Santowin Corporation Limited vs Sebi

Date of Decision: 3.10.2019

Appeal No.10 of 2019 Santowin Corporation Limited Shop No.5, Concord CHS Ltd., N.S. Road No.10, JVPD Scheme, Mumbai - 400 049. .... Appellant

Versus

BSE Limited Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai - 400001. ... Respondent

Ms. Prachi Pandya, Advocate i/b. Corporate Attorneys Appellant.

Mr. Tomu Francis, Advocate with Mr. Arka Saha, Advocate i/b. Khaitan & Co. for the Respondent.

CORAM: Justice Tarun Agarwala, Presiding Officer Dr. C.K.G. Nair, Member Justice M.T. Joshi, Judicial Member

Per : Justice Tarun Agarwala (Oral)

1.

The appellant has filed the present appeal against the

order dated 26th June, 2018 by which the Company has been

compulsorily delisted in terms of Rule 21 of the Securities

Contracts (Regulation) Rules, 1957 (hereinafter referred to as

'SCRR') read with Regulation 22(4) of the Securities and

Exchange Board of India (Delisting of Equity Shares)

Regulations, 2009 (hereinafter referred to as Delisting

Regulations).

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2. The facts leading to filing of the appeal is, that the

trading in the equity shares of the Company was suspended

with effect from 20th April, 2016. Since the trading of the

shares was not revoked inspite of granting opportunity, the

Respondent issued a show cause notice dated 1st June, 2018

to show cause as to why the equity shares of the Company

should not be compulsorily delisted from the platform of the

Exchange. Since no reply was received, the respondents

fixed 26th June, 2018 for hearing on which date the Managing

Director of the Company sought time to make a

representation as his Advocate was unable to attend the

hearing. Without granting time to the appellant to make

adequate representation, the impugned order dated 26th June,

2018 was passed compulsorily delisting the shares of the

Company from the platform of the Stock Exchange. The said

impugned order was served upon the appellant through a

covering letter dated 3rd July, 2018 which runs into eight

pages. Surprisingly, the appellant was served with another

order of delisting dated 26th June, 2018 running into eleven

pages through a covering letter dated 23rd July, 2018. The

appellants have annexed both the orders in the present

appeal.

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3. The learned counsel for the appellant contended that the

show cause notice was never served upon the appellant.

Further, the Managing Director of the Company appeared on

26th June, 2018 which was the date fixed for hearing on

which date the appellant sought time so that his Advocate

could represent the matter. It was contended that no time

was granted and the impugned order was passed on the same

date. It was contended that the order was passed in violation

of the principles of natural justice.

4. It was also contended that two impugned orders of the

same date has been passed, the first one runs into eight pages

and the second runs to eleven pages. It was contended that it

was not possible that the delisting committee passed two sets

of orders on the same date.

5. The respondent contended that adequate notice was

given and ample opportunity was given to the appellant to get

the suspension revoked. Since no reply was given to the

show cause notice the request for adjournment was refused

and, therefore, there was no violation of the principles of

natural justice. In so far as the two orders being passed on

the same date it was contended that an incorrect order dated

26th June, 2018 was sent by the covering letter dated 3 rd July, 4

2018 and when the error was realized the correct order dated

26th June, 2018 was sent on 23rd July, 2018.

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

find that the show cause notice was issued on 1st June, 2018.

The first date of hearing before the delisting committee was

fixed on 26th June, 2018. The request for adjournment was

only made for 26th June, 2018. The denial on the part of the

delisting committee in order to enable the appellant to be

represented by an Advocate is against the settled principles of

natural justice. Further, we find that it was the first date of

hearing and there is no allegation that undue adjournment

was sought by the appellant.

7. We also find that proviso to Section 21(A) of the SCRA

Act provides as under:

" Provided that the securities of a company shall not be delisted unless the company concerned has been given a reasonable opportunity of being heard."

8. From the aforesaid, it is clear that adequate and

reasonable opportunity of being heard was not provided to

the appellant. The impugned order is thus violative of the

principles of natural justice and cannot be sustained.

9. There is another aspect which is very serious and has

far reaching consequences which needs to be addressed, 5

namely, two orders of the same date has been passed by the

delisting committee. It was contended that the first order

dated 26thJune, 2018 that was forwarded to the appellant vide

covering letter dated 3rd July, 2018 was an erroneous order.

There is nothing in the reply which indicates that the first

order dated 26th June, 2018 that was forwarded to the

appellant vide covering letter dated 3rd July, 2018 was

recalled and a fresh order dated 26th June, 2018 was passed

on the same date. From a comparison of the two orders we

find that certain more facts have been inserted in the second

order of 26th June, 2018 primarily to cover the lacuna that

was glaring and apparent in the first order dated 26th June,

2018. We are of the opinion that once a signed order dated

26th June, 2018 was sent by the delisting committee a second

order of the same date could not have been passed without

recalling the earlier order and without issuing notice to the

parties which apparently in the instant case has not been

done. The passing of the second order dated 26 th June, 2018

incorporating further facts amounts to interpolation in the

order.

10. For the reasons stated aforesaid, the impugned order of

the delisting committee dated 26th June, 2018 as forwarded to 6

the appellant by the letter dated 3rd July, 2018 and 23rd July,

2018 are quashed on payment of cost of Rs. 1 lakh. The

matter is remitted to the delisting committee to decide the

matter afresh after granting an opportunity of hearing to the

appellant. The respondent will supply a copy of the show

cause notice to the appellant and fix a date of hearing. It is

made clear that the matter will not be adjourned at the

instance of the appellant on the date fixed by the delisting

committee. The amount of cost which we have imposed shall

not be paid by the respondent to the appellant directly but

would be adjusted, if any, in the ultimate order that would be

passed by the delisting committee.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C. K. G. Nair Member

Sd/-

Justice M.T. Joshi Judicial Member

3.10.2019 Prepared and compared by RHN