TMI Blog2021 (10) TMI 1308X X X X Extracts X X X X X X X X Extracts X X X X ..... ey can hold on to 2.35 % forever nor can they claim market price for selling of shares - the erstwhile promoter group has no locus standi either to remain in the company or by falsely interpreting the Option 1 or Option 2. Above everything or on the top of it what is required to be understood is that at no point of time it is the understanding of the parties with respect to the approved resolution plan, that the erstwhile promoter group shall continue in the company with their shareholding or alternatively sell the shares at market value. The plea taken by the Respondent No.2 and 3 that the equal treatment shall be given to the price with respect to Pledge and Un-pledge shares, in terms of Clause 6 of the Resolution Plan, it does not merit consideration since the clause 6 solely deals with the pledged shares - If unpledged shares are allowed to be transferred at the market price, then the same will result in modification in the terms of the resolution plan. Since, the resolution plan has a specific clause dealing with a specified rate INR 2.00 with respect to unpledged shares. Any other interpretation of the same shall result in modification in the terms of the Resolution Plan w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts leading to the Application may be stated as under: a) The Corporate Insolvency Resolution Process (CIRP) of Respondent No. 3 viz M/s Bhushan Steels Limited has been initiated on 26.07.2017. b) The Resolution Plan has been submitted by the Resolution Applicant viz M/s Tata Steels Limited on 03.02.2018 c) This Bench has approved the Resolution Plan submitted by the Applicant viz M/s Tata Steels Limited on 15.05.2018. 4. The counsel for the applicant submitted that, the Bamnipal Steels Limited is being the wholly owned subsidiary of Bhushan Steels Limited, (hereinafter referred as BSL ) whereas the Tata Steels Limited acquired the majority control and shareholding of BSL on 18.05.2018 as per the approved resolution plan. 5. The applicant further submits that as per the approved resolution plan the M/s Tata steels limited was required to purchase all the shares held by the erstwhile promoters, including the Respondent No. 1 and 2 for the consideration of INR 2/- per share. 6. The shareholding of Tata Steels Limited in Bamnipal Steels Limited was of 75%, and the fully paid-up equity share capital of Respondent No. 3 as per the terms of the approved resolution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase and the existing promoter group shall be bound to sell, all the shares held by the existing promoter group (i.e., 256,53,813 equity shares) for a consideration of ₹ 2 per share, such that the Resolution Applicant holds 75% of the fully paid-up equity share capital of the company. Upon the plan being approved by the AA, the terms of this plan including Annexure 5 are deemed to be accepted by the Existing Promoter Group in their capacity as shareholders of the Company. As a result of such issuance, the shareholding pattern of the company shall be as indicated in the table below: S.No. Shareholding Post Primary Share Issuance 1. The Resolution Applicant 794,428,986 72.65% 2. Existing Promoter Group 256,53,813 2.35% 3. Security Trustee on behalf of the Pledge holding Financial Creditors 146,802,524 13.43% 4. Other Public Shareholders 1265,58,40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Share Price (Per Share) (INR) 26.07.2017 CIRP Process of Respondent No. 3 commenced 71.40 03.02.2018 Submission of Resolution Plan by Tata Steels Limited 46.80 (As on 02.03.2018 last working day of the stock 15.05.2018 Approval by the Hon ble Adjudicating Authority of the Resolution Plan Submitted by Tata Steel Limited. 23.95 10.10.2018 Current Share Price 27.90 12. Thereafter, counsel for the respondents has submitted that all the equity shares owned by the respondents must be treated equally in light of clause 6 of the Approve Resolution Plan, which is in respect of the pledged shares. Further it demanded that the Applicant shall buy the unpledged shares at the current prevailing price which is at the rate of ₹ 27.90 per share, The contents of clause 6 in respect of treatment towards Pledge shares are reproduced below: 6 Acquisition of the Pledged shares by the pledge holding Financial Creditors On the Closing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iance sought by the applicant upon Rule 19A of the securities contract Regulation Rule, 1957 and Regulation 31A(7) of the SEBI Listing Obligations and Disclosure Requirements Regulations of 2015, to amend the resolution plan is also illegal and contrary to the provisions of IBC. The relevant clauses are reproduced hereunder: Regulation 31A(7) of SEBI listing Obligations and Disclosure Requirements Regulations of 2015: Without prejudice to sub-regulations (5) and (6), re classification of promoter as public shareholders shall be subject to the following conditions: a. Such promoters shall not, directly or indirectly, exercise control over the affairs of the entity. b. Increase in the level of public shareholding pursuant to re-classification of promoter shall not be counted towards achieving compliance with minimum public shareholding requirement under rule 19A of the securities Contract Rules, 1957, and provisions of these regulations. c. The event of re-classification shall be disclosed to the stock exchanges as a material event in accordance with the provisions of these regulations. d. Board may relax any condition for re-classification in specific cases i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cant that, since the question of prospective or retrospectivity was raised by the respondents with respect to SEBI LODR Regulation 31(A)(9) which was brought into effect only on 01.06.2018 i.e. post the approval of the resolution plan vide the approval order dated 15.05.2018 and as such is not applicable to the resolution plan that was approved and implemented prior to the amendment which came into effect on 01.06.2018. 26. In the light of the above it is further submitted that Bamnipal a wholly owned subsidiary of the applicant issued a letter dated 18.05.2018 exercising option 2 as per the approved resolution plan, requesting respondent no. 1 and 2 to transfer 256,53,813 unpledged shares. Till date respondent no. 1 and 2 has refused to sell its shares in accordance with the approved resolution plan. 27. After, hearing the submissions from both the parties, perusing the documents placed on record, written submissions of the parties, this Bench observes that, In the present application, the applicant raised only one issue with respect to non-transfer of 256,53,813 unpledged equity shares of Bhushan Steels Limited to its wholly owned subsidiary viz Bamnipal Steels Limited for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the erstwhile promoter group on the closing date shall sell away their holding which has been graciously granted to them in the approved resolution plan at INR 2 per share and walk away from the comp any. 34. That the plea taken by the Respondent No.2 and 3 that the equal treatment shall be given to the price with respect to Pledge and Un-pledge shares, in terms of Clause 6 of the Resolution Plan, in our considered view it does not merit consideration since the clause 6 solely deals with the pledged shares. 35. If unpledged shares are allowed to be transferred at the market price, then the same will result in modification in the terms of the resolution plan. Since, the resolution plan has a specific clause dealing with a specified rate INR 2.00 with respect to unpledged shares. Any other interpretation of the same shall result in modification in the terms of the Resolution Plan which is not permissible in light of the law laid down by the Hon ble Supreme Court in the matter of Ebix Singapore Private Limited Vs Committee of Creditors of Edu comp Solutions Limited Anr. Civil Appeal No. 3224 of 2020 dated 13.09.2021. The extract of the relevant portion is reproduced below: ..... X X X X Extracts X X X X X X X X Extracts X X X X
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