Securities Appellate Tribunal
Entegra Ltd. vs Sebi on 26 April, 2019
Author: Tarun Agarwala
Bench: Tarun Agarwala
BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Order Reserved on: 11.04.2019
Date of Decision : 26.04.2019
Appeal No. 482 of 2018
Entegra Ltd.
99, Niranjan Building,
Marine Drive,
Mumbai - 400 002. ...Appellant
Versus
1.National Stock Exchange of India Limited Exchange Plaza, C-1, Block G, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051.
2. Securities and Exchange Board of India.
SEBI Bhavan, Plot No. C-4A, G-Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400 051. ...Respondents Mr. P.N. Modi, Senior Advocate with Ms. Kalpana Desai and Mr. Saurabh Bachhawat, Advocates i/b SPS Associates for the Appellant.
Mr. Rashid Boatwalla, Advocate with Ms. Shreya Anuwal, Mr. Rahul Jain and Ms. Pranjal Krishna, Advocates i/b Manilal Kher Ambalal & Co. for Respondent No. 1.
Mr. Akshay Patil, Advocate with Mr. Nishant Upadhyay, Advocate i/b Desai & Diwanji for Respondent No. 2. 2 CORAM : Justice Tarun Agarwala, Presiding Officer Dr. C.K.G. Nair, Member Justice M.T. Joshi, Judicial Member Per : Dr. C.K.G. Nair, Member
1. This appeal is filed challenging the order of the Delisting Committee of the National Stock Exchange of India Limited ('NSE' for short), Respondent No. 1, communicated to the appellant vide letter dated November 29, 2018. By the said decision the equity shares of the appellant company are to be delisted on account of non-compliance with various clauses of the erstwhile Listing Agreement as well as the SEBI (Delisting of Equity Shares) Regulations, 2009. The Securities and Exchange Board of India ('SEBI' for short) is Respondent No. 2.
2. The facts relevant to the matter are the following. The share of the appellant company was listed on NSE on October 22, 2001. On October 18, 2016 trading in the equity shares of the appellant company was suspended. On February 21, 2018 NSE issued a show cause notice to the appellant company as to why the equity shares of the company should not be delisted. On June 12, 2018 an opportunity of personal hearing was given to the appellant by NSE. On June 28, 2018 NSE granted a period of one month more 3 to the appellant to comply with the process of revocation of suspension of trading and to comply with other non-compliances, a list of which was provided to the appellant. On July 16, 2018 the appellant company requested NSE to grant time till end of August 2018 to comply with the non-compliances relating to documents and additional time till December 2018 to regularize the fees in view of the financial hardships being faced by the appellant. On October 6, 2018 appellant sought from SEBI waiver of penalties and standard operating procedures for revocation of trading under the relevant SEBI circulars. On November 1, 2018 NSE provided an updated list of non-compliance. On November 29, 2018 NSE passed the impugned order aggrieved of which the present appeal has been filed.
3. Shri P.N. Modi, learned senior counsel appearing on behalf of the appellant submitted that the case of the appellant is not that of a willful defaulter and because of various disputes between other entities certain non-compliances have taken place which are beyond the control of the appellant. In one such dispute with Power Finance Corporation the appellant has succeeded in the matter before NCLT, NCLAT and the Apex Court and because of which the appellant is expected to overcome most of its problems. Accordingly, and as per the additional affidavit dated March 27, 4 2019 submitted to this Tribunal, all except one (8 out of 9) non-compliances as provided by the Respondent No. 1 NSE on November 1, 2018 have been complied with. The only remaining non-compliance is demating 100% of the promoter shares. The reason for this non-compliance, as indicated to NSE on November 6, 2018, is that 85,00,000 of these shares which are part of the promoter group holding were pledged with Madhya Pradesh State Industrial Corporation in physical form and they have been requested to return these physical shares to get it demated and on a returnable basis. With this exception all other requirements have been complied with and the appellant is in the process of getting this last issue also complied with.
4. Further, citing Section 21A of the Securities Contracts (Regulations) Act, 1956 the learned senior counsel submitted that a Stock Exchange can delist securities only after recording the reasons therefore. In the impugned order such reasons are not explicitly stated though there is a mention that the securities of the appellant have remained suspended for more than six months, one of the conditions provided under Rule 21 of Securities Contracts (Regulations) Rules, 1957.
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5. Learned senior counsel for the appellant also contended that the decision of the Delisting Committee was taken in its meeting held on September 11, 2018 which was however communicated to the appellant only on November 29, 2018. Further, the decision by the Delisting Committee, apart from not containing the reasons for delisting explicitly, also does not give any date from which the said delisting would takes place. This date i.e. December 24, 2018 is given by the Senior Manager of NSE who communicated the decision of the Delisting Committee. This is clearly not in accordance with law as the decision has to be taken by the Delisting Committee and the communicating authority cannot arbitrarily decide any such date.
6. In short, the learned senior counsel submitted that the appellant's case is a peculiar one where the appellant company has been making all-out efforts to comply with the requirements for remaining listed but due to circumstances some non-compliances have happened for which time was sought up to end of December 2018 which was not given by NSE. As of now except one non-compliance all other deficiencies have been complied with. Therefore, it is not a matter of delisting purely to be looked at in a technical way when the intention of the appellant is positively clear.
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7. Learned counsel for the Respondent No. 1 Shri Rashid Boatwalla submitted that the appellant was given sufficient time and an opportunity of hearing was also given. NSE does not have the power to waive any of the provisions of Securities Contracts (Regulations) Act, 1956 or SEBI (Delisting of Equity Shares) Regulations, 2009; such powers are with SEBI and the appellant has sought waiver from SEBI. Therefore, the Delisting Committee has taken an appropriate decision in tune with the mandate provided under the extant laws. Learned counsel for Respondent No. 1 also relied on this Tribunal's order in the matter of B S Appliances Ltd. & Ors. vs. National Stock Exchange of India Limited (Appeal No. 146 of 2018 decided on May 30, 2018) to support their contention that listed entities have to comply with the provisions of continues listing and suffer the consequences of non-compliances. As such, regulations have been brought in for bringing discipline in the listed market.
8. In addition to hearing the parties we have also perused the documents produced before us. It is on record that the appellant has been regularly in communication with NSE. It is also evident from records that the dispute / litigation the appellant had with other entities on which certain reliefs have been obtained by the appellant from various fora, including the Apex Court. All these 7 clearly show the positive intention of the appellant. Therefore, just taking a technical view, though within four corners of law, may not be appropriate in concluding every issue of delisting of the securities of a listed company in a purely technical way. The consequences of delisting to multiple stakeholders are high. It is not only the investors in such securities who are the stakeholders but even the company is also part of the overall interest of the securities market. Therefore, when in a particular case where sufficient evidence is available to show that the company is making serious efforts in compliance and seeking only some extra time the authorities should show some flexibility.
9. In the present matter we note that the securities have remained suspended for trading only from October 2016. Though this is more than six months but is not like the case of B S Appliances (supra) relied on by Respondent No. 1 where the securities remained suspended for several years and the company itself remained non-operational for 13 years. The evidence brought before us appears a genuine interest of the appellant company in rejuvenating their business and therefore continuing with listing may be in the overall interest of the stakeholders.
10. Given these peculiar facts and reasons relating to the appellant company and the fact that except one all other non- 8 compliances have been said to be addressed by the appellant in an affidavit, we are of the view that it will be in the interest of justice to provide one more opportunity to the appellant. Accordingly, we set aside the impugned order communicated to the appellant vide letter dated November 29, 2018 and remand the matter to the Delisting Committee of NSE to look at the facts, including the implications of promoter stake pledge, afresh and after giving an opportunity of hearing to the appellant pass a fresh order on merit and in accordance with law.
11. Appeal is disposed of on above terms. No order on costs.
Sd/-
Justice Tarun Agarwala Presiding Officer Sd/-
Dr. C.K.G. Nair Member Sd/-
Justice M.T. Joshi Judicial Member 26.04.2019 Prepared and compared by:msb