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CASE NO.: Appeal (civil)  3183 of 2003

PETITIONER: Clariant International Ltd. & Anr.                               

RESPONDENT: Securities & Exchange Board of India                             

DATE OF JUDGMENT: 25/08/2004

BENCH: N. Santosh Hegde,S.B. Sinha & A.K. Mathur

JUDGMENT: J U D G M E N T With CIVIL APPEAL NOs. 3701, 3872 of 2003  and D3952 of 2004  

S.B. SINHA, J:

       These appeals under Section 15Z of the Securities and Exchange  Board of India Act, 1992 (for short, ’the said Act) arise out of a judgment  and order dated 21.02.2003  passed by the  Securities Appellate Tribunal,  Mumbai (for short, ’the Tribunal’) in Appeal No.114 of 2002.

BACKGROUND FACTS :         Colour Chem Ltd. is a target company.  Its shares are listed on the  Bombay Stock Exchange and National Stock Exchange.  Appellant No.1  (Clariant) in Civil Appeal No.3183 of 2003 is a Swiss company being  subsidiary of another Swiss company, Clariant AG.  Hoechst  is a German  company whereas Ebito Chemiebeteiligungen AG (Ebito) is a Swiss  company. In Ebito Clariant held 49% and Hoechest 51% shares.  An  agreement was entered into by and between  Hoechst and Clariant pursuant  whereto and in furtherance whereof  German Specialty Chemicals business  was transferred to the latter by transferring 583708 equity shares of Rs.100/-  each of the target company.  On or about 21.11.1997, with a view to give  effect to the said agreement,  Clariant sought for an exemption from  compliance  of the requirements of making open offer to the shareholders of  the target company in terms of the provisions of the Securities and Exchange  Board of India (Substantial Acquisition of Shares and Takeovers)  Regulations, 1997 (for short, the Regulations).  Such exemption, however,  was not granted.  Hoechst in the aforementioned situation decided to sell off  the shares held by it  in the target company to Ebito, a company which was  floated on 19.5.2000 as a special purpose vehicle.  Actual transfer took place  on 13.10.2000.  Ebito by reason of the aforementioned transfer became a  100% subsidiary of Clariant.   

       A complaint was received by the Securities and Exchange Board of  India (for short, ’the Board’) to the effect that as by reason of the  aforementioned arrangement as 50.1% shares/voting rights and control  in  the target company  had been made without any public announcement, the  provisions of the Regulations had been violated.  Upon an  inquiry made in  this behalf, the Board came to the conclusion that the acquirer had actually  acquired the control over the target company on 21.11.1997.    By reason of  an order dated 16.10.2002, the Board directed :

"13.1 In view of the findings made above, in exercise of  the powers conferred upon me under sub-section (3) of  Section 4 read with Section 11B SEBI Act 1992 read

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with regulations 44 and 45 of the said Regulations, I  hereby direct the Acquirer to make public  announcement as required under Chapter III of the said  Regulations in terms of regulations 10 & 12 taking  21.11.97 as the reference date for calculation of offer  price.  The public announcement shall be made within  45 days of passing of this order.

13.2 Further, in terms of sub regulation (12) of  regulation 22, the payment of consideration to the  shareholders of the Target company has to be made  within 30 days of the closure of the offer.  The  maximum time period provided in the said Regulations  for completing the offer formalities in respect of an  open offer, is 120 days from the date of public  announcement.  The public announcement in the instant  case ought to have been made taking 21.11.97 as a  reference date and thus the entire offer process would  have been completed latest by 21.3.98.  Since no public  announcement for acquisition of shares of the Target  company has been made, which has adversely affected  interest of shareholders of Target Company, it would be  just and equitable to direct the Acquirer to pay interest  @15% per annum on the offer price, the Acquirer is  hereby accordingly directed to pay interest @15% per  annum to the shareholders for the loss of interest caused  to the shareholders from 22.3.98 till the date of actual  payment of consideration for the shares to be tendered  in the offer directed to be made by the Acquirer."          An appeal was preferred thereagainst by the acquirer wherein the  primal question raised was the rate of interest for the delay involved in  making payment to the shareholders who tendered the shares in the public  offer required to be made in terms of the Regulations.   

It is not in dispute that the value of the share as on 24.2.1998 was  Rs.220/-; on 22.10.2002 Rs.213/- and on the date of public announcement  i.e. on 7.4.2003 the value of the share was Rs.209/- , Rs.233/- Rs.203/- and  Rs.220/-, whereas the offer price was Rs.318/-.

       The submissions of the acquirer before the Tribunal were that (i) the  rate of interest is on the higher side; (ii)  the dividends having been paid in  the meantime, the same should be set off from the amount of payable  interest; and (iii) the interest is payable only to those shareholders who held  shares on the triggering date, namely, 24.2.1998.   

IMPUGNED JUDGMENT :         The Tribunal by its impugned judgment while rejecting the first two  contentions raised on behalf of the acquirer accepted the third, holding : "(i) Those persons who were holding shares of the target  company on 24.2.1998 and continue to be shareholders  on the closure day of public offer to be made in terms of  the directions given by the Respondent vide the  impugned order alone shall be eligible to receive interest  in case the shares which they were holding on 24.2.1998  are tendered in response to public offer made in terms of  the impugned order, and accepted by the Appellants.

(ii) The interest payable by the Appellants shall be at the  rate of 15% as directed by the Respondent in its order  dated 16.10.2002.

(iii) The dividend paid by the target company to its  shareholders not required to be deducted from the interest  payable to the shareholders by the Appellants."

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       The acquirer has preferred Civil Appeal No.3183 of 2003, whereas   the Board has filed Civil Appeal No.3701 of 2003 against the said judgment.   Civil Appeal Nos. D3952 of 2004 and 3872 of 2003  have  been filed  by the  Administrator of the Specified Undertaking of the Unit Trust of India and by  one Umeshkuamr G. Mehta respectively.

Submissions : Mr. R.F. Nariman, and Mr. D.A. Dave, learned Senior Counsel  appearing on behalf of the appellants, would submit that the intent and  purport of Regulation 44 of the Regulations, being  to compensate the  shareholders for the loss suffered by them, the rate of interest payable to the  shareholders would vary from case to case.   The guidelines in this regard  having been provided for in the statute, Mr. Nariman would submit,  grant of  9% interest should be held to be just and proper in view the fact that the  investment was to be made for a long period, i.e., for about five years.  In  support of the said contention, the learned counsel placed reliance on  Kaushnuma Begum (Smt.) and Others vs. New India Assurance Co. Ltd. and  Others [(2001) 2 SCC 9],  H.S. Ahammed Hussain and Another vs. Irfan  Ahammed and Another [(2002) 6 SCC 52], United India Insurance Co. Ltd.  and Others vs. Patricia Jean Mahajan and Others [(2002) 6 SCC 281] and  DDA and Others vs. Joginder S. Monga and Others [(2004) 2 SCC 297].

       It was further submitted that those shareholders who had purchased  the shares later than the date fixed by the SEBI were not entitled to receive  any compensation by way of interest  as they were not the shareholders on  the said date having regard to the fact that their names did not appear in the  register of the company.  As regard the findings of the Board that the amount  of dividend paid to the shareholders would not be set off against the amount  of interest, it was argued that having regard to the fact that actual date of  transfer had been fixed on 22.3.1998, by reason of a fiction created, a person  must be deemed to be a shareholder as on that date and having regard to the  fact that interest was being paid to the shareholders at the offer price from  the said date till the actual payment is made,  the amount received by the  shareholders by way of dividend is liable to be adjusted from the amount to  be paid by way of interest.  Our attention has further been drawn to the fact  that pursuant to the order of this Court dated 28.4.2003 a sum of Rs.111.50  crores  had been deposited and invested in a nationalized bank.

       Mr. Kirit Rawal, learned Senior Counsel appearing on behalf of the  Board, would, on the other hand, contend that while fixing the rate of  interest, the Board, being an expert body, exercises a discretionary  jurisdiction and, thus, the Tribunal and this Court should not interfere  therewith.  The learned counsel would argue that the rate of interest fixed at  15% p.a. cannot be said to be arbitrary and in support thereof reliance has  been placed on Delhi Development Authority vs. M/s Surgical Cooperative  Industrial Estate Ltd. and Others [(1993) Supp. 4 SCC 20].  Mr. Rawal  would contend that from a bare perusal of Regulation 44(i) of the  Regulations, it would appear that all those shareholders who had opted to  sell their shares pursuant to the  public offer are entitled to the payment of  interest and, thus, the finding of the Tribunal in this regard is bad in law.

       It was submitted that Regulation 44 must be read with Section 11B of  the Act so as to put a proper and effective meaning thereto in terms whereof  the Board is entitled to issue any direction including those which are  specified therein..   

       As regard the direction issued by the Tribunal to the effect that only  those shareholders who were on the roll of the company and continued to be  so on the date of public offer alone are entitled to interest,   Mr. Rawal  would contend that by reason of such construction of Regulation 44, the   free transferability of the shares which is the basic feature of the security  market would be interfered with.   

       Mr  K.K. Rai, learned counsel appearing on behalf of the Appellant in

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Civil Appeal No. 3872 of 2003, would, inter alia, contend that  transaction  being  commercial in nature, interest at the rate of 15% cannot be said to be  on a high side.   Reliance in support of the  said contention  has been placed  on State Bank of Patiala and Another vs. Harbans Singh [(1994) 3 SCC 495]  and Regional Provident Fund Commissioner vs. Shiv Kumar Joshi [(2000) 1  SCC 98].            It was contended that  as shares were traded on speculation, it may not  be possible to identify the shareholders who as per direction of the Tribunal  would be entitled to interest as the shares by such time might have changed  many hands.  Furthermore, the process being a complex one,  Regulation 44  should be read in such a manner which  may be  effectually worked out.

       Mr. Shrish Kr. Misra, learned counsel appearing on behalf of the  Administrator of the Specified Undertaking of the Unit Trust of India in  Civil Appeal No.D3952 of 2004 would submit that the appellants therein  should be held to be entitled to grant of interest despite the fact  that it was  not a shareholder as on 11.3.1998 as would appear from the following :

A. That the Unit Trust of India was a statutory  corporation under the Unit Trust of India Act, 1963 and  was/ is the shareholders of the Target company and as on  24-2-1998 holding 1123800 shares.

B. That Unit Trust of India Act, 1963 has been repealed  by the Act of the Parliament i.e. Unit Trust of India  (Transfer of Undertaking and Repeal) Act, 2002.

C. That the said Act provides for transfer and vesting of  Undertaking (excluding Specified Undertaking) of Unit  Trust of India to a Specified Company (being UTI  Trustee Company Pvt. Ltd.) to be formed and registered  under the Companies Act 1956 as well as for transfer and  vesting of Specified Undertaking of Unit Trust of India in  the Administrator appointed by the Central Government  in the terms of section 7 of Unit Trust of India (Transfer  of Undertaking and Repeal) Act, 2002.

D. That as per section 4(1) (b) of the said Act the  Specified undertaking of the erstwhile Unit Trust of India  being all business, assets, liabilities and properties set out  in Schedule-I of the said Act stood transferred to the  vested in the "Administrator of the Specified  Undertaking of the Unit Trust of India" on and with  effect from the appointed day viz. 1-2-2003.  That by  virtue of section 4(1)(a) of the said Act, the Undertaking  (excluding the Specified Undertaking) of the erstwhile  Unit Trust of India being all business, assets, liabilities  and properties set out in schedule \026 II of the said Act  stood transferred to and vested in the "UTI Trustee  Company Pvt. Ltd" on and with effect from the  appointed day viz. 1-2-2003.

E. That the 1123800 shares (considering face value of Rs.  10/- each) purchased by the erstwhile Unit Trust of India  were/are from the amount which relates to Schedule I &  II to the said Act.  Therefore, the shares purchased by the  erstwhile Unit Trust of India of M/s. Colour Chem Ltd.  stands transferred to and vested in the ’Administrator of  the Specified Undertakings of the Unit Trust of India’  and the ’Specified Company’ i.e. UTI Trustee Company  Pvt. Ltd. by virtue of the said Act.

F. That out of 1123800 shares the amount invested for  501100 (considering face value of  Rs.10/- each as on 24-

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2-1998) shares is from the schemes which come under  schedule \026I of the said Act, as such the "Administrator of  the Specified Undertaking of the Unit Trust of India" is  the successor in holder of 501100 shares.

G. That the amount invested by the erstwhile Unit Trust  of India for the balance 622700 (considering face value  of  Rs.10/- each as on 24-2-1998) shares was from the  schemes which come under the Schedule \026 II of the said  Act, as such the "UTI Trustee Company Pvt. Ltd." is the  successor in holder of those 622700 shares.

H. That as per Section 5(1) of the said Act all the assets  and liabilities including lands, buildings, vehicles, cash  balances, deposits, foreign currencies, disclosed and  undisclosed reserves, reserves fund, special reserve fund,  benevolent reserve fund, any other fund stock,  investments, shares, bonds, debentures, security, powers  authorities privileges benefits of the erstwhile Unit Trust  of India vest in "Administrator of the Specified  undertaking of the Unit Trust of India" and "UTI Trustee  Company Pvt. Ltd."

I. That as per section 5(2) of the said Act "All contracts,  deeds bonds guarantees, power of attorney other  instruments (including all units issued and unit schemes  formulated by the Trust and working arrangements)  subsisting immediately before the appointed day and  affecting the Trust shall cease to have effect or to be  enforceable against the Trust and shall be in full force  and effect against or in favour of the specified company  (UTI Trustee Company Pvt. Ltd.) or the Administrator   (Administrator of the Specified Undertaking of the Unit  Trust of India) as the case may be, in which the  undertaking or specified undertaking has vested by virtue  of the said Act and enforceable as fully and effectually as  if instead of the Unit Trust of India, the specified  company (UTI Trustee Company Pvt. Ltd) or the  Administrator (Administrator of the Specified  undertaking of the Unit Trust of India) had been named  therein or had been a party thereto.

The Relevant Statutory Provisions:         The Securities and Exchange Board of India Act, 1992 was enacted   to provide for the  establishment of a Board to protect the interests of  investors in securities and to promote the development of, and to regulate,  the securities market and for matter connected therewith or incidental  thereto.   Section 11 of the Act provides that inter alia the duty of the Board  is to protect the interest of investors in securities and to promote the  development of, and to regulate the securities market, by such measures as it  thinks fit, which  would include in regulation of substantial acquisition of  shares and take-over of companies.  Section 11B  empowers the Board to  issue directions, inter alia,  in the interest of investors, or orderly  development of securities market.    Regulation 44 of the 1997 Regulations  reads thus :

"44. Directions by the Board.  The Board may, in the  interests of the securities market, without prejudice to its  right to initiate action including criminal prosecution  under section 24 of the Act give such directions as it  deems fit including :  

(a) directing the person concerned not to further deal in  securities;

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(b) prohibiting the person concerned from disposing of  any of the securities acquired in violation of these  Regulations;

(c) directing the person concerned to sell the shares  acquired in violation of the provisions of these  Regulations;

(d) taking action against the person concerned".

       In terms of the said regulation, there was no express power to issue  any direction as regard grant of interest.                  Regulation  44 of 1997 Regulations was substituted in the year 2002  with effect from 9.9.2002, the relevant portion of  which reads thus : "44. Directions by the Board. Without prejudice to  its right to initiate action under Chapter VIA  and       section 24 of the Act, the Board may, in  the interest of securities market or  for protection  of interest of investors, issue such directions as it  deems fit  including: -   (i) directing the person concerned, who has  failed to make a public offer or   delayed the making of a public offer in  terms of these Regulations, to pay to the   shareholders, whose shares have been  accepted in the public offer made after the  delay, the consideration amount along with  interest at the rate not less than the  applicable rate of interest payable by banks  on fixed deposits."

       As the impugned order of the Tribunal had been passed on 21.2.2003,  it is not disputed that Regulation 44 as amended in 2002 shall be attracted in  the instant case.

       ’Shareholder’ has neither been defined in the Act nor in the  Regulations; whereas ’shares’ has been defined to mean shares in the share  capital of a company carrying voting rights and includes  any security which  would entitle the holder to receive shares with voting rights but shall not  include preference shares..

       In terms of sub-section (2) of Section 2 of the said Act, the words and  expressions used and not defined in the Act but defined in the Securities  Contracts (Regulation) Act, 1956 (42 of 1956) or the Depositors Act, 1996  (22 of 1996) shall have the meanings respectively assigned to them in that  Act.

       Clause (2) of Regulation 2 provides that all other expressions unless  defined therein shall have the same meaning as have been assigned to them  under the Act or the Securities Contracts (Regulation) Act, 1956 , or the  Companies Act, 1956, or any statutory modification or re-enactment thereto,  as the case may be.   As  ’shareholder’ has not been defined, with a view to  bring a ’shareholder’ within the provisions of the said Regulations, we have  no option but to refer to the relevant provisions of the Companies Act, 1956.   Section 41 of the Companies Act defines ’member’, sub-sections (1) and (2)  whereof are as under :-

"41. (1) The subscribers of the memorandum of a  company shall be deemed to have agreed to become  members of the company, and on its registration, shall be  entered as members in its register of members.

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(2) Every other person who agrees in writing to become a  member of a company and whose name is entered in its  register of members, shall be a member of the company."  

Rate of interest :

       Section 11 of the Act provides that it shall be the duty of the Board to  protect the interest of investors in securities.  Regulation 44 of 1997,  however,  empowered the Board to issue directions only in the interest of the  securities market. The expression "in the interest of the investors" did not  occur therein.  Regulation 44 of 2002 Regulations, thus, confers a wider  power upon the Board.  The said power   is  without prejudice to its right to  initiate action under Chapter VIA and  Section 24 of the Act  which deals  with offences .  Regulation 44 of 2002 Regulations, furthermore, empowers  the Board to issue directions both in the interest of the securities market as  well as for protection of interest of investors.  Such directions may be issued  in its discretion.  It, however, in its discretion  may or may not issue such  directions.  Regulation 44 (i) of Regulations, therefore, confers a power  upon the Board to issue directions also in the interest of  the investors which  would include a direction to pay interest.   

       A direction in terms of Regulation 44 which was in the interest of  securities market indisputably would have caused civil or evil consequences  on the defaulters.  Clause (i) of Regulation 44, however, does not provide for  any penal consequence.  It provides for only a civil consequence.  By reason  of the said provision, the  power of the Board to issue directions is sought to  be restricted to pay the amount consideration together with interest at the  rate not less than the interest payable by banks on fixed deposits.  Both the  Board and the Tribunal have proceeded on the basis that the interest is to be  paid  with a view to recompense  the shareholders and not by way of penalty  or damages.  Such a direction, therefore, was for the purpose of protecting  the interest of investors and not "in the interest of the securities market".   The transactions in the market are not thereby affected one way or the other.      The Board, as noticed hereinbefore, has a discretion in the matter and, thus,  it may or may not issue such a direction.  The shareholders do not have any  say in the matter.  As a necessary concomitant, they have no legal right.            The Board further having a discretionary jurisdiction must exercise  the same strictly in accordance with law and judiciously.  Such discretion  must be a sound exercise in law.  The discretionary jurisdiction, it is well- known,  although  may be of wide amplitude as the expression  "as it deems  fit"  has  been used but in view of the fact that civil consequence would  ensue by reason thereof, the same  must be exercised  fairly and bona fide.   The discretion so exercised is subject to appeal as also judicial review, and,  thus,  must also answer the test of reasonableness.      

       In Kruger and Others vs. Commonwealth of Australia, reported in   1997 (146) Australian Law Reports, page 126, it is stated :

"Moreover, when a discretionary power is statutorily  conferred on a repository, the power must be exercised  reasonably, for the legislature is taken to intend that the  discretion be so exercised.  Reasonableness can be  determined only by reference to the community  standards at the time of the exercise of the discretion  and that must be taken to be the legislative  intention\005."

       The discretionary jurisdiction has to be exercised keeping in view the  purpose for which it is conferred, the object sought to be achieved and the  reasons for granting such wide discretion. [(See Narendra Singh Vs.  Chhotey Singh and Another, (1983) 4 SCC 131]

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       A discretionary jurisdiction, furthermore, must be exercised within the  four-corners of the statute.  [See Dr. Akshaibar Lal and Others Vs. The  Vice-Chancellor, Banaras Hindu University and Others, (1961) 3 SCR 386  and also para 9-022 of De Smith, Woolf and Jowell’s Judicial Review of  Administrative Action, 5th Edition,  page 445]   

       Interest can be awarded in terms of an agreement or statutory  provisions.  It can also be awarded by  reason of  usage or trade having the  force of  law or on equitable considerations.  Interest cannot be awarded by  way of damages except in cases where  money due is wrongfully withheld  and there are equitable grounds therefor, for which a written demand is  mandatory.

       In absence of any agreement or statutory provision or a merchantile  usage, interest payable can be only at the market rate.  Such interest is  payable upon establishment of totality of circumstances justifying exercise  of such equitable jurisdiction. [See Municipal Corporation of Delhi vs.  Sushila Devi (Smt.) and Others \026 (1999) 4 SCC 317 \026 Para 16].           In  Executive Engineer, Dhenkanal, Minor Irrigation Division, Orissa  and Others vs. N.C. Budharaj (Deceased) by Lrs. And Others [(2001) 2 SCC  721], Raju, J. speaking for the majority held that a person deprived of the  use of money to which he is legitimately entitled has a right to be  compensated for the deprivation by whatever name it may be called, namely,  interest, compensation or damages.  

       In Black’s Law Dictionary, the word ’compensation’ has been defined  as under :         "money given to compensate loss or injury".          In a given case where the liability arises during pendency of a  litigation, doctrine of restitution  can be invoked.  In South Eastern  Coalfields Ltd. vs. State of M.P. and Others [(2003) 8 SCC 648], it was  observed :

"\005In law, the term "restitution" is used in three senses  (i) return or restoration of  some specific thing to its  rightful owner or status; (ii) compensation for benefits  derived from a wrong done to another; and (iii)  compensation or reparation for the loss caused to another  (See Black’s Law Dictionary, 7th Edn., p. 1315).  The  Law of Contracts by John D. Calamari & Joseph M.  Perillo has been quoted by Black to say that "restitution"  is an ambiguous term, sometimes referring to the  disgorging of something which has been taken and at  times referring to compensation for injury done:

       "Often, the result under either meaning of the term  would be the same\005.Unjust impoverishment as well as  unjust enrichment is a ground for restitution.  If the  defendant is guilty of a non-tortious misrepresentation,  the measure of recovery is not rigid but, as in other cases  of restitution, such factors as relative fault, the agreed- upon risks, and the fairness of alternative risk allocations  not agreed upon and not attributable to the fault of either  party need to be weighed."

        When a bench-mark is fixed by a statute,  the question as to whether a  discretion has been judicially or properly exercised or not will have to be  determined in the context of  the facts of the particular case.  [See Irrigation  Department vs. G.C. Roy, (1992) 1 SCC 508].  When a bench-mark is fixed  or the court grants interest at the agreed rate, it may not be necessary to give  reasons but where interest is granted at a higher or lessor rate, some reasons  are required to be assigned.  

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        By reason of Regulation 44, as substituted in 2002, the discretionary  jurisdiction of the Board is curtailed.  It in terms of Regulations 1997 could  award interest by way of damages but by reason of Regulation 2002, its  power is limited to grant interest to compensate the shareholders for the loss  suffered by them arising out of the delay in making the public offer.  The  courts of law  can take judicial notice  of both inflation as also fall in bank  rate of interest.  The bank rate of interest both for commercial purpose and  other purposes had been the subject-matter of statutory provisions as also the  judge-made laws.   Even in  cases of victims of motor vehicles accidents, the  courts have upon taking note of the fall in the rate of interest held that 9%  interest to be reasonable.  [See  Kaushnuma Begum (supra),  and H.S.  Ahammed Hussain (supra) and Patricia Jean Mahajan (supra)]

The statutory changes brought about must be noticed by the court  keeping in view the fact that the nature of  jurisdiction by the Board has been  changed.  The mischief rule also in this case should be applied.  Furthermore  while construing such provisions,  the courts must take into consideration  the provisions of the law as had been interpreted by courts prior thereto.          By way of an example we may notice that  the proviso appended to  sub-sections (1) and (2) of Section 34 of Code of Civil Procedure provides  for  the grant of rate at  which moneys are lent or advanced by nationalized  banks in relation to commercial transactions.          In DDA vs. M/s Surgical Cooperative Industrial Estate Ltd. and  Others  [(1993) Supp.4 SCC 20] whereupon Mr. Rawal has placed reliance,  15% interest was directed to be paid only in favour of those members who  had already been allotted plots and made some payments, on a suggestion  made by the court, as would appear from the following :      

"\005At the rate of 15% interest the amount would be  considerably less yet we suggested to the learned counsel  for these members to ascertain from their clients if they  would be willing to purchase the plots at 50% of the price  realised in the last auction. They conveyed their  willingness to pay that price i.e. 50% of Rs. 10,756 per  square metre. Mr. Arun Jaitley, the learned counsel for  the Delhi Development Authority submitted that  although he had no instructions from his clients in the  matter his clients would abide by any just, reasonable and  fair order that this Court would make in the facts and  circumstances of the case\005."  

       The said decision, therefore, has no application to the fact of the  present matter.

       We also do not agree with the contention that the payment of interest  for delay in making the public offer is  a commercial transaction.    While determining the cases of commercial transaction also, fall in  rate of interest has  been taken note of by this Court in Citibank N.A. etc. vs.  Standard Chartered Bank and Others etc. [(2004) 1 SCC 12, Para 62] and  Citibank N.A. vs. Standard Chartered Bank etc [(2004) 6 SCC 1, para 54].

       It is at this stage relevant to note that  the rate of  interest at the rate of  15% as directed by the Board has been affirmed by the Tribunal stating :

"\005Even on applying the said test, it does not appear to  me that the 15% interest directed to be paid to the  shareholders as compensation for the delay involved in  making the payment in the Appellants’ case is unjust.  In  this context it is to be noted that the payment was to be  made, in case the offer had been made according to the  provisions of the Takeover Regulations, by 22.3.1998

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and the amount to be so paid remains unpaid till date.   Therefore, in my view the interest rate applicable should  be that rate which was prevailing on 22.3.1998 and not  the one prevailing on the date of the impugned order.   According to the information furnished by the Appellants  the rate of interest payable on deposits for a period of 3  years and above by nationalized banks was around 12%  at that point of time.  In this context one should not fail to  note that the interest is directed to be paid to the  shareholders to compensate the loss.  Had the shareholder  received the money on due date, in the normal course  what return he would have received by effectively  investing that money has to be taken into consideration.   The amount was due on 22.3.1998.  The then existing  rate of 12%, if calculated on quarterly rest basis, at the  end of 2002 works out to more than 15% and therefore,  even if the interest is worked out in relation to the rate of  interest  payable on deposit by nationalized banks, the  rate of interest payable by the Appellants fixed at 15%  p.a. by the Respondent in the instant case cannot be  considered unjust, and the same is also not contrary to the  view held by the Hon’ble Supreme Court in Kaushnuma  Begum’s case or against the provisions of regulation  44(i)\005."   

       The observation of the Tribunal was on a wrong premise as the rate of  interest in a case of fixed deposit in a nationalized bank was not to be  calculated on quarterly rest basis.  Furthermore, the bank rate of interest  which  was prevailing in 1998 had also fallen down.   

       The rate of interest at the relevant time as was payable by Syndicate  Bank,  a nationalized bank,  is as under :                                           "FIXED DEPOSIT INTEREST RATES                         FOR  THREE YEARS  AND ABOVE                               FROM SYNDICATE BANK

Sl.No.         From          To Percentage 1. 02.07.1996 30.04.1997     13%  2. 01.05.1997 31.08.1997     12% 3. 01.09.1997 31.10.1997     11% 4. 01.11.1997 21.12.1997     10%  5. 22.12.1997 14.01.1998     11% 6. 15.01.1998 21.01.1998

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   11.5%  7. 09.02.1998 11.10.1998     12% 8. 12.10.1998 14.03.1999     11.5% 9. 15.03.1999 04.04.1999     11.25% 10. 05.04.1999 30.04.1999     11% 11. 01.05.1999 22.08.1999     10.5% 12. 23.08.1999 11.11.1999     10.25% 13. 12.11.1999 09.04.2000       9.75% 14. 10.04.2000 31.08.2000       9% 15. 01.09.2000 15.10.2000       9.5% 16. 16.10.2000 31.12.2000     10% 17. 01.01.2001 11.02.2001       9.75% 18. 12.02.2001 14.03.2001     10% 19. 15.03.2001 09.07.2001       9.5% 20. 10.07.2001 14.09.2001       9.25% 21. 15.09.2001 15.12.2001       8.75% 22. 16.12.2001 20.01.2002       8.50%

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23. 21.01.2002 07.04.2002       8.25% 24. 08.04.2002 06.08.2002       7.75% 25. 07.08.2002 27.10.2002       7.50%                                                                                   "          While awarding interest, it is required to bear  in mind that interest  would be payable on the maximum price of the share which was Rs.318/-  and not on Rs.220/- which was not the prevailing price in 1998, as a result  whereof not only a shareholder would be getting a higher price but would  also be getting  interest thereupon.

       So far as the contention regarding the applicability of dynamics of the  market or its being a volatile one is concerned, the same, in our opinion, has  nothing to do with rate of interest inasmuch both the Board and the Tribunal  proceeded on the basis that the shareholders are to be compensated by way  of interest for delayed payment.  In that view of the matter, the relevance of  rate of interest payable for the period it is payable and the persons who are  entitled to be compensated were required to be determined.  Rate of interest  should be a reasonable one as the same became payable for the delay in  making the payment, subject of course to  the statutory provision contained  in the Regulations.  As noticed hereinbefore, the discretion of the Board vis- ‘-vis the Tribunal had been curtailed.  There is a change even in relation to  the nature of  discretion of the Board.   The Board and the Tribunal , thus,  failed to apply the correct principles of law in determining the rate of interest  payable in this case.     

To whom interest is payable:

       It is not in dispute that the acquirer contravened Regulation 12 while  acquiring the control of the target company. Regulation 14(3) provides that a  public announcement referred to in Regulation 12 is required to be made by  the merchant banker not later than four working days after any such change  or changes are decided to be made as would result in the acquisition of  control over the target company by the acquirer.  Clause 4 of Regulation 15  provides that the offer under these Regulations shall be deemed to have been  made on the date on which the public announcement appeared in any of the  newspapers referred to in clause (1).  The announcement of offer in terms of  Regulation 16(xi) is to contain that date by which individual letters of offer  would be posted to each of the shareholders.  Regulation 20 provides for the  minimum offer price.   In terms of  clause  (1) of Regulation 21, the public  offer is required to be made by the acquirer to the shareholders of the target  company to acquire from them an aggregate minimum 20% of the voting  capital of the company.          The Board arrived at an inference that the acquirer had acquired the  control of the target company as the special vehicle company on 19.5.2000.   The liability of the acquirer to pay interest should be judged in the  aforementioned context.

Shareholder :                    To become a shareholder, a person has to fulfill two conditions,  namely, he must agree in writing to become a member of a company and  whose name should be  entered in its register of members.  The members  holding equity share capital of company and whose names are entered as  beneficial owner in the records of the depository shall be deemed to be the  members of the concerned company.     

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       In Palmer’s Company Law, 23rd Edn.  at page 154, para 12-07,  it is  stated :

"12-07 Subscribers as members \026 The subscribers of the  memorandum are deemed to have agreed to become  members of the company, and on its registration shall be  entered as members in its register of members (1948 Act,  s. 26(1))."

       It is further stated  :

"49.04. Other members \026 In the case of members other  than the subscribers to the memorandum two essential  conditions have to be satisfied to constitute a person a  member:

(1)     an agreement to become a member; and

(2)     entry on the register.

These two conditions are cumulative: unless they are  both satisfied, the person in question has not acquired the  status of member.

Thus, an agreement to become a member alone does not  create the status of membership; it is a condition  precedent to the acquisition of such status that the  shareholder’s name should be entered on the register.   Conversely, the company is not entitled to place a  person’s name on the register without his having agreed  to become a member; a person improperly registered  without his assent is not bound thereby and may have his  name removed from the register."

       In M/s Howrah Trading Co., Ltd. vs. The Commissioner of Income  Tax, Calcutta  [(1959) Supp.(2) SCR 448], the law is stated thus : "The question that falls for consideration is  whether the meaning given to the expression  "shareholder" used in section 18(5) of the Act by  these cases is correct. No valid reason exists why  "shareholder" as used in section 18(5) should mean  a person other than the one denoted by the same  expression in the Indian Companies Act, 1913. In  In re Wala Wynaad Indian Gold Mining Company  Chitty, J., observed :  "I use now myself the term which is common in  the courts, ’a shareholder’, that means the holder of  the shares. It is the common term used, and only  means the person who holds the shares by having  his name on the register.""         [See also Balkrishan Gupta and Others vs. Swadeshi Polytex Ltd. and  Another [(1985) 2 SCC 167]]

       The rights of a shareholder are purely contractual  and would be such  which are granted to him by Company’s Memorandum or Articles of  Association together with the statutory rights conferred on him by the  Companies Act.

       A shareholder having regard to the direction issued by the Tribunal  must be one who was a shareholder on the triggering date.  Purpose and  object of creating a legal fiction is well-known.  Once a fiction is created  upon imagining a certain state of affairs, the imagination cannot be  permitted to be boggled when it comes to the inevitable corollaries thereof.

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[See Dipak Chandra Ruhidas vs. Chandan Kumar Sarkar [(2003) 7 SCC  66]], ITW Signode India Ltd. Vs. CCE, [(2004) 3 SCC 48], and Ashok  Leyland Ltd. Vs. State of Tamil Nadu, (2004) 3 SCC 1].

       Directions by the Board are required to be issued for the purpose of  protecting the interest of the investors which would imply that such  protection be extended to the persons who are entitled thereto and not any  other shareholder who would get the same by windfall.  The shareholders  contemplated under clause (i) of  Regulation 44 must be those shareholders  whose shares have been accepted upon  public announcement of offer  and  who have suffered loss owing to blockage of amount by not being able to  sell the shares held by them. The object of the said provision is to protect the  interest of such shareholders who had suffered a loss for delay in making the  public announcement and, thus, may have to be compensated.  The very fact  that the bench-mark as regard the rate of interest has been fixed is also a  pointer to the fact that the interest is to be paid to such investors who had  suffered some loss.

While compensating a person, the court  should see that he is not  unjustly enriched.  Interest is directed to be paid on the default of the  acquirer occasioning loss suffered by an investor of  his money.  The  question of paying interest by way of compensation to persons who had not  suffered any loss, thus,  would not arise.    

       Interest was, therefore, payable only to such persons who were  shareholders of target company as on the triggering date.

Deposits made by the Appellants in this Court \026 Effect :

       It is not in dispute that the appellants pursuant to an order of this  Court dated 28th April, 2003 have deposited a sum of Rs.111.50 crores  which has been calculated on the following basis : " 1. Total paid-up capital of Colour-Chem Ltd. (By number of shares) 11,650,000 2. No. of  shares to be acquired through open  offer  2,330,000 3. Estimated number of shares available for offer  having eligibility for interest as per SAT Order (as of 25.4.2003) 3,724,224 4. Ratio of acceptance as per Regulation 21(6) 40% 5. No. of shares likely to be acquired as per  Regulation 21(6) from the lot eligible for  Interest  1,489,690 6. Balance to be acquired from the lot of shares  not eligible for interest 840,310 7. Total price consideration @ Rs.318/- per share 740,940,000 8. Total interest payable in respect of shares at Sl.  No.5 above \026 As per the Open Offer - @ 15%  p.a. for the period 22.3.1998 to 21.6.2003

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(1918 days) Rs.250.65/share)   Rs.373,390,799

TOTAL AMOUNT TO BE DEPOSITED AS  PER SUPREME COURT ORDER OF 28TH  APRIL, 2003   

Rs.1,114,330,799

ROUNDED OFF TO :  

Rs.111.50 crores                                                                                                  "         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.    

       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/-.

       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 SHARES                  FACE VALUE                    : RUPEES 10/- EACH

       OPEN OFFER PRICE              : RUPEES 318/- PER SHARE

       NO.OF SHARES TO BE                       ACQUIRED IN THE OPEN         OFFER                          :        20% OF THE PAID-UP                                                 CAPITAL \026 23.30 LAKHS SHARES  

       TOTAL CONSIDERATION  :  RUPEES 7409.40 LAKHS

Interest Rate  per Annum Period 24.2.1998 to 20.6.2003 Interest per Share (Rs.)         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

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          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.     

       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 Others \026 (2003) 7 SCC 1 - Para 4.1]  

       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:         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.

       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.

       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."

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       Reasons for creating special tribunals, according to the learned author,  are: (i)     Expert knowledge (ii)    Cheapness (iii)   Speed (iv)    Flexibility (v)     Informality

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)."

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 "Wednesbury" review.  He went on to  discuss the benefits of:

"\005having a Tribunal with a general  responsibility for overseeing and enforcing  the safeguards provided for the protection of  the environment\005The 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.); "multidisciplined adjudicating

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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."  

       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. \026

(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."

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  Mescher \026 [ 2002  (76) Australian Law Journal, p.119].

       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.

       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].

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.  

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.

       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

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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.   

       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 Others Vs. The State of Punjab, AIR 1955 SC 549].

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.

In Cellular Operators Association of India and Others vs. Union of  India and Others [(2003) 3 SCC 186], 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".

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 Amnon  Rubinstein a judicial power in contrast to the reviewing  power is stated thus:

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"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".

In West Bengal Electricity Regulatory Commission vs. CESC Ltd.  [(2002) 8 SCC 715], a Bench of this Court, (in which one of us Santosh  Hegde, J. was a member), observed :

"\005From 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."

 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).

       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         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

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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:

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.  

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%.

If  any dividend was paid during the said period, the same shall be  adjusted with the amount of interest.  

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..   

       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.

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.

       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.