was argued that the circulars and instructions issued by the Board are binding in law on the authorities under the respective statutes.
8. With regard to the Miscellaneous Applications, on instruction, learned senior counsel for the Appellants stated that a total amount of Rs. 115 crore has already been secured to enable the open offer @ Rs. 3.20 per share. On direction, the Appellants filed an affidavit dated March 10, 2017 before this Tribunal, inter alia, stating therein that:- (a) The acquirers have created an escrow account with HDFC Bank in favour of the Manager to the Open Offer for a sum of Rs. 30 crore; (b) An amount of Rs. 20 crore has been provided in a fixed deposit with lien in favour of the Manager to the Open Offer that can be used to meet the obligations of the acquirers under the open offer; (c) Mr. Rajiv Rattan, one of the PACs, has certified and provided an undertaking of financial support to Arbutus Consultancy LLP (one of the Appellants herein) upto an aggregate amount of Rs. 65 crore. In addition, a certificate relating to the networth of the acquirers issued by chartered accountant has also been submitted, which clearly shows that the acquirers are financially fully sound.
9. Shri Fredun DeVitre, learned senior counsel for the Respondent SEBI argued that the Regulations have to be interpreted correctly. A simple reading of Regulation 10(1)(a)(ii) of the SAST/Takeover Regulations, 2011 is that persons named as promoters in the shareholding patterns filed by target company in terms of the listing agreement for not less than 3 years prior to the proposed acquisition means that the shareholding pattern filed by the target company in terms of its listing agreement has to be available for a minimum of 3 years post listing. In the instant case, the target company filed its shareholding pattern in terms of its listing agreement on July 30, 2012. The inter-se transfers were made during July to October, 2014 and as such the company had filed the relevant details only for 2 years post listing whereas the requirement is not less than 3 years post listing. A straight forward reading of Regulation 10 of Takeover Regulations 2011 unambiguously shows that the Appellants were not eligible for exemption. When a straight forward reading of the Regulation/law is available that is the only way it should be read. In the instant matter no other interpretation is actually possible.
10. When the statute is clear, informal guidance should not be relied on. Informal guidance scheme cannot be used to reduce the importance of the statute itself. Under the SEBI Informal Guidance Scheme, 2003, the guidance is the view of the concerned department of SEBI and will not be binding on the Board. The letter issued by a department under this scheme should not be construed as a conclusive decision or determination of any question of law or fact by SEBI. Such a letter cannot be construed as an order of the Board under Section 15T of the Securities and Exchange Board of India Act, 1992 (SEBI Act for short) and shall not be appealable. Further citing the position of law in the USA where no-action letters as not legally binding opinion it was argued that guidance cannot become the determining factor on matters of interpretation of law. An informal guidance cannot be used as an estoppel against law.
11. Official of SEBI erred in the Weizmann Guidance by inadvertently providing an interpretation in the spirit of the Takeover Regulations, 1997 oblivious of the changes happened in terms of the SAST/Takeover Regulations, 2011. Such a mistake made by an officer of the respondent cannot be used to furtherance of the mistake. SEBI in all its subsequent informal guidances insisted that the target company has to complete a minimum period of 3 years as a listed entity and filing to that effect about promoter holdings for availing the exemption of inter-se promoter transfers from public offer obligation. In fact while the Weizmann Guidance was dated October 25, 2012 the correct guidance insisting on 3 years post-listing requirement was available as early as December 5, 2012, just 40 days later, in the matter of Commercial Engineers and Body Builders Company Ltd. Since the inter-se promoter transfers in the impugned order relates to 2014 the latter informal guidance also should have been relied on by the Appellants and a fresh guidance should have been sought from SEBI in case of any doubt.
12. 2011 amendments to SAST Regulations was specifically brought in to prevent the potential abuse of new promoters getting in soon after a company is listed. That is why for inter-se promoter transfers to be eligible for exemption from open offer a minimum 3 years condition after listing and as given in the listing agreement by the Target Company itself was mandated. A declaration relating to the promoters prior to listing or whether the same promoters continued after listing etc. has no relevance for getting this exemption.
13. The Learned senior counsel for the Respondent further argued that the judgments of the Apex Court relied upon by the Appellants relate to circulars approved by the board of the Central Board of Excise and Customs. The informal guidances issued by SEBI officials in the present matter are not approved by the board of SEBI and as such the cited judgments have no relevance here. Rather the learned senior counsel for the respondent relied on the judgment of this Tribunal in the case of Deepak Mehra vs. Securities and Exchange Board of India (Appeal No. 140 of 2009 dated 28th August, 2009) wherein the legal validity of the informal guidances was examined by this Tribunal. It was held that informal guidances were views of a department of SEBI and cannot be construed as law and as such not amenable for appeal before this Tribunal.
14. We do not find any merit in the arguments put forth by the learned senior counsel for the Appellants. SAST/Takeover Regulations, 2011 is the law during the relevant time. It states as follows:-
10. (1) The following acquisitions shall be exempt from the obligation to make an open offer under regulation 3 and regulation 4 subject to fulfillment of the conditions stipulated therefor, (a) acquisition pursuant to inter se transfer of shares amongst qualifying persons, being,
(i) ;
(ii) persons named as promoters in the shareholding pattern filed by the target company in terms of the listing agreement or these regulations for not less than three years prior to the proposed acquisition; Regulation 10(1)(a)(ii) clearly states that in order to be eligible for exemption from making an open offer inter-se transfers of shares amongst persons named as promoters in the shareholding pattern by the target company in terms of its listing agreement has to be for not less than 3 years prior to the proposed acquisition. The argument that the promoters have to be named in the listing agreement for minimum period of 3 years overall, not necessarily 3 years subsequent to the signing of the listing agreement, cannot be accepted by a plain reading of Regulation 10(1)(a)(ii). If such an interpretation is accepted a company listed today with an unchanged promoter holding for more than 3 years prior to listing becomes eligible for exemption from making an open offer for inter-se promoter transfers even tomorrow. This is not the intention behind the amended law (SAST/ Takeover Regulations, 2011). If that be the case SAST, 1997 would suffice. If such an interpretation is agreed to the very purpose of providing stability for promoter holding for a reasonable period of 3 years post listing will be defeated.
15. The impugned order clearly states that the inter-se transfers amongst promoters on July 9-10, 2014, September 5, 2014 and October 20, 2014 were not exempted from the open offer obligations. Further, vide e-mail dated December 4, 2015 addressed to the Manager to the Open Offer it was stated that Regulation 10(1)(a)(ii) of SAST/Takeover Regulations, 2011 was triggered. As such, there is no ambiguity in the order as the provision relating to exemption of inter-se promoter transfers from the open offer obligations is available only under Regulation 10(1)(a)(ii) of SAST/Takeover Regulations, 2011.
16. Fact that all relevant filings to SEBI / Stock Exchanges under relevant provisions of SAST/Takeover Regulations, 2011 were made regarding inter- se promoter transfers is not a ground for seeking that these transfers should become eligible for exemption from making an open offer. Argument of the Appellants that no alien entity has come in as promoter / promoters in the Target Company ever is also not a reason for claiming exemption for the inter-se promoter transfers from making an open offer. The law is not interpreted such that because nothing untoward has happened the benefit of law should be available to an entity. Compliance of law has to be the starting point, not the end result.
17. This Tribunal also sought to know as to whether it is essential to declare the history of promoter holding in the listing agreement as part of the format of the relevant filing. It was clarified by learned senior counsel for the respondent that such declarations are not part of the format. This fact also underscores that the promoter holding pattern prior to listing is not a relevant factor to be reckoned with for this purpose. Hence, it is irrelevant whether the same promoters were holding the same shares for over a long period either in the target company or in the parent company or both, prior to listing the target company. The only relevant factor is date of listing the target company and the promoter holding filed by the target company as part of the listing agreement. In the present appeal, it is an undisputed fact that the target company was listed only on July 30, 2012 and the inter-se promoter transfers were made first on July 9-10, 2014 and subsequently on September 5 and October 20, 2014. Therefore, as on the first date of inter-se promoter transfer the Target Company was listed for 23 months and 10 days and on the date of the last inter-se transfers the Target Company was listed for 26 months and 20 days. As such, the promoter holding as per the listing agreement was filed by the target company only for 23 months and 10 days as on the first date of inter-se promoter transfers. Since, the stated eligibility condition as per Regulation 10(1)(a)(ii) is for not less than 3 years the inter-se promoter transfers made on July 9-10, 2014 and also subsequently on September 5 and on October 20, 2014, all were ineligible for exemption from making an open offer.
18. It is fairly admitted by the Respondent that Weizmann Guidance dated October 25, 2012 was not a correct interpretation of law applicable as on that date. SEBI official should have been more careful and diligent in issuing interpretations of Regulations; however, a wrong interpretation given by an official cannot be used as a shelter in interpreting provisions of law. It is on record that on December 5, 2012 informal guidance on Commercial Engineers and Body Builders Company Ltd. was also available in public domain. The argument of the Appellants that this was not a relevant example as no details relating to this company was available in public domain prior to its listing in 2010 has no merit since this guidance as well as Regulation 10(1)(a)(ii) very clearly state that 3 years subsequent to listing of the Target Company is invariably needed for inter-se promoter transfers to become eligible for exemption from an open offer obligation.
19. We have also perused the Securities and Exchange Board of India (Informal Guidance) Scheme, 2003. Clauses 12 and 13 of the scheme state as follows:-
12. A no-action letter or an interpretive letter issued by a Department constitutes the view of the Department but will not be binding on the Board, though the Board may generally act in accordance with such a letter.
13. The letter issued by a Department under this scheme should not be construed as a conclusive decision or determination of any question of law or fact by SEBI. Such a letter cannot be construed as an order of the Board under section 15T of the Act and shall not be appealable. Accordingly, an interpretation provided under the Scheme by an official of department of SEBI cannot be used against the correct interpretation of law (in the instant matter SAST/Takeover Regulations, 2011).This Tribunals order in the matter of Deepak Mehra vs. SEBI (supra) also had held this view.
20. For the reasons stated above, we do not find any reason to interfere with the impugned direction of SEBI dated May 5, 2016. As a result, the appeals fail. Appellants are directed to proceed with implementing the open offer immediately. Miscellaneous Applications, therefore, become infructuous and are disposed of accordingly. No order as to costs.
21. After the judgment was pronounced, counsel for the Appellants sought stay for a period of four weeks on implementation of the public offer so as to enable the Appellants to move the Apex Court. The Appellants in their open offer had agreed to purchase shares from the public at Rs. 3.20 per share, whereas, SEBI has directed the Appellants to make the open offer at Rs. 6.30 per share. Since the appeal is dismissed, the Appellants must at least make good the amount payable as per their own open offer. It is not in dispute that the amount payable as per the open offer made by the Appellants comes to Rs. 115 crore. As ordered the Appellants are liable to pay interest @ 10% p.a. from July 09-10, 2014 till payment.
22. Accordingly, we direct the Appellants to deposit with SEBI the amount of Rs. 115 crore with interest @ 10% p.a. from July, 2014 till March 31, 2017 within four weeks from today. Subject to the payment of the aforesaid amount within the time stated above, we direct SEBI not to enforce the impugned order dated May 5, 2016 for a period of four weeks from today. Sd/- Justice J.P. Devadhar Presiding Officer Sd/- Jog Singh Member Sd/- Dr. C.K.G. Nair Member 05.04.2017 Prepared and compared by: rhn/msb