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Hearing in VST open offer issue put off to Thursday

Syed Amin Jafri in Hyderabad

The hearing on a batch of petitions relating to the open offers for acquisition of shares of VST Industries Limited by Bright Star Investments and Russell Credit in the Andhra Pradesh high court remained inconclusive on Wednesday.

The arguments will continue on Thursday.

Justice A Gopala Reddy heard the submissions by the counsel for original petitioners as well as Bright Star Investments in the afternoon and adjourned the hearing to Thursday.

S Ravi, counsel for the petitioners, argued that there were violations of the takeover regulation of Sebi by the two respondents, Bright Star Investments and Russell Credit.

He said that there were 'serious doubts' about the intention of Bright Star in making the open offer for acquisition of VST shares.

Quoting from the preliminary report on investigations conducted by Sebi into alleged share price manipulations by the Damanis, he said that the Damanis were making a bid to acquire 30 per cent more shares in the VST even as the Sebi investigations were on against two of the associates and persons acting in concert with the acquirer.

He alleged that Bright Star did not comply with the time schedule prescribed under the Sebi regulations with regard to the open offer.

"There is a tight time schedule prescribed by Sebi and the time-frame in the instant case cannot be different from what is prescribed. It (what the Bright Star did ) is a mockery of time schedule prescribed," he contended.

The counsel said that "Sebi cannot be a party to violations of its own regulations and cannot condone such violations. Sebi says in its counter affidavit that it normally permits such deviations and, hence, the present case be condoned and it has forgot the violations in the past and it would forget this time also."

The counsel alleged that so far Russell Credit was concerned, there were allegations that it was acting at the behest of British-American Tobacco.

"BAT's earlier attempts to increase its stakes in VST (from existing 32 per cent) met with failure because the Foreign Investment Promotion Board did not permit it," he said and pointed out that the VST, at its recent board meeting, took a decision to permit BAT to increase its stakes.

He said that if Bright Star was able to increase its shareholdings through an open offer, it would become the single largest shareholder. He contended that the Sebi should have, suo motu, investigated into any breach of the Takeover Code and other allegations against those who made the open offers.

"The Sebi cannot shut its eyes to reality. Let Sebi make investigations into the entire affair. Let them find out the bottom of the truth and take appropriate action," he said, summing up his arguments.

B Adinarayana Rao, counsel for Bright Star, questioning the credentials of the petitioner-shareholders, contended that they were guilty of indulging in 'delaying tactics'.

He also contended that there was not only delay on the part of the petitioners in approaching the AP high court but they did not make any complaints to Sebi nor voice any protest.

Stating that "judicial review (in these matters) is narrow and restrictive", he maintained that "when a special body is there, the jurisdiction of the court cannot be invoked."

He said that the petitioners, including an 'implead' petitioner did not disclose the particulars of the shares held by them.

Dwelling at length on the Sebi regulations, he said that these were meant to protect the interests of the shareholders.

He said that the relevant disclosures were made by Bright Star in its open offer and it did not suppress facts or make any false statements and hence there was no need to issue writ of mandamus to Sebi to investigate, especially when no complaints were made by shareholders to Sebi in this regard.

He contended that there was no departure from the time frame prescribed for open offers under the Sebi regulations.

"The timeframe (specified in Sebi regulations) is neither statutory nor demands adherence because the regulations are directory in nature," he said and maintained that there were no violations of the regulations which could vitiate the offers made by Bright Star.

He said that similar writ petitions were filed in the Calcutta high court and Delhi high court. While a single judge of the Delhi high court passed interim orders on May 28, these were vacated by a division bench on June 1.

A public interest litigation was filed in the Calcutta high court on May 21 but no stay order was granted.

The petitioners in the other high courts failed to get any interim orders. Hence, some petitioners had filed the writs in the AP High Court on June 8 and obtained stay order.

"The intention of the petitioners is to stall the proceedings of the open offers," the counsel said.

The arguments remained inconclusive and would be resumed on Thursday.

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