SAT Upholds Sebi Stay On Grasim L&T Open Offer

Mumbai, November 28: | Updated: Nov 29 2002, 05:30am hrs
In a major blow to the Aditya Birla group flagship Grasim Industries, the Securities Appellate Tribunal (SAT) has upheld the order issued by the Securities and Exchange Board (Sebi) staying its open offer for acquiring an additional 20 per cent stake in Larsen & Toubro (L&T).

Grasim Hopes For Positive Sebi Report
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Mumbai, November 28: Grasim Industries, which is now chalking out its future course of action after detailed consideration of the SAT order by its legal advisors, is confident that the result of the Sebi probe will be in its favour. In a late evening press release on Thursday, the AV Birla group said, Grasim is now considering its future course of action after detailed consideration of the order. As per the legal advise received, Grasim is confident that the result of the probe should be in favour of Grasim.

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SAT presiding officer C Achyutan, rejecting Grasims appeal seeking an interim relief against the stay, said here on Thursday, granting an interim order as sought by Grasim, in the light of the facts of the case, will tantamount to staying an investor protection measure put in operation by Sebi.

I am not inclined to grant an interim relief as prayed by Grasim, he said.

The judgement comes following an appeal filed by Grasim seeking a stay on the November 8 Sebi order. The arguments were concluded on Wednesday. Sebi had stayed Grasims open offer which was slated to commence on December 9.

SAT has, however, allowed Grasim to withdraw an amount of Rs 117 crore deposited by it in the escrow account. But since Sebi has asked the company to hold back its offer, Grasim will not be held responsible for not complying with time bound action. Since Grasim has been asked not to proceed with the offer it is but fair to allow it to withdraw the money from the said account, and they will redeposit the requisite amount as and when the public offer is allowed to be made, which they are allowed to do so.

Investors Grievances Forum president Kirit Somaiya, one of the major complainants against the open offer price of Rs 190 per share, welcoming the order said, it is a victory of small investors. The forum was fighting for the past 12 months against the injustice to the small investors of L&T. At last we got justice today.

Mr Somaiya also asked Sebi to complete all its probes into the L&T case within the next three months.

When contacted, L&T chief AM Naik said, we have nothing to comment. It is a matter between Sebi and Grasim.

The order further said, if the offer documents are to be cleared without waiting for verification of the allegation in the complaint or completion of the enquiry, the very purpose of conducting the enquiry or examining the complaint becomes redundant. In my view, on a purposeful construction of regulations 18 and 44, Sebi is competent to stall a public offer if it is of the opinion that the public issue is not in the interest of the investors. In this context it is to be noted that if such an offer is allowed to go, then there is no effective remedy, to make good the adverse effects of the same.

Reacting to the order, Sebi officials said, it is not a question of victory or defeat. We have nothing for or against any party. We got investor complaints and are acting on that basis.

Rejecting Grasims contention that Sebi had not complied with the requirements of regulation 39 and as such the probe order was void, the order said this view was not sustainable. It is very clear from regulation 38 that Sebi is empowered to appoint investigating officer(s) to undertake investigation for the purposes stated in clauses (a), (b) and (c) therein. One of the purposes for which investigating officer(s) can be appointed is to probe into the complaints received from persons or any matter having a bearing on the allegations of substantial acquisition of shares and takeovers. Thus, Sebi is empowered to probe into the complaints. It is not Grasims case that Sebi has not received complaints.

The order also said, Sebi carried out investigation on the basis of complaints filed before it. It said, in this context it is to be noted that what is stated in Sebis letters was based on the material then available before them. It cannot be said the matter is closed forever and even if any new material come before Sebi, or Sebi in due discharge of its duty of protecting the interest of the investors, cannot examine the allegations afresh.