
D 632 and Union of India v. Sanjay Kumar Jain, JT (2004) 6 SC 318 and
Dipak Chandra Ruhidas v. Chandan Kumar Sarkar, [2003] 7 SCC 66,
referred to.
3.2. Acquisition of shares from one Company in favour of the
other was done by a foreign company as a group and not as an
E individual company. Factually, it is not correct to contend that the
foreign holding company had acquired 21.89% shares of its own. Even
if other companies-Indian companies had done so, Regulation IO would
apply as no public announcement was made therefor. By reason of
acquisition so made, the foreign company, as acquirer, together with
F other Indian companies, had acquired more than 15% but less than
75% of shares. Any of those acquirers prohibited from acquiring by
itself any additional share entitling it to exercise more than 5% of the
voting rights. Such acquisition of additional shares may be either from
public or from a person with whom at one point of time the acquirer
G had acted in concert. If such a meaning is not assigned, the disjunctive
clauses contained in the expressions "either by himself or through or
with person acting in concert with him" may not carry a true and
effective meaning. [775-C-D-E-F-G-H]
4.1. It may be true that the Board in its impugned order
H proceeded on a wrong premise that having regard to the proviso
SWEDISH MATCH AB v. SECURITIES & EXCHANGE BOARD 751
appended to Regulation 12, Regulation 12 would be attracted. But SAT A
rightly construed the provisions of Regulations 11 and 12 in arriving
at a finding that Regulation 11 would be attracted and Regulation 12
would not be. The Tribunal was entitled to take a different view of the
matter from that of the Board with a view to sustain the ultimate result
in the appeal in exercise of its appellate power. Such a power in the B
appellate Courtffrihunal is akin to or analogous to the principles
contained in Order 41 Rule 33 CPC. Even otherwise before this Court
the judgment of the Tribunal is in question; this Court is required to
consider its correctness. In any event, the reasonings of the Tribunal
shall prevail over the Board. (776-G-H; 777-A-B] C
S. Shanmugavel Nadar v. State ofT.N, (2002] 8 SCC 361, relied on.
4.2. The Board is an expert body. As a legislature, it makes the
regulations; as an executive, it implements the legislation and in case D
of a breach it takes upon a quasi-judicial function. While functioning
in its judicial capacity, it has wide discretion. Its decision is final subject
to the decision of the Tribunal. But the sequence of events clearly go
to show that even the Board was not sure of the legal position. Since
the Board did not think it fit to apply the Explanation appended to E
Regulation 12 in its proper perspective, the Tribunal at a later stage
came to a clear finding that proviso appended to Regulation 12 would
have no application and Explanation would. [782-E-F-G; 783-A-B]
4.3. Although no difficulty in construing the provisions of
Regulations 11 and 12 is found but assuming Regulations 11 and 12 F
are not clear, the rule of purposive construction should be taken
recourse to. It is now trite that when an expression is capable of more
than one meaning, the Court would attempt to resolve that ambiguity
in a manner consistent with the purpose of the provisions and with
regard to the consequences of the alternative constructions. Regulations G
1O, 11 and 12 were amended in the year 1997 having regard to the fact
that the 1994 Regulations contained many loopholes, and thus, the
mischief rule should he resorted to so as to suppress the mischief
which would have surfaced had the literal rule been allowed to cover
the field. [777-C-D; 778-D-E] H
752 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A Anwar Hasan Khan v. Mohd. Shafi & Ors., [2001) 8 sec 540 and
Handicrafts Emporium & Ors. v. Union of India & Ors., [2003] 7 SCC
589, referred to.
Clark & Tokeley Ltd. (tla Spellbrook) v. Oakes, (1998) 4 All ER 353
B and Inland Revenue Commissioners v. Trustees ofSir John And Settlement,
(1984) Ch. 382, referred to.
5. A penal statute indisputably is required to be strictly construed.
But a different situation may arise if the penalty is sought to be levied
as a result of failure on the part of the person statutorily obliged to
C comply with the statutory provisions which are imperative in nature.
There may not be any doubt or dispute as regard the proposition that
when words employed in a penal statute are not clear, the principle
'against doubtful penalisation' would be applied. Regulations being
regulatory in nature, the intent and object sought to be achieved
D thereby must be firmly applied with. In this view of the matter,
Regulations do not deserve strict construction so as to hold that even
a public offer was not necessary. (778-F-G; 782-D]
Handicrafts Emporium & Ors. v. Union of India & Ors., [2003] 7
SCC 589; Reema Aggarwal v. Anupam & Ors, (2004] 3 SCC 199; Bairam
E Kumawat v. Union of lndia & Ors., [2003) 7 sec 628; The Seksaria
Cotton Mills Ltd. v. State of Bombay, [1953] SCR 825 and State of Bihar
v. Bhagirath Sharma & Anr,. (1973] 2 SCC 257, referred to.
6. The adversarial system prevailing in India allows a counsel to
F put forward construction of the enactment in question relying on
several alternative arguments and the Court may ultimately base its
judgment on unglossed literal meaning. (783-E]
Inland Revenue Commissioners v. Trustees ofSir John and Settlement,
G (1984) Ch. 382, referred to.
Francis Bennion 's Statutory Interpretation, Fourth Edition, page
371, referred to.
7. Once a public offer is made the investors would be entitled to
H elect to transfer their shares at a higher price which may be offered
SWEDISH MATCH AB v. SECURITIES & EXCHANGE BOARD [SINHA, J.] 753
by the acquirer with a view to acquire control over the target company. A
The investors would also be entitled to interest at such rate as the
Board may determine. The provisions of Section 15H of the Securities
and Exchange Board of India Act mandates that a penalty of rupees
twenty-five crore may be imposed. The Board does not have any
discretion in the matter and, thus, the adjudication proceeding is a B
mere formality. Only in the criminal proceedings initiated against the
Appellants, existence of mens rea on the part of the Appellants would
come up for consideration. Hence, it is a fit case where this Court
should exercise its jurisdiction under Article 142 of the Constitution
to direct the Board to forbear from proceeding with the adjudication C
proceeding against the Appellants. This may not, however, be treated
to be a precedent. (783-G-H; 784-A-B-C]
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2361 of
2003.
D
From the Judgment and Order dated 18.2.2003 of the Securities
Appellate Tribunal, Mumbai in appeal No. 33 of 2002.
F.S. Nariman, Rahul P. Dave, Robin R. David, Himanshu Narain,
Anuj,Dinesh Banth, Atul Sud and Mrs. Shirai: Contractor Patadia for the
Appellants. E
Kirit N. Raval, Bhargava V. Desai, Sanjeev Kumar Singh, Pradeep
Kumar Malik, E.C. Agrawala, K.K. Rai and Shrish Kumar Misra for the
Respondents.
F
The Judgment of the Court was delivered by
S.B. SINHA, J. : BACKGROUND FACTS:
Wimco Limited (Wimco) is a target company. Its shares are listed on
the stock exchanges at Mumbai, Delhi, Calcutta, Kanpur as also on the G
National Stock Exchange. It is engaged in the business of manufacture
and sale of a broad range of safety matches.
The Appellant No. I herein (Swedish Match) is incorporated in
Sweden. It is a holding company of the Appellant No. 2 (S.M.S) holding H
754 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A its entire paid up capital. It is also a holding company of Haravon
Investments Private Limited (Haravon) and Seed Trading Private Limited
(Seed). These four companies hereinafter would be called and referred to
as the Swedish Match Group. It had acquired in the target company 52.11 %
shares, i.e., 46.18% by Haravon and 5.93% by Seed. AVP Trading Private
B Limited (AVP) and Plash Floods P. Ltd. (Plash) \1ere Indian promoters of
the target company. They belong to one Jatia Group of companies holding
24. 11 % of the share capital of the target company, i.e., A VP holding 6.03%
and Plash holding 18.08%.
The Swedish Match entered into an agreement with the Jatie Group
C to acquire majority shoreholding in Haravon and Seed and to make a public
announcement of offer to acquire 20% shares in Wimco. The obligation
to make a public announcement of offer arose in view of indirect
acquisition of more than 10% shares in Wimco (in view of the law as
prevailing thence) attracting the provisions of Regulation 10 of the SEBI
D (Substantial Acquisition of Shares and Takeovers) Regulations, 1997
(hereinafter called and referred to for the sake of brevity as "the
Regulations").
On or about 17th December, 1997, the public announcement of offer
E was made by S.M.S. together with the Jatia Group of Companies, viz.,
Plash and A VP as "acquirers" and "persons acting in concert". In the letter
of offer, it was specified that both Swedish Match Group and Jatia Group
intend to exercise joint control over the affairs of Wimco. For the purpose
of the public announcement of offer, 'Haravon' and 'Seed' being subsidiaries
F of Swedish Match Singapore were deemed to be "persons acting m
concert" in terms of Regulation 2(e)(2)(i) of the 'Regulations'.
Upon completion of the process of public offer, the share holding in
Wimco was as under: Haravon 28.28%, Seed 10.33%, AVP 5% and Plash
15%. The aggregate of total share holding of both the groups, thus, came
G to 58.61%.
It is not in dispute tliat subsequent to April, 1998 the said Groups were
exercising joint control over the affairs of Wimco. By a Special Resolution
adopted in this behalf, the target company allotted shares on a preferential
H allotment basis to 'Haravon', 'AVP' and 'Plash' purported to be in terms
SWEDISH MATCH AB v. SECURITIES & EXCHANGE BOARD [SINHA, J.] 755
of Section 81(1)(A) of the Companies Act, 1956 whereupon the share A
holding in Wimco came to as under:
Haravon 46.18%, AVP 6.03%, Plash 18.08%.
As no preferential shares were allotted to Seed, its shareholding was
diluted to 5.93%. B
Swedish Match Group, thus, held 52.11 % and Jatia Group held
24.11% of the total shares in Wimco. The aggregate shareholding of both
the Groups came to 76.22%. The Government of India by an order dated
5th July, 1999 permitted increase in foreign equity participation in the C
target company from 38.61% to 52.11%.
S.M.S. thereafter acquired from Jatia Group (as the latter was desirous
of exiting from the joint control over Wimco) the following extent of share:
A VP 5.47%, Plash 16.42%, at a price well above the market price.
D
Pursuant to or in furtherance of the letter of the Government of India
dated 19th May, 2000 increasing foreign collaboration to the extent of'
74.00438%; the Swedish Match Group acquired 74% shareholding and
Jatia Group was left with 2.22% in Wimco.
E
It is also not in dispute that although the market value of each
acquired share of the target company was only Rs. 9.55; the consideration
paid to Jatia Group by the Swedisl. Match Group was Rs. 35/- per equity
share. Pursuant to or in furtherance of the said arrangement, the Directors
belonging to Jatia Group resigned as a result whereof, their joint control F
with Swedish Match Group ceased leading to sole control of the latter.
Allegedly, the cessation of joint control was approved in a general meeting
of the shareholders of Wimco held on 27th September, 2000. S.M.S.
thereupon by a letter dated 27th September, 2000 in terms of Regulation
7 of the Regulations disclosed to WIMCO its holding of more than 5% of
the equity share capital. The said transaction was also brought to the notice G
of the SEBI {the Board) by a letter dated 28th September, 2000. It also
agreed to adhere to the 'lock-in' restrictions applicable to the locked in
shares forming part of2 l.89% shares purchased from A VP and Plash (Jatia
Group of Companies). Upon receipt of the said information, SEBI by a
letter dated 17th October, 2000 made a query as to whether the said H
756 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A transaction took place in accordance with Regulation 20 (pricing guidelines),
Regulation 7 (mandatory disclosures) and Regulation 12 (change in
control) of the Regulations, in response whereto, Swedish Match by a letter
dated 1st November, 2000 submitted its replies thereto. An additional
query by SEBI was made as regard calculation of market price and
B ccimpliance of the provisions of the Regulations by a letter dated 30th
November, 2000; to which a reply was give1t on 8th January, 2001.
PROCEEDINGS BEFORE SEE! :
A show-cause notice was served upon the Appellants by SEBI asking
C them to show cause as to why no public announcement of offer had been
made in terms of Regulations I 0 and 11 ( 1) of the Regulations stating:
"4. As you have acquired the shares of WL in the manner as stated
above without making a public announcement as required by the
D provisions of the captioned regulations, you have, prima-facie,
violated the provisions of Regulation I 0 individually and
Regulation 11(1) collectively of the captioned Regulations and,
therefore, you are liable for penal action under the Regulations
and SEBI Act, 1992.
E 5. In view of the above, you are called upon to show cause as to
why one or more or all action(s) under Regulation 44 and
Regulation 45( 6) of the Regulations and Section 11 B of the SEBI
Act 1992, should not be initiated against you for violation
specified above."
F
The Appellants herein filed a show cause before the Board.
ORDER OF SEE! :
G The Chairman, SEBI upon hearing the Appellants by an order dated
4th June, 2002 observed that Regulation 12 has no application.
It was, however, held:
"In view of the above, the submission of the Acquirers that
H Regulation 11 (I) should exclude a transaction involving a transfer
SWEDISH MATCH AB v. SECURITIES & EXCHANGE BOARD [SINHA, J.) 757
of shares as part of cessation of participation in joint control, A
particularly where such persons in joint control acquired shares
as persons acting in concert is not tenable.
Therefore, if an Acquirer triggers either of the Regulations, i.e.,
Regulations 10, 11 or 12, he has to make a public announcement B
unless the acquisition is specifically exempt in terms of the
Regulations. Therefore, each of the Regulations 10, 11 & 12 has
to be complied with independently by the Acquirers. The acquisition
falling under proviso to Regulation 12 is not automatically exempt
from the applicability of Regulations 10 & 11."
c
Consequent upon the said findings, the following directions were
issued :
"In view of the above the exercise of the powers conferred upon
me under sub-section (3) of Section 4 read with Section 118 SEBI D
Act 1992 (hereinafter referred to as the Act) read with Regulation
44 & 45 of the Regulations, I hereby direct the Acquirers to make
public announcement in terms of Chapter III of the Regulations
in terms of sub-Regulation ( 1) of Regulation 11 taking 271912000
as the reference date for calculation of offer price within 4 5 days
of passing of this order." E
THE TRIBUNAL :
Aggrieved by and dissatisfied with the said order, an appeal was
filed by the Appellants herein before the Securities Appellate Tribunal F
(Tribunal). The Tribunal took notice of the Appellant's letter dated
28.9.2000 contending "We wish to inform you that we have through our
wholly owned subsidiary Swedish Match Singapore Pte. Ltd. and pursuant
to the requisite approvals acquired an additional 11382800 equity shares
from the aforesaid Indian companies such that we are not in sole control G
of WJMCO Ltd. " and held:
"Sequence has been mentioned correctly thus that they acquired
additional shares and thereby acquired sole control of WIMCO
Ltd. As the control is relatable to the shareholding in the instant
case and to nothing else and cessation of contrli'l was due to H
758 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A divesting of the said ownership of shares in the absence of any
other evidence to the contrary it can be safely concluded that the
Acquirers acquired shares from the Jatia Group and consequently
Jatia Group ceased to be in joint control of the target company.
Assuming that if the Jatia Group had been in joint control due to
B some other factors, then section 11 would not have attracted. In
the instant case, it is a clear case of acquisition of shares and
cessation of control consequential to divestment of shares held by
the person in control."
(Emphasis supplied)
C Holding that the provisions of Regulations 11 (I) and 12 are not in
conflict with each other in any manner and further holding that the
Regulation is a beneficial legislation, the Tribunal held:
"The legislative intent behind the Regulations is clear. The
D objective is to protect the interests in securities. It is with the said
objective that regulations I 0, 11 and 12 have been framed
providing an opportunity to the existing shareholders of a company
under acquisition and that exit opportunity cannot be denied by
resorting to a narrow and technical interpretation of the regulations.
As already stated in this order regulations I 0, 11 and 12 are put
E in position to meet different situations. Which one of these
regulations is attracted to an acquisition, would depend on the
specific facts. In my opinion in the light of the facts, as the
Respondent has held, the acquisition in question attracts the
provisions of regulation 11(1)."
F
This appeal has been filed by the Appellants herein before this Court
in terms of Section 15-Z of the Securities and Exchange Board of India
Act, 1992 (for short "the Act")
G SUBMISSIONS :
Mr. F.S. Nariman, learned senior counsel appearing on behalf of'the
Appellants would contend that although each one of the Regulation I 0, 11
and 12 of the Regulations require making of public announcement, but the
same are mutually exclusive and independent of one another as they
H address different types of acquisitions (as found by SEBI) and should
SWEDISH MATCH AB v. SECURlTIES & EXCHANGE BOARD [SINHA, J.] 759
necessarily, thus, be limited to the context of the situation with which it A
deals and should not be projected into the other.
The learned counsel would point out that Regulation I 0 applies to
initial acquisition of shares or voting rights by an acquirer whereas
Regulation 11 having been captioned as "Consolidation of Holdings" deals B
with consolidation of existing shareholder(s) by way of acquisition of
additional shares, i.e., such acquisition must be by way of combined
shareholding of acquirer and persons who previously acted in concert with
him resulting in increase of more than 5% and in case of Regulation 11 (I),
by acquisition of any additional shares.
c
Regulation 11, Mr. Nariman would submit, does not cover purchase
of shares by the acquirer from the persons who have previously acquired
shares in concert with him as in such a case there is no acquisition of
additional shares as the aggregate shareholding of the parties does not
increase at all and far less by 5%. Elaborating his submission, Mr. Nariman D
would argue that as both Swedish Match Group and Jatia Group had
76.22% which was reduced to 74%, there had been no acquisition of
additional shares and in that view of the matter the purported admission
by the Appellants in its letter dated 28.9.2000 should be ignored. Proviso
appended to Regulation 12, according to Mr. Nari man, is squarely attracted E
in the instant case, in view of the fact that the shareholders in a general
meeting had approved the change in control in favour of the Swedish
Match Group from the joint control of Swedish Match Group and Jatic
Group and in that view of the matter, no public announcement therefor was
required. In the alternative it was submitted that Regulation 11 does not F
envisage inter se transfer between one group to the another. The Scheme
of the statute is such, it was urged, that the requirement of public
announcement is not attracted in all cases which would be evident from
Regulation 3 of the Regulations and in that view of the matter it cannot
be said that the proviso appended to Regulation 12 will have no application
in the instant case. In this connection our attention has also been drawn G
to the subsequent amendments made to the regulations. The learned
counsel would argue that also in a situation like death or bankruptcy of
a person in joint control may lead to sole control of the target company
in which event also the rigours of Regulation 12 will have no application.
Pointing out the difference between Regulations 11 and 12, it was urged H
760 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A that whereas in terms of Proviso to Regulation 12 the change in control
is exempted from the applicability thereof (which otherwise requires the
making of a public announcement) by a resolution passed by the shareholders
in the General Meeting, but the necessity of making a public offer under
Regulation 11 cannot be condoned by the shareholders because a right to
B have the shares offered under the public offer is conferred upon the
remaining shareholders as even a majority of them cannot barter away the
right of a minority. The position, however, would be different in a case
where change in control of the target company is approved by the majority
of the shareholders in a general meeting, as therein the question as regard
C protection of the interest of the shareholders would fall for consideration.
Regulations 10, 11 and 12 having been intended for the benefit of the
shareholders of the target company, the learned counsel would argue, only
a letter of offer is required to be sent to all the shareholders of the target
company in terms of Regulation 22(3) for the purpose of allowing and
D enabling the existing shareholders to avail of the opportunity to offer their
shares for purchase to the acquirers at a price specified in the public
announcement and the letter of offer. Reqmrement of change from joint
control to sole control would be fulfilled if all the existing shareholders
approved the change from joint control to sole control, urged Mr. Nariman,
E as by reason of such a resolution, the transfer from joint control to the sole
control would be offered which would amount to an election not to exit
from the company and to remain therein under the management of the sole
controller.
It was urged that Explanations (i) and (ii) are explanations to the
F proviso appended to Regulation 12 and not to the main part thereof, which
had been inserted only for the purpose of clarifying the phrase "change in
control" occurring therein.
The learned senior counsel would submit that where there is a mere
G cessor of control by one out of two persons already in control or where
any person or persons are given joint control and the combined degree of
control is not greater than being presently exercised, a resolution in a
general meeting is not necessary; since there is no change in control and,
thus, the question of any acquisition of control within the meaning of the
H main part of Regulation 12 would not arise. Proviso to Explanation (i) i.e.
SWEDISH MATCH AB v. SECURITIES & EXCHANGE BOARD [SINHA, J.] 761
cessor of control by one or more persons already in control, according to A
Mr. Nariman, imposes a further restriction if the transfer of joint to sole
.control is through sale of shares at less than the market value of the shares,
in which an event only a special Resolution is required to be passed al a
specially called meeting of the shareholders of the target company.
B
Without prejudice to the submissions as referred to hereinbefore, Mr.
Nariman would argue that once a direction has been issued by the Board,
the penalties specified in Regulation 44 including(~) criminal prosecution
under Section 24 of the Act; (b) monetary penalty under Section I SH of
the Act and (c) directions under the provisions of Section 1IB of the Act
may ensue but in the facts and circumstances of the case penal provisions c
should not have been directed to be resorted to having regard to the fact
that the Regulations contained no clear and unambiguous words to indicate
the true legal position. The penal provisions, it was contended, are required
to be strictly construed. Reliance in this connection has been made on
Francis Bennion's Statutory Interpretation, Third Edition, at page 637, D
Avais v. Hartford Shankhouse and District Workingmen 's Social Club and
Institute, Ltd., [1969] l All ER 130 at 135, The Seksaria Cotton Mills Ltd
v. The State of Bombay, [1953] SCR 825 at 834 and State of Bihar v.
Bhagirath Sharma and Another, [1973] 2 SCC 257 at 261.
E
Mr. Kirit N. Raval, learned senior counsel appearing on behalf of the
Respondent, on the other hand, would contend that the language in
Regulations IO, 11and12 of the Regulations bein_g clear and unambiguous,
this Court should apply the principles of literal interpretation. He would
urge that having regard to Explanation I appended to Regulation 12, the F
question of application of Regulation 12 would not arise inasmuch as by
reason thereof a transfer of control from joint owners (Swedish Match A.B.
and Jatia Group) to a single sole owner (Swedish Match Group) stands
excluded from the concept of "Change in Control".
Mr. Raval would submit that although the Board has accepted the G
position that there was no violation of Regulation 12, relying on or on the
basis of proviso appended thereto, the Tribunal has clearly held that there
has been no change in control in tenns of the Regulations and in that view
of the matter the opinion of the Tribunal shall prevail over that of the
Board. Reliance in this connection has been placed on S. Shanmugavel H
762 SUI-REME COURT REPORTS (2004] SUPP. 3 S.C.R.
A Nadar v. State of TN., (2002] 8 sec 361.
The learned counsel would strenuously urge that the application of
Regulation 11 cannot be excluded by bringing the transaction in question
as having been made under Regulation 12 in terms whereof an additional
B liability was required to be incurred by the Appellants. It was pointed out
that no disclosure has ever been made by the Appellants that in fact they
had intended to purchase the shares belonging to the Jatia Group at a price
of Rs. 35 as against the then prevailing market price of Rs. 9.55 per equity
share. In fact the stand of the Appellants had all along been that they would
not sell the shares below the market price and, thus, indicating that the
C shares would be sold at the prevailing market price.
Mr. Raval would urge that the Appellants withheld a very valuable
information from the shareholders i.e. the actual price of share being paid
to Jatia Group which would have otherwise become known to them if a
D public announcement of offer was made. If it is to be held that even in a
case of this nature no public announcement is to be made, the intent and
purport of the legislature in bringing Regulations 10, 11 and 12 to the
statute book with a view to protect the interest of the investors shall be
frustrated.
E
The learned counsel would further submit that the regulations were
amended only for the purpose of plugging the loopholes which existed in
0
the 1994 Regulations in terms of the recommendations of a Committee
consisting of experts in the fields of law, securities market, accounts,
finance, management etc. and, thus, if the interpretation of regulations as
F suggested by Mr. Nariman, is accepted, the same would frustrate the object
of bringing the said regulations. Reliance in this behalf has been placed
on Reserve Bank of India v. Peerless General Finance & Investment Co.
Ltd., (1987] 1 SCC 424 and Shashikant Laxman Kale & Ors. v. Union of
India and Anr., [I 990] 4 SCC 366.
G
The learned counsel would urge that RegulatiOns 14, 15 and 16
clearly make a distinction in the timing of offer to be made between
Regulations 10 and 1I on the one hand and Regulation 12, on the other,
having regard to the fact that process of action initiating the operation of
H Regulations I 0, I I and I 2 would be different.
SWEDISH MATCH AB v. SECUR!TIES & EXCHANGE BOARD [SINHA, J.) 763
In a given case, Mr. Raval would submit, a transaction may trigger A
both Regulations 1I and 12, in which event, an appropriate combined
notice of public announcement of offer may be issued.
Drawing our attention to Regulation 44, the learned counsel would
contend that in terms thereof the Board is not obliged to issue any direction B
only in terms of Clauses (a) to (d) thereofas the words "give such directions
as it deems fit including" must be held to be of wide amplitude. Clauses
(a) to (d) are only illustrative and not exhaustive and in th1t view of the
matter, the Board was within its jurisdiction to issue the impugned
. directions.
c
It was contended that the penal provisions contained in Section I SH
are not the subject matter of the present proceedings. Further, an order
which may be passed under Section 15H of the Act would be separate and
distinct.
D
ISSUE FOR DETERMINATION :
The core issue which falls for our determination is ·the interpretation
of Regulations I 0, 11 and 12. ·
STATUTORY PROVISIONS : E
The Securities and Exchange Board of India Act, 1992 was enacted
to provide for the establishment of a Board to protect the interests of
investors ii;i securities and to promote the development of, and to regulate,
the securities market and for matters connected therewith or incidental p
thereto.
Section 11 of the Act provides for functions of the Board which would
include registering and regulating the working of persons specified in
Clauses (b) and (ba). Section 11 A provides for the matters which are to
be disclosed by the companies. Section 11 B empowers the Board to issue G
directions as specified therein.
Chapter VIA of the Act deals with penalties and adjudication whereas
Section l 5A provides for penalty for failure to furnish information, return
etc., Section 15H provides for penalty for non-disclosure of acquisition of H
764 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A shares and takeovers which include a case where public announcement to
acquire shares at a minimum price is not made as required under the Act
or the rules or the regulations. Section 15H of the Act provides for a penalty
of twenty-five crores or three times the amount of profits made out of such
failure, which is higher. Section 151 confers power upon the Board to
B adjudicate in the event a penalty proceeding is directed to be initiated.
Section 15T deals with appeal to the Securities Appellate Tribunal. Section
15Z, which has been brought in the statute book by Act 59 of 2002,
provides for an appeal to this Court from any decision or order of the
Tribunal on any question of law arising thereunder.
c Regulation 2(e) of the Regulations defines "person acting in concert".
Regulation 3 inter alia contains an exclusionary clause stating that the
matters specified therein shall not apply to Regulations 10, 11 and 12.
Regulations 10, ll(i) and 12 of the Regulations read as under:
D
"10. Acquisition of [15%] or more of the shares or voting rights
of any company. 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
E acquirer to exercise fifteen percent or more of the voting rights
in a company, unless such acquirer makes a public announcement
to acquire shares of such company in accordance with the
Regulations.
11. Consolidation of holdings (1) No acquirer who, together with
F persons acting in concert with him, has acquired, in accordance
with the provisions of law, 15 per cent or more but less than 75
per cent of the shares or voting rights in a company, shall acquire,
either by himself or through or with persons acting in concert with
him, additional shares or voting rights entitling him to exercise
G more than 5% of the voting rights, in any period of 12 months,
unless such acquirer makes a public announcement to acquire
shares in accordance with the Regulations.
12. Acquisition of control over a company - Irrespective of
H whether or not there has been any acquisition of shares or voting
SWEDISH MATCH AB v. SECURITIES & EXCHANGE BOARD [SINHA, J.] 765
rights in a company, no acquirer shall acquire control over the A
target company, unless such person makes a public announcement
to acquire shares and acquires such shares in accordance with the
Regulations.
Provided that nothing contained herein shall apply to any change B
in control which takes place in pursuance to a resolution passed
by the shareholders in a general meeting.
Explanation : (i) For the purposes of this Regulation where there
are two or more persons in control over the target company, the
cessor of any one such person from such control shall not be C
deemed to be a change in control of management nor shall any
change in the nature and quantum of control amongst them
constitute change in control of management.
Provided however that if the transfer of joint control to sole D
control is through sale at less than the market value of the shares,
a shareholders meeting of the target company shall be convened
to determine mode of disposal of the shares of the outgoing
shareholder, by a letter of offer or by block-transfer to the existing
shareholders in control in accordance with the decision passed by
a special resolution. Market value in such cases shall be determined E
in accordance with Regulation 20.
(ii) where any person or persons are given joint control, such
control shall not be deemed to be a change in control so long as
the control given is equal to or less than the control exercised by F
person(s) presently having control over the company."
Regulation 14 provides for the timing of public announcement of
offer to the effect that the same shall be made not later than four working
days of entering into an agreement for acquisition of shares or voting rights G
or deciding to acquire shares or voting rights exceeding the respective
percentages specified therein. Clause (3) of Regulation 14 provides for
public announcement referred to in Regulation 12 to be made not later than
four working days after any such change or changes are decided to be made
as would result in the acquisition of control over the target company by
the acquirer. H
766 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A Regulation 14 provides for the mode and manner of the public
announcement to be made under Regulations I 0, 11 or 12 whereas
Regulation 16 specifies the contents thereof.
Regulation 44 of the Regulations reads as under:
B
"44. Directions by the Board-;- The Board may, in the interests
of the securities market, without prejudice to its right to initir.te
action including criminal prosecution under section 24 of the Act
give such directions as it deems fit including :
c (a) ***
(b) ***
(c) directing the person concerned to sell the shares acquired in
D violation 0f the provisions of these Regulations;"
Regulation 44, as amended in the year 2002, provides for several
directions. Clauses (f) and (i) thereof are in the following terms:
E "44. Directions by the Board. Without prejudice to its right to
initiate action under Chapter VIA and section 24 of the Act, the
Board may, in the interest of securities market or for protection
of interest of investors, issue such directions as it deems fit
including: -
F
(f) directing the person concerned to make public offer to the
shareholders of the target company to acquire such number of
shares at such offer price as determined by the Board;
G (i) directing the person concerned, who has failed to make a public
offer or delayed the making of a public offer in terms of these
Regulations, to pay to the shareholders, whose shares have been
accepted in the public offer made after the delay, the consideration
amount along with interest at the rate not less than the applicable
H rate of interest payable by banks on fixed deposits."
SWEDISH MATCH AB v. SECURITIES & EXCHANGE BOARD [SINHA, J.) 767
ANALYSIS: A
E'stablishment of independent regulatory agencies and need for expert
regulations were long felt primarily as a response to the growing complexity
in human affairs and trade and business in particular. It was felt that a
regulator who was aware of the realities of that field should be ready to B
regulate that field. Demand for regulators who were not mere Government
officials but people who are experts in the field came up. Regulations
framed by an expert body like SEBI was felt to be an effective substitute
for government regulation. The evolution in respect whereof can be traced
back to the Great Depression of 1930s. As a part of the new deal, several
expert bodies were established like the Federal Communications Commission C
and Securities Exchange Commission. In the Indian context, this rationale
was invoked for the establishment of an expert body to regulate the
securities market after the Securities Scam in 1992.
The statement of Objects and Reasons of the Act are as under : D
"Securities and Exchange Board of India (SEBI) was established
in 1988 through a Government resolution to promote orderly and
healthy growth ofthe securities market and for investors' protection.
SEBI has been monitoring the activities of stock exchanges,
mutual funds, merchant banks, etc., to achieve these goals. E
The capital market has witnessed tremendous growth in recent
times, characterized particularly by the increasing participation of
the public. Investors' confidence in the capital market can be
'' sustained largely by ensuring investors' protection. With this end F
in view, Government decided to vest SEBI immediately with
statutory powers required to deal effectively with all matters
relating to capital market. As Parliament was not in session, and
there was an urgent need to instill a sense of confidence in public
in the growth and stability of the market, the President promulgated G
the Securities and Exchange Board of India Ordinance, 1992
(Ord. 5of1992) on 30th January, 1992. The Bill seeks to replace
the aforesaid Ordinance".
Section 30 of the 1992 Act empowers the Board (the expert body)
to make regulations consistent with the Act and the rules made thereunder H
768 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A to carry out the purposes of the Act inter alia providing for :
"(c) the matters relating to issue of capital, transfer of securities
and other matters incidental thereto and the manner in which such
matters shall be disclosed by the companies under section I IA;"
B
SEBI made Regulations in the year 1994. The said regulations were
said to have many loopholes and, thus, the Bhagwati Committee consisting
of experts in different fields was set up to suggest amendments therein.
Regulations 1997 indisputably were made pursuant to or in furtherance of
C the recommendations made by the said Committee. It is also not in dispute
that whereas most of the recommendations made by the Bhagwati Committee
were accepted, some were not.
In the aforementioned backdrop, this Court has been called upon to
interpret the scope and ambit of Regulations I 0, 11 and 12.
D
Before we advert to the said question, we must bear in mind that the
said Regulations seek to protect the interests of the shareholders. Public
announcement of offer is one of the modes of protecting the interests of
the shareholders.
E
Interpretation Principles of :
It is a well-settled principle of law that where wordings of a statute
are absolutely clear and unambiguous recourse to different principles of
F interpretations may not be resorted to but where the words of a statute are
not so clear and unambiguous, the other principles of interpretation should
be resorted to.
SEBI was an expert body. It made regulations which were meant to
sub-serve the interests of investors as also promote and regulate the
G securities market.
Regulations 10, 11 and 12 ex-facie operate in three different fields.
They seek to control creeping acquisition which may lead to substantial
acquisition and ultimately total control of the company. There may,
H however, be a case where control of the company is sought to be taken
SWEDISH MATCH AB v. SECURITIES & EXCHANGE BOARD [SINHA, J.] 769
over by transfer of share only i.e. by a single transaction, in which event A
Regulations 11 and 12 both may apply.
We would at the outset proceed to consider the admitted fact of the
matter that both Swedish Match Group and Jatia Group were acquirers "in
concert with each other". They were in joint control ofWimco. Jatia Group B
intended to transfer the control of the target company by transferring their
shares in favour of Swedish Group.
APPLICABILITY OF REGULATIONS 11AND12:
With a view to arrive at an answer to the question, we may begin with C
Regulation 12. The said Regulation like Regulations IO and 11 also speaks
of public announcement. Such public announcement is required to be made
irrespective of whether or not there has been any acquisition of shares or
voting rights in a company. In either of the case, the acquirer is statutorily
required to make public announcement of acquisition of shares and control D
of the target company in accordance ·with the regulations. The proviso
appended to Regulation 12 carves out an exception as regard necessity of
making public announcement. Explanation appended to Regulation 12,
however, states that it would have no application where a change in control
takes place pursuant to a resolution passed by the shareholders in a general
meeting. As would be noticed shortly hereinafter, the proviso to Regulation E
12 cannot be said to have any application in the instant case as by reason
of the Explanation appended thereto, Regulation 12 would have no
application. Result in change in control over the target company in terms
of Regulation 12 would come into being in two situations; viz. (i) by
acquisition of share, or voting rights; or (ii) where there has been none. F
A control over the target company may be achieved by amending the
memorandum of association or by any other mode which necessitates a
resolution to be passed by the shareholders in a general meeting. The
expressions "in pursuance to a resolution passed by the shareholders in a G
general meeting" are crucial as the proviso will apply only when the change
of control over the target company takes place otherwise than by acquisition
of shares or voting rights.
The primal question would be as to whether Explanation (i) appended
to Regulation 12 would bring the matter out of the purview of the H
770 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A regulation? In the fact of the present case, it does. Explanation appended
to Regulation 12 postulates that where there are two or more persons in
control over the target company (here Swedish Match Group and Jatia
Group), the cessor of any one such person (Jatia Group) from such control
shall not be deemed to be a change in control of management nor shall
B any change in the nature and quantum of control amongst them constitute
change in control of management. By reason of the said Explanation, a
legal fiction has been created pursuant whereto or in furtherance whereof
applicability of Regulation 12 is excluded. Change of control contemplated
under Regulation 12 calls for a public announcement when the same is
C sought to be achieved by acquiring shares or voting rights. A change of
control in terms of Regulation 12 may also take place pursuant to a
resolution passed by the shareholders in a general meeting. Only in the
latter case the proviso which carves out an exception would be attracted.
The effect and purport of the first proviso may also be construed having
D regard to the second proviso appended thereto. The second proviso
appended to Regulation 12 takes within its fold a case where the joint
control to sole control is through sale at less than the market value of the
share. It, therefore, speaks of a different situation, namely, control by
transfer of joint control to sole control through sale was at less than the
E market value of the shares. In a case where the second proviso is attracted,
the Explanation (I) will have no role to play.
Situation, however, would be different when the transfer of joint
control to sole control takes place through sale at a price which is higher
than the market value of the shares leading to change in control over the
F target company, which cannot be done pursuant to a resolution passed by
the shareholders in a general meeting in terms of the first proviso. In other
words, in the event, the change in control is sought to be achieved by sale
of shares at a price higher than the market value of the share, Regulation
12 will clearly be attracted making public announcement imperative. Such
G public announcement evidently is required to be made having regard to the
fact that the interest of investors is required to be protected; pursuant
whereto and in furtherance whereof the shareholder would be informed of
the value of the share at which the transfer of control would take place so
as to enable him to exercise his option to sell his shares at the price offered
H by the acquirer or continue to keep the same.
SWEDISH MATCH AB v. SECURITIES & EXCHANGE BOARD [SINHA, J.) 771
A general meeting of the shareholders of the target company had A
taken place but the same does not sub-serve the requirements of law
inasmuch as, it would bear repetition to state, when transfer of control over
the target company takes place by reason of acquisition of shares at a price
higher than the market price the acquirer has a statutory obligation to make
the public announcement. Such a statutory requirement is not capable of B
being waived by the majority shareholders. In this case, the records reveal
that the shareholders were not informed that although the market value of
the share was about Rs. 9.55, Jatia Group was offered the price of Rs. 35
per equity share. It was merely disclosed that such acquisition would not
be at a price lower than the market price. If such transfer was to take place C
/ at a price less than the market price, the second proviso appended to
Regulation 12 would have been attracted. It was, therefore, obligatory on
the part of the acquirer to furnish correct information as regard the price
- which was being offered to Jatia Group.
There may be cases where to some extent Regulations 11 and 12 may D
overlap. But Regulations 14, 15 and 16 clearly postulate that public
announcement is required to be made in relation to transfer of shares
attracting Regulations I0 or 11 not later than four working days of entering
into an agreement for acquisition of shares or voting rights or deciding to
acquire shares or voting rights exceeding the respective percentage specified E
therein and in case of acquisition of control in terms of Regulation 12; not
later than four working days after any such change or changes are decided
to be made as would result in the acquisition of control over the target
company by the acquirer.
In a given situation, a public announcement can be made upon F
compliance of both Regulations 11 and 12.
It is also not a case where Regulation 3 will have any application.
Admittedly, the Appellants did not claim any exemption in terms of
Regulation 3 nor were they eligible therefor. It is also not a case where G
change in control had taken place by reason of inheritance or succession
but by reason of conscious act of transfer of shares by one acquirer from
another.
In a case of this nature, thus, Regulation 12 would not apply, the
logical corollary whereof would be that Regulation 11 will apply. H
772 SUPREME COURT REPORTS [2004) SUPP. 3 S.C.R.
A Let us now consider the legal principles as regard 'Proviso and
Explanation'.
In S. Sundaram Pillai, Etc. v. VR. Pattabiraman, AIR (1985) SC 582,
a 3-Judge Bench of this Court held that proviso may serve four different
B purposes, namely:
"(I) qualifying or excepting certain provisions from the main
enactment;
c
(2) it may entirely change the very concept of the intendment of
the enactment by in~isting on certain mandatory conditions to be
1
fulfilled in order to make the enactment workable;
-
(3) it may be so embedded in the Act itself as to become an
integral part of the enactment and thus acquire the tenor and
D colour of the substantive enactment itself; and
(4) it may be used merely to act as an optional addenda to the
enactment with the sole object of explaining the real intendment
of the statutory provision."
E Proviso to Regulation 12 exempts only a part of the main enactment.
It does not t~ke within its umbrage both the situations contemplated under
Regulation 12.
As regard functions of an Explanation, it was opined:
F
"52(a) to explain the meaning and intendment of the Act itself,
(b) where there is any obscurity or vagueness in the main
enactment, to clarify the same so as to make it consistent with the
dominant object which it seems to subserve,
G
(c) to provide an additional support to the dominant object of the
Act in order to make it meaningful and purposeful,
(d) an Explanation cannot in any way interfere with or change the
H enactment or any pa11 thereof but where some gap is left which
SWEDISH MATCH AB v. SECURITIES & EXCHANGE BOARD [SINHA, J.] 773
is relevant for the purpose of the Explanation, in order to suppress A
the mischief and advance the object of the Act it can help or assist
the Court in interpreting the true purport and intendment of the
enactment, and
(e) it cannot, however, take away a statutory right with which any B
person under a statute has been clothed or set at naught the
working of an Act by becoming an hindrance in the interpretation
of the same."
The Explanation was inserted evidently with a view to clear the
obscurity occurring in Regulation 12 as regard a class of cases of cessation C
of joint control to sole control.
In Laxminarayan R. Bhattad and Others v. State ofMaharashtra and
Others, [2003) 5 SCC 413 this Court held that the proviso acted as an
exception to the main provision but such an exception must be strictly D
construed and confined to the intent of the legislature.
[See also Ali MK. and Others v. State of Kera/a and Others, [2003)
11 SCC 632 and Union of India v. Sanjay Kumar Jain, JT (2004) 6 SC
318.
E
In Dipak Chandra Ruhidas v. Chandan Kumar Sarkar, [2003] 7 SCC
66 it was held that in a case where a legal fiction created in the Explanation
was construed to be validly made as thereby main provision was made
absolutely clear and explicit, the legal fiction so created must also be given
its full effect.
F
It is true that Regulation 12 could have been better worded but the
application of Regulations 11 and 12 in a case of this nature is free from
doubt. This is not a case where having regard to the explanations in the
provisos and reading the provision in the manner we have done, it stands
obscure. The Explanations (i) and (ii) are not Explanations to the provi3os G
but the main part thereof. It would, therefore, be not correct to contend that
where there is a mere cessor of control by one out of two persons already
in control or where any person or persons are given joint control and the
combined degree of control is not greater than being presently exercised,
a Resolution in general meeting would sub-serve the purpose, is devoid of H
774 SUPREME COURT REPORTS [2004) SUPP. 3 S.C.R.
A any merit as change in control has taken place by reason of acquisition of
shares from another person in control. Having regard to the fact that the
price offered to Jatia Group was higher than the market price, a public
announcement was imperative so as to enable the shareholders to elect as
to whether to sell their shares held by them or not. No exemption from
B public announcement has been carved out by reason of the proviso
appended to Regulation 12 as in terms of the Explanation, Regulation 12
would have no application.
The purported resolution dated 27.9.2000 reads as under:
C "Resolved that the cession of their participation in the joint control
of the company by the Jatia Group as of the date hereof such that
Swedish Match AB and its subsidiary are in sole control of the
company be and is hereby approved."
D The said resolution is of no avail in the fact of the matter as neither
the proviso nor the second explanation appended to Regulation 12 is
attracted.
Furthermore, only because Regulation 12 also speaks of public
announcement, the same by itself would not exempt the acquirer from
E making a public announcement in terms of clause (!) of Regulation 11.
WAS THERE ANY REQUIREMENT TO COMPLY WITH REGULATION
11?
With a view to advert to the question, the admitted facts may be
F noticed.
Swedish Match Singapore agreed' to acquire majority shareholding in
Haravon and Seed subsequent to 17th December, 1997 wherefor the public
offer was made. S.M.S. comprising ofHaravon and Seed had 28.28% and
G I 0.33% whereas Jatia Group comprising of A VP and Plash had 5% and
15% respectively whereas public/others had 41.39% shares. In concert with
each other the two Groups acquired shares from public. On or about 25th
August, 1999 by acquiring preferential shares the Swedish Match Group
obtained 52.11 % and Jatia Group obtained 24.11 % as a result whereof in
H Wimco the shares held by public/others came down to 23.78%. Both
SWEDISH MATCH AB v. SECURITIES & EXCHANGE BOARD [SINHA, J.] 775
Swedish Group and Jatia Group were exercising the joint control. By A
reason of Jatia Group opting out of the joint control by transfer of shares
in favour of Swedish Match Singapore, a subsidiary of Swedish Match AB
(a part of Swedish Match Group) obtained 74% of shares whereas shares
i.e. Haravon 46.18%, Seed 5.93% and SMS 21.89%. Thus, the extent of
shares of Jatia Group came down to 2.22%. Jatia Group sold their shares B
to public as a result whereof shares of public became 23.78%. S.M.S. is
a subsidiary of the Singapore Match Group. The Swedish Match is the
holding company being the owner of the 100% shares of SMS. It stands
categorically admitted by the Appellants herein that acquisition of shares
from Jatia Group in favour of SMS was done by the Swedish company as
a group and not as an individual company. Factually, therefore, it is not C
correct to contend, although in its notice dated 28. 1.2002, SEBI had given
indication thereof, that SMS had acquired 21.89% shares of its own. Even
ifSMS had done so, Regulation IO would apply as no public announcement
was made therefor.
D
S.M.S. was a part of the Swedish Match Group and they acquired
21.89% shares from Jatia Group. On or about 25th August, 1999,
indisputably, Swedish Group and Jatia Group acted in concert with each
other. By reason of acquisition made in September, 2000, Swedish Group,
as acquirer, together with Jatia Group, had acquired more than 15% bµt E
less than 75% of shares. Any of those acquirers whether Swedish Match
Group or Jatia Group, therefore, was prohibited from acquiring by itself
any additional share entitling it to exercise more than 5% of the voting
rights. Regulation 11 does not brook any other interpretation. If additional
shares are acquired entitling an acquirer to exercise more than 5% of th~ F
voting rights, the statutory embargo to the effect that the acquirer (in this
case Swedish Match Group) must make a public announcement to acquire
shares in accordance with the Regulation comes into operation.
The words "additional shares" are not terms of art. It speaks of
acquisition of shares in addition to what it had got. Such acqui~ition of G
additional shares may be either from public or from a person with whom
at one point of time the acquirer had acted in concert. If such a meaning
is not assigned, the disjunctive clauses contained in the expressions "either
by himself or through or with person acting in concert with him" may not
carry a true and effective meaning. H
776 SUPREME COURT REPORTS [2004) SUPP. 3 'l.C.R.
A The pre-conditions attracting Regulation 11 are: (i) that an acquirer
had acquired shares in concert with another; (ii) such acquisition was more
than 15% but less than 50% of the shares or voting rights in a company;
(iii) in the event, the acquirer intends to acquire such additional shares or
voting rights which would allow him to exercise more than 5% of the
B voting rights within a period of 12 months, public announcement is
required to be made therefor. (iv) such acquisition of additional shares
contemplates three different situations, i.e., the acquisition may be by
acquirer himself or through or with the person acting in concert with the
person with whom they had acquired sh~.res earlier in concert with each
other.
c
Regulation 11, therefore, contemplates both situations, namely, where
substantial acquisition of shares may result in change of control and where
it does not. Only because in a case where acquisition of additional shares
may result in change of control, the same by itself would not exempt the
D acquirer from complying with the statutory requirement of Regulation 11.
Primarily, Regulations 10, 11 and 12 operate in different fields which is
manifested from a plain reading of Regulations 14, 15 and 16. We may,
however, hasten to add that there may be a situation where Regulations
11 ·and 12 may overlap with each other, in which event, it would be open
E to the acquirer to issue a combined notice fulfilling the requirement of both
Regulations 11 and 12.
Indisputably, the purport and object of which a regulation is made
must be duly fulfilled. Public announcement is at the base of Regulations
F l 0, 11 and 12. Except in a situation which would bring the case within one
or the other 'exception clause', the requirement of complying with the
mandatory requirements to make public announcement cannot be dispensed
with.
Admittedly in this case no public announcement has been made.
G
It may be true that the Board in its impugned order dated 4th June,
2002 proceeded on a wrong premise that having regard to the proviso
appended to Regulation 12, Regulation 12 would be attracted. But the SAT,
in our opinion, rightly construed the provisions of Regulations 11 and 12
H in arriving at a finding that Regulation 11 would be attracted and
SWEDISH MATCH AB v. SECURITIES & EXCHANGE BOARD [SINHA, J.] 777
Regulation 12 would not be. The tribunal was entitled to take a different A
view of the matter from that of the Board with a view to sustain the ultimate
result in the appeal in exercise of its appellate power. Such a power in the
appellate court/ tribunal is akin to or analogous to the principles contained
in Order 41 Rule 33 of Code of Civil Procedure. Even otherwise before
us the judgment of the Tribunal is in question, this Court is required to B
consider the correctness or otherwise of the Tribunal. In any event, the
reasonings of the tribunal shall prevail over the Board. (See S. Shanmugavel
Nadar (supra), para 17)
Although we do not find any difficulty in construing the provisions
of Regulations 11and12 but assuming Regulations 11 and 12 are not clear, C
the rule of purposive construction should be taken recourse to.
It is now trite that when an expression is capable of more than one
meaning, the Court would attempt to resolve that ambiguity' in a manner
consistent with the purpose of the provisions and with regard to the D
consequences of the alternative constructions. (See Clark & Tokeley Ltd.
(t/a Spellbrook) v. Oakes, [1998] 4 All ER 353.
In Anwar Hasan Khan v. Mohd. Shafi and Others, [2001] 8 SCC 540,
this Court held:
E
"8 .. .lt is a cardinal principle of construction of a statute that effort
should be made in construing its provisions by avoiding a conflict
and adopting a harmonious construction. The statute or rules made
thereunder should be read as a whole and one provision should
be construed with reference to the other provision to make the F
provision consistent with the object sought to be achieved .... "
In Inland Revenue Commissioners v. Trustees of Sir John Aird's
Settlement, [1984] Ch. 382, it is stated:
"Two methods of statutory interpretation have at times been G
adopted by the court. One, sometimes called literalist, is to make
a meticulous examination of the precise words used. The other
sometimes called purposive, is to consider the object of the
relevant provision in the light of the other provisions of the
Act - the general intendment of the provisions. They are not H
778 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A mutually exclusive and both have their part to play even in the
interpretation of a taxing statute."
It was also observed:
B "Where there is an exemption provision in a fiscal statute the onus
is on a taxpayer to show that the exemption applies: Barron v.
Littman, [1953] A.C. 96 and Imperial Chemical Industries Ltd. v.
Caro, [1961] I W.L.R. 529."
In Indian Handicrafts Emporium and Others v. Union of India and
C Others, [2003] 7 SCC 589 this Court referred to various decisions including
Peerless General Finance (supra) whereupon the Appellate Tribunal as
also Mr. Raval placed strong reliance expounding the theories of purposive
construction. (See also Ramesh Mehta v. Sanwal Chand Singhvi and Ors,
JT [2004] Suppl. I SC 274
D
Regulations I 0, II and 12 were amended in the year, 1997 having
regard to the fact that the 1994 Regulations contained many loopholes, and,
thus, the mischief rule should be resorted to so as to suppress the mischief
which would have surfaced had the literal rule been allowed to cover the
E field. [See Reema Aggarwal v. Anupam and Others, [2004] 3 sec 199].
IS STRICT CONSTRUCTION OF THE REGULATION CALLED FOR?
A penal statute indisputably is required to be strictly construed. But
F a different situation may arise if the penalty is sought to be levied as a result
of failure on the part of the person statutorily obliged to comply with the
statutory provisions which are imperative in nature.
There may not be any doubt or dispute as regard the proposition that
when words employed in a penal statute are not clear, the principle 'against
G doubtful penalisation' would be applied.
In Francis Bennion's Statutory Interpretation, Fourth Edition, at page
704, Section 271 it is stated that principle against penalization under a
doubtful statute is a legal policy which would apply in a given situation
H but the learned Author himself states that different consequences of
SWEDISH MATCH AB v. SECURITIES & EXCHANGE BOARD [SINHA, J.] 779
enactments are possible depending upon the text and context of the statute. A
In the same treatise at page 367, it is stated:
"(2) A construction put forward may rely entirely on the literal
meaning, or may elaborate (but still correspond to) the literal
meaning, or may depart from the literal meaning in favour of a B
strained meaning. The court, where it considers (or prefers to say)
that the literal meaning is unambiguous, will tend to decide in
favour of what it regards as the unglossed literal meaning and
reject other versions."
Referring to Trustees of Sir John Aird's Settlement (supra), the C
learned Author at pages 368 & 369 states:
"Subsection (2) Where the enactment is grammatically ambiguous,
the opposing constructions put forward are likely to be alternative
meanings each of which is grammatically possible. Where on the D
other hand the enactment is grammatically capable of one meaning
only, the opposing constructions are likely to contrast an
emphasized version of the literal meaning with a strained
construction. In the latter case the court will tend to prefer t~e
literal meaning, wishing to reject the idea that there is any doubt. E
Example 149.2 In a tax avoidance case concerning capital transfer
tax, the Court of Appeal were called on to construe the Finance
Act 197 5 Sch 5 para 6(7) as originally enacted. Counsel for the
Inland Revenue put forward several alternative arguments on F
construction, but the court preferred the one based on the unglossed
literal meaning. It may be conjectured however that the other
arguments helped to convince the court that the Inland Revenue's
case was to be preferred."
Failure to comply with a statute may attract penalty. But only because G
a statute attracts penalty for failure to comply with the statutory provisions,
the same in all situations would not call for a strict construction. A statute
ordinarily must be literally construed. Such a literal construction woi;ld not
be denied only because the consequence to comply the same may lead to
a penalty. This aspect of the matter has been considered by this Court in H
780 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A Indian Handicrafts Emporium (supra). Proceeding on the basis that there
existed a dichotomy, the Court ultimately held that the resolution will have
to be reached by reading the entire statute as a whole. [See also Reema
Aggarwal (supra)]
B In Bairam Kumawat v. Union ofIndia and Others, (2003] 7 sec 628
this Court held:
"The Courts will therefore reject that construction which will
defeat the plain intention of the Legislature even though there may
be some inexactitude in the language used. (See Salmon v.
c Duncombe (1886] 11 AC 627 at 634. Reducing the legislation
futility shall be avoided and in a case where the intention of the
Legislature cannot be given effect to, the Courts would accept the
bolder construction for the purpose of bringing about an effective
result. The Courts, when rule of purposive construction is gaining
D momentum, should be very reluctant to hold that the Parliament
has achieved nothing by the language it used when it is tolerably
plain what it seeks to achieve. (See BBC Ente1prises v. Hi-Tech
Xtravision Ltd., [1990] 2 All ER 118 at 122-3)"
Referring to its earlier decisions, this Court :
E
"36. These decisions are authorities for the proposition that the
rule of strict construction of a regulatory/penal statute may not be
adhered to, if thereby the plain intention of the Parliament to
combat <:rimes of special nature would be defeated."
F
Let us now consider the decisions relied upon by Mr. Nariman.
In Avais (supra), the House of Lords was concerned with the
construction of the meaning applied in Gaming machine. In that case itself,
it was held:
G
"The task of the courts is to ascertain in any particular case
whether the conditions have been (or, as in this case, would be)
complied with or not. There is no evident reason for interpreting
the conditions otherwise than according to their natural meaning.
H Indeed, there is this point to be borne in mind in favour of a literal
SWEDISH MATCH AB v. SECURITIES & EXCHANGE BOARD [SINHA, J.] 781
construction. If the conditions are not complied with, the club A
officials who allow the club premises to be used for the gaming
are guilty of criminal offences. The Act would be setting a trap
for them, if by some artificial construction of the provisions an
apparently innocent financial agreement (such as accepting from
the owner of the machines a guarantee of the club's takings) were B
held to involve or lead to a breach of the conditions."
The said decision, thus, runs counter to the submissions of
Mr. Nariman. In this case also conditions are imposed in the matter
of acquisition of shares. If the conditions have not been complied with, C
the Act having set up a trap for them, the logical consequences would
ensue.
In The Seksaria Cotton Mills Ltd. (supra), the Court was dealing with
the activities bf a welfare agent vis-a-vis the meaning of 'possession' in
the relevant Act. The Court found: D
"The facts are truly and accurately given according to the popular
and natural meaning of the words used; nothing was hidden. The
goods did reach the quota-holder in the end, or rather his proper
agent, and we cannot see what anyone could stand to gain in an E
unauthorised way over the very natural mistake which occurred
owing to what seems to have been a time-lag in the consequences
of a change of agency. So, even if there was a technical breach
of the law, it was not one which called for the severe strictures
which are to be found in the trial court's judgment and certainly F
not for the savage sentences which the learned Magistrate imposed.
In the High Court also we feel a nominal fine would have met
the ends of justice even on the view the learned Judges took of
the law."
In the aforementioned backdrop only, it was held: G
"In a penal statute of this kind it is our duty to interpret words
of ambiguous meaning in a broad and liberal sense so that they
will not become traps for honest, unlearned (in the law) and
unwa1y men. If there is honest and substantial compliance with H
782 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A an array of puzzling directions, that should be enough even if on
some hypercritical view of the law other ingenious meanings can
be devised."
This is a case of non-compliance of mandato1y statutory provisions
B and not of substantial compliance. It is also not a case involving unlearned
or unwary men.
In Bhagirath Sharma (supra), the question which fell for consideration
was whether 'tube' is included within the expression 'tyre'. Keeping in
view the provisions of the Essential Commodities - Prices and Stocks
C (Display and Control) Order, 1967, this Court applied the rule of strict
construction.
Regulations being regulatory in nature, the intent and object sought
to be achieved thereby must be firmly applied with. In this view of the
D matter, we are of the opinion that Regulations do not deserve strict
construction so as to hold that even a public offer was not necessary.
ANOTHER FACET OF THE CASE:
Having held so, would it be proper for this Court to direct the Board
E not to take any penal action against the Appellants?
The Board is an expert body. As a legislature, it makes the regulations,
as an executive, it implements the legislation and in case of a breach it takes
upon a quasi-judicial function. While functioning in its judicial capacity,
F it has wide discretion. It can initiate criminal proceedings in terms of
Section 24 of the Act, issue directions in terms of Section 11-B
and Regulation 44 as also take recourse to penal provisions as contained
in Section 24 and Chapter VI-A of the Act. Its decision is final subject to
the decision of the Tribunal. But the sequence of events, as noticed
G hereinbefore, clearly go to show that even the Board was not sure of the
legal position.
It in no uncertain terms held:
"As the said change from joint to sole control took place in
H pursuance to a resolution passed by the shareholders in general
SWEDISH MATCH AB v. SECURITIES & EXCHANGE BOARD [SINHA, J.] 783
meeting, the same would not trigger Regulation 12, same being A
covered under proviso to Regulation 12."
The Board even did not think it fit to apply the Explanation appended
to Regulation 12 in its proper perspective.
B
It is only the Tribunal at a later stage came to a clear finding that
proviso appended to Regulation 12 will have no application and Explanation
would.
Before us also the Counsel read the regulations in question over and
over again. Focus on certain words was placed differently at different C
times. It is only after considering the matter from different angles, we have
been able to arrive at a definite conclusion.
In Trustees of Sir John Aird's Settlement (supra) upon taking into
consideration several alternative arguments on construction of the Finance D
Act 1975 Schedule 5 para 6(7) as originally enacted, the Court preferred
the one based on the unglossed literal meaning.
The adversarial system prevailing in India allows a counsel to put
forward construction of the enactment in question relying on several E
alternative arguments and the Court may ultiniately base its judgment on
unglossed literal meaning. (See Example 149.5 of Francis Bennion's
Statutory Interpretation, Fourth Edition, page 371).
In the aforementioned backdrop, this Court thought it fit to consider F
as to whether in exercise of its jurisdiction under Article 142 of the
Constitution of India a direction should be issued directing the Board to
forbear from proceeding under Section l 5H of the Act against the
Appellant.
It is accepted that once a public offer is made the investors would G
be entitled to elect to transfer their shares at a higher price which may be
offered by the acquirer with a view to acquire control over the target
company. The investors would also be entitled to interest at such rate as
the Board may determine. The provisions of Section 15H of the Act
mandates that a penalty of rupees twenty-five crore may" be imposed. The H
784 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R.
A Board does not have any discretion in the matter and, thus, the adjudication
proceeding is a mere formality. Imposition of penalty upon the Appellant
would, thus, be a forgone conclusion. -Only in the criminal proceedings
initiated against the Appellants, existence of mens rea on the p.1rt of the
Appellants will come up for consideration.
B
We, therefore, are of the opinion that it is a fit case where this Court
should exercise its jurisdiction under Article 142 of the Constitution to
direct the Board to forbear from proc~edings with the adjudication
proceeding against the Appellants. This may not, however, be treated to
C be a precedent.
These appeals are allowed in part and to the extent ment!oned
hereinbefore. In the facts and circumstances of this case, there shall be no
order as to costs.
D S.K.S. Appeal partly allowed.
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