TEAM CODE: 129R

BEFORE THE HONBLE SUPREME COURT OF INDIA

APPEAL NO.____________/ 2016

(UNDER SECTION 15Z OF THE SECURITIES EXCHANGE BOARD OF INDIA ACT,
1992)

DREAMSELLERS LIMITED
(APPELLANT)
V.
SECURITIES EXCHANGE BOARD OF INDIA
(RESPONDENT)

MEMORIAL FOR RESPONDENT

i
MEMORANDUM ON BEHALF OF RESPONDENT

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

TABLE OF CONTENTS

LIST OF ABBREVIATIONS ........................................................................................... IV

INDEX OF AUTHORITIES .............................................................................................. V
STATEMENT OF JURISDICTION ............................................................................................... X
STATEMENT OF FACTS............................................................................................................. XI
ISSUES RAISED ......................................................................................................................... XIII
SUMMARY OF ARGUMENTS ................................................................................................. XIV

ARGUMENTS ADVANCED ............................................................................................1

ISSUE I .....................................................................................................................1
WHETHER

THE PROVISIONS OF REGULATION

23

OF THE NEW TAKEOVER

REGULATIONS RELATING TO WITHDRAWAL OF OPEN OFFER COULD BE APPLIED

TO AN OPEN OFFER MADE UNDER THE 1997 TAKEOVER REGULATIONS? ..............1

[1.1] STRICT INTERPRETATION OF LAW ................................................................1

[1.2] WITHDRAWAL PROVISION OF THE 1997 REGULATION UPHELD .....................2
[1.3] PUBLIC OFFER MADE UNDER THE 1997 REGULATION ...................................2
[1.4] PROTECTION BY THE SAVING CLAUSE ..........................................................5
ISSUE II ...................................................................................................................6
WHETHER IT CAN BE SAID THAT DREAMSELLERS HAD FAILED TO EXERCISE DUE
DILIGENCE AND THE FACTS RELATING TO DUE DILIGENCE WERE KNOWN OR

COULD

HAVE BEEN KNOWN BY DREAMSELLERS, IF DREAMSELLERS HAD

EXERCISED PROPER DUE DILIGENCE? ................................................................6

[2.1] DUE

DREAMSELLERS WAS NOT TRUE AND

ADEQUATE. ...........................................................................................................6
DILIGENCE PERFORMED BY

[2.2] APPLICATION OF THE PRINCIPLE OF CAVEAT EMPTOR .................................8

[2.3] CHARGES REGISTERED AGAINST ARTEMIS WERE MISSED OUT BY
DREAMSELLERS. ...................................................................................................9

ii
MEMORANDUM ON BEHALF OF RESPONDENT

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

ISSUE III ................................................................................................................10

WHETHER SEBI HAD VIOLATED THE PRINCIPLES OF NATURAL JUSTICE IN THE
PRESENT CASE WHILE PASSING ITS ORDER REJECTING THE APPLICATION TO
WITHDRAW THE OPEN OFFER WITHOUT HEARING DREAMSELLERS? .................10

ISSUE IV ................................................................................................................13
WHETHER REGULATION 27(1) (D) OF THE 1997 TAKEOVER REGULATIONS IS TO
BE GIVEN AN INTERPRETATION WHEREBY, THE WORDS SUCH CIRCUMSTANCES
AS IN THE OPINION OF THE BOARD MERIT WITHDRAWAL ARE TO BE READ
EJUSDEM GENERIS WITH THE OTHER PROVISIONS OF REGULATION 27 (1) OF THE
SAID CODE I.E. AS CIRCUMSTANCES WHERE IT IS IMPOSSIBLE TO PERFORM THE
OPEN OFFER? ........................................................................................................13
[4.1] IMPOSSIBILITY TO PERFORM PUBLIC OFFER .................................................13
[4.2] INTENTION OF LEGISLATURE ......................................................................16
PRAYER ................................................................................................................. XVIII

iii
MEMORANDUM ON BEHALF OF RESPONDENT

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

LIST OF ABBREVIATIONS

Percentage

&

And

Para

p.

Page

v.

Versus

AIR

All India Reporter

Bom

Bombay

Cal

Calcutta

Co.

Company

Comp.

Company

Ed.

Edition

ILR

Indian Law Report

Ltd.

Limited

M&A

Mergers and Acquisitions

Ors.

Others

Reg.

Regulation

SAT

Securities Appellate Tribunal

SC

Supreme Court

SCC

Supreme Court Reports

SCJ

Supreme Court Journal

SCR

Supreme Court Reporter

SEBI

Securities Exchange Board of India

Sec.

Section

Supp.

Supplementary

U/S

Under Section

W.B.

West Bengal

iv
MEMORANDUM ON BEHALF OF RESPONDENT

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

INDEX OF AUTHORITIES

CASES REFERRED
ADJUDICATION ORDERS
1. Adjudication Order In the matter of M/s Khatau Exim Limited, AK/AO7581/2015,
available

at

http:/www.sebi.gov.in/cms/sebi_data/attachdocs/1442921557603.pdf

......3, O
2. Adjudication order in the matter of SEBI v. India bulls securities Ltd.,SD/ Ao/88/2010,
(July

29,

2010)

available

at

http://www.sebi.gov.in/cms/sebi_data/attachdocs/1356705349130.pdf..................... 6, D
SAT CASES
1. Khaitan Electricals v. SEBI, SAT Appeal No. 23 of 2013, (June 06, 2013), available at
http://www.sebi.gov.in/cms/sebi_data/attachdocs/1357036277865.pdf.....................4, M
2. Madhuri S Pitti v. SEBI, SAT Appeal No. 2 of 2013,( Secember 13, 2013), available at
http://www.sebi.gov.in/cms/sebi_data/attachdocs/1383207800428.pdf ..................4, M
3. Pramod Jain v. Securities Exchange Board of India, SAT Appeal No. 111 of 2012, (
August
6,
2014),
available
at
http://www.sebi.gov.in/cms/sebi_data/attachdocs/1407312252581.pdf ......6, E; 7, E
4. SPS Share Brokers Private Limited v. Securities and Exchange Board of India, SAT
Appeal
No.
35
of
2013,
(August
27,
2013),
available
at
http://www.sebi.gov.in/cms/sebi_data/attachdocs/1377592049399.pdf....................4, P
SEBI ORDERS
1.

SEBI Order In the matter of CG-VAK Software and Exports Limited, WTM/RKA/CFDDCR/07/2014, available at
http://www.sebi.gov.in/cms/sebi_data/attachdocs/1392895909969.pdf.................... 4, N

2.

SEBI order in matter of Bharatiya Global infomedia Ltd, WTM/ RKA/ IVD/10/ 2014,
available at
http://www.sebi.gov.in/cms/sebi_data/attachdocs/1393857624351.pdf....................7, G

v
MEMORANDUM ON BEHALF OF RESPONDENT

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

INDIAN JUDGEMENTS
1. A.K. Gopalan v. State of Madras, AIR 1950 SC 136 ..............................................10, D
2. Amar Chandra Chakraborty v. Collector of Excise, (1972) 2 SCC 44214, F
3. Arul Nadar v. Authorised Officer, Land Reforms, (1998) 7 SCC 157.....2, B
4. Ashok Kumar Sonkar v. Union of India, (2007) 4 SCC 54... 10, B
5. Board of Mining Examination v. Ramjee, AIR 1977 SC 965: (1977) 2 SCC 256..11, J
6. Chander Kanta Bansal v. Rajinder singh Anand, ( 2008) 5 SCC 117....6, B
7. Clariant International Ltd v. SEBI, (2004) 8 SCC 524..........16, L
8. Commr of Income-tax, W.B. v. Sri Kishab Chandra Mandal, AIR 1950 SC 265........1, B
9. Gajapati Narayan Deo v. State of Orissa, AIR 1953 SC 375.....2, K
10. Ganesh Santa Ram Sirur v. State Bank of India, (2005) 1 SCC 13.10, D, 12, K
11. Girias Investment (P.) Ltd. v. State of Karnataka, (2008) 7 SCC 53.10, P
12. Grasim Industries Ltd. v. Collector of Customs, Bombay, AIR 2002 SC 1766.14, F
13. Gwalior Rayon Silk Mfg. Co. Ltd v. Custodian of Vested Forests, AIR 1990 SC
1747...1, A
14. H. J. Securities Private Limited v. Securities and Exchange Board of India, 2012 Indlaw
SAT 65.....7, G
15. Harinarayan Bajaj v. Union of India, (2009) 147 Comp Cases 579 (Bom)....3, L
16. Housing Board of Haryana v. Haryana Housing Board Employees Union, AIR 1996 SC
434, p. 441......14, F
17. Imperial corporation Finance and services Pvt. Ltd. v. SEBI, 2005 (61) SCL 197...9, M
18. In Re: Cell Industries Limited and others, 2016 Indlaw SEBI 129.....9, M
19. IncomeTax Officer, Alleppey v. M.C. Ponnoose & Ors, 1970 SCR (1) 678.........3 J
20. Jagdish Chandra Gupta v. Kajaria Traders (India) Ltd., AIR 1964 SC 1882..........14, E
21. K. Veeraswami v. Union of India, (1991) 3 SCC 65515, F
22. K.K Kochuni v. State of Madras, AIR 1960 SC 108015, G
23. Kesavan Madhava Menon v. State of Bombay [1951] SCR 228.......2, B
24. Keynote Corporate services Ltd. v. SEBI, 2014 Indlaw SAT 22..7, F
25. Lala Suraj v. Golab Chand, (1900) ILR 27 Cal 724...1, A
26. M.P. Industries Ltd. v. Union of India AIR 1966 SC 671: (1966) 1 SCR 466...11, F

vi
MEMORANDUM ON BEHALF OF RESPONDENT

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

27. Maharashtra University of Health Sciences v. Satchikitsa Prasarak Mandal, (2010) 3

SCC 786..14, F
28. Municipal Corporation of Greater Bombay v. Bharat Petroleum Corporation Ltd.,
(2002) 4 SCC 219...14, F
29. Nathi Devi v. Radha Devi Gupta, AIR 2005 SC 648, p.659....5, T
30. Nelson Motis v. Union of India, AIR 1992 SC 1981, 1984......5, T
31. Nirma

Industries

Limited

and

another

v.

SEBI,

(2013)

SCC

20......2, E; 9, M; 11, G; 15, G; 16, J

32. Ombalika Das v. Hulisha Shaw, (2002) 4 SCC 539................5, T
33. Raghunath Rai Bareja v. Punjab National Bank, (2007) 2 SCC 230..5, T
34. Raja Bhanu Pratap Singh v. Asstt. Custodian, AIR 1966 SC 245.............................14, E
35. Rajasthan State Electricity Board v. Mohan Lal, AIR 1967 SC 1857...15, F
36. Rananjaya Singh v. Baijnath Singh , 1954 SCJ 838....1, B
37. RMDC v. State of Mysore, AIR 1962 SC 594..1, B
38. Sahara India Real Estate Corporation Limited & Ors v. SEBI, 2012 Indlaw SC
272.......9, M
39. Sales-tax Officer v. Kanhayalal, AIR 1959 SC 135....1, A
40. Sangram Singh v Election Tribunal, AIR 1955 SC 425.10, B
41. SEBI v Akshya Industries (P) Ltd , (2014) 11 SCC 112.......2, F
42. Siddeshwari Cotton Mills (P) Ltd. v. Union of India, AIR 1989 SC 1019... 13, B
43. Sirish Finance & Investment v. M Sreenivasulu Reddy and Ors.,(2001) SCC Bom
838.................................................................................................................................3, J
44. State of Bombay v. Ali Gulshan, AIR 1955 SC 810...................................................14, E
45. State of Jharkhand v. Govind Singh, AIR 2005 SC 294, p. 296...5, T
46. State of Karnataka v. Kempaiah, AIR 1998 SC 3047....13, B
47. State of Punjab v. Bhajan Kaur, (2008) 12 SCC 112... 1, K
48. Syndicate Bank v. Venkatesh Gururao Kurati, (2006) 3 SCC 150... 12, K
49. Systematix Shares & Stocks (India) Limited v. Securities and Exchange Board of India,
2012 Indlaw SAT 90....7, G
50. Thakur Amarasinghji v. State of Rajasthan, AIR 1955 SC 504, .......... 13, B

vii
MEMORANDUM ON BEHALF OF RESPONDENT

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

51. Tribhuban Parkash Nayyar v. Union of India, (1969) 3 SCC 99.13, B; 15, F
52. Union of India & Anr v. M/S. Jesus Sales Corporation, (1996) 4 SCC 69.. 11, H
53. Union of India v. Alok Jain, (2010) 5 SCC 349 14, F
54. Union of India v. J.P.Mittar, AIR 1971 SC 1093..12, L
55. World Sport Group (India) (P) Ltd. v. Board of Control of Cricket in India, (2011) SCC
OnLine Bom 242......8, L

FOREIGN JUDGMENTS
1. Allen v. Emmerson, (1944) 1 ALL ER 344....14, F
2. Dillman v. Nadelhoffer, 43 N. E. 378..... 6, B
3. Hendricks v. W. U. Tel. Co., 120 N. C. 304.....6, B
4. Highland Ditch Co. v. Mumford; 5 Colo.330...6, B
5. Perry v. Cedar Falls, 87 Iowa, 315, 54 N. W. 225......6, B

BOOKS REFERRED

M. P. JAIN & S. N. JAIN, PRINCIPLES OF ADMINISTRATIVE LAW (6th ed., 2011).

G.P. SINGH, J., PRINCIPLES OF STATUTORY INTERPRETATION (12th ed., Lexis Nexis
Buttersworth 2014).

RAMAIYA, A., COMPANIES ACT, 2013 (18th Ed., Lexis Nexis, 2014).

CRAIES ON STATUTE LAWS, (7th Ed., Lexis Nexis, 2012).

P. RAMNATH AIYAR, ADVANCED LAW LEXICON (3rd ed, 2005).

STATUTES AND REGULATIONS REFERRED

INDIAN CONTRACT ACT, 1872

INDIAN COMPANIES ACT, 2013

SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992

SEBI (SUBSTANTIAL ACQUISITION AND SHARES TAKEOVER) REGULATIONS, 1997

SEBI (SUBSTANTIAL ACQUISITION AND SHARES TAKEOVER) REGULATIONS, 2011

SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE

viii
MEMORANDUM ON BEHALF OF RESPONDENT

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

REQUIREMENTS) REGULATIONS, 2009

SECURITIES AND EXCHANGE BOARD OF INDIA (PROHIBITION OF FRAUDULENT AND

UNFAIR TRADE PRACTICES RELATING TO SECURITIES MARKET) REGULATIONS, 2003
ARTICLES REFERRED

Seth Dua & Associates, Joint Ventures & Mergers and Acquisitions in India: Legal and
Tax Aspects LexisNexis Butterworths, 5 (2006)........................................................6, B

LM Sharma, Amalgamation, Merger and Acquisition, Comp. L. J. (1997).............6, B

Vikrant Pachnanda and Vinee Unnikrishnan, Due Diligence issues that face M&As ,
(2011) PL NovemberS-2..............................................................................................6, C

John O. Nigh and Macro Boschetti, M & A Due diligence: The 360 degree approach,
(2006) ..6, C
OTHER AUTHORITIES

Case

No

COMP/

M.

3732-

Procter

&

Gamble/

Gillette,

available

at

http://ec.europa.eu/competition/mergers/cases/decisions/m3732_20050715_20212_en.pdf
......................................................................................................................................8, J

Tata

motors

complete

acquition

on

Jaguar

Land

rover

available

at

www.tata.com/article/inside/mCgnlgckTZw=/TLYVr3YPkMU=.............................8, K
DICTIONARIES REFERRED

Blacks Law Dictionary 10th Edition

ix
MEMORANDUM ON BEHALF OF RESPONDENT

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

STATEMENT OF JURISDICTION

It is humbly submitted that the Petitioner have invoked the jurisdiction of the Honble Supreme
Court of India U/S 15(z) of Securities Exchange Board of India Act, 1992 in the case of
Dreamsellers Limited v. SEBI. The Respondent submits to the same.

All of which is most respectfully submitted

x
MEMORANDUM ON BEHALF OF RESPONDENT

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

STATEMENT OF FACTS
1. On Januray 30, 2009 Artemis Ltd borrowed Rs. 100 crore from Dreamsellers Ltd. and
pledged their equity shares as security. The debt was not paid by Artemis even after issuing a 30
days notice. Hence, on July 22, 2010 Dreamsellers invoked the pledge and acquired 12.5% of
equity shares of Artemis. Unsure of whether the shares would pay off the debt, Dreamsellers
decided to propose a voluntary open offer under Regulation 10 of the securities and Exchange
Board of India ( Substantial acquisition of shares and Takeovers) 1997, to acquire upto 37.6% of
equity shares of Artemis. Subsequent to this, Dreamsellers made a public announcement on
October 1, 2010 and published in Financial express about the open offer and filed a draft open
offer to SEBI.
2. Meanwhile, the lenders to Artemis have forced the Board of Directors to review the
operations of Artemis and in relation to it, the independent directors of the company have forced
for an internal audit of the company. Pursuant to the audit irregularities for the financial years
2005-2008 were known. Following this, the board of directors under the pressure of the
independent directors appointed a chartered accountant firm for a special investigative audit for
the past 10 years of the company. After the audit, the report submitted on Sept 30, 2010 said that
around Rs 300 crore were siphoned off and embezzled by the promoters of Artemis. This Report
was also brought into public domain on Oct 25, 2011 which resulted in market price being much
higher than what it should really be.
3. On Oct 30, 2011 in view of the above circumstances Dreamsellers through its merchant
bankers has sought for the withdrawal of the open offer to SEBI or as an alternative requested to
consider the re-pricing of the open offer. On Nov 1, 2011 SEBI issued its observations stating
that once an open offer is filed it cannot be withdrawn and also stated that Dreamsellers could
have exercised proper due diligence while putting forward the open offer.
4. Meanwhile the SEBI Takeover code, 2011 had been notified on September 23, 2011 and the
same came into existence on Oct 22, 2011. To this, the SEBI in its observation stated that

xi
MEMORANDUM ON BEHALF OF RESPONDENT

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

regulation 23 of the new takeovers Act would not be applicable as the offer was made under the
1997 takeover regulations.
5. Aggrieved by SEBIs order, Dreamsellers filed an appeal before the securities appellate
tribunal (SAT) under section 15T of the SEBI Act, 1992 challenging on the grounds 1) That
Artemis was a Public listed company and the information that was published was the basis for all
its decision and the state of affairs of artemis were not known to Dreamsellers 2) That with the
repeal of the 1997 takeover regulations, any old case law governing the old regulations would
not come in way at all 3) There was no way that dreamsellers could have known the fraud while
making the open offer 4) The open offer is not triggered by the pledge and the offer being
voluntary would not affect anyone 5) SEBI has not dealt with the alternative proposal of repricing of the offer.
6. SAT upheld SEBIs decision and stated that (i) Regulation 23 of the New takeover
Regulation is not applicable in the present case (ii) Regulation 27(1)(d) of the 1997 takeover has
to be properly interpreted and read along the words ejusdem generis to state the other situations
where it is impossible to make an open offer (iii) 1997 Takeover regulations have been well
interpreted by Honble Supreme court (iv) Dreamsellers ought to have conducted due diligence
and by conducting so, the fraud could have been known (v) There was no violation of the
principles of natural justice in the present case.
7. Aggrieved by SATs decision Dreamsellers filed an appeal to the Honble Supreme Court of
India under Section 15Z of the SEBI Act, 1992. Before the supreme court Dreamsellers
contended that (i) Both SEBI and SAT did not appreciate the fact that the large scale
embezzlement and siphoning of funds were known after the open offer was made and the same
was known only by a special investigative (ii) It is in itself a nullity that SAT renders a restrictive
interpretation of regulation 27 of the takeover regulations. Therefore, there is a case to be made
for constituting a larger bench to reconsider even the earlier rulings of the Supreme Court.
8. SEBI too has filed its reply. The pleadings were and the matter was posted for arguments. The
chief justice of India has constituted a larger bench to look into the matter in detail and if
necessary, even reconsider the earlier ratios.

xii
MEMORANDUM ON BEHALF OF RESPONDENT

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

ISSUES RAISED

1. WHETHER THE PROVISIONS OF REGULATION 23 OF THE NEW TAKEOVER REGULATIONS

RELATING TO WITHDRAWAL OF OPEN OFFER COULD BE APPLIED TO AN OPEN OFFER
MADE UNDER THE 1997 TAKEOVER REGULATION?

2. WHETHER

IT CAN BE SAID THAT DREAMSELLERS HAD FAILED TO EXERCISE DUE

COULD

HAVE

BEEN KNOWN BY DREAMSELLERS, IF DREAMSELLERS HAD EXERCISED PROPER

DUE

DILIGENCE AND THE FACTS RELATING TO FRAUD WERE

KNOWN

OR

DILIGENCE?

3. WHETHER SEBI HAD VIOLATED THE PRINCIPLES OF NATURAL JUSTUCE IN THE PRESENT
CASE WHILE PASSING THE ORDER REJECTING THE APPLICATION TO WITHDRAW THE
OPEN OFFER WITHOUT HEARING DREAMSELLERS?

4. WHETHER REGULATION 27 (1) (D)

OF THE

1997

AN INTERPRETATION WHEREBY, THE WORDS

TAKEOVER REGULATION IS TO GIVEN

SUCH CIRCUMSTANCES AS IN OPINION OF

THE BOARD MERIT WITHDRAWAL ARE TO BE READ EJUSDEM GENERIS WITH THE OTHER
PROVISIONS OF REGULATION

27(1) OF THE SAID CODE I.E. AS CIRCUMSTANCES WHERE

IT IS IMPOSSIBLE TO PERFORM THE OPEN OFFER?

xiii
MEMORANDUM ON BEHALF OF RESPONDENT

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

SUMMARY OF ARGUMENTS

ISSUE 1: WHETHER

THE PROVISIONS OF REGULATION

23

OF THE NEW TAKEOVER

REGULATIONS RELATING TO WITHDRAWAL OF OPEN OFFER COULD BE APPLIED TO AN OPEN

OFFER MADE UNDER THE 1997 TAKEOVER REGULATIONS?

The Respondent humbly submits that the provision of Reg. 23 of the new takeover regulations
cannot be applied to an open offer made under the provision of old takeover regulations. It is
further submitted that there is no express retrospective effect given to the new code. Moreover,
the new takeover code has been equipped with a savings clause which safeguards the open offer
made under the provisions of the old code.
ISSUE 2: WHETHER

IT CAN BE SAID THAT DREAMSELLERS HAD FAILED TO EXERCISE DUE

DILIGENCE AND THE FACTS RELATING TO DUE DILIGENCE WERE KNOWN OR COULD HAVE
BEEN KNOWN BY DREAMSELLERS, IF DREAMSELLERS HAD EXERCISED PROPER

DUE

DILIGENCE?

The Respondent humbly submits that the appellant company failed to exercise due diligence and
that facts relating to fraud could have been known. It is further submitted that the application of
principle of caveat emptor requires the appellant to get all relevant information regarding the
target company before making a public announcement. After making the public announcement
they cannot rescind it.
ISSUE 3: WHETHER SEBI HAD VIOLATED THE PRINCIPLES OF NATURAL JUSTICE IN THE PRESENT
CASE WHILE PASSING ITS ORDER REJECTING THE APPLICATION TO WITHDRAW THE OPEN
OFFER WITHOUT HEARING DREAMSELLERS?

The Respondent humbly submits that the principles of natural justice had not been violated in the
present case while passing its order in rejecting the application to withdraw the open offer
without personally hearing to Dreamsellers. It is contended by the Respondent that it had

xiv
MEMORANDUM ON BEHALF OF RESPONDENT

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

accepted the written submission filed by the Appellant and that it applied its judicial mind while
deciding the case.
ISSUE 4: WHETHER

REGULATION

27(1) (D)

OF THE

1997

TAKEOVER REGULATIONS IS TO BE

GIVEN AN INTERPRETATION WHEREBY, THE WORDS SUCH CIRCUMSTANCES AS IN THE OPINION

OF THE BOARD MERIT WITHDRAWAL ARE TO BE READ EJUSDEM GENERIS WITH THE OTHER
PROVISIONS OF REGULATION

27 (1)

OF THE SAID CODE I.E. AS CIRCUMSTANCES WHERE IT IS

IMPOSSIBLE TO PERFORM THE OPEN OFFER?

It is humbly submitted before the Honble Supreme Court that Regulation 27(1) (d) of the
Takeover Regulations, 1997 is to be given a strict interpretation and the words such
circumstances as in the opinion of the Board merit withdrawal are to be read ejusdem generis
with the other provisions of Regulation 27(1) limited to the circumstances where it is impossible
to perform the open offer.

xv
MEMORANDUM ON BEHALF OF RESPONDENT

ARGUMENTS ADVANCED

ISSUE I
WHETHER

THE PROVISIONS OF REGULATION

23

OF THE NEW TAKEOVER

REGULATIONS RELATING TO WITHDRAWAL OF OPEN OFFER COULD BE APPLIED TO

AN OPEN OFFER MADE UNDER THE 1997 TAKEOVER REGULATIONS?

A. It is humbly submitted before the Honble Court that the provisions of Regulation 23 of the SEBI
(Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (hereafter referred to as
New Takeover Regulations) relating to withdrawal of open offer cannot be applied to an open
offer made under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997
(hereafter referred to as Old Takeover Regulations). The respondent would like to submit his
submission on this issue in four folds, viz, [1.1] Strict Interpretation of Law [1.2] Withdrawal
provision of the 1997 Regulation upheld, [1.3] Public offer made under the 1997 Regulation, and
[1.4] Protection by the Savings Clause.

[1.1] STRICT INTERPRETATION OF LAW

B. The Respondent humbly submits that for the interpretation of enactment it is necessary to
consider the plain meaning of the words used.1 The court's function is not to say what the
legislature meant, but to ascertain what the legislature has said it meant.2 The intention of the
legislature is primarily gathered from the language used which means attention should be paid to
what has been said.3
C. When the language is clear, it is the duty of the court to give effect to it. It cannot be avoided on
the ground of hardship or inconvenience when the meaning is clear on the face of the statute 4 nor

Sales-tax Officer v. Kanhayalal, AIR 1959 SC 135.

Lala Suraj v. Golab Chand, (1900) ILR 27 Cal 724.
3
Gwalior Rayon Silk Mfg. Co. Ltd v. Custodian of Vested Forests, AIR 1990 SC 1747.
4
Commr of Income-tax, WB v. Sri Kishab Chandra Mandal, AIR 1950 SC 265.
2

1
MEMORANDUM ON BEHALF OF RESPONDENT

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

is the court concerned with the motive of Parliament in enacting the statute.5 It is also wellsettled that the true import of provisions which are explicit cannot be limited or controlled by
recourse to what is said to be the spirit of the legislation.6

[1.2] WITHDRAWAL PROVISION OF THE 1997 REGULATION UPHELD

D. The Respondent humbly submits that provisions of the 1997 Regulations have been interpreted
by the Apex Court and have been upheld by the same in various cases.
E. Further submitted, that a bare perusal of the Takeover Code shows that Regulation 27 states the
general rule in negative terms and it provides that no public offer, once made, can be withdrawn.
Moreover, the exceptions which are provided by the code are to be construed very strictly7. Once
the public announcement has been made no offer can allowed to be withdrawn which would
destroy the general rule.
F. In the matter of Nirma Industries Limited and another v. Securities and Exchange Board of
India8, the court under similar facts and circumstances took into consideration the provisions of
the 1997 takeover regulations since the public offer was made as per the provisions of the
aforesaid regulations.
G. In the matter of Securities and Exchange Board of India v M/s. Akshya Infrastructure Private
Limited9, the public announcement made by the Respondent Company was on the 20th of
October, 2011, two days before the enactment of the new Takeover Regulations of 2011. The
counsel for the Respondent pleaded that the withdrawal should be allowed in terms of Regulation
27 in further continuance of Regulation 23 of the New Code. However, the Honble Court held
that the judgment provided in Nirma Industries does not need consideration and upheld the same.
[1.3] PUBLIC OFFER MADE UNDER THE 1997 REGULATION
H. The Respondent humbly submits that the Appellant had made a public offer on the 1st of
October, 2010 which was published in the Financial Express, Mumbai Edition, to acquire up to

RMDC v. State of Mysore, AIR 1962 SC 594; Gajapati Narayan Deo v. State of Orissa, AIR 1953 SC 375.
Kesavan Madhava Menon v. State of Bombay [1951] SCR 228; Rananjaya Singh v. Baijnath Singh , 1954 SCJ
838; Arul Nadar v. Authorised Officer, Land Reforms, (1998) 7 SCC 157.
7
Infra Note 8.
8
Nirma Industries Limited and another v. Securities and Exchange Board of India, (2013) 8 SCC 20.
9
Securities and Exchange Board of India v M/s. Akshya Infrastructure Private Limited, (2014) 11 SCC 112.
6

2
MEMORANDUM ON BEHALF OF RESPONDENT

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

37.6% equity shares of Artemis Ltd. An application for the Draft Letter of Offer was also made
by them to the Board within the stipulated 14 days10.
I. It is submitted that the aforementioned act of making a public announcement was initiated and
completed as per the mandate of Reg. 1011. This shows their intent of invoking the provisions of
the takeover code which was present at that point of time. It further goes to show that the entire
process was to be governed by that code.
J. Further submitted, that on the October 22, 2011 there was a simultaneous repeal and reenactment of the Takeover Regulations which brought into effect the New Takeover
Regulations.12 However, there were no explicit retrospective powers provided on the
aforementioned Regulations. It is trite law that provisions of subordinate legislation such as the
Takeover Regulations cannot apply retrospectively13.
K. The Respondents further submits that In the matter of IncomeTax Officer, Alleppey v. M.C.
Ponnoose & Ors14, the Honble Court observed that the courts would not ascribe retrospectively
to new laws affecting rights unless by express words or necessary implication it appears that
such was the intention of the legislature. The retrospective effect of a statute depends on the
language of the statute and in the absence of such language; the courts cannot give it a
retrospective effect.
L. It was observed by the Supreme Court in the matter of State of Punjab v. Bhajan Kaur,15 that a
statute is presumed to be prospective unless held to be retrospective, either expressly or by
necessary implication. It is one of the facets of the rule of law.
M. The Hon'ble Bombay High Court, in the context of Regulation 47 of the Takeover Regulations,
1997 (identical to Regulation 35 of the Takeover Regulations, 2011) ruled in Harinarayan Bajaj
v. Union of India16 that the same, "nowhere provide for retrospective application of these
Regulations.
10

Moot Proposition, Pg 1, 6.
Regulation 10, Substantial Acquisition of Shares and Takeovers, SEBI Notification No. 124(E) (Feb. 20, 1997)
available at http://www.sebi.gov.in/acts/act15a.pdf.
12
Substantial Acquisition of Shares and Takeovers, SEBI Notification No. LAD-NRO/GN/2011-12/24/30181 (Sept.
23, 2011), available at http://www.sebi.gov.in/cms/sebi_data/commondocs/takeovernotifi_p.pdf.
13
Infra Note 19.
14
IncomeTax Officer, Alleppey v. M.C. Ponnoose & Ors, 1970 SCR (1) 678; Sirish Finance and Investment v. M
Sreenivasulu Reddy and Ors., (2001) SCC Bom 838.
15
State of Punjab v. Bhajan Kaur, (2008) 12 SCC 112
16
Harinarayan Bajaj v. Union of India, (2009) 147 Comp Cases 579 (Bom).
11

3
MEMORANDUM ON BEHALF OF RESPONDENT

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

N. Respondents have placed reliance on this judgment wherein the SAT had set aside the impugned
order of the SEBI in the matters of Madhuri S Pitti and others v. SEBI17 and Khaitan
Electricals v. SEBI18, where the SAT observed that for acts committed prior to the enactment of
2011 regulations, the same cannot be applied retrospectively while deciding those cases. They
would continue to be governed by the provisions of the Old Takeover Regulations of 1997.
O. It was also held in the matter of acquisition of shares of CG-VAK Software and Exports
Limited19, the SEBI held that New Takeover Regulations does not apply in the situation where
the acquisition was made by the notice when at the relevant time Takeover Regulations, 1997
were in force but did state that the Board may, however, take any other appropriate action at
appropriate stage.
P. Also held In the matter of M/s Khatau Exim Limited (Now known as M/s Velox Industries
Limited)20, the Adjudication Officer relied on all the above mentioned judgments to also declare
that the case should be decided in light of the 1997 regulations and penalty to be provided on the
basis of the same.
Q. In the matter of SPS Share Brokers Private Limited v. Securities and Exchange Board of
India21, the SAT had to answer, whether there could be any application of amended reg. 7 of
1997 regulation which came into force in 2002 for an act committed in the year 2001? Holding
the answer in negative, the SAT declared that the SEBI had made an error while stating that
amended Reg. 7 could be applied.
R. In the present scenario, there is a provision in the New Takeover Regulations which permit the
continuance of the old code for the public offers which were initiated as per the provisions of the
old code to be continued as such.

17

Madhuri S Pitti v. SEBI, SAT Appeal No. 2 of 2013,(September 13, 2013), available at
http://www.sebi.gov.in/cms/sebi_data/attachdocs/1383207800428.pdf
18
Khaitan Electricals v. SEBI, SAT Appeal No. 23 of 2013, (June 06, 2013), available at
http://www.sebi.gov.in/cms/sebi_data/attachdocs/1357036277865.pdf
19
SEBI Order In the matter of CG-VAK Software and Exports Limited, WTM/RKA/CFD-DCR/07/2014, available
at http://www.sebi.gov.in/cms/sebi_data/attachdocs/1392895909969.pdf.
20
Adjudication Order In the matter of M/s Khatau Exim Limited, AK/AO7581/2015, available at
http://www.sebi.gov.in/cms/sebi_data/attachdocs/1442921557603.pdf
21
SPS Share Brokers Private Limited v. Securities and Exchange Board of India, SAT Appeal No. 35 of 2013,
(August 27, 2013), available at http://www.sebi.gov.in/cms/sebi_data/attachdocs/1377592049399.pdf

4
MEMORANDUM ON BEHALF OF RESPONDENT

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

[1.4] PROTECTION BY THE SAVING CLAUSE

S. The Respondent humbly submits that there is a Repeal and Savings provision in the New
Takeover Regulations of 2011 which not only repeals the 1997 regulations but also protects the
applicability of the repealed regulation in some certain situations. A saving clause is used to
preserve some rights from the destruction of certain kind of rights, remedies or privileges already
existing. They are enacted into repealing clauses to safeguard rights which have already accrued
during the operation of the statute which is being repealed.
T. Regulation 35(2) (c)22 states that, any open offer for which a public announcement has been
made under the repealed regulations shall be required to be continued and completed under the
repealed regulations. This provision removes any possibility of the New Takeover Regulations
to be applicable in the present scenario.
U. Furthermore, the Respondent humbly submits that when the words of a statute are clear, plain
and unambiguous, the courts are bound to give effect to that meaning irrespective of the
consequences.23 Thus, the counsel humbly submits that following the aforementioned
judgements of various courts and tribunals that Regulation 23 of the New Takeover Regulations
has no application and Regulation 27 is applicable for an open offer made under the 1997
regulations.

22

Substantial Acquisition of Shares and Takeovers, SEBI Notification No. LAD-NRO/GN/2011-12/24/30181 (Sept.
23, 2011), available at http://www.sebi.gov.in/cms/sebi_data/commondocs/takeovernotifi_p.pdf.
23
Nelson Motis v. Union of India, AIR 1992 SC 1981, 1984; State of Jharkhand v. Govind Singh, AIR 2005 SC 294,
p. 296; Nathi Devi v. Radha Devi Gupta, AIR 2005 SC 648, p.659. Ombalika Das v. Hulisha Shaw, (2002) 4 SCC
539. Raghunath Rai Bareja v. Punjab National Bank, (2007) 2 SCC 230.

5
MEMORANDUM ON BEHALF OF RESPONDENT

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

ISSUE II
WHETHER IT CAN BE SAID THAT DREAMSELLERS HAD FAILED TO EXERCISE DUE
DILIGENCE AND THE FACTS RELATING TO DUE DILIGENCE WERE KNOWN OR

COULD

HAVE BEEN KNOWN BY DREAMSELLERS, IF DREAMSELLERS HAD

EXERCISED PROPER DUE DILIGENCE?

A. The respondents humbly submit to the Honble Supreme Court that Dreamsellers had failed to
exercise proper standard care and were not true and adequate while exercising due diligence. The
submission on this issue is put forward into three folds, viz, [2.1] Due diligence performed by
Dreamsellers was not true and adequate [2.2] Application of the principle of Caveat Emptor and
[2.3] Charges registered against Artemis were missed out by Dreamsellers.

[2.1] DUE DILIGENCE PERFORMED BY DREAMSELLERS WAS NOT TRUE AND ADEQUATE.
B. According to Blacks Law dictionary,24 due diligence is defined as25, Such a measure of
prudence, activity, or assiduity, as is properly to be expected from, and ordinarily exercised by, a
reasonable and prudent man under the particular circumstances; not measured by any absolute
standard, but depending on the relative facts of the special case.26
C. Due diligence is essential for a buyer to determine the genuineness and legitimacy of the
companys ownership of its assets, and whether the transfer of their title needs a third-party
approval, as well as if it is subjected to any statutory, regulatory or contractual approval. 27 The
buyer should be aware and acquaint himself with all the existing and potential liabilities that it
would get into, all of which would require a comprehensive 360 degree approach of due
diligence.28

24

10th ed., Blacks Law Dictionary

Seth Dua & Associates, Joint Ventures & Mergers and Acquisitions in India: Legal and Tax Aspects
LexisNexis Butterworths, 5 (2006); Vikrant Pachnanda and Vinee Unnikrishnan, Due Diligence issues that face
M&As , (2011) PL NovemberS-2.
26
Perry v. Cedar Falls, 87 Iowa, 315, 54 N. W. 225; Dillman v. Nadelhoffer, 1G0111. 121, 43 N. E. 378; Hendricks
v. W. U. Tel. Co., 120 N. C. 304, 35 S. E. 543, 78Am. St. Rep. 058; Highland Ditch Co. v. Mumford; 5 Colo.330;
Chander Kanta Bansal v. Rajinder singh Anand ( 2008) 5 SCC 117
27
LM Sharma, Amalgamation, Merger and Acquisition, Comp. L. J. (1997).
28
John O. Nigh and Macro Boschetti, M & A Due diligence: The 360 degree approach, available at https://imaainstitute.org/docs/m&a/towersperrin_01_M&A-Due%20Diligence-The-360-Degree-View.pdf
25

6
MEMORANDUM ON BEHALF OF RESPONDENT

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

D. In the present case Dreamsellers contended that they have exercised due diligence on the
documents that were available on the public domain as represented by the promoters of Artemis.
The facts relating to the fraud have come into picture after the open offer has been made 29. It was
also stated by Dreamsellers that Artemis was a Public Listed Company and that any due
diligence that could be conducted by them would be only on the documents that were made
available to them like any other reasonable person.30
E. However, the Counsel humbly submits that due diligence is generally conducted for the past
three years on the target company.31 In the present case, the irregularities that were detected
between the years 2005-2008 and the public offer was made in the year 2010. Therefore, if taken
into consideration, the information on the company from 2010-2007 and if Dreamsellers through
its Merchant Bankers32 have exercised proper due diligence and investigated into the companys
accounts etc, then there would be a possibility that in the year 2007-2008 the fraud have been
known.
F. In the case of Keynote Corporate services Ltd. v. SEBI33 it was held that Merchant Bankers
have failed to exercise proper due diligence in providing disclosures to the investors regarding
ESL and was held that there should have been veracity and adequacy to call for relevant
information and is expected to carry out due diligence to bring out truth and adequacy and
information.
G. In furtherance, in the SEBI Order of Bharatiya Global infomedia Ltd34 the same was reiterated
that Merchant Bankers have failed in exercising the due diligence in detecting the red flags in the
disclosures that were made
H. Similarly, in the give case, the Merchant Banker of the Dreamseller have failed to exercise the
due diligence properly because if they had conducted the proper diligence then they would have
29

Moot Proposition, p. 4 17
Adjudication order in the matter of SEBI v. India bulls securities Ltd.,SD/ Ao/88/2010, (July 29, 2010) available
at http://www.sebi.gov.in/cms/sebi_data/attachdocs/1356705349130.pdf
31
Pramod Jain v. Securities Exchange Board of India, SAT Appeal No. 111 of 2012, ( August 6, 2014), available at
http://www.sebi.gov.in/cms/sebi_data/attachdocs/1407312252581.pdf
32
Regulation 64, Issue of Capital and Disclosure Requirements, SEBI Notification No. LAD-NRO/GN/200910/15/174471 (August 26, 2009) available at http://www.sebi.gov.in/guide/sebiidcrreg.pdf.
33
Keynote Corporate services Ltd. v. SEBI, 2014 Indlaw SAT 22
34
SEBI order in matter of Bharatiya Global infomedia Ltd, WTM/ RKA/ IVD/10/ 2014, available at
http://www.sebi.gov.in/cms/sebi_data/attachdocs/1393857624351.pdf, H. J. Securities Private Limited v. Securities
and Exchange Board of India, 2012 Indlaw SAT 65; Systematix Shares & Stocks (India) Limited v. Securities and
Exchange Board of India, 2012 Indlaw SAT 90.
30

7
MEMORANDUM ON BEHALF OF RESPONDENT

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

come to know the facts relating to fraud committed by the company two years ago. Hence, it can
be stated that Dreamsellers did not exercise standard care to conduct the due diligence and
therefore were negligent in the process.

[2.2] APPLICATION OF THE PRINCIPLE OF CAVEAT EMPTOR

I. It is humbly submitted that the golden principle of Caveat Emptor35 is applicable to the given
facts and circumstances i.e. the buyer/investor has to be aware entirely, about the target company
which is only possible through the process of due diligence. An investor seeking to maximize the
value of a transaction should conduct robust due diligence to determine the risks and benefits
associated with the assets to be acquired. The "diligent investor," whether a potential merger
partner or a potential acquirer should take the Latin maxim, caveat emptor or "let the buyer
beware" to heart when assessing the complete value of a potential transaction.
J. In the landmark acquisition of P&G acquiring Gillette36 it was not sufficient to investigate on
Gillette but it also required P&G to do a thorough analysis of the target company by going
through their business, management evaluation, financial condition, customer opinions, etc.
K. This was also seen in the similar circumstances of Tata Motor Ltd acquiring Jaguar Land
Rover37 where Tata Motors have gone through 9 month deep extensive analysis on the target
company by going through their media reports, customer opinions, Journals and other aspects.
L. Similarly, in the given case, if the Dreamsellers had not restricted itself by checking the
documents available only public documents and have conducted standard of due diligence38,
prior to making the open offer, the facts regarding the fraud could have been known to them.
Therefore, it can be concluded that Dreamsellers were negligent in exercising a standard of care
while performing due diligence.

35

AIYAR P. RAMNATH, ADVANCED LAW LEXICON 721 (3rd ed, 2005).

Case
No
COMP/
M.
3732Procter
&
Gamble/
Gillette,
available
http://ec.europa.eu/competition/mergers/cases/decisions/m3732_20050715_20212_en.pdf
37

Tata
motors
complete
acquition
on
Jaguar
Land
rover
available
www.tata.com/article/inside/mCgnlgckTZw=/TLYVr3YPkMU=
38
World Sport Group (India) (P) Ltd. v. Board of Control of Cricket in India, (2011) SCC OnLine Bom 242.
36

8
MEMORANDUM ON BEHALF OF RESPONDENT

at
at

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

[2.3] CHARGES REGISTERED AGAINST ARTEMIS WERE MISSED OUT BY DREAMSELLERS.

M. Often lately there have been cases where the target company does not disclose the complete
information about it, out of which the charges registered against the company, is one39. This is
critical and thus, in such cases the investor should go through a stringent verification of the
documents and whatever information procured should be checked properly in order to overcome
such circumstances.40
N. In the case of Nirma Industries v. SEBI,41 the court held that The appellants already knew
about the pending litigations that were against the company prior to making the open offer and
failed to mention it in the Due diligence report. Hence the Appellants have failed to conduct
proper due diligence
O. In the present case, there were already pending litigations that were underway on Artemis 42 in
the Delhi High Court which was missed out by dreamsellers which shows that Dreamsellers have
been Negligent in conducting the due diligence of Artemis. If proper due diligence would have
been performed the facts relating to the pending litigation against the company and the fraud
would either be known or could have been known by them.

39

Imperial corporation Finance and services Private Limited v. SEBI, 2005 (61) SCL 197, Sahara India Real Estate
Corporation Limited & Ors v. SEBI, 2012 Indlaw SC 272, In Re: Cell Industries Limited and others, 2016 Indlaw
SEBI 129.
40
Supra Note 5
41
Nirma Industries v. SEBI, (2013) 8 SCC 20.
42
Moot Proposition, p. 2 9

9
MEMORANDUM ON BEHALF OF RESPONDENT

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

ISSUE III
WHETHER SEBI

HAD VIOLATED THE PRINCIPLES OF NATURAL JUSTICE IN THE

PRESENT CASE WHILE PASSING ITS ORDER REJECTING THE APPLICATION TO

WITHDRAW THE OPEN OFFER WITHOUT HEARING DREAMSELLERS?

A. The Respondent humbly submits that the Securities and Exchange Board of India (hereinafter
referred to SEBI) has not violated the principles of Natural Justice in the present case while
passing its order rejecting the application to withdraw the open offer without hearing
Dreamsellers.
DISCRETIONARY POWER OF ADJUDICATING BODY ON PERSONAL HEARING
B. In the rulings of the Apex Court, the court observed that the rule of audi alteram partem ensures
that no one should be condemned unheard.43 A person against whom any action is sought to be
taken or whose right or interest is being affected should be given a reasonable opportunity to
defend himself.44 It is a right of the aggrieved party to be provided with an opportunity to present
his case.
C. The Respondent humbly submits that they do acknowledge the law that no party can be
condemned unheard but there are two principle modes of hearing, viz.:
1. Oral hearing or personal hearing before the adjudicating authority.
2. Hearing through written submissions.
D. In the present case an application had been made by the Appellant for withdrawal of their open
offer by making written submissions through their merchant bankers. This application had to be
considered by the Board for passing their order. Thus, the hearing procedure may vary from case
to case. Natural Justice does not predicate an oral hearing unless the context requires otherwise.45
Even the courts do not insist that personal hearing has to be given by the concerned authority to
the person concerned under all circumstances and under different statutes.
E. Furthermore, the Respondent also contends that principle of natural justice requires quasijudicial bodies cannot make decisions adverse to an individual without providing him an
43

Sangram Singh v. Election Tribunal, AIR 1955 SC 425; Ashok Kumar Sonkar v. Union of India, (2007) 4 SCC
54.
44
M. P. Jain & S. N. Jain, Principles of Administrative Law, 6 d. 2011, p. 286.
45
A.K. Gopalan v. State of Madras, AIR 1950 SC 136; Girias Investment (P.) Ltd. v. State of Karnataka, (2008) 7
SCC 53; Ganesh Santa Ram Sirur v. State Bank of India, (2005) 1 SCC 13.

10
MEMORANDUM ON BEHALF OF RESPONDENT

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

effective opportunity of meeting any relevant allegation against him, but it does not have to be a
personal hearing. Hearing can also be through a written submission. If an adjudicating body
makes a decision adverse to an individual without even providing a minimum opportunity of
presenting his case through written memoranda then there would be a violation of the principles
of natural justice.
F. In the matter of M.P. Industries Ltd. v. Union of India46, it was observed whether opportunity
of hearing should be afforded by written representation or by personal hearing depends on the
facts and circumstances of each case and ordinarily it is in the discretion of the tribunal.
G. In the leading case of Nirma Industries v. Securities and Exchange Board of India47, under
similar facts and circumstances, it was observed by the court held that personal hearing was
neither requested by the Appellant nor by their merchant bankers. The application contained all
the necessary detail that was required to be put forward. The Board had considered all those
points before passing an order.
H. In matter of Union of India & Anr v. M/S. Jesus Sales Corporation48, it was observed when the
principles of natural justice require an opportunity to be heard before an adverse order is passed
on any appeal or application; it does not in all circumstances mean a personal hearing.
I. The requirement is complied with by providing an opportunity to the individual to present his
case before the quasi-judicial body who is expected to apply its judicial mind to the issues
involved.
J. In the matter of Board of Mining Examination v. Ramjee49, an inspector enquired into the cause
of the mine accident, suspended the certificate of the concerned shot-firer and sent all the papers
to the Board which cancelled his certificate. He challenged the order to the Board since he had
not been allowed to explain his conduct. However, Supreme Court held that there was no flaw in
the procedure since the shot-firer had, in the form of an appeal, sent his explanation which
amounted to hearing.

46

M.P. Industries Ltd. v. Union of India, AIR 1966 SC 671: (1966) 1 SCR 466, para 10.
Nirma Industries v. Securities and Exchange Board of India, (2013) 8 SCC 20
48
Union of India & Anr v. M/S. Jesus Sales Corporation, (1996) 4 SCC 69
49
Board of Mining Examination v. Ramjee AIR 1977 SC 965: (1977) 2 SCC 256.
47

11
MEMORANDUM ON BEHALF OF RESPONDENT

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

K. In another case, the Apex Court held that applicability of the natural justice principle depends on
the context facts and circumstances of each case. The object is to ensure a fair hearing, a fair deal
to a person whose rights are going to be affected.50
L. In the matter of Union of India v. J.P.Mittar51, a matter relating to correction of date of birth, it
was not considered necessary to provide personal hearing; a mere representation was held to be
sufficient to conform to the application of principles of natural justice.
M. The Respondent humbly submits that it is clear from the above mentioned case laws that
personal/ oral hearing is not a universal rule in adjudicatory proceedings by quasi-judicial bodies.
It has been seen in the above circumstances that the submission of the written representation of
by the concerned individual is regarded as an adequate compliance with natural justice.
N. Therefore, the order passed by the Respondent in the present without giving the Appellant a
personal hearing is in compliance with the principles of natural justice. It is also pertinent to note
that there was no request for a personal hearing made by the Appellant.

50

Ganesh Santa Ram Sirur v. State Bank of India, (2005) 1 SCC 150; Syndicate Bank v. Venkatesh Gururao Kurati,
(2006) 3 SCC 150.
51
Union of India v. J.P.Mittar AIR 1971 SC 1093.

12
MEMORANDUM ON BEHALF OF RESPONDENT

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

ISSUE IV
WHETHER REGULATION 27(1) (D) OF THE 1997 TAKEOVER REGULATIONS IS TO
BE GIVEN AN INTERPRETATION WHEREBY, THE WORDS SUCH CIRCUMSTANCES AS
IN THE OPINION OF THE BOARD MERIT WITHDRAWAL ARE TO BE READ EJUSDEM
GENERIS WITH THE OTHER PROVISIONS OF REGULATION 27 (1) OF THE SAID CODE
I.E. AS CIRCUMSTANCES WHERE IT IS IMPOSSIBLE TO PERFORM THE OPEN OFFER?
A. It is humbly submitted before the Honble Supreme Court that Regulation 27(1) (d) of the
Takeover Regulations, 1997 is to be given a strict interpretation and the words such
circumstances as in the opinion of the Board merit withdrawal are to be read ejusdem generis
with the other provisions of Regulation 27(1) to be limited to only circumstances where it is
impossible to perform the open offer. The submission on this issue is put forward into two folds:
[4.1] Impossibility to perform Public offer [4.2] Intention of Legislature.

[4.1] IMPOSSIBILITY TO PERFORM PUBLIC OFFER

B. It is humbly submitted before the Honble Court that the rule of ejusdem generis52 reflects an
attempt to reconcile incompatibility between the specific and general words.53 The purpose of the
rule is to ensure that all the words in a statute are to be construed as a whole and that no words in
a statute are presumed to be superfluous.54 Further, the submission is put forward in two folds
viz., [4.1.1] Regulation 27(1) forming a same genus and [4.1.2] Essentials for the rule.
[4.1.1] REGULATION 27(1) FORMING A SAME GENUS
C. According to the code, once a public offer is made, it cannot be withdrawn expect when it
becomes impossible to perform such offer. This is an exception to the general rule that an offer
can never be withdrawn. This exception is enshrined under Regulation 27 of the Takeover Code,
1997 which is given below:

52

Thakur Amarasinghji v. State of Rajasthan, AIR 1955 SC 504, p. 523; State of Karnataka v. Kempaiah, AIR 1998
SC 3047.
53
SINGH G.P., PRINCIPLE OF STATUTORY INTERPRETATION (12th ed., Lexis Nexis Buttersworth 2014); 10th ed.
Blacks Law Dictionary.
54
Tribhuwan Prakash Nayyar v. Union of India, (1969) 3 SCC 99; Siddeshwari Cotton Mills (P) Ltd. v. Union of
India, AIR 1989 SC 1019.

13
MEMORANDUM ON BEHALF OF RESPONDENT

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

D. 27(1) No public offer, once made, shall be withdrawn except under the following
circumstances:
(a) Omitted by Security and Exchange Board of India in year 2002.
(b) the statutory approval(s) required have been refused;
(c) the sole acquirer, being a natural person, has died;
(d) such circumstances as in the opinion of the Board merit withdrawal.55
E. It is essential for applying the rule of ejusdem generis that enumeration things before the general
words must constitute a class or genus which admits of a number of species or member. 56 The
exception to the Takeover Code cannot destroy the general rule that an offer once made, cannot
be withdrawn. An offer can only be withdrawn when there is impossibility to perform such offer.
Clause (b) of Regulation 27(1) permits the application of public offer to be withdrawn in case of
legal impossibility when the statutory approval has been denied. Clause (c) permits the
application of public offer to be withdrawn in case when person making such offer has died. This
deals with the natural impossibility of death of a person. Clauses (b) and (c) constitute same class
or category of impossibility to perform the open offer.

[4.1.2] ESSENTIALS FOR THE RULE

F. The rule applies when following essentials are satisfied: (1) the statute contains enumeration
of specific words; (2) the subjects of enumeration constitute a class or category; (3) that class
or category is not exhausted by the enumeration; (4) the general terms follow the
enumeration; and (5) there is no indication of a different legislative intent.57 For the
application of rule of ejusdem generis, it must be found out that the preceding words or specific
words constitute a genus class or category so that general words which are following them can be
given the same color.58 All the essentials must need to be satisfied if the rule is to be applied. The
55

Regulation. 27, Substantial Acquisition of Shares and Takeovers, SEBI Notification No. 124(E) (Feb. 20, 1997)
available at http://www.sebi.gov.in/acts/act15a.pdf.
56
State of Bombay v. Ali Gulshan, AIR 1955 SC 810; Jagdish Chandra Gupta v. Kajaria Traders (India) Ltd., AIR
1964 SC 1882; Raja Bhanu Pratap Singh v. Asstt. Custodian, AIR 1966 SC 245.
57
Housing Board of Haryana v. Haryana Housing Board Employees Union, AIR 1996 SC 434, p. 441;Grasim
Industries Ltd. v. Collector of Customs, Bombay, AIR 2002 SC 1766; Municipal Corporation of Greater Bombay v.
Bharat Petroleum Corporation Ltd., (2002) 4 SCC 219; CIT v. McDowell and Co. Ltd., (2009) 10 SCC 755; Amar
Chandra Chakraborty v. Collector of Excise, (1972) 2 SCC 442;
58
Maharashtra University of Health Sciences v Satchikitsa Prasarak Mandal, (2010) 3 SCC 786; Allen v
Emmerson, (1944) 1 ALL ER 344; Union of India v Alok Jain, (2010) 5 SCC 349.

14
MEMORANDUM ON BEHALF OF RESPONDENT

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

Honble Supreme Court59 has held that the rule of ejusdem generis is neither final nor conclusive
and is attracted only when the specific words enumerated constitute a class and when there is no
manifestation of intent to give broader meaning to the general words. 60
G. The rule is that when general words follow the specific words of the same nature, the general
words must be confined to the things of the same kind as those specified.61 Therefore, in the
present case also, Regulation 27(1) (d), which is a general clause, should also follow the specific
terms, which are Regulation 27 (1) (b) and (c), forming a specific genus of impossibility to
perform the public offer. The term such circumstances in clause (d) would also be restricted to
a situation which would make it impossible for the acquirer to perform the open offer. The
discretion has been left on the Board by the legislature to determine the circumstances which
falls within the realm of impossibility to carry on public offer.62 Therefore, all the above
mentioned conditions are getting satisfied which are required for the application of the rule of
ejusdem generis.
H. In the present case, on 1st October, 2010, Dreamsellers had made the public announcement in
Financial Express for the open offer to acquire upto 37.6% of equity shares of Artemis.
Meanwhile, the lenders of Artemis had pushed the directors to review the accounts of the
company. The independent directors conducted an internal audit of Artemis operation according
to which some irregularity were observed between 2005 and 2008. In a special investigation
report conducted by independent chartered accountant firm concluded that Rs. 300 crores has
been siphoned off and embezzled by the promoters of Artemis.63
I. After the report was brought in public domain by the directors on October 25, 2011, the prices of
share of Artemis fell drastically. Therefore, when the Dreamseller came to know that they would
suffer economic loss if they execute the open offer, they filed an application for withdrawal to
SEBI. This amounts to economic undesirability and not to impossibility to perform the open
offer and therefore doesnt fall within the same genus or category. Thus, the withdrawal of open
offer shall not be allowed as it goes against the rule of ejusdem generis.

59

Tribhuban Parkash Nayyar v. Union of India (1969) 3 SCC 99; K. Veeraswami v. Union of India, (1991) 3 SCC
655; Rajasthan State Electricity Board v. Mohan Lal, AIR 1967 SC 1857.
60
Craies on Statute Laws, 7th Edn, p.181-182
61
K.K Kochuni v. State of Madras, AIR 1960 SC 1080.
62
Nirma Industries Ltd v. SEBI, (2013) 8 SCC 20.
63
Moot proposition, p. 2, 9.

15
MEMORANDUM ON BEHALF OF RESPONDENT

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

J. In the landmark case of Nirma Industries Ltd v SEBI64, the Honble Supreme Court has held
that the term such circumstances used in Regulation 27(1) (d) of Takeover Code, 1997 would
be restricted would be restricted to a situation which would make it impossible for the acquirer to
perform the open offer. The possibility that the acquirer would end up making losses instead of
generating a huge profit would not bring the situation within the realm of impossibility.
K. In the case of SEBI v Akshya Industries (P) Ltd65., the Honble Supreme Court has reiterated
what has been already held by the SC in the Nirmas Case. The principle of ejusdem generis is
fully applicable for the interpretation of Regulation 27(1) (b), (c) and (d) as there is a common
genus of impossibility.66

[4.2] INTENTION OF LEGISLATURE

L. The object behind the Takeover Code, 1997 is to ensure that in the process of the substantial
acquisition or takeover, the security market is not distorted and to protect the interest of small
investors by providing them the opportunity to exit. The Takeover Code is meant to ensure fair
and equal treatment of all shareholders in relation to substantial acquisition of shares and
takeovers and that the process doesnt take place in a clandestine manner hampering the rights
and the interest of shareholders.67
M. If the application for the withdrawal of open offer is allowed then it would be contrary to the
aims and objectives of the Takeover Code which is to ensure transparency in acquisition of a
large percentage of shares in the target company. This would encourage undesirable and
speculative practices in the stock market which will put an adverse effect on the interest of
smaller shareholders. The acquirer company, Dreamseller, should have done proper due
diligence by checking the accounts while making the open offer to acquire the shares of Artemis.
The economic undesirability could not be a proper ground for allowing the withdrawal the
application of open offer.
N. According to Regulation 27(1) (b), (c) and (d) of the Takeover Code, a public offer once made
can only be permitted to be withdrawn in circumstances which make it virtually impossible to
64

Nirma Industries Ltd v. SEBI, (2013) 8 SCC 20.

SEBI v. Akshya Industries (P) Ltd (2014) 11 SCC 112.
66
Pramod Jain v. Securities Exchange Board of India, SAT Appeal No. 111 of 2012, ( August 6, 2014), available at
http://www.sebi.gov.in/cms/sebi_data/attachdocs/1407312252581.pdf
67
Clariant International Ltd v. SEBI, (2004) 8 SCC 524.
65

16
MEMORANDUM ON BEHALF OF RESPONDENT

2ND GNLU MOOT ON SECURITIES AND INVESTMENT LAW, 2016

perform the public offer. The purpose for deletion Regulation 27(1) (a) was to remove any
misapprehension that an offer once made can be withdrawn if it becomes economically not
viable. The Regulation 27(1) (a) states that withdrawal in consequent to a competitive bidding.
Therefore, this clearly shows that intention of legislature is clear and it doesnt want to create
any ambiguity. The intention is to restrict the Regulation 27(1) (d) in context of other provisions
of Regulation 27(1) in the class of impossibility to perform the open offer.

17
MEMORANDUM ON BEHALF OF RESPONDENT

PRAYER

In the light of the issues raised, arguments advanced and authorities cited, the counsel on behalf
of Respondent humbly prays before this Honble Court to kindly adjudge and declare:

That the order passed by the SAT should be upheld by the Honble Supreme
Court.

That the withdrawal of open offer should not be allowed.

That the cost of the proceedings should be borne by the Appellant.

And pass any other appropriate order as the court may deem fit in the interest of equity, justice
and good conscience.
And for this act of Kindness, the Respondent as in duty bound, shall forever pray.

Respectfully Submitted
Sd/Counsel for the Respondent

xviii
MEMORANDUM ON BEHALF OF RESPONDENT