Date of approval/effecting for transfer of shares cannot be kept hold if the consideration for transfer of shares is paid as per the time lines mentioned in the Share Purchase Agreement
BHUSHAN ENERGY LTD & ORS v. SECURITIES AND EXCHANGE BOARD OF INDIA & ANR [SAT] Decided on 28.12.2010 The Appellant (Bhushan Group) & Respondent No.2 (who are persons acting in concert of Bhushan Group) are holding 14.85% & 2.56% Equity Shares respectively is a listed company namely Orissa Sponge Iron & Steel Ltd (Target Company) prior to 6.10.2008. On 6.10.2008 Respondent No.2 transferred their shares to Jain Group, but the consideration for the transfer of shares was paid in 2009 as agreed in the Share Purchase Agreement (SPA) entered on 4th October, 2008. SEBI has not considered the date of approval of the transfer on 6th October, 2008, as the consideration has not been paid and imposed a monetary penalty of Rs. 4.5 Lacs for violating the rules, on the Bhushan Group on the contention that shareholdings of Bhushan Group and Respondent No.2 companies put together was exceeding 15% of the voting powers in the target company thereby attracting Regulation 10 of SEBI Takeover Regulations and consequently they had to make a public announcement. The Securities Appelleate Tribunal (SAT) has set aside the order given by the adjudicating authority on the grounds that payment of consideration for the sale of shares was made on February 27 and 28, 2009 which was in accordance with clause 5 of SPA and neither the appellants nor respondent no.2 violated Regulation 10 of the takeover code and the charge against them must fail.