The Telegraph
Since 1st March, 1999
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Sebi stay on open offer for L&T upheld

Mumbai, Nov. 28: The Securities Appellate Tribunal (SAT) today reaffirmed Sebi’s decision to put Grasim’s open offer for Larsen & Toubro (L&T) on hold.

The regulator’s order had been contested by the A V Birla group, which wanted to snap up 20 per cent more in L&T from investors, but was willing to pay only a fraction of what it had forked out to Reliance last November.

“The Tribunal is not inclined to grant an interim relief in this case as prayed for by appellants — Grasim and Samruddhi Swastik Trading and Investments,” the Tribunal said in its order here today.

More important, the judges who gave their verdict after days of arduous arguments from both sides said granting an interim order would prejudice an investor-protection measure implemented by Sebi. Grasim wanted the Tribunal to quash or set aside the regulator’s advice that its open offer should not go ahead now.

It had also tried to convince SAT that Sebi’s decision to order an investigation against the company for alleged violation of the takeover code was not warranted. What it was looking for in the legal jousting was an injunction restraining the regulator from doing anything that impedes or interferes with the open offer.

According to SAT, Sebi was within its rights to order an investigation, based on complaints received after Grasim’s October 14 offer announcement. “The respondent (Sebi), in its best judgement, has directed the appellants not to proceed further. There is not enough material before me to take a different view,” the judge said.

The Tribunal observed that Grasim and Samruddhi had not been able to explain why the open offer cannot be halted. “In the light of the facts and circumstances of the case, it is difficult to take a view that unless the order is stayed now, the appellants would suffer irreparable injury.”

Having examined the whole raft of regulations, SAT said it could not buy Grasim’s line that the regulator’s role was limited to calling for a revised letter of offer. “A public announcement in this case has already been made and further course of action has to be taken within a timeframe,” the Tribunal said in its order.

In doing so, the Tribunal however, gave a relief to Grasim when it allowed the company to withdraw a sum of Rs 117 crore it had deposited in the escrow account. “Since the appellants have been asked not to proceed with the public it is but fair to allow the appellants to withdraw the money from the said account, if they so desire, and they will redeposit the requisite amount as and when the public offer is allowed to be made. They are allowed to do so,” the Tribunal added. Today's interim order effectively means that Grasim’s open offer for shareholders of L&T at Rs 190 per share would be delayed.

Grasim was guarded in its reaction to the SAT order when it said that it is considering its future course of action after detailed consideration of by its legal advisors.

An official, however, confirmed that that the offer would be postponed, but he was confident that the investigation would vindicate Grasim’s stand.

Investors’ Grievances Forum (IGF) president Kirit Somaiya, who had railed against the Birlas for offering small investors a raw deal, welcomed the tribunal’s order.

“This is victory for small investors. IGF hopes that others will learn a lesson from Grasim-L&T and ACC-Gujarat Ambuja episodes,” Somaiya said. “IGF was fighting for last 12 months against the injustice to small investors of L&T,” he added.

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