Manu Rishi Guptha vs Icici Securities Limited

1. ICICI SECURITIES LIMITED Having its registered office at ICICI Venture House, Appasaheb Marathe Marg, Prabha Devi, Mumbai 400 025, Maharashtra. raju.nanwani(@jicicisecurities.com ..... Respondent No.1

2. ICICI BANK LIMITED Having its corporate office at ICICI Towers, Bandra-Kurla Complex, Mumbai 400 051, Maharashtra companysecretary@icicibank.com ..... Respondent No.2 Company Appeal (AT) No.395 of 2024 In the matter of: MANU RISHI GUPTHA Son of Sh. U.S. Gupta, residing at House No. 1139, Sector 21-B, Chandigarh, Sector 22, Chandigarh 160022. manu @mrgcapital.in ..... Appellant

Versus

1. ICICI BANK LIMITED Having its corporate office at ICICI Towers, Bandra-Kurla Complex, Mumbai 400 051, Maharashtra companysecretary@icicibank.com ..... Respondent No.2 2

2. ICICI SECURITIES LIMITED Having its registered office at ICICI Venture House, Appasaheb Marathe Marg, Prabha Devi, Mumbai 400 025, Maharashtra. raju.nanwani(@jicicisecurities.com ..... Respondent No.1

3. SECURITIES AND EXCHANGE BOARD OF INDIA SEBI Bhavan BKC, Plot No. C-4A, 'G' Block, Bandra Kurla Complex, Bandra (East), Mumbai 400 051, Maharashtra babitar@sebi.gov.in

Company Appeal (AT) No.393 of 2024

In the matter of: MANU RISHI GUPTHA Son of Sh. U.S. Gupta, residing at House No. 1139, Sector 21-B, Chandigarh, Sector 22, Chandigarh 160022. manu @mrgcapital.in ..... Appellant

Versus

1. ICICI BANK LIMITED Having its corporate office at ICICI Towers, Bandra-Kurla Complex, Mumbai 400 051, Maharashtra companysecretary@icicibank.com ..... Respondent No.1

2. ICICI SECURITIES LIMITED Having its registered office at ICICI Venture House, Appasaheb Marathe Marg, Prabha Devi, Mumbai 400 025, Maharashtra. raju.nanwani(@jicicisecurities.com ..... Respondent No.2 Company Appeal (AT) No.332/2024

MANU RISHI GUPTHA Son of Sh. U.S. Gupta, residing at House No. 1139, Sector 21-B, 3

Chandigarh, Sector 22, Chandigarh 160022. manu @mrgcapital.in ..... Appellant

Versus

1. ICICI SECURITIES LIMITED Having its registered office at ICICI Venture House, Appasaheb Marathe Marg, Prabha Devi, Mumbai 400 025, Maharashtra. raju.nanwani(@jicicisecurities.com ..... Respondent No.1

2. ICICI BANK LIMITED Having its corporate office at ICICI Towers, Bandra-Kurla Complex, Mumbai 400 051, Maharashtra companysecretary@icicibank.com ..... Respondent No.2

For Appellant : Mr. Kausik Chatterjee, Ms. Samridhi, Advocates. For Respondents : Mr. Arun Kathpalia, Sr. Advocate with Mr. Siddharth Ranade, Mr. Shankh Sengupta, Mr. Aubert Sebastian, Mr. P. Jain, Mr. Arnav Doshi, Mr. Ribhu Garg, Mr. Pushkar Deo, Ms. Ananya Bajpai, Advocates for R-1. Mr. Krishnendu Datta, Sr. Advocate with Mr. Siddharth Ranade, Mr. Shankh Sengupta, Mr. Aubert Sebastian, Mr. P. Jain, Mr. Arnav Doshi, Mr. Ribhu Garg, Mr. Pushkar Deo, Ms. Ananya Bajpai, Advocates for R-2

JUDGEMENT

JUSTICE YOGESH KHANNA, MEMBER (JUDICIAL)

These four appeals are filed by the appellant against the impugned

order dated 21st August, 2024, dated 8th October, 2024 and dated 9th October,

2024. The prayer made in all the four appeals are as under:

COMPANY APPEAL (AT) No.328/2024

a) Set aside the impugned judgment and order dated August 21, 2024 passed by the National Company Law Tribunal, Mumbai Bench I in C.P. (CAA)/ 71/ MB/ 2024 (In the matter of: ICICI Securities Limited), being Annexure 'A-1"

of the present Memorandum;

b) Such further order or orders be passed and/or direction or directions be given as this Hon'ble Appellate Tribunal may deem appropriate.

Company Appeal (AT) No.395 of 2024 4

a) Set aside the impugned judgment and order dated October 9, 2024 passed by the National Company Law Tribunal, Ahmedabad Bench No.1 in C.P. (CAA)/ 20/ AHM/ 2024 (In the matter of: ICICI Bank Limited), being Annexure 'A-1" of the present Memorandum;

b) Such further order or orders be passed and/or direction or directions be given as this Hon'ble Appellate Tribunal may deem appropriate. Company Appeal (AT) No.393 of 2024

a)Set aside the impugned judgment and order dated October 9, 2024 passed by the National Company Law Tribunal, Ahmedabad Bench No.1 in C.P. (CAA)/ 20/ AHM/ 2024 (In the matter of: ICICI Bank Limited), being Annexure 'A-1" of the present Memorandum of Appeal;

b)Such further order or orders be passed and/or direction or directions be given as this Hon'ble Appellate Tribunal may deem appropriate.

Company Appeal (AT) No.332/2024

a) Set aside the impugned judgment and order dated August 21, 2024 passed by the National Company Law Tribunal, Mumbai Bench I dismissing C.A. No. 190/2024 [Manu Rishi Guptha v. ICICI Securities Limited] in C.P. (CAA)/ 71/ MB/ 2024 (In the matter of: ICICI Securities Limited), being Annexure 'A-1' of the present Memorandum;

b) Such further order or orders be passed and/or direction or directions be given as this Hon'ble Appellate Tribunal may deem appropriate.

2. We have gone through the impugned orders wherein the objections filed

by the appellant against the scheme were dismissed. Besides these appeals

we have also decided Company Appeals (AT) No.333/2024 and No. 334/2024

filed by the Quantum Mutual Fund and others, primarily against the

acceptance of the scheme of arrangment by the Ld. NCLT.

2A. We have gone through the averments made in the appeals as also the

arguments advanced by Ld. counsels. The crux of the contentions raised by

the appellant in all these four appeals can be summed up as follow. a) the

prejudice is caused to the public shareholders as the scheme takes away the 5

right to reverse book building; b) there being an unfair valuation and swap ratio;

c) the relaxation granted by SEBI being not valid; d) the outreach exercise by

ICICI Bank and SEBI administrative warning shows undue influence caused

by the company over its shareholders; e) non-disclosure of the relaxation

granted by SEBI; f) the participation of employees and mutual funds of ICICI

group in the voting as public shareholders was bad;

Qua contention a) it is the Appellant's case the valuation is unfair and

the reverse book building process (RBB) may have yielded a better price. This

argument is in the teeth of the regulatory rationale behind introducing

Regulation 37 as part of the SEBI (Delisting of Equity Shares) Regulations

2021 (Delisting Regulations). Reg. 37 was introduced after detailed

deliberations as an alternate mode of delisting by way of an amendment. As

part of the process, SEBI had issued a board memorandum dated 29

September 2020 which specifically deliberated upon the merits of providing

an alternative mode of delisting and the safeguards to be built in when opting

for this route. The Board memorandum specifically discussed three key

safeguards for protecting the interest of public shareholders. viz a) regarding

the valuation of shares being not less than 60-days volume weighted average

price (VWAP) of the companies; b) the voting threshold being 66% of the public

shareholders of the listed subsidiary in addition to the usual requirement of

75% amongst all shareholders of the listed subsidiary in terms of Section 230

of the Act; c) the shares of the holding company (in this case ICICI Bank) are

frequently traded which ensures the shareholders have the ability to freely

exit the holding company at any time by selling the shares in the stock 6

market. Each of these safeguards have been built into Reg. 37(2) of the

Delisting Regulations, for protection of public shareholders, hence it cannot

be said the public shareholder would be prejudiced merely because the

delisting takes place through a scheme under Reg. 37 rather than through

RBB. In any event, shareholders retain the right to exit at any time prior to

delisting as shareholders of ICICI Securities Limited and also after the

delisting as shareholders of ICICI Bank Limited. The Appellants' claim reverse

book building RBB would have guaranteed a better price is mere speculative

as is held valuation is not an exact science and is subject to professional

judgment and can vary from one valuer to another and as long as recognized

methods are adhered to, valuation cannot be faulted as held in Indiabulls Real

Estate Limited v. Department of Income Tax, Company Appeal (AT) No. 120 of

2023.

4. Secondly, the contention of the Appellant that RBB mechanism requires

90% of public shareholders to tender their shares is completely baseless as

the said regulation only says the total shareholding of the acquirer should

become more than 90% for the delisting to take place. In any case, this

contention is irrelevant as SEBI has after thoughtful consideration introduced

the alternate mechanism of delisting through a scheme of arrangement under

Reg. 37. More so the Ld. NCLT also noted the argument on RBB is entirely

speculative, since stock exchange trading platform is considered to be the best

price discovery mechanism. Further, the Ld. NCLT per order dated

21.08.2024 observed the shareholders of ICICI Securities would also benefit

indirectly by receiving shares of ICICI Bank and merger will lead to an 7

increase in the intrinsic value of ICICI Bank, which would reflect in the traded

price consequent upon implementation of Scheme. Thus it is entirely baseless

to argue that any prejudice is being caused to the public shareholders.

5. Qua contention (b) we may note the joint valuation report has been

prepared by 2 (two) independent and registered valuers who adopted a

comprehensive methodology by applying a combination of internationally

recognized and commonly used methods. The valuation was supported by

fairness opinions issued by two SEBI registered merchant bankers. The

valuation of ICICI Securities is in accordance with the minimum requirement

prescribed under Reg. 37(2)(j) of the Delisting Regulations i.e., the per share

valuation of the listed subsidiary shall be at least equal to 60-day VWAP. It is

settled law the courts should not enquire into the issue of valuation of shares

as the same is a question of fact which is based on technical and complex

considerations and should be left to the experts in the field of accountancy as

is held in G.L. Sultania & Anr. v. Securities and Exchange Board of India

(2007) 5 SCC 133 and Miheer H. Mafatlal v. Mafatlal Industries Ltd. (1997) 1

SCC 579.

6. Qua contention (c) we may note the relaxation has been granted by

SEBI in exercise of its regulatory powers. Regulation 42 of the Delisting

Regulations specifically empowers SEBI to grant relaxation from strict

compliance of the Delisting Regulations. The fact of such relaxation being

granted is undisputed. It is beyond the scope of the present proceedings to sit

in appeal over the relaxation granted by SEBI, which is an expert regulatory

body. The Ld. NCLT has rightly noted this aspect and held that with the 8

relaxation in place, the Companies were entitled to propose the Scheme in

terms of Reg. 37. In Sahara India Real Estate Corporation Limited & Ors. v.

Securities and Exchange Board of India, (2013) 1 SCC 1 the Hon'ble Supreme

Court has held that on the subject of protecting the interests of investors, the

SEBI Act, 1992 is a standalone legislation, and SEBI's powers thereunder are

not fettered by any other law, including the Companies Act.

7. Qua contention (d) we may note the Administrative Warning Letter

dated 6 June 2024 does not refer to any legal provision that has been

breached by ICICI Bank in the course of the outreach initiative. The letter also

does not point out to any specific fiduciary or other legal duty owed by ICICI

Bank which would make the outreach initiative illegal or inconsistent with

such duty. The letter does not in any manner suggest ICICI Bank has resorted

to any illegal methods or has interfered with or attempted to influence the

voting process or the free will of the shareholders of ICICI Securities. There is

nothing in the administrative warning which can be said to be connected to

the voting process or the outcome of the voting. Further SEBI has nowhere

stated the voting would stand invalidated on account of the outreach

initiative, nor has SEBI referred to any circumstance that would invalidate

the votes cast by the shareholders of ICICI Securities. At best, the SEBI may

have taken exception to the mode of carrying out a outreach and not the

outreach per se nor even the objective of such outreach.

8. In Amir Chand Vs Smt Sucheta Kirplani, 1960 SCC OnLine Punjab it

was held no amount of 'influence' can possibly have the impact of invalidating

a vote so long as the free agency of the shareholder is not impaired. It has 9

been held that mere suggestions, friendly influence, appeals or even

solicitation do not amount to undue influence and any influence which exists

from attachment or respect or which results from arguments or appeals to

reason and judgment is not an undue influence. In any case, the fact the

Appellant has himself voted against the Scheme shows the Appellant was in

no manner influenced, let alone 'unduly influenced', by the outreach exercise.

Lastly, SEBI has explicitly stated in its submissions it did not find any

evidence of undue influence or solicitation or misleading of voters by ICICI

Bank and thus the Appellant's contention that the administrative warnings

indicate the shareholders were coerced is entirely baseless.

9. Qua contention (e) we may note the NOC by NSE and BSE reproduced

SEBI's observations which has two requirements in respect of the relaxation

i.e., (i) the grounds and the justification for the relaxation and (ii) details of

the relaxation. There is no direction for sharing a copy of the relaxation letter

dated 20 June 2023. Now the grounds and justification for the relaxation

including the details of such relaxation have been disclosed in the

Explanatory Statement to the notice of meeting sent to equity shareholders.

The disclosure made in the Explanatory Statement informs the shareholder

the Scheme in the present case will be in terms of the requirements stipulated

in Reg. 37(2) of the Delisting Regulations. In fact, the Explanatory Statement

provides a detailed chart of provisions of Reg. 37(2) showing how each of the

provisions thereof are met. Thus the shareholders had all information

necessary for voting on the Scheme. All requisite details required for the

shareholders to make an informed decision in respect of the Scheme were 10

available in the explanatory statement, the Scheme itself and the joint

valuation report, each of which were accessible to the public shareholders at

the time of voting.

10. Pertinently, in an appeal filed by one of the shareholders (Appeal No.

6001 of 2024), SEBI's appellate authority has also upheld the above position

and refused to provide a copy of the relaxation letter, relying on the decision

of the Hon'ble Supreme Court of India in Institute of Chartered Accountants

of India Vs. Shaunak H. Satya and Ors (2011) 8 SCC 781. In fact, the authority

directed the shareholder to refer to the Explanatory Statement as the same

was sufficient disclosure. Hence, SEBI itself considered the Relaxation Letter

to be a confidential document and its refusal to provide a copy of the

relaxation letter shows it did not consider disclosure of the relaxation letter

necessary. Moreso, the Ld. NCLT has also noted the grounds for seeking

relaxation have been duly provided for in the Explanatory Statement and

neither SEBI nor the Stock Exchanges had filed any representation alleging

non compliance with disclosure conditions stipulated in the NOC's, even

though ICICI Bank and ICICI Securities had duly filed their compliance

reports. Thus the requirement of Reg. 37(2) have been fully met with by the

Companies. In fact, the Explanatory Statement provides a detailed chart of

provisions of Reg. 37(2) showing how each of the provision thereof is met.

11. Qua contention (f) we note only those funds of ICICI Prudential which

held 21,675 shares as on the record date have cast their votes. This

constitutes 0.0067% of the paid-up capital of ICICI Securities, and therefore,

their participation had negligible impact on the overall voting. The definition 11

of "public shareholding" under Rule 2(e) of the Securities Contract

(Regulation) Rules, 1957, does not exclude employees holding ESOP shares,

nor does Rule 2(d) classify them as promoters or part of the promoter group.

Since no such exclusion exists, the argument that employee shareholders

should not be considered "public shareholders" does not hold good.

12. To conclude, not only is the Appellant not entitled in terms of the

proviso to Section 230(4) to object to the Scheme, but the Appellant has also

failed to demonstrate any illegality in either the process followed for

sanctioning of the Scheme or in the terms of the Scheme itself. The Impugned

Order is a detailed, well-reasoned order which has effectively dealt with all the

contentions raised by the Appellant whilst noting that the Appellant is not

entitled to object to the Scheme.

13. Lastly we may note, the Appellant does not meet the 10% threshold

under Section 230(4) of the Companies Act, 2013 (Act) to object to the Scheme.

As of 20 March 2024, Manu Rishi Gupta, the appellant, RG held 0.002% of

ICICI Securities' shares. Section 230(4) is a mandatory provision, introduced

pursuant to the recommendations contained in the 2005 Expert Report on

Company Law to prevent frivolous objections by shareholders with miniscule

shareholdings. It is settled law that 'what cannot be done directly cannot be

done indirectly'--since the Appellants have no right to object, they cannot

maintain the Appeals as "aggrieved persons," in terms of Section 421 of the

Act. In this regard, it may be noted that 93.82% of equity shareholders and

71.89% of public shareholders have approved the Scheme way back in March

2024. However, it is only at the instance of the Appellant, who holds a 12

miniscule 0.002% shares, the implementation of the Scheme is being delayed

and the majority shareholders are being deprived of the benefits of the

Scheme. This militates against the basic principle of shareholder's

democracy, which permeates through all corporate actions.

14. Further it is pertinent to point out despite his so-called objections to

the Scheme, on the ground it devalues the shares of ICICI Securities, the

Appellant has continued to indulge in buying and selling of shares of ICICI

Securities, including as recently as August 2024. That the Appellant has

purchased shares of ICICI Securities even after the Scheme was announced

and the swap ratio was in public domain it makes it obvious the Appellant is

not acting bona fide in raising objections to the Scheme but is indulging in

speculative litigation.

15. Thus the contentions raised does not inspire us to set aside a reasoned

order, hence all appeals are dismissed. Pending applications are also

disposed of. No order as to cost.

(Justice Yogesh Khanna) Member (Judicial)

(Mr. Ajai Das Mehrotra) Member (Technical) Dated:10-03-2025

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