Supreme Court upholds SAT ruling quashing SEBI order for open offer on ground of inordinate delay

The Supreme Court this week refused to interfere with a ruling passed by the Securities Appellate Tribunal (SAT) which quashed a Securities and Exchange Board of India (SEBI) order calling for an open offer on the ground of inordinate delay (Securities and Exchange Board of India through Chairman v. Rajeev Bhanot & Ors)..In a short order, the Bench of Justices BR Gavai and PS Narasimha held,"We are not inclined to interfere with the impugned order dated 09.07.2021 passed by the Securities Appellate Tribunal, Mumbai in Appeal Nos.396 of 2018, 405 of 2018 and 562 of 2019. Accordingly, the Civil Appeals are dismissed.".The case relates to an order passed by a whole time member of SEBI in August 2018 directing the acquirers, heirs of the deceased and the promoters of M/s. Bhanot Leasing Limited to make an open offer under various SEBI Regulations..SAT had held that the SEBI order was unsustainable as it had issued a show cause notice 12 years after the acquisition of shares took place in the financial year 2005-2006."The acquisition made by the appellant was a fact which was in the public domain and was known to the Stock Exchange as well as to SEBI. Since they had information SEBI did not raise any query for several years. The first query was raised after more than 6 years in November, 2011. The details of the queries were provided by the target Company. Further, details were sought in July, 2014 and again in September, 2015. Information was supplied and it was also intimated that two of the acquirers have died. Inspite of receiving the information no steps were taken by the respondent to find out the heirs of the acquirers..." the SAT order stated..It was also held that the mere fact that SEBI made queries from time to time does not extend the period of limitation nor does it condone the delay in issuing the show cause notice. SEBI was pulled up for its lackadaisical attitude in handling the matter.Further, the finding of the SEBI member that there is no time limit for issuing notice and that an order cannot be set aside on the ground of delay was patently erroneous, the SAT Bench held..While relying on Regulation 27(1)(c) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, the Appellate Tribunal further noted,"Inspite of having knowledge that two noticees have died SEBI chose to initiate proceedings against dead persons. It is settled law that no proceedings can be initiated against dead person. Further, the directions of the WTM that the heirs of the deceased are liable to make an open offer is illegal and is without any authority of law.".Noting that long delay in initiating proceedings by itself causes prejudice, the SAT held that the direction to make an open offer was not appropriate in the circumstances of the case..SEBI had then approached the apex court in appeal against this decision..Senior Advocate Chander Uday Singh, along with Advocates Dhaval Mehrotra and Sudhanshu Sikka, through K Ashar & Co, represented SEBI before the Supreme Court..[Read Supreme Court order].HT to @sumitatsebi.