a)Appellant-Co. had entered into an agreement to acquire shares of Bangur group (target-Co.). Further, by virtue of another agreement, the appellant had agreed to pay non-compete fee to target-Co.
b)On consideration of information provided by merchant bank of Appellant, the SEBI informed the appellants through their merchant banker to revise the offer price to the public shareholders.
c)SEBI directed the appellant-Co. to include non-compete fee in the price of shares offered to public shareholders. It held that non-compete fee was, in fact, part of negotiated price payable by appellants to the target-Co.
d)On appeal, the SAT concluded that the non-compete agreement was a sham which resulted in depriving other shareholders of the target company of their rightful claim to get a just price for their shares. Consequently, the Tribunal dismissed the appeal preferred by the appellant.
The Supreme Court held as under:
1)Ordinarily when there was a gap of 25 per cent between consideration paid to outgoing promoters and non-compete fee, SEBI ought not to have conducted any inquiry.
2)However, if it appeared to SEBI that difference between offer price and the non-compete fee was less than 25 per cent but that was nevertheless a disguise or a camouflage for reducing cost of acquisition through a public offer, then SEBI could certainly delve further into the matter.
3)In absence of any disguise, the SEBI had erred in carrying out an enquiry into payment of non-compete fee by appellant-acquirer to outgoing promoters of target-company.
4)The appellant-acquirers were not liable to pay a non-compete fee to public shareholders of target-company as was being paid to outgoing promoters of target-company which was being taken over by appellants – I. P. HOLDING ASIA SINGAPORE P. LTD. V SEBI  49 TAXMANN.COM 370 (SC)