Case BriefsTribunals/Commissions/Regulatory Bodies

Securities and Exchange Board of India (SEBI): The Board comprising G. Mahalingam as Whole Time Member, granted an exemption to a family trust from public announcement of an open offer for acquiring shares of one of its companies.

Supriyajith Family Trust (Acquirer) filed an application under Regulation 11(1) the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 seeking exemption from the applicability of Regulation 3 in the matter of proposed acquisition of shares in the Target Company (Suprajit Engineering Limited)

The proposed acquisition was a non-commercial transaction to be undertaken pursuant to a private family arrangement intended to facilitate a family succession plan of the promoters and to ensure seamless transition in the future.

It was noted that the proposed transfer was in no way prejudicial to the interests of the public shareholders and would not result in reduction in the holding of public shareholders in the Target Company. It would ensure that there are no future conflicts in ownership pertaining to the promoter shareholding and such stability would, in fact, be in the interest of Target Company and all its stakeholders and shareholders.

Further, there would be no new acquisition of shares by the promoters group and the pre-acquisition and post-acquisition shareholding of the promoter group in the Target Company would remain the same.

In view of the above, the Board granted an exemption to the proposed Acquirer – Supriyajith Family Trust, from complying with the requirements of Regulation 3(1) of the Takeover Regulations with respect to the proposed acquisition/exercise of voting rights in respect of the Target Company, viz. Suprajit Engineering Limited.[Suprajit Engineering Ltd. v. Supriyajith Family Trust, 2019 SCC OnLine SEBI 14, Order dated 07-03-2019]

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Securities and Exchange Board of India: The Board comprising G. Mahalingam as Whole Time Member, allowed a consortium of port trusts exemption from making a public announcement of open offer for acquiring shares of a mini-ratna public sector undertaking (PSU), opining that the takeover would cause no change in ultimate control of the said PSU.

Cabinet Committee on Economic Affairs gave in-principle approval for strategic disinvestment of shares held by President of India in Dredging Corporation of India Limited (‘Target Company’) – a Mini-Ratna PSU – by four acquirers being – Visakhapatnam Port Trust, Paradip Port Trust, Jawaharlal Nehru Port Trust, and Deendayal Port Trust (‘Acquirers’). The Acquirers collectively filed an application seeking exemption from applicability of Regulations 3 and 4 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, which mandates public announcement of open offer for acquiring shares.

Acquirers submitted that they are port trusts constituted by the Government of India (‘GOI’) under Major Port Trusts Act, 1963 (‘MPT Act’) as autonomous entities to administer and manage major ports. Disinvestment of 73.47 per cent of shares of Target Company in their favour would give them direct control of the Target Company, but its ultimate supervisory control would rest with the GOI (since the Acquirers are under direct control of GOI in accordance with MPT Act).

It was submitted that Regulation 10(1)(a)(iii) of Takeover Regulations exempts inter-se transfer of shares amongst certain qualifying persons being a company subject to control over such qualifying persons being exclusively held by the same persons. Though Regulation 10(1)(a)(iii) may not strictly apply for the proposed acquisition, the same shall apply in spirit since GOI will continue to have ultimate supervisory control over the Target Company post proposed acquisition.

The Board opined that proposed acquisition would not be covered under automatic exemption available under Regulation 10(1)(a)(iii) of the Takeover Regulations since it would change the nature of control exercised by GOI over Target Company from direct to indirect control. However, there would be no change in control of Target Company, from a takeover perspective, since GOI shall continue to exercise supervisory control over Target Company through the Acquirers. In view thereof, exemption sought in the application was granted.

[Dredging Corporation of India Ltd. v. Visakhapatnam Port Trust, 2019 SCC OnLine SEBI 23, Order dated 28-02-2019]

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Securities and Exchange Board of India (SEBI): The Board comprising G. Mahalingam as Whole Time Member, granted Wipro exemption from the prohibition on the public announcement of buy-back during the pendency of an amalgamation scheme.

Wipro approved a scheme of amalgamation of four of its subsidiaries with itself and the said scheme was pending sanction of the National Company Law Tribunal.

Regulation 24(ii) of the Securities and Exchange Board of India (Buy–back of Securities) Regulations, 2018 prohibits public announcement of buy-back during the pendency of any scheme of amalgamation. The instant application was filed by Wipro seeking exemption/relaxation from strict enforcement of the said requirement pleading that in view of the backlog of cases at NCLT, it could not anticipate the time for completion of the merger.

In its application, Wipro submitted that relaxation from the requirement of Regulation 24(ii) would enable it to place a proposal for buy–back of equity shares for the consideration of the Board of Directors of the company; and such proposed buy–back inter would be in the interests of investors as shareholders of the company would benefit from return of surplus cash through the buy–back program.

The Board noted that vide Circular No. CFD/DIL3/CIR/2017/21 dated 10-03-2017 and Regulation 37(6) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, SEBI had exempted schemes involving the merger of a wholly owned subsidiary with holding company from various compliances. Further, Regulation 28 of the Buy–back Regulations empowers SEBI to relax strict enforcement of any requirement of the said Regulations, in the interest of investors and the securities market, on the satisfaction that the requirement is procedural in nature or if it might cause undue hardship to investors.

In view of the above, Wipro’s application was allowed.[Buy-back of securities in Wipro Ltd., In re, 2019 SCC OnLine SEBI 1, Order dated 15-02-2019]