9911796707
TMI Blog2023 (5) TMI 985X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. 2. The Petitioner's contention is that the Respondent No. 3 BSE is empowered under the statutory provisions to list or to suspend the trading of shares/ stocks/ securities and the listed companies on the stock exchange keeping in view Rule 19(5) of the Securities Contracts (Regulation) Rules, 1957 and the power to suspend the listed company is being arbitrarily used by Respondent No. 3 being the stock exchange, merely on the grounds of non-compliance of procedural disclosures under listing agreement, non-payment of the listing fees etc. and the shares/ stocks/ securities of the listed companies have been suspended from time to time. 3. It has been stated that large number of companies have been suspended from continued listing by Respondent No. 3 and subsequently many of them have been de-listed without ensuring any protection to investors and, therefore, appropriate mechanism should be in place to take action against those persons who are duping the investors. 4. It has been further stated that the Respondent No. 2 is the apex regulatory body and the Securities and Exchange Board of India Act, 1992 (SEBI Act) was enacted to protect the interest of investors in securities an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irections to Respondent No. 3 so as to come out with more stringent and effective alternative penal provisions against promoters and management of the errant listed companies; iii. Issue a writ of mandamus or any other appropriate writ(s) / order(s) / direction(s) to the Respondent No. 2 to constitute an internal panel to monitor the conduct of the promoters of a listed company whose trading of shares / stocks / securities is proposed to be suspended; iv. Issue a writ of mandamus or any other appropriate writ(s) / order(s) / direction(s) to the Respondent No. 1 to institute a grievance redressal mechanism within Respondents No. 2 and 3 for the redressal of grievances of the public investors of the listed companies whose trading of shares already remains suspended and to trace out the promoters and management of such listed companies and make them settle the dues of innocent public shareholders / investors; v. Issue a writ of mandamus or any other appropriate writ(s) / order(s) / direction(s) to the Respondent No. 3 for not implementing the new norms for the revocation of suspension of trading to shares/ stocks / securities of suspended / delisted companies which will come int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be complied with by public companies for the purpose of getting their securities listed on any stock exchange. It has been further stated that SCRA prescribes the requirement with respect to the listing of securities on a recognized stock exchange and it empowers the stock exchange to suspend or withdraw admission to the dealings in the securities of a company for breach of any condition of admission to dealings or any other reason, to be recorded in writing. 11. It has been further stated that the SCRA also provides that the stock exchange shall provide a reasonable opportunity to the concerned company to show cause against the proposed action and a remedy of appeal is provided to the aggrieved company or a body corporate before the Securities Appellate Tribunal. Thus, the stand of Respondent No. 2 is that there is a complete mechanism in place to deal with the companies who are playing fraud upon the investors. 12. In respect of the Petitioner's contention that the promoters and the management of the company's default in complying with the listing agreement is resulting in suspension of such companies and their subsequent de-listing (compulsory) is affecting the investors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... associating in any way with the capital market activities. At the time when reply was filed, the SEBI has furnished figures and has informed that SEBI has passed orders under Section 11B of SEBI Act against 102 companies and 391 of its promoters/ directors debarring them from activities connected with capital market, raising funds from capital markets and dealing in securities. 17. It has been further stated that the Indian regulatory framework is based on a disclosure based regime and the SEBI has taken large number of measures to enhance disclosures and tighten the regulatory framework. The measures taken by SEBI as detailed in the affidavit are reproduced as under: a) The issuer company is required to inter alia make disclosures of complete profile of the promoters and directors alongwith photograph, Voter ID Number, Driving License Number, DIN, age etc. in the offer document. Further, the Permanent Account Number, Bank Account Number and Passport Number of the promoters are required to be submitted to the Stock Exchanges on which securities are proposed to be listed, at the time of filing the draft offer document with them. b) In terms of the Equity Listing Agreement of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order or decision of a recognized stock exchange before the Securities Appellate Tribunal. It has been further contended that the Securities Exchange Board of India Act, 1992 and Securities Contracts (Regulations) 1956 empowers the Securities and Exchange Board of India to supervise and to have a control over the stock exchanges. It has been further contended that Section 21 of the SCRA mandates that where securities are listed, on the application of any person in any recognized Stock Exchange, such person shall comply with the conditions of the listing agreement with that stock exchange. 20. It has been further stated that Rule 19 of the Securities Contracts (Regulation) Rules, 1957 provides various formalities and procedures required to be mandatorily complied with by a Public Limited Company, before its shares and securities can be traded on the floor of the recognized stock exchange. 21. The Respondent No. 3 has further stated that the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009 provides adequate and sufficient protection for investors and the market. Rule 21 of the Securities Contracts (Regulation) Rules provides for delisting of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . [Regulation 6 (b)]. iii. Compulsory Delisting [Chapter V of the Delisting Regulations] 24. The Respondent No. 3 has further stated that Section 21A (2) of the SCRA provides that a listed company or an aggrieved investor may file an appeal before the Securities Appellate Tribunal against the decision of the recognized stock exchange delisting the securities. It has been further stated that Section 23 (2) of the SCRA provides that any person who fails to comply with the provisions of Section 21 and 21A of SCRA shall be liable for a punishment with an imprisonment for a term which may extend to ten years or with fine, which may extend to twenty five crores rupees, or with both. 25. It has been further stated that Rule 19 (5) of the SCRR states that a recognized stock exchange, may suspend or withdraw admission to dealings in the securities of a company or body corporate either for a breach of or noncompliance with, any of the conditions of admission to dealings or for any other reason, to be recorded in writing, which in the opinion of the stock exchange justifies such action. Provided, however, that no such action shall be taken by a stock exchange without affording to the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delisting of securities, adequate participation and/ or representation of public shareholders in the process of delisting and also provides for challenge to the decision of delisting by any aggrieved investor. The Respondents have further stated that even in case of compulsory delisting which is a disciplinary mechanism an aggrieved investor may file an appeal before the Securities Appellate Tribunal against the decision of the recognized stock exchange delisting the securities under section 21A (2) of the SCRA. 30. The Respondent No. 3 has further stated that the Listing Agreement also explicitly mentions that the Company agrees and declares that all or any of its securities listed on the stock exchange shall remain on the list entirely at the discretion of the stock exchange and that stock exchange may, in its absolute discretion, suspend or remove the securities from the list at any time and for any reason whatsoever. 31. The Respondent has further submitted that the norms under challenge were reconsidered by Respondent No. 3 suo-moto in the interest of the investors and much prior to the filing of the present Writ Petition. It has been stated that the new norms for revocatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reholding of promoter and promoter group entities shall be under lock-in for a period of 3 months from the date of commencement of trading, post revocation of suspension. 5. Company should have its own website. 6. Payment of reinstatement fees as applicable." 32. It has been further stated that the aforesaid norms are approved in the interest of investors. The aforesaid norms are necessary and vital for enabling the investor to take an informed decision with regards to their investments and to deal safely in securities market. The contention of Respondent No. 3 is that the aforesaid norms are not extraneous, unreasonable and can be complied easily by the Listed Company thereby enabling the investor to deal in securities market prudently and safely. 33. It has been further stated that the Respondent No. 3 has always endeavoured to maintain fair, just and equitable norms for revocation of suspension after taking into consideration the interest of the investor, the company and the securities market. The Respondent No. 3 has further submitted that it is the duty of the Respondent No. 3 as a stock exchange to take a balanced view on the norms for revocation of suspension, in order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regulatory organisations; (e) prohibiting fraudulent and unfair trade practices relating to securities markets; (f) promoting investors' education and training of intermediaries of securities markets; (g) prohibiting insider trading in securities; (h) regulating substantial acquisition of shares and takeover of companies; (i) calling for information from, undertaking inspection, conducting inquiries and audits of the stock exchanges 21[, mutual funds, other persons associated with the securities market,] intermediaries and self-regulatory organisations in the securities market; 22[(ia) calling for information and records from any person including any bank or any other authority or board or corporation established or constituted by or under any Central or State Act which, in the opinion of the Board, shall be relevant to any investigation or inquiry by the Board in respect of any transaction in securities;] 23[(ib) calling for information from, or furnishing information to, other authorities, whether in India or outside India, having functions similar to those of the Board, in the matters relating to the prevention or detection of violations in respect of securitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice to the provisions contained in sub-section (1), (2), (2-A) and (3) and Section 11-B, the Board may, by an order, for reasons to be recorded in writing, in the interests of investors or securities market, take any of the following measures, either pending investigation or inquiry or on completion of such investigation or inquiry, namely:- (a) suspend the trading of any security in a recognised stock exchange; (b) restrain persons from accessing the securities market and prohibit any person associated with securities market to buy, sell or deal in securities; (c) suspend any office bearer of any stock exchange or self-regulatory organisation from holding such position; (d) impound and retain the proceeds or securities in respect of any transaction which is under investigation; [(e) attach, for a period not exceeding ninety days, bank accounts or other property of any intermediary or any person associated with the securities market in any manner involved in violation of any of the provisions of this Act, or the rules or the regulations made thereunder: Provided that the Board shall, within ninety days of the said attachment, obtain confirmation of the said attachment f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Board in accordance with the regulations made under this Act.] xxxxxxxx [11-B. Power to issue directions [and levy penalty].- [(1)] Save as otherwise provided in Section 11, if after making or causing to be made an enquiry, the Board is satisfied that it is necessary- (i) in the interest of investors, or orderly development of securities market; or (ii) to prevent the affairs of any intermediary or other persons referred to in Section 12 being conducted in a manner detrimental to the interests of investors or securities market; or (iii) to secure the proper management of any such intermediary or person, it may issue such directions,- (a) to any person or class of persons referred to in Section 12, or associated with the securities market; or (b) to any company in respect of matters specified in Section 11-A, as may be appropriate in the interests of investors in securities and the securities market.] [Explanation.-For the removal of doubts, it is hereby declared that the power to issue directions under this section shall include and always be deemed to have been included the power to direct any person, who made profit or averted loss by indulging in any tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o such appeals: Provided that the Securities Appellate Tribunal may, if it is satisfied that the company was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding one month.] xxxxxx 23. Penalties.-(1) Any person who- (a) without reasonable excuse (the burden of proving which shall be on him) fails to comply with any requisition made under sub-section (4) of Section 6; or (b) enters into any contract in contravention of any of the provisions contained in Section 13 or Section 16; or (c) contravenes the provisions contained in [Section 17 or Section 17-A] or Section 19; or [(d) enters into any contract in derivative in contravention of Section 18-A or the rules made under Section 30.] (e) owns or keeps a place other than that of a recognised stock exchange which is used for the purpose of entering into or performing any contracts in contravention of any of the provisions of this Act and knowingly permits such place to be used for such purposes; or (f) manages, controls, or assists in keeping any place other than that of a recognised stock exchange which is used for the purpose of enteri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of the foregoing power, such rules may provide for,- (a) the manner in which applications may be made, the particulars which they should contain and the levy of a fee in respect of such applications; (b) the manner in which any inquiry for the purpose of recognizing any stock exchange may be made, the conditions which may be imposed for the grant of such recognition, including conditions as to the admission of members if the stock exchange concerned is to be the only recognised stock exchange in the area; and the form in which such recognition shall be granted; (c) the particulars which should be contained in the periodical returns and annual reports to be furnished to the Central Government; (d) the documents which should be maintained and preserved under Section 6 and the periods for which they should be preserved; (e) the manner in which any inquiry by the governing body of a stock exchange shall be made under Section 6; (f) the manner in which the bye-laws to be made or amended under this Act shall before being so made or amended be published for criticism; (g) the manner in which applications may be made by dealers in securities for licences under Section 17, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se he is aggrieved in the matter of delisting of the security. 40. Section 30 of the SCRA empowers the Central Government to frame Rules for carrying on the objects the SCRA, and Rules have been framed which are known as Securities Contracts (Regulation) Rules, 1957. Rule 19 of the said Rules reads as under: "19. Requirements with respect to the listing of securities on a recognised stock exchange.- (1) A public company as defined under the Companies Act, 1956, desirous of getting its securities listed on a recognised stock exchange, shall apply for the purpose to the stock exchange and forward along with its application the following documents and particulars: (a) Memorandum and articles of association and, in the case of a debenture issue, a copy of the trust deed. (b) Copies of all prospectuses or statements in lieu of prospectuses issued by the company at any time. (c) Copies of offers for sale and circulars or advertisements offering any securities for subscription or sale during the last five years. (d) Copies of balance-sheets and audited accounts for the last five years, or in the case of new companies, for such shorter period for which accounts have been made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n holders of each class or kind of securities of the company as on the date of application along with particulars as to the number of shares or debentures held by and the address of each such holder. (p) Particulars of shares or debentures for which permission to deal is applied for: Provided that a recognised stock exchange may either generally by its bye-laws or in any particular case call for such further particulars or documents as it deems proper. (2) Apart from complying with such other terms and conditions as may be laid down by a recognised stock exchange, an applicant company shall satisfy the stock exchange that: (a) Its articles of association provide for the following among others- (i) that the company shall use a common form of transfer, (ii) that the fully paid shares will be free from all lien, while in the case of partly paid shares, the company's lien, if any, will be restricted to moneys called or payable at a fixed time in respect of such shares, (iii) that any amount paid-up in advance of calls on any share may carry interest but shall not entitle the holder of the share to participate in respect thereof, in a dividend subsequently declared, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use (ii) or sub-clause (iii), shall increase its public shareholding to at least twenty five per cent within a period of three years from the date of listing of the securities, in the manner specified by the Securities and Exchange Board of India: Provided further that this clause shall not apply to a company whose draft offer document is pending with the Securities and Exchange Board of India on or before the commencement of the Securities Contracts (Regulation) Third Amendment Rules, 2014, if it satisfies the conditions prescribed in clause (b) of sub-rule (2) of Rule 19 of the Securities Contracts (Regulation) Rules, 1956 as existed prior to the date of such commencement:] 47[Provided also that the applicant company 48[referred to in clause (b)], who has issued equity shares having superior voting rights to its promoters or founders and is seeking listing of its ordinary shares for offering to the public under this rule and the regulations made by the Securities and Exchange Board of India in this regard, shall mandatorily list its equity shares having superior voting rights at the same recognized stock exchange along with the ordinary shares being offered to the public.] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipts and renewal receipts as good and sufficient discharge without insisting on the discharge of the registered holders, and (ii) to verify when the company is unable to issue certificates or split receipt or consolidation receipts or renewal receipts immediately on lodgement whether the discharge of the registered holders, on the documents lodged for sub-division or consolidation or renewal and their signatures on the relative transfers are in order; (d) on production of the necessary documents by shareholders or by members of the exchange, to make on transfers an endorsement to the effect that the power of attorney or probate or letters of administration or death certificate or certificate of the Controller of Estate Duty or similar other document has been duly exhibited to and registered by the company; (e) to issue certificates in respect of shares or debentures lodged for transfer within a period of one month of the date of lodgement of transfer and to issue balance certificates within the same period where the transfer is accompanied by a larger certificate; (f) to advise the stock exchange of the date of the board meeting at which the declaration or recommendatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is to be taken); and in the case of a right or bonus issue to so close the transfer books or fix a record date only after the sanctions of the competent authority subject to which the issue is proposed to be made have been duly obtained, unless the exchange agrees otherwise; (p) to forward to the stock exchange an annual return immediately after each annual general meeting of at least ten principal holders of each class of security of the company along with particulars as to the number of shares or debentures held by, and address of, each such holder; (q) to grant to shareholders the right of renunciation in all cases of issue of rights, privileges and benefits and to allow them reasonable time not being less than four weeks within which to record, exercise, or renounce such rights, privileges and benefits and to issue, where necessary, coupons or fractional certificates or provide for the payment of the equivalent of the value of the fractional right in cash unless the company in general meeting or the stock exchange agrees otherwise; (r) to promptly notify the stock exchange- (i) of any action which will result in the redemption, cancellation or retirement in whole or i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll apply to such appeal. The Securities Appellate Tribunal may, after giving the stock exchange an opportunity of being heard, vary or set aside the decision of the stock exchange and its orders shall be carried out by the stock exchange.] [(6) A recognised stock exchange may, either at its own discretion or shall in accordance with the orders of the Securities Appellate Tribunal under sub-rule (5) restore or re-admit to dealings any securities suspended or withdrawn from the list.] [(6-A) Except as otherwise provided in these rules or permitted by the Securities and Exchange Board of India under sub-rule (7), all requirements with respect to listing prescribed by these rules shall, so far as they may be, also apply to a public sector company.] [* * *] (7) The [Securities and Exchange Board of India] may, at its own discretion or on the recommendation of a recognised stock exchange, waive or relax the strict enforcement of any or all of the requirements with respect to listing prescribed by these rules. [(8) Notwithstanding anything contained in this rule, the minimum offer and allotment requirements as prescribed under clause (b) of sub-rule (2) shall not be applicable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blic representative; (b) one representative of an investor association recognised by the Board; (c) one representative of the Ministry of Corporate Affairs or Registrar of Companies; and (d) the Executive Director or Secretary of the recognised stock exchange. (3) Before passing an order under sub-regulation (1), the recognised stock exchange shall give a notice in at least one English national newspaper with wide circulation, one Hindi national newspaper with wide circulation in their all India editions and one vernacular newspaper of the region where the relevant recognised stock exchange is located, of the proposed delisting, giving a time period of not less than fifteen working days from the date of such notice, within which representations, if any, may be made to the recognised stock exchange by any person aggrieved by the proposed delisting and shall also display such notice on its trading systems and website. (4) The recognised stock exchange shall, while passing any order under sub-regulation (1), consider the representation, if any, made by the company and also any representation received in response to the notice given under sub-regulation (3), and shall comply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Provided that in case the delay was not attributable to any act or omission of the acquirer or was caused due to the circumstances beyond the control of the acquirer, the Board may grant waiver from the payment of such interest. 34. Consequences of compulsory delisting.-(1) Where a company has been compulsorily delisted under this Chapter, the company, its whole-time directors, person(s) responsible for ensuring compliance with the securities laws, its promoters and the companies which are promoted by any of them shall not directly or indirectly access the securities market or seek listing of any equity shares or act as an intermediary in the securities market for a period of ten years from the date of such delisting. (2) In case of a company whose fair value is positive- (a) such a company and the depositories shall not effect transfer, by way of sale, pledge, etc., of any of the equity shares held by the promoters/promoter group and the corporate benefits like dividend, rights, bonus shares, split, etc. shall be frozen for all the equity shares held by the promoters/promoter group, till the promoters of such company provide an exit option to the public shareholders in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t cause for not filing it within that period. (3) On receipt of an appeal under sub-section (1), the Securities Appellate Tribunal may, after giving the parties to the appeal, an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against. (4) The Securities Appellate Tribunal shall send a copy of every order made by it to the parties to the appeal and to the concerned adjudicating officer. (5) The appeal filed before the Securities Appellate Tribunal under sub-section (1) shall be dealt with by it as expeditiously as possible and endeavour shall be made by it to dispose of the appeal finally within six months from the date of receipt of the appeal." 45. The aforesaid statutory provisions of law provide for an Appeal against any order/ decision for recognized stock exchange before the SAT and any person aggrieved in the matter by the order or decision of the recognized stock exchange or the adjudicating officer or any order made by the SEBI under Section 4B can prefer an Appeal, therefore, an efficacious remedy is also available under the statutory provisions. 46. The statutory provisions governing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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