Jhs Svendgaard Laboratories Ltd. vs Sebi

JHS Svendgaard Laboratories Ltd. Trilokpur Road, Kheri (Kala Amb), Tehsil - Nahan, Distt. Sirmour, Himachal Pradesh - 173030, India. ..... Appellant

Versus

1.

National Stock Exchange of India Ltd.

Exchange Plaza, Bandra Kurla Complex, Bandra (E), Mumbai - 400 051.

2. Bombay Stock Exchange Ltd.

Floor 25, P J Towers, Dalal Street, Mumbai - 400 001.

3. Securities and Exchange Board of India SEBI Bhavan, Plot No. C-4A, G Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051. ......Respondents

Mr. Joby Mathew, Advocate with Mr. Deepak Dhane, Mr. Pratyush Ranjan, Advocates i/b Halai & Co. for the Appellant. Mr. Rashid Boatwalla, Advocate with Ms. Aditi Kamath, Advocate i/b Manilal Kher Ambalal & Co. for the Respondent No. 1. Mr. Ajay Khaire, Advocate i/b The Law Point for Respondent No. 2. Mr. Mihir Mody, Advocate with Mr. Rushin Kapadia, Advocate i/b K. Ashar & Co. for the Respondent No. 3.

CORAM : Justice J. P. Devadhar, Presiding Officer Jog Singh, Member A. S. Lamba, Member

Per : Justice J. P. Devadhar (Oral) 2

1. Appellant is aggrieved by the communication dated February 3,

2015 issued by the National Stock Exchange of India Ltd. (NSE for short)

wherein it is stated that the trading in securities of the appellant will be

suspended with effect from February 25, 2015 on account of non

compliance with Clause 41 of the Listing Agreement and / or Regulation

55A of the Securities and Exchange Board of India (Depositories and

Participants) Regulations, 1996 for two consecutive quarters i.e. June 2014

and September 2014. In the said communication, it is further stated that if

the appellant complies with the Clause 41 of the Listing Agreement

including payment of fines already imposed by February 19, 2015, the

trading in securities of the appellant will not be suspended. Admittedly, the

appellant has not complied with the requirements contemplated under

Clause 41 of the Listing Agreement till date.

2. Counsel for the appellant submitted that the delay in complying with

the requirements of Clause 41 of the Listing Agreement (i.e. submission of

unaudited financial statements for the first three quarters of FY 2014-15)

has been on account of 'persisting reasons being dire financial duress

pushing the company into debt trap and vicious standstill, sore litigations

initiated against the appellant company at various forums, internal

reconstruction process undertaken by the company to accrete (sic) funds

through the prospective investors and loss of huge amount of workforce

due to high attrition rate, which are beyond the control of the appellant

company and that the appellant company is proactively and aggressively

pursuing all the fronts to revitalize the company and make it walk out of the

vicious standstill and that there is no malafide intention on appellant's part

in doing so'.

3

3. It is not in dispute that for not submitting the unaudited financial

statements within the stipulated date, penalty as per SEBI Circular dated

September 30, 2013 has been imposed upon the appellant from time to

time. Inspite of imposing penalty from time to time, the appellant has

neither complied with Clause 41 of the Listing Agreement nor paid the

penalty. In these circumstances, no fault can be found with the NSE in

seeking to suspend the trading in the securities of the appellant.

4. Counsel for appellant submitted that the impugned communication

is bad in law because, the serious financial difficulties which were brought

to the notice of NSE for not complying with the Clause 41 of the Listing

Agreement has not been considered in the said communication. Counsel

for the appellant further relied upon para 6 of SEBI Circular dated

September 30, 2013 which reads thus :-

"Without prejudice to the provisions of the Securities Contracts (Regulation) Act, 1956 and Securities Contracts (Regulation) Rules, 1957, recognized stock exchanges may, having regard to the interests of investors and securities market, take appropriate action in line with the principles and procedures laid down in Annexure I and II and any deviation therefore should not dilute the spirit of the policy contained therein. Any necessary and reasonable deviation shall be on justifiable reasons to be recorded in writing.

5. Based on the above para, it is contended by the counsel for appellant

that the NSE is not justified in passing the impugned communication

without assigning any reason for rejecting the representation made by the

appellant.

6. We see no merit in the above contentions. If due to severe financial

crisis appellant is unable even to submit the unaudited financial statements

for three quarters inspite of repeated penalties imposed against the

appellant, then, it is all the more necessary to suspend the trading in the 4

securities of the appellant immediately, because, any delay in suspending

the trading in the securities of appellant may harm the interests of investors.

Assuming that the financial crisis of the appellant is genuine, permitting the

investors to trade in the securities of the appellant without disclosing the

unaudited financial status of the appellant would be hazardous to the

interests of the investors as well as the securities market and contrary to the

policy decision of SEBI.

7. In these circumstances, we see no merit in the present appeal and the

same is hereby dismissed with no order as to costs.

Sd/-

Justice J. P. Devadhar Presiding Officer

Sd/-

Jog Singh Member

Sd/-

A. S. Lamba Member 24.02.2015 Prepared & Compared by PTM