Securities Appellate Tribunal
Amit Securities Limited vs Bse Limited on 30 April, 2025
IN THE SECURITIES APPELLATE TRIBUNAL
AT MUMBAI
Dated this the 30th April, 2025
CORAM : Justice P.S. Dinesh Kumar, Presiding Officer
Ms. Meera Swarup, Technical Member
Dr. Dheeraj Bhatnagar, Technical Member
Appeal No. 191 of 2024
[Along with Misc. Application No. 175 of 2024]
BETWEEN:
Amit Securities Limited
1st Floor, Swadeshi Market,
316, Kalbadevi Road,
Mumbai - 400 002.
Maharashtra. ..... Appellant
(By Mr. Kunal Kataria, Advocate with Ms. Rinku Valanju,
Advocate i/b. R V Legal for the Appellant)
AND:
1. BSE Ltd.
25th Floor, P.J. Towers,
Dalal Street, Fort,
Mumbai - 400 001.
2. Securities and Exchange Board of India
SEBI Bhavan, Plot No. C-4A, G-Block,
Bandra-Kurla Complex, Bandra (East),
Mumbai - 400 051. ...Respondents
(By Mr. Manish Chhangani, Advocate with Mr. Atul Kumar
Agrawal, Mr. Sumit Yadav and Mr. Abhay Chauhan,
Advocates i/b The Law Point for the Respondent No. 1 - BSE
Ltd.)
2
(By Mr. Sumit Rai, Advocate with Mr. Mihir Mody,
Mr. Harshvardhan Melanta, Mr. Yash Sutaria and Mr. Tushar
Bansode, Advocates i/b. M/s. K. Ashar & Co. for Respondent
No. 2 - SEBI.)
THIS APPEAL IS FILED UNDER SECTION 23L OF
THE SECURITEIS CONTRACTS (REGULATION) ACT,
1956 TO QUASH AND SET ASIDE ORDER DATED
02.01.2024 (EXHIBIT - A) PASSED BY THE 'REQUEST
REVIEW COMMITTEE' OF BSE LTD.
THIS APPEAL HAVING BEEN HEARD AND
RESERVED FOR ORDERS ON 22.10.2024, COMING ON
FOR PRONOUNCEMENT OF ORDER THIS DAY, THE
TRIBUNAL MADE THE FOLLOWING:
ORDER
Per: Ms. Meera Swarup, Technical Member This appeal has been filed by the Appellant (Amit Securities Limited) ('the Company' for short) impugning e-mail dated January 02, 2024 conveying the order of 'Request Review Committee' of BSE imposing a fine of Rs. 39,64,800/- for violation of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ('LODR Regulations' for short). The fine has been imposed for delayed submission of quarterly consolidated financial statement for quarter ended on September and December 2019. The Respondent had 3 suspended the Company from trading on its platform from January 18, 2021 on account of non-compliance with Regulation 33 of LODR Regulations. The entire shareholding of the promoters held in demat account was also frozen w.e.f. December 16, 2022.
2. The facts leading to the filing of the present appeal are as follows:-
The appellant is a registered Company in the business of trading and investing in equity of domestic companies. The shares of Appellant have been listed on BSE since 2015.
Based on SEBI's informal guidance in the matter of Shriram Transport Finance Company Limited issued on August 02, 2019, the BSE had issued a circular dated September 26, 2019 which stated "it is mandatory for the listed companies to file quarterly / year-to-date consolidated financial results. For this purpose, companies are required to consolidate the accounts of Subsidiary and / or its Associate companies / Joint ventures as the case may be, with the standalone results of the listed company. The consolidated financial results as mentioned above shall be submitted to the Exchange from the quarter ending September 30, 2019 onwards".4
3. As a listed company the Appellant had to comply with the LODR Regulations and other regulations of SEBI and BSE circulars, norms, guidelines, directions etc. The Appellant failed to comply with the BSE circular dated September 26, 2019 and did not submit consolidated financial statements for the quarters ending September 2019 and December 2019 within the stipulated dates. Admittedly, these consolidated statements were filed by the Appellant with BSE on January 12, 2021. Subsequently, the Appellant also failed to comply with these directions for the quarters ending March 2020, June 2020 and September 2020. BSE in terms of SEBI's SOP circular dated May 3, 2018 levied fines on the Appellant. Since the Appellant failed to ensure compliance and make payment of fines, the Exchange issued instructions in December 2020 to the Depositories to freeze the demat accounts of the promoters. As non-compliance of Regulation 33 of LODR Regulations continued for two consecutive quarters (March 2020 and June 2020), the trading of securities of the Appellant was suspended from January 18, 2021.
4. The Appellant filed waiver applications seeking waiver of fines levied for quarters ending September 2019, December 2019, March 2020, June 2020 and September, 2020 5 amounting to Rs. 66,55,200/-. The waiver application was placed before the 'Request Review Committee' of BSE wherein the Committee decided to waive the fines levied for non-compliance with Regulation 33 of LODR Regulations for quarters ended March 2020, June 2020 and September 2020 on account of Covid 2019 pandemic thereby granting a waiver of Rs. 21,12,200/-. The Appellant sought further waiver of remaining fines for quarters ending September 2019 and December 2019 and the Committee decided to grant partial waiver of fines amounting to Rs. 5,78,200/- considering that the Appellant had submitted its annual report for the financial year 2019-2020 to the Exchange on November 30, 2020 which consisted of consolidated financial statements of the Appellant in the prescribed form. The Appellant sought further waiver of remaining fines amounting to Rs. 39,64,800/- (including GST). However, the Committee upheld its earlier decision to reject the waiver request for the remaining outstanding fine.
5. We have heard Shri Kunal Katariya, learned Advocate for the Appellant, Shri Manish Chhangani, learned Advocate for BSE and Shri Sumit Rai, learned Advocate for SEBI. 6
6. Before us, the main argument of the Appellant was that Regulation 33 of LODR Regulations does not provide for consolidation of accounts of associate companies, consolidation of quarterly financial statements is required only when there is a subsidiary. The Appellant does not have any subsidiary and has only associate companies; the details thereof were disclosed in its Annual Report. BSE issued a Circular dated September 26, 2019 which made it mandatory for listed companies to file quarterly / year to date consolidated financial results. The circular stated that the companies are required to consolidate the financial statements of subsidiary and or its Associate Companies / Joint Ventures as the case may be with the Standalone results of the listed Company. This Circular based on a SEBI's informal guidance in the matter of Shriram Transport Finance Company Limited was not binding on listed companies. According to the appellant the plain language of Regulation 33 of LODR Regulations will override the provisions of the BSE Circular and the informal guidance. By their very nature, the informal guidance given by SEBI is not even binding on SEBI therefore BSE had no authority to issue such a Circular which overrode the LODR Regulations. The stand taken by BSE in its Circular dated September 26, 2019 that post April 1, 2019, 7 Regulation 33(3) of LODR Regulations requires mandatory consolidation of subsidiaries, associates and Joint Ventures is incorrect. The Appellant submitted that prior to amendments to LODR Regulations which became effective from April 1, 2019, it was not mandatory for a listed Company having subsidiary to submit quarterly / year to date consolidated financial results. Pursuant to the said amendment a listed Company, having a subsidiary, was mandatorily required to submit consolidated quarterly and annual financial results. As the Appellant did not have any subsidiary, it did not submit consolidated quarterly accounts. However, as required under the provisions of the Companies Act, the Appellant has been showing the consolidated results including its Associate Companies in its Annual Report.
7. The Appellant also raised the issue regarding the applicability of the Standard Operating Procedure (SOP) Circulars issued by SEBI for violation of LODR Regulations on violations of BSE Circular. Stressing that SOP Circular is issued under Regulation 97 and 98 of LODR Regulations which prescribe for fines and punishments for violation of LODR Regulation, the Appellant stated that violation of BSE's Circular or SEBI's informal guidance can't be brought 8 under SOP Circular. Penal statutes must be construed strictly and there is no penalty for not following a BSE Circular.
8. On the other hand, the Respondent No. 1 first raised a preliminary objection that without impugning the suspension notice and orders regarding the freezing of demat accounts of promoter, the Appellant is seeking to restore the suspension from trading of its accounts and de-freezing of demat accounts of promoter. More than 1200 days have passed since suspension notice was issued and by not challenging the suspension earlier, the Appellant have accepted the suspension. Therefore, through the appeal, the Appellant is attempting to get the revocation of suspension without following the due process of law for restoration of trading which include payment of applicable fees and other compliances.
9. On merits, the contention of the Respondent No. 1 was that every listed Company has to comply with listing and disclosure requirement as per LODR Regulations. Regulation 4(g) of LODR Regulations mandates on all listed companies to abide by all applicable laws and other guidelines as issued by SEBI and the Stock Exchanges. Further, the Appellant had entered into a Listing Agreement with the Respondent No. 1 9 dated December 29, 2015 whereby the Appellant has undertaken to comply with Rules, By-laws and Regulations of the BSE and the Circulars issued by SEBI / BSE from time to time.
10. As part of compliance with LODR Regulations, a listed entity in terms of Regulation 33(3) is required to submit quarterly and year to date financial results on standalone and / or consolidated basis to the Stock Exchanges within 45 days of end of each quarter, other than the last quarter. With effect from March 31, 2017, the format for financial results to be submitted by listing entities was as per the formats as prescribed in Schedule - III of the Companies Act, 2013. The format specified under Schedule - III to the Companies Act, 2013 clearly provides that all subsidiaries, associates and joint ventures will be covered under the consolidated financial statement. Post amendment of LODR Regulations with effect from April 1, 2019, the submission of consolidated financial results was made mandatory. Thus, post 2019 amendment to LODR Regulations, every listed Company having a subsidiary, associate or joint venture was required to disclose quarterly financial results on consolidated basis covering all subsidiaries, associates or joint ventures. BSE issue a Circular 10 dated September 26, 2019 to clarify this requirement as substantiated by informal guidance issued by SEBI in the case of Shriram Transport Finance Company Limited. Admittedly, consolidated financial results were not submitted by the Appellant for quarters ending September and December, 2019 within the schedule laid out for their submission. Therefore, in terms of SOP Circular 2018 fines were levied on the Appellant. The Appellant further failed to submit consolidated quarterly financial results for the quarters ending March, June and September 2020 for which fines were levied. Since the Appellant failed to make payment of fines and ensure submission of consolidated financial results for September 2020, the demat accounts of the promoters were freezed in December 2020. Since the non-compliance of Regulation 33 of LODR Regulations continued for two consecutive quarters (March and June 2020), the trading of securities of the Appellant was suspended with effect from January 18, 2021.
11. Summarizing the Respondent's case, the Counsel for Respondent (BSE) stated that the Appellant's contentions that Regulation 33(3)(b) of LODR Regulations is only applicable to companies having subsidiary is devoid of merit. If the SOP 11 Circulars of SEBI, LODR Regulations and the requirement specified in Schedule - III of Companies Act, 2013 are read harmoniously, it will be clear that companies are required to consolidate the financial statements of subsidiary and / or its associate companies / joint ventures along with standalone results and submit them to the Stock Exchange quarterly and annually.
12. We first deal with the preliminary objections raised by the Respondent No. 1. The Respondent raised the issue that the Appellant has sought revocation of suspension from trading and de-freezing of its promoter's demat accounts without impugning the suspension notice and notice freezing the demat accounts. The Appellant did not challenge these noticees at relevant time and so, in effect, they accepted the orders and cannot be allowed to challenge them belatedly with a delay of more than 1200 days.
13. We do not agree with the preliminary objections raised by the Respondent No. 1 as in our view the Company's suspension from trading and freezing of promoter's accounts are consequences arising from alleged non-compliance of Regulation 33 of LODR, a matter which forms the very basis of this appeal. We note that the Appellant was in constant 12 communication with BSE and was given opportunity to put his case to the Request Review Committee, therefore, in our view this was a continuous single process which culminated in the impugned order. Further, trading in the securities of the Appellant was suspended for non-compliance for two consecutive quarters - March and June 2020. Promoter's demat accounts were frozen for non-payment of fines imposed due non-compliance with provisions of Regulation 33 of LODR (Financial Results) for March 2020. We note that the Committee of BSE has waived off the fines for the two quarters (March and June 2020) which were the very basis for suspension of trading and freezing of promoter's accounts. Thus, there is no merit in the preliminary objection raised by the Respondent No. 1.
14. On merits, it would be appropriate to extract Regulation 33(3) of the LODR Regulations as follows:-
"33(3) The listed entity shall submit the financial results in the following manner:
(a) The listed entity shall submit quarterly and year-
to-date standalone financial results to the stock exchange within forty-five days of end of each quarter, other than the last quarter.
(b) In case the listed entity has subsidiaries, in addition to the requirement at clause (a) of sub- regulation (3), the listed entity [shall] also submit quarterly/year-to-date consolidated financial results.
13(4) The applicable formats of the financial results and [Statement of Impact of Audit Qualifications (for audit report with modified opinion )] 216 shall be in the manner as specified by the Board."
15. Vide SEBI Circular dated July 5, 2016 prescribed that on or after March 31, 2017 the format for financial results will be as prescribed in Schedule III of the Companies Act, 2013. The relevant extract of Schedule III of the Companies Act is as follows:-
"1. Where a company is required to prepare Consolidated Financial Statements, i.e., consolidated balance sheet and consolidated statement of profit and loss, the company shall mutatis mutandis follow the requirements of this Schedule as applicable to a company in the preparation of balance sheet and statement of profit and loss ......................................................... ............................................................................
3. All subsidiaries, associates and joint ventures (whether Indian or foreign) will be covered under consolidated financial statements.
4. An entity shall disclose the list of subsidiaries or associate or joint ventures which have not been consolidated in the consolidated financial statements along with the reasons of not consolidating."
16. The basic issue under challenge is whether a Company without subsidiary but having Associates / JV is required to submit consolidated financial statements on a quarterly basis to the exchange. A careful reading of Regulation 33(3)(b) of LODR Regulations indicates that the regulations specifies that in case a listed company has subsidiaries it has to prepare and 14 submit quarterly and annual consolidated financial results. Thus, as per Regulation 33(3)(b) it is only in case that a listed entity has subsidiary, it needs to be submitted quarterly financial statement. Schedule III of the Companies Act, 2013 which provides general instruction for the preparation of consolidated financial statements starts with the phrase "where a company is required to prepare consolidated financial statement..........". Instruction No. 3 states that "all subsidiaries, associates or joint ventures (whether Indian or foreign) will be covered under consolidated financial statements". Schedule III of the Companies Act flows from Section 129(1) and lays down format of accounts required under the Section. Section 129(2) states that the financial statement for the financial year are to be laid in the annual general meeting of a Company. Section 129(3) states that where a company has one or more subsidiaries or associate company, it shall along with standalone financial statement prepare consolidated financial statement for a financial year. Thus, the Section 129 of Companies Act read along with Schedule III is specific to preparation of annual financial statement. In our view Regulation 33(3) of LODR Regulations lays down the requirement of preparation of quarterly consolidated financial statements and these are to be 15 prepared by a listed entity, which has a subsidiary. In case the listed entity prepares quarterly consolidated financial statement, then the accounts of its associates / joint ventures (if any) will also have to be consolidated.
17. It would be appropriate hereto extract the Circular dated September 26, 2019 issued by BSE on submission of Consolidated Financial Results", which reads thus:-
"Subject : Submission of Consolidated Financial Results This has reference to Regulation 33 of SEBI (Listing Obligation and Disclosure Requirements) Regulation, 2015 and the informal Guidance issues by SEBI on August 02, 2019 in the matter of Shriram Transport Finance Company Limited.
As stated in the aforementioned SEBI informal Guidance, it is mandatory for listed companies to file quarterly / year to date consolidated financial results. For this purpose, Companies are required to consolidate the financial statements of Subsidiary and or its Associate companies / Joint ventures as the case may be, with the Standalone results of the listed company.
The Consolidated Financial Results as mentioned above shall be submitted to the Exchange from the quarter ending September 30, 2019 onwards.
Listed Companies are required to take note of the same and comply accordingly."
18. Paragraph 2 of the circular states that as stated in SEBI's informal guidance it is mandatory for listed companies to file quarterly consolidated financial results of its subsidiary and associate companies. We note that Clause 13 of SEBI 16 (Informal Guidance) Scheme, 2003 states that "the letter issued by a Department under this scheme should not be construed as a conclusive decision or determination of any question of law or fact by SEBI." Therefore, reliance on informal guidance given by SEBI in a particular case is patently incorrect.
19. Thus, in our view there is ambiguity in the interpretation made by BSE that the Appellant has violated Regulation 33(3) of LODR Regulations by not submitting quarterly consolidated financial results for quarters ended September and December, 2019. We note with concern that though SEBI was impleaded as Respondent No. 2 in this appeal vide our order dated September 30, 2024, SEBI did not file any reply or written submission and remained a mute spectator on an issue which has major ramifications. In our view, the Appellant should be given benefit of doubt with regard to this ambiguous position. Accordingly, we hold that there is no violation of Regulation 33(3) of LODR Regulations by the Appellant and the fines imposed have no basis. Hence the following:-
17
ORDER
(i) Appeal is allowed with no order as to costs.
Impugned communication dated January 2, 2024 is set aside;
(ii) Suspension of trading in Appellant's scrip may be lifted and the promoter's accounts be de-freezed with immediate effect;
(iii) SEBI may examine the issue regarding the need for consolidation of quarterly financial results by listed companies having only Associates / Joint Ventures without having any subsidiary, and issue necessary clarification in this regard;
Pending Interlocutory applications(s), if any, stand disposed of.
No costs.
Justice P.S. Dinesh Kumar Presiding Officer Ms. Meera Swarup Technical Member Dr. Dheeraj Bhatnagar Technical Member MADHUKAR 30.04.2025 BHALBAR Digitally signed by MADHUKAR BHALBAR Date: 2025.05.01 17:37:21 +05'30' msb