Order in the matter of Delisting of Equity Shares of Aaradhana Realties Limited

UNDER SECTION 11(1) AND 11 B OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH REGULATION 25A OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (DELISTING OF EQUITY SHARES) REGULATIONS, 2009.

IN THE MATTER OF DELISTING OF EQUITY SHARES OF AARADHANA REALTIES LTD.

Background -

1. Aaradhana Realties Limited (“ARL” / the “Applicant” / the “Company”), (earlier known as Essar Investments Limited), is a company incorporated under the Companies Act, 1956 on December 10, 1976, having its registered office at Essar House, 11, K.K. Marg, Mahalaxmi, Mumbai - 400 034. The equity shares of the Applicant are listed on BSE Limited (“BSE”).

2. Securities and Exchange Board of India (“SEBI”) received an application dated March 06, 2018 (“Application”) from ARL seeking exemption / relaxation under Regulation 25A of the SEBI (Delisting of Equity Shares) Regulations, 2009 (“Delisting Regulations”). The Applicant, vide email dated November 22, 2018, further clarified that the relaxation is sought from the provisions of Regulation 6(b) of Delisting Regulations, i.e. from the requirement to give exit opportunity to its shareholders.

3. Gist of the submissions made by the Applicant vide the Application and the email dated November 22, 2018, is given below:

Order in the Matter of Delisting of Equity Shares of Aaradhana Realties Limited P age 1 o f 11 a. The equity shares of the Company were listed on BSE during the year 1976-77;

b. During the period 1988-1992, the promoters of the Company had acquired the entire shareholding in the Company. Since 1992, there is no public shareholding in the Company and there has been no trading in the shares of the Company.

c. Currently, Manju Ruia holds the entire listed capital of the Company.

d. Since promoters hold entire share capital in the Company, no offer, as required under the Delisting Regulations, could be made.

e. The Company’s case will not fall under the regulations of Chapter V of Delisting Regulations as the following criteria for compulsory delisting are not applicable in the extant case:

i. Tracing promoters is not applicable in the extant case.

ii. The non-disclosures by the Company under the listing agreement have no impact as there are no public shareholders.

iii. The Company has complied with all the statutory requirements under the Companies Act 1956 / 2013 and necessary filings were made with the Registrar of Companies from time to time.

f. The substance for being listed has ceased to exist for the Company much before the Delisting Regulations came into force and the Company cannot be delisted by pursuing either voluntary delisting or compulsory delisting.

Order in the Matter of Delisting of Equity Shares of Aaradhana Realties Limited P age 2 o f 11 g. The Company had previously submitted the required documents pertaining to delisting of equity shares of the Company to BSE on May 02, 2002 and May 08, 2002 and BSE has replied thereon vide letter dated August 27, 2002.

h. As per the Delisting Regulations, a company is required to provide an exit opportunity to all its public shareholders. However, the entire equity stake in the Company has already been acquired by the promoters during the period 1988-92, i.e., even before the notification of the Delisting Regulations.

i. The Company has not taken any steps to comply with Minimum Public Shareholding (MPS) requirements as the trading has been suspended by BSE.

4. In view of the above, the Company has sought relaxation from Regulation 6(b) of the Delisting Regulations.

5. The Applicant has also sought an opportunity for personal hearing, which was granted on July 22, 2020. Kirthivasan Rajagopalan, Chartered Accountant and authorised representative of the Company, attended the personal hearing through video conferencing. The authorised representative made oral submissions followed by written submissions vide letter dated July 24, 2020. The gist of the submissions so made is given below:

a. The promoters of the Company had acquired the entire public shareholding of the Company during the period 1988-1992.

b. The trading in the shares of the Company was suspended in the year 1999.

Order in the Matter of Delisting of Equity Shares of Aaradhana Realties Limited P age 3 o f 11 c. The Company, in its Extra Ordinary General Meeting (“EGM”) held on March 20, 1999, passed a resolution for delisting of shares of the Company, which was the only action possible for the Company. All other actions as per the Delisting Regulations, such as offer to public shareholders, determination of exit price, opening of escrow account etc. are infructuous in the instant case.

d. An application for delisting of shares of the Company was submitted to BSE vide letter dated April 26, 2002. The Company has been representing to BSE for delisting of its equity shares and various communications have been exchanged in this regard.

e. The Company vide letter dated May 07, 2002, intimated BSE regarding the amalgamation involving the Company pursuant to which promoter holding in the Company had become 100%.

f. Post 2002, there had been various communications exchanged between the Company and BSE, which did not reach any conclusion as Delisting Regulations were not in place till 2009.

g. An application dated June 08, 2016 was submitted to SEBI seeking delisting of the Company’s shares.

h. Subsequently, the Company filed an application under Regulation 25A of the Delisting Regulations, in proper format, seeking exemption for delisting of shares, on March 06, 2018.

i. The Company’s case did not fall within the provisions of Chapter V of the Delisting Regulations and the steps relating to delisting, as provided in the Regulations, were infructuous with respect to the Company as it did not have any outside shareholder.

Order in the Matter of Delisting of Equity Shares of Aaradhana Realties Limited P age 4 o f 11

Consideration

6. From the time of the Capital Issues (Control) Act, 1947, followed by the enactment of the Securities Contracts (Regulation) Act, 1956 (“SCRA”) in 1956 and the recognition of BSE by the Government in August 1957, the benefit that the companies derived out of listing its securities with a stock exchange was to command a higher standing among investors and a higher price for its securities. It is understood that prior to September 1993, Rule 19(2)(b) of the Securities Contract (Regulations) Rules, 1957, (“SCRR”) required a minimum public offer of 60% of the issued capital of a company for getting itself listed on a stock exchange. This minimum public float was only an initial listing condition and thereafter, the promoters could gradually buy it out from the public, subject to other compliances. At this point of time, it is relevant to state that the Securities and Exchange Board of India Act, 1992 (“SEBI Act”) was brought into force on January, 30, 1992. Between 1992 to 1994, vide various Government notifications, the powers of the Central Government under SCRA was delegated to SEBI, and the same included Section 21, which mandated that the listed securities should comply with the conditions of the listing agreement with the stock exchange. On September 20, 1993, the Rule 19(2)(b) of SCRR was amended to bring down the minimum public offer by a company for getting listed to 25% from the earlier norm of 60% or such other percentage as was admissible under the guidelines of the Government, with the object of encouraging the listing of a large number of companies to broaden the market. Again, it is to be noted that the requirement of minimum public float continued only as an initial listing condition and was subject to relaxations at the stock exchange level, with respect to Government companies having the prior approval of the Central Government till 1996.

Order in the Matter of Delisting of Equity Shares of Aaradhana Realties Limited P age 5 o f 11

7. For the first time, SEBI, vide its circular dated 2nd May 2001, directed stock exchanges to amend Clause 40A of the listing agreement to provide that the company shall maintain, on a continuous basis, the minimum level of non-promoter holding at the level of public shareholding as required at the time of listing. Thus, the requirement of maintaining continuous non-promoter shareholding at a particular level was brought into force for the first time only in 2001. Subsequently, SEBI by way of the SEBI (Delisting of Securities) Guidelines, 2003 (“Delisting Guidelines”) prescribed the guidelines for delisting of securities. These guidelines allowed for voluntary delisting by a company as well as compulsory delisting of a company by the stock exchanges. In the case of compulsory delisting, the stock exchange could compulsorily delist a company if the company had been suspended for a minimum period of six months for non-compliance with the Listing Agreement or by following the norms prescribed in Schedule III of the Delisting Guidelines. It is pertinent to note that under the Delisting Guidelines there were no penal consequences on the promoters/whole-time directors/ company, on the lines of Regulation 24 of the Delisting Regulations, 2009, when the stock exchange considered a company for compulsory delisting. Section 21A dealing with “Delisting of securities” was inserted in SCRA w.e.f. October 12, 2004. This section authorised a recognised stock exchange to delist the securities, in appropriate cases and also provided an appeal route to the Securities Appellate Tribunal for a listed company or aggrieved investor. The Delisting Regulations, 2009 brought into force w.e.f. June 10, 2009, contained provisions in Regulation 22 (Compulsory Delisting by a stock exchange) which read with Rule 21 of SCRR (Delisting of securities) empowering a stock exchange to compulsorily delist a listed company for the non-compliance of MPS requirement and visit the company, its promoters and whole time directors and the companies promoted by any of them with consequences such as inability to access the securities market or prohibition seeking

Order in the Matter of Delisting of Equity Shares of Aaradhana Realties Limited P age 6 o f 11 listing for a period of 10 years from the date of delisting. Subsequently, the Government of India, vide notifications dated June 4, 2010 and August 9, 2010 amended SCRR to insert Rule 19A which mandated that all listed companies ought to achieve and maintain MPS of 25% of each class or kind of equity shares or debentures convertible into equity shares issued by such companies. The companies whose public shareholding was less than 25% of each class or kind of equity shares or debentures convertible into equity shares issued by such companies were required to comply with this continuous MPS requirement within a period of three years from the date of amendment i.e. June 03, 2013. Further, Rule 19A(2) of SCRR provides for a 12 month period to a company to bring back its public shareholding to 25% if it falls below 25% from the date of such fall. Even the amendment of Clause 40A of the listing agreement whereby the listed companies were made to agree to comply with the continuous MPS mandate was brought into effect only in June 2010. (Incidentally, Regulation 7(4) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 and Regulation 38 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR”) also require listed companies to meet the same requirements).

8. With this historical background of the evolution of MPS mandate in India, the only question that arises for consideration is whether the Applicant Company, on the merits of the facts, need to be slotted in the category of companies for compulsory delisting by the exchange or not. In this connection, one relevant issue is whether a company which has outlived its purpose of listing on a stock exchange and had sought the permission of the Exchange to delist, prior to the enactment of the mandatory continuous MPS requirement, can be cast with compliance obligations emanating from the subsequent changes in law, as traced out above,(i.e. beginning from 2nd May, 2001 onwards, seeking

Order in the Matter of Delisting of Equity Shares of Aaradhana Realties Limited P age 7 o f 11 the amendment of Clause 40A of the listing agreement, till the LODR, 2015 along with all the related SEBI circulars issued in this respect, including the penal consequences contained in the 2009 Delisting Regulations).

9. I would now proceed to consider whether the Applicant Company merits a grant of permission for delisting or not, based on the submissions made and the documents made available to SEBI. As a Competent Authority, I have had occasions to deal with the cases of certain companies that could not comply with MPS norms or certain other conditions of the Delisting Regulations, and have granted relaxations to a few companies under the Delisting Regulations subject to certain conditions regarding the exit price, wide public dissemination of the delisting exercise, extended period to accept shares from the public etc. The facts and circumstances of each company is unique and it is often difficult for the exchanges as well as the Board to formulate uniform policy parameters that can be applied across the market adopting a standard tick box method to deal with such cases.

10. As regards the instant case, I note that the Applicant has been listed on BSE since 1976- 77 pursuant to an Initial Public Offer. Thereafter, the promoters and their associates went on acquiring shares from the open market and they had acquired almost all of the equity shares of the Company by the year 1988. Hon’ble Bombay High Court and Hon’ble Madras High Court approved a scheme of amalgamation of 10 companies with the Applicant in 2002, pursuant to which the shares held by these companies in the Applicant got cancelled and promoters’ shareholding became 100%.

11. As per the submissions made by the Company in the Application, (along with shareholding disclosures of 1992 and 1997), I note that there is no public shareholding

Order in the Matter of Delisting of Equity Shares of Aaradhana Realties Limited P age 8 o f 11 in the Company since 1992, and there has not been any trading in the shares of the Company and currently, Manju Ruia holds the entire listed capital of the Company.

12. I also note from the Company’s letter dated April 26, 2002, to BSE, that it had passed a shareholder’s resolution approving the delisting on March 20, 1999 and consequently, requested BSE to delist the Company from the stock exchange under compulsory delisting norms since the requirement of giving exit opportunity to public shareholders under the voluntary delisting mode cannot be complied due to absence of public shareholders in the Company. However, the resolution could not culminate into the delisting of the Company and the Company continued to be a listed company.

13. I also note from the Company’s letter dated June 08, 2016 addressed to SEBI, that the Company was also included in the list of 664 companies identified by BSE for compulsory delisting, vide its circular dated November 28, 2006. It was also stated therein that the Company had written to BSE in 2009 for delisting of its shares. I also note that the Company had written to SEBI seeking exemption / relaxation from the applicability of Delisting Regulations vide letter dated June 08, 2016. I note that the Company has simultaneously replied to BSE vide a letter dated June 08, 2016, inter-alia, stating that it had made an application to SEBI seeking relaxation under Delisting Regulations and requested BSE not to consider the Company for compulsory delisting. The initial application to SEBI was followed up by a formal exemption application dated March 06, 2018. I note that there have been multiple attempts by the Company to get delisted in the past, even before the notification of the Delisting Regulations and the introduction of the MPS Requirements.

Order in the Matter of Delisting of Equity Shares of Aaradhana Realties Limited P age 9 o f 11

14. The Delisting Regulations deal broadly with two categories of delisting – voluntary and compulsory. The thrust of the Regulations is the protection of the interest of the public investors of those companies where the promoters are seeking to delist. The protection is ensured by laying down procedures to arrive at a fair exit offer price, participation of public shareholders in the process of passing the resolution, keeping the offer open for stipulated period etc. In other words, since the scope of the Delisting Regulations is to take care of the public investors, in my opinion, its applicability to companies which reached 100% promoter shareholding prior to June, 2009, i.e. before the commencement of these Regulations, may not be sustainable in law.

15. I agree with the substantial submission of the Company that no purpose would be served to retain the Company as a listed entity, as it does not have any public shareholder. As discussed earlier in this order, this Company which had 100% promoter shareholding as early as in 1992, cannot be compelled to delist under the provisions of compulsory delisting contained in Chapter V of the Delisting Regulations. I am, therefore, inclined to relax the conditions that are standing in the way of voluntary delisting of the Applicant Company.

Order

16. For the aforesaid reasons, in the interest of the securities market and the investors and in exercise of powers under sections 11(1) and 11B of the SEBI Act,1992 read with Regulation 25A of the SEBI (Delisting of Equity Shares) Regulations, 2009, I hereby grant the Applicant Company i.e. Aaradhana Realties Limited, relaxation from the requirement of providing exit offer under Regulation 6(b) and incidental / consequential requirements thereof and to proceed with delisting subject to the following conditions:

Order in the Matter of Delisting of Equity Shares of Aaradhana Realties Limited Pa ge 10 o f 11 a. The Company shall issue a public announcement in at least one English national daily with wide circulation, one Hindi national daily with wide circulation and one regional language newspaper of the region where the concerned recognised stock exchange, i.e. BSE, is located, disclosing, inter-alia, that the Company is 100% promoter held and is seeking delisting from BSE, pursuant to this order, within a period of one month from this order.

b. Thereafter, the Company shall approach the Stock Exchange for guidance and the exchange shall do the needful to allow the Company to get delisted.

c. The exercise of delisting shall be completed within a period of 6 months from the date of this order.

d. The delisting will be subject to the restrictions contained in regulation 30(1) (a) of the Delisting Regulations.

e. Copy of this order shall also be served to BSE for information and necessary action.

f. The Application dated March 06, 2018 along with related correspondence stands disposed of accordingly.

G. MAHALINGAM PLACE: MUMBAI WHOLE TIME MEMBER DATE: September 08, 2020 SECURITIES AND EXCHANGE BOARD OF INDIA

Order in the Matter of Delisting of Equity Shares of Aaradhana Realties Limited Pa ge 11 o f 11