SAT Sets Aside SEBI Communications on Open Offer Withdrawal, Remits Matter for Speaking Order

Marwadi Chandarana Intermediaries Brokers Ltd Vs Securities and Exchange Board of India (Securities Appellate Tribunal Mumbai)

The appeal was filed by Marwadi Chandarana Intermediaries Brokers Private Limited against SEBI’s communication dated 30.01.2026 addressed to the appellant’s Merchant Banker, conveying SEBI’s comments and directing that an open offer be proceeded with.

The appellant was engaged in stock broking and merchant banking services and sought to acquire control of TruCap Finance Limited, an NBFC listed on BSE and NSE. For this purpose, it entered into a Share Purchase Agreement (SPA) and Securities Subscription Agreement (SSA), both dated 26.05.2025. Under the SPA, the appellant agreed to acquire 3,68,00,220 equity shares, representing 15.26% of the emerging share capital of the target company, from the promoters and promoter group at ₹4.07 per equity share, for a maximum consideration of up to ₹14,97,76,896, subject to necessary statutory approval from RBI. The SSA concerned preferential allotment of 9,37,00,000 warrants at ₹9.88 per warrant, convertible into equity shares.

A public announcement relating to the open offer was made on 26.05.2025, followed by a Detailed Public Statement on 02.06.2025. The appellant filed a draft letter of offer with SEBI on 09.06.2025. Subsequently, the SPA and SSA were terminated on 22.09.2025 and SEBI was informed. On 24.09.2025, the Merchant Banker informed SEBI that the appellant would not proceed with acquisition of the target company and sought withdrawal of the open offer. The appellant again formally sought permission to withdraw the open offer on 06.10.2025. SEBI informed the Merchant Banker on 27.10.2025 that the open offer could not be withdrawn. The appellant thereafter made a further representation on 04.11.2025, followed by further correspondence, and submitted a detailed note to SEBI on 22.01.2026.

The appellant contended before the Tribunal that SEBI’s communication had serious civil consequences, was bereft of cogent reasons and suffered from non-application of mind. It was submitted that the communication violated principles of natural justice because SEBI had not considered the appellant’s detailed factual and legal submissions concerning the expressly conditional nature of the open offer, failure of the relevant condition precedent for reasons beyond the appellant’s control and valid termination of the SPA and SSA. The appellant therefore sought setting aside of the impugned communication and remand to SEBI for fresh consideration through a speaking order.

SEBI contended that the communication under challenge could not be construed as an order and was issued in response to the draft letter of offer. It relied upon Regulation 23(1)(c) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 and contended that the appellant could not withdraw the open offer because the material adverse effect was not disclosed in the Detailed Public Statement. SEBI also contended that the SPA and SSA were private agreements between the appellant and the target company and that investors had taken decisions on the basis of the public announcement and Detailed Public Statement without knowledge of the contractual conditions contained in those agreements.

The Tribunal noted that the SPA and SSA contained a “Material Adverse Effect” clause. Clause (b) in both agreements contemplated a material adverse effect where the consolidated net worth of the target company had reduced or was reasonably expected to reduce by 20% or more compared with the net worth on the Accounts Date. According to the appellant, the target company’s net worth had reduced by more than 20%, resulting in termination of the SPA and SSA and the request to SEBI to permit withdrawal of the open offer.

The Tribunal carefully examined SEBI’s communications. It noted that the communication dated 27.10.2025 stated that, under Regulation 23(1)(c), an acquirer could not withdraw an open offer pursuant to a public announcement under Regulation 13(2)(g), even if the proposed acquisition through the preferential issue was unsuccessful. The Tribunal further noted that SEBI subsequently sought the Merchant Banker’s independent comments and had received the appellant’s detailed note on facts and law before issuing the communication dated 30.01.2026.

However, according to the Tribunal, neither the communication dated 30.01.2026 nor the earlier communication dated 27.10.2025 contained reasons dealing with the appellant’s request for withdrawal, the termination of the SPA and SSA, the Merchant Banker’s comments or the appellant’s detailed factual and legal submissions. The communication dated 30.01.2026 also directed that the letter of offer should be dispatched within seven working days from receipt of the communication and that the offer could open within five working days thereafter. The Tribunal found that these directions would result in serious consequences, including shareholders offering their shares and the appellant being obliged to purchase them.

The Tribunal held that SEBI, being the statutory market regulator, was duty-bound to pass a speaking order in accordance with law. Since SEBI’s decision on the request to withdraw the open offer would have consequences for the acquirer, target company and investors, the Tribunal considered it imperative that the regulator convey its decision with reasons. It found that both communications did not contain reasons and that the impugned communication was, in substance, akin to an order notwithstanding its description as SEBI’s comments under Regulation 16(4) of the SAST Regulations.

The Tribunal accordingly allowed the appeal, set aside the communications/orders dated 30.01.2026 and 27.10.2025, and remitted the matter to SEBI to pass a speaking order. The Tribunal expressly clarified that it had not examined the merits of the case. Thus, the order did not finally determine whether the appellant was entitled to withdraw the open offer on the basis of termination of the SPA and SSA or the material adverse effect clause. Pending interlocutory applications, if any, were disposed of and there was no order as to costs.

In reaching its conclusion, the Tribunal referred to the decisions concerning the filing of Form 10/10B and the distinction drawn in Principal Commissioner of Income-tax vs. Wipro Ltd. and other decisions regarding procedural compliance and the availability of prescribed forms before the relevant proceedings were concluded.

Cases Discussed

• Association of Indian Panelboard Mfg. — TA 655 of 2022 (Guj) — Referred to as a judicial precedent supporting the proposition that the requirement concerning Form 10/10B is directory/procedural where the prescribed report was available on record.
• DCIT vs. Cryogas Equipment P. Ltd. — ITA 415/Ahd/2020 — Referred to for the distinction drawn between the facts considered in Wipro Ltd. and cases involving deduction and procedural filing requirements.
• True Sparrow Systems P. Ltd. vs. PCIT — ITA 765/Ahd/2019 — Referred to among decisions reiterating the principle concerning filing of Form 10/10B.
• Shardaben Education Trust vs. ITO — ITA 2312/Ahd/2018 — Referred to among judicial precedents concerning the filing requirement for Form 10/10B.
• CIT vs. Xavier Kelavani Mandal P. Ltd. — 221 Taxman 43 (Guj) — Referred to in support of the treatment of delayed filing of the prescribed audit report.
• Zenith Processing Mills vs. CIT — 219 ITR 721 (Guj) — Referred to for the proposition that the requirement of furnishing the prescribed auditor’s report with the return was directory and that the report could be produced at a later stage during assessment proceedings.
• CIT vs. Mayur Foundation — 274 ITR 562 (Guj) — Referred to among decisions concerning the procedural nature of the prescribed filing requirement.
• CIT vs. Gujarat Oil & Allied Industries — 201 ITR 325 (Guj) — Referred to concerning delayed furnishing of an audit report and the availability of the report at a later stage.
• CIT vs. G. M. Knitting Industries — 376 ITR 456 (SC) — Referred to concerning filing of the prescribed certificate/report before completion of assessment. TaxGuru has also discussed this precedent in connection with delayed filing of prescribed audit reports. :contentReference[oaicite:0]{index=0}
• CIT vs. Web Commerce (India) P. Ltd. — 318 ITR 135 (Del) — Referred to among judicial precedents concerning the procedural filing requirement.
• CIT vs. Contimeters Electricals P. Ltd. — 317 ITR 422 (Del) — Referred to among judicial precedents concerning filing of prescribed audit reports. :contentReference[oaicite:1]{index=1}
• PCIT vs. Surya Merchants — 387 ITR 105 (Allahabad) — Referred to among judicial precedents concerning the prescribed filing requirement.
• DIC Fine Chemicals P. Ltd. vs. DCIT — 177 ITD 672 (Kol.) — Referred to among judicial precedents concerning Form 10/10B compliance.
• Principal CIT v. Wipro Ltd. — 140 Taxman.com 223 (SC) — Relied upon by the Revenue and distinguished by the Tribunal on facts, particularly because the present case involved a consistent claim under Section 11(2) in the original and revised returns and an original Form 10/10B filing before the prescribed due date. TaxGuru has discussed the Supreme Court decision in connection with the mandatory nature of the relevant conditions. :contentReference[oaicite:2]{index=2}
• CIT vs. Nagpur Hotel Owners Association — [2001] 114 Taxman 255 (SC) — Referred to by the CIT(A) for the proposition that the necessary information in Form 10 must be available before completion of assessment. TaxGuru materials discuss the same decision in the context of Section 11(2) and Form 10. :contentReference[oaicite:3]{index=3}
• CIT vs. Rai Bahadur Bissesswarlal Motilal Malwasie Trust — (1992) 195 ITR 825 — Referred to by the CIT(A) for the proposition that filing the audit report with the return was a procedural requirement and exemption should not be denied where the report was available to the Assessing Officer before completion of assessment.
• Calcutta Management Association vs. VTO — (1992) 42 ITD 62 — Referred to by the CIT(A) concerning filing of the audit report at the appellate stage.
• Sarvodaya Charitable Trust v. Income Tax Officer (Exemption) — [2021] 125 taxmann.com 75 (Gujarat) — Referred to by the CIT(A) in support of the view concerning delayed furnishing of the audit report.
• G.M. Knitting Industries (P.) Ltd. — Referred to again in the discussion quoted from DCIT v. Cryogas Equipment P. Ltd., including its distinction from the Supreme Court’s decision in Wipro Ltd.
• CIT v. Yokogawa India Ltd. — 391 ITR 274 (SC) — Referred to in the quoted reasoning from DCIT v. Cryogas Equipment P. Ltd. concerning the distinction between deduction and exemption provisions.
• M/s. ACN Info-Tech vs. ACIT — ITA No. 79/Viz/2017 — Referred to in the quoted reasoning from DCIT v. Cryogas Equipment P. Ltd. concerning filing of Form 56F during assessment proceedings.
• ITO v. Accentia Technologies — 52 taxmann.com 89 (Mum) — Referred to in the quoted reasoning from DCIT v. Cryogas Equipment P. Ltd. concerning a mistaken claim and subsequent procedural compliance.

FULL TEXT OF THE JUDGMENT/ORDER OF SECURITIES APPELLATE TRIBUNAL MUMBAI

1 This appeal is directed against SEBI9s communication dated 30.01.2026 addressed to the appellant9s Merchant Banker conveying its comments with a direction to make an open offer.

2. We have heard Mr. Janak Dwarkadas, learned Senior Advocate for the appellant and Mr. Chetan Kapadia, learned Senior Advocate for the SEBI.

3. Brief facts of the case are, appellant, Marwadi Chandarana Intermediaries Brokers Private Limited, is in the business of stock broking services, merchant banking services etc. It desired to acquire control of 8TruCap Finance Limited9 23 (8TruCap/target company9 for short) an NBFC listed on BSE and 4 NSE. It entered into a Share Purchase Agreement (8SPA9 for 1 Securities and Exchange Board of India 2 Non-Banking Financial Institution 3 Bombay Stock Exchange 4 National Stock Exchange short) and Securities Subscription Agreement (8SSA9 for short) both dated 26.05.2025 with the target company to acquire its controlling rights. The SSA was for issue of fresh equity shares of 47.98% under the preferential route and SPA for direct sale of 15.26% of equity to acquire voting rights in excess of 25%.

4. A public announcement was made on 26.05.2025 in relation to the open offer made by the appellant with SEBI through its Merchant Banker. On 02.06.2025, 8Detailed Public Statement9 was made in relation to the open offer. On 09.06.2025, appellant filed a draft letter of offer with SEBI.

5. On 22.09.2025, SPA and SSA were terminated and it was intimated to the SEBI. On 24.09.2025, the Merchant Banker conveyed to the SEBI that appellant would not proceed with acquiring the target company and sought to withdraw the open offer.

6. On 06.10.2025, appellant submitted another formal letter to the SEBI seeking permission to withdraw the open offer. On 27.10.2025, SEBI informed the Merchant Banker that the open offer cannot be withdrawn. On 04.11.2025, appellant submitted a representation explaining the position of law and again requested to consider its request to withdraw the open offer. After exchange of communications between the appellant, SEBI and Merchant Banker, on 30.01.2026, SEBI sent the impugned communication.

7. Assailing the impugned communication, Mr. Janak Dwarkadas, learned Senior Advocate submitted at the outset that the impugned communication meets the appellant with serious civil consequences. The said communication is bereft of cogent reasons and without application of mind and hence, unsustainable in law.

8. He further submitted that the impugned order is in violation of principles of natural justice; SEBI has not considered appellant9s detailed factual and legal submissions, wherein appellant had demonstrated that the open offer was expressly conditional and the relevant condition precedent had failed for the reasons beyond appellant9s control and that the agreements giving rise to open offer had stood validly terminated.

9. He submitted that since the impugned order is in violation of principles of natural justice, this Tribunal may set aside the same and remit the matter to the SEBI for fresh consideration with a direction to pass a speaking order.

10. In reply, Mr. Chetan Kapadia, learned Senior Advocate for the SEBI submitted that what is challenged in this appeal cannot be construed as an order passed by the SEBI. It is a communication issued in response to the draft letter of offer dated 09.06.2025 submitted by the appellant. Appellant cannot be permitted to withdraw its open offer in terms of Regulation 5 23(1)(c) of SAST Regulations, because appellant has not disclosed 8material adverse effect9 in the 8Detailed Public Statement9.

11. Amplifying his contention, Mr. Kapadia argued that the SPA and SSA are private agreements between the appellant and the target company. Investors take decisions to invest based on the public announcement and Detailed Public Statement. They did not have the benefit of knowing the conditions in the SPA and SSA to take an informed decision.

12. In substance, he contended that appellant has not disclosed the precise condition contained in the SPA and SSA. Therefore, withdrawal of open offer is not permissible.

13. We have carefully considered rival contentions and perused the records.

14. Admitted facts are, appellant entered into a share purchase agreement (8SPA9) to purchase 3,68,00,220 equity shares (representing 15.26% of the emerging share capital of the target company) from the promoters and members of the promoter group of the target company, at a price of ₹4.07 per equity share, for a maximum consideration of up to ₹14,97,76,896 and subject to the receipt of necessary statutory 6 approval from RBI. Pursuant to a Board resolution passed by the 5 SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 6 Reserve Bank of India https://taxguru.in/ 6 target company, authorising issuance and allotment of 11,56,80,000 shares, appellant entered into an SSA for preferential allotment of 9,37,00,000 warrants at a price of ₹9.88 per warrant convertible into equity shares by way of preferential allotment.

15. The summary underlining the transaction in SPA and SSA is as follows:

16. The 8material adverse effects9 are recorded thus in the SPA are as follows:

”Material Adverse Effect means any event, occurrence, fact, condition, change, development or effect (including any change in Applicable Laws or any order, award, injunction or decision  by a Governmental Authority) (any such item, an Effect) that individually or when considered with any other Effect

(a) has or would reasonably be expected to have a material adverse effect on the legality, validity, binding nature or enforceability of this Agreement and any other Transaction Documents, or restrains, prohibits or renders illegal any of the transactions contemplated thereby;

(b) has reduced or would reasonably be expected to reduce the consolidated net worth of the Company by 20% (Twenty percent) or more, as compared to the net worth of the Company on the Accounts Date;

(c) xxxxxx;

(d) xxxxxx;

(e) xxxxxx;”

(Emphasis Supplied)

17. The 8material adverse effects9 are recorded thus in the SSA as follows:

”Material Adverse Effect means any event, occurrence, fact, condition, change, development or effect (including any change in Applicable Laws or any order, award, injunction or decision by a Governmental Authority) (any such item, an Effect) that individually or when considered with any other Effect:

(a) has or would reasonably be expected to have a material adverse effect on the legality, validity, binding nature or enforceability of this Agreement and any other Transaction Documents, or restrains, prohibits or renders illegal any of the transactions contemplated thereby;

(b) has reduced or would reasonably be expected to reduce the consolidated net worth of the Company by 20% (Twenty percent) or more, as compared to the net worth of the Company on the Accounts Date;

(c) xxxxxxxx; h

(d) xxxxxxx;

(e) xxxxxxx;

(f) xxxxxxx”

(Emphasis Supplied)

18. Clause (b) in both SPA and SSA is 8material adverse effect9 clause. It means that if the net worth of the target company reduces by 20% or more as compared to the net worth on the accounts date, the agreements could be terminated. According to the appellant, the net worth of target company reduced by more than 20% and therefore, the appellant terminated the SPA and SSA and communicated to the SEBI through its Merchant Banker and sought permission to withdraw the offer. After exchange of correspondence, SEBI has issued the impugned order/communication.

19. Mr. Dwarkadas has argued that the impugned communication has serious consequences because it shall ensue in shareholders offering their shares and appellant shall be obliged to purchase them. Appellant had sought permission to withdraw its offer letter because the SPA and SSA had been terminated. The SEBI, being the market Regulator, ought to have passed a reasoned order.

20. SEBI9s contention is that the 8material adverse effects9 are not made known in the Detailed Public Announcement, which  9 deprived the shareholders and investors from taking informed decisions.

21. We have carefully perused the communication dated 30.01.2026. It is mentioned that it is in response to appellant9s letter dated 09.06.2025 and other correspondences regarding the open offer for acquisition of shares. Exhibit – H to the memorandum of appeal is appellant9s letter to the SEBI seeking 7 permission to withdraw. Exhibit – I is SEBI9s response and it reads as follows:

”Subject: RE: Intimation regarding Termination of SPA and SSA – Open Offer of TruCap Finance Limited

Sir,

Please note that as per Regulation 23(1)(c), an acquirer shall not withdraw an open offer pursuant to a public announcement made under clause (g) of sub-regulation (2) of Regulation 13 (i.e., preferential issue), even if the proposed acquisition through the preferential issue is not successful.

Hence, the captioned open offer cannot be withdrawn.

In this regard, you are advised to provide your response on the clarifications sought on Sep 23, 2025.

Regards

Madhuri

Assistant Manager,

Division of Corporate Restructuring -1,

Registration, Approvals and Correspondences,

Corporation Finance Department,

Securities and Exchange Board of India.

Phone: 022-20752380”

22. Exhibit–I quotes Regulation 23(1)(c) of SAST Regulations and conveys that open offer cannot be withdrawn. Subsequently, on 12.11.2025, SEBI has written to the Merchant Banker to submit its independent comments with regard to withdrawal of offer. The Merchant Banker has submitted its comments as per 8 Exhibit–L. Thereafter, appellant has also submitted a detailed note with the SEBI on 22.01.2026.

23. As on the date of impugned communication, respondent had received appellant9s initial request seeking withdrawal, Merchant Banker9s comments and appellant9s detailed note. Without adverting to any of them, the impugned communication has been sent in response to appellant9s draft letter of offer dated 09.06.2025. Paragraph No.4 of the impugned 9 communication is relevant and it reads as follows:

”The letter of offer should be dispatched within 7 working days from the date of receipt of this letter and offer may open within 5 working days thereafter. Suitable amendments regarding the revised activity schedule and consequential effects/compliance of other obligations like escrow etc. should be carried out in the letter of offer, wherever required.=

24. Appellant is right in contending that the above paragraph of the letter directs the appellant to dispatch the letter of offer within 7 working days from the date of receipt of impugned communication. This shall ensue in shareholders offering to sell their shares. Suffice to note that all events subsequent to the 8 Dated 24.11.2025 9 Dated 30.01.2026 https://taxguru.inL 11 impugned communication meet the appellant with civil consequences.

25. SEBI is statutory market regulator. It is duty bound to pass speaking orders in accordance with law. Much water has flown for nearly six months after submission of appellant9s 8draft letter of offer9. Appellant9s request for permission to withdraw, Merchant Banker9s comments and appellant9s detailed note on facts and law do not find any reference in the impugned communication. There is no reference to the termination of the SPA and SSA. In these circumstances, the impugned communication will result in serious consequences. Therefore, in our opinion, it is akin to an 8order9, although it is mentioned as 8SEBI9s comments in terms of Regulation 16(4) of SAST Regulations.9

26. SEBI has filed a detailed reply and it was urged that this Tribunal may not accede to appellant9s initial prayer to remit the matter to the SEBI. SEBI, as a Regulator has not conveyed its decision on appellant9s prayer to withdraw the open offer with a speaking order. SEBI9s express rejection with a cryptic communication as per Exhibit – I and implied rejection by the impugned communication is appellant9s main grievance and the crux of the matter. To consider and decide whether to grant or not the permission to withdraw is within the domain of SEBI. In this case, SEBI9s decision shall have consequences on several entities viz., the acquirer, the target company and the investors. Therefore, it is not only desirable but imperative that the Regulator conveys its decision with reasons. Admittedly, both Exhibit – A and I do not contain any reasons.

27. In the circumstances, the following:

ORDER

1. Appeal is allowed.

2. Communications/orders dated 30.01.2026 Exhibit – A and Exhibit – I dated 27.10.2025 are set aside.

3. Matter is remitted to the SEBI to pass a speaking order.

4. We make it clear that we have not examined the merits of the case.

5. Pending interlocutory application(s), if any, stand disposed of.

6. No costs.

Notes:

¹ Securities and Exchange Board of India

² Non-Banking Financial Institution

³ Bombay Stock Exchange

⁴National Stock Exchange

⁵ SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011

⁶ Reserve Bank of India

⁷Dated 27.10.2025

⁸Dated 24.11.2025

⁹Dated 30.01.2026