A. R. DAHIYAversusSEBI

                        [2015] 12 S.C.R. 202


A                           A. R. DAHIYA
                                  v.
                                SEBI
                   (Civil Appeal No. 2127 of 2006)
B
                       NOVEMBER 26, 2015
        [VIKRAMAJIT SEN AND SHIVA KIRTI SINGH, JJ.]
          Securities and Exchange Board of India (Substantial
c   Acquisition of Shares and Takeovers) Regulations, 1997 -
    Regs 3, 10, 11, 12, 16 and 20 - Takeover of company -
     Transaction of buy-back of shares between promoter and
    State Financial Institution - Requirement of disclosure in the
    public announcement - On facts, takeover of company,
D   appellant-promoter acquiring in excess of 15% of the total
    shareholding of the Target Company - Appellant made a
    public announcement making an offer to the remaining
    shareholders of the target company to purchase shares of
    the company at an offer price of Rs 8. 75 per equity share
E   when their face value was Rs 101- and the appellant had
    acquired at the rate of Rs 23. 75 per share -Appellant neither
    in the public announcement nor in the letter disclosed that
    he had already bought back the shares of the Institution -
    Appellant deposited amount with the Institution via post dated
F   cheques-Appellant's case that the said cheques was not in
    consideration for the buy-back of shares but by way of security
    for buy back obligation and since the cheques were later
    dishonoured, there was no acquisition - Held: Transaction
G   between the appellant and the State Financial Institution is
    subject to Regs 16 and 20, and the rate at which the appellant
    bought back the shares from the Institution had to be
    disclosed in the public announcement- Post-dated cheques
    were in consideration of the buy-back of the shares - Said
H   cheques amounted to a promise to pay and promise to pay
                                 202
                  A. R. DAHIYA v. SEBI                        203


amounted to sale of shares - Subsequent dishonouring of A
the cheque would have no effect - Buy-back was in pursuance
of an agreement, there was consensus ad idem -Appellant
subsequently shirked his responsibility and tried to slither
away from honouring the agreement, which he cannot be
allowed to gain from - Acquisition takes place the moment B
the acquirer decides or agrees to acquire, irrespective of the
time when the transfer stands completed in all respects -
Actual transfer need not be contemporaneous with the
intended transfer and can be in futuro - Thus, the order
passed by SEBI directing the appellant to go in for a fresh C
public announcement and offer to the shareholders of the.
target company the price of Rs. 23. 75 per share upheld -
Securities and Exchange Board of India (Substantial
Acquisition of Shares and Takeovers) Regulations, 2011.
                                                               D
     Dismissing the appeal, the Court
       HELD: 1.1 It is evident from a reading of SEBI
(Substantial Acquisition of Shares and Takeovers)
Regulations, 1997 that the buy-back transaction               E
between the appellant and HSIDC was incapable of
triggering Regulation 10, as the said transaction was
protected by Regulation 3. However, the acquisition of
the entire share capital of 'G' by the appellant attracted
Regulation 10 as the acquisition was in excess of 15%.        F
Further, as this transaction was between two promoters,
it did not have the protection of Regulation 3. As required
under Regulation 10, the appellant did make a public
announcement, but did not disclose its buy-back
transaction with HSIDC. The appellant vainly and              G
incorrectly attempted to justify his act of non-disclosure
by stating that the transaction with HSIDC was protected
by Regulation 3, which placed it beyond the ambit of
Regulation 10, 11 and 12. Regulation 3 only protects a
transaction between a co-promoter and a State financial       H
204      SUPREME COURT REPORTS            [2015] 12 S.C.R.

A institution to the extent that, as a consequence of such
  transaction a public announcement will not be required
  to be made.as provided under Regulations 10, 11 and
  12. However, it does not imply that the said transaction
  is to be protected from the rigours of other Regulations
B provided for under the Act. Thus, the transaction
  between the appellant and HSIDC would have to be
  subject to Regulations 16 and 20, and the rate at which
  the appellant bought back the shares from HSIDC had
  to be disclosed in the public announcement. [Para 13]
C [219-A-F]

       1.2 The submission that the post-dated cheques
  forwarded to HSIDC were given by way of a guarantee
  cannot be accepted, since the same was denied by
D HSIDC in its letter to SEBI, wherein HSIDC stated that
  the post-dated cheques had been issued in
  consideration of the buy-back of shares. [Para 14] [219- .
  G-H]

 E      1.3 The appellant submitted that as the cheques
  presented had been dishonoured on presentation, the
  said transaction did not culminate.in an acquisition. The
  post-dated cheques issued by the appellant in favour of
  HSIDC were in consideration of the buy-back of the
F shares held by HSIDC in the Target Company. The
  appellant had submitted that the cheques were post-
  dated because he was suffering from a liquidity crunch.
  The post-dated cheques amounted to a promise to pay
  and that promise would be fulfilled on the date mentioned
G on the cheque. Thus, this promise to pay amounted to a
  sale of shares/equity. The subsequent dishonouring of
  the post-dated cheque would have no bearing on the
  case. At the time of making the public announcement
  the appellant had bought back the shares of HSIDC by
H making payment via the said post-dated cheques.
                  A. R. DAHIYA v. SEBI                       205


 Further, as the buy-back was in pursuance of an             A
 agreement, there was consensus ad idem. The appellant
 has subsequently shirked his responsibility and has tried
 to slither away from honouring the agreement, which he
 cannot be allowed to gain from, as is established by the
 legal maxim commodum ex injuri su non habere debet.         B
 While interpreting the term acquisition, the intention
 behind these Regulations must be conceptualized
 which is to safeguard the shareholders from adverse
 consequences of acquisitions and takeovers as far as
 the value of the shares is concerned. Not infrequently,     C
 the new management's endeavour is to manipulate the
 market price of the shares in a manner calculated to
 induce the existing shareholders to off load their
 holdings at a low price. This is achieved by portraying a
                                                             0
·false picture of their value. In the background of such
 an intention it would fallacious to suggest that the said
 transaction did not tantamount to an acquisition. [Para
 15] [220-A-G]
      1.4 Under the Regulation 2 Clause (1) Sub-clause E
(a) of the SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 2011, 'acquisition' means
directly or indirectly acquiring or agreeing to acquire
shares or voting rights in, or control over, a Target
Company. This definition clarifies that an acquisition F
takes place the moment the acquirer decides or agrees
to acquire, irrespective of the time when the transfer
stands completed in all respects. The definition
explicates that the actual transfer need not be G
contemporaneous with the intended transfer and can be
in futuro. Further, the letter on which the appellant placed
reliance to prove that there was no acquisition, which
was well after the public announcement where the
appellant was required to make disclosures in H
206         SUPREME COURT REPORTS                  [2015] 12 S.C.R.


A  compliance with the Regulations. This clearly indicates,
   that at the date of making the public announcement the
   appellant was under the impression that the acquisition
 . has taken place. Thus, there is no infirmity in the order
   of SEBI directing the appellant to go in for a fresh public
B announcement and offer to the shareholders of the
   target company the price of Rs. 23. 75 per share along
   with interest at the rate of 15% per annum for the period.
   [Paras 7, 16-17) [213-C-D; 221-A-E]

C         CIVIL APPELLATE JURISDICTION : Civil Appeal No.
      2727 of2006

           From the Judgment and Order dated 19.04.2006 of the
      Securities Appellate Tribunal, Mumbai in Appeal No. 113 of
D     2003

           Tarun Gupta, S. Janani for Appellant.

          C. U. Singh, Rishi Gautam, Bhargava V. Desai, Saurnya
      Mehrotra, Dhawal Mehrotra, Ravindra Bana for the
E     Respondent.

           The Judgment of the Court was delivered by

        VIKRAMAJIT SEN, J. 1. This Appeal assails the
F Judgment dated 19.4.2006 of the Securities Appellate Tribunal
  which upheld the order of the Securities and Exchange Board
  of India dated 1.8.2003. The factual matrix is that one Mr. V.P.
  Garg (hereinafter referred to as 'Garg') entered into an
  'Assisted Sector Agreement' with the Haryana State Industrial
G Development Corporation Limited (hereinafter referred to as
  'HSIDC') on 4.1.1993, for the purpose of setting up a modern
  resort hotel complex at Village Chowky, Tehsil Kalka, Haryana.
  The parties agreed to collaborate for the profitable
  implementation and operation of the project in the assisted
H sector through a company already incorporated by Garg under
       A.' R. DAHIYA v. SEBI [VIKRAMAJIT SEN, J.]                  207


the name and style of Polo Hotels Ltd. (hereinafter referred to A
as the 'Target Company'). HSIDC extended a term loan to
Garg and also subscribed to 3,00,000 shares of Rs. 10/- each
of the Target Company. Clause 24 of the Agreement provided
for buy-back of the shares of HSIDC. The said clause is
reproduced for facility of reference:                           B

     BUY BACKARRANGEMENT:-
     24 (a) At any time after the Company goes in for
     commercial production, the Corporation may with the
     consent of the Collaborator offload its shareholding in C
     the Company partially or fully in such manner as it may
     deem fit. The Collaborator will however have the pre-
     emptive right to buy the shareholding of the Corporation.
     Similarly, after the shares of the Company are duly listed
                                                                0
     on the Stock Exchange/DTCET, and with the consent of
     the Corporation, the Collaborator .may buy its
     shareholding at a mutually agreed price which shall be
     equal to or higher than that provided under sub clause
     (c).                                                       E
     (b) After expiry of five years from the date of
     commencement of commercial production by the
     Company or at the expiry of seven years from the date of
     its incorporation whichever is earlier, the Collabori:ltor
     shall be bound to purchase the Equity share holding of F
     the Corporation in the Company. Provided that the
     Corporation may at its discretion retain the shares
     acquired by it through over subscription or rights issue
     or bonus shares.
                                                                   G
     (c) On buy back of shareholding of the Corporation by
     the Collaborator under sub clause (b), the price to be
     paid shall be highest of the:
        i) Issue price of the share plus simple interest for the
            period at the lowest normal lending rate of interest   H
208       SUPREME COURT REPORTS                  [2015] 12 S.C.R.



A              on term loans under refinance scheme of IDBI
               prevailing at the time of first issue of shares to the
               Corporation under its agreement. OR
            ii) The highest price of the shares ruling on any Indian
                Stock Exchanges for a period of two months
B
                preceding the date on which the Collaborator ought
                to purchase the shares held by the Corporation as
                provided in Clause (b) above. OR
            iii) Assessed value of the shares as determined by
c                the Auditors of the Company on the basis of net
                 worth, of the Company on the date of sale of the
                 shares.

         2. Garg defaulted in repayment of loan as well as in
o buying back the shares of HSIDC in the Target Company. In
  March 1999, Garg entered into an agreement with Mr. AR.
  Dahiya (the 'Appellant') for the sale of Garg's entire
  shareholding of 28.09% in the Target Company. This
  agreement was subject to the approval of HSIDC and
E contained a clause that Garg would be absolved of fulfilling
  the buy-back obligation, provided HSIDC agreed to accept
  the Appellant in place of Garg. Garg wrote a letter to HSIDC
  dated 31.3.1999 stating that on account of his deteriorating
  financial condition, he had decided to transfer his equity
F shareholding in the Target Company to the Appellant and that
  the Appellant had agreed to furnish his personal guarantee for
  buy-back of the three lac equity shares held by HSIDC. In the
  letter Garg requested HSIDC to accept the personal guarantee
  of the Appellant in lieu of his buy-back guarantee and to
G absolve him from the obligation.

       3. The Appellant also wrote a letter to HSIDC dated
  15.4.1999, informing it that he and Garg had entered into an
  agreement for purchase of equity shareholding of Garg and
H for complete takeover of the management of the Target
       A. R. DAHIYA v. SEBI [VIKRAMAJIT SEN, J.]                    209


Company. The Appellant confirmed that he was prepared to A
buy-back the equity holding of HSIDC as provided for in the
assisted sector agreement instead of Garg, under similar terms
and conditions. The Appellant also requested that since he
was facing a stringent liquidity problem, the payment for the
buy-back which was due in April 1999 be instead made in B
monthly instalments of Rs.20 lacs each with effect from
September 1999. Enclosed with the letter were four post-dated
cheques in respect of the said buy-back obligations, amounting
to a total of Rs.71,25,466/-. HSIDC, vide its letter dated
19.4.1999 to Garg, accepted the joint request made by him C
and the Appellant. Subsequently, the Appellant, Garg and
HSIDC entered into a tripartite financial collaboration
agreement, whereby HSIDC consented to the Appellant
stepping into the shoes of Garg.
                                                                    D
      4. On 20.4.1999, Garg and the Appellant entered into
an agreement whereby the Appellant agreed to purchase the
entire share capital of 28.09% held by Garg at the rate of Rs.
8.50 per fully paid up equity share. Since this acquisition was
in excess of 15% of the total shareholding of the Target            E
Company, the Regulations under the SEBI (Substantial
Acquisition of Shares and Takeovers) Regulations, 1997, were
attracted. In order to comply with the Regulations, the Appellant
made a public announcement on 24.4.1999 making an offer             F
to the remaining shareholders of the Target Company to
purchase a minimum of.20% shares of the said company at
an offer price of Rs. 8. 75 per equity share.

      5. On 5.5.1999, a draft letter of offer was sent by the
merchant banker of the Appellant to SEBI for its approval.          G
Neither in the public.announcement nor in the letter did the
Appellant disclose the fact that he and his associates had
already bought back the shares of HSIDC. SEBI reverted with
a letter dated 26.5.1999 seeking clarifications from the            H
 210         SUPREME COURT REPORTS                  [2015] 12 S.C.R.


 A  merchant banker of the Appellant. The letter stated that the
    price at which the Appellant proposed to acquire the shares
    from HSIDC as per the agreement dated 19.4.1999, had to
    be calculated and specified upfront in the offer document.
    Further, if the price payable to HSIDC as per the said
 B agreement was higher than the present offer price of Rs. 8. 75
    per share, then the offer price must be justified as required
    under Regulation 20(6). The draft letter of offer dated 5.5.1999
    was approved by the SEBI subject to certain changes vide its'
    communication dated 30.9.1999. As it transpired in response
 C ·to the public announcement, the Appellant could acquire only
    2.42% of the shares of the Target Company, as the
    shareholders were not willing to offer their shares at Rs.8. 75
    when their face value was Rs.10/-.

 D           6. SEBI received a complaint from Mr. Komlam Sardana
       alleging that the Appellant had acquired three lac equity shares
       from HSIDC for Rs. 71,25,466/- at the rate of Rs. 23.75 per
       share, whereas the shares were not offered at the same price
       to the existing shareholders. The complainant alleged that the
 E     Appellant was suffering from a liquidity crunch and had
       requested HSIDC to receive the consideration amount with
       respect to the transfer of shares in monthly instalments. The
       complainant also brought to the notice of SEBI that the post-
 F     dated cheques through which the Appellant had tendered
       consideration had subsequently been dishonoured and
       criminal proceedings had been initiate~ against him. A copy
       of the said complaint was forwarded to the Appellant through
       his merchant banker.
- G      7. The Appellant moved an application on 2.12.1999
   stating that he was covered under the ambit of Regulation
   3(1)(i}, and as a result was immune to the provisions under
   Regulations 10, 11 and 12. The relevant provisions have been
 H reproduced as under:
  A. R. DAHIYA v. SEBI [VIKRAMAJIT SEN, J.]                        211


 3. Applicability of the Regulation.- (1) Nothing A
 contained in the Regulations 10, 11 and 12 of these
 Regulations shall apply to:
 xxxxxxxxx
 (i) transfer of shares from state level financial institutions,   8
 including their subsidiaries to co-promoter(s) of the
 company pursuant to an agreement between such
 financial institution and such co-promoter(s);
 xxxxxxxxx
                                                                   c
 xxxxxxxxx
CHAPTER Ill
'"SUBSTANTIAL ACQUISITION OF SHARES OR
 VOTING RIGHTS IN AND ACQUISITION OF D
 CONTROL OVER A LISTED COMPANY
10. Acquisition of 15% or more of the shares or
voting rights of any company.- No acquirer shall
acquire shares or voting rights which (taken together with
shares or voting rights, if any, held by him or by persons E
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 F
accordance with the Regulations.
 11. Consolidation of holdings.- (1) N<;> acquirer who,
 together with persons acting in concert with him, has
.acquired, in accordance with the provisions of law, 15
 per cent or more but less than 75% of the shares or voting G
 rights in a company, shall acquire, either by himself or
 through or with persons acting in concert with him
 additional shares or voting rights entitling him to exercise
 more than 5% of the voting rights, in any period of 12
 months, unless such acquirer makes a public H
212       SUPREME COURT REPORTS                 [2015] 12 S.C.R.


A        announcement to acquire shares in accordance with the
         Regulations.
         (2) No acquirer who, together with persons acting in
         concert with him has acquired, in accordance with the
         provisions of law, 75% of the shares or voting rights in a
 B
         company, shall acquire either by himself or through
         persons acting in concert with him any additional shares
         or voting rights, unless such acquirer makes a public
         announcement to acquire shares in accordance with the
c        regulations.
         )()()()()()()()()(


         12. Acquisition of control over a company.-
         Irrespective of whether or not there has been any
0        acquisition of shares or voting rights in a company, no
         acquirer shall acquire control over the Target Company,
         unless such person makes a public announcement to
         acquire shares and acquires such shares in accordance
         with the regulations:
E        Provided that nothing contained herein shall apply to any
         change in control which takes place in pursuance to a
         resolution passed by the shareholders in a general
         meeting.
F SEBI sought a clarification from the merchant banker on
  29.2.2000, regarding the non-disclosure of the payment of
  Rs.71,25,466/- bytheAppellantthrough post-dated cheques.
  The merchant banker in its letter dated 13.4.2000 informed
  SEBI that the Appellant had not informed him about the payment
G made through post-dated cheques. Subsequently, SEBI wrote
  a letter to HSIDC dated 2.6.2000 asking whether the letter
  dated 15.4.1999 pertained to the buy-back of shares and
  whether the post-dated cheques were deposited with HSIDC
  as security for the buy-back obligations. The HSIDC in its reply
H via letter dated 1.8.2000, stated that the post-dated cheques
        A. R. DAHIYA v. SEBI [VIKRAMAJITSEN;J.]                       213


 had been issued towards the purchase consideration for the           A
 buy-back of three lac equity shares held by HSIDC in the Target
 Company. SEBI, on being satisfied that a prima facie case of
 non-disclosure of material facts in the public announcement
 and a violation of Regulations exists, issued a show cause
 notice to the Appellant. The Appellant filed his reply to the show   B
 cause notice after which SEBI by its order dated 1.8.2003
 issued directions to the Appellant under Section 4(3) read with
Section 11 B of the Act and Regulations 44 and 45 of the
Regulations. The Appellant was directed to make a fresh public
announcement for 20% shares as required under Chapter 11              C
of the Regulations in accordance with Regulation 10 and offer
to the shareholders of the Target Company the price of Rs.
23.75 per share along with interest at the rate of 15% per
annum for the period from 16.11.1999 to the actual date of
                                                                      0
payment of consideration. SEBI further directed the Appellant
to pay the balance amount at the aforesaid rate to all the
shareholders who had offered their shares in pursuance to the
public announcement dated 24.4.1999 along with interest.
Aggrieved by this order, the Appellant preferred an appeal.           E

       8. Before the Securities Appellate Tribunal the Appellant
contended that the amount deposited with HSIDC via post-
dated cheques was not in consideration for the buy-back of
shares. Instead it was deposited by way of comfort/security F
for the buy-back obligation so a.s to demonstrate to HSIDC
that the Appellant was a man of means who could buy-back
the shares subsequently (an assertion which in any case stood
belied by the dishonour of the cheques). The Tribunal rejected
this contention by placing reliance on two letters. The first letter, G
issued by the Appellant on 15.4.1999, was addressed to
HSIDC, where in no uncertain terms the Appellant had stated
that the payment by means of post-dated cheques was in
consideration for the buy-back of shares. The second letter
referred to by the Tribunal was issued by HSIDC on 11.1.2001, H
214         SUPREME COURT REPORTS                 [2015] 12 S.C.R.



A  where in its reply to SEBl's clarificatory letter, HSIDC
   categorically stated that the payment by the Appellant was
   consideration for the buy-back of.the shares. The Tribunal also
   indicated that if the said amount had been deposited by way
   of comfort or security was being contended by the Appellant,
 B then it would have been a lump sum figure and not an amount
   as precise as Rs. 71.25,466/-. In light of the above stated facts,
   it was held to be beyond doubt that the Appellant had paid the
   said sum as a consideration for the buy-back of shares at a
   rate of Rs. 23. 75 per share. Thus as a necessary corollary, the
 C said transaction had to be disclosed at the time of public
   announcement as provided under Regulation 16(viii). The
   Tribunal observed that as the said transaction and its details
   were neither disclosed in the public offer nor in the letter of
   offer made to the other shareholders, SEBI was correct in
 0
   directing the Appellant to go in for a fresh public announcement
   and offer to the remaining shareholders of the Target Company
   the rate of Rs. 23.75 per share.

             9. The Appellant also contended that the said post-dated
 E    cheques had subsequently been dishonoured, hence no
      payment could be said to have been made in respect of the
      buy-back of shares. Furthermore, the shares held by HSIDC
      had not been transferred in the name of the Appellant or his
 F    associates, so the acquisition had not reached its stage of
      fruition. Resultantly, the price offered to HSIDC could not be
      taken into consideration as provided under Regulation 20(2)(b)
      of the Regulations to determine the minimum offer price.

           20. Minimum offer price.-(1) The offer to acquire the
 G         shares under regulation 10, 11 or 12 shall be made at a
           minimum offer price which shall be payable-
              (a) in cash; or
              (b) by exchange and/or transfer of shares of the
 H            acquirer company, if the person seeking to acquire
       A R. DAHIYA v. SEBI [VIKRAMAJIT SEN, J.]                        215


        the shares is a listed body corporate; or                      A
        (c) by exchange and/or transfer of secured instruments
        with a minimum of"A" grade rating from a credit rating
        agency;
        (d) a combination of clause (a), (b) or (c):                   B
        Provided that .................... .
     (2) For the purposes of sub-regulation (1 ), the minimum
     offer price shall be the highest of-
     (a) the negotiated price under the agreement referred to          C
     in sub-regulation (1) of regulation 14;
     (b) the highest price paid by the acquirer or persons
     acting in concert with him for any acquisitions, including
     by way of allotment in a public or rights issue, if any, during   o
     the 26 week period prior to the date of public
     announcement;
     (c) the price paid by the acquirer under a preferential
     allotment made to him or to persons acting in concert
     with him at any time during the.twelve months period up           E
     to the date of closure of the offer;
     (d) the average of the weekly high and low of the closing
     prices of the shares of the Target Company as quoted
     on the stock exchange where the shares of the company             F
     are most frequently traded during the 26 weeks preceding
     the date of public announcement.
     Explanation .............. .

      10. The Tribunal observed that from a perusal of G
Regulation 20(2)(b) it was clear that the highest price paid by
an acquirer for any acquisition would be taken into
consideration for determining the minimum offer price. As the
Appellant had paid Rs.23.75 per share to HSIDC within the
period of 26 weeks prior to the date of public announcement, H
216         SUPREME COURT REPORTS                 [2015] 12 S.C.R.


A this transaction had to be taken into consideration for
  determining the minimum offer price. The Tribunal negated the
  specific contention of the Appellant, finding that irrespective
  of whether acquisition took place or not, Regulation 20(2)(b)
  stood attracted as the amount was paid for the purpose of the
B acquisition. The Appellant contended that as his buy-back from
  HSIDC, was a transfer of shares from a State level financial
  institution to a co-promoter of the Target Company, it was
  exempt under Regulation 10. Thus in turn, the same transaction
  need not be taken into consideration to determine the minimum
C offer price. The Tribunal dismissed this contention by stating
  that the exemption under Regulation 10 was only with respect
  to making a public announcement. The said exemption does
  not permit the Appellant from not disclosing the transaction for
  the purpose of calculating the minimum offer price.
0
            11. Aggrieved by the decision of the Tribunal, the
      Appellant has now filed this Appeal. Counsel for the Appellant
      contends that Regulation 20(2)(b) uses the exiJression
      "acquisition" and submits that as the said acquisition was to
 E    happen in the future, the Regulation was not applicable to him.
      Further, the post-dated cheques that had been deposited were
      given in the form of a guarantee to HSIDC. Counsel submits
      that the buy-back was initially due in April 19q9, but was
 F    subsequently postponed till November 1999, and thus as the
      buy-back was to take place in November, it is then that the
      rate would have been calculated and determined. Reliance
      has been placed on a letter issued by HSI DC dated 1.6.1999
      addressed to the Appellant stating that the purchase
G     consideration of the shares under buy-back agreement could
      not be determined as on date, and the equity had to be bought
      back by the promoters at a purchase consideration which
      would be calculated as per the terms contained in Clause 15
      of the Tripartite agreement. Counsel relies on a letter issued
 H    by HSIDC dated 9.12.1999 wherein it was communicated to
        A. R. DAHIYA v. SEBI [VIKRAMAJIT SEN, J.]                     217


the Appellant that the post-dated cheques which he had A
deposited were dishonoured on presentation due to non-
availability of sufficient funds with the accounts, and thus as
there had been no payment no acquisition had taken place.
To further buttress this contention Learned Counsel relied on
a letter issued by HSIDC dated 11.1.2001 addressed to SE.Bl, B
wherein it was averred that the transfer of shares to the
incoming collaborators would be effected only on the deposit
of the entire amount of purchase consideration.

      12. Learned Senior Counsel for the Respondent                   C
contends that the Regulations were triggered when the
purchase was made by one promoter from another, that is by
the Appellant from Garg, and not from the purchase by the
Appellant from HSIDC. Evidence was placed on record to
prove that the Appellant was still carrying on business of the        D
Target Company. Counsel contended that on 31.3.1999, the
Appellant agreed to step into the shoes of Garg. On 15.4.1999
HSIDC received intimation from the Appellant regarding the
agreement and also received four post-dated cheques
amounting to Rs.71,25,466 as consideration for the purchase           E
of three lac equity shares in the Target Company, thus taking
his share in the Target Company to 8.83%. On 19.4.1999, the
Tripartite agreement between the Appellant, Garg and HSIDC
was entered into. Subsequently, on 20.4.1999, the Appellant           F
and Garg entered into an agreement as per which the Appellant
purchased Garg's entire share capital of 9,54,450 shares
amounting to 28.09% share in the Target Company at the rate
of Rs. 8.50 per fully paid up equity share. It was this transaction
which triggered Regulation 10, as there was an acquisition of         G
more than 15% of the total shareholding of the Target Company.
In order to comply with Regulation 10, the Appellant made a
public announcement within four working days as prescribed
in Regulation 14(1) on 24.4.1999. The rate that was being
offered by the Appellant (lt which he would acquire shares from       H
218        SUPREME COURT REPORTS                  [2015] 12 S.C.R.



A the public was Rs. 8.75. In response to the public
  announcement, the Appellant could only acquire 2.42% of the
  shares of the Target Company, which was not surprising as
  the rate at which the shares were being offered to be purchased
  by the Appellant was lower than the face value of the shares.
B Counsel relied on a letter issued by HSIDC to SEBI dated
  11.1.2001, wherein it was categorically mentioned that the
  cheques issued by the Appellant to HSIDC were consideration
  for the buy-back of the shareholding held by HSIDC in the Target
  Company. Finally, Learned Senior Counsel places reliance on
C Regulation 16 which provides the contents of the public
  announcement, of which one of the disclosures that a company
  had to make is to state the highest and the average price paid
  by the acquirer or persons acting in concert with him for
  acquisition, if any, of shares of the Target Company made by
0
  him during the twelve month period prior to the date of public
  announcement.

         13. The first issue that has to be addressed before us is
   whether the transaction of buy-back of shares which transpired
 E between the Appellant and HSIDC was required to be
   disclosed in the public announcement dated 24.4.1999. In
   order to determine this requirement, we must examine the
   operative clauses of the relevant Regulations. Regulation 3
·F states that Regulations 10, 11and12 shall have no applicability
   to any transfer of shares from state level financial institutions,
   including their subsidiaries, to co-promoter(s) of the company
   pursuant to an agreement between such financial institution
   and such co-promoter(s). Regulations 10, 11and12 mandate
G the making of a public announcement, if any of the criteria
   mentioned therein are satisfied. Regulation 16 provides the
   contents and essential disclosures that are to be made at the
   time of making a public announcement. Regulation 20
   establishes the method of computation to be employed in order
 H to determine the minimum offer price which the acquirer must
        A. R. DAHIYA v. SEBI [VIKRAMAJITSEN, J.]                    219



  offer to purchase shares in a public announcement under           A
  Regulation 10, 11 or 12. It is evident from a reading of the
  above Regulations that the buy-back transaction between the
  Appellant and HSIDC was incapable of triggering Regulation
  10, as the said transaction was protected by Regulation 3 .
. However, the acquisition of the entire share capital of Garg by   B
  the Appellant attracted Regulation 10 as the acquisition was
  in excess of 15%. Further, as this transaction was between
  two promoters, it did not have the protection of Regulation 3.
 As required under Regulation 10, the Appellant did make a
  public announcement, but did not disclose its buy-back            C
  transaction with HSIDC. The Appellant has vainly and
  incorrectly attempted to justify his act of non-disclosure by
 stating that the transaction with HSIDC was protected by
  Regulation 3, which placed it beyond the ambit of Regulation
                                                                    0
  10, 11 and 12. In our view, Regulation 3 only protects a
 transaction between a co-promoter and a State financial
  institution to the extent that, as a consequence of such
 transaction a public announcement will not be required to be
 made as provided under Regulations 10, 11 and 12. However,         E
 it does not imply that the said transaction is to be protected
 from the rigours of other Regulations provided for under the
 Act. Thus, the transaction between the Appellant and HSIDC
 will have to be subject to Regulations 16 and 20, and the rate
 at which the Appellant bought back the shares from HSIDC           F
 had to be disclosed in the public announcement.

       14. We also find no force whatsoever in the co"ntention of
the Learned Counsel for the Appellant that the post-dated
cheques forwarded to HSIDC enclosed with letter dated G
15.4.1999 were given by way of a guarantee, especially in
light of the fact that the same was denied by HSIDC in its letter
to SEBI dated 11.1.2001, wherein HSIDC stated that the post-
dated cheques had been issued in consideration of the buy-
back of shares.                                                   H
220         SUPREME COURT REPORTS                    [2015] 12 S.C.R.


A            15. The next contention that was raised by the Counsel
      for the Appellant was that as the cheques presented had been
      dishonoured on presentation, the said transaction did not
      culminate in an acquisition. It has already been held beyond
      doubt that the post-dated cheques issued by the Appellant in
B     favour of HSIDC were in consideration of the buy-back of the
      shares held by HSIDC in the Target Company. The Appellant
      had submitted that the cheques were post-dated because he
      was suffering from a liquidity crunch. In our view, the post-
      dated cheques amounted to a promise to pay and that promise
C     would be fulfilled on the date mentioned on the cheque. Thus,
      this promise to pay amounted to a sale of shares/equity. The
      subsequent dishonouring of the post-dated cheque would have
      no bearing on the case. At the time of making the public
      announcement the Appellant had bought back the shares of
0
      HSIDC by making payment via the said post-dated cheques.
      Further, as the buy-back was in pursuance of an agreement,
      there was consensus ad idem. The Appellant has subsequently
      shirked his responsibility and has tried to slither away from
E     honouring the agreement, which he cannot be allowed to gain
      from, as is established by the legal maxim commodum ex
      injuri su non habere debet. While interpreting the term
      acquisition, we must conceptualize the intention behind these
      Regulations which, it seems to us, is to safeguard the
F     shareholders from adverse consequences of acquisitions and
      takeovers as far as the value of the shares is concerned. Not
      infrequently, the new management's endeavour is to
      manipulate the market price of the shares in a manner
      calculated to induce the existing shareholders to off load their
G     holdings at a low price. This is achieved by portraying a false
      picture of their value. In the background of such an intention it
      would fallacious to s.uggest that the said transaction did not
      tantamount to an acquisition.

H        16. In order to dispel doubts regarding the term 'acquisition',
         A. R. DAHIYA v. SEBI [VIKRAMAJIT SEN, J.]                221


the same was subsequently defined in the Securities and A
Exchange Board of India (Substantial Acquisition of Shares
and Takeovers) Regulations, 2011. Under Regulation 2 Clause
(1) Sub-clause (a)- 'acquisition' means directly or indirectly
acquiring or agreeing to acquire shares or voting rights in, or
control over, a Target Company. This definition clarifies that B
an acquisition takes place the moment the acquirer decides
or agrees to acquire, irrespective of the time when the transfer
stands completed in all respects. The definition explicates
that the actual transfer need not be contemporaneous with the
intended transfer and can be in futuro.                          C

      17. Further, the letter on which the Counsel for the
Appellant had placed reliance to prove that there was no
acquisition, is dated 9.12.1999, which was well after the public
announcement dated 24.4.1999 where the Appellant was D
required to make disclosures in compliance with the
Regulations. This clearly indicates, that at the date of making
the public announcement the Appellant was under the
impression that the acquisition has taken place.
                                                                 E
      18. We neither find any merit in the appeal, nor any
infirmity in the order of SEBI dated 1.8.2003. Thus Appeal is
dismissed.

Nidhi Jain                                    Appeal dismissed.   F