SAT upholds Sebi decision to reject public offer in GTL case

Market regulator had rejected the application filed by J P Financial Services, Plus Corporate Ventures and Pramod Jain in October, 2011

Securities Appellate Tribunal (SAT) today upheld Sebi decision to reject the withdrawal of public offer made by three entities related to the acquisition of 25% stake in Golden Tobacco Ltd (GTL).

Sebi had rejected the application filed by J P Financial Services, Plus Corporate Ventures and Pramod Jain in October, 2011 seeking permission to withdraw public offer of November 12, 2009. The public offer was made to acquire 25% stake of GTL from company's shareholders.

Following the market regulator's ruling, the entities had approached SAT which in an order today held that "decision of Sebi in rejecting the application for withdrawal of open offer made by appellants cannot be faulted".

The entities had submitted with SAT that the withdrawal should have been allowed on the grounds that a delay of two years in approving the draft letter of offer by the regulator had "frustrated the public offer".

Further, they had said that during the pendency of public offer, promoters/management of GTL have encumbered the most valuable asset (Vile-Parle property) and had also siphoned of funds of the company "thereby frustrating the object with which public offer was made and making it impossible for them to acquire shares of virtually a dead firm".

However, SAT noted that entities' request to Sebi to keep the process of open offer in abeyance "clearly falsifies the case of appellants that the actions taken by promoters of GTL during the course of two years has frustrated the public offer, because, if public offer was frustrated, appellants would not have asked Sebi to keep the process of public offer in abeyance".

The SAT order said: "Having asked Sebi on August 9, 2011 to keep the process of public offer in abeyance, appellants were not justified in filing application on October 11, 2011 seeking permission to withdraw the open offer on ground that inordinate delay has frustrated the open offer."

In a dissenting order on the matter, SAT member A S Lamba said that he had "no hesitation in terming the offer of having been becoming impossible of performance, since the appellants will acquire a dead company, whereas they proposed to acquire a healthy company".

Lamba noted that GTL "is before BIFR (Board for Industrial and Financial Reconstruction) and in its last stages of life and perhaps no lifeline, short of a miracle, can bring the company to its original health.

"Towards the end, it may be mentioned that respondent (Sebi) had forgotten that they had to approve the draft letter of offer, but they sprang up for action when application of withdrawal of open offer was submitted by appellants...," Lamba added.

Under the norms, Sebi is required to approve or suggest changes within 21 days from the date of receiving draft of the letter of offer.