The fundamental issue which arose in this appeal before Supreme Court was whether an open offer voluntarily made through a public announcement for purchase of shares of the target company can be permitted to be withdrawn under Regulation 23(1)(d) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (‘New Takeover Regulations’) on the ground that the voluntary open offer has become financially unviable. It was contended that a delay of 13 months in clearance of offer documents by SEBI made the offer unviable. SEBI had withheld its approval of the offer documents due to detection of a previous breach by the respondent. Akshya Infrastructure Pvt. Ltd. - respondent here had made certain acquisitions of shares in the target company between 2006 and 2011 that caused the Respondent to breach the creeping acquisition limits under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (‘Old Takeover Regulations’).
The Apex Court on 25-4-2014 upheld the sanctity of a voluntary open offer made under Regulation 11 of the new Takeover Regulations. The Court held that Regulation 27 of New Takeover Regulations and the restrictive interpretation of the corresponding provision of the Old Takeover Regulations in the Apex Court’s judgment of Nirma Industries Ltd. v. SEBI, [(2013) 8 SCC 20] is equally applicable to both mandatory offers and voluntary offers under the New Takeover Regulations. Although the delay by SEBI in clearing the offer documents was criticized, it was held that such a delay in itself would not nullify its action. Also economic viability could not be said to be ‘impossibility’ of performance as envisaged in Regulation 27 of the Takeover regulations.