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CS Executive · Capital Market and Securities Laws · Acquisition of Shares and Takeovers - Concepts

Rohit Capital made a public offer for Sundaram Auto Ltd and sent the letter of offer, but later did not pay the consideration to shareholders who tendered their shares. Another bidder, Tanvi Ventures, never sent the letter of offer to shareholders at all. Which statement about Section 15H of the SEBI Act, 1992 is correct?

Both are covered by Section 15H. Tanvi's failure to send the letter of offer falls under clause (iii), and Rohit's failure to pay consideration to shareholders who sold under the offer falls under clause (iv). Each attracts the same penalty range under the section.

  1. ABoth defaults are separately covered: Rohit under clause (iv) and Tanvi under clause (iii), each attracting the same penalty rangeCorrect
  2. BOnly Rohit is covered, because Section 15H applies solely to non-payment of consideration
  3. COnly Tanvi is covered, because non-payment after a valid offer is a civil matter outside Section 15H
  4. DNeither is covered, because Section 15H only penalises failure to disclose shareholding before acquisition

Explanation

Clause (iii) penalises failure to make a public offer by sending the letter of offer, which is Tanvi's default. Clause (iv) penalises failure to pay consideration to shareholders who sold pursuant to the letter of offer, which is Rohit's default. Both fall under the same penalty provision, with a minimum of ten lakh rupees and a maximum of twenty-five crore rupees or three times profits, whichever is higher.

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