In Triumph International Financial India Limited v. SEBI, the Securities Appellate Tribunal (SAT) interpreted “persons acting in concert” in the context of persons with close business associations. Triumph had, inter alia, acted as a broker for some of the investment companies owned and controlled by Ketan Parekh and had acquired shares of the target company. The Adjudicating Officer (AO) concluded that Triumph had acted in concert with entities controlled by Ketan Parekh which had manipulated the securities market during the period from 1999 to 2002. Together with persons acting in concert, Triumph was found by AO to have violated Regulation 7 of the Takeover Code.
SAT noted that, “Persons acting in concert has been defined in the takeover code to mean persons who for a common objective or purpose of substantial acquisition of shares or voting rights pursuant to an agreement or understanding (formal or informal) directly or indirectly cooperate by acquiring or agreeing to acquire shares or voting rights in the target company. It is, thus, clear that before two or more persons can be said to be acting in concert with each other they must have a common objective and that common objective should be substantial acquisition of shares. The shares should then be acquired pursuant to an agreement or an understanding which could be formal or informal…Before a charge of acting in concert is levied, it has to alleged that the delinquent had a common objective pursuant to an agreement or understanding with another person for substantial acquisition of shares of the target company”
SAT then went on to reverse the AO order. The facts that were relied on by AO were found by SAT to indicate an association between persons. SAT held that, “Association between persons is one thing but their acting in concert with a common objective to acquire substantial number of shares in a company in pursuance to an understanding or an agreement between them is altogether different…Close business association between two or more persons does not by itself make them persons acting in concert.”
