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The Securities Appellate Tribunal (SAT), while hearing various appeals relating to transactions, ruled on important provisions of the Takeover Code. The Takeover Code, which essentially deals with acquisition, was heavily examined when the appellants challenged orders of the Securities and Exchange Board of India (SEBI), specifically under Regulation 11(2) of the SEBI (Substantial Acquisitions of Shares and Takeovers) Regulations, 1997.
Regulation 11(2) does not permit any person who already own 55%-75% shares of the targeted company to acquire more shares, without making a public announcement. However, if the acquisition is not made through a ‘bulk deal’ the person may be exempted to buy 5% shares. The counsel for SEBI argued that one of the appellants had violated this proviso, but the appellant relied on the ambiguity surrounding what a ‘bulk deal’ entails. There were primarily two questions before the tribunal –
The SAT answered the first in affirmative and the second in negative. It stated there needs to be an examination of not only what the Regulation says, but also its intent. They held the appellants guilty of violating the Regulation 11 (2) while examining the first issue. Further, while deciding upon the second question, the Tribunal also placed reliance on a 2009 SEBI circular which stated that the 5% voting rights could be acquired in one or more tranches, making it abundantly clear that it could be acquired even in a single transaction and hence, dismissed SEBI’s argument.
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