Entegra Ltd. vs Sebi

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