Calcutta High Court
Ashoka Marketing Limited & Anr vs The Calcutta Stock Exchange Limited & ... on 16 November, 2017
W.P. No. 523 of 2017
IN THE HIGH COURT AT CALCUTTA
Constitutional Writ Jurisdiction
Original Side
Ashoka Marketing Limited & Anr.
Vs.
The Calcutta Stock Exchange Limited & Ors.
For the Petitioners : Mr. Anindya Kr. Mitra, Sr. Advocate
Mr. Abhrajit Mitra, Sr. Advocate
Mr. Reetobroto Mitra, Advocate
Mr. Soumya Roy Chowdhury, Advocate
Mr. Sarvapriya Mukherjee, Advocate
Mr. Sandip Das Gupta, Advocate
For the Respondents : Mr. Rupak Ghosh, Advocate
Mr. Kaushik Chatterjee, Advocate Ms. Shrayashee Saha Das, Advocate Mr. Debayan Sen, Advocate Hearing concluded on : November 3, 2017 Judgment on : November 16, 2017 DEBANGSU BASAK, J.:-
The writ petitioners have challenged the decision of the Calcutta Stock Exchange, refusing to grant in principle approval for delisting of the equity shares of the first petitioner, as contained in the writing dated April 21, 2017 issued by the Calcutta Stock Exchange. The writ petitioners have also sought in principle approval for delisting of the equity shares of the first petitioner as made in the application dated October 7, 2016.
Learned Senior Advocate appearing for the writ petitioners has submitted that, the equity shares of the first writ petitioner is listed with the Calcutta Stock Exchange. Such shares are infrequently traded. The first petitioner has decided to delist its equity shares from the Calcutta Stock Exchange. It had applied on October 7, 2016 for such purpose. He has referred to the various correspondence exchanged between the petitioners and the Calcutta Stock Exchange and has submitted that, the petitioners had answered every query raised by the Calcutta Stock Exchange. He has referred to the provisions of the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009 and submitted that, a stock exchange cannot withhold grant of in principle approval, unfairly. He has submitted that, the Regulations of 2009 notices few grounds for refusal. None of such grounds are attracted in the facts of the present case. Therefore, the Calcutta Stock Exchange should have granted the in principle approval. He has referred to the grounds of refusal as contained in the impugned letter dated April 21, 2017. He has submitted that, such grounds are without any basis. He has contended that, the first petitioner is seeking to delist its equity shares from the Calcutta Stock Exchange. No outsider is acquiring or taking over the first petitioner. The provisions of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 are not attracted. The allegation of non- settlement of investor grievances are without any basis. The only grievance of the investors which can have any legitimacy, if at all, is the non-fixation of the exit price. Exit price is required to be fixed only after the first petitioner receives the in principle approval. Since such approval is still awaited, the sufficiency of such grievance need not be considered at the present moment.
Calcutta Stock Exchange is a body which functions under various statutes, rules and regulations governing it. It has to proceed strictly in accordance with such provisions. In the present case, Calcutta Stock Exchange has exceeded its jurisdiction in purporting to act beyond the statute and the regulations governing it. In support of such contentions, learned Senior Advocate for the petitioners, has relied upon 1988 Volume 1 Calcutta Law Journal page 295 (Ram Nath Mehra & Ors. v. The Calcutta Municipal Corporation & Ors.). Relying upon 2003 Volume 2 Supreme Court Cases page 107 (Harbanslal Sahnia & Anr. v. Indian Oil Corporation Ltd. & Ors.), judgment and order dated July 6, 2017 passed in W.P. No. 487 of 2015 (Jaju Petrochemicals Pvt. Ltd. & Anr. v. The Commissioner of Customs (Port) & Ors.) ) and the judgment and order dated August 16, 2017 passed in W.P. No. 21465 (W) of 2017 (Balaji Polytex Industries Pvt.
Ltd. v. The Union of India & Ors.) he has submitted that, exclusion of writ jurisdiction due to availability of alternative remedy is a rule of discretion and not one of compulsion. He has submitted that, therefore, the reliefs as sought for by the petitioners be granted.
Learned Advocate appearing for the respondent has questioned the maintainability of the writ petition. He has submitted that, the petitioners have statutory alternative remedy available. He has referred to various provisions of the Securities Contracts (Regulation) Act, 1956 particularly Sections 31, 21A, 23L and 23F of the Act of 1956 in support of his contention that, the impugned order is appealable to Securities Appellate Tribunal. He has relied upon two unreported decisions of the Securities Appellate Tribunal being Appeal No. 126 of 2010 dated September 15, 2010 (Bharat Jayantilal Patel v. Securities and Exchange Board of India) and Appeal No. 86 of 2011 (HB Stockholdings Limited v. Securities and Exchange Board of India and Ors.). Relying upon 2011 Volume 4 Calcutta High Court Notes page 91 (Rose Valley Real Estates and Constructions Ltd v. Securities and Exchange Board of India and others) he has submitted that, the petitioners having statutory alternative remedy of an appeal, the writ petition should not be entertained.
Referring to the merits of the matter, learned advocate for the respondents has submitted that, the first writ petitioner had applied to the Calcutta Stock Exchange identifying a legal entity as an acquirer. In such circumstances, the provisions of Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009 as amended along with the provisions of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 as amended would apply. He has referred to the application made by the first writ petitioner to the Calcutta Stock Exchange and has submitted that, the first writ petitioner having identified a legal entity as an acquirer, and the first writ petitioner not having a promoter, the provisions of Regulation 5A of the Takeover Regulations and Regulation 8 of the Delisting Regulations applies. He has referred to a letter dated February 28, 2017 issued by SEBI in response to the queries raised by the Calcutta Stock Exchange. He has submitted that, the Calcutta Stock Exchange did not act unilaterally or arbitrarily in the matter of considering the application for grant of approval to the writ petitioners. SEBI was consulted on the issue. SEBI had given its views. The Calcutta Stock Exchange had taken its decision as appearing in the impugned letter on the basis of the views expressed by SEBI. The petitioners having identified an acquirer and there not being any open offer in terms of the Takeovers Regulations, 2011, the request of the petitioners for delisting was rightly rejected. Furthermore, the impugned letter would demonstrate that, the request for delisting was rejected on the ground of non-resolution of investor grievances. He has referred to Regulation 8(4)(b) of the Delisting Regulations and has submitted that, Calcutta Stock Exchange can require an applicant seeking voluntary delisting to satisfy the Stock Exchange as to the resolution of the investor grievances by the applicant. Although, the first petitioner had filed an undertaking- cum-indemnity with the Calcutta Stock Exchange claiming that, it has resolved all the investor grievances, such claims are incorrect. He has referred to the redressal of investor grievance through SEBI Complaints Redress System (SCORES) platform. He has submitted that, there are a number of complaints pending in such platform against the first petitioner. He has referred to the correspondence exchanged between the parties in this regard. He has also submitted that, exemptions are provided in such provisions, such exemptions are not attracted in the facts of the present case. He has submitted that, in the event, the Court is pleased to find that the writ petition is maintainable, the Court should allow the respondents to file affidavits before disposing of the writ petition.
The following issues have arisen for consideration in the present writ petition:-
(i) Is a decision of a Stock Exchange refusing to grant in principle approval to an application for voluntary delisting of shares from such Stock Exchange appealable under the provisions of Securities Contracts (Regulation) Act, 1956?
(ii) Is the writ petition maintainable?
(iii) Is the impugned decision of the Calcutta Stock Exchange without jurisdiction?
(iv) To what reliefs, if any, are the parties entitled to?
In the present case, the impugned decision of the Calcutta Stock Exchange in refusing to grant in principle approval to delist the equity shares of the first petitioner has been contended to be appealable under Section 21A of the Securities Contracts (Regulation) Act, 1956. Provisions of Section 23L of the Act of 1956 have also been relied upon to suggest that, appeal to the Security Appellate Tribunal would lie against such a decision of a Stock Exchange.
The first petitioner had applied for delisting of its equity shares. The delisting process is, therefore, voluntary and it emanates from an entity when it seeks its shares to be delisted in contradiction to a Stock Exchange directing the entity to delist its shares. The second scenario is considered as compulsory delisting of shares. Delisting of shares is governed by the provisions of Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009. Chapter III of such Regulations of 2009 deals with voluntary delisting. Chapter V deals with compulsory delisting. It has been contended on behalf of the petitioners that, the provisions of Securities Contracts (Regulation) Act, 1956 do not contain any provision for voluntary delisting. The procedure for voluntary delisting has been provided in the Regulations of 2009.
Section 21A of the Securities Contracts (Regulation) Act, 1956 is as follows:-
"21A. Delisting of securities - (1) A recognised stock exchange may delist the securities, after recording the reasons therefor, from any recognized stock exchange on any of the ground or grounds as may be prescribed under this Act:
Provided that the securities of a company shall not be delisted unless the company concerned has been given a reasonable opportunity of being heard.
(2) A listed company or an aggrieved investor may file an appeal before the Securities Appellate Tribunal against the decision of the recognised stock exchange within fifteen days from the date of the decision of the recognised stock exchange delisting the securities and the provisions of sections 22B to 22E of this Act, shall apply, as far as may be, to such appeals:
Provided that 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."
Section 23L of the Act of 1956 provides for appeals to the Securities Appellate Tribunal. Section 23L is as follows:-
"23L. Appeal to Securities Appellate Tribunal.--
(1) Any person aggrieved, by the order or decision of the recognised stock exchange or the adjudicating officer or any order made by the Securities and Exchange Board of India under section 4B [or sub-section (3) of section 23-I], may prefer an appeal before the Securities Appellate Tribunal and the provisions of sections 22B, 22C, 22D and 22E of this Act, shall apply, as far as may be, to such appeals.
(2) Every appeal under sub-section (1) shall be filed within a period of forty-five days from the date on which a copy of the order or decision is received by the appellant and it shall be in such form and be accompanied by such fee as may be prescribed:
Provided that the Securities Appellate Tribunal may entertain an appeal after the expiry of the said period of forty- five days if it is satisfied that there was sufficient 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."
Section 21A of the Act of 1956 does not distinguish between a voluntary and a compulsory delisting of securities. It empowers the Stock Exchange to delist the securities, after recording the reasons, on any of the ground as may be prescribed under the Act of 1956. Power to delist a share as provided in Section 21A encompasses both voluntary and compulsory. Voluntary and compulsory are two manners and methods of delisting. Both processes results in delisting of the shares. Once the power to delist is vested it cannot be gain said that, such a power is available only in respect of one of the manner and method of delisting to the exclusion of the other. Section 21A incorporates the principles of natural justice in the process of delisting. Sub-section (2) of Section 21A of the Act of 1956 permits a listed company or an aggrieved investor to file an appeal before the Securities Appellate Tribunal against the decision of the recognized Stock Exchange in relation to the delisting of securities. It also provides that, Sections 22B to 22E of the Act of 1956 shall apply as far as may be, to such appeal. The proviso to Sub- section (2) of Section 21 allows the Securities Appellate Tribunal to condone the delay in filing the appeal for a period exceeding one month from the time stipulated for preferring the appeal.
On a plain reading of Section 23L it appears that, the provisions of such Section of the Act of 1956 allows a person aggrieved by the order or decision of a recognized Stock Exchange or the adjudicating officer or any order made by the Securities and Exchange Board of India to prefer an appeal before the Securities Appellate Tribunal. There are certain distinctions between Section 21A(2) and Section 23L of the Act of 1956. Section 21A of the Act of 1956 limits the category of the appellant to a listed company or an aggrieved investor while there is no such limitation in Section 23L. Section 23L allows any person who can substantiate that it is aggrieved by the order or decision can prefer the appeal. The time limit to prefer the appeal in the two provisions is different. Section 21A(2) allows 15 days time to prefer the appeal with a provision for considering the delay for a further period not exceeding one month. Section 23L allows the appeal to be preferred within 45 days with the Securities Appellate Tribunal being empowered to condone any quantum of delay in filing the appeal on sufficient cause. Section 21A(2) relates to decisions of the recognized Stock Exchange taken in the process for delisting of the shares. It would include decisions taken in respect of voluntary as well as compulsory delisting. Section 23L on the other hand relates to an appeal in respect of an order or decision of a recognised Stock Exchange or an adjudicating officer or by SEBI passed or taken under Section 4B or Section 23I(3) of the Act of 1956. These differences allow one to infer that they operate on different fields. Provisions of Section 23L are not attracted to an appeal against the decisions of the Stock Exchange taken in the delisting process. Such a decision would attract Section 21A(2) for the purpose of appeal. In the present case, the impugned writing of the Calcutta Stock Exchange contains its decision to refuse in principle approval of voluntary delisting of shares. The same is appealable under Section 21A(2).
The first issue is answered in the affirmative by holding that, a decision of a Stock Exchange refusing to grant in principle approval to an application for voluntary delisting is appealable under Section 21A(2) of the Securities Contracts (Regulation) Act, 1956.
Section 31 of the Act of 1956 empowers the Securities and Exchange Board of India to make regulations. In exercise of powers, inter alia, under Section 21A and Section 31of the Act of 1956, the Securities and Exchange Board of India has made the Delisting Regulations of 2009. Chapter III of the Delisting Regulations, 2009 deals with voluntary delisting while Chapter V deals with compulsory delisting. Regulation 5 of the Regulations of 2009 allows a company to delist its equity shares provided that, all public shareholders of such company are given an exit opportunity in accordance with the Chapter IV of the Regulations of 2009. Regulation 8 of the Regulations of 2009 deals with conditions and procedure for delisting where exit opportunity is required. In the present case, there appears to be public shareholders and such shareholders are required to have an exit opportunity. In the facts of the present case, it appears that, the company has obtained the prior approval of the Board of Directors of the company in its meeting to apply for permission to delist from the Stock Exchange. It has received the prior approval of the shareholders of the company by special resolution passed through postal ballot, after disclosure of all material facts in the explanatory statement sent to the shareholders in relation to such resolution. The special resolution does not stand defeated by reason of the proviso to Regulation 8(1)(b) being satisfied. The company has made an application to the concerned Stock Exchange for in principle approval in terms of Regulation 8(1)(c). It is at this stage that, the Stock Exchange has refused the grant of in principle approval. Therefore, the question of the company proceeding any further under the Regulation 8 does not arise. It has been contended on behalf of the petitioners that, the exit opportunity contemplated under Chapter IV will become applicable only after the receipt of the in principle approval for delisting. Therefore, the company cannot be said to have defaulted in complying with Chapter IV of the delisting Regulations of 2009, at the present moment in the facts of the present case. According to the petitioners, the Calcutta Stock Exchange has exercised jurisdiction erroneously and therefore, notwithstanding the statutory appeal, the writ petition should be entertained.
Notwithstanding the availability of alternative remedy including a statutory alternative remedy of appeal, a writ petition has been held to be maintainable so long, the impugned action is substantiated to be without jurisdiction, non-speaking, or is perverse or tainted with mala fides. Simplicitor on the ground that there exists, an alternative remedy, a writ petition cannot be said to be not maintainable.
Harbanslal Sahnia & Anr. (supra) has held that, the rule of exclusion of writ jurisdiction by availability of an alternative remedy is a rule of discretion and not one of compulsion. It has recognized that, a writ petition is maintainable notwithstanding the availability of an alternative remedy, where the writ petition seeks enforcement of any fundamental right, where there is failure of principles of natural justice, where the orders of proceedings are wholly without jurisdiction and where the vires of an Act is under challenge. Such view has been followed in Jaju Petrochemicals Pvt. Ltd. & Anr. (supra) and Balaji Polytex Industries Pvt. Ltd. (supra).
It has been contended on behalf of the petitioners that, the impugned order of the Calcutta Stock Exchange is without jurisdiction as it had failed to act in accordance with the Delisting Regulations of 2009. Reliance has been placed on Ram Nath Mehra & Ors. (supra) in support of the contention that, where a statutory authority fails to proceed in accordance with the statutes or the regulations, such a failure is liable to be struck down as it was beyond jurisdiction. Failure to sanction a building plan after the claim of compliance of all formalities by owner of a portion of a premise was under consideration in Ram Nath Mehra & Ors. (supra) in the context of a requirement of Kolkata Municipal Corporation on the owner to submit No Objection Certificate of the Urban Land Ceiling Department. In such context, the Kolkata Municipal Corporation was directed to proceed to accord sanction in accordance with the provisions of the Act and the Rules without requiring the production of a No Objection Certificate from the competent authority under the Urban Land (Ceiling and Regulation) Act, 1976.
In Rose Valley Real Estates and Constructions Ltd. (supra) an order of SEBI passed exercising powers under Section 11B of the Securities and Exchange Board of India Act, 1992 and Regulation 65 of the SEBI (Collective Investment Schemes) Regulations, 1999 was under
challenge. In the facts of that case, it has been held that, such an order was appealable. It has noted that, powers under Article 226 of the Constitution of India can be exercised if there is an extraordinary situation to warrant exercise of such power.
The second issue is answered by holding that, the present writ petition is maintainable in view of the availability of statutory alternative remedy. The petitioners have not established that, the impugned decision is without jurisdiction, or is perverse, or non-speaking or tainted with mala fides. No provision of any of the statutes or regulations governing the process of delisting is under challenge.
In the present case, the Stock Exchange is required by law to decide an application for voluntary delisting. A Stock Exchange has the jurisdiction to do so. It has taken a decision which is impugned in the present writ petition. The decision gives reasons. The Stock Exchange has claimed to have consulted with Securities and Exchange Board of India prior to the petitioners being informed with the impugned decision. It cannot be said that, the impugned decision is vitiated by the breach of the principles of natural justice. It is within the domain of the Calcutta Stock Exchange to decide on the application for grant of voluntary delisting. The petitioners may have a case to argue that, the decision returned in the impugned order cannot be sustained on a better appreciation of the materials produced for consideration by the Calcutta Stock Exchange. Such a scenario does not give rise to a lack of jurisdiction of the Calcutta Stock Exchange to have returned the impugned decision. In the facts of the present case, it cannot be said that, the Calcutta Stock Exchange has acted beyond the jurisdiction vested upon it in law. The impugned decision of the Calcutta Stock Exchange is amenable to appeal under Section 21A(2) of the Securities Contracts (Regulation) Act, 1956. The petitioners, therefore, have a statutory alternative remedy available to itself. The petitioners would be better placed to ventilate their grievance that, the materials produced before the Calcutta Stock Exchange were not appreciated correctly and that, a different view as that returned in the impugned decision is plausible and ought to be taken before the appellate authority. A Writ Court need not undertake the reappreciation of the evidence as an appellate authority and substitute the impugned decision with its own acting as an appellate authority.
In view of the discussions above, the third issue is answered in the negative and against the petitioners.
Since the impugned order is appealable and the petitioners have statutory alternative remedy available and since I am not minded to interfere in the present writ petition, the merits of the case and the rival contentions of the parties need not be entered into. It is clarified that, any observations made on the merits of the matter was for the purpose of adjudicating whether or not to entertain the writ petition and decide the same on merits. Any observations made on the merits of the matter should not prejudice any of the parties in any subsequent proceedings.
W.P. No. 523 of 2017 is dismissed. No order as to costs. The fourth issue is answered accordingly.
[DEBANGSU BASAK, J.]