Holding

Regulation 10’s ‘acquirer’ includes persons acting in concert, it does not apply when the combined holding exceeds 15%, the Board’s powers under Regulations 44/45 are discretionary, and the Appellate Tribunal may review but cannot replace Board directions with a Section 15‑H penalty.

Summary

The Supreme Court examined two appeals filed by SEBI against Sunil Krishna Khaitan and others and Madhuri S. Pitti, challenging SEBI's show‑cause notices and directions under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. The Court clarified that the term “acquirer” in Regulation 10 includes the individual shareholder together with any persons acting in concert, and that Regulation 10 does not apply when the combined holding already exceeds the 15% threshold, in which case Regulation 11 may apply. It held that the Board’s power under Regulations 44 and 45 is discretionary, not mandatory, and that the Board must consider the interests of the market and investors before issuing directions. The Court further ruled that the Securities Appellate Tribunal, while exercising its appellate jurisdiction under Section 15T of the SEBI Act, may review the correctness of the Board’s order but cannot substitute the Board’s directions with a monetary penalty under Section 15‑H. Consequently, the Court set aside the Board’s directions for a belated public offer, upheld the penalty for violation of Regulation 11(1), and dismissed SEBI’s appeals.

Issues considered

The proper interpretation of ‘acquirer’ and ‘person acting in concert’ under Regulation 10 of the Takeover Regulations, 1997.
Whether Regulation 10 applies when the acquirer already holds more than 15% of voting rights.
The scope of the Board’s discretionary power under Regulations 44 and 45 and the mandatory nature of its directions.
The jurisdiction and powers of the Securities Appellate Tribunal under Section 15T of the SEBI Act, especially its authority to impose penalties under Section 15‑H.
The applicability of the Takeover Regulations 2011 retrospectively to transactions occurring under the 1997 regulations.
The effect of delay in issuing show‑cause notices on the enforceability of penalties.

Legislation cited

Companies Act, 1956s. 6
Securities and Exchange Board of India Act, 1992s. 11, s. 11B, s. 15H, s. 15I, s. 15J, s. 15T, s. 24
Takeover Regulations, 1997s. 10, s. 11(1), s. 2(1)(b), s. 2(1)(e), s. 44, s. 45, s. 6, s. 7, s. 8
Takeover Regulations, 2011s. 14(1), s. 3(3), s. 33, s. 35

Subjects

Regulation 10acquirerperson acting in concertTakeover RegulationsSEBI Board discretionRegulation 44Regulation 45Section 15Tpenaltyretrospective applicationdoubtful penalisationlegitimate expectationdelay in enforcement

Judgment

[2022] 18 S.C.R. 987 987

SECURITIES AND EXCHANGE BOARD OF INDIA A
v.
SUNIL KRISHNA KHAITAN AND OTHERS
(Civil Appeal No. 8249 of 2013)
JULY 11, 2022 B
[SANJIV KHANNA AND BELA M. TRIVEDI, JJ.]
SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 1997 –Regulation 10 – Interpretation of Regulation
10 of the SEBI Regulations, 1997 – Held: Regulation 10 states that
C
no ‘acquirer’ shall acquire voting rights, which taken together with
the shares or voting rights held by him or by a ‘person acting in
concert’ would entitle the ‘acquirer’ to exercise 15% or more of the
voting rights in the company, unless such ‘acquirer’ makes public
announcement to acquire shares in accordance with the regulations
–The word ‘acquirer’ used in Regulation 10 takes its meaning from D
the definition clause (b) to Regulation 2(1), which refers to the
shareholder as an individual and also ‘person acting in concert’
with the him, which expression has been very widely defined vide
clause (e) to Regulation 2(1) of the Takeover Regulations 1997 –
Regulation 10 does not apply when the ‘acquirer’ already holds
E
more than 15% shares or voting rights in the target company – The
‘acquirer’, for the purpose of the said Regulation, not only means
the individual person but also the ‘person acting in concert’ with
the individual person.
SEBI (Substantial Acquisition of Shares and Takeovers)
F
Regulations, 1997 –Regulation 44 and 45 –Regulation 11 and the
penalty under regulations 44 and 45 of the Takeover Regulations
1997 – Held:Use of the word ‘may’ and not ‘shall’ in Regulation 44
is significant – It is not mandatory that in case of every violation
and breach of Regulations 10, 11 and 12, direction under Regulation
44 shall be issued – The Board, therefore, when it decides to exercise G
its power under Regulation 44 and issues directions under the said
Regulation has to keep the two facets in mind, namely, (i) interest of
the securities market; and (ii) protection of interest of the investors–
Regulation 44 is not a strict liablity provision –Nowhere, Regulation
45 stipulates that in case of violation of Regulations 10, 11 or 12 of
H
987
988 SUPREME COURT REPORTS [2022] 18 S.C.R.

A the Takeover Regulations 1997, the Board must initiate action and
issue directions in terms of Regulation 44.
Securities and Exchange Board of India Act, 1992 (SEBI Act)
– S. 15T – Power of Appellate Tribunal - The Appellate Tribunal
does not have the power for the first time to initiate and thereupon,
B impose penalty for non-compliance of the provisions of the
Regulations under Chapter VI-A of the Act while deciding an appeal
against directions issued under Regulation 44 of the Takeover
Regulations, 1997 – That power is vested with the authority specified
in the Act or the Regulations – The Appellate Tribunal is an appellate
forum and not the authority empowered to initiate penalty
C proceedings under Section 15-H or suo moto issue directions under
Section 11, 11B or 11(4)(d) of the Act – It can uphold or set aside
the direction issued, or modify and substitute the direction issued
under Regulation 44 of the Takeover Regulations 1997 read with
Sections 11, 11B and 11(4)(d) of the Act.
D Words and Phrases – Acquirer – discussed and explained.
Doctrines/Principles – Principle of doubtful penalisation.
Dismissing the appeals by the Board, the Court
HELD: (Interpretation of Regulation 10 of the Takeover
E Regulations)
1.1 Regulation 10 states that no ‘acquirer’ shall acquire
voting rights, which taken together with the shares or voting
rights held by him or by a ‘person acting in concert’ would entitle
the ‘acquirer’ to exercise 15% or more of the voting rights in
F the company, unless such ‘acquirer’ makes public announcement
to acquire shares in accordance with the regulations. The word
‘acquirer’ used in Regulation 10 takes its meaning from the
definition clause (b) to Regulation 2(1), which refers to the
shareholder as an individual and also ‘person acting in concert’
with the him, which expression has been very widely defined vide
G
clause (e) to Regulation 2(1) of the Takeover Regulations 1997.
The Appellate Tribunal has, therefore, rightly held that the word
‘acquirer’, which is a term of art,25 should not be restricted to
shares or voting rights of the individual shareholder as the term
as defined includes the ‘person acting in concert’ with the
H
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 989
KRISHNA KHAITAN AND OTHERS

shareholder. The shareholding/voting rights of the ‘acquirer’, that A
is the individual shareholder together with the ‘person acting in
concert’ decides whether the ‘acquirer’ is required to make a
public offer/announcement in terms of Regulation 10, which
applies when the voting rights of the ‘acquirer’ before acquisition
were less than 15 %, but on fresh acquisition exceed 15% of the
B
voting rights in the company. Regulation 10 does not apply when
the collective voting rights of the individual shareholder and the
‘person acting in concert’, taken together is 15% or more on the
date when fresh shares or voting rights are acquired. The
bracketed portion of Regulation 10, namely “taken together with
shares or voting rights, if any, held by him or by persons acting in C
concert with him” affirms and endorses this interpretation. [Para
44][1017-F-H; 1018-A-C]
1.2 In the context of Regulation 10, this Court does not
think that the draftsmen had committed a mistake or had forgotten
the definition clauses while wording Regulation 10, wherein they D
have consciously used the expression ‘acquirer’, after having
defined the same, instead of the word a ‘person’, which word has
been used in Regulations 6 and 8 of the Takeover Regulations
1997. To accept the interpretation given by the Board, we would
have to stretch the language of Regulation 10 and not read it as it
reads, by assuming that the intent is to apply Regulation 10 in E
two situations (i) when the acquirer as a single entity, without
taking into consideration the shareholding or voting rights of the
person(s) acting in concert; as well as (ii) when the single entity
together with the person(s) acting in concert, acquire voting
rights, and in either case to cross the stipulation of 15% of the F
voting rights. But this would require us to ignore or rewrite the
word ‘acquirer’ which as defined includes the ‘person(s) acting
in concert’. It defeats the object and purpose behind the ‘term of
art’ definition. Regulation 10 applies to the ‘acquirer’ acquiring
voting rights, with reference to the existing holding as a person
and in concert with other persons, because the acquisition is to G
be “taken together with shares or voting rights held by the
acquirer himself or by person acting in concert with him”. The
combined holding of the person and the ‘person acting in concert’
determines application of Regulation 10. If an ‘acquirer’ already
H
990 SUPREME COURT REPORTS [2022] 18 S.C.R.

A holds more than 15 % shares or voting rights in concert with
other persons, such holding is not be fragmented to calculate the
shares or voting rights of the ‘acquirer’ in his personal capacity
under Regulation 10.[Para 46][1018-G; 1019-A-E]
1.3 Regulation 10 does not apply when the ‘acquirer’
B already holds more than 15% shares or voting rights in the target
company. The ‘acquirer’, for the purpose of the said Regulation,
not only means the individual person but also the ‘person acting
in concert’ with the individual person. In such cases, Regulation
11(1) may apply when the ‘acquirer’ who hold between 15% to
55% of shares or voting rights, post the acquisition of the
C additional shares or voting rights is entitled to exercise more
than 5% of the voting rights. It is accepted by the Board that
they had read the expression ‘acquirer’ in Regulation 10 to mean
and include the shareholder along with ‘person acting in concert’.
Meaning thereby, there would not be any violation of Regulation
D 10 if the ‘acquirer’, which would include the ‘person acting in
concert’, acquires new shares or voting rights when he
individually or along with the ‘person in concert’, already hold
more than 15% shares in the target company. This interpretation
was accepted and even communicated by the Board to third
parties. Adjudicating Officer(s) have accepted this interpretation
E and dropped penalty proceedings, which orders have attained
finality and accepted by the Board. [Paras 48 and 50][1019-G-H;
1020-G; 1021-A]
1.4 The Board as well as the Adjudicating Officer have
treated the expression ‘acquirer’, for the purpose of Regulation
F 10, to include a ‘person acting in concert’ and the combined
shareholding were taken into consideration for deciding whether
there was a breach of Regulation 10. Where the ‘acquirer’,
including the ‘person acting in concert’, already had shares or
voting rights in excess of the prescribed limit, they were not
G held guilty of violating Regulation 10.[Para 51][1022-F-G]
1.5 Contention of the Board that there is no estoppel against
law is well known, but the said principle is not applicable for several
reasons. First, the interpretation accepted by the Appellate
Tribunal is not only plausible but more acceptable than the
H interpretation propounded by the Board. Secondly, the Board,
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 991
KRISHNA KHAITAN AND OTHERS

which has the power to enact the Regulations, interpret and apply A
them, adjudicate and also pass a penalty order in case of violation
for good and substantial reasons had interpreted regulations in
the same manner in earlier instances as interpreted by the
Appellate Tribunal. Thirdly, the adjudication orders in the present
case were passed well after the Takeover Regulations 1997 were
B
repealed with the enactment and enforcement of the Takeover
Regulations 2011. In the present case, therefore, we are dealing
with a legacy issue. Regulation 10 of the Takeover Regulations
1997, as interpreted and applied by the Board for over ten years,
is sought to be overturned by the Board, thereby, creating penal
consequences. This should not be permitted and is hardly C
acceptable when we apply the principle of good governance and
regulation.[Para 60][1029-B-E]
1.6 On the enforcement of Takeover Regulations 2011, it
is clear that Regulation 10 will apply on an acquirer who crosses
the threshold of 15%, which under the Takeover Regulations D
2011, has been increased to 25%. Further, Regulation 10 would
apply both when an individual acquirer or an acquirer in concert
with others acquires shares or voting rights beyond the threshold
level and such an acquirer would have to comply with the
applicable regulation. Takeover Regulations 1997 and Takeover
Regulations 2011, therefore, postulate different preconditions and E
thresholds. Reliance placed upon the Takeover Regulatory
Advisory Committee Report would show that there was a
rethought and re-examination of Regulation 10 pursuant to which
Regulation 3(3) was enacted and made a part of the regulatory
mechanism under the Takeover Regulations 2011. It is a general F
rule of law of interpretation that unless explicitly mentioned, a
law cannot be presumed to be retrospective. Further, in the
absence of express statutory authorisation, delegated legislation
in the form of rules or regulations, cannot operate retrospectively.
Certainly, Regulation 3(3) in the Takeover Regulations 2011
clarified and possibly removed the shortcoming of the 1997 G
Regulations.[Para 62 and 63][1030-C-F; 1031-E]
Regulation 11 and the penalty under Regulations 44 and
45 of the Takeover Regulations 1997

H
992 SUPREME COURT REPORTS [2022] 18 S.C.R.

A 2.1 The impugned order dismisses the appeal preferred by
the respondents and thereby affirms the order holding the
respondents guilty of violation of Regulation 11(1) of the Takeover
Regulations 1997. The respondents have not filed appeals or cross
objections challenging the said finding of the Appellate Tribunal.
Hence, we are not required to and would not comment on the
B
findings recorded by the Appellate Tribunal on violation of
Regulation 11(1) of the Takeover Regulations 1997. We proceed
on the basis that the respondents are guilty and have failed to
make public announcement within stipulated timeline as per the
Takeover Regulations 1997. The contention of the Board is that
C the Appellate Tribunal should not have modified the direction
given by the Whole Time Member obligating public announcement
with the monetary penalty of Rs. 25,00,000/-. [Para 64 and
65][1032-A-D]
2.2 Discretion is an effective and an important tool which
D the legislature confers and vests with the executive for effective
and good governance, administration, and in the present case –
regulation, of the securities market which has complex
commercial and economic facets. Therefore, the law provides an
option to the Board and the authorities to adopt one or the other
alternatives. However, this does not mean that the Board or the
E authorities enjoy unfettered and unchecked discretionary
jurisdiction to act according to private or personal opinion in a
vague and fanciful manner. Discretion, when of wide amplitude,
and when it can have civil and penal consequences, must be
exercised in a legal and regular manner. In the context of
F Regulations 44 and 45, it implies that the Board has the power to
make a choice between different courses of action or inaction.
This choice is not unfettered but is always held subject to implied
limitations inherent in every statute, limitations set by the common
law and the constitutional mandate of rule of law. Regulation 44
differs from Section 15-H, which is somewhat a strict liability
G provision that applies if a person fails to comply with the clauses
(i) to (iv). The phase ‘profits made out of such failure’ in Section
15-H indicates that while imposing quantum of penalty the
authority should consider the profit made by the acquirer on
account of failure to comply with the requirements mentioned in
H clauses (i) to (iv) of Section 15-H. Reliance placed by the Board
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 993
KRISHNA KHAITAN AND OTHERS

on the judgments which relate to and arise from the orders passed A
by the adjudicating officer under Chapter VI-A of the Act are of
no relevance, as Regulation 44 is a discretionary power and not
mandatory in nature. Not only this, the directions under
Regulation 44 are required to beissued considering relevant
factors, including, interest of the securities market and protection
B
of the investors in mind. Regulation 44 is not a strict liablity
provision. [Para 71, 72, 73 and 75][1037-F-H; 1038-A]
2.3 We entirely agree with the reasoning given by the
Appellate Tribunal for setting aside the directions given in the
penultimate paragraph of the orders passed by the Whole Time
Member. As noticed above, the violation alleged in Appeal No. C
23 of 2013 in the case of Sunil Krishna Khaitan relates to the
years 2006-2007. The order issuing the directions was passed
on 31st December 2012, nearly eight years after the alleged
violation. The direction given is that the shareholders should be
given an option to sell the shares held by them on 16th June D
2007 by directing the respondents to make a public announcement
to acquire the shares. Direction has also been given to pay
interest @ 10% per annum from 16th June 2007 till shares have
been accepted in the open offer. The dividend paid, if any, would
be adjusted. We are not stating that this direction can never be
issued, but the exercise of discretion to issue the said directions E
has to be predicated and based upon good grounds and reasons.
The directions of this nature are not automatic and are to be
issued only when they are warranted and justified. The
incongruities and absurdities of the directions issued have been
highlighted and noticed in the order passed by the Appellate F
Tribunal. [Para 79][1044-B-D]
Power of the Appellate Tribunal under section 15T of the
Act
3.1 An order in the form of directions under Regulation 44
of the Takeover Regulations 1997 was issued. It was this order G
which was made subject matter of challenge before the Appellate
Tribunal.Thus we do not accept the contention of the Board that
the Appellate Tribunal while exercising appellate power could
not have set aside and quashed the directions given in the appeal.
H
994 SUPREME COURT REPORTS [2022] 18 S.C.R.

A In the present case, proceedings under Section 15-H for levy of
penalty were not initiated and no order of penalty under 15-H
was passed by the adjudicating authority. The Appellate Tribunal,
therefore, was not hearing an appeal against imposition of penalty
under Section 15-H of the Act. Further, an order under Section
15-H of the Act is passed by an adjudicating authority which, while
B imposing penalty, is required to take into consideration the factors
mentioned in Section 15-J.[Paras 88 and 89][1050-D-G]
3.2 The Appellate Tribunal does not have the power for
the first time to initiate and thereupon, impose penalty for non-
compliance of the provisions of the Regulations under Chapter
C VI-A of the Act while deciding an appeal against directions issued
under Regulation 44 of the Takeover Regulations, 1997. That
power is vested with the authority specified in the Act or the
Regulations. The Appellate Tribunal is an appellate forum and
not the authority empowered to initiate penalty proceedings
under Section 15-H or suo moto issue directions under Section
D
11, 11B or 11(4)(d) of the Act. It can uphold or set aside the
direction issued, or modify and substitute the direction issued
under Regulation 44 of the Takeover Regulations 1997 read with
Sections 11, 11B and 11(4)(d) of the Act. Similarly, Appellate
Tribunal can uphold, set aside, modify and even substitute the
E order of penalty under Chapter VI-A of the Act. The power to
initiate and levy penalty in terms of Section 15-I is vested with an
officer to be appointed by the Board, not below the rank of
Divisional Commissioner, to act as an adjudicating officer. [Para
90][1051-A-D]

F 3.3 Thus, the Appellate Tribunal in appeal no.23 of 2013
could not have substituted the penalty imposed by the Board
under Regulation 44 with that of penalty under Section 15-H. An
appropriate view would be that when the Appellate Tribunal holds
that the order passed by the Whole Time member on violation of
Regulations 10, 11 and 12 is sustainable, but the directions given
G in the order under Regulation 44 are not sustainable, it should
leave it open to the Board to initiate proceedings and pass an
order under Chapter VI-A of the Act.[Para 91][1052-B-D]
Commissioner of Income Tax, (Central) -I, New Delhi v.
Vatika Township Private Ltd. (2015) 1 SCC 1 : [2014]
H 12 SCR 1037 – followed.
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 995
KRISHNA KHAITAN AND OTHERS

Punjab Communications Ltd. v. Union of India and A
Others (1999) 4 SCC 727 : [1999] 2 SCR 1033;
Tolaram Relumal and Another v. State of Bombay [1955]
1 SCR 158; Bipinchandra Parshottamdas Patel (Vakil)
v. State of Gujarat and Others (2003) 4 SCC 642 :
[2003] 3 SCR 533; Swedish Match AB and Another v. B
Securities & Exchange Board of India and Another
(2004) 11 SCC 641 : [2004] 3 Suppl. SCR 745; Official
Liquidator v. Dharti Dhan (P) Ltd. (1977) 2 SCC 166 :
[1977] 2 SCR 964; Dinesh Chandra Pandey v. High
Court of Madhya Pradesh and Another (2010) 11 SCC
C
500 : [2010] 8 SCR 37; Clariant International Ltd. and
Another v. Securities and Exchange Board of India
(2004) 8 SCC 524 : [2004] 3 Suppl. SCR 843; Banglore
Medical Trust v. B.S. Muddappa and Others (1991) 4
SCC 54 : [1991] 3 SCR 102; Adjudicating Officer,
Securities and Exchange Board of India v. Bhavesh D
Pabari (2019) 5 SCC 90; State of Gujarat v. Patil
Raghav Natha and Others (1969) 2 SCC 187 : [1970]
1 SCR 335; State of Punjab and Others v. Bhatinda
District Coop. Milk Producers Union Ltd. (2007) 11
SCC 363 : [2007] 11 SCR 14; Commissioner of Income E
Tax, U.P., Lucknow v. Kanpur Coal Syndicate, Kanpur
AIR 1965 SC 325 : [1964] SCR 85; Commissioner of
Income Tax, M.P., Bhopal v. Nirbheram Dalura (1997)
10 SCC 373– relied on.
Sanjiv Coke Manufacturing Company v. M/s. Bharat F
Coking Coal Limited and Another (1983) 1 SCC 147 :
[1983] 1 SCR 1000; Prakash Gupta v. Securities &
Exchange Board of India 2021 SCC OnLine SC 485;
Zile Singh v. State of Haryana and Others (2004) 8 SCC
1 : [2004] 5 Suppl. SCR 272; Chairman, SEBI v. Shriram
G
Mutual Funds and Another (2006) 5 SCC 361 : [2006]
2 Suppl. SCR 833; Securities and Exchange Board of
India v. Saikala Associates Limited (2009) 7 SCC 432 :
[2009] 6 SCR 798; – referred to.

H
996 SUPREME COURT REPORTS [2022] 18 S.C.R.

A Case Law Reference
[1983] 1 SCR 1000 referred to Para 28
[2004] 5 Suppl. SCR 272 referred to Para 31
[2006] 2 Suppl. SCR 833 referred to Para 31
B [2009] 6 SCR 798 referred to Para 31
[1999] 2 SCR 1033 relied on Para 53
[1955] 1 SCR 158 relied on Para 55
[2003] 3 SCR 533 relied on Para 55
C
[2004] 3 Suppl. SCR 745 relied on Para 24
[2014] 12 SCR 1037 relied on Para 63
[1977] 2 SCR 964 relied on Para 69
[2010] 8 SCR 37 relied on Para 69
D
[2004] 3 Suppl. SCR 843 relied on Para 71
[1991] 3 SCR 102 relied on Para 71
(2019) 5 SCC 90 relied on Para 33
E [1970] 1 SCR 335 relied on Para 82
[2007] 11 SCR 14 relied on Para 82
[1964] SCR 85 relied on Para 87
(1997) 10 SCC 373 relied on Para 87
F CIVIL APPELLATE JURISDICTION : Civil Appeal No.8249
of 2013.
From the Judgment and Order dated 19.06.2013 of the Securities
Appellate Tribunal Mumbai in Appeal No.23 of 2013.

G With
Civil Appeal No.1762 of 2014.
C. U. Singh, Niranjan Reddy, Sr. Advs., Bhargava V. Desai,
Shivam Jasra, Abhishek Sharma, Sahil Ravin, Advs. for the Appellant.

H
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 997
KRISHNA KHAITAN AND OTHERS

Somasekhar Sundaresan, Divyam Agarwal, Pulkit Sukhramani, A
Ms. Vidhi Jhawar, Abhishek, Aditya Narayan Dass, Dheeraj Nair, Ms.
Mridula Ray Bharadwaj, Advs. for the Respondents.
The Judgment of the Court was delivered by
SANJIV KHANNA, J.
B
This common judgment would decide the aforesaid two appeals
preferred by the Securities and Exchange Board of India 1, whereby it
has challenged the order of the Securities Appellate Tribunal2 dated 19th
June 2013 in Appeal No. 23 of 2013 titled ‘Sunil Krishna Khaitan and
Others v. Securities and Exchange Board of India’; and the order
dated 31st October 2013 in Appeal No. 2 of 2013 titled ‘Smt. Madhuri C
S. Pitti and Others v. Securities and Exchange Board of India’.
2. Primary questions of law raised in these appeals relates to the
interpretation of Regulation 10 of the SEBI (Substantial Acquisition of
Shares and Takeovers) Regulations, 1997;3the power and exercise of
the power by the Board under Regulations 44 readwith 45 of the Takeover D
Regulations, 1997; and the power and jurisdiction of the Appellate Tribunal
under Section 15T of the Securities and Exchange Board of India Act,
1992.4
A. Background facts:
E
I) Appeal No. 23 of 2013 (Sunil Krishna Khaitan’s case)
3. Khaitan Electrical Limited,5 a company incorporated in 1975,
listed on BSE Limited and National Stock Exchange Limited, is engaged
in the business of manufacturing and marketing of electrical goods.
4. KEL was founded by late Shri Krishna Khaitan (R12 in the F
appeal), who had passed away on 04th November 2012 and is represented
by his legal representatives. The promoter group consists of his family
member/relative and associate entities, which include other respondents
in the appeal, namely Sunil Krishna Khaitan, M/s. KhaitanLefin Limited
and M/s. The Oriental Mercantile Company Limited (R11st, R13rd and
R14th respectively). G

1
The ‘Board’, for short.
2
The ‘Appellate Tribunal’, for short.
3
Hereinafter referred to as ‘Takeover Regulations 1997’.
4
For short, the ‘Act’.
5
For short, ‘KEL’. H
998 SUPREME COURT REPORTS [2022] 18 S.C.R.

A 5. In the Extraordinary General Meeting held on 23 rd March 2006,
the shareholders of KEL had approved issuance of 10,00,000 equity
share warrants with the face value of Rs. 10/- each at a premium of Rs.
50/- each on preferential basis to the respondents. The warrants were
to be converted into equity shares within a period of eighteen months
from the date of allotment.
B
6. In the Extraordinary General Meeting held on 29th November
2006, the shareholders had approved issuance of 10,00,000 warrants
with face value of Rs. 10/- each with premium of Rs. 121/- each on
preferential basis to M/s. Khaitan Lefin Limited (R13),6 an identified
member of the promoter group, to be converted into equity shares within
C a period of eighteen months. This Extraordinary General Meeting had
also approved issuance of 25,00,000 equity shares of face value of Rs.
10/- each at a premium of Rs. 125/- each on preferential basis to strategic
investors. However, in this appeal, we are not concerned with the issue
of shares to the strategic investors.
D 7. On 12th March 2007, the respondents acquired 13,00,000 shares
in KEL in two tranches i.e., 5,00,000 in one transaction and 8,00,000
shares in the other. Upon receipt of the full consideration in terms of the
warrants, KEL had issued shares to the respondents consequent to which
the shareholdings of the respondents and the promoter group underwent
E a change, which are required to be noted and are reproduced :

F

G

8. The respondents were served with the show-cause notice dated
26 th March 2012 issued by the Board with respect to violation of
6
H For short, ‘KLL’.
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 999
KRISHNA KHAITAN AND OTHERS [SANJIV KHANNA, J.]

Regulations 10 and 11(1) of the Takeover Regulations 1997, calling upon A
them to show cause why suitable directions under Sections 11 and 11B
of the Act and Regulations 44 and 45 of the Takeover Regulations 1997
read with corresponding provisions of Regulations 33 and 35 of the SEBI
(Substantial Acquisition of Shares and Takeover) Regulations, 2011 7
should not be issued against them. Violation of Regulation 10 was
B
predicated on the ground that on 12th March 2007, shareholding of KLL
(R13) had individually increased from 10.52% to 17.16% and thereby it
was mandatory for KLL to make a public announcement in accordance
with the provisions of Regulation 10 read with Regulation 14(1) of the
Takeover Regulations 1997 within four working days from 12 th March
2007. Further, on 12th March 2007, the collective shareholding of the C
promoter group, including the acquirers, had increased from 25.83% to
34.21% and, therefore, the acquirers collectively were required to make
a public announcement in accordance with the provisions of Regulation
11(1) read with Regulations 14(1) of the Takeover Regulations 1997
within four working days from 12th March 2007.
D
9. The respondents contested the show-cause notice on various
grounds, which we will be canvassing subsequently.
10. The Whole Time Member8 of the Board did not agree with
the submissions made by the respondents and vide his order dated 31st
December 2012 held that there was violation of Regulations 10 and E
11(1) of the Takeover Regulations 1997 and, therefore, the respondents
shall make a combined public announcement to acquire shares of the
target company,9 namely KEL, in terms of Regulations 10 and 11(1) of
the Takeover Regulations 1997 within forty-five days of the order. Further
the respondent, along with the consideration amount, shall pay interest
@ 10% per annum from 16th June 2007 till the date of payment to the F
shareholders who were holding shares in KEL on the date of violation,
and whose shares shall be accepted in the open offer, albeit after
adjustment of dividend, if any, paid. The effect of the aforesaid direction
in the order dated 31 st December 2012 would be examined by us
subsequently. G
7
Hereinafter referred to as the ‘Takeover Regulations 2011’.
8
See Section 4(1)(d) of the Act:
“The Board shall consist of the following members, namely:
(d) five other members of whom at least three shall be the whole-time members.”
9
Regulation 2(1)(o): “target company” means a listed company whose shares or voting
rights or control is directly or indirectly acquired or is being acquired. H
1000 SUPREME COURT REPORTS [2022] 18 S.C.R.

A 11. The respondents preferred an appeal before the Appellate
Tribunal, which by the impugned order has been partly allowed. The
Appellate Tribunal has held that Regulation 10 was not violated, but
Regulation 11(1) was violated albeit the direction with regard to issue of
public announcement and open offer was not sustainable at a belated
stage. There was a delay of about 5 years in issuing show-cause
B
noticerelating to acquisition/incidents which pertain to the year 2006-07,
and as the impugned order came to be passed only on 31st December
2012, the directions of the Whole Time Member for issue of public
announcement and open offer were set aside. However, monetary
penalty of Rs. 25,000,00/- has been imposed.
C II) Appeal No. 2 of 2013 (Madhuri S. Pitti’s case)
12. Pitti Laminations Ltd.10 was incorporated in the year 1983
under the Companies Act, 1956 and its six promoters, namely, Mr. Sharad
B. Pitti, Ms. Madhuri Pitti (R21), Mr. Akshay S. Pitti (R23),Pitti Electrical
EquipmentPvt. Ltd (R22), Mrs. Shanti B. Pitti and Mr. Sharad B. Pitti
D have been controlling the affairs of PLL since its inception.
13. On 22nd June 2005, PLL allotted 3,90,000 shares and 4,10,000
warrants convertible into equity shares to R23. On 26th April 2006, R23
converted some warrants into equity shares which increased his individual
shareholding in PLL from 11.87% to 16.25%.
E
14. On 11th April 2007, R23 converted the remaining warrants into
equity shares of PLL, which again increased his individual shareholding
in PLL from 14.88% to 15.77%.
15. At the Annual General Meeting of PLL on 11th August 2011, a
F preferential allotment of 40,50,000 equity shares to R21 andR22was
authorised by the shareholders of PLL.This resulted in increase in the
total shareholding of the three respondents (R21, R22 and R23) with that
of Mr. Sharad Pitti from 41.70% to 59.21%.
16. Accordingly, a public announcement was made on 09 th
September 2011 and simultaneously, a Draft Letter of Offer was filed
G
before the Board for its approval on 19th September 2011.
17. On a query by the Board,R23 on 28th November 2011, wrote a
letter denying his failures to make public announcement at the time of
acquisition of shares by him on 22nd June 2005, and 26th April 2006.
10
H Hereinafter referred to as “PLL”.
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 1001
KRISHNA KHAITAN AND OTHERS [SANJIV KHANNA, J.]

Subsequently, on 19th March 2012 a hearing was afforded to him in this A
regard. Thereafter, R23had submitted replies on three occasions on the
respect of his purported failure to make public announcement at the
time of acquisition of the shares in 2005 and 2006.
18. After a lapse of more than one year, the Board through Assistant
General Manager, Corporate Finance Department, Division of Corporate B
Restructuring issued the letter dated 17th December 2012,mandating the
Merchant Banker of the respondents to inter alia revise the schedule
of the offer by taking into account the acquisitions made by R23 on 26th
April, 2006 and 11th April, 2007 and thereby, revise the offer price to the
shareholders.
C
19. The respondents challenged the letter before the Appellate
Tribunal, which vide impugned order dated 31st October 2013 allowed
the appeal and permitted the respondents to continue with their offer
excluding the Board’s directions relating to the acquisitions by R23 in the
years 2006 and 2007. The impugned order observes that the Board by
such letters could not issue directions to listed companies, by terming it D
as a mere advice without giving any choice in the matter. Further, placing
reliance on the impugned order herein in Sunil Khaitan v. SEBI, Appeal
No. 23 of 2013 decided on 19th June 2013, the Appellate Tribunal observed
that to determine whether or not the limit under Regulation 10has been
crossed, shareholdings of all members of the group of persons acting in E
concert would have to be reckoned as a whole.11
B. Contentions of the appellant/Board:
20. On 12th March 2007, individual shareholding of KLL (R13)in
KEL had increased from 10.52% to 17.16%, whereas shareholding of
the promoter group had collectively increased from 25.83% to 34.21%. F
Thus, there was a violation of both Regulation 10 and Regulation 11(1)
of the Takeover Regulations 1997.
11
In Appeal No. 2 of 2013 (Madhuri S. Pitti’scase), there is no specific order under
Regulation 44 by the Whole Time Member, albeit, as noticed above, directions were
issued by the Board to amend the draft letter of offer submitted by PLL for the Board’s
approval on 19 th September 2011, vide the Board’s letter dated 17 th December 2012.
G
The Appellate Tribunal has adversely commented on the Board’s conduct in issuing the
said direction by directing amendment of the draft letter of offer. During the course of
arguments, the Board has not specifically challenged the observations and the adverse
finding of the Appellate Tribunal that such directions could not have been issued by the
Board vide letter dated 17 th December 2012. We will not make any comments or give
findings in this regard. H
1002 SUPREME COURT REPORTS [2022] 18 S.C.R.

A 21. On 26th April 2006, shareholding of R23 in PLL had increased
from 11.87% to 16.25%. Again, on 11th April 2007, shareholding of R23
had increased from 14.88% to 15.77%. However, no public announcement
for open offer was made by R23 or by the acquirer group within the
period of four days from the respective dates.
B 22. The objective of the Takeover Regulations 1997 is to bring to
the knowledge of the shareholders of the company any change in
substantial ownership of the company and to provide an exit opportunity
through an open offer in case of such substantial change.
23. Regulations 10 and 11(1) have to be read accordingly and in
C line with the objective of the Takeover Regulations 1997.
24. Regulations 10, 11 and 12 operate in three distinct fields in
which the acquirer of shares or voting rights of the company is required
to make a public announcement and make an open offer to acquire
shares of existing shareholders. These Regulations may overlap in some
D cases as in the present case, but are not mutually exclusive, as has been
held by this Court in Swedish Match AB and Another v. Securities
&Exchange Board of India and Another.12
25. Impugned judgment and reasoning given by the Appellate
Tribunal is contrary to the objective of Regulation 10, which is to ensure
E that an exit option is provided to the existing shareholders once any
person, whether individually, and or along with any another person acting
in concert with each other, acquires shares that cross the 15% threshold.
Such acquirer or group, as the case may be, would be able to exercise
sufficient degree of control over the management of the company, which
may not be in the interest of the company and, therefore, exit option
F should be given to the existing shareholders.
26. In contrast, the objective of Regulation 11 is to provide an
opportunity to the shareholders to exit in case an acquirer of shares,
having 15% or more but less than 55% of the shares or voting rights,
either individually or with persons acting in concert, increases their
G shareholding or voting rights over 5% at any given point in a financial
year. As such acquisition enables the individual or the person acting in
concert with others to yield greater influence over management of the
company, and Regulations 11(1) of the Takeover Regulations 1997
provides for an exit option to the existing shareholders.
12
H (2004) 11 SCC 641.
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 1003
KRISHNA KHAITAN AND OTHERS [SANJIV KHANNA, J.]

27. Regulation 3(3) of the Takeover Regulations 2011 makes A
explicit what was already implicit in the Takeover Regulations 1997, that
in a case an individual within the group crosses the stipulated minimum
shareholding threshold, such an individual shall make a public offer even
when there is no change in aggregate shareholdings of the group, that is,
persons acting in concert. Reference is made to the report of the
B
Takeover Regulation Advisory Committee headed by Mr. C. Achuthan,
which exhibits that Regulation 3(3) is to clarify the requirement that was
already existing in the Takeover Regulations 1997.
28. There is no estoppel against a statute and, therefore, the
respondents in appeals herein cannot take any advantage and plead that
the Board is deviating from its earlier stance. Reference is made to C
Sanjiv Coke Manufacturing Company v. M/s. Bharat Coking Coal
Limited and Another.13 In fact, the interpretation given by the Board in
these appeals has been accepted by the Appellate Tribunal in certain
cases.
29. The Board has been conferred with powers under the Act in D
terms of Section 11 thereof to issue appropriate direction for protection
of interest of the shareholders; under Section 15-H read with Section
15-I to impose monetary penalty on the defaulter; and under Section 24
to criminally prosecute the defaulter for contravention of the provisions
of the Act or regulations thereunder. These are separate powers vested E
with the Board with distinct objectives, which can sometimes be
overlapping but are not identical, as has been held by this Court in Prakash
Gupta v. Securities &Exchange Board of India.14 The Board being
an expert body is entitled to exercise the aforesaid powers to subserve
the interest of the investors as well as to promote orderly and healthy
growth of the securities market. F

30. The Appellate Tribunal should not have interfered with the
directions to make an open offer, which are in line with the objective of
Sections 11 and 11-B of the Act read with Regulation 44 of the Takeover
Regulations 1997. The order passed by the WholeTimeMember directing
making of public announcement for open offer along with paying interest G
to the shareholders of the target company, was made with the larger
objective of protecting interests of the shareholders who have a right
and expectation to be provided with the opportunity to exit the company
13
(1983) 1 SCC 147
14
2021 SCC OnLine SC 485. H
1004 SUPREME COURT REPORTS [2022] 18 S.C.R.

A in case the shareholding/voting rights of a person and/or persons acting
in concert crosses the stipulated threshold at any point of time.
31. Scope of power of the Appellate Tribunal enumerated in Section
15-T does not extend to substituting directions issued under Sections 11
and 11B of the Act with monetary penalty under Section 15-H of the
B Act. The scope of power of the Appellate Tribunal is wide but cannot be
exercised in a manner which is inconsistent with the scheme of the Act.
Further, the directions issued for public announcement and open offer
are in line with the objectives of the Act which states that as soon as the
contravention of the statutory obligation is established, penalties must
follow. This is a distinct objective envisaged in Sections 11 and 11B of
C the Act read with Regulation 44 of the Takeover Regulations 1997, as
has been held in several decisions of this Court in Zile Singh v. State of
Haryana and Others,15Chairman, SEBI v. Shriram Mutual Funds
and Another16 and Securities and Exchange Board of India v. Saikala
Associates Limited.17
D 32. The Appellate Tribunal does not exercise jurisdiction under
Article 226 of the Constitution of India and is a creation of the statute
and, therefore, cannot pass any order inconsistent with the scheme of
the Act. Thus, imposition of monetary penalty for violation of Regulation
11(1) of the Takeover Regulations 1997, as directed by the Appellate
E Tribunal, is contrary to law and would also result in weakening of investor
confidence in securities market as defaulters would be able to escape
the obligation.
33. Lastly, the delay in issue of show-cause notice itself would
not exonerate the defaulters under the Act and the relevant Regulations,
F as has been held in Adjudicating Officer, Securities and Exchange
Board of India v. Bhavesh Pabari.18
34. For brevity, we are not reproducing the submissions made by
the respondents as they would be noticed subsequently and are inferable
from our reasoning, which upholds the orders by the Appellate Tribunal
G on the interpretation of Regulation 10 of the Takeover Regulations
1997.Secondly, we have upheld the order of the Appellate Tribunal setting
aside the directions of public announcement with open offer given by
15
(2004) 8 SCC 1
16
(2006) 5 SCC 361
17
(2009) 7 SCC 432
18
(2019) 5 SCC 90
H
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 1005
KRISHNA KHAITAN AND OTHERS [SANJIV KHANNA, J.]

the Whole Time Member under Regulation 44 for violation of Regulation A
11(1) of the Takeover Regulation,1997 in the case of Sunil Kumar
Khaitanin Appeal No. 8249 of 2013. However on the aspect of the power
of Appellate Tribunal under Section 15T of the Act, we have expressed
our reservation and disagreed with the Appellate Tribunal for the reasons
set out below.
B
C. Relevant Provisions:
35. We begin by reproducingthe relevant provisions of the Takeover
Regulations 1997 which are as under:
“2. Definitions.
C
2. (1) In these Regulations, unless the context otherwise requires:
xx xx xx
(b) “acquirer” means any person who, directly or indirectly,
acquires or agrees to acquire shares or voting rights in the target
company, or acquires or agrees to acquire control over the target D
company, either by himself or with any person acting in concert
with the acquirer;
xx xx xx
(e) “person acting in concert” comprises—
(1) persons who, for a common objective or purpose of substantial E
acquisition of shares or voting rights or gaining control over the
target company, pursuant to an agreement or understanding (formal
or informal), directly or indirectly co-operate by acquiring or
agreeing to acquire shares or voting rights in the target company
or control over the target company.
F
(2) Without prejudice to the generality of this definition, the following
persons will be deemed to be persons acting in concert with other
persons in the same category, unless the contrary is established:
(i) a company, its holding company, or subsidiary or such
company or company under the same management either G
individually or together with each other;
(ii) a company with any of its directors, or any person entrusted
with the management of the funds of the company;
(iii) directors of companies referred to in sub-clause (i) of clause
(2) and their associates; H
1006 SUPREME COURT REPORTS [2022] 18 S.C.R.

A (iv) mutual fund with sponsor or trustee or asset management
company;
(v) foreign institutional investors with sub-account(s);
(vi) merchant bankers with their client(s) as acquirer;
B (vii) portfolio managers with their client(s) as acquirer;
(viii) venture capital funds with sponsors;
(ix) banks with financial advisers, stock brokers of the acquirer,
or any company which is a holding company, subsidiary or
relative of the acquirer :
C
Provided that sub-clause (ix) shall not apply to a bank
whose sole relationship with the acquirer or with any company,
which is a holding company or a subsidiary of the acquirer or
with a relative of the acquirer, is by way of providing normal
commercial banking services or such activities in connection
D with the offer such as confirming availability of funds, handling
acceptances and other registration work;
(x) any investment company with any person who has an
interest as director, fund manager, trustee, or as a shareholder
having not less than 2 per cent of the paid-up capital of that
E company or with any other investment company in which such
person or his associate holds not less than 2 per cent of the
paid-up capital of the latter company.
Note : For the purposes of this clause ¯associate means,—
(a) any relative of that person within the meaning of section 6
F of the Companies Act, 1956 (1 of 1956); and (b) family trusts
and Hindu undivided families;
xx xx xx
6. Transitional provision.
(1) Any person, who holds more than five per cent shares or
G voting rights in any company, shall within two months of notification
of these regulations disclose his aggregate shareholding in that
company, to the company.
(2) Every company whose shares are held by the persons referred
to in subregulation (1) shall, within three months from the date of
H
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 1007
KRISHNA KHAITAN AND OTHERS [SANJIV KHANNA, J.]

notification of these regulations, disclose to all the stock exchanges A
on which the shares of the company are listed, the aggregate
number of shares held by each person.
(3) A promoter or any person having control over a company shall
within two months of notification of these regulations disclose the
number and percentage of shares or voting rights held by him and B
by person(s) acting in concert with him in that company, to the
company.
(4) Every company, whose shares are listed on a stock exchange
shall within three months of notification of these regulations,
disclose to all the stock exchanges on which the shares of the C
company are listed, the names and addresses of promoters and/
or person(s) having control over the company, and the number
and percentage of shares or voting rights held by each such person.
7. Acquisition of 5 per cent and more shares or voting rights
of a company. D
(1) Any acquirer, who acquires shares or voting rights which (taken
together with shares or voting rights, if any, held by him) would
entitle him to more than five per cent or ten per cent or fourteen
per cent 2 [or fifty four per cent or seventy four per cent] shares
or voting rights in a company, in any manner whatsoever, shall E
disclose at every stage the aggregate of his shareholding or voting
rights in that company to the company and to the stock exchanges
where shares of the target company are listed.
(1A) Any acquirer who has acquired shares or voting rights of a
company under sub-regulation (1) of regulation 11, 1 [or under F
second proviso to sub-regulation (2) of regulation 11] shall disclose
purchase or sale aggregating two per cent or more of the share
capital of the target company to the target company, and the stock
exchanges where shares of the target company are listed within
two days of such purchase or sale along with the aggregate
shareholding after such acquisition or sale. G
Explanation.—For the purposes of sub-regulations (1) and (1A),
the term acquirer‘ shall include a pledgee, other than a bank or a
financial institution and such pledgee shall make disclosure to the
target company and the stock exchange within two days of creation
of pledge. H
1008 SUPREME COURT REPORTS [2022] 18 S.C.R.

A (2) The disclosures mentioned in sub-regulations (1) and (1A)
shall be made within two days of — (a) the receipt of intimation
of allotment of shares; or (b) the acquisition of shares or voting
rights, as the case may be.
(2A) The stock exchange shall immediately display the information
B received from the acquirer under sub-regulations (1) and (1A) on
the trading screen, the notice board and also on its website.
(3) Every company, whose shares are acquired in a manner
referred to in subregulations (1) and (1A), shall disclose to all the
stock exchanges on which the shares of the said company are
C listed the aggregate number of shares held by each of such persons
referred above within seven days of receipt of information under
sub-regulations (1) and (1A).
8. Continual disclosures.
(1) Every person, including a person mentioned in regulation 6
D who holds more than fifteen per cent shares or voting rights in
any company, shall, within 21 days from the financial year ending
March 31, make yearly disclosures to the company, in respect of
his holdings as on 31st March.
(2) A promoter or every person having control over a company
E shall, within 21 days from the financial year ending March 31, as
well as the record date of the company for the purposes of
declaration of dividend, disclose the number and percentage of
shares or voting rights held by him and by persons acting in concert
with him, in that company to the company.
F (3) Every company whose shares are listed on a stock exchange,
shall within 30 days from the financial year ending March 31, as
well as the record date of the company for the purposes of
declaration of dividend, make yearly disclosures to all the stock
exchanges on which the shares of the company are listed, the
changes, if any, in respect of the holdings of the persons referred
G
to under subregulation (1) and also holdings of promoters or
person(s) having control over the company as on 31st March.
(4) Every company whose shares are listed on a stock exchange
shall maintain a register in the specified format to record the
information received under subregulation (3) of regulation 6, sub-
H
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 1009
KRISHNA KHAITAN AND OTHERS [SANJIV KHANNA, J.]

regulation (1) of regulation 7 and subregulation (2) of regulation A
8.
xx xx xx
10. Acquisition of fifteen per cent or more of the shares or
voting rights of any company.
No acquirer shall acquire shares or voting rights which (taken B
together with shares or voting rights, if any, held by him or by
persons acting in concert with him), entitle such acquirer to
exercise fifteen per cent or more of the voting rights in a company,
unless such acquirer makes a public announcement to acquire
shares of such company in accordance with the regulations. C
11. Consolidation of holdings.
(1) No 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 fifty five per cent (55%) of the
shares or voting rights in a company, shall acquire, either by himself D
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, with post acquisition shareholding or voting rights
not exceeding fifty five per cent., in any financial year ending on
31st March unless such acquirer makes a public announcement E
to acquire shares in accordance with the regulations.
(2) No acquirer, who together with persons acting in concert with
him holds, fifty-five per cent (55%) or more but less than seventy-
five per cent (75%) of the shares or voting rights in a target
company, shall acquire either by himself or through or with persons F
acting in concert with him any additional shares entitling him to
exercise voting rights or voting rights therein, unless he makes a
public announcement to acquire shares in accordance with these
Regulations:
Provided that in a case where the target company had obtained
G
listing of its shares by making an offer of at least ten per cent
(10%) of issue size to the public in terms of clause (b) of sub-rule
(2) of rule 19 of the Securities Contracts (Regulation) Rules, 1957,
or in terms of any relaxation granted from strict enforcement of
the said rule, this sub-regulation shall apply as if for the words and
H
1010 SUPREME COURT REPORTS [2022] 18 S.C.R.

A figures seventy-five per cent (75%), the words and figures ninety
per cent (90%) were substituted.
Provided further that such acquirer may, notwithstanding the
acquisition made under regulation 10 or sub-regulation (1) of
regulation 11, without making a public announcement under these
B Regulations, acquire, either by himself or through or with persons
acting in concert with him, additional shares or voting rights entitling
him upto five per cent. (5%) voting rights in the target company
subject to the following:
(i) the acquisition is made through open market purchase in
C normal segment on the stock exchange but not through bulk
deal /block deal/ negotiated deal/ preferential allotment; or the
increase in the shareholding or voting rights of the acquirer is
pursuant to a buyback of shares by the target company;
(ii) the post-acquisition shareholding of the acquirer together
D with persons acting in concert with him shall not increase
beyond seventy five percent. (75%).
(2A) Where an acquirer who (together with persons acting in
concert with him) holds fifty-five per cent (55%) or more but less
than seventy-five per cent (75%) of the shares or voting rights in
E a target company, is desirous of consolidating his holding while
ensuring that the public shareholding in the target company does
not fall below the minimum level permitted by the Listing
Agreement, he may do so by making a public announcement in
accordance with these regulations:

F Provided that in a case where the target company had obtained
listing of its shares by making an offer of at least ten per cent
(10%) of issue size to the public in terms of clause (b) of sub-rule
(2) of rule 19 of the Securities Contracts (Regulation) Rules, 1957,
or in terms of any relaxation granted from strict enforcement of
the said rule, this sub-regulation shall apply as if for the words and
G figures seventy-five per cent (75%), the words and figures ninety
per cent (90%) were substituted.
(3) Notwithstanding anything contained in regulations 10, 11 and
12, in case of disinvestment of a Public Sector Undertaking, an
acquirer who together with persons acting in concert with him,
H has made a public announcement, shall not be required to make
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 1011
KRISHNA KHAITAN AND OTHERS [SANJIV KHANNA, J.]

another public announcement at the subsequent stage of further A
acquisition of shares or voting rights or control of the Public Sector
Undertaking provided:— (i) both the acquirer and the seller are
the same at all the stages of acquisition, and (ii) disclosures
regarding all the stages of acquisition, if any, are made in the
letter of offer issued in terms of regulation 18 and in the first
B
public announcement.
Explanation. — For the purposes of regulation 10 and
regulation 11, acquisition shall mean and include — (a) direct
acquisition in a listed company to which the regulations apply; (b)
indirect acquisition by virtue of acquisition of companies, whether
listed or unlisted, whether in India or abroad. C

12. Acquisition of control over a company.
Irrespective of whether or not there has been any acquisition of
shares or voting rights in a company, no acquirer shall acquire
control over the target company, unless such person makes a public D
announcement to acquire shares and acquires such shares in
accordance with the regulations:
Provided that nothing contained herein shall apply to any change
in control which takes place in pursuance to a special resolution
passed by the shareholders in a general meeting: E
Provided further that for passing of the special resolution facility
of voting through postal ballot as specified under the Companies
(Passing of the Resolutions by Postal Ballot) Rules, 2001 shall
also be provided.
Explanation — For the purposes of this regulation, acquisition F
shall include direct or indirect acquisition of control of target
company by virtue of acquisition of companies, whether listed or
unlisted and whether in India or abroad.”
D.Interpretation of Regulation 10 of the Takeover
Regulations, 1997: G
36. Regulation 6, a transitional provision, states that any person
who holds more than 5% shares or voting rights in a company shall,
within two months of the notification of the Takeover Regulations 1997,
disclose the aggregate shareholding to the company.19 Every company
19
Regulation 6(1) of the Takeover Regulations, 1997. H
1012 SUPREME COURT REPORTS [2022] 18 S.C.R.

A is required to, within three months of the notification of the Takeover
Regulations 1997, disclose, to all stock exchanges in which the shares of
the company are listed, the aggregate number of shares held by such
person.20 A promoter or person having control over the company is
required to, within two months, disclose the number and percentage of
voting rights held by him and the persons acting in concert with him to
B
the company.21 In turn, the company is, within three months, required to
disclose to all stock exchanges in which the shares of the company are
listed, the names and addresses of the promoters or the persons having
control of the company, the number and percentage of shares or voting
rights held by each such person.22
C 37. Regulation 7 states that any acquirer who acquires shares or
voting rights, taken together with the shares or voting rights already held
by him, which would entitle him to more than 5% or 10% or 14% or 54%
or 74% shares or voting rights of the company in any manner whatsoever,
disclose at every stage, aggregate of his shareholding or voting rights to
D the company and to the stock exchanges where the shares are listed.23
Sub-regulation 1A to Regulation 7 states that any acquirer who has
acquired shares or voting rights of the company, under sub-regulation 1
to Regulation 11 or under second proviso to sub-regulation 2 to Regulation
11, shall disclose the purchase or sale aggregating 2% or more of the
share capital of the target company to the target company, and to the
E stock exchanges where the shares of the target company are listed within
two days of such purchase or sale along with aggregate of shareholding
after such acquisition or sale. The explanation to Regulation 7(1) and
(1A) states that the term ‘acquirer’ for sub-regulation (1) and (1A) shall
include a pledgee, other than a bank or financial institution. Such pledgee
F shall make a disclosure to the target company and the stock exchange
within two days of creation of the pledge. Sub-regulation (2A) to
Regulation 7 states that the stock exchange shall immediately display
the information received from the acquirer under sub-regulation (1) and
(1A) on the trading screen, the notice board and also on its website.
Sub-regulation (3) requires every company whose shares are acquired
G in the manner referred to in sub-regulation (1) and (1A) to disclose to all
stock exchanges, on which the shares of the said company are listed,
20
Ibid Regulation 6(2).
21
Ibid Regulation 6(3).
22
Ibid Regulation 6(4).
23
H Ibid Regulation 7(1).
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 1013
KRISHNA KHAITAN AND OTHERS [SANJIV KHANNA, J.]

the aggregate number of shares held by such persons referred above, A
within seven days of receipt of information under sub-regulation (1) and
(1A) of Regulation 7 of the Takeover Regulations 1997.
38. Regulation 6 exposits transparency and openness which is
required in the form of disclosure to be made by the shareholders,
promoters or a person having control over the company, as well as the B
company in which they hold the shares. The information is not only
given to the stock exchanges where the shares of the company are
listed but are also put in the public domain so as to inform the shareholders
and others. Similar transparency and openness is mandated by Regulation
7 which uses the expression ‘acquirer’, and applies when the ‘acquirer’
acquires shares or voting rights of the specified percentage in the C
company. Regulation 6 consciously uses the terms ‘person’, ‘promoter’,
or ‘a person having control over the company’, and does not use the
term ‘acquirer’, as the term ‘acquirer’ has been given, as noticed below,
a specific legal meaning by the Takeover Regulations 1997. Regulation
7, on the other hand, expressly uses the term ‘acquirer’. D
39. When we turn to Regulation 8 which deals with ‘continuous
disclosures’, the regulation uses the term ‘person’, ‘promoter’, and ‘every
person having control over the company’, which are the terms used in
Regulation 6. Regulation 8 stipulates every person, which includes the
person mentioned in Regulation 6, who hold more than 15% shares of E
voting rights as on 31st March shall make a disclosure to the company
within 21 days from the end of the financial year. There is a similar
stipulation in sub-regulation (2) to regulation 8 which requires a promoter
or every person having control over a company to make a disclosure
within 21 days from the end of the financial year, as well as the record
date of the company for declaration of dividend, to make a disclosure of F
the number and percentage of shares or voting rights held by him and by
persons acting in concert with him in that company to the company.The
expression ‘person acting in concert’ has been defined in clause (e) to
Section 2(1) of the Regulation, which clause has been examined and
interpreted by us subsequently, also finds reference in the expression G
‘acquirer’ defined by clause (b) in Regulation 2 to the Takeover
Regulations 1997. Every company whose shares are listed in the stock
exchange is mandated by Regulation 8(3)to make a disclosure to all
stock exchanges where their shares are listed, within 30 days of the end
of the financial year as well as the record date for the purpose of
H
1014 SUPREME COURT REPORTS [2022] 18 S.C.R.

A declaration of dividend as to the holdings of the persons covered by sub-
regulations (1) and (2) of Regulation 8. Regulation 8(4) states that every
company, whose shares are listed, shall maintain a register in the specified
format to record the information received under sub-regulation (3) to
Regulation 6, sub-regulation (1) to Regulation 7 and sub-regulation (2) to
Regulation 8.
B
40. The expression ‘acquirer’, as defined in the Takeover
Regulations 1997, is broad, wideand is given an expansive definition. An
‘acquirer’ is a person who directly or indirectly acquires or agrees to
acquire shares or control over the target company by himself or with
any person acting in concert with him. The phrase ‘directly or indirectly’
C as well as the expressions ‘acquired shares or voting rights’ and ‘with
any person acting in concert with the acquirer’underlines the extensiveand
widespread ambit of the term ‘acquirer’. The term ‘acquirer’ is not
restricted to the person or individual shareholder as it encompasses any
other person acting in concert with the ‘acquirer’.
D 41. The expression ‘person acting in concert’ as defined in clause
(e) to Section 2(1) is again broad and expansive. The expression ‘person
acting in concert’ as per sub-clause (1) to Clause (e) includes a person,
who for a common object or for purpose of substantial acquisition of
shares, voting rights, gaining control over the company, pursuant to an
E agreement or understanding formal or informal, directly or indirectly,
cooperate by acquiring or agreeing to acquire shares or voting rights in a
target company or to take control over a target company.Sub-clause 2
to clause (e) to Section 2(1) incorporates legal fiction as it states that the
persons enumerated in clauses (i) to (x) shall be deemed to be persons
acting in concert with other persons in the same category.The note to
F sub-clause (e) to Clause 2(1) explains the expression ‘associate’ as a
relative of the person within the meaning of Section 6 of the Companies
Act, 1956, family trust and Hindu Undivided Families. However, the
presumption raised vide sub-clause (2) to Regulation 2(1)(e) is qualified
and subject to- ‘unless the contrary is established’. Therefore, if the
G contrary is established, the presumption raised vide clauses (i) to (x)
may not apply in enterity or only apply in part limited to specific
shareholder(s) or the persons mentioned in clauses (i) to (x) who in
concert acquire shares or voting rights of a target company. The factual
matrix is determinative as clause (e)vide sub-clause (1) to Regulation
2(1) of the Takeover Regulations 1997 lays down a derivativeor spin-off
H
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 1015
KRISHNA KHAITAN AND OTHERS [SANJIV KHANNA, J.]

rule of interpretation, and even when the presumption under sub-clause A
(2)arises, the adjudicator will not applythe presumption when the fact to
the contrary are established. The presumptionis to be looked as “the
bats of law, flitting in the sunlight but disappearing in the sunshine of
fact”. 24
42. The object of the aforesaid wide definitions is to ensure that B
no one is able to dribble past and defeat the Takeover Regulations 1997
by resorting to camouflage and subterfuge.
43. Interpreting Regulation 10 the Appellate Tribunal in the case
of Madhuri S. Pitti, by referring to their earlier decision in the case of
Sunil Krishna Khaitan, has opined:
C
“21. The first ingredient of the regulation in question is “acquirer”,
the second is “shares or voting rights, if any, held by him or by
persons acting in concert with him”; and the third is “entitle such
acquire to exercise fifteen percent or more of the voting rights in
a company”. The definitions of “acquirer” and “persons acting in
concert” as given in the Code of Conduct, 1997 are reproduced D
below for the sake of convenience”:
“2(b) “acquirer” means any person who, directly or
indirectly, acquires or agrees to acquire shares or voting
rights in the target company, or acquires or agrees to
acquire control over the target company, either by himself E
or with any person acting in concert with the acquirer;
2(e) “person acting in concert” comprises, -
(1) persons who, for a common objective or purpose of
substantial acquisition of shares or voting rights or gaining
control over the target company, pursuant to an agreement F
or understanding (formal or informal), directly or indirectly
cooperate by acquiring or agreeing to acquire shares or
voting rights in the target company or control over the target
company.
(2) Without prejudice to the generality of this definition,
G
the following persons will be deemed to be persons acting
in concert with other persons in the same category, unless
the contrary is established:……”
24
Words from the Full Bench decision of the Andhra Pradesh High Court in G. Vasu v.
Syed Yaseen Sifuddin Quadri, AIR 1987 AP 139.
H
1016 SUPREME COURT REPORTS [2022] 18 S.C.R.

A 22. A simple reading of the definition of the word “acquirer” makes
it clear that an acquirer may act alone or as part of a group of
persons acting inconcert. On the other hand, the definition of
“persons acting in concert” reveals that people who cooperate
with each other in order to acquire substantial voting rights in a
particular company would be considered persons acting in concert.
B
At this point, we find it necessary to quote paragraph 31 from
Sunil Khaitanvs SEBI (Appeal No. 23 of 2013 decided on 19.06.
2013) mentioned herein below:
“31. In this connection, it may also be pertinently noted that
the SAST Regulations, 1997 allow certain persons/ entities to
C act in concert for the purpose of acquisition. Even the definition
of “persons acting in concert” as provided in Regulation 2 (e)(1)
clearly provides that this expression includes persons who agree
to cooperate with each other to acquire shares/voting rights in
a target company or control over the target company pursuant
D to a formal or informal understanding between them, directly
or indirectly. Thus, the definition is wide enough and gives ample
scope to persons to act in concert as one unit for the purpose
of acquisition of shares/voting rights. Further, Regulation 2(e)(2)
also enumerates various persons who could act in concert and
they, inter alia, include a company, its holding company, a
E subsidiary, directors, mutual fund with sponsor or trustee,
foreign institutional investors, merchant bankers, so on and so
forth. In this context, if we look at the new SAST Regulations,
2011, we note that Regulation 3(3) specifically provides that
acquisition of shares by any person within the meaning of sub-
F regulations 3(1) and 3(2) would be attracting the obligation to
make an open offer for acquiring shares of the target company
irrespective of its aggregate shareholding with persons acting
in concert if the shareholding of such individual person exceeds
the threshold limit prescribed by regulation 10. It is pertinent to
note that such a specific and unambiguous provision making
G an individual liable to make a public offer in case the individual
shareholding increases during the course of the acquisition even
while acting in concert with other persons is conspicuously
missing in the SAST Regulations, 1997. KLL was, therefore,
not required to make a public offer and the finding in the
H Impugned Order qua appellant no. 3, i.e., KLL is hereby set
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 1017
KRISHNA KHAITAN AND OTHERS [SANJIV KHANNA, J.]

aside. At any rate, since the amendment of the Takeover Code A
and the inclusion of regulation 3(3) in the SAST Regulations,
2011 the discussion regarding the applicability of regulation 10
of the SAST Regulations, 1997 has been rendered academic.
Having said that, in the facts and circumstances of the present
case, KLL cannot be called upon to make an open offer by
B
applying regulation 3(3) of the new Takeover Code
retrospectively.”
23. Therefore, it is evident that the framers of the Takeover
Regulation, 1997 intended to bring out a clear distinction between
individual acquiring of shares on one hand and shares acquired by
persons acting in concert on the other. The benchmark of 15% C
would, thus, apply to an individual when the individual is acquiring
shares/voting rights on his behalf alone. Similarly, when we attempt
to determine whether or not the said limit has been crossed,
shareholdings of all members of the group of persons acting in
concert would have to be reckoned as a whole. Any other D
interpretation which would serve to dilute the distinction between
an individual acquirer and a group of “persons acting in concert”
as an acquirer. It would, indeed, make the concept of “persons
acting in concert” nugatory, which could never have been the
intention of the law makers. We, therefore, find Appellant No. 3
free of any blame with respect to provisions of regulation 10 of E
the SAST Regulations, 1997 regarding his acquisitions in the years
2006 and 2007.”
(Emphasis Added)
44. We agree with the interpretation.Regulation 10 states that no F
‘acquirer’ shall acquire voting rights, which taken together with the shares
or voting rights held by him or by a ‘person acting in concert’ would
entitle the ‘acquirer’ to exercise 15% or more of the voting rights in the
company, unless such ‘acquirer’ makes public announcement to acquire
shares in accordance with the regulations. The word ‘acquirer’ used in
Regulation 10 takes its meaning from the definition clause (b) to Regulation G
2(1),which refers to the shareholder as an individual and also ‘person
acting in concert’ with the him, which expression has been very widely
defined vide clause (e) to Regulation 2(1) of the Takeover Regulations
1997. The Appellate Tribunal has, therefore, rightly held that the word
H
1018 SUPREME COURT REPORTS [2022] 18 S.C.R.

A ‘acquirer’, which is a term of art,25 should not be restricted to shares or
voting rights of the individual shareholder as the term as defined includes
the ‘person acting in concert’ with the shareholder. The shareholding/
voting rights of the ‘acquirer’, that is the individual shareholder together
with the ‘person acting in concert’ decides whether the ‘acquirer’ is
required to make apublic offer/announcementin terms of Regulation 10,
B
which applies when the voting rights of the ‘acquirer’ before acquisition
were less than 15 %, but on fresh acquisition exceed15%of the voting
rights in the company. Regulation 10 does not apply when the collective
voting rights of the individual shareholder and the ‘person acting in
concert’, taken together is 15% or more on the date when fresh shares
C or voting rights are acquired.The bracketed portion of Regulation 10,
namely “taken together with shares or voting rights, if any, held by him
or by persons acting in concert with him” affirms and endorses this
interpretation.
45. When a word/term has been defined in a statute in a particular
D manner then the interpreter can assume the word/term must be
understood in the stipulated sense. The principle applies with greater
vigour when the definition ofthe word/term is given a legal and substantive
meaning, different from the common meaning, as then the writer demands
that the reader should understand the term/word in the sense
defined.When the content and meaning given is technical, theinterpreter
E is entitled to infer that the intention of the draftsmen is to deviate and
depart from the ordinary, literalor customary meaning. Therefore, when
a statutory enactment consciously defines a word or expression by
enlarging or restricting the ordinary meaning, in the absence of clear
indication to the contrary, the term as defined shall cover what is proposed,
F authorised, done or referred to in the enactment.26 This principle can be
also discarded when the definition readand applied would not agree with
the subject and context thereby making the provision unworkable or
otiose.
46. In the context of Regulation 10, we do not think that the
G draftsmen had committed a mistake or had forgotten the definition
clauseswhile wording Regulation 10, wherein they have consciously used
25
Lord Nicholls has defined the phrase‘termof art’ in a legal sense as a term with one
specific and precise meaning for the purposes of the enactment- see Brooks Vs. Brooks
(1995) 3 All ER 257.
26
Lord Lowry,Wyre Forest District Council v. The Secretary of State for Environment,
H 1990 2 AC 357.
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 1019
KRISHNA KHAITAN AND OTHERS [SANJIV KHANNA, J.]

the expression ‘acquirer’, after having defined the same, instead of the A
word a ‘person’, which word has been used in Regulations 6 and 8 of
the Takeover Regulations 1997.To accept the interpretation given by the
Board, we would have to stretch the language of Regulation 10 and not
read it as it reads, by assuming that the intent is to apply Regulation 10 in
two situations(i) when the acquirer as a single entity, without taking into
B
consideration the shareholding or voting rights of the person(s) acting in
concert; as well as (ii) when the single entity together with the person(s)
acting in concert, acquire voting rights,and in either case to cross the
stipulation of 15% of the voting rights.But this would require us to ignore
or rewrite the word ‘acquirer’ which as defined includes the ‘person(s)
acting in concert’. It defeats the object and purpose behind the ‘term of C
art’ definition. Regulation 10 applies to the ‘acquirer’ acquiring voting
rights, with reference to the existing holding as a person and in concert
with other persons, because the acquisition is to be “taken together with
shares or voting rights held by the acquirer himself or by person acting in
concert with him”. The combined holding of the person and the ‘person
D
acting in concert’ determines application of Regulation 10. If an ‘acquirer’
already holds more than 15 % shares or voting rights in concert with
other persons, such holding is not be fragmented to calculate the shares
or voting rights of the ‘acquirer’ in his personal capacity under Regulation
10.
47. The language and the wording of Regulation 10 clearly differs E
from the language and wording of Regulation 11(1) of the Takeover
Regulations 1997. In Regulation 11(1), an acquirer, either himself or
through or with any person acting in concert with him, has 15% or more
but less than 55% shares/voting rights, is required to make a public
announcement in accordance with the Regulation when he, either by F
himself or through or with persons acting in concert with him, acquire
additional shares or voting rights entitling him to exercise more than 5%
of the voting shares in addition to already acquired shares/voting rights.
48. Thus Regulation 10 does not apply when the ‘acquirer’ already
holds more than 15% shares or voting rights in the target company. The G
‘acquirer’, for the purpose of the said Regulation, not only means the
individual person but also the ‘person acting in concert’ with the individual
person. In such cases, Regulation 11(1) may apply when the ‘acquirer’
who hold between 15% to 55% of shares or voting rights, post the
acquisition of the additional shares or voting rights is entitled to exercise
more than 5% of the voting rights. H
1020 SUPREME COURT REPORTS [2022] 18 S.C.R.

A 49. The contention of the Board that the interpretation by the
Appellate Tribunal defeats the object and purpose of the Takeover
Regulations 1997 is a feeble and evanescent argument. The interpretation,
does not render Regulation 10 ineffective to deal with cases where an
individual, parts ways with the ‘person(s) acting in concert’ to acquire
shares beyond the threshold of 15% with the intend to gain control or
B
stake in the target company. The argument overlooks the wording of
Regulations 2(1)(b) and (e). A ‘person acting in concert’ as defined in
clause (e) to Regulation 2(1) is a fluctuating and not a fixed body of
persons. When there are divisions and differences between or amongst
the ‘person acting in concert’, or even otherwise, an acquirer acts at his
C own behest or in concert with a different persons or group, Regulation
10 may catch up. Definitions of the terms, ‘acquirer’ and ‘person acting
in concert’ are situation and fact specific. The legal fiction vide sub-
clause 2 to Section 2(1)(e), specifically stipulates- unless contrary is
established. Yes, there could be situations when the ‘person(s) acting in
concert’ holding more than 15% voting rights post the said acquisition
D
may part ways, but Regulation 10 is not attracted and applicable to such
situations. To argue that public shareholders can predict such events
and therefore the Board’s interpretation is more acceptable is imaginative
but an uncompelling and a weak argument.Risk taking is essential to an
an active market, and in fact the secruties marketthrives on legitimate
E changes in management, flexibility and willingness to accept change,
which may not predicitable. Good regulation, it is said, should promote
and allow for the effective management of risk and not striffle risk taking.
Regulator should ensure that capital and other prudential requirements
are sufficient to address appropriate risk taking, and check excessive
risk taking.27 Therefore, the apprehension of the Board, which is more in
F
the nature of skepticism and qualm,is misconceived and should be rejected.
50. There is ample material, and it is accepted by the Board that
they had read the expression ‘acquirer’ in Regulation 10 to mean and
include the shareholder along with ‘person acting in concert’. Meaning
thereby, there would not be any violation of Regulation 10 if the ‘acquirer’,
G which would include the ‘person acting in concert’, acquires new shares
or voting rights when he individually or along with the ‘person in concert’,
already hold more than 15% shares in the target company. This
interpretation was accepted and even communicated by the Board to
27
See Objectives and Principles of Securties Regulation- Objectives of Securities
H Regulation 4.2.3 International Organisation of Securities Commissions,- May,2003.
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 1021
KRISHNA KHAITAN AND OTHERS [SANJIV KHANNA, J.]

third parties.Adjudicating Officer(s) have accepted this interpretation A
and dropped penalty proceedings, which orders have attained finality
and accepted by the Board. Relevant portions of some communications/
orders passed are reproduced below:

B

C

D

E

F

G

H
1022 SUPREME COURT REPORTS [2022] 18 S.C.R.

A

B

C

D

E

F 51. Thus, the Board as well as the Adjudicating Officer have
treated the expression ‘acquirer’, for the purpose of Regulation 10, to
include a ‘person acting in concert’ and the combined shareholding were
taken into consideration for deciding whether there was a breach of
Regulation 10. Where the ‘acquirer’, including the ‘person acting in
concert’, already had shares or voting rights in excess of the prescribed
G
limit, they were not held guilty of violating Regulation 1028.
28
Under sub-section (3) to Section 15-I, the Board has the power to call for and examine
records of any proceedings if it considers the order passed by the adjudicating officer is
erroneous to the extent it is not in the interests of the securities market and after causing
or making an inquiry pass an order enhancing the quantum of penalty if the circumstances
of the case so justify. The second proviso states that an order under sub-section (3) can
H
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 1023
KRISHNA KHAITAN AND OTHERS [SANJIV KHANNA, J.]

52. It is important for the regulator to be consistent and A
predictable.Further regulations must be clear as ambiguous regulations
cause confusion and uncertainty. Regularity and predictability, along with
certainty, are hallmarks of good regulation and governance. These
principles underpinthe ‘rule of law’, check arbitrariness and are read as
the intent of the legislation, which the Courts, if need be, will enforce as B
a principle of interpretation.The Board is entrusted to preform legislative,
executive, investigative and adjudicatory functions. A regulator when it
executes statutory functions interprets the enactment and gives meaning
and, in that sense, lays down what is believes is the rule. As a legislator
who constructs and states at the first instance what is the rule, the Board
tacitly promises and prophecies the interpretation that appeals to them. C
Any good regulatory system must promote and adhere to principle of
certainty and consistency,providing assurance to the individual as to the
consequence of transactions forming part of his daily affairs.29 Lord
Diplock has aptly said “unless men know what the rule of conduct is
they cannot regulate their actions to confirm to it.” Otherwise the D
regulator”fails in its primary function as a rule” maker.30 This does not
mean that the regulator/authorities cannot deviate from the past practice,
albeit any such deviation or change must be predicated on greater public
interest or harm. This is the mandate of Article 14 of the Constitution of
India which requires fairness in action by the State, and non-arbitrariness
E
in essence and substance.Therefore to examine the question of
inconsistency, the analysis is to ascertain the need and functional value
of the change, as consistency is a matter of operational effectiveness.
Sometimes changes are desiable and necessary.Referring to these
aspects, in some cases, the Indian courts have applied the doctrine of
F
be passed by the Board after expiry of period of three months from the date of the order
passed by the adjudicating officer or disposal of the appeal under Section 15-T, whichever
is earlier.
29
Union of India v. Raghubir Singh, (1989) 2 SCC 754. Also see, The Nature of the
Judicial Process, Benjamin N. Cardozo, page 33: “I am not to mar the symmetry of the
legal structure by the introduction of inconsistencies and irrelevancies and artificial
exceptions unless for some sufficient reason, which will commonly be some consideration G
of history or custom or policy or justice. Lacking such a reason, I must be logical just
as I must be impartial, and upon like grounds. It will not do to decide the same question
one way between one set of litigants and the opposite way between another.”
30
Franics Bennion, Bennion on Statutory Interpretation, Fifth Edition (Indian reprint),
Section 266 at page 801.

H
1024 SUPREME COURT REPORTS [2022] 18 S.C.R.

A substantive legitimate expectation31 observing that the change in policy
should not be irrational or perverse or one which no reasonable person
could have made. In other words, principles of Wednesbury’s
reasonableness would apply. Such a principle stems, but is somewhat
different from the foundational idea of procedural legitimate expectation,
which applies where a particular mode is prescribed for doing an act
B and there is no impediment in adopting the procedure, the deviation to
act in similar manner without any reasonable principle, can be labelled
as arbitrary.32
53. In Punjab Communications Ltd. v. Union of India and
Others,33 it is observed that for a legitimate expectation to arise, the
C decisions of the administrative authority must affect the person by
depriving him of some benefit or advantage which he had in the past
been permitted by the decision-maker to enjoy, and which he can
legitimately expect to be permitted to continue to do until he has been
communicated some rational grounds for withdrawing it andhe has been
given an opportunity to comment. It also means that the assurance given
D by the decision maker will not be withdrawn, without giving him an
opportunity of advancing reasons to contend that they should not be
withdrawn. Reference can also be made to a recent decision of this
Court in State of Jharkhand and Others v. Brahmputra Metallics
Ltd., Ranchi and Another34 wherein reference was made to earlier
E judgment in National Buildings Construction Corporation v. S.
Raghunathan and Others35 to reiterate that claims based on legitimate
expectations have been held to acquire reliance on the representations
and resulting detriment to the complainant in the same way as claims
based on promissory estoppel.
31
See, Council of Civil Service Unions v. Minister for the Civil Service, 1985 AC 374,
F wherein it was observed in that case that for a legitimate expectation to arise, the
decisions of the administrative authority must affect the person by depriving him of
some benefit or advantage which either (i) he had in the past been permitted by the
decision-maker to enjoy and which he can legitimately expect to be permitted to continue
to do until there has been communicated to him some rational grounds for withdrawing
it on which he has been given an opportunity to comment; or (ii) he has received
G assurance from the decision-maker that they will not be withdrawn without giving him
first an opportunity of advancing reasons for contending that they should not be
withdrawn.
32
Bannari Amman Sugars Ltd. v. Comercial Tax Officers and Others, (2005) 1 SCC
625.
33
(1999) 4 SCC 727
34
(2020) SCC Online SC 968
35
H (1998) 7 SCC 66
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 1025
KRISHNA KHAITAN AND OTHERS [SANJIV KHANNA, J.]

54. In the context of the present case, it is to be noted that the A
Board is the draftsman of the legislationhaving enacted the Takeover
Regulations 1997 and hence, their interpretation and understanding of
the Regulations is of importance and relevance. In the context of the
present case, the Board, nearly five years after the transactions, had
issued the show-cause notice and then passed an order taking a view on
B
interpretation of Regulation 10, which was contrary to the view expressed
by it in several communications as also orders passed by the adjudicating
authority.Past is passe and not present, and by giving ‘retroactive’
operation without good reason and ground36, the direction violates
fundamental notions of predictability and legal stability. 37
55. We also feel that the principle of doubtful penalisation would C
be applicable in the present case. Way back in 1955, this Court in Tolaram
Relumal and Another v. State of Bombay38 had held that it is a well
settled rule of construction of penal statutes that if two views and
reasonable constructions can be put on a provision, the court must lean
in favour of construction which exempts the subject from penalty rather D
than one which imposes penalty.39 In Bipin chandra Parshottamdas
Patel (Vakil) v. State of Gujarat and Others,40 a three Judges’ Bench
of this Court had referred to this principle and quoted the following
passage from Mohammad Ali Khan and Others v. Commissioner of
Wealth Tax, New Delhi,41 which reads:
E
“6. It is a cardinal principle of construction that the words of a
statute are first understood in their natural, ordinary or popular
36
See our findings below.
37
Methew P. Harrington: Foreward: The Dual Dichotomy of Retroactive Lawmaking.
38
(1955) 1 SCR 158
39
Ibid, para 8: “The question that needs our determination in such a situation is F
whether Section 18(1) makes punishable receipt of money at a moment of time when
the lease had not come into existence, and when there was a possibility that the
contemplated lease might never come into existence. It may be here observed that the
provisions of Section 18(1) are penal in nature and it is a well-settled rule of construction
of penal statutes that if two possible and reasonable constructions can be put upon a
penal provision, the court must lean towards that construction which exempts the
subject from penalty rather than the one which imposes penalty. It is not competent to G
the court to stretch the meaning of an expression used by the legislature in order to
carry out the intention of the legislature. As pointed out by Lord Macmillan in London
and North Eastern Railway Co. v. Berriman [1946 AC 278, 295] “where penalties for
infringement are imposed it is not legitimate to stretch the language of a rule, however,
beneficient its intention, beyond the fair and ordinary meaning of its language”.
40
(2003) 4 SCC 642
41
(1997) 3 SCC 511 H
1026 SUPREME COURT REPORTS [2022] 18 S.C.R.

A sense and phrases and sentences are construed according to their
grammatical meaning unless that leads to some absurdity or unless
there is something in the context or in the object of the statute to
suggest the contrary. It has been often held that the intention of
the legislature is primarily to be gathered from the language used,
which means that attention should be paid to what has been said
B
as also to what has not been said. As a consequence a construction
which requires for its support addition or substitution of words or
which results in rejection of words as meaningless has to be
avoided. Obviously the aforesaid rule of construction is subject to
exceptions. Just as it is not permissible to add words or to fill in a
C gap or lacuna, similarly it is of universal application that effort
should be made to give meaning to each and every word used by
the legislature.”
Reference was thereafter made to Francis Bennion’s Statutory
Interpretation which observes that the principle of doubtful penalisation,
D often limited to criminal statutes, in fact, extends to any form of detriment.
The jurist has opined that it is a principle of legal policy that a person
should not be penalised except under clear law. We, when considering in
relation to the facts of the instant case, wherein the opposing constructions
of the enactment is possible, should presume that the legislature intended
to observe this principle. The courts, therefore, try to avoid adopting a
E construction which penalises a person where the legislature’s intention
to do so is doubtful.
56. We would quote Section 278 from the Bennion on Statutory
Interpretation, 5th Edition, Indian Reprint, which reads as under:

F “Section 278. Statutory interference with economic interests
One aspect of the principle against doubtful penalisation is that by
the exercise of state power the property or other economic interests
of a person should not be taken away, impaired or endangered,
except under clear authority of law.”
G In the comments in Section 278 of the treatise, it is stated that the
presumption against imposition of statutory detriment to a person’s
property or other economic interest has been recognised and explained
in Entick v. Carrington42 by Brat C.J. in the following words:
42
(1765) 19 State Tr 1029 at 1060.
H
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 1027
KRISHNA KHAITAN AND OTHERS [SANJIV KHANNA, J.]

“The great end for which men entered into society was to secure A
their property. That right is preserved sacred and incommunicable
in all instances where it has not been abridged by some public law
for the good of the whole.”
57. The principle of doubtful penalisation has limited value when
interpreting beneficial or remedial statutes where the adjudicator may B
adopt a liberal and a purposive interpretation.43 The principle can be
ignored when other interpretative factors, like interest of public law and
good of the society, weigh heavily to tilt the scales against application of
the principle.44 The law of interpretation and court decisions applying
the law of interpretation recognise pluralism in interpretation. 45 Legal
meaning of the enactment/provision in question often involves applications C
of divergent principles, rules, cannons and presumptions, which are
resolved by weighing and balancing the conflicting interpretative criteria
and factors.46 Clearly, a straitjacket approach should not be adopted
without reference to the context, the subject matter and the object of the
provision. Only then the court can interpret and give meaning which the D
legislature wanted to achieve and convey.
58. We have already, while referring to the principle of legitimate
expectation, referred to the exceptions when the court may not apply
the said principle.
59. The Board has drawn our attention to the decision of this E
Court in Swedish Match (supra) wherein Mr. Justice S.B. Sinha, who is

43
FranicsBennion, Bennion on Statutory Interpretation, Fifth Edition (Indian reprint),
Section 271 at page 827.
44
See Her Majesty The Queen ex rel. Linda Merk v. International Association of
Bridge, Structural, Ornamental and Reinforcing Iron Workers, Local 771, 2005 SCC F
70; R. v. Hasslewander, [1993] 2 S.C.R. 398; R. v. Goulis (1981), 125 D.L.R. (3d) 137;
Sullivan, Ruth. Sullivan and Driedger on the Construction of Statutes, 4th ed. Markham,
Ont.: Butterworths, 2002 at page 387: “The rule [of strict construction] is difficult to
reconcile with federal and provincial Interpretation Acts which provide that all legislation
is to be deemed remedial and given a liberal and purposive interpretation. In the
clearest possible language, this statutory directive requires doubts and ambiguities in
penal legislation to be resolved in a manner that promotes the purpose of the legislation, G
regardless of the impact on accused persons.”; Côté, Pierre André. The Interpretation
of Legislation in Canada, 3rd ed. Scarborough, Ont.: Carswell, 2000 at page 477; Graham,
Randal N. Statutory Interpretation:Theory and Practice. Toronto: Emond Montgomery,
2001. at pp. 210-15.
45
FranicsBennion, Bennion on Statutory Interpretation, Fifth Edition (Indian reprint).
46
Ibid. H
1028 SUPREME COURT REPORTS [2022] 18 S.C.R.

A also the author of the judgment in Bipinchandra (supra), had not applied
the principle of doubtful penalisation with reference to Regulation 11 of
the Takeover Regulations 1997. The Hon’ble Judge in Swedish Match
(supra) has explained that in the said case there was a clear violation
and failure on the part of the persons statutorily obliged to comply with
the imperative statutory provisions. With reference to this decision, the
B
Board had referred to one line in paragraph 7747 which refers to Regulation
10 and states that the same would apply as no public announcement was
made in its compliance. It is to be noted that Regulation 10 was not
invoked by the Board in Swedish Match (supra) and its violation was
not alleged. In the subject appeal before this Court in Swedish Match
C (supra), reliance was placed on Regulation 12 to get over the mandate
of Regulation 11, which contention was rejected. One stray sentence in
paragraph 77 that Regulation 10 would apply should not be read as ratio
decidendi of the said decision and as a finding on the interpretation of
Regulation 10.48 Decision dated 25th July 2012 of the Appellate Tribunal
D 47
"77. With a view to advert to the question, the admitted facts may be noticed: Swedish
Match Singapore agreed to acquire majority shareholding in Haravon and Seed
subsequent to 17-12-1997 wherefor the public offer was made. SMS comprising Haravon
and Seed had 28.28% and 10.33% whereas the Jatia Group comprising AVP and Plash
had 5% and 15% respectively whereas public/others had 41.39% shares. In concert
with each other the two groups acquired shares from public. On or about 25-8-1999 by
acquiring preferential shares the Swedish Match Group obtained 52.11% and the Jatia
E Group obtained 24.11% as a result whereof in Wimco the shares held by public/others
came down to 23.78%. Both the Swedish Group and the Jatia Group were exercising
joint control. By reason of the Jatia Group opting out of the joint control by transfer of
shares in favour of Swedish Match Singapore, a subsidiary of Swedish Match AB (a
part of the Swedish Match Group) obtained 74% of shares whereas Haravon — 46.18%,
Seed — 5.93% and SMS — 21.89%. Thus, the extent of shares of the Jatia Group came
F down to 2.22%. The Jatia Group sold its shares to the public as a result whereof shares
of the public became 23.78%. SMS is a subsidiary of the Singapore Match Group.
Swedish Match is the holding company being the owner of 100% shares of SMS. It
stands categorically admitted by the appellants herein that acquisition of shares from
the Jatia Group in favour of SMS was done by the Swedish company as a group and not
as an individual company. Factually, therefore, it is not correct to contend, although in
its notice dated 28-1-2002, SEBI had given indication thereof, that SMS had acquired
G 21.89% shares of its own. Even if SMS had done so, Regulation 10 would apply as no
public announcement was made therefor.”
48
See Natural Resources Allocation, In re, Special Reference No. 1 of 2012, (2012) 10
SCC 1:
“70. Each case entails a different set of facts and a decision is a precedent on its own
facts; not everything said by a Judge while giving a judgment can be ascribed precedential
value. The essence of a decision that binds the parties to the case is the principle upon
H
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 1029
KRISHNA KHAITAN AND OTHERS [SANJIV KHANNA, J.]

in Hanumesh Realtors Private Limited v. Securities and Exchange A
Board of India49 is per incuriam as it has referred to the decision in
Swedish Match (supra), which decision relates to and interprets
Regulation 11(1). In the present reasoning, we are not dealing and
interpreting Regulation 11(1) but Regulation 10 of the Takeover
Regulations,1997.
B
60. Contention of the Board that there is no estoppel against law
is well known, but the said principle is not applicable for several reasons.
First, the interpretation accepted by the Appellate Tribunal is not only
plausible but more acceptable than the interpretation propounded by the
Board. Secondly, the Board, which has the power to enact the
Regulations, interpret and apply them, adjudicate and also pass a penalty C
order in case of violation for good and substantial reasons had interpreted
regulations in the same manner in earlier instances as interpreted by the
Appellate Tribunal. Thirdly, the adjudication orders in the present case
were passed well after the Takeover Regulations 1997 were repealed
with the enactment and enforcement of the Takeover Regulations 2011. D
In the present case, therefore, we are dealing with a legacy issue.
Regulation 10 of the Takeover Regulations 1997, as interpreted and
applied by the Board for over ten years, is sought to be overturned by
the Board, thereby, creating penal consequences. This should not be
permitted and is hardly acceptable when we apply the principle of good
governance and regulation. E
61. The argument of the Board that Takeover Regulations 2011
are retrospective is to be only noted and rejected. The impugned order
passed by the Appellate Tribunal in the case of Madhur S Pitti(Appeal
No. 2 of 2013) specifically records that the Board had conceded that
Takeover Regulations 2011 do not have any retrospective application.50 F
which the case is decided and for this reason, it is important to analyse a decision and
cull out from it the ratio decidendi……..
73. It is also important to read a judgment as a whole keeping in mind that it is not an
abstract academic discourse with universal applicability, but heavily grounded in the
facts and circumstances of the case. Every part of a judgment is intricately linked to
others constituting a larger whole and thus, must be read keeping the logical thread G
intact……….”
49
Before Securities Appellate Tribunal, Mumbai, Appeal No. 66 of 2012, Date of
Decision: 25.07.2012.
50
“27. We agree with the Respondent to the extent that the SEBI Act is certainly a
social welfare legislation. But this does not take away from the undeniable fact that
Regulations 3(3) of the SAST Regulations, 2011 introduced the provision stating that
even in case of an individual’s shareholding crossing the stipulated threshold, which is H
1030 SUPREME COURT REPORTS [2022] 18 S.C.R.

A The contention that Takeover Regulations 2011 are clarificatory and,
therefore, retrospective is ex facie fallacious and untenable. Regulation
3(3) of Takeover Regulations 2011 specifically postulate as under:
“3. Substantial acquisitionof sharesor voting rights.
xx xx xx
B (3) For the purposes of sub-regulation (1) and sub-regulation (2),
acquisition ofshares by any person,such that the individual
shareholding of such person acquiring shares exceeds the
stipulated thresholds,shall also be attracting the obligation to make
an open offer for acquiring shares of the target
C companyirrespective of whether there is a change inthe aggregate
shareholding with persons acting in concert.”
62. In the aforesaid background, on the enforcement of Takeover
Regulations 2011, it is clear that Regulation 10 will apply on an acquirer
who crosses the threshold of 15%, which under the Takeover Regulations
D 2011, has been increased to 25%. Further, Regulation 10 would apply
both when an individual acquirer or an acquirer in concert with others
acquires shares or voting rights beyond the threshold level and such an
acquirer would have to comply with the applicable regulation. Takeover
Regulations 1997 and Takeover Regulations 2011, therefore, postulate
different preconditions and thresholds. Reliance placed upon the Takeover
E Regulatory Advisory Committee Report would show that there was a
rethought and re-examination of Regulation 10 pursuant to which
Regulation 3(3) was enacted and made a part of the regulatory mechanism
under the Takeover Regulations 2011.
63. It is a general rule of law of interpretation that unless explicitly
F mentioned, a law cannot be presumed to be retrospective. In
Commissioner of Income Tax, (Central)-I, New Delhi v.Vatika
Township Private Ltd., 51a constitution bench decision, this court
observed that:
now 25%, the need to make a public offer shall arise. The Respondent has in all fairness
G has agreed that the new Takeover Code of 2011 does not apply retrospectively.”
We may observe that SEBI Act is not a social welfare legislation but an eco-legal
legislation and, therefore, must be interpreted pragmatically taking into account the
commercial practices, interest of the investors/shareholders and also without ignoring
the difficulties of the persons in control of the company. Competing interests, rights
and obligations have to be balanced.
51
(2015) 1 SCC 1.
H
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 1031
KRISHNA KHAITAN AND OTHERS [SANJIV KHANNA, J.]

“31. Of the various rules guiding how a legislation has to be A
interpreted, one established rule is that unless a contrary intention
appears, a legislation is presumed not to be intended to have a
retrospective operation. The idea behind the rule is that a current
law should govern current activities. Law passed today cannot
apply to the events of the past. If we do something today, we do
B
it keeping in view the law of today and in force and not tomorrow’s
backward adjustment of it……
32. The obvious basis of the principle against retrospectivity is the
principle of ‘fairness’, which must be the basis of every legal rule
as was observed in the decision reported in L’OfficeCherifien
des Phosphates v. Yamashita-Shinnihon Steamship Co.Ltd. Thus, C
legislations which modified accrued rights or which impose
obligations or impose new duties or attach a new disability have
to be treated as prospective unless the legislative intent is clearly
to give the enactment a retrospective effect; unless the legislation
is for purpose of supplying an obvious omission in a former D
legislation or to explain a former legislation….”
Further, in the absence of express statutory authorisation, delegated
legislation in the form of rules or regulations, cannot operate
retrospectively.52 Certainly, Regulation 3(3) in the Takeover Regulations
2011 clarified and possibly removed the shortcoming of the 1997 E
Regulations. However, the language of Regulation 3(3) as reproduced
above is apparently not of clarificatory or declaratory nature.53
E. Regulation 11 and the penalty under Regulations 44 and
45 of the Takeover Regulations 1997:54
52
Assitant Excise Commr, Kottayam and Others. v.Esthappan Cherian and Another, F
(2021) 10 SCC 210. Also see, Income Tax Officer, Alleppey v M.C. Ponnose and
Others, 1970 SCR (1) 678; Hukum Chand Etc. v Union of India and Others, (1973) 1
SCR 896; Regional Transport Officer,Chittoor and Others v.Associated Transport
Madras (P) Ltd. and Others, (1980) 4 SCC 597; Federation of Indian Mineral Industries
and Others v Union of India and Another, (2017) 16 SCC 186 and Union of India and
Others v G.S. Chatha Rice Millsand Another, (2021) 2 SCC 209.
53
See L.R. Brothers Indo Flora Ltd. v. Commissioner of Central Excise, 2020 SCC G
OnLine SC 705, Commissioner of Income Tax (Central)-I, New DelhiI v. Vatika Township
(P) Ltd., (2015) 1 SCC 1 and Union of India and Another v. Indusind Bank Ltd. and
Another, (2016) 9 SCC 720.
54
In Civil Appeal No. 1762 of 2014 (Madhuri S. Pitti’s case), as per the findings
recorded by the Appellate Tribunal, violation of Regulation 11(1) was not alleged and
made the basis of the letter dated 17 th December 2012.
H
1032 SUPREME COURT REPORTS [2022] 18 S.C.R.

A 64. The impugned order in Appeal No. 23 of 2013 (Sunil Krishna
Khaitan case) dismisses the appeal preferred by the respondents and
thereby affirms the order holding the respondents guilty of violation of
Regulation 11(1) of the Takeover Regulations 1997. The respondents
have not filed appeals or cross objections challenging the said finding of
the Appellate Tribunal. Hence, we are not required to and would not
B
comment on the findings recorded by the Appellate Tribunal on violation
of Regulation 11(1) of the Takeover Regulations 1997. We proceed on
the basis that the respondents are guilty and have failed to make public
announcement within stipulated timeline as per the Takeover Regulations
1997.
C 65. As noticed above, the contention of the Board is that the
Appellate Tribunal should not have modified the direction given by the
Whole Time Member obligating public announcement with the monetary
penalty of Rs. 25,00,000/-.
66. Regulations 44 and 45 of the Takeover Regulations 1997 read
D thus:
“44. Directions by the Board.
Without prejudice to its right to initiate action under Chapter VIA
and section 24 of the Act, the Board may, in the interest of securities
E market or for protection of interest of investors, issue such
directions as it deems fit including:
(a) directing appointment of a merchant banker for the purpose
of causing disinvestment of shares acquired in breach of regulation
10, 11 or 12 either through public auction or market mechanism, in
F its entirety or in small lots or through offer for sale;
(b) directing transfer of any proceeds or securities to the Investors
Protection Fund of a recognised stock exchange;
(c) directing the target company or depository to cancel the shares
where an acquisition of shares pursuant to an allotment is in breach
G of regulation 10, 11 or 12;
(d) directing the target company or the depository not to give
effect to transfer or further freeze the transfer of any such shares
and not to permit the acquirer or any nominee or any proxy of the
acquirer to exercise any voting or other rights attached to such
H shares acquired in violation of regulation 10, 11 or 12;
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 1033
KRISHNA KHAITAN AND OTHERS [SANJIV KHANNA, J.]

(e) debarring any person concerned from accessing the capital A
market or dealing in securities for such period as may be
determined by the Board;
(f) directing the person concerned to make public offer to the
shareholders of the target company to acquire such number of
shares at such offer price as determined by the Board; B
(g) directing disinvestment of such shares as are in excess of the
percentage of the shareholding or voting rights specified for
disclosure requirement under regulation 6, 7 or 8;
(h) directing the person concerned not to dispose of assets of the
target company contrary to the undertaking given in the letter of C
offer;
(i) directing the person concerned, who has failed to make a public
offer or delayed the making of a public offer in terms of these
regulations, to pay to the shareholders, whose shares have been
accepted in the public offer made after the delay, the consideration D
amount along with interest at the rate not less than the applicable
rate of interest payable by banks on fixed deposits.
45. Penalties for non-compliance.
(1) Any person violating any provisions of the regulations shall be
E
liable for action in terms of the regulations and the Act.
(2) If the acquirer or any person acting in concert with him, fails
to carry out the obligations under the regulations, the entire or a
part of the sum in the escrow account shall be liable to be forfeited
and the acquirer or such a person shall also be liable for action in
F
terms of the regulations and the Act.
(3) The board of directors of the target company failing to carry
out the obligations under the regulations shall be liable for action
in terms of the regulations and the Act.
(4) The Board may, for failure to carry out the requirements of G
the regulations by an intermediary, initiate action for suspension
or cancellation of registration of an intermediary holding a
certificate of registration under section 12 of the Act: Provided
that no such certificate of registration shall be suspended or
cancelled unless the procedure specified in the regulations
applicable to such intermediary is complied with. H
1034 SUPREME COURT REPORTS [2022] 18 S.C.R.

A (5) For any mis-statement to the shareholders or for concealment
of material information required to be disclosed to the shareholders,
the acquirers or the directors where the acquirer is a body
corporate, the directors of the target company, the merchant
banker to the public offer and the merchant banker engaged by
the target company for independent advice would be liable for
B
action in terms of the regulations and the Act.
(6) The penalties referred to in sub-regulations (1) to (5) may
include:—
(a) criminal prosecution under section 24 of the Act;
C (b) monetary penalties under section 15H of the Act;
(c) directions under the provisions of section 11B of the Act;
(d) directions under section 11(4) of the Act;
(e) cease and desist order in proceedings under section 11D of
the Act;
D
(f) adjudication proceedings under section 15HB of the Act.”
67. It may be also relevant to reproduce here Sections 15-H and
15-I, which form part of Chapter-VIA, of the Act, which read thus:55
“15H. Penalty for non-disclosure of acquisition of shares
E and take-overs-
If any person, who is required under this Act or any rules or
regulations made thereunder, fails to,-
(i) disclose the aggregate of his shareholding in the body corporate
before he acquires any shares of that body corporate; or
F (ii) make a public announcement to acquire shares at a minimum
price;
(iii) make a public offer by sending letter of offer to the
shareholders of the concerned company; or
(iv) make payment of consideration to the shareholders who sold
G
their shares pursuant to letter of offer,
he shall be liable to a penalty twenty-five crore rupees or three
times the amount of profits made out of such failure, whichever is
higher.
55
H As they existed during the relevant time period for this case.
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 1035
KRISHNA KHAITAN AND OTHERS [SANJIV KHANNA, J.]

15I. Power to adjudicate- A
(1) For the purpose of adjudging under sections 15A, 15B, 15C,
15D, 15E, 15F, 15G, 15H, 15HA and 15HB, the Board shall appoint
any of its officers not below the rank of a Division Chief to be an
adjudicating officer for holding an inquiry in the prescribed manner
after giving any person concerned a reasonable opportunity of B
being heard for the purpose of imposing any penalty.
(2) While holding an inquiry, the adjudicating officer shall have
power to summon and enforce the attendance of any person
acquainted with the facts and circumstances of the case to give
evidence or to produce any document which in the opinion of the
adjudicating officer, may be useful for or relevant to the subject C
matter of the inquiry and if, on such inquiry, he is satisfied that the
person has failed to comply with the provisions of any of the
sections specified in sub-section (1), he may impose such penalty
as he thinks fit in accordance with the provisions of any of those
sections.” D
68. Regulation 44 states that the Board, without prejudice to their
rights to initiate action under Chapter VI-A56 and Section 2457 of the
Act,may in the interest of the securities market or for protection of the
interests of the investors, issue such directions as it may deem fit.
Thereafter, it specifies certain directions in clauses (a) to (i), using the E
word ‘including’, which implies that the directions issued by the Board
can include the directions given in clauses (a) to (i), albeit the Board
may issue directions even beyond what is stated in clauses (a) to (i).
Thus, the Board’s power to give directions is wide. This is also clear
from the relevant provisions of the Act, namely, Section 11 and 11B and
Sections 11(2)(h), which read: F
“11. Functions of Board. – (1) Subject to the provisions of this
Act, it shall be the duty of the Board to protect the interest of
investors in securities and to promote the development of, and to
regulate the securities market, by such measures as it thinks fit.
xx xx xx G
11-B. Power to issue directions. – Save as otherwise provided in
section 11, if after making or causing to be made an enquiry, the
Board is satisfied that it is necessary –
56
Chapter VI-A: “Penalties and Adjudication” (Section 15A to 15JA)
57
Section 24: “Offences” H
1036 SUPREME COURT REPORTS [2022] 18 S.C.R.

A (i) in the interest of investors, or orderly development of securities
market; or
(ii) to prevent the affairs of any intermediary or other persons
referred to in section 12 being conducted in a manner detrimental
to the interest of investors of securities market; or
B (iii) to secure the proper management of any such intermediary
or person, it may issue such directions –
(a) to any person or class of persons referred to in section 12,
or associated with the securities market; or

C (b) to any company in respect of matter specified in section
11-A, As may be appropriate in the interests of investors in
securities and the securities market.
11(2) Without prejudice to the generality of the foregoing provisions,
the measures referred to therein may provide for:
D (h) Regulating substantial acquisition of shares and take-over of
companies;”
69. The use of the word ‘may’ in Regulation 44 and the wording
of Sections 11(1), 11B and 11(2)(h) reflect that the Board has been
conferred a discretion, which in turn also means and should be interpreted
E as imposing a duty, an aspect which we will elucidate in the subsequent
paragraphs. Use of the word ‘may’ over the years is normally construed
as permissive and not imperative. The words ‘may’ or ‘shall’ by their
very etymological foundation denote discretion and mandatory nature of
an act respectively. This Court has, therefore, held that the courts should
not readily interpret the word ‘may’ as ‘shall’ unless such interpretation
F
is necessary to avoid absurdity, inconvenient consequences or as
mandated by the intent of the legislature which is gathered from the
other parts of the statute.58
70. Use of the word ‘may’ and not ‘shall’ in Regulation 44 is
significant. It is not mandatory that in case of every violation and breach
G of Regulations 10, 11 and 12, direction under Regulation 44 shall be
58
See Official Liquidator v. Dharti Dhan (P) Ltd., (1977) 2 SCC 166; Dinesh Chandra
Pandey v. High Court of Madhya Pradesh and Another, (2010) 11 SCC 500; Mohan
Singh and Othersv. International Airport Authority of India and Others, (1997) 9 SCC
132. Also see, Rajender Mohan Rana and Others v. Prem Prakash Chaudhary and
Others, 2011 SCC OnLine Del 3684.
H
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 1037
KRISHNA KHAITAN AND OTHERS [SANJIV KHANNA, J.]

issued. The interpretation gets fortified in view of the words and object A
of the Regulation 44 which empowers the Board to issue directions as it
deems fit. Section 11(1), while broadly defining the functions of the Board,
states that it is the duty of the Board to protect interest of investors in
securities and to promote the development of, and regulate the securities
market by such measures as it thinks fit. Section 11B, which deals with
B
the power of the Board to give directions, states that the Board, after
making or causing an inquiry, may issue directions if it is satisfied that it
is necessary in the interest of the investors, or orderly development of
the securities market; to prevent the affairs of any intermediary or other
persons referred to in Section 12 from conducting affairs in a manner
detrimental to the interest of the investors or to secure proper C
management of such intermediary or persons. Section 11(2)(h) provides
that the Board is entitled to take measures for regulating substantial
acquisition of shares and takeover of companies. Regulation 44 states
that the Board while issuing directions, has to keep in mind the interest
of the securities market and its role as a protector of interest of investors.
D
We will read the word ‘or’ between the expression ‘in the interest of
securities market or protection of investors’ as ‘and’. The Board,
therefore, when it decides to exercise its power under Regulation 44
and issues directions under the said Regulation has to keep the two
facets in mind, namely, (i) interest of the securities market; and (ii)
protection of interest of the investors. The exercise of discretion of the E
Board, in fact, would not be restricted to the two facets mentioned above
as the power and functions of the Board are far broader as they include
promotion, development and regulation of securities market as a whole
and regulating substantial acquisition of shares and takeover of companies.
71. Discretion is an effective and an important tool which the F
legislature confers and vests with the executive for effective and good
governance, administration, and in the present case – regulation, of the
securities market which has complex commercial and economic facets.
Therefore, the law provides an option to the Board and the authorities to
adopt one or the other alternatives. However, this does not mean that
the Board or the authorities enjoy unfettered and unchecked discretionary G
jurisdiction to act according to private or personal opinion in a vague and
fanciful manner.59 Discretion, when of wide amplitude, and when it can
59
Sharpe v. Wakefield, [1891 AC 173]. Also see, Sant Raj and Anotherv. O.P. Singla and
Another, (1985) 2 SCC 349 at para 4 and S.G. Jaisinghaniv. Union of India and Others,
AIR 1967 SC 1427. H
1038 SUPREME COURT REPORTS [2022] 18 S.C.R.

A have civil and penal consequences, must be exercised in a legal and
regular manner.60 Exercise of discretion is always governed by rules,
which means that the exercise of discretion should be fair and reasonable
as the legislature while conferring discretion never intends that the
authorities would not act whimsically, arbitrarily, buton the precept that
they shall act only when it appears to be necessary in public interest. 61
B
Legal exercise of discretion is one, where the authority examines and
ascertains the facts, is aware of the law, and then decides objectively
and rationally what serves the interest better. This is true even when the
statutes are silent and only the power is conferred to act in one way or
the other. Reasonableness as a standard is tested by reference to the
C community standards at the time of exercise of discretion. This means
that discretion should be exercised within the limit to which an honest
man competent to discharge his office ought to confine himself. 62 It will
be also true to state that the greater the harm or penal consequences,
greater is the duty and obligation of the public authority to ensure that
discretion is used as an effective tool in regulation or administration but
D
does not cause confusion, chaos and instability.
72. In the context of Regulations 44 and 45, it implies that the
Board has the power to make a choice between different courses of
action or inaction. This choice is not unfettered but is always held subject
to implied limitations inherent in every statute, limitations set by the
E common law and the constitutional mandate of rule of law. The underlying
rationale of giving discretion is to ensure that the Board exercises the
discretion in consonance with legitimate values of public law, which
include need to maintain legal certainty and consistency which are at the
heart of the principle of rule of law.63 These have to be balanced with
F other equally legitimate public law value, which is the object and purpose
of the enactment. The need for the said flexibility is given and is necessary
to meet unusual and practical situations and to do justice in a particular
60
Clariant International Ltd. and Another v. Securities and Exchange Board of India,
(2004) 8 SCC 524 at para 26.
61
Banglore Medical Trust v. B.S. Muddappa and Others, (1991) 4 SCC 54 at para 46
G and 48.
62
Sharpe v. Wakefield, [1891 AC 173]: “according to the rules of reason and justice, not
according to private opinion;…according to law and not humor. It is to be, not arbitrary,
vague and fanciful, but legal and regular. And it must be exercised within the limit, to
which an honest man competent to the discharge of his office ought to confine himself.”
63
De Smith’s Judicial Review, 7th Edition, Sweet and Maxwell (South Asian Edition) at
H Heading 9-005 on page 515.
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 1039
KRISHNA KHAITAN AND OTHERS [SANJIV KHANNA, J.]

case.64 The remedial order passed by the Board as the regulator must A
also meet the said parameters in addition to meeting the requirements of
the enactment.
73. Clearly, therefore, Regulation 44 differs from Section 15-H,
which is somewhat a strict liability provision that applies if a person fails
to comply with the clauses (i) to (iv). It may be, however, noted that B
Section 15-H prescribes the lower as well as the higher monetary penalty
limits. These stipulations have undergone modifications and changes from
time to time. As per the amendments made by Act No. 59 of 2002, with
retrospective effect from 29th October 2002, the penalty which can be
imposed is not to be less than Rs. 10,00,000/- but may extend up to Rs.
25,00,00,000/- or three times the amount of profits made out of such C
failure, whichever is higher. The phase ‘profits made out of such failure’
in Section 15-H indicates that while imposing quantum of penalty the
authority should consider the profit made by the acquirer on account of
failure to comply with the requirements mentioned in clauses (i) to (iv)
of Section 15-H. D
74. Reference in this regard is also to be made to Section 15-I,
which has been quoted above. It states that the person concerned has to
be given a reasonable opportunity of being heard for the purpose of
imposing any penalty. The adjudicating officer has the power to summon
and enforce attendance of any person acquainted with the facts and E
circumstances of the case to give evidence or produce documents which,
in the opinion of the adjudicating officer, would be useful or relevant to
the subject matter of enquiry. Lastly, the adjudicating authority should be
satisfied that the person has failed to comply with the provisions of the
section specified in sub-section (1).65
F
75. In this context, reliance placed by the Board on the judgments
which relate to and arise from the orders passed by the adjudicating
64
C. Hilson, ‘Judicial Review, Policies and the Fettering of Discretion” [2002] P.L. 111;
D. Galligan, ‘The Nature and Functions of Policy Within Discretionary Power’ [1976]
P.L. 332.
65
Sub-section (3) empowers the Board to call for and examine records of any proceedings
G
under this Section and if it considers the order passed by the adjudicating authority is
erroneous to the extent it is not in the interest of the securities market, it may, after
making or causing an inquiry to be made, pass an order enhancing the quantum of
penalty. The order under sub-section (3) can be passed within a period of three months
from the date of order passed by the adjudicating authority or disposal of the appeal
under Section 15-T, whichever is earlier. H
1040 SUPREME COURT REPORTS [2022] 18 S.C.R.

A officer under Chapter VI-A of the Act are of no relevance, as Regulation
44 is a discretionary power and not mandatory in nature. Not only this,
the directions under Regulation 44 are required to be issued considering
relevant factors, including, interest of the securities market and protection
of the investors in mind. Regulation 44 is not a strict liablity provision.
B 76. The above position in law gets fortified from Regulation 45
which stipulates that any person violating a provision of the regulations
shall be liable in terms of the Regulation, that is, the Takeover Regulations
1997 and the Act. Sub-regulation (6) to Regulation 45, with reference to
the penalties, states that it would include monetary penalties under Section
15-H of the Act. It may also include directions under the provisions of
C Section 11B and 11(4) of the Act. Further, there is power to issue cease
and desist order in proceedings under Section 11D of the Act. Criminal
prosecution under Section 24 of the Act can also be initiated. Lastly,
adjudicating proceedings under Section 15-H of the Act can be held.
Therefore, the authorities have a right to take recourse to multiple
D proceedings which have been loosely classified and referred to as
‘penalties’ in Regulation 45(6). Nowhere, however, Regulation 45
stipulates that in case of violation of Regulations 10, 11 or 12 of the
Takeover Regulations 1997, the Board must initiate action and issue
directions in terms of Regulation 44. The Board, in appropriate case,
may take action under Regulation 44 and issue directions, but when it
E issues such directions, it must keep in mind the interest of securities
market and to the protect the interests of the investors. Existence and
conferment of power, and reasonable and legilimate exercise of the power
in accordance with law are two different facets.
77. We will now reproduce the order passed by the
F WholeTimeMember recording the reasons for issuing directions:
“31. In my view, the facts and circumstance of the case, do not
suggest any reason to deviate from the normal rule of requirement
of making public announcement in accordance with the Takeover
Regulations, 1997 as the same would be in the interest of the
G public shareholders of the Target Company.
32. In this case, since requisite public announcement has not been
made by the noticees, KLL has contravened regulation 10 and
the promoter group has contravened regulation 11(1) as discussed
above. I note that the Takeover Regulations, 1997 have been
H repealed by the Takeover Regulations, 2011. In terms of regulation
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 1041
KRISHNA KHAITAN AND OTHERS [SANJIV KHANNA, J.]

35(2)(b) of the Takeover Regulations, 2011, the obligation or liability A
acquired, accrued or incurred under the repealed regulations, shall
remain unaffected as if the repealed regulations has never been
repealed. In the present case, the noticees triggered the obligation
under regulation 10 and 11(1) of the Takeover Regulations, 1997
on March 12, 2007 and interms of regulation 14(1) thereof they
B
were obligated to make requisite public announcement within 4
days from March 12, 2007. Thus, the noticees had incurred this
obligation prior to repeal of Takeover Regulations, 1997 and the
obligation has to be completed under Takeover Regulations, 1997.
33. Since obligation under regulations 10 and 11 both have
overlapped in this case, as observed by Hon’ble Supreme Court C
in ‘Swedish Mach’ case, the noticees shall make a combined public
announcement under regulations 10 and 11 read with regulation
14(1) of the Takeover Regulations, 1997.
34. Had the noticees made the public announcement in accordance
with the Takeover Regulations, 1997 regulations and complied all D
related activities within the timelines specified under the Takeover
Regulations, 1997, all formalities with respect to their public
announcement and the open offer would 7 have been completed
on June 15, 2007. Since the noticees have failed to make the
public announcement within the stipulated time and the public E
announcement in compliance with this order would be after delay,
the noticees shall pay interest on consideration amount as provided
under the Takeover Regulations, 1997 to the shareholders who
tender their shares in the open offer and who are eligible for
interest as per law.
F
35. I, therefore, in exercise of powers conferred upon meunder
sections 19, 11 and 11B of the SEBI Act, 1992 and regulations 44
and 45 of the SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997 read with regulation 32(1)(h) of
the SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 2011, hereby issue the following directions: G
(a) The noticees, Mr. Sunil Krishan Khaitan, Mr. Krishan
Khaitan, KhaitanLefin Limited and The Orientale Mercantile
Company Limited shall make a combined public
announcement to acquire shares of the Target Company,
Khaitan Electricals Limited, in terms of regulations 10 and H
1042 SUPREME COURT REPORTS [2022] 18 S.C.R.

A 11(1) of the SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997, within a period of 45 days
from the date of this Order.
(b) The noticees shall, alongwith consideration amount,pay
interest at the rate of 10% per annum, from June 16, 2007
B to the date of payment of consideration, to the shareholders
who were holding shares in the target company on the date
of violation and whose shares have been accepted in the
open offer, after adjustment of dividend, if any, paid.”
78. The Appellate Tribunal, on the other hand, has given the
C following reasons why the aforesaid directions were unacceptable and
should be set aside:
“35. In the instant case too, as a matter of undisputed fact, the
promoter group has been in control of the Company since its very
establishment in the year 1975. The Appellants seem to have been
D aware of the implication of the limit of creeping acquisition of 5%
and, hence, did not breach regulation 11 by letting some warrants
lapse and not converting them into shares. In fact, the Tribunal
notes that during the relevant period there were about 7 acquisitions
but at no point of time did the Appellants violate the provisions of
any law but for the two conversions on March 12, 2007. We also
E note from the records that the Appellants have invariably acted in
a bonafide manner by keeping the concerned stock exchanges
and the Respondent informed regarding the true happenings with
respect to the acquisitions of shares and the corresponding
changes in the shareholding pattern. In this connection, the Tribunal
F has perused various corporate announcements made by the
Company to the stock exchanges informing them about the
allotment of equity shares as well as shareholding pattern as of
March 2006, June 2006, September 2006 and December 2006.
Letters dated April 10, 2006, October 13, 2006 and April 11, 2007
etc. are on record and have been perused by the Tribunal.
G
36. Similarly, it is noted that the two conversions of warrants on
March 12, 2007, which were different transactions, in as much as
the shares in the first tranche pertaining to 5 lac shares allotted to
the promoter group were allotted pursuant to conversion of
warrants at the rate of Rs.60 per share, and the shares in the
H second transaction consisting of 8 lac warrants were converted
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 1043
KRISHNA KHAITAN AND OTHERS [SANJIV KHANNA, J.]

at the rate of Rs.131 per share. Although, the two spells were A
different, they were executed on the same date and the creeping
acquisition limit of 5% was clearly crossed in respect of the
acquisition by the promoter group. Therefore, technically there is
violation of Regulation 11(1) of the Takeover Code of 1997. For
this violation, we are of the opinion that a suitable monetary penalty,
B
must be imposed instead of calling upon the Appellants to make a
combined public announcement to acquire shares of the Company
at this belated stage. The requirement of making a public
announcement would be totally superfluous in the facts and
circumstances of the case and would not beget any good. The
objective of the preferential allotment of shares in question was C
only to address the working capital requirements of the Company
for its smooth day to day functioning. Therefore, a stable, low-
cost funding-source, such as preferential allotment, was undertaken
in the larger interests of the Company and, in effect, its
shareholders. In this connection, it is pertinent to note that the
D
allotment of preferential shares in question was made after seeking
approval of the shareholders of the Company in two duly convened
EGM’s held on March 23, 2006 and November 29, 2006.
37. Lastly, the acquisitions/ incidents pertain to the year 2006-
2007. The show cause notice was issued by the Respondent on
March 26, 2012. After holding proceedings against the Appellants, E
the Impugned Order came to be passed only on December 31,
2012. We note that there is an inordinate delay of about 5 years
even in issuing the show cause notice and no explanation has
been offered for the same. The Respondent was kept duly
informed by the Appellants of all the transactions/acquisitions in F
the year 2006-2007 along with information to other concerned
authorities like various stock exchanges but no action was taken
for the alleged violation for years together. Also, the point to be
borne in mind while modifying the penalty imposed upon the
Appellants is that the securities market is a volatile and pulsating
structure wherein events unfold at a staggeringly fast pace. We G
feel that to compel the Appellants to make a combined public
announcement to acquire shares today would be iniquitous and
would lead to more harm than good for a meretechnical fault,
which in our opinion is remissible. Indeed, this Tribunal has taken
a view consistently that in such cases of technical violation a H
1044 SUPREME COURT REPORTS [2022] 18 S.C.R.

A monetary penalty could be imposed to serve the ends of justice
keeping in view the factuality of a given situation.”
79. We entirely agree with the reasoning given by the Appellate
Tribunal for setting aside the directions given in the penultimate paragraph
of the orders passed by the Whole Time Member. As noticed above, the
B violation alleged in Appeal No. 23 of 2013 in the case of Sunil Krishna
Khaitan relates to the years 2006-2007. The order issuing the directions
was passed on 31st December 2012, nearly eight years after the alleged
violation. The direction given is that the shareholders should be given an
option to sell the shares held by them on 16th June 2007 by directing the
respondents to make a public announcement to acquire the shares.
C Direction has also been given to pay interest @ 10% per annum from
16th June 2007 till shares have been accepted in the open offer. The
dividend paid, if any, would be adjusted. We are not stating that this
direction can never be issued, but the exercise of discretion to issue the
said directions has to be predicated and based upon good grounds and
D reasons. The directions of this nature are not automatic and are to be
issued only when they are warranted and justified. The incongruities
and absurdities of the directions issued have been highlighted and noticed
in the order passed by the Appellate Tribunal.
80. The direction given by the Board vide letter dated 17th
E December 2012 in the case of Madhuri S. Pitti in the form of direction
to modify the draft letter of offer submitted to the Board for approval on
19th September 2011 pursuant to the public announcement made by PLL
on 9th September 2011, it must be stated, is rather odd and defies
objectivity and logic. The Appellate Tribunal is right in noticing that there
was lack of clarity on the part of the Board as to the provision under
F which the power has been exercised,as the Board’s power under
Regulation 18 of the Takeover Regulations 1997 is to specify changes, if
any, in the letter of offer, without there being any obligation on the part
of the Board to do so, and thereupon the merchant banker and the
‘acquirer’ are required to carry out such changes before the letter of
G offer is despatched to the shareholders. As per sub-regulation (2), the
letter of offer is to be despatched to the shareholder not earlier than 21
days from the date of submission of the letter of offer to the Board in
terms of sub-regulation (1). In this case, directions of the Board for
amendment of the letter of offer was issued after a lapse of more than
one year as the draft letter of offer was submitted on 19th September
H
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 1045
KRISHNA KHAITAN AND OTHERS [SANJIV KHANNA, J.]

2011 and the directions were issued vide letter dated 17th December A
2012. Further, these directions were for the reason that the acquirer had
failed to comply with Regulation 10 of the Takeover Regulations 1997 in
the remote past, that is, in the year 2006 and 2007. Clearly, this is
whimsical and arbitrary exercise of discretion by the Board which would
have led to chaos and confusion.
B
81. This Court in the judgment authored by one of us (Sanjiv
Khanna, J.) in Bhavesh Pabari (supra) had examined the question of
delay and laches in initiating proceedings under Chapter VI-A of the Act
and the principle of law that when no limitation period is prescribed
proceedings should be initiated within a reasonable time and what would
be reasonable time would depend upon facts and circumstances of each C
case. In this regard, it was held as under:
“35. The appellants have also contended that in the absence of
any prescribed limitation period, SEBI should have issued show-
cause notice within a reasonable time and there being a delay of
about 8 years in issuance of show-cause notice in 2014, the D
proceedings should have been dropped. This contention was not
raised before the adjudicating officer in the written submissions
or the reply furnished. It is not clear whether this contention was
argued before the Appellate Tribunal. There are judgments which
hold that when the period of limitation is not prescribed, such power E
must be exercised within a reasonable time. What would be
reasonable time, would depend upon the facts and circumstances
of the case, nature of the default/statute, prejudice caused, whether
the third-party rights had been created, etc. The show-cause notice
in the present case had specifically referred to the respective
dates of default and the date of compliance, which was made F
between 30-8-2011 to 29-11-2011 (delay was between 927 days
to 1897 days). Only upon compliance being made that the defaults
had come to notice. In the aforesaid background, and so noticing
the quantum of fine/penalty imposed, we do not find good ground
and reason to interfere.” G
82. The directions given in the aforesaid quotation should not be
understood as empowering the authorities/Board to initiate action at any
time. In the absence of any period of time and limitation prescribed by
the enactment, every authority is to exercise power within a reasonable
period. What would be the reasonable period would depend upon facts H
1046 SUPREME COURT REPORTS [2022] 18 S.C.R.

A of each case, such as whether the violation was hidden and camouflaged
and thereby the Board or the authorities did not have any knowledge.
Though, no hard and fast rules can be laid down in this regard as
determination of the question will depend on the facts of each case, the
nature of the statute, the rights and liabilities thereunder and other
consequences, including prejudice caused and whether third party rights
B
have been created are relevant factors. Whenever a question with regard
to inordinate delay in issuance of a show-cause notice is made, it is open
to the noticee to contend that the show-cause notice is bad on the ground
of delay and it is the duty of the authority/officer to consider the question
objectively, fairly and in a rational manner. There is public interest involved
C in not taking up and spending time on stale matters and, therefore, exercise
of power, even when no time is specified, should be done within
reasonable time.66 This prevents miscarriage of justice, misuse and abuse
of the power as well as ensures that the violation of the provisions are
checked and penalised without delay, thereby effectuating the purpose
behind the enactment.
D
83. We have already referred to Regulations 6, 7 and 8 of Takeover
Regulations 1997 which requires the acquirer/shareholders to make
disclosures to the company as well as to the stock exchange where the
shares are listed. Violation of Regulations 6, 7 and 8 is not alleged. While
it is true that the said disclosures and public notice of the disclosures
E cannot be treated as disclosure to the Board or authorities under the
Act, the Board and the authorities, as a good regulator, cannot also claim
complete ignorance. Significantly, in the present case, the investors of
the target company have not raised any objection. The impugned order
passed by the Whole Time Member does not refer to any market
F manipulation or fluctuation in share price, which was detrimental to the
interests of the investors. It is not the case of the Board that any windfall
gains or profits have been made by the respondents on account of violation
of Regulation 11(1) of Takeover Regulations 1997. The order passed by
the Whole Time Member, in fact, does not take into account the impact
of the order on the securities market in case the investors/shareholders
G
66
See State of Gujarat v. Patil Raghav Natha and Others, (1969) 2 SCC 187 at para 11;
Mansaramv. S.P. Pathak and Others, (1984) 1 SCC 125 at para 12; Government of
India v. Citedal Fine Pharmaceuticals, Madras and Others, (1989) 3 SCC 483 at para
6; State of Orissaand Othersv. Brundaban Sharma and Another, 1995 Supp (3) SCC
249 at para 16; State of Punjab and Othersv. Bhatinda District Coop. Milk Producers
H Union Ltd., (2007) 11 SCC 363.
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 1047
KRISHNA KHAITAN AND OTHERS [SANJIV KHANNA, J.]

in the target company as on 16th June 2007 are given an option to sell A
their shares on or after 31st December 2012, possibity of distruption on
the functioning market place,detrimental impact on the market place/
investor confidence, qualitative impact of the retroactive directions on
the law’s santity predicated on predicibilty and legal stability, as well as
undermining of the people’s faith and trust on the Board as the protector
B
of law.The directions, therefore, cannot be sustained.
84. There is, as noticed and held below, some merit in the contention
of the Board that the Appellate Tribunal could not have imposed penalty
under Section 15-H when proceedings under the said Section had not
been invoked by the Board and there is no order passed by the
adjudicating authority imposing penalty under Section 15-H of the Act. C
However, the effect of the argument raised by the Board would be that
the order passed by the Whole Time Member under Regulation 44 giving
directions would be quashed and set aside. The respondents would have,
therefore, escaped without having to pay any penalty for violation of
Regulation 11(1) of the Takeover Regulations 1997. It is in this factual D
background we have to decide the present appeals. As noticed above,
the respondents have not filed appeals or cross objections challenging
the penalty imposed by the Appellate Tribunal for violation of Regulation
11(1) of the Takeover Regulations 1997.
F. Power of the Appellate Tribunal under section 15T of E
the Act:
85. The last aspect of the present appeals relates to the power of
the Appellate Tribunal.67 Sections 15-T of the Act read as under:68
“15T. Appeal to the Securities Appellate Tribunal.
(1) Save as provided in subsection (2), any person aggrieved,- F
(a) by an order of the Board made, on and after the commencement
of the Securities Laws (Second Amendment) Act, 1999, under
this Act, or the rules or regulations made thereunder; or
(b) by an order made by an adjudicating officer under this Act,
may prefer an appeal to a Securities Appellate Tribunal having G
jurisdiction in the matter.
(2) No appeal shall lie to the Securities Appellate Tribunal from
an order made –
67
In reference to impugned judgment in Appeal No. 23 of 2012.
68
As it existed pre-2014 and 2017 amendment. H
1048 SUPREME COURT REPORTS [2022] 18 S.C.R.

A (a) by the Board on and after the commencement of the Securities
Laws (Second Amendment) Act, 1999;
(b) by an adjudicating officer, with the consent of the parties.
(3) Every appeal under sub-section (1) shall be filed within a period
of forty-five days from the date on which a copy of the order
B made by the Board or the adjudicating officer, as the case may
be,is received by him and it shall be in such form and be
accompanied by such fee as may be prescribed:
Provided that the Securities Appellate Tribunal may entertain an
appeal after the expiry of the said period of forty-five days if it is
C satisfied that there was sufficient cause for not filing it within that
period.
(4) On receipt of an appeal under sub-section (1), the Securities
Appellate Tribunal may, after giving the parties to the appeal, an
opportunity of being heard, pass such orders thereon as it thinks
D fit, confirming, modifying or setting aside the order appealed
against.
(5) The Securities Appellate Tribunal shall send a copy of every
order made by it to the Board, the parties to the appeal and to the
concerned Adjudicating Officer.
E
(6) The appeal filed before the Securities Appellate Tribunal under
sub-section (1) shall be dealt with by it as expeditiously as possible
and endeavour shall be made by it to dispose of the appeal finally
within six months from the date of receipt of the appeal.”
86. The Board has contended that the Appellate Tribunal, in the
F
exercise of power under Section 15-T and while considering appeals
against proceedings under Section 11 and 11B of the Act and Regulation
44 of the Takeover Regulation, 1997, could not have converted the
directions of the Board with monetary penalty under Section 15-H. Thus,
the impugned order could not have substituted the direction of the Board
G against respondents to:(a) make a public offer in terms of Regulation 11;
and (b) pay consideration amount along with interest at the rate of 10%
per annum from June 16, 2007 to the date of payment of consideration
to the shareholders, with the direction to pay a monetary penalty of
Rs.25,00,000 for the breach of Regulation 11(1) of Takeover Regulation
1997. We have briefly referred to the reasoning in the earlier paragraphs,
H
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 1049
KRISHNA KHAITAN AND OTHERS [SANJIV KHANNA, J.]

and commented on the same. We have also reproduced the reasoning A
given by the Appellate Tribunal to substitute the direction of the Whole
Time Member with that of the penalty.
87. The appeal before the Appellate Tribunal under Section 15T,
is the first appeal against the decision of the Board or the adjudicating
officer. First appeal is a continuation or is co-terminus with the B
proceedings of the original adjudicating authority. 69 The first appeal is a
valuable right of the party aggrieved, and all questions of fact and law
decided by the Boardor the adjudicating authority,including exercise of
discretionwhether within the law, are open for full consideration and
examination.70 The Appellate Tribunal, in the absence of any limit, has
plenary powers in disposing of an appeal.71 It can do what the Board/ C
authorities can do and also direct them to do what they have failed to do.
The position as to the power of the Appellate Tribunal has been
appropriately summarised in Swedish Match (supra), wherein it has
been held:
69
D
See, Commissioner of Income Tax, U.P., Lucknow v. Kanpur Coal Syndicate, Kanpur,
AIR 1965 SC 325; Jute Corpn. of India Ltd. v. Commissioner of Income Tax and
Another, 1991 Supp (2) SCC 744; Commissioner of Income Tax, M.P., Bhopal v.
NirbheramDaluram, (1997) 10 SCC 373; National Thermal Power Co. Ltd. v.
Commissioner of Income Tax, (1997) 7 SCC 489.
70
Clariant International Ltd. and Anotherv. Securities &Exchange Board of India, (2004)
8 SCC 524: E
“74. The jurisdiction of the Appellate Tribunal under the Act is not in any way
fettered by the statute and, thus, it exercises all the jurisdiction as that of the
Board. It can exercise its discretionary jurisdiction in the same manner as the
Board.
……………..
77. The Board exercises its legislative power by making regulations, executive
power by administering the regulations framed by it and taking action against F
any entity violating these regulations and judicial power by adjudicating disputes
in the implementation thereof. The only check upon exercise of such wide-
ranging powers is that it must comply with the Constitution and the Act. In
that view of the matter. where an expert Tribunal has been constituted, the
scrutiny at its end must be held to be of wide import. The Tribunal. another
expert body, must, thus, be allowed to exercise its own jurisdiction conferred
on it by the statute without any limitation.” G
(Emphasis Supplied)
71
Securities and Exchange Board of India v. Opee Stock-Link Ltd. and Another, (2016)
14 SCC 134:
“15. Upon perusal of the impugned order passed by SAT, we do not find any
specific conclusion arrived at by SAT to the effect that the findings recorded by
the WholeTime Member as well as the Adjudicating Officer of SEBI were H
1050 SUPREME COURT REPORTS [2022] 18 S.C.R.

A “84. It may be true that the Board in its impugned order dated 4-
6-2002 proceeded on a wrong premise that having regard to the
proviso appended to Regulation 12, Regulation 12 would be
attracted. But SAT, in our opinion, rightly construed the provisions
of Regulations 11 and 12 in arriving at a finding that Regulation 11
would be attracted and Regulation 12 would not be. The Tribunal
B
was entitled to take a different view of the matter from that of the
Board with a view to sustain the ultimate result in the appeal in
exercise of its appellate power. Such a power in the appellate
court/tribunal is akin to or analogous to the principles contained in
Order 41 Rule 33 of the Code of Civil Procedure. Even otherwise,
C before us the judgment of the Tribunal is in question, this Court is
required to consider the correctness or otherwise of the Tribunal.
In any event, the reasoning of the Tribunal shall prevail over the
Board.”
(Emphasis Supplied)
D 88. In the context of the present appeal, it is to be noted that in the
case of Sunil Krishna Khaitan, an order in the form of directions under
Regulation 44 of the Takeover Regulations 1997 was issued. It was this
order which was made subject matter of challenge before the Appellate
Tribunal.Thus we do not accept the contention of the Board that the
E Appellate Tribunal while exercising appellate power could not have set
aside and quashed the directions given in the appeal.
89. At the sametime, in Sunil Krishna Khaitan’s case proceedings
under Section 15-H for levy of penalty were not initiated and no order of
penalty under 15-H was passed by the adjudicating authority. The
F Appellate Tribunal, therefore, was not hearing an appeal against imposition
of penalty under Section 15-H of the Act. Further, an order under Section
15-H of the Act is passed by an adjudicating authority which, while
imposing penalty, is required to take into consideration the factors
mentioned in Section 15-J.72
incorrect. The appeals before SAT were in the nature of first appeal and therefore,
G it was open to SAT to reappreciate the evidence after looking at the facts of the
case but upon perusal of the impugned order, we do not find any such finding
to the effect that the findings arrived at by the Whole-Time Member as well as
the Adjudicating Officer of SEBI were incorrect or perverse for a particular
reason.”
(Emphasis Supplied)
72
15J.Factors to be taken into account by the adjudicating officer.-
H
SECURITIES AND EXCHANGE BOARD OF INDIA v. SUNIL 1051
KRISHNA KHAITAN AND OTHERS [SANJIV KHANNA, J.]

90. We have also referred to Regulation 45 which in sub-regulation A
(6) refers to different types of penalties which can be imposed on a
person violating any of the provisions of the Regulations. The Appellate
Tribunal does not have the power for the first time to initiate and
thereupon, impose penalty for non-compliance of the provisions of the
Regulations under Chapter VI-A of the Act while deciding an appeal
B
against directions issued under Regulation 44 of the Takeover Regulations,
1997. That power is vested with the authority specified in the Act or the
Regulations. The Appellate Tribunal is an appellate forum and not the
authorityempowered to initiate penalty proceedings under Section 15-H
or suo moto issue directions under Section 11, 11B or 11(4)(d) of the
Act. It can uphold or set aside the direction issued, or modify and substitute C
the direction issued under Regulation 44 of the Takeover Regulations
1997 read with Sections 11, 11B and 11(4)(d) of the Act. Similarly,
Appellate Tribunal can uphold, set aside, modify and even substitute the
order of penalty under Chapter VI-A of the Act.The power to initiate
and levy penalty in terms of Section 15-I73 is vested with an officer to be
D
appointed by the Board, not below the rank of Divisional Commissioner,
While adjudging quantum of penalty under section 15-I, the adjudicating officer shall
have due regard to the following factors, namely:
(a) the amount of disproportionate gain or unfair advantage, wherever quantifiable,
made as a result of the default;
(b) the amount of loss caused to an investor or group of investors as a result of the
E
default;
(c) the repetitive nature of the default
73
15-I. Power to adjudicate:
(1) For the purpose of adjudging under sections 15A, 15B, 15C, 15D, 15E, 15F,
15G,15H, 15HA and 15HB, the Board shall appoint any officer not below the rank of
a Division Chief to be an adjudicating officer for holding an inquiry in the prescribed
manner after giving any person concerned a reasonable opportunity of being heard for F
the purpose of imposing any penalty.
(2) While holding an inquiry the adjudicating officer shall have power to summon and
enforce the attendance of any person acquainted with the facts and circumstances of
the case to give evidence or to produce any document which in the opinion of the
adjudicating officer, may be useful for or relevant to the subject-matter of the inquiry
and if, on such inquiry, he is satisfied that the person has failed to comply with the
provisions of any of the sections specified in subsection (1), he may impose such G
penalty as he thinks fit in accordance with the provisions of any of those sections.
(3) The Board may call for and examine the record of any proceedings under this section
and if it considers that the order passed by the adjudicating officer is erroneous to the
extent it is not in the interests of the securities market, it may, after making or causing
to be made such inquiry as it deems necessary, pass an order enhancing the quantum of
penalty, if the circumstances of the case so justify:
H
1052 SUPREME COURT REPORTS [2022] 18 S.C.R.

A to act as an adjudicating officer. The adjudicating officer is required to
hold an inquiry in the prescribed manner after giving the person a
reasonable opportunity of being heard for the purpose of imposing any
penalty. Powers are vested with the adjudicating officer to summon and
enforce attendance of any person acquainted with the facts and
circumstances of the case to give evidence or to produce any document.
B
91. Thus, the Appellate Tribunal in Appeal No. 23 of 2013 in the
case of Sunil Krishna Khaitan, could not have substituted the penalty
imposed by the Board under Regulation 44 with that of penalty under
Section 15-H.An appropriate view, in our opinion, would be that when
the Appellate Tribunal holds that the order passed by the Whole Time
C member on violation of Regulations 10, 11 and 12 is sustainable, but the
directions given in the order under Regulation 44 are not sustainable, it
should leave it open to the Board to initiate proceedings and pass an
order under Chapter VI-A of the Act.
92. However, as held above, in the absence of any cross-appeal
D or cross-objection by the respondent in Appeal No. 23 of 2013 (Sunil
Krishna Khaitan’s case), we are not interfering with the order imposing
penalty of Rs.25,00,000/- for the violation of Regulation 11(1) of the
Takeover Regulations 1997. The said direction has attained finality. At
the same time, we are inclined to direct that the Board would give quietus
E to the matter and should not initiate proceedings under Chapter VI-A of
the Act.
93. For the aforesaid reasons and grounds, the Civil Appeals
preferred by the Board are dismissed with the clarification as to the
power of the Appellate Tribunal under Section 15-T of Chapter VI-A of
F the Act, which is confined to examination of correctness and legality of
the order under challenge.
94. There will be no order as to costs.

Ankit Gyan Appeals dismissed.
G (Assisted by : Adnan Khan, LCRA)

Provided that no such order shall be passed unless the person concerned has been given
an opportunity of being heard in the matter:Provided further that nothing contained in
this sub-section shall be applicable after an expiry of a period of three months from the
date of the order passed by the adjudicating officer or disposal of the appeal under
H section 15T, whichever is earlier.