ORDER
OF 28TH 3APRIL, 2003ROUNDED OFF TO : Rs.111.50 crores '
61. The estimated number of shares available as per order of the Tribunal as on 25.4.2003 would be about 60% of the total shareholders, who would be benefitted.
62. We have hereinbefore noticed that the offer price of Rs. 318/- per equity share would be payable as on 24.2.1998 although the market price thereof at the relevant time was only Rs.220/-.
63. We may notice the difference on monetary terms on the amount payable to the investors on public announcement of offer, as would appear from the following chart :
TOTAL PAID-UP CAPITAL OF COLOUR-CHEM LTD. : 1,16,50,000 EQUITY SHARESFACE VALUE : RUPEES 10/- EACHOPEN OFFER PRICE : RUPEES 318/- PER SHARENO.OF SHARES TO BEACQUIRED IN THE OPENOFFER : 20% OF THE PAID-UP CAPITAL - 23.30 LAKHS SHARESTOTAL CONSIDERATION : RUPEES 7409.40 LAKHSInterest Rate per Period 24.2.1998 Interest per Share (Rs.)Annum to 20.6.2003 A B C 15% 5916.35 253.92 14% 5521.93 237.00 13% 5127.51 220.07 12% 4733.08 203.14 11% 4338.66 186.21 10% 3944.24 169.28 9% 3549.81 152.35 8% 3155.39 135.42
The difference of amount calculated on the basis of interest at the rate of 10% and 15% would be about Rs.85 per equity share. If shareholders are to be compensated owing to the act of delay on the part of the acquirer in making the public announcement, in a case of this nature, an attempt should be made to strike a delicate balance. The bank rate of interest payable by the nationalized banks on a fixed deposit for the period from 1998 to 2003 was around 9%. This fact has been accepted by the Tribunal. It has also been accepted by the Tribunal that the decisions of this Court relating to rate of interest payable by nationalized banks on fixed deposits and on the compensation amount fixed under the Motor Vehicles Act would be 9% p.a. The Tribunal has applied the said test but, as discussed hereinbefore, committed two apparent errors, namely, it did not think fit to calculate the mean of the rate of interest payable by the banks and; it thought that quarterly rests is payable on the deposits made by an investor in a bank. Quarterly rests are only payable in commercial transactions when a bank grants loans.
64. When any criteria is fixed by a statute or by a policy, an attempt should be made by the authority making the delegated legislation to follow the policy formulation broadly and substantially and in conformity thereof. [See Secretary, Ministry of Chemicals & Fertilizers, Government of India vs . Cipla Ltd. and Ors. - : AIR2003SC3078 ].
65. The rate of interest fixed by the Board and the Tribunal, thus, in our opinion, was not correct.
Effect of Board being an expert body:
66. The modern sociological condition as also the needs of the time have necessitated growth of administrative law and administrative tribunal. Executive functions of the State calls for exercise of discretion. The executive also, thus, performs quasi judicial and quasi legislative functions and, in this view of the matter, the administrative adjudication has become an indispensable part of the modern state activity.
67. Administrative Tribunals may be called a specialized court of law, although it does not fulfil the criteria of a law court as is ordinarily understood inasmuch as it cannot like an ordinary court of law entertain suits on various matters, including the matter relating to the vires of legislation. However, such a Tribunal like ordinary law courts are bound by the rules of evidence and procedure as laid down under the law and are required to determine the lis brought before it strictly in accordance with the law.
68. O. Hood Phillips in his 'Constitutional and Administrative Law', Eight Edition, at page 686 under the Chapter 'Tribunals' has stated as follows :-
'These are independent statutory tribunals whose function is judicial. The tribunals are so varied in composition, method of appointment, functions and procedure, and in their relation to Ministers on the one hand and the ordinary courts on the other, that a satisfactory formal classification is impossible.'
69. Reasons for creating special tribunals, according to the learned author, are:
(i) Expert knowledge
(ii) Cheapness
(iii) Speed
(iv) Flexibility
(v) Informality
70. At para 30-021 at page 692 of the said treatise, it is stated :
'Appeals from tribunals
A party to proceedings before most statutory tribunals, who is dissatisfied with the tribunal's decision on a point of law, may either appeal to the High Court or require the tribunal to state a case for the opinion of the High Court. Appeal lies by leave of the High Court or of the Court of Appeal to the Court of Appeal, and thence to the House of Lords (section 11).'
71. In 'Environmental Enforcement: The Need for a Specialist Court' by Robert Carnwath published in (1992) Journal of Planning and Environment Law at page 799, the requirements of having an environment court in place of the ordinary courts were highlighted. The author had submitted a report known as 'Enforcing Planning Control' and on referring thereto, it was noticed:
'Most of the report's substantive recommendations for reform of the planning enforcement system were adopted by the Government and incorporated in the Planning and Compensation Act 1991. There was no formal response to the suggestions for a unified court system. This was hardly surprising, since reform of the court system is not within the remit of the Department of the Environment.
Last year, however, the idea was given a new impetus from an unexpected quarter. Sir Harry Woolf gave his Garner lecture to U.K.E.L.A. on the theme 'Are the Judiciary Environmentally Myopic?' He commented on the problems of increasing specialization in environmental law; and on the difficulty of the Courts, in their present form, moving beyond their traditional role of detached 'Waynesburg' review. He went on to discuss the benefits of:
'...having a Tribunal with a general responsibility for overseeing and enforcing the safeguards provided for the protection of the environment the tribunal could be granted a wider discretion to determine its procedure so that it was able to bring to bear its specialist experience of environmental issues in the most effective way.'A key feature of this Tribunal would be flexibility. Possible innovations would be the involvement of expertise from other professions (architects, surveyors, etc.); 'multidiscipline adjudicating panels'; broad discretion over rights of appearance; power to instruct independent counsel on behalf of the Tribunal or members of the public; resources for direct investigation by the Tribunal itself; and incorporation into the Tribunal of the existing inspectorate to deal with 'cases of a lesser dimension.'
72. The Board is indisputably an expert body. But when it exercises its quasi judicial functions; its decisions are subject to appeal. The Appellate Tribunal is also an expert Tribunal. Only such persons who have the requisite qualifications are to be appointed as members thereof as would appear from Sub-section 2 of Section 15M of the said Act which reads thus:-
'15.M Qualification for appointment as Presiding Officer or Member of the Securities Appellate Tribunal. -
(2) A person shall not be qualified for appointment as Member of a Securities Appellate Tribunal unless he is a person of ability, integrity and standing who has shown capacity in dealing with problems relating to securities market and has qualification and experience of corporate law, securities laws, finance, economics or accountancy:
Provided that a member of the Board or any person holding a post at senior management level equivalent to Executive Director in the Board shall not be appointed as Presiding Officer or Member of a Securities Appellate Tribunal during his service or tenure as such with the Board or within two years from the date on which he ceases to hold office as such in the Board.'
73. The conflict of jurisdiction between an expert tribunal vis--vis the courts in the context of the doctrine of separation of powers poses a problem even in other countries. [For a detailed discussion see the Article 'Powers of the Takeovers Panel and their Effect upon ASIC and the Court' by Barbara Melcher - 2002 (76) ALJ p.119.
74. In Australia, the takeover Panel has also a function of identifying and notifying the third parties who are affected by a decision. Takeover panel created under the Corporate Law Economic Reform Programme Act, 1999, as amended by the Corporation Act, 2001, is also an expert panel.
75. Throughout the world, specialized adjudicators are performing numerous roles. There are diverse specialized tribunals in America as also in the Commonwealth countries. In certain States, statutes have been enacted authorizing appeals to the Administrative Division which jurisdiction used to be exercised by the High Court alone. The appeals range from questions of law to selected questions of fact, to full rehearing of all issues. [See Stephen Legomsky's 'Specialized Justice].
76. Had the intention of the Parliament been to limit the jurisdiction of the Tribunal, it could say so explicitly as it has been done in terms of Section 15Z of the Act whereby the jurisdiction of this Court to hear the appeal is limited to the question of law.
77. The jurisdiction of the appellate authority under the Act is not in any way fettered by the statute and, thus, it exercises all the jurisdiction as that of the Board. It can exercise its discretionary jurisdiction in the same manner as the Board.
78. The SEBI Act confers a wide jurisdiction upon the Board. Its duties and functions thereunder, run counter to the doctrine of separation of powers. Integration of power by vesting legislative, executive and judicial powers in the same body, in future, may raise a several public law concerns as the principle of control of one body over the other was the central theme underlying the doctrine of separation of powers.
79. Our Constitution although does not incorporate the doctrine of separation of powers in its full rigour but it does make horizontal division of powers between the Legislature, Executive and Judiciary. [See Rai Sahib Ram Jawaya Kapur and Ors. Vs . The State of Punjab, : [1955]2SCR225 ].
80. The Board exercises its legislative power by making regulations, executive power by administering the regulations framed by it and taking action against any entity violating these regulations and judicial power by adjudicating disputes in the implementation thereof. The only check upon exercise of such wide ranging power is that it must comply with the Constitution and the Act. In that view of the matter, where an expert Tribunal has been constituted, the scrutiny at its end must be held to be of wide import. The Tribunal, another expert body, must, thus, be allowed to exercise its own jurisdiction conferred on it by the statute without any limitation.
81. In Cellular Operators Association of India and Ors. vs . Union of India and Ors. : [2002]SUPP5SCR222 , this Court observed :
'TDSAT was required to exercise its jurisdiction in terms of Section 14A of the Act. TDSAT itself is an expert body and its jurisdiction is wide having regard to sub- section (7) of Section 14A thereof. Its jurisdiction extends to examining the legality, propriety or correctness of a direction/order or decision of the authority in terms of sub-section (2) of Section 14 as also the dispute made in an application under sub-section (1) thereof. The approach of the learned TDSAT, being on the premise that its jurisdiction is limited or akin to the power of judicial review is, therefore, wholly unsustainable. The extent of jurisdiction of a court or a Tribunal depends upon the relevant statute. TDSAT is a creature of a statute. Its jurisdiction is also conferred by a statute. The purpose of creation of TDSAT has expressly been stated by the Parliament in the Amending Act of 2000. TDSAT, thus, failed to take into consideration the amplitude of its jurisdiction and thus misdirected itself in law'
82. The court noticed the celebrated book on 'Judicial Review of Administrative Law' by H.W.R. Wade and C.F. Forsyth and held :
'The rule as regard deference to expert bodies applies only in respect of a reviewing court and not to an expert tribunal. It may not be the function of a court exercising power of judicial review to act as a super-model as has been stated in Administrative Law by Bernard Schwartz, 3rd edition in para 10.1 at page 625; but the same would not be a case where an expert tribunal has been constituted only with a view to determine the correctness of an order passed by another expert body. The remedy under Section 14 of the Act is not a supervisory one. TDSAT's jurisdiction is not akin to a court issuing a writ of certiorari. The tribunal although is not a court, it has all the trappings of a Court. Its functions are judicial.
In 'Jurisdiction and Illegality' by Amnion Rubinstein a judicial power in contrast to the reviewing power is stated thus:
'A judicial power, on the other hand, denotes a process in which ascertainable legal rules are applied and which, therefore, is subject to an objectively correct solution. But that, as will be seen, does not mean that the repository of such a power is under an enforceable duty to arrive at that solution. The legal rules applied are capable of various interpretations and the repository of power, using his own reasoning faculties, may deviate from that solution which the law regards as the objectively correct one.' The regulatory bodies exercise wide jurisdiction. They lay down the law. They may prosecute. They may punish. Intrinsically, they act like an internal audit. They may fix the price, they may fix the area of operation and so on and so forth. While doing so, they may, as in the present case, interfere with the existing rights of the licensees'.
83. In West Bengal Electricity Regulatory Commission vs . CESC Ltd. : AIR2002SC3588 , a Bench of this Court, (in which one of us Santosh Hegde, J. was a member), observed :
'...From s. 4 of the 1998 Act, we notice that the Central Electricity Regulatory Commission which has a judicial member as also a number of other members having varied qualifications, is better equipped to appreciate the technical and factual questions involved in the appeals arising from the orders of the Commission. Without meaning any disrespect to the judges of the High Court, we think neither the High Court nor the Supreme Court would in reality be appropriate appellate forums in dealing with this type of factual and technical matters. Therefore, we recommend that the appellate power against an order of the state commission under the 1998 Act should be conferred either on the Central Electricity Regulatory Commission or on a similar body. We notice that under the Telecom Regulatory Authority of India Act 1997 in chapter IV, a similar provision is made for an appeal to a special appellate tribunal and thereafter a further appeal to the Supreme Court on questions of law only. We think a similar appellate provisions may be considered to make the relief of appeal more effective.'
84. The provisions of the 1992 Act and the Regulations framed thereunder squarely apply to the observations made by this Court in West Bengal Electricity Regulation Commission (supra).
85. We may furthermore notice that in Part XI of the Electricity Act, 2003, an expert appellate tribunal for electricity in the light of the observations made by this Court has been constituted.
Dividend: Effect of
86. In view of our findings aforementioned, we are of the opinion that while calculating the amount of interest, the amount of dividend paid to the shareholders should be excluded. The shareholders who by reason of default on the part of acquirer have been deprived of interest payable on the difference of the offer price and market price would be entitled to interest as direction to pay interest being not penal in nature, they cannot make double gains. The Tribunal, in our opinion, has committed an error in holding that the dividend being a participatory benefit available to a shareholder and being distinct from interest, the same should not be taken into consideration. The regulation fixes a benchmark as regard rate of interest. If any amount has been received by the shareholders by keeping the shares till a public offer was made, the amounts so received by him by way of dividend should be set off. We would reiterate that the shareholders did not have any right to get interest and in effect and substance they were only to be compensated for the loss of interest and nothing more. On the same analogy, if they had received some gains by holding the shares fairly for a long period of five years, the amount of dividend cannot be permitted to be retained by them. The amount of dividend should, thus, be adjusted towards the interest payable to them.
Conclusion:
87. We, therefore, direct, having regard to the peculiar facts and circumstances of the case, that the interest of justice would be sub-served, if the rate of interest is directed to be paid at 10% per annum from March 1998 till 2003.
88. The interest at the rate of 10% per annum is directed in stead and place of normal 9% having regard to the fact that the Appellants themselves in their Memorandum of Appeal filed before the Tribunal had contended that the Board should have granted interest at the rate of 10% per annum instead of 15%.
89. If any dividend was paid during the said period, the same shall be adjusted with the amount of interest.
90. The appellants had deposited a total amount of 111.50 crores which sums have been invested. The interest accruing thereupon shall enure to the benefit of those shareholders who were entitled to the payment of interest for the period during which the said amount remained invested in terms of the order of this Court..
91. We uphold that part of the decision of the Tribunal whereby it was held that those persons who were the shareholders till 24.2.1998 and continued to be shareholders on the closure day of public offer alone would be entitled to interest.
92. The case of the Administrator of the Specified Undertaking of the Unit Trust of India, however, stands on a different footing. The facts of the matter, as noticed hereinbefore, clearly go to show that in effect and substance, the Appellants are the successors of the U.T.I. They being the statutory beneficiary, are entitled to interest irrespective of the fact that it came into being after 1998.
93. For the reasons aforementioned, Civil Appeal Nos.3183 of 2003, filed by the Acquirer and D3952 of 2004 filed by the Administrator of the Specified Undertaking of the Unit Trust of India, are allowed; whereas Civil Appeal No.3701 of 2003 filed by SEBI and Civil Appeal No. 3872 of 2003 filed by Umeshkumar G. Mehta are dismissed. No costs.