Supreme Court rejects permission to withdraw open offers

[Editor: Today Marg Ltd (Rs.22.60) went in for a 5% correction. But, looking at the case it is now safe to say, that the company cannot  escape from the honourable Supreme Court's Judgement. It is because Vide letter dated November 11, 2011, the respondent  (SEBI) stated that the Promoter Group appeared to have acquired shares in excess of the limits prescribed by Regulations 11(1) and 11(2) of the SEBI (SAST) Regulations of 1997 on March 30, 2007, October 12, 2007 and February 19, 2011. In this respect, the Appellants contended that at no point of time was there any acquisition by the Promoter Group which could lead to its shareholding going beyond the threshold of 5% during any financial year. However, the honorouble Supreme Court Judgement has come out clear on this issue. It is to be  noted that the exchange of correspondence that ensued between SEBI and Akshya primarily related to Akshya’s prior trigger of the mandatory offer requirements due to its breach of the creeping acquisition limits. Due to this, there was a delay of 13 months in SEBI’s clearance of the offer documents. After comments were conveyed by SEBI on November 30, 2012, Akshya challenged them before the Securities Appellate Tribunal (SAT), including on the ground that the delay in SEBI’s response rendered the offer unviable and academic. 
By its order, the SAT allowed Akshya’s appeal and allowed it to withdraw the open offer and the escrow amount deposited in support thereof. But this is totally against any Legal Sanity and hence, the honorable Supreme Court of India had rightly rejected the SAT judgement. 
Also, the fundamentals of the company are expected to improve, like many of its peers in the Construction space. In the recently concluded fifth CIDC Vishwakarma Awards 2013 at New Delhi, GRK Reddy of MARG GROUP was chosen as ‘Industry Doyen’ for his exemplary contribution to the construction sector through adoption of path breaking technologies, best practices, people management and CSR initiatives. Besides, MARG Ltd was chosen as ‘Best Professionally Managed Company’ for exhibiting professionalism across its operation. Therefore, the investors should buy the shares of  the company and keep holding]

According to a recent judgment made by the Supreme Court, the corporate of the country cannot withdraw open offers on the basis that such offers have become either uneconomical or lacks commercial reasonableness. The court also confirmed that the corporate cannot hold back from open offers even if the market regulator, Securities and Exchange Board of India (SEBI) makes any delay to respond to open offer applications.

The court also ruled out differences between a triggered public offer and a voluntary public offer as a distinction between the two routes will defeat the purpose of a SEBI takeover code.

According to Pratap Venugopal, Partner, KJ John and Co. and representative of SEBI in this matter, the takeover code is implemented for the purpose of promoting an honest market for the control of corporates. An open offer can be permitted to be withdrawn only in cases such as death of the acquirer, natural disaster or even legal impossibility. The judgment made by SEBI will take the above circumstances into consideration.

A senior government official reported to ET NOW that the fate of the open offer cases involving Khaitan Electricals, Arvind Mills, AP Paper Mills and Golden Tobacco will be decided on the basis of the order.

A report was also published by ET on May 10, 2013 on the Supreme Court’s refusal to Nirma’s request of withdrawing an open offer for an Ahmedabad Firm, Shri Rama Multi Tech.

The judgment was passed by the Supreme Court on an appeal made by market regulator SEBI against a previous order by the Securities Appellate Tribunal (SAT).  The order was in favour of Akhsya Infrastructure Private Limited, which was a part promoter of Marg Limited and had breached the 5 per cent creeping acquisition limit in Marg Limited for the years 2006- 07, 2007-08 and 2010-11. A voluntary offer was announced by Akshya on October 20, 2011 in which an opportunity was given to the shareholders of Marg Ltd. to exit at an offer price of Rs.91/share. 

But according to the company, the delay made by SEBI to approve the draft letter of the offer have made the entire process of open offer meaningless and so it sought to withdraw it.

According to SEBI, permitting the company to withdraw the open public offer will prove to be harmful to the interest of the shareholders. 

Courtesy: Vakilno1.com