In a landmark verdict that lays down the law of the land regarding India Inc's obligation to open offers, the Supreme Court has ruled that corporates will not be allowed to withdraw open offers on grounds that the offer has become 'uneconomical' or lacks commercial reasonableness. The top court also concluded that any delay by the market regulator Sebi in responding to open offer applications cannot be cited by corporates to back out of open offers
Moreover, the court ruled that there is "no distinction between a triggered public offer and a voluntary public offer " and that both routes "have to be considered on an equal footing " or else the very purpose of the Sebi takeover code would be defeated.
"A public offer under the SEBI Takeover Code, once triggered voluntarily or otherwise, is the rule and its withdrawal an exception.
The Takeover Code is to promote a fair market for corporate control. Withdrawal of an open offer can only be permitted in cases involving death of the acquirer; legal impossibility or natural disaster as prescribed under the takeover code. The discretion which could be exercised by Sebi would be necessarily in line with these circumstances," said Pratap Venugopal, partner, KJ John & Co which represented Sebi in the matter.
" This order will impact the fate of other similar open offer cases involving Khaitan Electricals, Arvind Mills, AP Paper Mills and Golden Tobacco," a senior government official told ET NOW.
On May 10th, 2013, ET had reported a Supreme Court decision which refused Nirma's request to withdraw an open offer for Shri Rama Multi Tech, an Ahmedabad -based firm.
The Supreme Court passed the verdict on an appeal filed by market regulator Sebi against an earlier order by SAT ( Securities Appellate Tribunal) which favoured Akshya Infrastructure Private Limited.Akshya Infra is part of the promoter group of Marg Limited and had breached the 5% creeping acquisition limit in the target company Marg Limited in years 2006-07, 2007-08 and 2010-11. On 20th October 2011,
Akshya announced a voluntary open offer wherein the public shareholders of Marg ltd were given an opportunity to exit at an offer price of Rs 91/share. But on 29th March 2012, Akshya Infra alleged unjustified delay by Sebi in approving the draft letter of offer and sought to withdraw the open offer. The company claimed that the regulator's delay had rendered the entire open offer exercise meaningless and that the offer lacked economic rationale and commercial reasonableness.
Sebi found that that permitting Akshya Infra to withdraw the public offer would be detrimental to the overall interest of the shareholders.