{"id":49911,"date":"2004-08-25T00:00:00","date_gmt":"2004-08-24T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/swedish-match-ab-anr-vs-securities-exchange-board-on-25-august-2004"},"modified":"2017-07-28T20:29:15","modified_gmt":"2017-07-28T14:59:15","slug":"swedish-match-ab-anr-vs-securities-exchange-board-on-25-august-2004","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/swedish-match-ab-anr-vs-securities-exchange-board-on-25-august-2004","title":{"rendered":"Swedish Match Ab & Anr vs Securities & Exchange Board, … on 25 August, 2004"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Swedish Match Ab & Anr vs Securities & Exchange Board, … on 25 August, 2004<\/div>\n
Author: S.B. Sinha<\/div>\n
Bench: N. Santosh Hegde, S.B. Sinha, A.K. Mathur<\/div>\n
           CASE NO.:\nAppeal (civil)  2361 of 2003\n\nPETITIONER:\nSwedish Match AB & Anr.\t\t\t\t\t\n\nRESPONDENT:\nSecurities & Exchange Board, India & Anr.\t\t\t\n\nDATE OF JUDGMENT: 25\/08\/2004\n\nBENCH:\nN. Santosh Hegde,S.B. Sinha & A.K. Mathur\n\nJUDGMENT:\n<\/pre>\n
J U D G M E N T<\/p>\n
S.B. SINHA, J:\n<\/p>\n
BACKGROUND FACTS:\n<\/p>\n
 \tWimco Limited (Wimco) is a target company.  Its shares are listed on
\nthe stock exchanges at Mumbai, Delhi, Calcutta, Kanpur as also on the
\nNational Stock Exchange.   It is engaged in the business of manufacture  and
\nsale of a broad range of safety matches.\n<\/p>\n
 \tThe Appellant No. 1 herein (Swedish Match) is incorporated in
\nSweden.  It is a holding company of the Appellant No. 2 (S.M.S)  holding its
\nentire paid up capital.  It is also a holding company of Haravon Investments
\nPrivate Limited (Haravon) and Seed Trading Private Limited (Seed).  These
\nfour companies hereinafter would be called and referred to as the Swedish
\nMatch Group.  It had acquired in the target company 52.11% shares, i.e.,
\n46.18% by Haravon and 5.93% by Seed.  AVP Trading Private Limited
\n(AVP) and Plash Floods P. Ltd. (Plash) were Indian promoters of the target
\ncompany.  They belong to one Jatia Group of companies holding 24.11% of
\nthe share capital of the target company, i.e., AVP holding 6.03% and Plash
\nholding 18.08%.\n<\/p>\n
 \tThe Swedish Match entered into an agreement with the Jatia Group to
\nacquire majority shoreholding in Haravon and Seed and to make a public
\nannouncement of offer to acquire 20% shares in Wimco.  The obligation to
\nmake a public announcement of offer arose  in view of indirect acquisition
\nof more than 10% shares in Wimco (in view of the law as prevailing thence)
\nattracting the provisions of Regulation 10 of the SEBI (Substantial
\nAcquisition of Shares and Takeovers) Regulations, 1997 (hereinafter called
\nand referred to for the sake of brevity as “the Regulations”).\n<\/p>\n
 \tOn or about 17th December, 1997, the public announcement of offer
\nwas made by S.M.S. together with the Jatia Group of Companies, viz., Plash
\nand AVP as “acquirers” and “persons acting in concert”.  In the letter of
\noffer, it was specified that both Swedish Match Group and Jatia Group
\nintend to exercise joint control over the affairs of Wimco.  For the purpose
\nof the public announcement of offer, ‘Haravon’ and ‘Seed’ being
\nsubsidiaries of Swedish Match Singapore were deemed to be “persons acting
\nin concert” in terms of Regulation 2(e)(2)(i) of the ‘Regulations’.\n<\/p>\n
 \tUpon completion of the process of public offer, the share holding in
\nWimco was as under : Haravon 28.28%, Seed 10.33%, AVP 5% and Plash
\n15%.  The aggregate of total share holding of both the groups, thus, came to
\n58.61%.\n<\/p>\n
 \tIt is not in dispute that subsequent to April, 1998 the said Groups were
\nexercising joint control over the affairs of Wimco.  By a Special Resolution
\nadopted in this behalf, the target company allotted shares on a preferential
\nallotment basis to ‘Haravon’, ‘AVP’ and ‘Plash’ purported to be in terms of
\nSection 81(1)(A) of the Companies Act, 1956 whereupon the share holding
\nin Wimco came to  as under:\n<\/p>\n
Haravon  46.18%, AVP  6.03%, Plash  18.08%.\n<\/p>\n
 \tAs no preferential shares were allotted to Seed, its shareholding was
\ndiluted to 5.93%.\n<\/p>\n
Swedish Match Group, thus, held 52.11% and Jatia Group held
\n24.11% of the total shares in Wimco.  The aggregate shareholding of both
\nthe Groups came to 76.22%.  The Government of India by an order dated 5th
\nJuly, 1999 permitted increase in foreign equity participation in the target
\ncompany from 38.61% to 52.11%.\n<\/p>\n
S.M.S. thereafter acquired from Jatia Group (as the latter was desirous
\nof exiting from the joint control over Wimco) the following extent of share:
\nAVP  5.47%, Plash  16.42%, at a price well above the market price.\n<\/p>\n
 \tPursuant to or in furtherance of the letter of the Government of India
\ndated 19th May, 2000 increasing foreign collaboration to the extent of
\n74.00438%; the Swedish Match Group  acquired 74% shareholding and Jatia
\nGroup was left with 2.22% in Wimco.\n<\/p>\n
 \tIt is also not in dispute that although the market value of each
\nacquired share of the target company was only Rs. 9.55; the consideration
\npaid to Jatia Group by the Swedish Match Group was Rs. 35\/- per equity
\nshare.  Pursuant to or in furtherance of the said arrangement, the Directors
\nbelonging to Jatia Group resigned as a result whereof, their joint control with
\nSwedish Match Group ceased leading to sole control of the latter.
\nAllegedly, the cessation of joint control was approved in a general meeting
\nof the shareholders of Wimco held on 27th September, 2000.  S.M.S.
\nthereupon by a letter dated 27th September, 2000 in terms of Regulation 7 of
\nthe Regulations disclosed to WIMCO its holding of more than 5% of the
\nequity share capital.  The said transaction was also brought to the notice of
\nthe SEBI (the Board) by a letter dated 28th September, 2000.  It also agreed
\nto adhere to the ‘lock-in’ restrictions applicable to the locked in shares
\nforming part of 21.89% shares purchased from AVP and Plash (Jatia Group
\nof Companies).  Upon receipt of the said information, SEBI by a letter dated
\n17th October, 2000 made a query as to whether the said transaction took
\nplace in accordance with Regulation 20 (pricing guidelines), Regulation 7
\n(mandatory disclosures) and Regulation 12 (change in control) of the
\nRegulations, in response whereto, Swedish Match by a letter dated 1st
\nNovember, 2000 submitted its replies thereto.  An additional query by SEBI
\nwas made as regard calculation of market price and compliance of the
\nprovisions of the Regulations by a letter dated 30th November, 2000; to
\nwhich  a reply was given on 8th January, 2001.\n<\/p>\n
PROCEEDINGS BEFORE SEBI :\n<\/p>\n
 \tA show-cause notice was served upon the Appellants by SEBI asking
\nthem to show cause as to why  no public announcement of offer had  been
\nmade in terms of Regulations 10 and 11(1) of the Regulations stating:\n<\/p>\n
“4. As you have acquired the shares of WL in the
\nmanner as stated above without making a public
\nannouncement as required by the provisions of the
\ncaptioned regulations, you have, prima-facie,
\nviolated the provisions of Regulation 10
\nindividually and Regulation 11(1) collectively of
\nthe captioned Regulations and, therefore, you are
\nliable for penal action under the Regulations and
\nSEBI Act, 1992.\n<\/p>\n
5. In view of the above, you are called upon to
\nshow cause as to why one or more or all action (s)
\nunder Regulation 44 and Regulation 45(6) of the
\nRegulations and Section 11B of the SEBI Act
\n1992, should not be initiated against you for
\nviolation specified above.”\n<\/p>\n
 \tThe Appellants herein filed a show cause before the Board.\n<\/p>\n
ORDER OF SEBI :\n<\/p>\n
The Chairman, SEBI upon hearing the Appellants by an order dated
\n4th June, 2002  observed that Regulation 12 has no application.\n<\/p>\n
 \tIt was, however, held:\n<\/p>\n
“In view of the above, the submission of the
\nAcquirers that Regulation 11(1) should exclude a
\ntransaction involving a transfer of shares as part of
\ncessation of participation in joint control,
\nparticularly where such persons in joint control
\nacquired shares as persons acting in concert is not
\ntenable.\n<\/p>\n
Therefore, if an Acquirer triggers either of the
\nRegulations, i.e., Regulations 10, 11 or 12, he has
\nto make a public announcement unless the
\nacquisition is specifically exempt in terms of the
\nRegulations.  Therefore, each of the Regulations
\n10, 11 & 12 has to be complied with independently
\nby the Acquirers.  The acquisition falling under
\nproviso to Regulation 12 is not automatically
\nexempt from the applicability of Regulations 10 &\n<\/p>\n
11.”\n<\/p>\n
 \tConsequent upon the said findings, the following directions were
\nissued :\n<\/p>\n
“In view of the above the exercise of the powers
\nconferred upon me under sub-section (3) of
\nSection 4 read with Section 11B SEBI Act 1992
\n(hereinafter referred to as the Act) read with
\nRegulation 44 & 45 of the Regulations, I hereby
\ndirect the Acquirers to make public announcement
\nin terms of Chapter III of the Regulations in terms
\nof sub-Regulation (1) of Regulation 11 taking
\n27\/9\/2000 as the reference date for calculation of
\noffer price within 45 days of passing of this order.”\n<\/p>\n
THE TRIBUNAL :\n<\/p>\n
 \tAggrieved by and dissatisfied with the said order, an appeal was filed
\nby the Appellants herein before the Securities Appellate Tribunal (Tribunal).
\nThe Tribunal took notice of the Appellant’s letter dated 28.9.2000
\ncontending  “We wish to inform you that we have through our wholly owned
\nsubsidiary Swedish Match Singapore Pte. Ltd. and pursuant to the requisite
\napprovals acquired an additional 11382800 equity shares from the
\naforesaid Indian companies such that we are not in sole control of WIMCO
\nLtd.”  and held:\n<\/p>\n
“Sequence has been mentioned correctly thus that
\nthey acquired additional shares and thereby
\nacquired sole control of WIMCO Ltd.  As the
\ncontrol is relatable to the shareholding in the
\ninstant case and to nothing else and cessation of
\ncontrol was due to divesting of the said ownership
\nof shares in the absence of any other evidence to
\nthe contrary it can be safely concluded that the
\nAcquirers acquired shares from the Jatia Group
\nand consequently Jatia Group ceased to be in joint
\ncontrol of the target company.  Assuming that if
\nthe Jatia Group had been in joint control due to
\nsome other factors, then section 11 would not have
\nattracted.  In the instant case, it is a clear case of
\nacquisition of shares and cessation of control
\nconsequential to divestment of shares held by the
\nperson in control.”\n<\/p>\n
\t\t\t\t\t(Emphasis supplied)
\n \tHolding that the provisions of Regulations 11(1) and 12 are not in
\nconflict with each other in any manner and further holding that the
\nRegulation is a beneficial legislation,  the Tribunal  held:\n<\/p>\n
“The legislative intent behind the Regulations is
\nclear.  The objective is to protect the interests in
\nsecurities.  It is with the said objective that
\nregulations 10, 11 and 12 have been framed
\nproviding an opportunity to the existing
\nshareholders of a company under acquisition and
\nthat exit opportunity cannot be denied by resorting
\nto a narrow and technical interpretation of the
\nregulations.  As already stated in this order
\nregulations 10, 11 and 12 are put in position to
\nmeet different situations.  Which one of these
\nregulations is attracted to an acquisition, would
\ndepend on the specific facts.  In my opinion in the
\nlight of the facts, as the Respondent has held, the
\nacquisition in question attracts the provisions of
\nregulation 11(1).”\n<\/p>\n
This appeal has been filed by the Appellants herein before this Court
\nin terms of Section 15-Z of the Securities and Exchange Board of India Act,
\n1992 (for short “the Act”)<\/p>\n
SUBMISSIONS :\n<\/p>\n
 \tMr. F.S. Nariman, learned senior counsel appearing on behalf of the
\nAppellants would contend that although each one of the Regulation 10, 11
\nand 12 of the Regulations require making of public announcement, but the
\nsame are mutually exclusive and independent of one another as they address
\ndifferent types of acquisitions (as found by SEBI) and should necessarily,
\nthus, be limited to the context of the situation with which it deals and should
\nnot be projected into the other.\n<\/p>\n
 \tThe learned counsel would point out that Regulation 10 applies to
\ninitial acquisition of shares or voting rights by an acquirer whereas
\nRegulation 11 having been captioned as “Consolidation of Holdings” deals
\nwith consolidation of existing shareholder (s) by way of acquisition of
\nadditional shares, i.e., such acquisition must be by way of combined
\nshareholding of acquirer and persons who previously acted in concert with
\nhim resulting in increase of more than 5% and in case of Regulation 11(1),
\nby acquisition of any additional shares.\n<\/p>\n
 \tRegulation 11, Mr. Nariman would submit, does not cover purchase
\nof shares by the acquirer from the persons who have previously acquired
\nshares in concert with him as in such a case there is no acquisition of
\nadditional shares as the aggregate shareholding of the parties does not
\nincrease at all and far less by 5%.  Elaborating his submission, Mr. Nariman
\nwould argue that as both Swedish Match Group and Jatia Group had 76.22%
\nwhich was reduced to 74%, there had been no acquisition of additional
\nshares and in that view of the matter the purported admission by the
\nAppellants in its letter dated 28.9.2000 should be ignored.  Proviso appended
\nto Regulation 12, according to Mr. Nariman, is squarely attracted in the
\ninstant case, in view of the fact that the shareholders in a general meeting
\nhad approved the change in control in favour of the Swedish Match Group
\nfrom the joint control of Swedish Match Group and Jatia Group and in that
\nview of the matter, no public announcement therefor was required.  In the
\nalternative it was submitted that Regulation 11 does not envisage inter se
\ntransfer between one group to the another.  The Scheme of the statute is
\nsuch, it was urged, that the requirement of public announcement is not
\nattracted in all cases which would be evident from Regulation 3 of the
\nRegulations and in that view of the matter it cannot be said that the proviso
\nappended to Regulation 12 will have no application in the instant case.  In
\nthis connection our attention has also been drawn to the subsequent
\namendments made to the regulations.  The learned counsel would argue that
\nalso in a situation like death or bankruptcy of a person in joint control may
\nlead to sole control of the target company in which event also the rigours of
\nRegulation 12 will have no application.  Pointing out the difference between
\nRegulations 11 and 12, it was urged that whereas in terms of Proviso to
\nRegulation 12 the change in control is exempted from the applicability
\nthereof (which otherwise requires the making of a public announcement) by
\na resolution passed by the shareholders in the General Meeting, but the
\nnecessity of making a public offer under Regulation 11 cannot be condoned
\nby the shareholders because a right to have the shares offered under the
\npublic offer is conferred upon the remaining shareholders as even a majority
\nof them cannot barter away the right of a minority.  The position, however,
\nwould be different in a case where change in control of the target company
\nis approved by the majority of the shareholders in a general meeting, as
\ntherein the question as regard protection of the interest of the shareholders
\nwould fall for cosnideration.\n<\/p>\n
 \tRegulations 10, 11 and 12 having been intended for the benefit of the
\nshareholders of the target company, the learned counsel would argue, only a
\nletter of offer is required to be sent to all the shareholders of the target
\ncompany in terms of Regulation 22(3) for the purpose of allowing and
\nenabling the existing shareholders to avail of the opportunity to offer their
\nshares for purchase to the acquirers at a price specified in the public
\nannouncement and the letter of offer.  Requirement of change from joint
\ncontrol to sole control would be fulfilled if all the existing shareholders
\napproved the change from joint control to sole control, urged Mr. Nariman,
\nas by reason of such a resolution, the transfer from joint control to the sole
\ncontrol would be offered which would amount to an election not to exit from
\nthe company and to remain therein under the management of the sole
\ncontroller.\n<\/p>\n
 \tIt was urged that Explanations (i) and (ii) are explanations to the
\nproviso appended to Regulation 12 and not to the main part thereof, which
\nhad been inserted only for the purpose of clarifying the phrase “change in
\ncontrol” occurring therein.\n<\/p>\n
 \tThe learned senior counsel would submit that where there is a mere
\ncessor of control by one out of two persons already in control  or where any
\nperson or persons are given joint control and the combined degree of control
\nis not greater than being presently exercised, a resolution in a general
\nmeeting is not necessary; since there is no change in control and, thus, the
\nquestion of any acquisition of control within the meaning of the main part of
\nRegulation 12 would not arise.  Proviso to Explanation (i) i.e. cessor of
\ncontrol by one or more persons already in control, according to Mr.
\nNariman, imposes a further restriction if the transfer of joint to sole control
\nis through sale of shares at less than the market value of the shares, in which
\nan event only a special Resolution is required to be passed at a specially
\ncalled meeting of the shareholders of the target company.\n<\/p>\n
 \tWithout prejudice to the submissions as referred to hereinbefore, Mr.
\nNariman would argue that once a direction has been issued by the Board, the
\npenalties specified in Regulation 44 including (a) criminal prosecution under
\nSection 24 of the Act; (b) monetary penalty under Section 15H of the Act
\nand (c) directions under the provisions of Section 11B of the Act may ensue
\nbut in the facts and circumstances of the case penal provisions should not
\nhave been directed to be resorted to having regard to the fact that the
\nRegulations contained no clear and unambiguous words to indicate the true
\nlegal position.  The penal provisions, it was contended,  are required to be
\nstrictly construed.  Reliance in this connection has been made on Francis
\nBennion’s Statutory Interpretation, Third Edition, at page 637, Avais Vs.
\nHartford Shankhouse and District Workingmen’s Social Club and Institute,
\nLtd. [1969 (1) All ER 130 at 135], The Seksaria Cotton Mills Ltd. Vs. the
\nState of Bombay [1953 SCR 825 at 834] and State of Bihar Vs. Bhagirath
\nSharma and Another[(1973) 2 SCC 257 at 261].\n<\/p>\n
 \tMr. Kirit N. Raval, learned senior counsel appearing on behalf of the
\nRespondent, on the other hand, would contend that the language in
\nRegulations 10, 11 and 12 of the Regulations being clear and unambiguous,
\nthis Court should apply the principles of literal interpretation.  He would
\nurge that having regard to Explanation I appended to Regulation 12, the
\nquestion of application of Regulation 12 would not arise inasmuch as by
\nreason thereof a transfer of control from joint owners (Swedish Match A.B.
\nand Jatia Group) to a single sole owner (Swedish Match Group) stands
\nexcluded from the concept of “Change in Control”.\n<\/p>\n
 \tMr. Raval would  submit that although the Board has accepted the
\nposition that there was no violation of Regulation 12, relying on or on the
\nbasis of proviso appended thereto, the Tribunal has clearly held that there
\nhas been no change in control in terms of the Regulations and in that view of
\nthe matter the opinion of the Tribunal shall prevail over that of the Board.
\nReliance in this connection has been placed on S. Shanmugavel Nadar Vs.
\nState of T.N. [(2002) 8 SCC 361].\n<\/p>\n
 \tThe learned counsel would strenuously urge that the application of
\nRegulation 11 cannot be excluded by bringing the transaction in question as
\nhaving been made under Regulation 12 in terms whereof an additional
\nliability was required to be incurred by the Appellants.  It was pointed out
\nthat  no disclosure has ever been made by the Appellants that in fact they
\nhad intended to purchase the shares belonging to the Jatia Group at a price of
\nRs. 35 as against the then prevailing market price of Rs. 9.55 per equity
\nshare.  In fact the stand of the Appellants had all along been that they would
\nnot sell the shares below the market price and, thus, indicating that the
\nshares would be sold at the prevailing market price.\n<\/p>\n
 \tMr. Raval would urge that the Appellants withheld a very valuable
\ninformation from the shareholders i.e. the actual price of share being paid to
\nJatia Group which would have otherwise become known to them if a public
\nannouncement of offer was made.  If it is to be held that even in a case of
\nthis nature no public announcement is to be made, the intent and purport of
\nthe legislature in bringing Regulations 10, 11 and 12 to the statute book with
\na view to protect the interest of the investors shall be frustrated.\n<\/p>\n
 \tThe learned counsel would further submit that the regulations were
\namended only for the purpose of plugging the loopholes which existed in the
\n1994 Regulations in terms of the recommendations of a Committee
\nconsisting of experts in the fields of law, securities market, accounts,
\nfinance, management etc. and, thus, if the interpretation of regulations as
\nsuggested by Mr. Nariman, is accepted, the same would frustrate the object
\nof bringing the said regulations.  Reliance in this behalf has been placed on
\nReserve Bank of India Vs. Peerless General Finance & Investment Co. Ltd.
\n[(1987) 1 SCC 424] and Shashikant Laxman Kale & Ors. Vs. Union of India
\nand Anr. [(1990) 4 SCC 366].\n<\/p>\n
 \tThe learned counsel would urge that Regulations 14, 15 and 16 clearly
\nmake a distinction in the timing of offer to be made between Regulations 10
\nand 11 on the one hand and Regulation 12, on the other, having regard to the
\nfact that process of action initiating the operation of Regulations 10, 11 and
\n12 would be different.\n<\/p>\n
 \tIn a given case, Mr. Raval would submit, a transaction may trigger
\nboth Regulations 11 and 12, in which event, an appropriate combined notice
\nof public announcement of offer may be issued.\n<\/p>\n
Drawing our attention to Regulation 44, the learned counsel would
\ncontend that in terms thereof the Board is not obliged to issue any direction
\nonly in terms of Clauses (a) to (d) thereof as the words “give such directions
\nas it deems fit including” must be held to be of wide amplitude.  Clauses (a)
\nto (d) are only illustrative and not exhaustive and in that view of the matter,
\nthe Board was within its jurisdiction to issue the impugned directions.\n<\/p>\n
 \tIt was contended that the penal provisions contained in Section 15H
\nare not the subject matter of the present proceedings.  Further, an order
\nwhich  may be  passed under Section 15H of the Act would be  separate and
\ndistinct.\n<\/p>\n
ISSUE FOR DETERMINATION :\n<\/p>\n
 \tThe core issue which falls for our determination is the interpretation
\nof Regulations 10, 11 and 12.\n<\/p>\n
STATUTORY PROVISIONS :\n<\/p>\n
\tThe Securities and Exchange Board of India Act, 1992 was enacted to
\nprovide for the establishment of a Board to protect the interests of investors
\nin securities and to promote the development of, and to regulate, the
\nsecurities market and for matters connected therewith or incidental thereto.
\n \tSection 11 of the Act provides for functions of the Board which would
\ninclude registering and regulating the working of persons specified in
\nClauses (b) and (ba).  Section 11A provides for the matters which are to be
\ndisclosed by the companies.  Section 11B empowers the Board to issue
\ndirections as specified therein.\n<\/p>\n
 \tChapter VIA of the Act deals with penalties and adjudication whereas
\nSection 15A provides for penalty for failure to furnish information, return
\netc., Section 15H provides for penalty for non-disclosure of acquisition of
\nshares and takeovers which include a case where public announcement to
\nacquire shares at a minimum price is not made as required under the Act or
\nthe rules or the regulations.  Section 15H of the Act provides for a penalty of
\ntwenty-five crores or three times the amount of profits made out of such
\nfailure, which is higher.  Section 15I confers power upon the Board to
\nadjudicate in the event a penalty proceeding is directed to be initiated.
\nSection 15T deals with appeal to the Securities Appellate Tribunal.  Section
\n15Z, which has been brought in the statute book by Act 59 of 2002, provides
\nfor an appeal to this Court from any decision or order of the Tribunal on any
\nquestion of law arising thereunder.\n<\/p>\n
 \tRegulation 2(e) of the Regulations defines “person acting in concert”.
\nRegulation 3 inter alia contains an exclusionary clause stating that the
\nmatters specified therein shall not apply to Regulations 10, 11 and 12.\n<\/p>\n
 \tRegulations 10, 11(i) and 12 of the Regulations read as under:
\n“10. Acquisition of [15%] or more of the shares or
\nvoting rights of any company. No acquirer shall
\nacquire shares or voting rights which (taken
\ntogether with shares or voting rights, if any, held
\nby him or by persons acting in concert with him),
\nentitle such acquirer to exercise  fifteen percent or
\nmore of the voting rights in a company, unless
\nsuch acquirer makes a public announcement to
\nacquire shares of such company in accordance
\nwith the Regulations.\n<\/p>\n
11. Consolidation of holdings  (1) No acquirer
\nwho, together with persons acting in concert with
\nhim, has acquired, in accordance with the
\nprovisions of law, 15 per cent or more but less than
\n75 per cent of the shares or voting rights in a
\ncompany, shall acquire, either by himself or
\nthrough or with persons acting in concert with him,
\nadditional shares or voting rights entitling him to
\nexercise more than 5% of the voting rights, in any
\nperiod of 12 months, unless such acquirer makes a
\npublic announcement to acquire shares in
\naccordance with the Regulations.\n<\/p>\n
12. Acquisition of control over a company –\n<\/p>\n
Irrespective of whether or not there has been any
\nacquisition of shares or voting rights in a company,
\nno acquirer shall acquire control over the target
\ncompany, unless such person makes a public
\nannouncement to acquire shares and acquires such
\nshares in accordance with the Regulations.\n<\/p>\n
Provided that nothing contained herein shall apply
\nto any change in control which takes place in
\npursuance to a resolution passed by the
\nshareholders in a general meeting.\n<\/p>\n
Explanation : (i) For the purposes of this
\nRegulation where there are two or more persons in
\ncontrol over the target company, the cessor of any
\none such person from such control shall not be
\ndeemed to be a change in control of management
\nnor shall any change in the nature and quantum of
\ncontrol amongst them constitute change in control
\nof management.\n<\/p>\n
Provided however that if the transfer of joint
\ncontrol to sole control is through sale at less than
\nthe market value of the shares, a shareholders
\nmeeting of the target company shall be convened
\nto determine mode of disposal of the shares of the
\noutgoing shareholder, by a letter of offer or by
\nblock-transfer to the existing shareholders in
\ncontrol in accordance with the decision passed by a
\nspecial resolution. Market value in such cases shall
\nbe determined in accordance with Regulation 20.\n<\/p>\n
 (ii) where any person or persons are given joint
\ncontrol, such control shall not be deemed to be a
\nchange in control so long as the control given is
\nequal to or less than the control exercised by
\nperson(s) presently having control over the
\ncompany.”\n<\/p>\n
 \tRegulation 14 provides for the timing of public announcement of
\noffer to the effect that the same shall be made not later than four working
\ndays of entering into an agreement for acquisition of shares or voting rights
\nor deciding to acquire shares or voting rights exceeding the respective
\npercentages specified therein.  Clause (3) of Regulation 14 provides for
\npublic announcement referred to in Regulation 12 to be made not later than
\nfour working days after any such change or changes are decided to be made
\nas would result in the acquisition of control over the target company by the
\nacquirer.\n<\/p>\n
 \tRegulation 14 provides for the mode and manner of the public
\nannouncement to be made under Regulations 10, 11 or 12 whereas
\nRegulation 16 specifies the contents thereof.\n<\/p>\n
 \tRegulation 44 of the Regulations reads as under:\n<\/p>\n
“44. Directions by the Board  – The Board may, in
\nthe interests of the securities market, without
\nprejudice to its right to initiate action including
\ncriminal prosecution under section 24 of the Act
\ngive such directions as it deems fit including :\n<\/p>\n
 (a)\t*** <\/p>\n
 (b) \t***<\/p>\n
(c)\tdirecting the person concerned to sell the
\nshares acquired in violation of the provisions
\nof these Regulations;”\n<\/p>\n
 \tRegulation 44, as amended in the year 2002, provides for several
\ndirections.  Clauses (f) and (i) thereof are in the following terms:
\n“44. Directions by the Board. Without prejudice to
\nits right to initiate action under Chapter VIA
\nand       section 24 of the Act, the Board may, in
\nthe interest of securities market or  for protection
\nof interest of investors, issue such directions as it
\ndeems fit  including: –\n<\/p>\n
(f) directing the person concerned to make
\npublic offer to the shareholders of the target
\ncompany to acquire such number of shares
\nat such offer price as determined by the
\nBoard;\n<\/p>\n
(i) directing the person concerned, who has
\nfailed to make a public offer or
\ndelayed the making of a public offer in
\nterms of these Regulations, to pay to the
\nshareholders, whose shares have been
\naccepted in the public offer made after the
\ndelay, the consideration amount along with
\ninterest at the rate not less than the
\napplicable rate of interest payable by banks
\non fixed deposits.”\n<\/p>\n
ANALYSIS :\n<\/p>\n
 \tEstablishment of independent regulatory agencies and need for expert
\nregulations were long felt primarily as a response to the growing complexity
\nin human affairs and trade and business in particular.  It was felt that a
\nregulator who was aware of the realities of that field should be ready to
\nregulate that field.  Demand for regulators who were not mere Government
\nofficials but people who are experts in the field came up.  Regulations
\nframed by an expert body like SEBI was felt to be an effective substitute for
\ngovernment regulation.  The evolution in respect whereof can be traced back
\nto the Great Depression of 1930s.  As a part of the new deal, several expert
\nbodies were established like the Federal Communications Commission and
\nSecurities Exchange Commission.  In the Indian context, this rationale was
\ninvoked for the establishment of an expert body to regulate the securities
\nmarket after the Securities Scam in 1992.\n<\/p>\n
The statement of Objects and Reasons of the Act are as under :\n<\/p>\n
“Securities and Exchange Board of India (SEBI)
\nwas established in 1988 through a Government
\nresolution to promote orderly and healthy growth
\nof the securities market and for investors’
\nprotection.  SEBI has been monitoring the
\nactivities of stock exchanges, mutual funds,
\nmerchant banks, etc., to achieve these goals.\n<\/p>\n
The capital market has witnessed tremendous
\ngrowth in recent times, characterized particularly
\nby the increasing participation of the public.
\nInvestors’ confidence in the capital market can be
\nsustained largely by ensuring investors’ protection.
\nWith this end in view, Government decided to vest
\nSEBI immediately with statutory powers required
\nto deal effectively with all matters relating to
\ncapital market.  As Parliament was not in session,
\nand there was an urgent need to instill a sense of
\nconfidence in public in the growth and stability of
\nthe market, the President promulgated the
\nSecurities and Exchange Board of India
\nOrdinance, 1992 (Ord. 5 of 1992) on 30th January,
\n1992.  The Bill seeks to replace the aforesaid
\nOrdinance”.\n<\/p>\n
\tSection 30 of the 1992 Act empowers the Board (the expert body) to
\nmake regulations consistent with the Act and the rules made thereunder to
\ncarry out the purposes of the Act inter alia providing for :\n<\/p>\n
“(c) the matters relating to issue of capital, transfer
\nof securities and other matters incidental thereto
\nand the manner in which such matters shall be
\ndisclosed by the companies under section 11A;”\n<\/p>\n
 \t SEBI made Regulations in the year 1994.  The said regulations were
\nsaid to have many loopholes and, thus, the Bhagwati Committee consisting
\nof experts in different fields was set up to suggest amendments therein.
\nRegulations 1997 indisputably were made pursuant to or in furtherance of
\nthe recommendations made by the said Committee.  It is also not in dispute
\nthat whereas most of the recommendations made by the Bhagwati
\nCommittee were accepted, some were not.\n<\/p>\n
 \tIn the aforementioned backdrop, this Court has been called upon to
\ninterpret the scope and ambit of Regulations 10, 11 and 12.
\nBefore we advert to the said question, we must bear in mind that the
\nsaid Regulations seek to protect the interests of the shareholders.  Public
\nannouncement of offer is one of the modes of protecting the interests of the
\nshareholders.\n<\/p>\n
Interpretation  Principles of :\n<\/p>\n
 \tIt is a well-settled principle of law that where wordings of a statute are
\nabsolutely clear and unambiguous recourse to different principles of
\ninterpretations may not be resorted to but where the words of a statute are
\nnot so clear and unambiguous, the other principles of interpretation should
\nbe resorted to.\n<\/p>\n
 \tSEBI was an expert body.  It made regulations which were meant to
\nsub-serve the interests of investors as also promote and regulate the
\nsecurities market.\n<\/p>\n
\tRegulations 10, 11 and 12 ex-facie operate in three different fields.
\nThey seek to control creeping acquisition which may lead to substantial
\nacquisition and ultimately total control of the company.  There may,
\nhowever, be a case where control of the company is sought to be taken over
\nby transfer of share only i.e. by a single transaction, in which event
\nRegulations 11 and 12 both may apply.\n<\/p>\n
We would at the outset proceed to consider the admitted fact of the
\nmatter that both Swedish Match Group and Jatia Group were acquirers “in
\nconcert with each other”.  They were in joint control of Wimco.  Jatia Group
\nintended to transfer the control of the target company by transferring their
\nshares in favour of Swedish Group.\n<\/p>\n
APPLICABILITY OF REGUALTIONS 11 AND 12:\n<\/p>\n
 \tWith a view to arrive at an answer to the question, we may begin with
\nRegulation 12.  The said Regulation like Regulations 10 and 11 also speaks
\nof public announcement.  Such public announcement is required to be made
\nirrespective of whether or not there has been any acquisition of shares or
\nvoting rights in a company.  In either of the case, the acquirer is statutorily
\nrequired to make public announcement of  acquisition of  shares and control
\nof the target company in accordance with the regulations.  The proviso
\nappended to Regulation 12 curves out an exception as regard necessity of
\nmaking public announcement.  Explanation appended to Regulation 12,
\nhowever, states that it would have no application where a change in control
\ntakes place pursuant to a resolution passed by the shareholders in a general
\nmeeting.  As would be noticed shortly hereinafter, the proviso to Regulation
\n12 cannot be said to have any application in the instant case as by reason of
\nthe Explanation appended thereto, Regulation 12 would have no
\napplication..  Result in change in control over the target company in terms of
\nRegulation 12 would come into being in two situations; viz. (i) by
\nacquisition of share, or voting rights; or (ii) where there has been none.
\n \tA control over the target company may be achieved by amending the
\nmemorandum of association or by any other mode which necessitates a
\nresolution to be passed by the shareholders in a general meeting.  The
\nexpressions “in pursuance to a resolution passed by the shareholders in a
\ngeneral meeting” are crucial as the proviso will apply only when the change
\nof control over the target company takes place otherwise than by acquisition
\nof shares or voting rights.\n<\/p>\n
 \tThe primal question would be as to whether Explanation (i) appended
\nto Regulation 12 would bring the matter out of the purview of the
\nregulation?  In the fact of the present case, it does.  Explanation appended to
\nRegulation 12 postulates that where there are two or more persons in control
\nover the target company (here Swedish Match Group and Jatia Group), the
\ncessor of any one such person (Jatia Group) from such control shall not be
\ndeemed to be a change in control of management nor shall any change in the
\nnature and quantum of control amongst them constitute change in control of
\nmanagement.  By reason of the said Explanation, a legal fiction has been
\ncreated pursuant whereto or in furtherance whereof applicability of
\nRegulation 12 is excluded. Change of control contemplated under
\nRegulation 12 calls for a public announcement when the same is sought to
\nbe achieved by acquiring shares or voting rights.  A change of control in
\nterms of Regulation 12 may also take place pursuant to a resolution passed
\nby the shareholders in a general meeting.  Only in the latter case the proviso
\nwhich carves out an exception would be attracted.  The effect and purport of
\nthe first proviso may also be construed having regard to the second proviso
\nappended thereto.  The second proviso appended to Regulation 12 takes
\nwithin its fold a case where the joint control to sole control is through sale at
\nless than the market value of the share.  It, therefore, speaks of a different
\nsituation, namely, control by transfer of joint control to sole control through
\nsale was at less than the market value of the shares.  In a case where the
\nsecond proviso is attracted, the Explanation (1) will have no role to play.
\n \tSituation, however, would be different when the transfer of joint
\ncontrol to sole control takes place through sale at a price which is higher
\nthan the market value of the shares leading to change in control over the
\ntarget company, which cannot be done  pursuant to a resolution passed by
\nthe shareholders in a general meeting in terms of the first proviso.  In other
\nwords, in the event, the change in control is sought to be achieved by sale of
\nshares at a price higher than the market value of the share, Regulation 12
\nwill clearly be attracted making  public announcement imperative.  Such
\npublic announcement evidently is required to be made having regard to the
\nfact that the interest of investors is required to be protected; pursuant
\nwhereto and in furtherance whereof the shareholder would be informed of
\nthe value of the share at which the transfer of control would take place so as
\nto enable him to exercise his option to sell his shares at the price offered by
\nthe acquirer or continue to keep the same.\n<\/p>\n
 \tA general meeting of the shareholders of the target company had
\ntaken place but the same  does not sub-serve the requirements of law
\ninasmuch as, it would bear repetition to state,  when transfer of control over
\nthe target company takes place by reason of acquisition of shares at a price
\nhigher than the market price the acquirer has a statutory obligation to make
\nthe public announcement.  Such a statutory requirement is not capable of
\nbeing waived by the majority shareholders.  In this case, the records reveal
\nthat the shareholders were not informed that although the market value of
\nthe share was about Rs. 9.55, Jatia Group was offered the price of Rs. 35\/-
\nper equity  share.  It was merely disclosed that such acquisition would not be
\nat a price lower than the market price.  If such transfer was to take place at a
\nprice less than the market price, the second proviso appended to Regulation
\n12 would have been attracted.  It was, therefore, obligatory on the part of the
\nacquirer to furnish correct information as regard the price which was being
\noffered to Jatia Group.\n<\/p>\n
 \tThere may be cases where to some extent Regulations 11 and 12 may
\noverlap.  But Regulations 14, 15 and 16 clearly postulate that public
\nannouncement is required to be made in relation to transfer of shares
\nattracting Regulations 10 or 11 not later than four working days of entering
\ninto an agreement for acquisition of shares or voting rights or deciding to
\nacquire shares or voting rights exceeding the respective percentage specified
\ntherein and in case of acquisition of control in terms of  Regulation 12; not
\nlater than four working days after any such change or changes are decided to
\nbe made as would result in the acquisition of control over the target
\ncompany by the acquirer.\n<\/p>\n
 \tIn a given situation, a public announcement can be made upon
\ncompliance of both Regulations 11 and 12.\n<\/p>\n
 \tIt is also not a case where Regulation 3 will have any application.
\nAdmittedly, the Appellants did not claim any exemption in terms of
\nRegulation 3 nor were they eligible therefor.  It is also not a case where
\nchange in control had taken place by reason of inheritance or succession but
\nby reason of conscious act of transfer of shares by one acquirer from
\nanother.\n<\/p>\n
In a case of this nature, thus,  Regulation 12 would not apply, the
\nlogical corollary whereof would be that Regulation 11 will apply.
\nLet us now consider the legal principles as regard ‘Proviso and
\nExplanation’.\n<\/p>\n
 \tIn S. Sundaram Pillai, etc. Vs. V.R. Pattabiraman [AIR 1985 SC 582],
\na 3-Judge Bench of this Court held that proviso may serve four different
\npurposes, namely:\n<\/p>\n
“(1) qualifying or excepting certain provisions
\nfrom the main enactment;\n<\/p>\n
(2) it may entirely change the very concept of the
\nintendment of the enactment by insisting on certain
\nmandatory conditions to be fulfilled in order to
\nmake the enactment workable;\n<\/p>\n
(3) it may be so embedded in the Act itself as to
\nbecome an integral part of the enactment and thus
\nacquire the tenor and colour of the substantive
\nenactment itself; and
\n(4) it may be used merely to act as an optional
\naddenda to the enactment with the sole object of
\nexplaining the real intendment of the statutory
\nprovision.”\n<\/p>\n
 \tProviso to Regulation 12 exempts only a part of the main enactment.
\nIt does not take within its umbrage both the situations contemplated under
\nRegulation 12.\n<\/p>\n
 \tAs regard functions of an Explanation, it was opined:
\n“52(a) to explain the meaning and intendment of
\nthe Act itself,\n<\/p>\n
(b) where there is any obscurity or vagueness in
\nthe main enactment, to clarify the same so as to
\nmake it consistent with the dominant object which
\nit seems to subserve,\n<\/p>\n
(c) to provide an additional support to the
\ndominant object of the Act in order to make it
\nmeaningful and purposeful,\n<\/p>\n
(d) an Explanation cannot in any way interfere
\nwith or change the enactment or any part thereof
\nbut where some gap is left which is relevant for the
\npurpose of the Explanation, in order to suppress
\nthe mischief and advance the object of the Act it
\ncan help or assist the Court in interpreting the true
\npurport and intendment of the enactment, and\n<\/p>\n
(e) it cannot, however, take away a statutory right
\nwith which any person under a statute has been
\nclothed or set at naught the working of an Act by
\nbecoming an hindrance in the interpretation of the
\nsame.”\n<\/p>\n
 \tThe Explanation was inserted evidently with a view to clear the
\nobscurity occurring in Regulation 12 as regard a class of cases of cessation
\nof joint control to sole control.\n<\/p>\n
 \tIn Laxminarayan R. Bhattad and Others Vs. State of Maharashtra and
\nOthers [(2003) 5 SCC 413] this Court held that the proviso acted as an
\nexception to the main provision but such an exception must be strictly
\nconstrued and confined to the intent of the legislature.
\n[See also Ali M.K. and Others vs. State of Kerala and Others  (2003) 11
\nSCC 632 and Union of India vs. Sanjay Kumar Jain<\/a>  JT 2004 (6)
\nSC 318].\n<\/p>\n
 \tIn Dipak Chandra Ruhidas Vs. Chandan Kumar Sarkar [(2003) 7 SCC
\n66] it was held that in a case where a legal fiction created in the Explanation
\nwas construed to be validly made as thereby main provision was made
\nabsolutely clear and explicit, the legal fiction so created must also be given
\nits full effect.\n<\/p>\n
\tIt is true that Regulation 12 could have been better worded but the
\napplication of Regulations 11 and 12 in a case of this nature is free from
\ndoubt.  This is not a case where having regard to the explanations in the
\nprovisos and reading the provision in the manner we have done, it stands
\nobscure.  The Explanations (i) and (ii) are not Explanations to the provisos
\nbut the main part thereof.\n<\/p>\n
 \tIt would, therefore, be not correct to contend that where there is a
\nmere cessor of control by one out of two persons already in control or where
\nany person or persons are given joint control and the combined degree of
\ncontrol is not greater than being presently exercised, a Resolution in general
\nmeeting would sub-serve the purpose, is devoid of any merit as change in
\ncontrol has taken place by reason of acquisition of shares from another
\nperson in control.  Having regard to the fact that the price offered to Jatia
\nGroup was higher than the market price, a public announcement was
\nimperative so as to enable the shareholders to elect as to whether to sell their
\nshares held by them or not.  No exemption from public announcement has
\nbeen carved out by reason of the proviso appended to Regulation 12 as in
\nterms of the Explanation, Regulation 12 would have no application.
\n \tThe purported resolution dated 27.9.2000 reads as under:
\n“Resolved that the cession of their participation in
\nthe joint control of the company by the Jatia Group
\nas of the date hereof such that Swedish Match AB
\nand its subsidiary are in sole control of the
\ncompany be and is hereby approved.”\n<\/p>\n
\tThe said resolution is of no avail in the fact of the matter as neither
\nthe proviso nor the second explanation appended to Regulation 12  is
\nattracted.\n<\/p>\n
 \tFurthermore, only because Regulation 12 also speaks of public
\nannouncement, the same by itself would not exempt the acquirer from
\nmaking a public announcement in terms of clause  (1) of Regulation 11.
\n WAS THERE ANY REQUIREMENT TO COMPLY WITH
\nREGULATION 11?\n<\/p>\n
 \tWith a view to advert to the question, the admitted facts may be
\nnoticed.\n<\/p>\n
 \tSwedish Match Singapore agreed to acquire majority shareholding in
\nHaravon and Seed subsequent to 17th December, 1997 wherefor the public
\noffer was made.  S.M.S. comprising of Haravon and Seed had 28.28% and
\n10.33% whereas Jatia Group comprising of AVP and Plash had 5% and 15%
\nrespectively whereas public\/others had 41.39% shares.  In concert with each
\nother the two Groups acquired shares from public.  On or about 25th August,
\n1999 by acquiring preferential shares the Swedish Match Group obtained
\n52.11% and Jatia Group obtained 24.11% as a result whereof in Wimco the
\nshares held by public\/others came down to 23.78%.  Both Swedish Group
\nand Jatia Group were exercising the joint control.  By reason of Jatia Group
\nopting out of the joint control by transfer of shares in favour of  Swedish
\nMatch Singapore, a subsidiary of Swedish Match AB (a part of Swedish
\nMatch Group) obtained 74% of  shares whereas shares i.e. Haravon
\n46.18%, Seed  5.93% and SMS  21.89%.  Thus, the extent of shares of
\nJatia Group came down to 2.22%.  Jatia Group sold their shares to public as
\na result whereof shares of public became 23.78%.  S.M.S. is a subsidiary of
\nthe Singapore Match Group.  The Swedish Match is the holding company
\nbeing the owner of the 100% shares of SMS. It stands categorically admitted
\nby the Appellants herein that acquisition of shares from Jatia Group in
\nfavour of SMS was done by the Swedish company as a group and not as an
\nindividual company.  Factually, therefore, it is not correct to contend,
\nalthough in its notice dated 28.1.2002, SEBI had given indication thereof,
\nthat SMS had acquired 21.89% shares of its own.  Even if SMS had done so,
\nRegulation 10 would apply as no public announcement was made therefor.
\n \tS.M.S. was a part of the Swedish Match Group and they acquired
\n21.89% shares from Jatia Group.  On or about 25th August, 1999,
\nindisputably, Swedish Group and Jatia Group acted in concert with each
\nother.  By reason of acquisition made in September, 2000, Swedish Group,
\nas acquirer, together with Jatia Group, had acquired more than 15% but less
\nthan 75% of shares.  Any of those acquirers whether Swedish Match Group
\nor Jatia Group, therefore, was prohibited from acquiring by itself any
\nadditional share entitling it to exercise more than 5% of the voting rights.
\nRegulation 11 does not brook  any other interpretation.  If additional shares
\nare acquired entitling an acquirer to exercise more than 5% of the voting
\nrights, the statutory embargo to the effect that the acquirer (in this case
\nSwedish Match Group) must make a public announcement to acquire shares
\nin accordance with the Regulation comes into operation.
\nThe words “additional shares” are not terms of art.  It speaks of
\nacquisition of shares in addition to what it had got.  Such acquisition of
\nadditional shares may be either from public or from a person with whom at
\none point of time the acquirer had acted in concert.  If such a meaning is not
\nassigned, the disjunctive clauses contained in the expressions “either by
\nhimself or through or with person acting in concert with him” may not carry
\na true and effective meaning.\n<\/p>\n
 The pre-conditions attracting Regulation 11 are: (i) that an acquirer
\nhad acquired shares in concert with another; (ii) such acquisition was more
\nthan 15% but less than 50% of the shares or voting rights in a company; (iii)
\nin the event, the acquirer intends to acquire such additional shares or voting
\nrights which would allow him to exercise more than 5% of the voting rights
\nwithin a period of 12 months, public announcement is required to be made
\ntherefor.  (iv) such acquisition of additional shares contemplates three
\ndifferent situations, i.e., the acquisition may be by acquirer himself or
\nthrough or with the person acting in concert with the person with whom they
\nhad acquired shares earlier in concert with each other.
\n \tRegulation 11, therefore, contemplates both situations, namely, where
\nsubstantial acquisition of shares may result in change of control and where it
\ndoes not.  Only because in a case where acquisition of additional shares may
\nresult in change of control, the same by itself would not exempt the acquirer
\nfrom complying with the statutory requirement of Regulation 11.  Primarily,
\nRegulations 10, 11 and 12 operate in different fields which is manifested
\nfrom a plain reading of Regulations 14, 15 and 16.  We may, however,
\nhasten to add that there may be a situation where Regulations 11 and 12 may
\noverlap with each other, in which event, it would be open to the acquirer to
\nissue a combined notice fulfilling the requirement of both Regulations 11
\nand 12.\n<\/p>\n
Indisputably, the purport and object of which a regulation is made
\nmust be duly fulfilled.  Public announcement is at the base of Regulations
\n10, 11 and 12.  Except in a situation which would bring the case within one
\nor the other ‘exception clause’, the requirement of complying with the
\nmandatory requirements to make public announcement cannot be dispensed
\nwith.\n<\/p>\n
 Admittedly in this case no public announcement has been made.
\n  It may be true that the Board in its impugned order dated 4th June,
\n2002 proceeded on a wrong premise that having regard to the proviso
\nappended to Regulation 12, Regulation 12 would be attracted.  But the SAT,
\nin our opinion, rightly construed the provisions of Regulations 11 and 12 in
\narriving at a finding that Regulation 11 would be attracted and Regulation 12
\nwould not be.  The tribunal was entitled to take a different view of the matter
\nfrom that of the Board with a view to sustain the ultimate result in the appeal
\nin exercise of its appellate power.  Such a power in the appellate court\/
\ntribunal is akin to or analogous to the principles contained in Order 41 Rule
\n33 of Code of Civil Procedure.   Even otherwise before us the judgment of
\nthe Tribunal is in question, this Court is required to consider the correctness
\nor otherwise of the Tribunal. In any event, the reasonings of the tribunal
\nshall prevail over the Board.  (See S. Shanmugavel Nadar (supra), para 17)
\n \tAlthough we do not find any difficulty in construing the provisions of
\nRegulations 11 and 12 but assuming Regulations 11 and 12 are not clear, the
\nrule of purposive construction should be taken recourse to.
\n \tIt is now trite that when an expression is capable of more than one
\nmeaning, the Court would attempt to resolve that ambiguity in a manner
\nconsistent with the purpose of the provisions and with regard to the
\nconsequences of the alternative constructions. (See Clark & Tokeley Ltd.
\n(t\/a Spellbrook) Vs. Oakes [1998 (4) All ER 353].\n<\/p>\n
 \tIn Anwar Hasan Khan Vs. Mohd. Shafi and Others [(2001) 8 SCC
\n540], this Court held:\n<\/p>\n
“8It is a cardinal principle of construction of a
\nstatute that effort should be made in construing its
\nprovisions by avoiding a conflict and adopting a
\nharmonious construction.  The statute or rules
\nmade thereunder should be read as a whole and
\none provision should be construed with reference
\nto the other provision to make the provision
\nconsistent with the object sought to be
\nachieved.”\n<\/p>\n
\tIn Inland Revenue Commissioners Vs. Trustees of Sir John Aird’s
\nSettlement [1984] Ch. 382, it is stated:\n<\/p>\n
“Two methods of statutory interpretation have at
\ntimes been adopted by the court.  One, sometimes
\ncalled literalist, is to make a meticulous
\nexamination of the precise words used.  The other
\nsometimes called purposive, is to consider the
\nobject of the relevant provision in the light of the
\nother provisions of the Act  the general
\nintendment of the provisions.  They are not
\nmutually exclusive and both have their part to play
\neven in the interpretation of a taxing statute.”\n<\/p>\n
 \tIt was also observed:\n<\/p>\n
“Where there is an exemption provision in a fiscal
\nstatute the onus is on a taxpayer to show that the
\nexemption applies: Barron v. Littman [1953] A.C.
\n96 and Imperial Chemical Industries Ltd. v. Caro
\n[1961] 1 W.L.R. 529.”\n<\/p>\n
 \tIn Indian Handicrafts Emporium and Others Vs. Union of India and
\nOthers [(2003) 7 SCC 589] this Court referred to various decisions including
\nPeerless General Finance (supra) whereupon the Appellate Tribunal as also
\nMr. Raval placed strong reliance expounding the theories of purposive
\nconstruction.  (See also Ramesh Mehta Vs. Sanwal Chand Singhvi and Ors,
\nJT 2004 (Suppl.1) SC 274)
\n\tRegulations 10, 11 and 12 were amended in the year, 1997 having
\nregard to the fact that the 1994 Regulations contained many loopholes, and,
\nthus, the mischief rule should be resorted to so as to suppress the mischief
\nwhich would have surfaced had the literal rule been allowed to cover the
\nfield.  [See Reema Aggarwal Vs. Anupam and Others, (2004) 3 SCC 199]<\/p>\n
 IS STRICT CONSTRUCTION OF THE REGULATION CALLED FOR?\n<\/p>\n
 \tA penal statute indisputably is required to be strictly construed.  But a
\ndifferent situation may arise if the penalty is sought to be levied as a result of
\nfailure on the part of the person statutorily obliged to comply with the
\nstatutory provisions which are imperative in nature.\n<\/p>\n
 \tThere may not be any doubt or dispute as regard the proposition that
\nwhen words employed in a penal statute employs are not clear, the principle
\n‘against doubtful penalisation’ would be applied.\n<\/p>\n
 \tIn Francis Bennion’s Statutory Interpretation, Fourth Edition, at page
\n704, Section 271 it is stated that principle against penalization under a
\ndoubtful statute is a legal policy which would apply in a given situation but
\nthe learned Author himself states that different consequences of enactments
\nare possible depending upon the text and context of the statute.  In the same
\ntreatise at page 367, it is stated:\n<\/p>\n
“(2) A construction put forward may rely entirely
\non the literal meaning, or may elaborate (but still
\ncorrespond to) the literal meaning, or may depart
\nfrom the literal meaning in favour of a strained
\nmeaning.  The court, where it considers (or prefers
\nto say) that the literal meaning is unambiguous,
\nwill tend to decide in favour of what it regards as
\nthe unglossed literal meaning and reject other
\nversions.”\n<\/p>\n
 \tReferring to Trustees of Sir John Aird’s Settlement (supra), the
\nlearned Author at pages 368 & 369 states:\n<\/p>\n
“Subsection (2) Where the enactment is
\ngrammatically ambiguous, the opposing
\nconstructions put forward are likely to be
\nalternative meanings each of which is
\ngrammatically possible.  Where on the other hand
\nthe enactment is grammatically capable of one
\nmeaning only, the opposing constructions are
\nlikely to contrast an emphasized version of the
\nliteral meaning with a strained construction.  In the
\nlatter case the court will tend to prefer the literal
\nmeaning, wishing to reject the idea that there is
\nany doubt.\n<\/p>\n
Example 149.2 In a tax avoidance case concerning
\ncapital transfer tax, the Court of Appeal were
\ncalled on to construe the Finance Act 1975 Sch 5
\npara 6(7) as originally enacted.  Counsel for the
\nInland Revenue put forward several alternative
\narguments on construction, but the court preferred
\nthe one based on the unglossed literal meaning.  It
\nmay be conjectured however that the other
\narguments helped to convince the court that the
\nInland Revenue’s case was to be preferred.”\n<\/p>\n
 \tFailure to comply with a statute may attract penalty.  But only because
\na statute attracts penalty for failure to comply with the statutory provisions,
\nthe same in all situations would not call for a strict construction.  A statute
\nordinarily must be literally construed.  Such a literal construction would not
\nbe denied only because the consequence to comply the same may lead to a
\npenalty.  This aspect of the matter has been considered by this Court in
\nIndian Handicrafts Emporium (supra).  Proceeding on the basis that there
\nexisted a dichotomy, the Court ultimately held that the resolution will have
\nto be reached by reading the entire statute as a whole. [See also Reema
\nAggarwal (supra)]  <\/p>\n
\tIn Balram Kumawat Vs. Union of India and Others [(2003) 7 SCC
\n628] this Court held:\n<\/p>\n
“The Courts will therefore reject that construction
\nwhich will defeat the plain intention of the
\nLegislature even though there may be some
\ninexactitude in the language used. [See Salmon vs.
\nDuncombe [(1886) 11 AC 627 at 634].  Reducing
\nthe legislation futility shall be avoided and in a
\ncase where the intention of the Legislature cannot
\nbe given effect to, the Courts would accept the
\nbolder construction for the purpose of bringing
\nabout an effective result.  The Courts, when rule of
\npurposive construction is gaining momentum,
\nshould be very reluctant to hold that the Parliament
\nhas achieved nothing by the language it used when
\nit is tolerably plain what it seeks to achieve. (See
\nBBC Enterprises Vs. Hi-Tech Xtravision Ltd.,
\n(1990) 2 All ER 118 at 122-3)”\n<\/p>\n
Referring to its earlier decisions, this Court :\n<\/p>\n
“36. These decisions are authorities for the
\nproposition that the rule of strict construction of a
\nregulatory\/penal statute may not be adhered to, if
\nthereby the plain intention of the Parliament to
\ncombat crimes of special nature would be
\ndefeated.”\n<\/p>\n
Let us now consider the decisions relied upon by Mr. Nariman.\n<\/p>\n
In Avais (supra), the House of Lords was concerned with the
\nconstruction of the meaning applied in Gaming machine.  In that case itself,
\nit was held:\n<\/p>\n
“The task of the courts is to ascertain in any
\nparticular case whether the conditions have been
\n(or, as in this case, would be) complied with or
\nnot.  There is no evident reason for interpreting the
\nconditions otherwise than according to their
\nnatural meaning.  Indeed, there is this point to be
\nborne in mind in favour of a literal construction.  If
\nthe conditions are not complied with, the club
\nofficials who allow the club premises to be used
\nfor the gaming are guilty of criminal offences.  The
\nAct would be setting a trap for them, if by some
\nartificial construction of the provisions an
\napparently innocent financial agreement (such as
\naccepting from the owner of the machines a
\nguarantee of the club’s takings) were held to
\ninvolve or lead to a breach of the conditions.”\n<\/p>\n
 \tThe said decision, thus, runs counter to the submissions of Mr.
\nNariman.  In this case also conditions are imposed in the matter of
\nacquisition of shares.  If the conditions have not been complied with, the Act
\nhaving set up a trap for them, the logical consequences would ensue.\n<\/p>\n
 \tIn The Seksaria Cotton Mills Ltd. (supra), the Court was dealing with
\nthe activities of a welfare agent vis-`-vis the meaning of ‘possession’ in the
\nrelevant Act.  The Court found:\n<\/p>\n
“The facts are truly and accurately given according
\nto the popular and natural meaning of the words
\nused; nothing was hidden. The goods did reach the
\nquota-holder in the end, or rather his proper agent,
\nand we cannot see what anyone could stand to gain
\nin an unauthorised way over the very natural
\nmistake which occurred owing to what seems to
\nhave been a time-lag in the consequences of a
\nchange of agency. So, even if there was a technical
\nbreach of the law, it was not one which called for
\nthe severe strictures which are to be found in the
\ntrial court’s judgment and certainly not for the
\nsavage sentences which the learned Magistrate
\nimposed. In the High Court also we feel a nominal
\nfine would have met the ends of justice even on the
\nview the learned Judges took of the law.”\n<\/p>\n
 \tIn the aforementioned backdrop only, it was held:\n<\/p>\n
“In a penal statute of this kind it is our duty to
\ninterpret words of ambiguous meaning in a broad
\nand liberal sense so that they will not become traps
\nfor honest, unlearned (in the law) and unwary men.
\nIf there is honest and substantial compliance with
\nan array of puzzling directions, that should be
\nenough even if on some hypercritical view of the
\nlaw other ingenious meanings can be devised.”\n<\/p>\n
 \tThis is a case of non-compliance of mandatory statutory provisions
\nand not of substantial compliance.  It is also not a case involving unlearned
\nor unwary men.\n<\/p>\n
 \tIn Bhagirath Sharma (supra), the question which fell for consideration
\nwas whether ‘tube’ is included within the expression ‘tyre’.  Keeping in
\nview the provisions of the Essential Commodities  Prices and Stocks
\n(Display and Control) Order, 1967, this Court applied the rule of strict
\nconstruction.\n<\/p>\n
\tRegulations being regulatory in nature, the intent and object sought to
\nbe achieved thereby must be firmly applied with.  In this view of the matter,
\nwe are of the opinion that Regulations do not deserve strict constructions so
\nas to hold that even a public offer was not necessary.\n<\/p>\n
ANOTHER FACET OF THE CASE:\n<\/p>\n
 Having held so, would it be proper for this Court to direct the Board
\nnot to take any penal action against the Appellants?
\n \tThe Board is an expert body.  As a legislature, it makes the
\nregulations, as an executive, it implements the legislation and in case of a
\nbreach it takes upon a quasi-judicial function.  While functioning in its
\njudicial capacity, it has wide discretion.  It can initiate criminal proceedings
\nin terms of Section 24 of the Act, issue directions in terms of Section 11-B
\nand Regulation 44 as also take recourse to penal provisions as contained in
\nSection 24 and Chapter VI-A of the Act.  Its decision is final subject to the
\ndecision of the Tribunal.  But the sequences of events, as noticed
\nhereinbefore, clearly go to show that even the Board was not sure of the
\nlegal position.\n<\/p>\n
 \tIt in no uncertain terms held:\n<\/p>\n
“As the said change from joint to sole control took
\nplace in pursuance to a resolution passed by the
\nshareholders in general meeting, the same would
\nnot trigger Regulation 12, same being covered
\nunder proviso to Regulation 12.”\n<\/p>\n
 \tThe Board even did not think it fit to apply the Explanation appended
\nto Regulation 12 in its proper perspective.\n<\/p>\n
 \tIt is only the Tribunal at a later stage came to a clear finding that
\nproviso appended to Regulation 12 will have no application and Explanation
\nwould.\n<\/p>\n
 \tBefore us also the Counsel read the regulations in question over and
\nover again.  Focus on certain words was placed differently at different times.
\nIt is only after considering the matter from different angles, we have been
\nable to arrive at a definite conclusion.\n<\/p>\n
 \tIn Trustees of Sir John Aird’s Settlement (supra) upon taking into
\nconsideration several alternative arguments on construction of the Finance
\nAct 1975 Schedule 5 para 6(7) as originally enacted, the Court preferred the
\none based on the unglossed literal meaning.\n<\/p>\n
 \tThe adversarial system prevailing in India allows a counsel to put
\nforward construction of the enactment in question relying on several
\nalternative arguments and the Court may ultimately base its judgment on
\nunglossed literal meaning. (See Example 149.5 of Francis Bennion’s
\nStatutory Interpretation, Fourth Edition, page 371).
\n\tIn the aforementioned backdrop, this Court thought it fit to consider as
\nto whether in exercise of its jurisdiction under Article 142 of the
\nConstitution of India a direction should be issued directing the Board to
\nforbear from proceeding under Section 15H of the Act against the Appellant.
\n \tIt is accepted that once a public offer is made the investors would be
\nentitled to elect to transfer their shares at a higher price which may be
\noffered by the acquirer with a view to acquire control over the target
\ncompany.  The investors would also be entitled to interest at such rate as the
\nBoard may determine.  The provisions of Section 15H of the Act mandates
\nthat a penalty of rupees twenty-five crore may be imposed.  The Board does
\nnot have any discretion in the matter and, thus, the adjudication proceeding
\nis a mere formality.  Imposition of penalty upon the Appellant would, thus,
\nbe a forgone conclusion.  Only in the criminal proceedings initiated against
\nthe Appellants, existence of mens rea  on the part of the Appellants will
\ncome up for consideration.\n<\/p>\n
\tWe, therefore, are of the opinion that it is a fit case where this Court
\nshould exercise its jurisdiction under Article 142 of the Constitution to direct
\nthe Board to forbear from proceedings with the adjudication proceeding
\nagainst the Appellants.  This may not, however, be treated to be a precedent.
\n \tThese appeals are allowed in part and to the extent mentioned
\nhereinbefore.  In the facts and circumstances of this case, there shall be no
\norder as to costs.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Swedish Match Ab & Anr vs Securities & Exchange Board, … on 25 August, 2004 Author: S.B. Sinha Bench: N. Santosh Hegde, S.B. Sinha, A.K. Mathur CASE NO.: Appeal (civil) 2361 of 2003 PETITIONER: Swedish Match AB & Anr. RESPONDENT: Securities & Exchange Board, India & Anr. DATE OF JUDGMENT: 25\/08\/2004 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-49911","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nSwedish Match Ab & Anr vs Securities & Exchange Board, ... on 25 August, 2004 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/swedish-match-ab-anr-vs-securities-exchange-board-on-25-august-2004\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Swedish Match Ab & Anr vs Securities & Exchange Board, ... on 25 August, 2004 - 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