National Company Law Appellate Tribunal
Manu Rishi Guptha vs Icici Bank Limited on 10 March, 2025
1
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
PRINCIPAL BENCH, NEW DELHI
COMPANY APPEAL (AT) No.328/2024
In the matter of:
MANU RISHI GUPTHA
Son of Sh. U.S. Gupta,
residing at House No. 1139,
Sector 21-B,
Chandigarh, Sector 22,
Chandigarh 160022.
manu @mrgcapital.in ..... Appellant
Versus
1. ICICI SECURITIES LIMITED
Having its registered office at ICICI Venture House,
Appasaheb Marathe Marg,
Prabha Devi,
Mumbai 400 025,
Maharashtra.
raju.nanwani(@jicicisecurities.com ..... Respondent No.1
2. ICICI BANK LIMITED
Having its corporate office at ICICI Towers,
Bandra-Kurla Complex,
Mumbai 400 051, Maharashtra
[email protected] ..... Respondent No.2
Company Appeal (AT) No.395 of 2024
In the matter of:
MANU RISHI GUPTHA
Son of Sh. U.S. Gupta,
residing at House No. 1139,
Sector 21-B,
Chandigarh, Sector 22,
Chandigarh 160022.
manu @mrgcapital.in ..... Appellant
Versus
1. ICICI BANK LIMITED
Having its corporate office at ICICI Towers,
Bandra-Kurla Complex,
Mumbai 400 051, Maharashtra
[email protected] ..... Respondent No.2
2
2. ICICI SECURITIES LIMITED
Having its registered office at ICICI Venture House,
Appasaheb Marathe Marg,
Prabha Devi,
Mumbai 400 025,
Maharashtra.
raju.nanwani(@jicicisecurities.com ..... Respondent No.1
3. SECURITIES AND EXCHANGE BOARD OF INDIA
SEBI Bhavan BKC,
Plot No. C-4A,
'G' Block,
Bandra Kurla Complex, Bandra (East),
Mumbai 400 051,
Maharashtra [email protected]
Company Appeal (AT) No.393 of 2024
In the matter of:
MANU RISHI GUPTHA
Son of Sh. U.S. Gupta,
residing at House No. 1139,
Sector 21-B,
Chandigarh, Sector 22,
Chandigarh 160022.
manu @mrgcapital.in ..... Appellant
Versus
1. ICICI BANK LIMITED
Having its corporate office at ICICI Towers,
Bandra-Kurla Complex,
Mumbai 400 051, Maharashtra
[email protected] ..... Respondent No.1
2. ICICI SECURITIES LIMITED
Having its registered office at ICICI Venture House,
Appasaheb Marathe Marg,
Prabha Devi,
Mumbai 400 025,
Maharashtra.
raju.nanwani(@jicicisecurities.com ..... Respondent No.2
Company Appeal (AT) No.332/2024
MANU RISHI GUPTHA
Son of Sh. U.S. Gupta,
residing at House No. 1139,
Sector 21-B,
3
Chandigarh, Sector 22,
Chandigarh 160022.
manu @mrgcapital.in ..... Appellant
Versus
1. ICICI SECURITIES LIMITED
Having its registered office at ICICI Venture House,
Appasaheb Marathe Marg,
Prabha Devi,
Mumbai 400 025,
Maharashtra.
raju.nanwani(@jicicisecurities.com ..... Respondent No.1
2. ICICI BANK LIMITED
Having its corporate office at ICICI Towers,
Bandra-Kurla Complex,
Mumbai 400 051, Maharashtra
[email protected] ..... Respondent No.2
For Appellant : Mr. Kausik Chatterjee, Ms. Samridhi, Advocates.
For Respondents : Mr. Arun Kathpalia, Sr. Advocate with Mr. Siddharth
Ranade, Mr. Shankh Sengupta, Mr. Aubert Sebastian, Mr. P. Jain, Mr. Arnav
Doshi, Mr. Ribhu Garg, Mr. Pushkar Deo, Ms. Ananya Bajpai, Advocates for
R-1. Mr. Krishnendu Datta, Sr. Advocate with Mr. Siddharth Ranade, Mr.
Shankh Sengupta, Mr. Aubert Sebastian, Mr. P. Jain, Mr. Arnav Doshi, Mr.
Ribhu Garg, Mr. Pushkar Deo, Ms. Ananya Bajpai, Advocates for R-2
JUDGEMENT
JUSTICE YOGESH KHANNA, MEMBER (JUDICIAL) These four appeals are filed by the appellant against the impugned order dated 21st August, 2024, dated 8th October, 2024 and dated 9th October, 2024. The prayer made in all the four appeals are as under:
COMPANY APPEAL (AT) No.328/2024
a) Set aside the impugned judgment and order dated August 21, 2024 passed by the National Company Law Tribunal, Mumbai Bench I in C.P. (CAA)/ 71/ MB/ 2024 (In the matter of: ICICI Securities Limited), being Annexure 'A-1"
of the present Memorandum;
b) Such further order or orders be passed and/or direction or directions be given as this Hon'ble Appellate Tribunal may deem appropriate.
Company Appeal (AT) No.395 of 2024 4
a) Set aside the impugned judgment and order dated October 9, 2024 passed by the National Company Law Tribunal, Ahmedabad Bench No.1 in C.P. (CAA)/ 20/ AHM/ 2024 (In the matter of: ICICI Bank Limited), being Annexure 'A-1" of the present Memorandum;
b) Such further order or orders be passed and/or direction or directions be given as this Hon'ble Appellate Tribunal may deem appropriate. Company Appeal (AT) No.393 of 2024
a)Set aside the impugned judgment and order dated October 9, 2024 passed by the National Company Law Tribunal, Ahmedabad Bench No.1 in C.P. (CAA)/ 20/ AHM/ 2024 (In the matter of: ICICI Bank Limited), being Annexure 'A-1" of the present Memorandum of Appeal;
b)Such further order or orders be passed and/or direction or directions be given as this Hon'ble Appellate Tribunal may deem appropriate. Company Appeal (AT) No.332/2024
a) Set aside the impugned judgment and order dated August 21, 2024 passed by the National Company Law Tribunal, Mumbai Bench I dismissing C.A. No. 190/2024 [Manu Rishi Guptha v. ICICI Securities Limited] in C.P. (CAA)/ 71/ MB/ 2024 (In the matter of: ICICI Securities Limited), being Annexure 'A-1' of the present Memorandum;
b) Such further order or orders be passed and/or direction or directions be given as this Hon'ble Appellate Tribunal may deem appropriate.
2. We have gone through the impugned orders wherein the objections filed by the appellant against the scheme were dismissed. Besides these appeals we have also decided Company Appeals (AT) No.333/2024 and No. 334/2024 filed by the Quantum Mutual Fund and others, primarily against the acceptance of the scheme of arrangment by the Ld. NCLT.
2A. We have gone through the averments made in the appeals as also the arguments advanced by Ld. counsels. The crux of the contentions raised by the appellant in all these four appeals can be summed up as follow. a) the prejudice is caused to the public shareholders as the scheme takes away the 5 right to reverse book building; b) there being an unfair valuation and swap ratio;
c) the relaxation granted by SEBI being not valid; d) the outreach exercise by ICICI Bank and SEBI administrative warning shows undue influence caused by the company over its shareholders; e) non-disclosure of the relaxation granted by SEBI; f) the participation of employees and mutual funds of ICICI group in the voting as public shareholders was bad;
Qua contention a) it is the Appellant's case the valuation is unfair and the reverse book building process (RBB) may have yielded a better price. This argument is in the teeth of the regulatory rationale behind introducing Regulation 37 as part of the SEBI (Delisting of Equity Shares) Regulations 2021 (Delisting Regulations). Reg. 37 was introduced after detailed deliberations as an alternate mode of delisting by way of an amendment. As part of the process, SEBI had issued a board memorandum dated 29 September 2020 which specifically deliberated upon the merits of providing an alternative mode of delisting and the safeguards to be built in when opting for this route. The Board memorandum specifically discussed three key safeguards for protecting the interest of public shareholders. viz a) regarding the valuation of shares being not less than 60-days volume weighted average price (VWAP) of the companies; b) the voting threshold being 66% of the public shareholders of the listed subsidiary in addition to the usual requirement of 75% amongst all shareholders of the listed subsidiary in terms of Section 230 of the Act; c) the shares of the holding company (in this case ICICI Bank) are frequently traded which ensures the shareholders have the ability to freely exit the holding company at any time by selling the shares in the stock 6 market. Each of these safeguards have been built into Reg. 37(2) of the Delisting Regulations, for protection of public shareholders, hence it cannot be said the public shareholder would be prejudiced merely because the delisting takes place through a scheme under Reg. 37 rather than through RBB. In any event, shareholders retain the right to exit at any time prior to delisting as shareholders of ICICI Securities Limited and also after the delisting as shareholders of ICICI Bank Limited. The Appellants' claim reverse book building RBB would have guaranteed a better price is mere speculative as is held valuation is not an exact science and is subject to professional judgment and can vary from one valuer to another and as long as recognized methods are adhered to, valuation cannot be faulted as held in Indiabulls Real Estate Limited v. Department of Income Tax, Company Appeal (AT) No. 120 of 2023.
4. Secondly, the contention of the Appellant that RBB mechanism requires 90% of public shareholders to tender their shares is completely baseless as the said regulation only says the total shareholding of the acquirer should become more than 90% for the delisting to take place. In any case, this contention is irrelevant as SEBI has after thoughtful consideration introduced the alternate mechanism of delisting through a scheme of arrangement under Reg. 37. More so the Ld. NCLT also noted the argument on RBB is entirely speculative, since stock exchange trading platform is considered to be the best price discovery mechanism. Further, the Ld. NCLT per order dated 21.08.2024 observed the shareholders of ICICI Securities would also benefit indirectly by receiving shares of ICICI Bank and merger will lead to an 7 increase in the intrinsic value of ICICI Bank, which would reflect in the traded price consequent upon implementation of Scheme. Thus it is entirely baseless to argue that any prejudice is being caused to the public shareholders.
5. Qua contention (b) we may note the joint valuation report has been prepared by 2 (two) independent and registered valuers who adopted a comprehensive methodology by applying a combination of internationally recognized and commonly used methods. The valuation was supported by fairness opinions issued by two SEBI registered merchant bankers. The valuation of ICICI Securities is in accordance with the minimum requirement prescribed under Reg. 37(2)(j) of the Delisting Regulations i.e., the per share valuation of the listed subsidiary shall be at least equal to 60-day VWAP. It is settled law the courts should not enquire into the issue of valuation of shares as the same is a question of fact which is based on technical and complex considerations and should be left to the experts in the field of accountancy as is held in G.L. Sultania & Anr. v. Securities and Exchange Board of India (2007) 5 SCC 133 and Miheer H. Mafatlal v. Mafatlal Industries Ltd. (1997) 1 SCC 579.
6. Qua contention (c) we may note the relaxation has been granted by SEBI in exercise of its regulatory powers. Regulation 42 of the Delisting Regulations specifically empowers SEBI to grant relaxation from strict compliance of the Delisting Regulations. The fact of such relaxation being granted is undisputed. It is beyond the scope of the present proceedings to sit in appeal over the relaxation granted by SEBI, which is an expert regulatory body. The Ld. NCLT has rightly noted this aspect and held that with the 8 relaxation in place, the Companies were entitled to propose the Scheme in terms of Reg. 37. In Sahara India Real Estate Corporation Limited & Ors. v. Securities and Exchange Board of India, (2013) 1 SCC 1 the Hon'ble Supreme Court has held that on the subject of protecting the interests of investors, the SEBI Act, 1992 is a standalone legislation, and SEBI's powers thereunder are not fettered by any other law, including the Companies Act.
7. Qua contention (d) we may note the Administrative Warning Letter dated 6 June 2024 does not refer to any legal provision that has been breached by ICICI Bank in the course of the outreach initiative. The letter also does not point out to any specific fiduciary or other legal duty owed by ICICI Bank which would make the outreach initiative illegal or inconsistent with such duty. The letter does not in any manner suggest ICICI Bank has resorted to any illegal methods or has interfered with or attempted to influence the voting process or the free will of the shareholders of ICICI Securities. There is nothing in the administrative warning which can be said to be connected to the voting process or the outcome of the voting. Further SEBI has nowhere stated the voting would stand invalidated on account of the outreach initiative, nor has SEBI referred to any circumstance that would invalidate the votes cast by the shareholders of ICICI Securities. At best, the SEBI may have taken exception to the mode of carrying out a outreach and not the outreach per se nor even the objective of such outreach.
8. In Amir Chand Vs Smt Sucheta Kirplani, 1960 SCC OnLine Punjab it was held no amount of 'influence' can possibly have the impact of invalidating a vote so long as the free agency of the shareholder is not impaired. It has 9 been held that mere suggestions, friendly influence, appeals or even solicitation do not amount to undue influence and any influence which exists from attachment or respect or which results from arguments or appeals to reason and judgment is not an undue influence. In any case, the fact the Appellant has himself voted against the Scheme shows the Appellant was in no manner influenced, let alone 'unduly influenced', by the outreach exercise. Lastly, SEBI has explicitly stated in its submissions it did not find any evidence of undue influence or solicitation or misleading of voters by ICICI Bank and thus the Appellant's contention that the administrative warnings indicate the shareholders were coerced is entirely baseless.
9. Qua contention (e) we may note the NOC by NSE and BSE reproduced SEBI's observations which has two requirements in respect of the relaxation i.e., (i) the grounds and the justification for the relaxation and (ii) details of the relaxation. There is no direction for sharing a copy of the relaxation letter dated 20 June 2023. Now the grounds and justification for the relaxation including the details of such relaxation have been disclosed in the Explanatory Statement to the notice of meeting sent to equity shareholders. The disclosure made in the Explanatory Statement informs the shareholder the Scheme in the present case will be in terms of the requirements stipulated in Reg. 37(2) of the Delisting Regulations. In fact, the Explanatory Statement provides a detailed chart of provisions of Reg. 37(2) showing how each of the provisions thereof are met. Thus the shareholders had all information necessary for voting on the Scheme. All requisite details required for the shareholders to make an informed decision in respect of the Scheme were 10 available in the explanatory statement, the Scheme itself and the joint valuation report, each of which were accessible to the public shareholders at the time of voting.
10. Pertinently, in an appeal filed by one of the shareholders (Appeal No. 6001 of 2024), SEBI's appellate authority has also upheld the above position and refused to provide a copy of the relaxation letter, relying on the decision of the Hon'ble Supreme Court of India in Institute of Chartered Accountants of India Vs. Shaunak H. Satya and Ors (2011) 8 SCC 781. In fact, the authority directed the shareholder to refer to the Explanatory Statement as the same was sufficient disclosure. Hence, SEBI itself considered the Relaxation Letter to be a confidential document and its refusal to provide a copy of the relaxation letter shows it did not consider disclosure of the relaxation letter necessary. Moreso, the Ld. NCLT has also noted the grounds for seeking relaxation have been duly provided for in the Explanatory Statement and neither SEBI nor the Stock Exchanges had filed any representation alleging non compliance with disclosure conditions stipulated in the NOC's, even though ICICI Bank and ICICI Securities had duly filed their compliance reports. Thus the requirement of Reg. 37(2) have been fully met with by the Companies. In fact, the Explanatory Statement provides a detailed chart of provisions of Reg. 37(2) showing how each of the provision thereof is met.
11. Qua contention (f) we note only those funds of ICICI Prudential which held 21,675 shares as on the record date have cast their votes. This constitutes 0.0067% of the paid-up capital of ICICI Securities, and therefore, their participation had negligible impact on the overall voting. The definition 11 of "public shareholding" under Rule 2(e) of the Securities Contract (Regulation) Rules, 1957, does not exclude employees holding ESOP shares, nor does Rule 2(d) classify them as promoters or part of the promoter group. Since no such exclusion exists, the argument that employee shareholders should not be considered "public shareholders" does not hold good.
12. To conclude, not only is the Appellant not entitled in terms of the proviso to Section 230(4) to object to the Scheme, but the Appellant has also failed to demonstrate any illegality in either the process followed for sanctioning of the Scheme or in the terms of the Scheme itself. The Impugned Order is a detailed, well-reasoned order which has effectively dealt with all the contentions raised by the Appellant whilst noting that the Appellant is not entitled to object to the Scheme.
13. Lastly we may note, the Appellant does not meet the 10% threshold under Section 230(4) of the Companies Act, 2013 (Act) to object to the Scheme. As of 20 March 2024, Manu Rishi Gupta, the appellant, RG held 0.002% of ICICI Securities' shares. Section 230(4) is a mandatory provision, introduced pursuant to the recommendations contained in the 2005 Expert Report on Company Law to prevent frivolous objections by shareholders with miniscule shareholdings. It is settled law that 'what cannot be done directly cannot be done indirectly'--since the Appellants have no right to object, they cannot maintain the Appeals as "aggrieved persons," in terms of Section 421 of the Act. In this regard, it may be noted that 93.82% of equity shareholders and 71.89% of public shareholders have approved the Scheme way back in March 2024. However, it is only at the instance of the Appellant, who holds a 12 miniscule 0.002% shares, the implementation of the Scheme is being delayed and the majority shareholders are being deprived of the benefits of the Scheme. This militates against the basic principle of shareholder's democracy, which permeates through all corporate actions.
14. Further it is pertinent to point out despite his so-called objections to the Scheme, on the ground it devalues the shares of ICICI Securities, the Appellant has continued to indulge in buying and selling of shares of ICICI Securities, including as recently as August 2024. That the Appellant has purchased shares of ICICI Securities even after the Scheme was announced and the swap ratio was in public domain it makes it obvious the Appellant is not acting bona fide in raising objections to the Scheme but is indulging in speculative litigation.
15. Thus the contentions raised does not inspire us to set aside a reasoned order, hence all appeals are dismissed. Pending applications are also disposed of. No order as to cost.
(Justice Yogesh Khanna) Member (Judicial) (Mr. Ajai Das Mehrotra) Member (Technical) Dated:10-03-2025 bm