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Pramod Jain and Others v. Securities and Exchange Board of India

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 9103 of 2014)Decided 7 Nov 2016
Civil Appeal No. 9103 of 2014
Justice Anil R. Dave · Justice Adarsh Kumar Goel

Background

Pramod Jain and associated entities made a public offer in 2009 to acquire a 25% stake in Golden Tobacco Ltd. through a hostile takeover. SEBI took over two years to process the offer documents, during which the acquirers raised various complaints about the target company's management, including allegedly improper dealing with a valuable Mumbai property. The acquirers then asked to withdraw their open offer, citing SEBI's delay and the target company's conduct; SEBI refused, and the Securities Appellate Tribunal upheld that refusal.

Decision Breakdown

The Supreme Court agreed that SEBI's two-year delay in processing the offer was unjustified, but held that delay alone does not entitle an acquirer to withdraw an open offer. Under Takeover Regulation 27(1), a public offer, once made, can be withdrawn only in narrow circumstances amounting to genuine impossibility of performing it (such as a statutory approval being refused, or the sole acquirer dying), not merely because the deal became less attractive or inconvenient. The Court found the acquirers themselves had settled their disputes over the property with the target company before the Company Law Board, and had even asked SEBI to keep the offer in abeyance rather than claiming it was frustrated, undercutting their own claim. Since performing the offer remained possible, the appeal was dismissed.

Lesson Learnt

Once a public takeover offer is made under SEBI's regulations, it generally cannot be withdrawn just because the acquirer has second thoughts or faces regulatory delay, only genuine impossibility of carrying out the offer justifies withdrawal, because shareholders have a vested right to rely on the offer.

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

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