Aug 23, 2011 - to appeal and find that the matter can be decided on merit based on the ..... I find that the information
BEFORE THE APPELLATE AUTHORITY (Under the Right to Information Act, 2005) SECURITIES AND EXCHANGE BOARD OF INDIA Appeal No. 1250 of 2011 Yayati Sarode :
Appellant
Vs. CPIO, SEBI, Mumbai 1.
: ORDER
Respondent
The appellant had filed an application dated June 16, 2011 under the Right to Information
Act, 2005 (RTI Act). The respondent, vide letter dated July 14, 2011, responded to the appellant. Aggrieved by the response of the respondent, the appellant has filed this appeal dated July 27, 2011 and an addendum to appeal dated August 06, 2011. 2.
I have carefully examined the application, the response and the appeal and the addendum
to appeal and find that the matter can be decided on merit based on the material available on record. 3.
The appellant had sought information with respect to the open offer made by M/s. India
Star Mauritius Limited (Acquirer) through HSBC (Merchant Banker) for Garware Offshore Services Limited. He had submitted that the announcement of the said open offer was made on November 8, 2007 and few complaints have already been made against various disclosures and statements made in the open offer document dated March 12, 2008 and they are pending for long. He had alleged that the reason why the offer was made was because the Acquirer converted Unsecured Optionally Convertible Debentures (UOCDs) held by them into shares and exceeded in holding 15% of issued capital in shares of Target whereas the Debentures held by them were Fully Convertible Debentures (FCDs) as per EGM Notice and shareholder's approval (in the EGM held on May 10, 2006). On this backdrop, the appellant had asked information which was discussed in the succeeding paragraphs. 4.
Items 1(a), (b), (c), and (d): The appellant had asked whether SEBI was aware of the
aforesaid discrepancy and misrepresentation (of FCD and not UOCD) on the date of open offer and if it was not aware, when it was found/noticed/examined/investigated by SEBI, reason for such lapse, why it was not verified and related queries. The respondent replied that the information sought was in the nature of inquisition and hence the same cannot be construed as ‘information’ under section 2(f) of the RTI Act. While I agree with the respondent that most of the queries are beyond the scope and ambit of the definition of ‘information’ under section 2(f) of Page 1 of 7
the RTI Act as the obligation of the respondent under the RTI Act is to provide identifiable and material information to the applicants as held by the Hon’ble CIC in the matters of Shri M. M. Sundram Vs. SEBI (Order dated June 18, 2008) and Shri Vibhor Dileep Barla Vs. Central Excise & Customs (Order dated July 9, 2007), I find that the disclosure of information as directed under Para 4 supra would enable the appellant to find answer to most of his queries. 5.
Items
1(e)
and
(f):
The
appellant
had
asked
whether
any
enquiry/examination/investigation have been instituted/commenced to verify/question the misrepresentation and misstatement, the information including the correspondence in the matter, the outcome of the enquiry/examination/investigation and the steps/actions taken by SEBI to ensure the protection of the interest of shareholders of the Target Company. The respondent stated that a preliminary examination in the matter is under progress and furnishing information at this stage is exempted under section 8(1)(h) of the RTI Act as it may hamper the process of examination. Though the appellant has not questioned/challenged the applicability of section 8(1)(h) of the RTI Act in this matter, the same is discussed elsewhere in this order. The only argument of the appellant here is that though the preliminary examination is under progress, the steps being taken by SEBI to protect the interest of shareholders can be provided. I find that the respondent can only provide information which should be in material forms such as records, documents, etc. and cannot ask the respondent to give something which is not available with him. Thus, asking of hypothetical question demanding the steps being taken or what future course of action SEBI will take etc. are all questions beyond the purview of the RTI Act, as held by the Hon’ble CIC in the matter of Shri N. Anbarasan Vs. the CPIO of CIC (Order dated October 26, 2006). 6.
Item
1(g):
The
appellant
had
asked
whether
SEBI
has
independently
verified/found/detected the existence of any such shareholder's Agreement/MOU/ Arrangement in between the Acquirer and Target or its promoters and had sought the copies thereof. The respondent informed the appellant that the information sought was in the nature of inquisition and hence the same cannot be construed as ‘information’ under section 2(f) of the RTI Act. However, it informed the appellant that the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 do not require SEBI to independently verify/find/detect the existence of any such Shareholders’ Agreement/MOU/Arrangement between the Acquirer and Target. It further informed the appellant that Merchant Banker to the Offer is required to exercise due diligence for giving correct and adequate disclosure in the Letter of Offer filed with SEBI. In this appeal, the appellant has asked if the Merchant Banker has not done due diligence properly, Page 2 of 7
what are the remedial action taken by the Board to protect the shareholders. I find that this not information, but hypothetical question which cannot be answered under the RTI Act. The word ‘if’ in his query narrates hypothetical situation and then in the context of that situation, the appellants had asked question which begins with the prefix ‘what’. The answer to such hypothetical question is beyond the scope of the definition of ‘information’ under section 2(f) of the RTI Act, as held by the Hon’ble CIC in the matter of Shri C.T. Adsule Vs. Department of Legal Affairs (Order dated January 5, 2009) wherein it held that “The origins of the second-appeal lies in the RTI-application of the appellant dated 31.03.2008, which, to say the least, makes a curious reading. Appellant has painted certain hypothetical scenarios and demanded that the respondents explain to him what they would have done if those scenarios were to become a reality. ……. It is quite obvious that not only the requested information is not held by the respondents, they were not obliged to respond to hypothetical scenarios the appellant has narrated.” 7.
Item 1(h): The appellant had asked to inform: (a) why the acquirer has not made a
Open Offer under Regulation 12 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, (b) provisions under which it has escaped applicability of the said Regulation, (c) whether same has been questioned by SEBI, (d) what reply they have furnished for the same and (f) provide the copies of the correspondence between SEBI and Acquirer/Merchant Bankers in the matter. The respondent stated the information sought was in the nature of inquisition and hence the same cannot be construed as ‘information’ under section 2(f) of the RTI Act. The respondent also stated that the Merchant Banker for the open offer was asked inter alia: “Disclose that the current offer is not made under regulation 12 of the Regulations for change in control of the target and if the acquirer acquires control at a later date another offer shall be made as per the provisions of the Regulations. Also clarify why there is no change in control in view of the post offer shareholding of the acquirer and the promoter.” The respondent, further, stated that the copies of the correspondence between SEBI and Merchant Banker are held by SEBI in fiduciary capacity and hence exempted under section 8(1)(e) of the RTI Act. The appellant has argued that the respondent should either state the query was in the nature of inquisition or else he should state SEBI has in fact raised objections with Merchant Banker. The appellant has, further, alleged that the response of the respondent was contradictory. I find that though the queries were in the nature of inquisitions, the respondent provided the identifiable and disclosable information to the appellant. It does not mean that the respondent ought to answer all his queries which are in the nature of inquisitions. I, therefore, find that the response of the respondent is complete.
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8.
Item 1(i): The appellant had asked if any letter has been issued to Acquirer, Target or
Directors of any/both of them or other officers in this matter, then inform what replies they have given and the copies of letters/replies thereof. The respondent replied that a preliminary examination in the matter is under progress and furnishing information like copies of letters/replies at this stage may hamper the process of examination and therefore, the disclosure of the same is exempted under section 8(1)(h) of the RTI Act. The appellant has argued that the reply is inconsistent with reply in item 1(g). The appellant has not brought up any fact suggesting inconsistency nor do I find any. I, therefore, find that the response is complete. 9.
Item 2: The appellant had asked whether SEBI is investigating/examining the
discrepancies and misrepresentation/misstatement in the said Open Offer to provide justice to the shareholders by asking Acquirer to make a fresh Open Offer under Regulations 10 and 12 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 and whether any enquiry is intended or instituted for the purpose. The respondent stated the information sought was in the nature of inquisition and hence the same cannot be construed as ‘information’ under section 2(f) of the RTI Act. The appellant has argued that the respondent has accepted initiation of examination in its reply to items 1(e), (f), (h), (i) and 2(a) and (b). It is true that the respondent has informed about a pending preliminary examination. However, the respondent cannot say that the said preliminary examination is intended or instituted for the purpose of asking acquirer to make a fresh Open Offer under Regulations 10 and 12 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. In the matter of public offer, SEBI may receive complaints and the same would take up with the concerned entities for the purpose of preliminary examination. A preliminary examination is meant to find out prima facie violation of law and if it is established that an entity appears to have violated the law, the appropriate action/proceedings will be initiated against the entity in accordance with the law. 10.
Item 2 (a) and (b): The appellant had asked copies of the letters issued to Acquirer,
Target and/or Merchant Bankers and copies of reply/representations received from them/submitted by them or on their behalf along with copies of annexure if any. The respondent replied that a preliminary examination in the matter is under progress and furnishing information like copies of letters/replies at this stage may hamper the process of examination and therefore, the disclosure of the same is exempted under section 8(1)(h) of the RTI Act. The appellant has argued that since the matter is more than 3 years old and they are suffering as shareholders, this information is very much necessary to be given to them. I find that the public Page 4 of 7
offer was of the year 2008 does not mean that preliminary examination in the matter was initiated in 2008. Preliminary examination might have initiated on receipt of complaints. 11.
Notwithstanding the above, I find that an alleged delay in completion of an examination
does not entitle an applicant to get exempted information. It is clear from the response of the respondent that the matter has not reached its logical end and the disclosure of the information sought by the appellant at this stage, will expose the authority to competing pressures which may hamper cool reflection on the decision and compromise objectivity of decision making and the disclosure at this stage may also harm the reputation of the parties involved in the matter, as held by the Hon’ble CIC in the matters of Shri Govind Jha Vs. Maj Gen. Gautam Dutt (Order dated June 1, 2006) and Mr. A.N. Gupta Vs. Mr. Pradip Kumar (Order dated May 06, 2011). I, therefore, find that the respondent is justified to deny the information under section 8(1)(h) of the RTI Act. 12.
Item 2(c): The appellant had asked whether SEBI has collected EGM notice,
Resolution(s) approved in EGM, in-principle approvals, copies of listing applications from the Stock Exchanges where shares are listed and/or from the Target/Acquirer/Merchant Bankers to check the correctness of the statements made in the open offer, if so when was it done and copies of all these documents and the copies of the correspondence done with all of them on the subject matter. The respondent while responding to the appellant that the information sought was in the nature of inquisition, it also informed him that the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 do not require SEBI to collect EGM notice, Resolution(s) approved in EGM, in-principle approvals, copies of listing applications from the Stock Exchanges for verification of disclosures in the Letter of Offer which are provided by Manager to the Offer after exercising due diligence. The appellant has adopted his arguments in item 1(g) and 1(h) for this item and has requested to instruct the respondent to provide the information. The appellant’s arguments in items 1(g) and 1(h) have been dealt with in the relevant paragraphs supra and for the same reasons and findings therein, I find that the response of the respondent is complete. 13.
Item 2(d): The appellant had asked copies of note/memo authorizing such an enquiry/
investigation and collection if the same is intended or instituted for the purpose of asking acquirer to make a fresh Open Offer under Regulations 10 and 12 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. The respondent replied that no such enquiry/investigation has been ordered in the matter. The appellant has adopted his arguments in item 1(g) and 1(h) for this item and has requested to instruct the respondent to provide the Page 5 of 7
information. The appellant’s arguments in item 1(g) and 1(h) have been dealt with in the relevant paragraphs supra and for the same reasons and findings therein and also the findings with respect to item 2, wherein it is clearly observed that only a preliminary examination is under progress and this does not mean that the same was is intended or instituted for the purpose of asking acquirer to make a fresh Open Offer under Regulations 10 and 12 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, I find that the response of the respondent is complete. 14.
Item 3(a) to (d): The appellant had asked to inform him that under the SEBI (Substantial
Acquisition of Shares and Takeovers) Regulations, 1997 what are the rights of the shareholders and investors and also asked about the provisions applicable to certain given situations. The respondent stated that information sought was in the nature of inquisition and hence the same cannot be construed as ‘information’ under section 2(f) of the RTI Act. It, however, advised the appellant to refer to the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 which is also available on SEBI website. The appellant has argued that it is unfair to ask the applicant to see the website and download various Rules and Regulations of SEBI against a specific and clear request. I find that the information placed on website or in the public domain accessible to the citizens cannot be said to be ‘held’ or ‘under the control of’ the public authority and thus ceases to be an information accessible under the RTI Act, as held by the Hon’ble CIC in matter Shri K. Lall Vs. Shri M.K. Bagri (Order dated April 12, 2007) wherein it held: “… once an information is voluntarily disseminated it is excluded from the purview of the RTI Act and, to that extant, contributes to minimizing the resort to the use of this Act…” The laws (Acts, Rules, Regulations, Guidelines, Circulars, etc) are available in the public domain. What is not available is the answer to specific questions in the nature of seeking professional advice as was sought by the appellant. But a professional reading of the law would provide answer to his questions. Hence the raw material for answering the questions is already available to the appellant. The appellant himself can go through the laws which are available in the public domain and get answer to his questions. The appellant cannot expect the public authority to work as consultant or secretariat or back office for him. Similar view has been taken by the Hon’ble CIC in the matter of S.K. Kapoor Vs. CPIO, SEBI & Anr. (Order dated February 21, 2007) wherein it held: “The SEBI Act, Rules, all its instructions are properly in the public domain already, which the appellant can easily access by putting up little bit of extra effort. Far from it, he wishes to treat the public authority as his Consultants who should enable him to locate provisions of Acts & Rules at public cost. This is not what the RTI Act is all about. In view of the above, there shall be no disclosure obligation regarding this item of information”. Page 6 of 7
15.
Without prejudice to the above, I find that most of the queries of the appellant were
based on his understanding that the open offer was triggered pursuant to conversion FCDs and not UOCDs. In this regard, I am of the considered view that the respondent may inform the appellant from the available records: (a) whether the said open offer was triggered pursuant to conversion FCDs or UOCDs, (b) whether there was any mistake either in public announcement or offer document, (c) if there was a mistake, whether the same was rectified by way of corrigendum and (d) any other information like amendment to resolution, disclosure to exchanges etc. Disclosing such information would answer most of the queries of the appellant and disclosure of such information, which is otherwise available in the public domain, may not hamper any pending examination of the complaints. I, therefore, direct the respondent to provide the above information to the appellant, if they are available in the records of SEBI, in accordance with the RTI Act, within 15 working days from receipt of this order. 16.
The appeal is accordingly disposed of.
Place: Mumbai Date: August 23, 2011
PRASHANT SARAN APPELLATE AUTHORITY SECURITIES AND EXCHANGE BOARD OF INDIA
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