[2016] 8 S.C.R. I 0 I SECURITIES & EXCHANGE BOARD OF INDIA A v. BURREN ENERGY INDIA LTD. & ORS. (Civil Appeal No. 36 I of2007) DECEMBER 02, 2016 B [RANJAN GOGOi AND N.V. RAMANA, JJ.] Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 - Regns. 22(7), 2(1)([) - Acquisition of 26.01% of the share capital in the ctarget company on the date of Share Purchase Agreement by the acquirer - On the same date appointment of directors i11 the target company by the acquirer company and the company acting in concert - SEEi held that this amounted to violation of Regn. 22(7) since the appointment was made during the offer period-date of execution of share purchase agreement - Tribunal held them not D liable for violating Regn. 22(7) - On appeal, held: Concluded agreement is not rnntemplated to be the starting point of th<' rJjfer period - But such a consequence must naturally follow once the offer period commences from the date of entering into a Memorandum of Understanding-agreement, falling short of a E binding contract - If the offer period can be triggered of by an understanding that is yet to fructify into an agreement, the same can be said to have commenced/started ji·om the date of a concluded agreement-share purchase agreement - Order passed by the tribunal is set aside and that of the Adjudicating Officer is restored. F Allowing the appeal, the Court

HELD: 1.1 In the instant case, while respondent company was the acquirer, UBL was the person acting in concert. This is evident from the letter of offer (public announcement) dated 15'h February, 2005. The embargo under Regulation 22(7) of the G Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 is both on the acquirer and a person acting in concert. The expression 'person acting in concert' includes a corporate entity [Regulation 2(l){e){2){i)] and also its directors and associates [Regulation H JOI 102 SUPREME COURT REPORTS [2016] 8 S.C.R. A 2(1)(e)(2)(iii)). If this is what is contemplated under the Regulations, the argument of the respondents that Regulation 22(7) can have no application to the instant case cannot be accepted. [Para 11)(106-D-E]

1.2 It is correct that in the definition of 'offer period' B contained in Regulation 2(1)(1), relevant for the instant case, a concluded agreement is not contemplated to be the starting point of the offer period. But such a consequence must naturally follow once the offer period commences from the date of entering into a Memorandum of Understandin~ which, in most cases would C reflect an agreement in principle falling short of a binding contract. If the offer period can be triggered of by an understanding that is yet to fructify into an agreement, it cannot be seen how the the same can be said not to have commenced/started from the date of a concluded agreement-share purchase agreement. [Para 12)(106-F-G] D 1.3 The tribunal was incorrect in reaching its impugned conclusions and in reversing the order of the Adjudicating Officer. Consequently the order of the tribunal is set aside and that of the Adjudicating Officer is restored. [Parn 13)(107-A-BJ CIVIL APPELLATE JURISDICTION: Civil Appeal No. 361 of E 2007. From the Judgment and Order dated 07.11.2006 of the Securities Appellate Tribunal, Mumbai in Appeal No. 132 of2006.

Chander Uday Singh, Sr. Adv., Rishi Gautam, Bhargava V. Desai, Ms. Akriti Dewan, Siddhartha Chowdhury, Advs. for the Appellant. F Shyam Divan, Sr. Adv., Tejas Karia, S. Shankar Das, Ms. Avlokita Rajvi, S.S. Shroff, Anil Kumar Tandale, Advs. for the Respondents. The Judgment of the Court was delivered by RANJAN GOGOi, J. I. The challenge in this appeal is to an G order of the learned Securities Appellate Tribunal, Mumbai (hereinafter referred to as "the Tribunal") reversing the order of the Adjudicating Officer dated 25'h August, 2006 holding the respondents guilty of contravening the provisions of Regulation 22(7) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and H Takeovers) Regulations, 1997 (hereinafter referred to as "the SECURITIES & EXCHANGE BOARD OF INDIA v. BURREN 103 ENERGY INDIA LTD. [RANJAN GOGOi, J.] Regulations"). A penalty of Rs.25 lakhs has been imposed on each on A the respondents herein for the aforesaid violation. Aggrieved by the aforesaid reversal, Securities & Exchange Board oflndia (hereinafter referred to as "SEBI") is in appeal before us.

2. The relevant facts are not in dispute. The first respondent herein - Burren Energy India Ltd. (hereinafter referred to as "Burren") B was incorporated in December, 2004 under the laws of England and Wales with its registered office in London. Burren was fonned to acquire the entire of the equity share capital of one Unocal Bharat Limited (hereinafter referred to as "UBL"), incorporated in Mauritius in July, 1996. The shares of the aforesaid UBL were acquired in September, 1996 by one Unocal International Corporation (for short "UIC") C incorporated in California in USA. 3. Admittedly, UBL did not carry out any business activity but, at the relevant time, held 26.01% of the issued share capital of Hindustan Oil Exploration Co. Ltd. (hereinafter referred to as "the target company"). D

4. Burren entered into a share purchase agreement with UIC on J4•h February, 2005 to acquire the entire equity share capital of UBL. This agreement was entered into in England and by virtue thereof all the shares of UBL were registered in the name of Burren on the same day itself i.e. 14'h February, 2005. On account of this transformation Burren E came to hold 26.0 I% of the share capital in the target company. As the acquisition was beyond the stipulated 15% of the equity share capital of the target company the Regulations got attracted making it obligatory on the part. of Burren to make a public announcement in accordance with the Regulations. Such public announcement in the form ofa public offer F for sale/purchase of 20% of the shares of the target company at a determined price of Rs.92.41 per fully paid up equity share was made on 15•h February, 2005 by Burren and UBL acting as a person acting in concert. 5. On 14'11 February, 2005 i.e. date of execution of the share G purchase agreement Burren appointed two of its Directors (Mr. Finian O'Sullivan and Mr. Atul Gupta) on the board of UBL and on the same date UBL, which is a person acting in concert with Burren, appointed the same persons on the board of directors of the target company. This, according to SEBI, amounted violation of Regulation 22(7) of the H 104 SUPREME COURT REPORTS [2016] 8 S.C.R.

A Regulations inasmuch as the said appointment was made during the offer period which had commenced on and from 14' 11 February,2005 i.e. date of execution of the share purchase agreement. 6. To appreciate the issue the provisions of Regulation 2(1 )(f) of the Regulations which defines 'offer period' and Regulation 22(7) of the B Regulations alleged to have been violated by the respondents may be extracted below: "2( I )(f) "Offer period" means the period between the date of entering into Memorandum of Understanding or the public announcement, as the case may be and the date of c completion of offer formalities relating to the offer made under these regulations" 22. General obligations of the acquirer.- (I) .................. . (2) ........................................................... .D (7) During the offer period, the acquirer or persons acting in concert with him shall not be entitled to be appointed on the Board of Directors· of the target company: E Provided that in case ofacquisition of shares or voting rights or control of a Public Sector Undertaking pursuant to a public announcement made under the proviso to sub-regulation (I) of Regulation 14, the provisions of sub-regulation (8) of Regulation 23 shall be applicable: F

Provided fu11her that where the acquirer, other than the acquirer who has made an offer under regulation 21 A, after assuming full acceptances, has deposited in the escrow account hundred per cent of the consideration payable in G cash where the consideration payable is in cash and in the form of securities where the consideration payabl~ is by way of issue, exchange or transfer of securities or combination thereof, he may be entitled to.be appointed on . the Board of Directors of the target company after a pt:riod of twenty-one days from the date of public annotmcement. H SECURITIES & EXCHANGE BOARD OF INDIA v. BURREN 105 ENERGY INDIA LTD. [RANJAN GOGOI,J.]

7. The Tribunal hearing the matter in appeal took the view that A under Regulation 2(l)(t) of the Regulations 'offer period' is clearly defined as the period of time between the date of entering into Memorandum of Understanding or the public announcement, as the case may be, and the date of completion of offer formalities. The learned Tribunal was of the view that when there was no ambiguity or uncertainty 8in the provisions of the Regulations the definition of'offer period' has to be literally interpreted. The learned Tribunal went into the dictionary meaning of the expression 'Memorandum of Understanding' and went on to hold that the same falls short of a concluded contract. As there was no Memorandum of Understanding between the parties it is the date of public announcement that would trigger of the commencement c of the 'offer period'. As the appointment of the Directors in the target company was made on 14'h February, 2005 and the public announcement was made on l 5'h February, 2005 the learned Tribunal was of the view thatthe respondents (appellants before it) cannot be held liable for violating Regulation 22(7) of the Regulations, as found by the Adjudicating Officer. D

8. The main thrust of the contentions advanced on behalf of the appellant before us appears to be that the words 'Memorandum of Understanding' are not words of Art conveying a single meaning. In an appropriate situation a 'Memorandum of Understanding' may also include a concluded agreement between the parties. Even in a given case where Ea Memorandum of Understanding is to fall short of a concluded agreement and, in fact, the concluded agreement is executed subsequently, the 'offer period' would still commence from the date of the Memorandum ofunderstanding. If the offer period commences from the date of such Memorandum of Understanding, according to the learned counsel, there is no reason why the same should not commence from F the date of the share purchase agreement when the parties had not executed a Memorandum of Understanding. It is also submitted that the commencement of the 'offer period' from the date of public announcement would primarily have relevance to a case where acquisition of shares is from the market and there is no Memorandum of GUnderstanding or a concluded agreement pursuant thereto. 9. In reply, Shri Shyam Divan, learned Senior Counsel appearing. for the respondents has urged that Regulation 22(7) of the Regulations can have no application to the present case inasmuch as the disqualification from appointment on the board of directors of the target company will 1 l 106 SUPREME COURT REPORTS [2016] 8 S.C.R.

A operate only when the acquirer or persons acting in concert are individuals and not a corporate entity. This is because under Section 253 ofthe Companies Act, I 956 (corresponding to Section 149 of the Companies Act, 20 I 3) there is an embargo on a body corporate from being appointed as a director. Shri Divan has also drawn the attention of the Courtto the provisions of Regulation 22(7) of the Regulations as it originally existed; 8 its amendment in the year 2002 (which provision is relevant for the purposes of the present case) and the subsequent amendment effected in the year 2011. Shri Divan has submitted that meaning sought to be attributed to the Regulations relevant to the present case i.e. 2002. Regulations has been specifically incorporated in the Regulations amended c in the year 2011. That the concluded share purchase agreement would be the starting point of the 'offer period' is mandated under the 2011 Regulations and not under the 2002 Regulations. 10. We have considered the submissions of the parties.

11. In the present case, while Burren was the acquirer, UBL was D the person acting in concert. This is evident from the letter of offer (public announcement) dated I S'h February, 2005. The embargo under Section 22(7) is both on the acquirer and a person acting in concert. The expression 'person acting in concert' includes a corporate entity [Regulation 2(1)(e)(2)(i) of the Regulations] and also its directors and E associates [Regulation 2( I )(e )(2)(iii) of the Regulations]. If this is what is contemplated under the Regulations we do not see how the first argument advanced by Shri Divan on behalf of the respondents can have our acceptance. 12. Insofar as tht: second argument advanced by Shri Divan is F concerned it is correct that in the definition of'offer period' contained in Regulation 2( I )(f) of the Regulations, relevant for the present case, a concluded agreement is not contemplated to be the starting point of the offer period. But such a consequence must naturally follow once the offer period commences from the date of entering into a Memorandum of Understanding which, in most cases would reflect an agreement in G principle falling short of a binding contract. If the offer period can be triggered of by an understanding that is yet to fructify into an agreement, we do not see how the same can be said not to have commenced/started from the date of a concluded agreement i.e. share purchase agreement as in the present case. H

SECURITIES & EXCHANGE BOARD OF INDIA v. BURREN 107 ENERGY INDIA LTD. [RANJAN GOGOi, J.] I 3. On the view that we have taken we will have to hold that the A learned Tribunal was incorrect in reaching its impugned conclusions and in reversing the order of the Adjudicating Officer. Consequently the order of the learned Tribunal is set aside and that of the Adjudicating Officer is restored. The penalty awarded by the Adjudicating Officer by order dated 251h August, 2006 shall be deposited in the manner directed within Btwo months from today. 14. The appeal consequently is allowed in the above terms. Nidhi Jain Appeal allowed.

[2016] 8 S.C.R. I 0 I SECURITIES & EXCHANGE BOARD OF INDIA A v. BURREN ENERGY INDIA LTD. & ORS. (Civil Appeal No. 36 I of2007) DECEMBER 02, 2016 B [RANJAN GOGOi AND N.V. RAMANA, JJ.] Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 - Regns. 22(7), 2(1)([) - Acquisition of 26.01% of the share capital in the ctarget company on the date of Share Purchase Agreement by the acquirer - On the same date appointment of directors i11 the target company by the acquirer company and the company acting in concert - SEEi held that this amounted to violation of Regn. 22(7) since the appointment was made during the offer period-date of execution of share purchase agreement - Tribunal held them not D liable for violating Regn. 22(7) - On appeal, held: Concluded agreement is not rnntemplated to be the starting point of th<' rJjfer period - But such a consequence must naturally follow once the offer period commences from the date of entering into a Memorandum of Understanding-agreement, falling short of a E binding contract - If the offer period can be triggered of by an understanding that is yet to fructify into an agreement, the same can be said to have commenced/started ji·om the date of a concluded agreement-share purchase agreement - Order passed by the tribunal is set aside and that of the Adjudicating Officer is restored. F Allowing the appeal, the Court

HELD: 1.1 In the instant case, while respondent company was the acquirer, UBL was the person acting in concert. This is evident from the letter of offer (public announcement) dated 15'h February, 2005. The embargo under Regulation 22(7) of the G Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 is both on the acquirer and a person acting in concert. The expression 'person acting in concert' includes a corporate entity [Regulation 2(l){e){2){i)] and also its directors and associates [Regulation H JOI 102 SUPREME COURT REPORTS [2016] 8 S.C.R. A 2(1)(e)(2)(iii)). If this is what is contemplated under the Regulations, the argument of the respondents that Regulation 22(7) can have no application to the instant case cannot be accepted. [Para 11)(106-D-E]

1.2 It is correct that in the definition of 'offer period' B contained in Regulation 2(1)(1), relevant for the instant case, a concluded agreement is not contemplated to be the starting point of the offer period. But such a consequence must naturally follow once the offer period commences from the date of entering into a Memorandum of Understandin~ which, in most cases would C reflect an agreement in principle falling short of a binding contract. If the offer period can be triggered of by an understanding that is yet to fructify into an agreement, it cannot be seen how the the same can be said not to have commenced/started from the date of a concluded agreement-share purchase agreement. [Para 12)(106-F-G] D 1.3 The tribunal was incorrect in reaching its impugned conclusions and in reversing the order of the Adjudicating Officer. Consequently the order of the tribunal is set aside and that of the Adjudicating Officer is restored. [Parn 13)(107-A-BJ CIVIL APPELLATE JURISDICTION: Civil Appeal No. 361 of E 2007. From the Judgment and Order dated 07.11.2006 of the Securities Appellate Tribunal, Mumbai in Appeal No. 132 of2006.

Chander Uday Singh, Sr. Adv., Rishi Gautam, Bhargava V. Desai, Ms. Akriti Dewan, Siddhartha Chowdhury, Advs. for the Appellant. F Shyam Divan, Sr. Adv., Tejas Karia, S. Shankar Das, Ms. Avlokita Rajvi, S.S. Shroff, Anil Kumar Tandale, Advs. for the Respondents. The Judgment of the Court was delivered by RANJAN GOGOi, J. I. The challenge in this appeal is to an G order of the learned Securities Appellate Tribunal, Mumbai (hereinafter referred to as "the Tribunal") reversing the order of the Adjudicating Officer dated 25'h August, 2006 holding the respondents guilty of contravening the provisions of Regulation 22(7) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and H Takeovers) Regulations, 1997 (hereinafter referred to as "the SECURITIES & EXCHANGE BOARD OF INDIA v. BURREN 103 ENERGY INDIA LTD. [RANJAN GOGOi, J.] Regulations"). A penalty of Rs.25 lakhs has been imposed on each on A the respondents herein for the aforesaid violation. Aggrieved by the aforesaid reversal, Securities & Exchange Board oflndia (hereinafter referred to as "SEBI") is in appeal before us.

2. The relevant facts are not in dispute. The first respondent herein - Burren Energy India Ltd. (hereinafter referred to as "Burren") B was incorporated in December, 2004 under the laws of England and Wales with its registered office in London. Burren was fonned to acquire the entire of the equity share capital of one Unocal Bharat Limited (hereinafter referred to as "UBL"), incorporated in Mauritius in July, 1996. The shares of the aforesaid UBL were acquired in September, 1996 by one Unocal International Corporation (for short "UIC") C incorporated in California in USA. 3. Admittedly, UBL did not carry out any business activity but, at the relevant time, held 26.01% of the issued share capital of Hindustan Oil Exploration Co. Ltd. (hereinafter referred to as "the target company"). D

4. Burren entered into a share purchase agreement with UIC on J4•h February, 2005 to acquire the entire equity share capital of UBL. This agreement was entered into in England and by virtue thereof all the shares of UBL were registered in the name of Burren on the same day itself i.e. 14'h February, 2005. On account of this transformation Burren E came to hold 26.0 I% of the share capital in the target company. As the acquisition was beyond the stipulated 15% of the equity share capital of the target company the Regulations got attracted making it obligatory on the part. of Burren to make a public announcement in accordance with the Regulations. Such public announcement in the form ofa public offer F for sale/purchase of 20% of the shares of the target company at a determined price of Rs.92.41 per fully paid up equity share was made on 15•h February, 2005 by Burren and UBL acting as a person acting in concert. 5. On 14'11 February, 2005 i.e. date of execution of the share G purchase agreement Burren appointed two of its Directors (Mr. Finian O'Sullivan and Mr. Atul Gupta) on the board of UBL and on the same date UBL, which is a person acting in concert with Burren, appointed the same persons on the board of directors of the target company. This, according to SEBI, amounted violation of Regulation 22(7) of the H 104 SUPREME COURT REPORTS [2016] 8 S.C.R.

A Regulations inasmuch as the said appointment was made during the offer period which had commenced on and from 14' 11 February,2005 i.e. date of execution of the share purchase agreement. 6. To appreciate the issue the provisions of Regulation 2(1 )(f) of the Regulations which defines 'offer period' and Regulation 22(7) of the B Regulations alleged to have been violated by the respondents may be extracted below: "2( I )(f) "Offer period" means the period between the date of entering into Memorandum of Understanding or the public announcement, as the case may be and the date of c completion of offer formalities relating to the offer made under these regulations" 22. General obligations of the acquirer.- (I) .................. . (2) ........................................................... .D (7) During the offer period, the acquirer or persons acting in concert with him shall not be entitled to be appointed on the Board of Directors· of the target company: E Provided that in case ofacquisition of shares or voting rights or control of a Public Sector Undertaking pursuant to a public announcement made under the proviso to sub-regulation (I) of Regulation 14, the provisions of sub-regulation (8) of Regulation 23 shall be applicable: F

Provided fu11her that where the acquirer, other than the acquirer who has made an offer under regulation 21 A, after assuming full acceptances, has deposited in the escrow account hundred per cent of the consideration payable in G cash where the consideration payable is in cash and in the form of securities where the consideration payabl~ is by way of issue, exchange or transfer of securities or combination thereof, he may be entitled to.be appointed on . the Board of Directors of the target company after a pt:riod of twenty-one days from the date of public annotmcement. H SECURITIES & EXCHANGE BOARD OF INDIA v. BURREN 105 ENERGY INDIA LTD. [RANJAN GOGOI,J.]

7. The Tribunal hearing the matter in appeal took the view that A under Regulation 2(l)(t) of the Regulations 'offer period' is clearly defined as the period of time between the date of entering into Memorandum of Understanding or the public announcement, as the case may be, and the date of completion of offer formalities. The learned Tribunal was of the view that when there was no ambiguity or uncertainty 8in the provisions of the Regulations the definition of'offer period' has to be literally interpreted. The learned Tribunal went into the dictionary meaning of the expression 'Memorandum of Understanding' and went on to hold that the same falls short of a concluded contract. As there was no Memorandum of Understanding between the parties it is the date of public announcement that would trigger of the commencement c of the 'offer period'. As the appointment of the Directors in the target company was made on 14'h February, 2005 and the public announcement was made on l 5'h February, 2005 the learned Tribunal was of the view thatthe respondents (appellants before it) cannot be held liable for violating Regulation 22(7) of the Regulations, as found by the Adjudicating Officer. D

8. The main thrust of the contentions advanced on behalf of the appellant before us appears to be that the words 'Memorandum of Understanding' are not words of Art conveying a single meaning. In an appropriate situation a 'Memorandum of Understanding' may also include a concluded agreement between the parties. Even in a given case where Ea Memorandum of Understanding is to fall short of a concluded agreement and, in fact, the concluded agreement is executed subsequently, the 'offer period' would still commence from the date of the Memorandum ofunderstanding. If the offer period commences from the date of such Memorandum of Understanding, according to the learned counsel, there is no reason why the same should not commence from F the date of the share purchase agreement when the parties had not executed a Memorandum of Understanding. It is also submitted that the commencement of the 'offer period' from the date of public announcement would primarily have relevance to a case where acquisition of shares is from the market and there is no Memorandum of GUnderstanding or a concluded agreement pursuant thereto. 9. In reply, Shri Shyam Divan, learned Senior Counsel appearing. for the respondents has urged that Regulation 22(7) of the Regulations can have no application to the present case inasmuch as the disqualification from appointment on the board of directors of the target company will 1 l 106 SUPREME COURT REPORTS [2016] 8 S.C.R.

A operate only when the acquirer or persons acting in concert are individuals and not a corporate entity. This is because under Section 253 ofthe Companies Act, I 956 (corresponding to Section 149 of the Companies Act, 20 I 3) there is an embargo on a body corporate from being appointed as a director. Shri Divan has also drawn the attention of the Courtto the provisions of Regulation 22(7) of the Regulations as it originally existed; 8 its amendment in the year 2002 (which provision is relevant for the purposes of the present case) and the subsequent amendment effected in the year 2011. Shri Divan has submitted that meaning sought to be attributed to the Regulations relevant to the present case i.e. 2002. Regulations has been specifically incorporated in the Regulations amended c in the year 2011. That the concluded share purchase agreement would be the starting point of the 'offer period' is mandated under the 2011 Regulations and not under the 2002 Regulations. 10. We have considered the submissions of the parties.

11. In the present case, while Burren was the acquirer, UBL was D the person acting in concert. This is evident from the letter of offer (public announcement) dated I S'h February, 2005. The embargo under Section 22(7) is both on the acquirer and a person acting in concert. The expression 'person acting in concert' includes a corporate entity [Regulation 2(1)(e)(2)(i) of the Regulations] and also its directors and E associates [Regulation 2( I )(e )(2)(iii) of the Regulations]. If this is what is contemplated under the Regulations we do not see how the first argument advanced by Shri Divan on behalf of the respondents can have our acceptance. 12. Insofar as tht: second argument advanced by Shri Divan is F concerned it is correct that in the definition of'offer period' contained in Regulation 2( I )(f) of the Regulations, relevant for the present case, a concluded agreement is not contemplated to be the starting point of the offer period. But such a consequence must naturally follow once the offer period commences from the date of entering into a Memorandum of Understanding which, in most cases would reflect an agreement in G principle falling short of a binding contract. If the offer period can be triggered of by an understanding that is yet to fructify into an agreement, we do not see how the same can be said not to have commenced/started from the date of a concluded agreement i.e. share purchase agreement as in the present case. H

SECURITIES & EXCHANGE BOARD OF INDIA v. BURREN 107 ENERGY INDIA LTD. [RANJAN GOGOi, J.] I 3. On the view that we have taken we will have to hold that the A learned Tribunal was incorrect in reaching its impugned conclusions and in reversing the order of the Adjudicating Officer. Consequently the order of the learned Tribunal is set aside and that of the Adjudicating Officer is restored. The penalty awarded by the Adjudicating Officer by order dated 251h August, 2006 shall be deposited in the manner directed within Btwo months from today. 14. The appeal consequently is allowed in the above terms. Nidhi Jain Appeal allowed.