SC fixes ‘offer period’ in Sebi rules
The Supreme Court has set aside the ruling of the Securities Appellate Tribunal (SAT) and held that an acquiring company, its directors and associates cannot appoint directors of the target company during the offer period. In this case, Securities & Exchange Board of India vs Burren Energy India Ltd, the acquisition of an Indian company was done by an English company via entities in Mauritius and California. Two directors were appointed on the board of the target company on the date of the share purchase agreement. The public announcement was made the next day. Sebi found that the appointment of directors during the ‘offer period’ violated Regulation 22(7) of the Sebi Acquisition of Shares and Take-over Regulations. It imposed a penalty of ~25 lakh on the acquirers. However, SAT reversed the order on the question when the offer period starts. According to it, the period is one between the date of entering the memorandum of understanding or public announcement and the date of completion of formalities. Reversing the ruling, the Supreme Court declared that the period started from the date of a concluded contract, namely the share purchase agreement.
HCs must not review evidence
When a commissioner under the Workman’s Compensation Act decides the amount based on the injuries suffered by an employee, the high court should not review the evidence and change the order, the Supreme Court has ruled in Golla Rajanna vs Divisional Manager. The Act permits only a limited role to the high court and allows it to examine the appeal if it raises “substantial questions of law”. In this case, six employees were severely injured in a mishap caused by a truck. They petitioned the commissioner who found that they had suffered disabilities ranging from 35 to 40 per cent, based on medical certificates. The commissioner found that the disabilities had affected their capacity to earn income. Therefore, compensation was awarded based on medical evidence. However, the insurance company appealed to the Andhra Pradesh high court, which drastically reduced the amount. It went into the evidence and commented that “the entire exercise by the petitioners before the commissioner is to create a make-believe situation to show that indeed they had suffered serious injuries.” When the victims appealed to the Supreme Court, it restored the order of the commissioner and criticised the high court for not following the principles laid down by the welfare law. The commissioner is the last authority on facts, the judgment asserted, and added that “the high court recorded its own findings on percentage of disability for which there is no basis.”
Auction buyer cannot retract sale
The Bombay High Court has stated an auction sale of a property of a defaulter cannot be cancelled because the coastal regulations and other restrictions had affected its value. The buyer has an obligation for due diligence probe, especially when the property is sold on “as is where is and as is what is basis”. In this case, Asset Reconstruction Co vs Florita Buildcom Ltd, the latter company bought property mortgaged by a firm which defaulted in the repayment of loan. The bank invoked the Securitisation & Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act and auctioned it. However, the buyer later learnt that the property could not be fully enjoyed due to coastal regulations and municipal plan for a recreation ground. So it wanted to cancel the sale though it had paid part of the value. The Debt Recovery Tribunal rejected the request but the appellate tribunal set aside the sale, leading to the petition in the high court by the asset reconstruction company. It held that the appellate tribunal was wrong. The tender document made it abundantly clear that the successful bidder shall be deemed to have bought the property with full knowledge and subject to all municipal and other regulations.
Co-op pleas against note ban dismissed
The Karnataka High Court last week dismissed a batch over 20 writ petitions moved by cooperatives of farmers, fishermen, tappers and others seeking compensation for the losses suffered by its members due to demonetisation. They had demanded quashing of the government notification of November 8, suitable rate of interest for retaining their current accounts and barring cash withdrawals. Dismissing the petitions, led by the Korangrapady Coop vs Union of India, the high court cited Supreme Court judgments to assert that it is open to the state to take economic and management decisions depending upon the exigencies of the situation, guided by the appropriate financial policy notified in public interest. “If every decision taken by the state is tested by a microscopic and a suspicious eye, administration will come to a standstill and the decision-makers will lose all their initiative and enthusiasm,” the judgment said.
Foreign award not to be enforced
The Delhi High Court last week declined to enforce a foreign award because there was no express agreement between a Singapore exporter, Virgoz, and National Agricultural Coop Federation of India (Nafed) on buying palm oil. The arbitral tribunal constituted under the Palm Oil Refiners Association of Malaysia Rules had accepted the claim of the Singapore firm against Nafed. It moved the high court for the execution of the award. Nafed resisted, arguing that there was no signed contract and there were only negotiations through a broker. Virgoz showed communications between the two entities as binding contracts. Deciding the case, Virgoz Oils & Fats PTE vs NAFED, the court accepted the version of Nafed, stating that there was no meeting of minds or agreement in writing, which was a requirement of the Arbitration Act.
Casual labour circulars quashed
The Uttaranchal high court last week described as “callous” the attitude of the central government which issued instructions to its authorities in the northern border areas that casual workers should not be allowed to complete 240 days of continuous service lest they claim regularisation under labour laws. While quashing such circulars, the court directed the government to frame a scheme to absorb workers who had been kept casual for over five years. Dismissing the appeal, Union of India vs AITUC, it asked the government not to retrench workers who had completed 240 days, pay them minimum wages, implement all labour laws, provide them well-lit, airy pre-fabricated houses, free medical care at military hospitals and other benefits. A similar set of directions by the Jammu & Kashmir high court in 2010 has been ignored by the government, the present judgment noted.
