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TMI Blog2015 (8) TMI 1410X X X X Extracts X X X X X X X X Extracts X X X X ..... time frame. Further, the SSTL be directed to give " a continuous open exit option to the minority share-holders", at a value deemed fit by the Court from amongst the value of Rs. 220/-, as per the valuation of Uninor, Rs. 156/- as per the purported agreement between the promoters and the financial strategic investor, or Rs. 49.31- the price at which the Russian Federal Agency was allotted shares of the respondent company. He had also prayed for other misc. reliefs, such as appointment of a representative of minority shareholders on the Board of Directors of the respondent Company for the protection of their interests and compensation to the minority shareholders for the unnecessary delay since 2008 in the "buy back" option of the applicants' shares resulting in a purported loss to them. 3. Clause 3.7 of the sanctioned scheme, on the basis of which the application was filed, reads as follows:- "All the equity shares of the STLL as on the Transfer Date, including any further shares issued by STLL, shall be listed and /or admitted to trading on National Stock Exchange (NSE) and / or Bombay Stock Exchange (BSE). NSE and BSE shall list the shares of STLL and listing of said shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trol the rule-making of the said Exchanges. Stock Exchanges are held to be regulatory authorities. Their byelaws bind not only buyers, sellers and brokers, but also third parties who are affected by the transactions in the Stock Exchange. They are entitled to regulate all matters connected with the business of the Stock Exchange. The byelaws have the effect of the statutory force. Hence, given the expertise in the above field, the exclusive province of the Stock Exchange to grant recognition subject to the compliance of the Securities Laws, the Regulations and the Listing Agreement, in the context of Clause 24(f) is not to be confused with the jurisdiction of this Court granting approval of the Scheme. The applicants have, no doubt, filed a copy of the Scheme and the petition proposed to be filed. However, considering Clause 24(g), even after the grant of approval to the Scheme, it is open to the Stock Exchange to reject the plea for listing, when it is satisfied that such listing would be violative of the Securities Laws, there is no disrespect to the order of approval granted by this Court. The authority who is to judge on the merits of listing is competent to arrive at a decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsive legal opinion vis-à-vis compliances required to be made by the answering Respondent under the prevalent laws would also be obtained. It was also decided by the Committee that a detailed in-house exercise be carried out in consultation with suitable experts and Directors of the answering Respondent to assess the feasibility of listing of shares in the current market scenario. (c) This matter was once again reviewed by the Management Committee on 16.04.2009, wherein after a detailed discussion on the Commercial Report submitted by the in-house team of exerts and the Legal Opinion received, the Committee observed that in view of the market conditions not being conducive and posing an unfavourable state of affairs, the making of public offering by IPO and listing of the shares, based thereon, would not be commercially viable. It was further decided that the management efforts must be continued to explore the possibilities of initiating process of listing through IPO as soon as possible. (d)Thereafter, the matter was again reviewed at length at the level of the Board of Directors on 15.10.2009 wherein a special committee named as the "Directors Special Committee for Lis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de (i) was ruled out when SEBI vide letter dated 28.12.2007 rejected the answering Respondent's request for relaxation under Rule 19(2) (b) of SCRR. Even mode (ii) was rendered impermissible as the answering Respondent did not have any distributable profits under Section 205 of the Companies Act, 1956 for at least 3 out of the immediately preceding 5 years. The only remaining route was that of listing through a book building process. In complete deference to the said Order, the answering Respondent, undertook further steps stated hereinbelow to commence the process of listing of its equity shares through the book building process. (h)The matter of the listing was once again reviewed by the BoD on 16.12.2009. After detailed discussion and keeping in view the steps already taken towards implementing the Court's directions for initiating the process for the listing of shares, the members of the Board unanimously decided that the matter be directly monitored by the Board and a detailed report be submitted to the Board from time to time appraising the Board about the developments in the matter. Further, in light of the issuance of ICDR Regulations and the resultant repeal of SEBI (Dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon'ble Supreme Court of India questioning the proprietary of the entire process of granting licenses on First Come First Serve basis by DoT in 2008. 14. This suddenly created highly volatile market conditions and deeply afflicted the investor sentiment in the telecom sector. Notwithstanding the same, the BoD continued to constantly review and assess the feasibility of securing listing of its shares 15. On 02 February 2012, the Hon'ble Supreme Court vide its judgment of even date quashed all 122 licenses granted to various telecom operators on or after 10.01.2008. The 21 telecom licenses allotted to the answering Respondent in 2008 (except the already existing Rajasthan Circle) were also canceled vide the said judgment. The quashing of the answering Respondent's licenses landed a severe blow to its ambitious business plans of being a Pan India Telecom Operator. Aggrieved by the same, the answering Respondent preferred a Review petition and a curative Petition against the aforesaid judgment dated 02.02.2012, but the same were rejected by the Hon'ble Supreme Court of India. 16. Compelled by such exigencies, the answering Respondent closed down operations in 13 out of 21 circl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent through the book building process became an unviable option and in fact, a virtual impossibility. 22. As a direct result of the above, the BoD of the answering Respondent was left with no option but to put its IPO plans on hold. The BoD had disclosed this fact to all its shareholders, including the Appellants, vide the Annual Report for the years ending 31 March 2012, 31 March 2013 and 31 March 2014. Copy of the annual reports for the years ending 2012 and 2013 are already on record as part of Annexure-B to the present appeal. Copy of the Annual Report for the year ending 31 March 2014 is being enclosed herewith as Annexure-B. 23. From the aforesaid events, it is clear that the answering Respondent has taken all possible steps, in the given circumstances, for initiating the process of listing of its shares and has at all times been fully compliant of direction no. 1 of the said Order. 24. It is pertinent to clarify that merely because the answering Respondent has not been able to secure listing of its shares, cannot be construed to mean that the answering Respondent has contravened direction no. 1 of the said Order or has violated the sanction accorded to the approved S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cense granted to the answering Respondent in respect of the said circles. Owing to DoT's failure in ensuring contiguous availability of spectrums awarded to the answering Respondent, the answering Respondent has taken out proceedings before the Telecom Disputes Settlement and Appellate Tribunal, Delhi in this regard. As and when this issue is decided and the answering Respondent is provided contiguous availability of its spectrum, it will be able to efficiently utilize its spectrum and offer third and fourth generation network services to its customers. 28. In the year 2013-2014, the answering Respondent has also attained break even in 5 circles at an operational level. The net losses have also witnessed reduction from Rs. 3158.8 crores in the fiscal 2012 to Rs. 2881.7 crores in the fiscal 2013 to Rs. 2072.8 crores in the fiscal 2014, and to Rs. 1717.3 crores in the fiscal 2015, as per the provisional accounts. There has been, thus, a considerable reduction in the losses due to cost optimization measures undertaken by the answering Respondent. The value per share has also strengthened from (-ve) Rs. 9.02 per share in year 2012-2013 to (-ve) Rs. 6.49 in 2013-2014. 29. Though the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ze and all previous issues made in the same financial year does not exceed five times its pre-issue net worth as per the audited balance sheet of the preceding financial year; iv. it has a pre-issue net worth of Rs. 1 crore in each of the three preceding years; and v. in the event of a change in its name within the last year, at least 50% of the revenue of the preceding full year is earned from the activity suggested by the new name. If a company does not meet these eligibility conditions described above it may still undertake an initial public offer, however, such company has to follow the mandatory allocation of 75% of the total offer size to QIBs. It is respectfully submitted that no company which has large accumulated losses and which is continuing to make operational losses can ever go in for a successful public offering of its shares. It is respectfully submitted that no investor will subscribe, in a public offering, to shares of a company which has not made and is not making any profits. b. Eligibility under the Stock Exchanges' rules and bye-laws One of the key eligibility criteria for listing an initial public offer on the National Stock Exchange of India Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opening of IPO and all its terms are best left for the determination by the Company...". Even the Ld. Single Judge passing the order dated 07 August 2008 was fully cognizant of this commercial reality and therefore, did not fix any time for listing but only specified the period of 18 months to "initiate" the process of listing. 36. This position is particularly true for telecom industry, which is a highly competitive and capital intensive sector. It takes years before a company attains the stage of offering its shares to the public. For instance, Bharti launched its IPO only after becoming a market leader and carving a niche in the Telecom sector. Another clear illustration will be that of Vodafone, which has not yet moved for an IPO, despite creating a huge subscriber base in India. 37. In view of such facts and circumstances, it is prayed that no direction be passed by this Hon'ble Court in matters of listing of the answering Respondent. 38. Having said that, the answering Respondent is fully conscious of its obligation to all its shareholders and will continue to act in compliance of the said Order. It is committed to undertake any and all action that is necessary in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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