121R

BEFORE THE SUPREME COURT OF INDIA

AT NEW DELHI

Civil Appeal No.___/ 2016

DREAMSELLERS LTD. (REPRESENTED BY DIRECTOR)

APPELLANT
v
SECURITIES AND EXCHANGE BOARD OF INDIA (REPRESENTED BY LEGAL OFFICER)
RESPONDENT

2016

MEMORIAL ON BEHALF OF THE RESPONDENT

TABLE OF CONTENTS

List of Abbreviations ................................................................................................................. 5

Index of Authorities ................................................................................................................... 6
Statement of Jurisdiction............................................................................................................ 8
Statement of Facts ...................................................................................................................... 9
Issues Raised ............................................................................................................................ 11
I.

Whether the provisions of Regulation 23 of the 2011 Takeover Regulations relating to

withdrawal of open offer could be applied to an open offer made under the 1997 Takeover
Regulations? ......................................................................................................................... 11
II.

Whether it can be said that the Appellant had failed to exercise due diligence and the

facts relating to the fraud were known or could have been known by the Appellant, if
the Appellant had exercised proper due diligence? .......................................................... 11
III.

Whether the Respondent had violated the principles of natural justice in the present

case while passing its order rejecting the application to withdraw the open offer without
hearing the Appellant? ......................................................................................................... 11
IV.

Whether Regulation 27(1)(d) of the 1997 Takeover Regulations is to be given an

interpretation whereby, the words such circumstances as in the opinion of the Board merit
withdrawal are to be read ejusdem generis with the other provisions of Regulation 27(1) of
the said code i.e. as circumstances where it is impossible to perform the open offer? ........ 11
Summary .................................................................................................................................. 12
Arguments Advanced............................................................................................................... 14
I.

The provisions of Regulation 23 of the 2011 Takeover Regulations relating to

withdrawal of open offer cannot be applied to an open offer made under the 1997 Takeover
Regulations. ......................................................................................................................... 14
i.

Regulation 23 of the 2011 Takeover Regulations expressly requires that such an open

offer be continued and completed under the 1997 Takeover Regulations....................... 14

ii.

The Appellants letter seeking withdrawal and the Respondents observations on

it would remain unaffected as if the 1997 Takeover Regulations had never been repealed.
............................................................................................................................... 15
2

iii.

A voluntary open offer is not covered under Regulation 23(1)(c) of the 2011

Takeover Regulations. ..................................................................................................... 16

II.

The Appellant had failed to exercise due diligence and the facts relating to the fraud

were known or could have been known by the Appellant, if the Appellant had exercised
proper due diligence ......................................................................................................... 16
i.

The Appellant failed to exercise due diligence and did not fulfil the duty of taking

proper care before making the open offer. ....................................................................... 17

ii.

The facts leading to the knowledge of the siphoning and embezzlement of the funds

were known or could have been known had the Appellants exercised proper due diligence.
............................................................................................................................... 18
III.

The Respondent did not violate the principles of natural justice in the present case

while passing its order rejecting the application to withdraw the open offer without hearing
the Appellant. ....................................................................................................................... 19
i.

Application of the principles of natural justice is not absolute in nature. ................. 20

ii.

Personal hearing is not required to be granted in all circumstances. ..................... 20

iii.

The Appellant did not suffer any prejudice. .......................................................... 21

IV.

The words such circumstances as in the opinion of the Board merit withdrawal

appearing in Regulation 27(1)(D) of the 1997 Takeover Regulations should be read ejusdem
generis with the preceding clauses of Regulation 27(1). ..................................................... 22
i.

Regulation 27(1)(d) has to be read in context of Regulation 27(1) as it stands after

amendment in 2002. ......................................................................................................... 22

ii.

The tests for the application of the rule of ejusdem generis are satisfied by

Regulation 27. .................................................................................................................. 23

iii.

The rule of ejusdem generis is not made inapplicable through indications of a

different legislative intent. ............................................................................................... 24

a. The wisdom of the Legislature is presumed while interpreting statutes. .................. 24
b.

The ejusdem generis interpretation of Regulation 27(1)(d) is in harmony with the

scheme, objective and policy of the 1997 Takeover Regulations and the SEBI Act, 1992 .
. .............................................................................................................................. 25

iv.

Clauses (b) to (d) of Regulation 27(1) are in the nature of exceptions and should be

construed strictly. ............................................................................................................. 27

Prayer ....................................................................................................................................... 28

LIST OF ABBREVIATIONS
%

Per cent

&

and

Section

Paragraph

AIR

All India Reporter

i.e.

that is

Id.

Idem

ILR

Indian Law Reports

Ltd.

Limited

M/s

Messrs

Pvt.

Private

Rs.

Rupees

SAT

Securities Appellate Tribunal

SC

Supreme Court

SCC

Supreme Court Cases

SEBI

Securities and Exchange Board of India

Versus

INDEX OF AUTHORITIES
Judgements
Ali M.K. v State of Kerala, (2003) 11 SCC 632 ...................................................................... 27
Amar Chandra v Collector of Excise, Tripura, (1972) 2 SCC 472 .................................... 23, 24
Balram Kumawat v Union of India, (2003) 7 SCC 628 .......................................................... 24
Commissioner of Agricultural Income Tax, Bengal v Sri Keshab Chandra Mandal, AIR 1950
SC 265.................................................................................................................................. 14
Harbans Lal (Dead) v Sales-Tax Officer, ILR (1977) Del 212 ............................................... 24
J.A. Naiksatam v Prothonotary and Senior Master, High Court of Bombay, (2004) 8 SCC 653
.............................................................................................................................................. 20
Karnataka Public Service Commission v B.M. Vijaya Shankar, (1992) 2 SCC 206 .............. 20
Krishna Swami v Union of India (1992) 4 SCC 605 ............................................................... 21
Madhya Pradesh Industries Ltd. v Union of India, AIR 1966 SC 671 .................................... 20
Maharashtra University of Health Sciences v Satchikitsa Prasarak Mandal, (2010) 3 SCC 876
.............................................................................................................................................. 24
Managing Director, ECIL, Hyderabad v Karunakar, (1993) 4 SCC 727 ................................ 20
Minerva Mills v Union of India, (1986) 4 SCC 222 ................................................................ 20
Nathi Devi v Radha Devi Gupta, (2005) 2 SCC 271 ............................................................... 25
Nirma Industries Ltd. v SEBI, (2013) 8 SCC 20 ................................. 16, 17, 19, 20, 23, 25, 26
Onkarlal Nandlal v State of Rajasthan, (1985) 4 SCC 404...................................................... 22
R.S. Dass v Union of India, 1986 Supp SCC 617.................................................................... 21
SEBI v Akshya Infrastructure Pvt. Ltd., (2014) 11 SCC 112 ...................................... 16, 21, 22
Shadi Lal Gupta v State of Punjab, (1973) 1 SCC 680 ............................................................ 20
Siddeshwari Cotton Mills Pvt. Ltd. v Union of India, (1989) 2 SCC 458 ............................... 23
State of Karnataka v Kempaiah, (1998) 6 SCC 103 ................................................................ 23
State of Punjab v Harnek Singh, (2002) 3 SCC 481 ................................................................ 15
Swadeshi Cotton Mills v Union of India, (1981) 1 SCC 664 .................................................. 19
Swedish Match AB v SEBI, (2004) 11 SCC 641 .................................................................... 14
T. Devadasan v Union of India, AIR 1964 SC 179 ................................................................. 27
The Chairman, Board of Mining Examination v Ramjee, (1977) 2 SCC 256 ......................... 20
Udayan Chinubhai v R.C. Bali, (1977) 4 SCC 309 ................................................................. 24
Union of India v Jesus Sales Corporation, (1996) 4 SCC 69................................................... 20
Union of India v S.H. Seth, (1977) 4 SCC 193........................................................................ 24
6

Universal Imports Agency v The Chief Controller of Imports and Exports, AIR 1961 SC 41
.............................................................................................................................................. 15
Other Authorities
Justice

P.N.

Bhagwati

Committee

Report

on

Takeovers,

(1997),

available

at

http://www.sebi.gov.in/cms/sebi_data/attachdocs/1470054168949.pdf.............................. 17
Report of the Takeover Regulations Advisory Committee Under the Chairmanship of Mr. C.
Achuthan,

(2010),

available

at

http://www.sebi.gov.in/cms/sebi_data/attachdocs/1287826537018.pdf........................ 14, 26
Regulations
SEBI (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 1997 ..............
.................................................................................................................................. 16, 17, 25
SEBI (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 2011 ..............
.................................................................................................................................. 14, 15, 16
SAT and SEBI Orders
Imperial Corporate Finance and Services Pvt. Ltd. v SEBI, SAT Appeal No. 56/2003 (July 30,
2004), available at http://www.sebi.gov.in/cms/sebi_data/pdffiles/12098_t.pdf ................ 18
Nirma Industries Ltd. v SEBI, SAT Appeal No. 24 of 2007 (June 5, 2008), available at
http://www.sebi.gov.in/cms/sebi_data/pdffiles/6814_t.pdf ..................................... 23, 25, 27
SEBI Order In the Matter of Open Offer of M/s Jyoti Ltd., WTM/SR/CFD/39/08/2016,
available at http://www.sebi.gov.in/cms/sebi_data/attachdocs/1470054168949.pdf.......... 16
Treatises
2 NORMAN J. SINGER & J.D. SHAMBLE SINGER, STATUTES AND STATUTORY CONSTRUCTION (7th
ed., 2008) ............................................................................................................................. 24
DR. J.C. VERMA, CORPORATE MERGERS, AMALGAMATIONS & TAKEOVERS, (2002)......... 18, 19
Glanville Williams, The Origins and Logical Implications of the Ejusdem Generis Rule, 7
CONV. & PROP. LAW. (n.s.) (1943)....................................................................................... 24
K.R. SAMPATH, LAW

AND

PROCEDURE

FOR

MERGERS, AMALGAMATIONS, TAKEOVERS &

CORPORATE RESTRUCTURE, (2nd ed., 2006) ........................................................................ 18

STATEMENT OF JURISDICTION
The Respondent most humbly and respectfully submits to the jurisdiction of this Honourable
Court under Section 15Z of the SEBI Act, 1992 read with Order XIX, Rule 1 and 40 of the
Supreme Court Rules, 2013.

STATEMENT OF FACTS
The Promoters of Artemis Ltd. (hereinafter Target Company), a listed company, borrowed a
sum of Rs. One Hundred Crore from Dreamsellers Ltd. (hereinafter Appellant) on January
30, 2009, and pledged its equity shares as security. Upon the Target Companys failure to pay
the debt within the prescribed period, the Appellant invoked the pledge on July 22, 2010. This
entitled the Appellant to 12.5% equity shares in the Target Company.
The Promoters of the Target Company were under financial stress. The Appellant was unsure
whether the shares would pay off the debt. Hence, the Appellant decided to make a voluntary
open offer under Regulation 10 of the SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 1997 (hereinafter 1997 Takeover Regulations) to acquire up to 37.6% equity
shares in the Target Company.
On October 1, 2010, the Appellant made a public announcement for the proposed open offer
after going through the financial accounts of the Target Company. A Draft Letter of Offer was
filed with the SEBI (hereinafter Respondent) through a merchant banker. Further, the
Respondent raised various questions and supplemental questions on various counts.
The lenders to the Target Company were meanwhile pressurising its Board of Directors to
review the operations of the Target Company. An internal audit of the Target Companys
operations and financial statements was conducted upon insistence by the independent
directors. It showed irregularities in the financials of the Target Company between 2005 and
2008. A special investigative audit into the financial affairs of the Target Company for the past
10 years was directed. The investigative report dated September 30, 2011, established that Rs.
Three Hundred Crores had been siphoned off and embezzled, through fraudulent transactions,
by the Promoters of the Target Company.
On October 25, 2011, one of the representatives of the lenders, on the Board of Directors of
the Target Company filed the report in certain legal proceedings that were underway in the
Delhi High Court. The report came into the public domain. This resulted in a sharp decline in
the prices of shares of the Target Company.
On October 30, 2011, the Appellant wrote to the Respondent through its merchant bankers,
seeking to withdraw the open offer, on the ground of emergence of extraordinary facts. As an
alternative argument, the Appellant sought that the Respondent should permit re-pricing of the

open offer price in view of the new facts that had become known, because of which the market
price had been much higher than what it would have been had those facts been known before.
On November 1, 2011, the Respondent issued its observations on the Draft Letter of Offer.
The Respondent stated that the request for withdrawal of the open offer was not being
considered favourably and did not comment on the embezzlement of funds. The Respondent
also stated that the offer once made cannot be withdrawn and that the acquirers should conduct
their due diligence before making an open offer.
Meanwhile, the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011
(hereinafter 2011 Takeover Regulations) had come into force from October 22, 2011.
Aggrieved by the Respondents observations, the Appellant filed an appeal before the SAT,
which was dismissed. SAT, inter alia, held that- the 2011 Takeover Regulations would not be
applicable in the present case; there was no violation of the principles of natural justice; the
Appellant ought to have conducted proper due diligence before making the open offer; and the
words such circumstances as in the opinion of the Board merit withdrawal are to be read
ejusdem generis with clause (b) and (c) of Regulation 27(1) of the 1997 Takeover Regulations.
Being aggrieved by the Order of the SAT, the Appellant filed an appeal before the Honble
Supreme Court. The Chief Justice of India has constituted a larger bench to look into the matter
and hence the matter has come before this Court.

10

ISSUES RAISED
I.

WHETHER

THE PROVISIONS OF

REGULATION 23

OF THE

2011 TAKEOVER

REGULATIONS RELATING TO WITHDRAWAL OF OPEN OFFER COULD BE APPLIED TO AN

OPEN OFFER MADE UNDER THE 1997 TAKEOVER REGULATIONS?

II.

WHETHER

IT CAN BE SAID THAT THE

APPELLANT

HAD FAILED TO EXERCISE DUE

DILIGENCE AND THE FACTS RELATING TO THE FRAUD WERE

HAVE BEEN KNOWN BY THE

APPELLANT,

IF THE

KNOWN

APPELLANT

OR COULD

HAD EXERCISED

PROPER DUE DILIGENCE?

III.

WHETHER THE RESPONDENT HAD VIOLATED THE PRINCIPLES OF NATURAL JUSTICE

IN THE PRESENT CASE WHILE PASSING ITS ORDER REJECTING THE APPLICATION TO
WITHDRAW THE OPEN OFFER WITHOUT HEARING THE APPELLANT?

IV.

WHETHER REGULATION 27(1)(D) OF THE 1997 TAKEOVER REGULATIONS IS TO BE

GIVEN AN INTERPRETATION WHEREBY, THE WORDS SUCH CIRCUMSTANCES AS IN THE
OPINION OF THE

BOARD

MERIT WITHDRAWAL ARE TO BE READ EJUSDEM GENERIS

WITH THE OTHER PROVISIONS OF

REGULATION 27(1)

OF THE SAID CODE I.E. AS

CIRCUMSTANCES WHERE IT IS IMPOSSIBLE TO PERFORM THE OPEN OFFER?

11

SUMMARY
I.

THE

PROVISIONS OF

REGULATION 23

OF THE

2011 TAKEOVER REGULATIONS

RELATING TO WITHDRAWAL OF OPEN OFFER CANNOT BE APPLIED TO AN OPEN OFFER

MADE UNDER THE 1997 TAKEOVER REGULATIONS.

Regulation 23 of the 2011 Takeover Regulations expressly and unambiguously requires that
such an open offer be continued and completed under the 1997 Takeover Regulations. The
Appellants Draft Letter of Offer, along with the letter seeking withdrawal of the open offer,
and the Respondents observations thereof would remain unaffected as if the 1997 Takeover
Regulations had never been repealed, as they are covered by the savings clause of the 2011
Takeover Regulations. Although the observations were made after the 2011 Takeover
Regulations came into force, the observations are covered by the savings clause as they were
integrally connected with and were a legal consequence of the filing of the Draft Letter of Offer
and the letter seeking withdrawal of the open offer. Further, the new exception under
Regulation 23(1)(c) of the 2011 Takeover Regulations is not available to voluntary open offers
and hence it continues to be governed by the 1997 Takeover Regulations.
II.

THE APPELLANT

HAD FAILED TO EXERCISE DUE DILIGENCE AND THE FACTS

RELATING TO THE FRAUD WERE KNOWN OR COULD HAVE BEEN KNOWN BY THE

APPELLANT, IF THE APPELLANT HAD EXERCISED PROPER DUE DILIGENCE.

Regulation 24(2) of the 1997 Takeover Regulations requires that the merchant banker submit
a due diligence certificate along with the Draft Letter of Offer and any due diligence has to be
conducted by the acquirer before making the open offer, with the highest standard of care and
accuracy. The Appellant did not fulfil this obligation and failed to exercise the required degree
of care because of which the facts relating to the fraud could not be discovered.
The lack of due diligence should run from the facts of the case. The measures taken to fulfil
the requirements of due diligence thus become a relevant fact. The laxity of the Appellant in
performing these measures hence show the lack of due diligence. The Appellants access to the
financial accounts of the Target Company such as the balance sheet, the audited and nonaudited information, their knowledge of the poor financial health of the Target Company, and
the legal proceedings underway against the Target Company were some of the relevant
information which could give the Appellant a fair idea about the irregularities in the working
of the Target Company and the risk involved in going ahead with the transaction.
12

III.

THE RESPONDENT DID NOT VIOLATE THE PRINCIPLES OF NATURAL JUSTICE IN THE
PRESENT CASE WHILE PASSING ITS ORDER REJECTING THE APPLICATION TO
WITHDRAW THE OPEN OFFER WITHOUT HEARING THE APPELLANT.

Principles of natural justice are an important aspect of law; however, their application depends
on the circumstances and is not absolute in nature. In the present case, no personal hearing was
sought by the Appellant in its letter seeking the withdrawal of the open offer. An opportunity
to place the relevant information on record in writing is sufficient compliance with the rule of
audi alteram partem. Multiple correspondences were exchanged between the Respondent and
the Appellant pursuant to the Draft Letter of Offer and the letter seeking withdrawal of the
open offer. All grounds were considered by the Respondent and no prejudice has been suffered
by the Appellant.
IV.

THE

WORDS

SUCH

CIRCUMSTANCES AS IN THE OPINION OF THE

WITHDRAWAL APPEARING IN

REGULATION 27(1)(D)

OF THE

BOARD

MERIT

1997 TAKEOVER

REGULATIONS SHOULD BE READ EJUSDEM GENERIS WITH THE PRECEDING CLAUSES

OF REGULATION 27(1).

Regulation 27(1)(d) should be read ejusdem generis with clause (b) and (c) of Regulation 27(1)
to be restricted to the class of impossibility. For the rule of ejusdem generis to apply the
enactment should contain an enumeration of specific words; the subjects of enumeration should
constitute a class; that class should not be exhausted by the enumeration; the general terms
should follow the enumeration; there should be no indication of a different legislative intent.
The conditions are fulfilled here as the general clause (d) follows the specific clauses (b)
and (c) that fall in the class of impossibility. There is no indication of a legislative intent
against a restrictive interpretation and the ejusdem generis interpretation is in harmony with
the scheme, objective and policy of the 1997 Takeover Regulations. An expansive
interpretation of Regulation 27(1)(d) to allow withdrawal on grounds like economic
undesirability would hamper the interests of the public shareholders and deprive them of their
right to exit from the Target Company. Finally, clauses (b) to (d) of Regulation 27(1) are in the
nature of an exception and should be construed strictly.

13

ARGUMENTS ADVANCED
I.

THE

PROVISIONS OF

REGULATION 23

OF THE

2011 TAKEOVER REGULATIONS

RELATING TO WITHDRAWAL OF OPEN OFFER CANNOT BE APPLIED TO AN OPEN OFFER

MADE UNDER THE 1997 TAKEOVER REGULATIONS.

The provisions of Regulation 23 of the 2011 Takeover Regulations cannot be applied to the
open offer made under the 1997 Takeover Regulations. Though the 1997 Takeover Regulations
have been repealed, the application for the withdrawal of the offer is saved from the effects of
such repeal.
The argument is in three parts. [i] Regulation 23 of the 2011 Takeover Regulations expressly
requires that such an open offer be continued and completed under the 1997 Takeover
Regulations. [ii] The Appellants letter seeking withdrawal and the Respondents
observations on it would remain unaffected as if the 1997 Takeover Regulations had never
been repealed. [iii] Voluntary open offer is not covered under Regulation 23(1)(c) of the 2011
Takeover Regulations.
i.

Regulation 23 of the 2011 Takeover Regulations expressly requires that such an

open offer be continued and completed under the 1997 Takeover Regulations.

It is a settled position that where words of a statute are absolutely clear and unambiguous,
different principles of interpretations are not be resorted to.1 Further, hardship or inconvenience
cannot alter the meaning of the language employed by the Legislature if such meaning is clear
on the face of the statute.2
The 2011 Takeover Regulations expressly state that an open offer for which a public
announcement was made under the 1997 Takeovers Regulations shall be continued and
completed under the 1997 Takeovers Regulations.3
Reference to non-completion of open offer in case of withdrawal of open offer has been made
by the Takeover Regulations Advisory Committee in its report.4 Further, offer period has been
defined as the period between the date of the public announcement and the date on which the

Swedish Match AB v SEBI, (2004) 11 SCC 641, 52.

Commissioner of Agricultural Income Tax, Bengal v Sri Keshab Chandra Mandal, AIR 1950 SC 265, 25.
3
SEBI (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 2011, Regulation 35(2)(c).
4
Report of the Takeover Regulations Advisory Committee Under the Chairmanship of Mr. C. Achuthan, 6.2
(2010), available at http://www.sebi.gov.in/cms/sebi_data/attachdocs/1287826537018.pdf.
2

14

payment of consideration to shareholders is made, or the date on which the open offer is
withdrawn. Thus, it is submitted that withdrawal is also an aspect of the continuation and
completion of an open offer.
Hence, the words of the statute should be followed and the 1997 Takeover Regulations should
be applicable to the open offer made by the Appellant.
ii.

The Appellants letter seeking withdrawal and the Respondents observations on

it would remain unaffected as if the 1997 Takeover Regulations had never been
repealed.

The 2011 Takeover Regulations provide that anything duly done under the 1997 Takeover
Regulations, shall remain unaffected as if the 1997 Takeover Regulations had never been
repealed.5 The result of such a saving clause is that the pre-existing law continues to govern
the things done before a particular date from which the repeal of such a pre-existing law takes
effect.6
In the present case, the public announcement of the open offer was made on October 1, 2010
and the Draft Letter of Offer was filed within the stipulated time of 14 days, as per the 1997
Takeover Regulations.7 Hence, it will continue to be governed by the 1997 Takeover
Regulations.
Although, the observations on the Draft Letter of Offer were made on November 1, 2011,8
which is after the 2011 Takeover Regulations coming into force. It has been held by this Court
that is not necessary that an impugned thing in itself should have been done before the Act was
repealed, but it would be enough if it was integrally connected with and was a legal
consequence of a thing done before the said repeal.9 It is submitted that observations on the
Draft Letter of Offer were integrally connected with it, and were a legal consequence of the
filing of the Draft Letter of Offer with the Respondent. Hence, it will continue to be governed
by the 1997 Takeover Regulations.

SEBI (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 2011, Regulation 35(2)(b).
State of Punjab v Harnek Singh, (2002) 3 SCC 481, 16.
7
6, Proposition.
8
11, Proposition.
9
Universal Imports Agency v The Chief Controller of Imports and Exports, AIR 1961 SC 41, 16.
6

15

iii.

A voluntary open offer is not covered under Regulation 23(1)(c) of the 2011
Takeover Regulations.

Comparing the provisions of the 1997 Takeover Regulations10 and the 2011 Takeover
Regulations11 on the withdrawal of an open offer, it can be seen that there is a general
prohibition on the withdrawal of open offer. The only addition to the exceptions under the 2011
Takeover Regulations is, if any condition stipulated in the agreement for acquisition attracting
the obligation to make the open offer is not met for reasons outside the reasonable control of
the acquirer, and such agreement is rescinded, subject to such conditions having been
specifically disclosed in the detailed public statement and the letter of offer.12
It is submitted that this exception cannot be of any assistance to the voluntary open offer made
by the Appellant, as there was no obligation to make the open offer in the present case.13
Thus, the voluntary open offer will continue to be governed by the provisions of the 1997
Takeover Regulations.
Consequently, the ratio laid down by this Court in the matters of Nirma Industries Ltd. v SEBI14
and SEBI v Akshya Infrastructure Pvt. Ltd.15 with respect to Regulations 27(1) of the 1997
Takeover Regulations, would be squarely applicable to the provisions of Regulation 23(1) of
the 2011 Takeover Regulations.16
Hence, the provisions of Regulation 23 of the 2011 Takeover Regulations relating to
withdrawal of open offer would not be applicable to the open offer made under the 1997
Takeover Regulations.
II.

THE APPELLANT

HAD FAILED TO EXERCISE DUE DILIGENCE AND THE FACTS

RELATING TO THE FRAUD WERE KNOWN OR COULD HAVE BEEN KNOWN BY THE

APPELLANT, IF THE APPELLANT HAD EXERCISED PROPER DUE DILIGENCE.

Regulation 24(2) of the 1997 Takeover Regulations puts an obligation on the merchant banker
appointed by the acquirer to provide a due diligence certificate along with the Draft Letter of
10

See SEBI (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 1997, Regulation 27.
See SEBI (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 2011, Regulation 23.
12
SEBI (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 2011, Regulation 23(1)(c).
13
5, Proposition.
14
(2013) 8 SCC 20.
15
(2014) 11 SCC 112.
16
SEBI Order In the Matter of Open Offer of M/s Jyoti Ltd., WTM/SR/CFD/39/08/2016, available at
http://www.sebi.gov.in/cms/sebi_data/attachdocs/1470054168949.pdf, 4.5.6.
11

16

Offer. This obligation makes it necessary to conduct proper due diligence before making an
open offer. On the basis of the above rule, the Respondent contends that the Appellant had
failed to fulfil this obligation.
The argument is in two parts. [i] The Appellant failed to exercise due diligence and did not
fulfil the duty of taking proper care before making the open offer. [ii] The facts leading to the
knowledge of the siphoning and embezzlement of the funds were known or could have been
known had the Appellant exercised proper due diligence.
i.

The Appellant failed to exercise due diligence and did not fulfil the duty of taking
proper care before making the open offer.

The 1997 Takeover Regulations make it mandatory for a merchant banker to be appointed by
the acquirer before making an open offer.17 One of the important functions and obligations of
the merchant banker is to submit a due diligence certificate along with the Draft Letter of
Offer.18 The Apex Court in Nirma Industries Ltd. v SEBI19 observed that Regulation 24(2)
clearly indicates that all kinds of enquiries or due diligence have to be made by the acquirer
before the making of an open offer. This shows the obligation of the acquirer under the
Regulations to conduct due diligence to prevent any damage that may come from unwanted
transactions. If not done, the acquirer cannot later cite lack of information as the reason for the
withdrawal of the open offer.20 One of the main guiding principles in the Justice P.N. Bhagwati
Committee Report on Takeovers was that an offer must be announced after most careful and
responsible consideration21 and that the acquirer and all the professionals involved in the offer
must exercise highest standards of care and accuracy in preparing offer documents.22 In the
instant matter, the Appellant failed to exercise the required high degree of care before making
the open offer. Had the Appellant exercised proper due diligence with the degree envisaged in
the 1997 Takeover Regulations, they would have come across the facts that came to light later
on. The Appellant failed to properly assess the information that had been made available to the
Appellant and which would have been sufficient to point out the facts relating to the fraud or

17

SEBI (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 1997, Regulation 13.
Id., Regulation 24(2).
19
(2013) 8 SCC 20, 91.
20
Id.
21
Justice P.N. Bhagwati Committee Report on Takeovers, 1.2(vi) (1997), available
http://www.sebi.gov.in/cms/sebi_data/attachdocs/1470054168949.pdf.
22
Id., 1.2(vii).
18

17

at

any kind of irregularity that could adversely affect the transaction between the Appellant and
the Target Company.
Hence, the Appellant failed to fulfil the duty to perform proper due diligence.
ii.

The facts leading to the knowledge of the siphoning and embezzlement of the funds
were known or could have been known had the Appellants exercised proper due
diligence.

The courts have given no set legal definition of the concept or process of due diligence. In
Imperial Corporate Finance and Services Pvt. Ltd. v SEBI23, the SAT observed that lack of
due diligence should run from the facts of each case and ultimately there can be no hard and
fast rule as to what constitutes lack of due diligence. In light of the above principle, the
measures that can be taken to show the lack of due diligence, become a relevant fact. The broad
steps that need to be followed during due diligence are sufficient to bring out the facts in the
case to the surface or give a reasonable idea as to certain irregularitiesi.

Accounting and financial analysis: These include assessing the financial accounts of
the company; the profit-loss account, the balance sheet,24 audited financial accounts,
unaudited information supplied by the seller or given in press publications25. The
Appellant got access to all the financial accounts of the Respondent that contained all
the transactions of the company.26 The financial accounts are tabulated accounts
regarding the expenditure and earnings of any company. Irregularity such as siphoning
of funds could have been known or deduced from these accounts as the amount that has
been embezzled is a large amount, i.e. Rs. Three Hundred Crores.27 In addition to this
the Appellant also had an option to look at the audited and non-audited information
which could have shown the fairness of the accounts given by the Target Company.28
This is because the reported irregularities had come to the surface when the independent
directors had carried out an audit.29 This would have been sufficient for the Appellant

23

SAT
Appeal
No.
56/2003
(July
30,
2004),
available
at
http://www.sebi.gov.in/cms/sebi_data/pdffiles/12098_t.pdf, 21.
24
DR. J.C. VERMA, CORPORATE MERGERS, AMALGAMATIONS & TAKEOVERS, 258 (2002).
25
K.R. SAMPATH, LAW AND PROCEDURE FOR MERGERS, AMALGAMATIONS, TAKEOVERS & CORPORATE
RESTRUCTURE, 1202 (2nd ed., 2006).
26
Query 2, Proposition Clarification.
27
8, Proposition.
28
K.R. SAMPATH, LAW AND PROCEDURE FOR MERGERS, AMALGAMATIONS, TAKEOVERS & CORPORATE
RESTRUCTURE, 1202 (2nd ed., 2006).
29
7-8, Proposition.

18

to know that there was something irregular and suspicious going on within the
company. The poor financial health of the Target Company was known by the
Appellant before the offer was made.30 Hence, it is submitted that the Appellant did not
conduct proper due diligence with respect to the financial accounts of the Target
Company.
ii.

Legal liabilities: The acquirers are also supposed to see if there are any legal liabilities
on the target company.31 In Nirma Industries Ltd. v SEBI,32 the fact scenario of which
is very similar to the instant case, this Court took into account the various legal
proceedings and the legal liabilities pending against the target company and concluded
that the information was sufficient to indicate to the acquirer that going ahead with the
transaction was not a prudent decision. The facts in the instant case show that there
were legal proceedings going on against the Target Company in the Delhi High Court.
The lenders of the Target Company filed the report dated September 30, 2011 in the
Delhi High Court after it came out.33 This shows legal liabilities against the company,
which were not investigated by the Appellant. Since the reports of embezzlement of
funds of the Target Company were relevant in the proceedings, this shows that the
liabilities were of serious financial nature. The Appellant failed to take a note of this.
Hence, this again shows that the Appellant did not exercise proper due diligence and
the extraordinary facts that allegedly emerged later could have been discovered earlier
in the process.

Hence, the Appellant failed to fulfil the duty to perform proper due diligence and the facts
relating to the fraud were known or could have been known, if the Appellant had
exercised proper due diligence.
III.

THE RESPONDENT DID NOT VIOLATE THE PRINCIPLES OF NATURAL JUSTICE IN THE
PRESENT CASE WHILE PASSING ITS ORDER REJECTING THE APPLICATION TO
WITHDRAW THE OPEN OFFER WITHOUT HEARING THE APPELLANT.

A fundamental maxim of the principles of natural justice is audi alteram partem which implies
that no one should be condemned unheard.34 However, whether or not there has been failure of

30

Id., 4.
DR. J.C. VERMA, CORPORATE MERGERS, AMALGAMATIONS & TAKEOVERS, 259 (2002).
32
(2013) 8 SCC 20, 87.
33
9, Proposition.
34
Swadeshi Cotton Mills v Union of India, (1981) 1 SCC 664, 27.
31

19

natural justice in a particular case will depend on the facts and circumstances of that case.35 It
is submitted that no personal hearing is required in the present case as no serious prejudice has
been caused to the Appellant.
The argument is in three parts. [i] The application of the principles of natural justice is not
absolute in nature. [ii] Personal hearing is not required to be granted in all circumstances. [iii]
The Appellant did not suffer any prejudice.
i.

Application of the principles of natural justice is not absolute in nature.

The application of the principles of natural justice is not a question of observance of a mere
technicality.36 It has been held that where the party visited with an adverse order has not
suffered from denial of reasonable opportunity, the court will decline to be fanatical as if the
rules of natural justice were sacred scriptures.37 No breach of natural justice can be complained
of, where fairness is shown by the decision-maker to the man proceeded against.38 Hence, it
cannot be said that there was been a breach of the principles of natural justice.
ii.

Personal hearing is not required to be granted in all circumstances.

It is an accepted principle that an opportunity to place the relevant information on record in

writing is sufficient compliance with the principles of audi alteram partem.39 Not being given
the opportunity of personal hearing cannot be equated to not being given an opportunity to
submit an explanation at all.40 The courts cannot insist that under all circumstances under
different statutory provisions personal hearings have to be afforded to the persons concerned.41
This Court has observed that in suitable cases the interest of justice is better served by denying
opportunity of hearing and permitting the person concerned to challenge the order itself on
merits to establish the bona fide.42
In Nirma Industries Ltd. v SEBI, 43 an application for withdrawal of open offer was rejected by
the Respondent after written correspondences were exchanged with the applicant. This Court
35

Minerva Mills v Union of India, (1986) 4 SCC 222, 9.

Shadi Lal Gupta v State of Punjab, (1973) 1 SCC 680, 13.
37
Managing Director, ECIL, Hyderabad v Karunakar, (1993) 4 SCC 727, 21.
38
The Chairman, Board of Mining Examination v Ramjee, (1977) 2 SCC 256, 13.
39
Madhya Pradesh Industries Ltd. v Union of India, AIR 1966 SC 671, 10; J.A. Naiksatam v Prothonotary and
Senior Master, High Court of Bombay, (2004) 8 SCC 653, 6.
40
Nirma Industries Ltd. v SEBI, (2013) 8 SCC 20, 26.
41
Union of India v Jesus Sales Corporation, (1996) 4 SCC 69, 5.
42
Karnataka Public Service Commission v B.M. Vijaya Shankar, (1992) 2 SCC 206, 4.
43
(2013) 8 SCC 20, 34-36.
36

20

held that there is no duty cast upon the Respondent under the 1997 Takeover Regulations,
which would make it incumbent upon it to grant an opportunity of hearing before rejecting the
application made by the applicants or its merchant bankers.
Hence, lack of personal hearing cannot be equated to denial of the principles of natural justice,
unless prejudice can be shown by the Appellant.
iii.

The Appellant did not suffer any prejudice.

It is a settled proposition of law that mere breach of principles of natural justice is not
sufficient.44 Principles of natural justice are not rigid rules, they are flexible and their
application depends upon the setting and background of statutory provisions, nature of the right
which may be affected and the consequences which may entail; thus, its application depends
upon the facts and circumstances of each case.45 Further, when a party has nothing additional
to contribute in its submission, denial of personal hearing is justified.46 Similarly, in the present
case the Appellant had already conveyed its reasons to seek withdrawal of the open offer.47
Further, it cannot be said that the Appellant had requested personal hearing prior to the issuance
of the observations.
It is submitted that multiple correspondences were exchanged between the Respondent and the
Appellant and questions were raised on various grounds.48 Further, all grounds raised by the
Appellant permissible under the 1997 Takeover Regulations were considered in the
observations on the Draft Letter of Offer and observations were made on all legal
grounds.49 With regard to the delay in issuing its observations by the Respondent, it has been
held previously in a similar case that such delay cannot be of any assistance to the Appellant.50
Hence, it is submitted that the Appellant has failed to place on the record the prejudice that has
been caused by not observing principles of natural justice.
Thus, the Respondent did not violate the principles of natural justice while passing its order
rejecting the application to withdraw the open offer without hearing the Appellant.

44

SEBI v Akshya Infrastructure Pvt. Ltd., (2014) 11 SCC 112, 37.

R.S. Dass v Union of India, 1986 Supp SCC 617, 25.
46
Krishna Swami v Union of India (1992) 4 SCC 605, 21.
47
10, Proposition.
48
6, Proposition.
49
11, Proposition.
50
SEBI v Akshya Infrastructure Pvt. Ltd., (2014) 11 SCC 112, 31.
45

21

IV.

THE

WORDS

SUCH

CIRCUMSTANCES AS IN THE OPINION OF THE

WITHDRAWAL APPEARING IN

REGULATION 27(1)(D)

OF THE

BOARD

MERIT

1997 TAKEOVER

REGULATIONS SHOULD BE READ EJUSDEM GENERIS WITH THE PRECEDING CLAUSES

OF REGULATION 27(1).

Regulation 27(1) of the 1997 Takeover Regulations lays down the circumstances where a
public offer may be withdrawn by an acquirer. Clause (a), omitted by the SEBI (Substantial
Acquisition of Shares and Takeovers) (Amendment) Regulations, 2002 (hereinafter 2002
Amendment) allowed withdrawal in the event of a competitive bid. Clause (b) allows
withdrawal when the requisite statutory approvals have been denied; clause (c) allows
withdrawal upon the death of the sole acquirer; and clause (d) allows withdrawal in such
circumstances as in the opinion of the Board merit withdrawal. The Respondent humbly
submits that the words such circumstances as in the opinion of the Board merit withdrawal
should be read ejusdem generis with clauses (b) and (c) of Regulation 27(1) of the 1997
Takeover Regulations to restrict its scope.
The argument is in four parts. [i] Regulation 27(1) (d) has to be read in context of Regulation
27(1) as it stands after amendment in 2002. [ii] The tests for the application of the rule of
ejusdem generis are fulfilled. [iii] The rule of ejusdem generis is not made inapplicable through
indications of a different legislative intent. [iv] Clauses (b) to (d) of Regulation 27(1) are in the
nature of exceptions and should be construed strictly.
i.

Regulation 27(1)(d) has to be read in context of Regulation 27(1) as it stands after

amendment in 2002.

After a statute has been amended it has to be read and construed with reference to the new
provisions and not the provisions that originally existed, except where this leads to an
inconsistency, repugnancy or absurdity.51 Hence, clause (d) of Regulation 27(1) has to be
interpreted in reference to Regulation 27(1) as it stands after the deletion of clause (a) by the
2002 Amendment. This has also been emphasised by this Court on an earlier occasion.52 The

51
52

Onkarlal Nandlal v State of Rajasthan, (1985) 4 SCC 404, 9.

SEBI v Akshya Infrastructure Pvt. Ltd., (2014) 11 SCC 112, 33.

22

absence of any absurdity, repugnancy or inconsistency in context, due to this construal, is

dealt with later.53
ii.

The tests for the application of the rule of ejusdem generis are satisfied by
Regulation 27.

The rule of ejusdem generis applies when the following requirements are cumulatively
fulfilled54(i) the statute contains an enumeration of specific words,
(ii) the subjects of enumeration constitute a class or category,
(iii) that class or category is not exhausted by the enumeration,
(iv) the general terms follow the enumeration,
On the fulfilment of all these conditions, the general words are construed as being limited to
the class to which the specific words belong.55
The subjects of enumeration are said to belong to the same class when they possess some
common and dominant feature.56 Clause (b) of Regulation 27(1) allows the withdrawal of a
public offer when the requisite statutory approval has been refused. Clause (c) of Regulation
27(1) allows withdrawal when the sole acquirer, being a natural person has died. Both of the
above situations, as the SAT observed57, backed by the Supreme Court in Nirma Industries v
SEBI58, fall within the same genus or class of impossibility. Clause (b) lays down a situation
of legal impossibility while clause (c) specifies a situation where it has become impossible to
continue the offer due to a natural event, the deceased having been the sole acquirer.
Hence, as the general clause (d) follows the specific clauses (b) and (c), its meaning has to be
restricted to those situations where, in the opinion of the Board, it has become impossible
for the acquirer to complete the public offer.

53

See infra Argument IV(iii)(b).

Amar Chandra v Collector of Excise, Tripura, (1972) 2 SCC 472, 9.
55
State of Karnataka v Kempaiah, (1998) 6 SCC 103, 8.
56
Siddeshwari Cotton Mills Pvt. Ltd. v Union of India, (1989) 2 SCC 458, 16.
57
Nirma Industries Ltd. v SEBI, SAT Appeal No. 24 of 2007 (June 5, 2008), available at
http://www.sebi.gov.in/cms/sebi_data/pdffiles/6814_t.pdf, 6.
58
(2013) 8 SCC 20, 67.
54

23

iii.

The rule of ejusdem generis is not made inapplicable through indications of a

different legislative intent.

The rule of ejusdem generis is a principle which arises from the linguistic implication by which
words literally having a wide meaning (when taken in isolation) are treated as reduced in scope
due to their verbal context.59 Thus, this principle is presumed to apply unless there is some
contrary indication.60 This Court has laid down that there should be no indication of a different
legislative intent,61 for the rule to apply.
It is submitted that giving a restricted interpretation to Regulation 27(1)(d) does not conflict
with the legislative intent, but furthers it. The intent has to be deduced from the context, by
reading the 1997 Takeover Regulations in their entirety. The provisions of a statute should be
construed with reference to the context vis--vis the other provisions and internal aids, to make
a consistent presentation of the whole statute relating to the subject-matter.62 Reliance may also
be placed upon external aids like the historical background of the enactment to discover the
'real intent' of the legislature,63 especially to resolve ambiguities.64
a. The wisdom of the Legislature is presumed while interpreting statutes.
There is a common law presumption that the legislature is endowed with wisdom.65 It knows
its mind when it sets about to amend any legislation.66
The legislative language is interpreted on the assumption that the legislature was aware of
existing statutes, the rules of statutory construction, and the judicial decisions and that if a
change occurs in legislative language a change was intended in legislative result.67
The legislature, in omitting clause (a) of Regulation 27(1) should be presumed to have intended
the ensuing consequences, and to have known the construction that would be placed upon it by
the courts in the absence of any indication to the contrary.

59

Maharashtra University of Health Sciences v Satchikitsa Prasarak Mandal, (2010) 3 SCC 876, 26.
Glanville Williams, The Origins and Logical Implications of the Ejusdem Generis Rule, 7 CONV. & PROP. LAW.
(n.s.) 119 (1943), cited in Maharashtra University of Health Sciences v Satchikitsa Prasarak Mandal, (2010) 3
SCC 876, 27.
61
See Amar Chandra v Collector of Excise, Tripura, (1972) 2 SCC 472, 9.
62
Balram Kumawat v Union of India, (2003) 7 SCC 628, 20.
63
Udayan Chinubhai v R.C. Bali, (1977) 4 SCC 309, 29.
64
Union of India v S.H. Seth, (1977) 4 SCC 193, 79, 83.
65
Harbans Lal (Dead) v Sales-Tax Officer, ILR (1977) Del 212, 23.
66
Id.
67
2 NORMAN J. SINGER & J.D. SHAMBLE SINGER, STATUTES AND STATUTORY CONSTRUCTION (7th ed., 2008).
60

24

b. The ejusdem generis interpretation of Regulation 27(1)(d) is in harmony

with the scheme, objective and policy of the 1997 Takeover Regulations and
the SEBI Act, 1992.
During the interpretation of a statute, if the words used are capable of more than one
construction, the Courts may adopt a construction on the ground that such construction is more
consistent with the object and policy of the Act.68
The Supreme Court69 and the SAT70 undertook a thorough analysis of the purpose that the
setting up of the SEBI was supposed to achieve and the scheme and objective of the 1997
Takeover Regulations vis--vis the interpretation to be placed upon Regulation 27(1)(d).
Under Section 11 of the SEBI Act, 1992 the SEBI has been entrusted with ensuring the orderly
development of the securities market and to protect the integrity of the securities market. The
scheme of the 1997 Takeover Regulations is in agreement with this. The 1997 Takeover
Regulations place stringent obligations relating to disclosure upon acquirers like releasing their
aggregate shareholding at every stage.71 No acquirer can exercise more than 15% voting rights
in a company without making a public announcement.72 A detailed procedure is prescribed for
making such a public announcement and the manner in which the offer price at which the shares
are offered to the public shareholders is determined, under Regulations 11-21. Stringent
obligations have also been placed upon the merchant banker under Regulation 24 before it can
cause the bank with which the escrow amount has been deposited to release the balance amount
to the acquirers and cause the process to culminate.
Referring to the above provisions, the Court observed that the scheme of the 1997 Takeover
Regulations is- (a) to ensure that the target company is aware of the substantial acquisition (b)
to ensure that in the process of the substantial acquisition or takeover, the security market is
not distorted or manipulated and (c) to ensure that the small investors are given an option to
exit, i.e., they may either discharge their shares at a price as determined in accordance with the
1997 Takeover Regulations or continue as shareholders under the new exemption.73 The 1997
Takeover Regulations are meant to ensure the fair and equal treatment of all shareholders in

68

Nathi Devi v Radha Devi Gupta, (2005) 2 SCC 271, 13.

See Nirma Industries Ltd. v SEBI, (2013) 8 SCC 20, 49-62.
70
Nirma Industries Ltd. v SEBI, SAT Appeal No. 24 of 2007 (June 5, 2008), available at
http://www.sebi.gov.in/cms/sebi_data/pdffiles/6814_t.pdf, 6.
71
SEBI (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 1997, Regulation 7.
72
Id., Regulation 10.
73
Nirma Industries Ltd. v SEBI, (2013) 8 SCC 20, 59.
69

25

relation to substantial acquisition of shares and takeovers, and that the process does not take
place in a covert manner without protecting the interests of the shareholders.74
The observations of the Court are in line with the objectives of the 1997 Takeover
Regulations,75 to provide a transparent legal framework for facilitating takeover activities, to
protect the interests of investors in securities and the securities market, to balance the
conflicting objectives and interests of various stakeholders in the context of substantial
acquisition of shares in, and takeovers of, listed companies and to provide each shareholder an
opportunity to exit his investment in the target company.
It has also been acknowledged that while the 1997 Takeover Regulations mostly strike a
balance between the interests of the various stakeholders, the Regulations do recognize and
accord primacy to the goal of protection of the interests of the public shareholders in takeover
situations.76
As already stated, Regulation 27(1)(d) of the 1997 Takeover Regulations has to be interpreted
keeping the objectives, scheme and policy in mind. Hence, an expansive interpretation of the
phrase such circumstances would frustrate the objects of the 1997 Takeover Regulations to
ensure transparency in substantial acquisition of shares by a company, and encroach upon the
rights of the public shareholders. Withdrawal of a public offer on grounds like economic
undesirability or the discovery of some adverse facts pertaining to the financial health of the
target company would endanger the interest of the public shareholders as they will be deprived
of their right to exit from the target company,77 along with encouraging speculative practices
in the stock market.78
As this Court rightly emphasised, the orderly development of the securities market requires
that public offers should not to be allowed to be withdrawn on the ground of fall in share price
of the target company. If allowed, it would adversely affect the interests of the shareholders of
the target company and the integrity of the securities market.79

74

Id.
Report of the Takeover Regulations Advisory Committee Under the Chairmanship of Mr. C. Achuthan, 11,
12 (2010), available at http://www.sebi.gov.in/cms/sebi_data/attachdocs/1287826537018.pdf.
76
Id., 9.
77
Nirma Industries Ltd. v SEBI, (2013) 8 SCC 20, 90.
78
Id, 69.
79
Id, 88-90.
75

26

iv.

Clauses (b) to (d) of Regulation 27(1) are in the nature of exceptions and should be
construed strictly.

It is a well-established rule of interpretation that exceptions to the general rule are construed
strictly and confined to the intention of the Legislature.80 They cannot be interpreted to destroy
the main provision.81 Regulation 27 of the 1997 Takeover Regulations starts with the words
No public offer, once made, shall be withdrawn except. It is submitted that the SAT82 rightly
observed that the prohibitive language employed indicates the intention of the framers to lay
down the general rule that a public offer once made should not be allowed to be withdrawn.
The exceptions are laid down in clauses (b) to (d) of Regulation 27(1). Hence, Regulation
27(1)(d) should be construed strictly and in harmonisation with the intention of the Legislature
to restrict the situations wherein an offer can be withdrawn.
Hence, the words such circumstances as in the opinion of the Board merit withdrawal
appearing in Regulation 27(1)(D) of the 1997 Takeover Regulations should be read ejusdem
generis with the preceding clauses of Regulation 27(1).

80

Ali M.K. v State of Kerala, (2003) 11 SCC 632.

T. Devadasan v Union of India, AIR 1964 SC 179, 9.
82
Nirma Industries Ltd. v SEBI, SAT Appeal No. 24 of 2007 (June 5, 2008), available at
http://www.sebi.gov.in/cms/sebi_data/pdffiles/6814_t.pdf, 6.
81

27

PRAYER
Wherefore in light of the facts stated, issues raised, arguments advanced and authorities cited,
it is most humbly and respectfully prayed before this Honourable Court that it may be pleased
to:

Hold that the provisions of Regulation 23 of the 2011 Takeover Regulations cannot be
applied to an open offer made under the 1997 Takeover Regulations.

Hold that the Appellant has not exercised due diligence.

Hold that the Respondent has not violated the principles of natural justice by passing
its order without hearing the Appellant.

Hold that Regulation 27(1)(d) of the 1997 Takeover Regulations should not be read
ejusdem generis with Regulations 27(1)(b) and 27(1)(c) of the 1997 Takeover
Regulations.

Uphold the order of the SAT.

Grant any other order which the Honourable Court may deem fit in the eyes of equity,
justice and good conscience.

Date: September 11, 2016

Place: New Delhi

28

Counsel for the Respondent

121R