Aditi Asim Dalal vs Sebi

Order Reserved on: 11.3.2021 Date of Decision : 06.4.2021

Appeal No.164 of 2021

Aditi Asim Dalal 42, Chitrakoot, Altamount Road, Mumbai - 400026. ...Appellant

Versus

1.

Securities & Exchange Board of India Flat No.C-4/A, G Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400051.

2. BSE Ltd.

Rotunda, Dalal Street, Fort, Mumbai 400001. ...Respondents

Mr. Piyush Rahejo, Advocate i/b. Devanshu Desai Advocate for the Appellant.

Mr. Vishal Kanade, Advocate with Mr. Mihir Mody, Mr. Sushant Yadav and Mr. Karan Dhawan, Advocates i/b. K. Ashar & Co. for the Respondent No.1.

Mr. Pesi Modi, Senior Advocate with Mr. Anubhav Ghosh and Mr. Raveshekhar Pandey, Advocates i/b. The Law Point for the Respondent No.2.

CORAM: Justice Tarun Agarwala, Presiding Officer Justice M.T. Joshi, Judicial Member

Per : Justice Tarun Agarwala, Presiding Officer 2

1. The appellant has challenged the action of BSE Ltd.

('BSE' for short) in freezing the demat account and

have filed the present appeal.

2. The facts leading to the filing of the present appeal

is, that the appellant is a promoter in Oasis

Neturaceuticals Ltd. and holds 50,000 shares. It is

contended that the appellant is not involved in the

management of the Company. It transpires that the

Company became a defaulter under the Securities and

Exchange Board of India (Listing Obligations and

Disclosure Requirements Regulations (hereinafter

referred to as 'LODR Regulations) and failed to pay

the listing fees to the stock exchange. As a result of

the failure on the part of the Company to pay the

listing fee, the stock exchange took recourse to its

circular dated 11th June, 2019 and took steps to freeze

the demat accounts of the promoter and promoter

groups including the appellants.

3. It is alleged that the appellant forwarded a cheque of

Rs.1,66,479 towards part payment of the listing fee and

requested the stock exchange to grant six monthly 3

instalment to enable the appellant to pay the balance

due. It is contended that the respondent stock exchange

encashed the cheque but did not grant any liberty to

pay the balance amount in instalment.

4. Before this Tribunal the contention raised is, that the

stock exchange does not have any power to freeze the

demat account under the LODR Regulations. It was

also contended that the respondent stock exchange has

no power under the SEBI Act, SCRA Act or the

regulations framed thereunder to freeze the demat

account or to issue a circular and, therefore, the action

taken by the respondent is wholly illegal and without

jurisdiction.

5. On the other hand, the respondent contended that they

have the power under the LODR Regulations and take

steps to freeze the accounts. It was submitted that

steps were taken pursuant to circular dated 11th June,

2019 and, therefore, there is no illegality in the

freezing of the accounts.

6. SEBI contends that the circular dated 11th June,

2019 issued by the stock exchange has now been 4

superseded by a circular dated 11th February, 2021

wherein a standard operating procedure has been

framed by SEBI which is required to be followed.

7. We have heard Mr. Piyush Rahejo, Advocate for the

Appellant and Mr. Vishal Kanade, Advocate assisted

by Mr. Mihir Mody, Mr. Sushant Yadav and Mr.

Karan Dhawan, Advocates for the Respondent No.1

and Mr. Pesi Modi, Senior Advocate assisted by Mr.

Anubhav Ghosh and Mr. Raveshekhar Pandey,

Advocates for the Respondent No.2.

8. Having heard the learned counsel for the parties, we

find that the action to freeze the demat accounts of the

appellant have been taken under the circular dated 11th

June, 2019 which stipulates that with effect from 1st

December, 2019 onwards if the Company continues to

remain in default in which case demat account of the

promoter and the promoter group shall be frozen for all

debits. This circular dated 11th June, 2019 has now

been superseded by the circular dated 11th February,

2021 issued by SEBI. This circular becomes relevant

now for the purpose of disposal of the present appeal. 5

9. A perusal of this circular indicates that standard

operating procedure has been framed by SEBI for

action to be initiated against listed companies for non-

payment of annual listing fees. Freezing of the

shareholding of the promoters has also been provided

but such steps could only be taken after giving notice

and after giving opportunity of hearing. In para 9.2 of

the circular, it has been stated that the exchanges were

directed to inform the depositories to unfreeze the

demat accounts of the promoter group entities which

have been frozen for non-payment of annual listing fee

till date with immediate effect.

10. In the light of the aforesaid, it is not necessary for

this Tribunal to go into the question as to whether the

stock exchanges has the power to issue circular and

whether they have power to defreeze the account in

view of the fact that the said circular dated 11th June,

2019 has now been superseded by circular dated 11th

February, 2021.

11. The circular of SEBI dated 11th February, 2021 has

provided a standard operating procedure which are 6

required to be adopted and exercised by stock

exchanges against listed companies for non-payment of

annual listing fees. The circular clearly states that the

stock exchanges are required to follow the procedure

as given in the circular and, accordingly, have directed

to defreeze all the demat accounts which have been

frozen so far.

12. In the light of the aforesaid facts the appeal is

allowed. The demat accounts frozen by the stock

exchange under the circular dated 11th June, 2019 are

now required to be defreezed immediately in view of

the circular dated 11th February, 2021. Liberty is given

to the stock exchange to proceed against the Company

and its promoters and promoters group in accordance

with the standard operating procedure as laid down in

circular dated 11th February, 2021.

13. This Tribunal while entertaining the appeal had

passed an interim order dated 24th December, 2019

directing the appellant to provide a bank guarantee of

Rs.15 lakhs pursuant to which the demat accounts

would be defereezed. It has been stated that a bank 7

guarantee of Rs.15 lakhs has been provided. Since the

appeal is being allowed we direct the respondent to

release the bank guarantee forthwith. The appeal is

allowed with no order as to costs.

14. The present matter was heard through video

conference due to Covid-19 pandemic. At this stage it

is not possible to sign a copy of this order nor a

certified copy of this order could be issued by the

registry. In these circumstances, this order will be

digitally signed by the Private Secretary on behalf of

the bench and all concerned parties are directed to act

on the digitally signed copy of this order. Parties will

act on production of a digitally signed copy sent by fax

and/or email.

Justice Tarun Agarwala Presiding Officer

Justice M.T. Joshi Judicial Member

RAJALA Digitally signed

06.4.2021 by

KSHMI NAIR RAJALAKSHMI H

Date: 2021.04.07 RHN H NAIR 10:58:58 +05'30'