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Kosha Investments Ltd. v. Securities & Exchange Board of India

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 3219 of 2006)Decided 18 Sept 2015
Civil Appeal No. 3219 of 2006
Justice Vikramajit Sen · Justice Shiva Kirti Singh

Background

Kosha Investments Ltd. acquired shares of Snowcem India Ltd. (SIL) and became one of its promoters. SEBI's investigation found that during June-August 1999 Kosha acquired shares exceeding 5% of SIL's paid-up capital without making the public announcement required under Regulation 11(1) of the SEBI Takeover Regulations, 1997. SEBI directed Kosha to make a public announcement and imposed penalties for non-compliance; the Securities Appellate Tribunal upheld SEBI's order, prompting these two appeals to the Supreme Court.

Decision Breakdown

The Court held that Regulation 14(1) requires a public announcement within four working days of any acquisition (or decision to acquire) crossing the 5% threshold in a financial year, regardless of whether the acquirer later sold down its holding to stay under the net cap. Accepting Kosha's "netting off" argument would let acquirers repeatedly breach Regulation 11(1) while evading public disclosure by quickly reselling shares, defeating the Regulation's purpose. The Court also rejected the argument that Regulation 14(2) (which applies to convertible securities like GDRs/ADRs) postponed the disclosure obligation, holding Regulation 14(1) was the correct, directly applicable provision. Both appeals were dismissed with a consolidated cost of Rs. 50,000 payable by Kosha to SEBI.

Lesson Learnt

An investor who crosses the SEBI disclosure threshold for share acquisitions must make the public announcement within the stipulated time even if the shares are later sold back down: temporarily exceeding the limit still triggers the disclosure duty, and cannot be avoided through same-period buy-sell transactions.

Official source (sci.gov.in)View Judgment (PDF)

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