2004 Supreme(SC) 959

2004(7) Supreme 615
SUPREME COURT OF INDIA
(From Securities Appellate Tribunal, Mumbai)
N. Santosh Hegde, S.B. Sinha & A.K. Mathur, JJ.
Swedish Match AB & Anr. -Appellants
versus
Securities & Exchange Board, India & Anr. -Respondents
Civil Appeal No. 2361 of 2003
Decided on 25-8-2004
Counsel for the Parties :
For the Appellants : F.S. Nariman, Sr. Advocate, Rahul P. Dave, Robin R. David, Himanshu Narain, Anuj, Dinesh Banth, Atul Sud and Mrs. Shiraz Contractor Patodia, Advocates.
For the Respondents : Kirit N. Raval, Sr. Advocate, Bhargava V. Desai, Sanjeev Kumar Singh, Pradeep Kumar Malik, E.C. Agrawala, K.K. Rai and Shrish Kumar Misra, Advocates.

IMPORTANT POINT
Public announcement is at the base of Regulations 10, 11 and 12 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 and 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.

Headnote:(i) Securities and Exchange Board of India Act, 1992-Sections 11A, 11B, 15A, 15H, 15T, 15Z and 24-SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 1997-Regulations 10, 11 and 12-Companies Act, 1956-Sections 81(1)(A)-Acquisition of shares-Change of control of target company-Requirement of complying with mandatory requirements to make public announcement-Appellant company, Swedish Match incorporated in Sweden is a holding company of appellant 2, SMS holding its entire paid up capital-It is also holding company of Haravon Investments and Seed Trading-Swedish Match entered into an agreement with Jatia Group to acquire majority shareholding in Haravon and Seed and to make a public announcement of offer to acquire 20 shares in Wimco-Subsequent to April 1998, the said groups were exercising joint control over the affairs of Wimco-Target company, Wimco allotted shares on a preferential allotment basis to Haravon , AVP and Plash -Shareholding of Seed diluted to 5.93 from 10.33 -Increase of foreign collaboration-Swedish Match Group acquired 74 shareholdings and Jatia Group left with 2.22 in Wimco-Price offered to Jatia group was higher than the market price-Sole control of Swedish Match Group-Cessation of joint control-No public announcement of the offer had been made-Show cause notice-Whether requirement of complying with mandatory requirements to make public announcement can be dispensed with-(No)-Whether in exercise of its jurisdiction under Article 142 of the Constitution a direction can be issued directing the Board to forbear from proceeding under Section 15H of the Act against appellant-(Yes)-Constitution of India-Article 142.

       Held : 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 of Haravon and Seed had 28.28 and 10.33 whereas Jatia Group comprising of AVP 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 Wimco the shares held by public/others came down to 23.78 . Both Swedish Group and Jatia Group were exercising the joint control. By 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 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 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 if SMS had done so, Regulation 10 would apply as no public announcement was made therefor. 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 but 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 the 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 acquisition of 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. 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 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 shares earlier in concert with each other. 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 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 to the acquirer to issue a combined notice fulfilling the requirement of both Regulations 11 and 12. (Paras 76 to 80)

       It is accepted that once a public offer is made the investors would 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 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 part of the Appellants will come up for consideration. 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 proceedings with the adjudication proceeding against the Appellants. This may not, however, be treated to be a precedent. (Paras 110 and 111)

       (ii) INTERPRETATION OF STATUTES-Purposive Construction-When an expression is capable of more than one meaning-Court would attempt to resolve that ambiguity in a manner consistent with purpose of provisions and with regard to consequences of alternative constructions. (Para 85)

       (iii) INTERPRETATION OF STATUTES-Strict Construction-Penal statute is required to be strictly construed-When words employed in a penal statute are not clear-Principle against doubtful penalisation would be applied.

       Held : 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 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 employs are not clear, the principle against 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 but the learned Author himself states that different consequences of enactments are possible depending upon the text and context of the statute. (Paras 90 to 92)

       Failure to comply with a statute may attract penalty. But only because 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 would not be denied only because the consequence to comply with same may lead to a penalty. (Para 94)