Supreme Court tells Nirma to complete Shree Rama open offer

MUMBAI: In a setback to Nirma, the Supreme Court on Thursday dismissed its appeal against Securities Appellate Tribunal (SAT) decision that upheld Sebi’s order rejecting the company’s request for withdrawal of open offer for Shree Rama Multi Tech, an Ahmedabad-based firm, whose pledged shares the detergents maker had invoked. Now Nirma has to complete the open offer for a minimum price of Rs 18.60 per share.

Nirma had approached the Supreme Court after SAT upheld the Securities and Exchange Board of India’s order refusing to allow Nirma to withdraw the open offer for the shares of Shree Rama Multi-Tech. Nirma invoked the pledged shares of Shree Rama Multi Tech in 2005 after the packaging firm defaulted in payment. This resulted in Nirma Group’s stake increasing to 24.25 per cent in the company, triggering the mandatory open offer.

In keeping with the takeover code, the company came out with an open offer to acquire a further 20 per cent in Shree Rama Multi-tech. However, later, Nirma wanted to revise the offer as the market price of the stock was much below its offer price. But Sebi did not approve the revision. Subsequently, Nirma applied to Sebi for withdrawal of the open offer as it alleged that the erstwhile promoters of Rama Multi-Tech had siphoned off funds from the company and that this came to light only after the public announcement for the open offer was made. But Sebi refused to accept the circumstances and said that Nirma should have done its due diligence before invoking the pledge and should not have acquired the shares if the circumstances so warranted.

The SC directed Nirma to complete its open offer. In 2008, SAT upheld Sebi’s ruling on the matter. “They are only trying to wriggle out of a bad bargain which is not permissible… Sec 27(1) d, which deals with withdrawal of open offer in special cases, should be interpreted strictly in exception only and should draw “colour” from preceding sections 27(1) b and c, which allow withdrawal of offer only if statutory approval(s) required have been refused or the sole acquirer, being a natural person, has died, respectively.”