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VST case: Sebi rejects petitioners' argument

Syed Amin Jafri in Hyderabad

The Securities and Exchange Board of India on Thursday rejected the contentions of the petitioners in the VST open offer case that there were any violations of the regulations by the markets regulator.

Sebi also contended that there was no necessity for an enquiry into the allegations against Bright Star Investments and Russell Credit which made the open offers for acquisition of shares in the Hyderabad-based VST Industries Limited.

On Thursday, counsels for Sebi and the Government of India made their submissions before Justice A Gopala Reddy in the Andhra Pradesh high court. The hearings remained inconclusive and would be resumed on Friday.

Sebi counsel PVSSS Rama Rao contended that there were no violations of the regulations in the instant case. "The so-called violations alleged by petitioners as per regulation 22 (3&4) may not be applicable because there was a directive from Sebi to respondents (Bright Star Investments) on May 8, 2001, to incorporate in their letter of offer certain disclosures," he pointed out.

Regarding the contention that there was violation of the time-schedule by Bright Star Investments as prescribed under regulation 22 of Sebi, the counsel argued that "the time-adherence under regulation 22 has no strict application" since Sebi had directed the merchant bankers on behalf of Bright Star Investments to incorporate certain disclosures in the offer.

The counsel said that the petitioners were not entitled to seek remedy from the court and instead they should have made an adequate representation to the markets regulator.

He said that there was no need for Sebi to conduct an investigation since there were no complaints from the investors as prescribed under regulation 38.

"The petitioners never approached Sebi nor there were any complaints (before Sebi) in this regard," he explained.

"There is no complaint from the investors. Hence, Sebi has not, suo motu, conducted any investigation. There is no question of conducting any investigation since prima facie, the Sebi has not found any violations by the respondents (Bright Star and Russell Credit)," the counsel pointed out.

He also stated that there was no need to extend the time limit for the closure of offers, which ended on June 13.

L Narasimha Reddy, standing counsel, Government of India, contended that the petitioners impleaded the Government of India for no specific reasons.

"They only wanted to maintain their writ petition, nothing more, nothing less," he quipped.

He said that it was only for Sebi to take action in such matters and the Government of India has no role.

"No irregularity was brought to the notice of the Government of India. They (petitioners) did not even choose to complain. Suddenly, on the eve of the closure of open offers, they filed the writ petition and impleaded the Government of India, as if they (the government) has no other business except to watch all these things," he said.

The standing counsel said that at one place, the petitioners alleged inaction on the part of the Government of India and at another place, they accused the government of allowing violations of the regulations. "These are contradictory allegations," he pointed out.

Earlier, B Adinarayana Rao, counsel for Bright Star, concluded his submissions in the court. Challa Kodandaram, counsel for another petitioner, also made his submissions. The hearing remained inconclusive and it would continue on Friday.

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