JUDGMENT
C. Achuthan, Presiding Officer
1. Securities and Exchange Board of India (Respondent herein) vide its order dated 3-10-2001 appointed an Adjudicating Officer (Respondent herein) for holding an inquiry for the purpose of imposing monetary penalty for the alleged violation of Section 15H of the Securities and Exchange Board of India Act, 1992 (the SEBI Act) by four companies viz. (1) Mividha Investments Ltd., (2) Classic Credit Ltd., (3) Panther Investrade Ltd., (4) JDP Shares and Finance (P.) Ltd. The Adjudicating Officer after inquiry found the said companies guilty of violating Regulation 10 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (the Regulations) and imposed a sum of five lakh rupees as penalty on the said companies in terms of Section 15H of the SEBI Act vide order dated 31 -7-2002. In terms of the order the said companies “will be jointly and severally liable to pay” the said penalty amount of five lakh rupees.
2. Claiming to be aggrieved, the said four companies filed separate appeals challenging the common order passed by the Adjudicating Officer. Since all the four appeals are directed against the common order, and the order is based on the Adjudicating Officer’s perception that all the four Appellants had acted in concert, the appeals were clubbed and posted for hearing in one batch. But, when the appeals were taken up for consideration the learned counsel representing JDP Shares & Finance Ltd., the Appellant in Appeal No. 66/2002 (JDP) submitted that its case be heard separately and be not clubbed with the other three appeals while hearing. Since the Appellant wanted its case to be heard separately, the appeal was kept out and other three appeals were heard in one batch and the appeal filed by JDP was heard separately. Even though JDP had attacked the order on a separate ground, the material basis of the order is common that the Appellants by acting in concert acquired more than 1596 shares of the Target Company without making any public offer. Therefore,, the decision on merit in any one of the appeals has a bearing on the other appeals also.
3. In the case of JDP it was brought to the notice of the Tribunal at the time of hearing by its learned Counsel that the Adjudicating Officer passed the order before the enquiry was completed and as such the order cannot be sustained. In support of the said submission he had produced the minutes of the proceedings of 1 -2-2002 before the Adjudicating Officer. In that context learned Counsel appearing for SEBI had expressed SEBI’s willingness to hear the said Appellant’s case afresh in case the Tribunal decides to remand the matter for the purpose. The Tribunal, accordingly vide its order dated 8-7-2003 directed SEBI to hear the matter afresh and decide the charges preferred against JDP, covered in the show-cause notice. For the purpose the case relating to JDP was remanded to the Adjudicating Officer.
4. The appeals filed by the Appellants herein were heard before the Tribunal heard and decided the JDP’s case. The order was deserved in the present appeals, pending disposal of the JDP’s case. JDP’s appeal was allowed by way of remand.
5. It is noted that according to the common show-cause notice dated 23-10-2001 issued by the Adjudicating “Mividha Investments Ltd., Classic Credit Ltd., Panther Investrade Ltd., and JDP Shares & Finance (P.) Ltd., acting in concert acquired more than 15% of the paid up capital of Aftec Infosys Ltd., without making a public offer to the other shareholders of the company thereby violating regulations 10 and 11 read with Section 15H of the SEB1 Act.” The Adjudicating Officer after inquiry confirmed that the noticees violated regulation 10 of the 1997 Regulations inasmuch as they acquired 17% shares of the Target Company acting in concert with each other.
As per regulation 10 :
“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 acquirer to exercise fifteen per cent 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”
6. It is seen from the material on record that none of the said four appellants have acquired independent of others more than 1596 of the capital of the Target Company to attract regulation 10, that the charge would survive only if it is established that all the said four appellants acquired the shares by acting in concert. Therefore, the question whether all of them acted in concert has to be answered first. This question cannot be considered in isolation without considering the relevant material as a whole and including the role of JDP. Since the Tribunal has remanded the case of JDP to SEBI for fresh hearing, it is not possible to take any view in the three other appeals. Whether all the four appellants acted in concert for acquiring the Target Company’s shares cannot be considered compartmentally. It is possible that the outcome of the adjudication in the remanded case would have a bearing on the charges against the other three appellants also. In any case the three appeals can not be decided separately to the exclusion of JDP’s case in view of the alleged concerted action resulting in violation of regulation 10.
7. It is, therefore, felt that it is necessary to consider afresh whether the Appellants in the present appeals acted in concert with JDP in the context of the remand of JDP’s case for fresh enquiry and that exercise cannot be done by the Tribunal at this stage, and that the proper authority for the purpose is the Adjudicating Officer to whom the JDP’s case has been remanded for inquiry.
8. In view of the fact that all the four appeals are the offshoot of one and the same order and the basis of the order being common that the Appellants and JDP had acted in concert, the Appellants’ cases are interrelated to JDP’s case, and the JDP’s case has been already remanded for fresh inquiry, it is felt necessary that the Appellants’ case also need be remanded so that the Adjudicating Officer could pass an appropriate common order.
9. Accordingly the case relating to the Appellants herein is also remanded to the Adjudicating Officer to consider the same along with the case of JDP and to pass appropriate orders. Accordingly that part of the impugned order relating to the Appellants is set aside and the matter is remanded to the Adjudicating Officer.
