2015 (8) TMI 1410 - HC - Companies Law

Eligibility of sanctioned scheme - proof of direction for listing of the shares of the Company with reference to Clause 3.7 of the sanctioned scheme - Eligibility under the relevant Securities and Exchange Board of India Regulations - Held that - As gone through the detailed reasons given in the reply of the resultant Company, affirmed by the affidavit of Shri Vinay Kumar Dadheech, and do not find any lack of bonafides in making sincere efforts for compliance of Clause 3.7 of the Sanctioned Scheme. The permission from the SEBI has not come forward on account of unavoidable reasons, which cannot be attributed to the respondents. It was not their fault, in which the shares could not be listed on the Stock Exchanges. Also find that the appellant continuous to be shareholder of the resultant Company, and that he has also exercised option to subscribe to the rights shares, which goes to demonstrate that the appellant, as on date, did not have any intention to exercise the exit option, for which he had pressed the application before learned Company Judge, nor he has accepted an offer made by respondents to make a joint effort for a willing buyer on mutually acceptable price. We also agree with the submission of learned counsel appearing for the respondents that the application of the kind, filed by the appellant, was not maintainable under Rule 9 of the Rules of 1959. The inherent powers of the Company Courts do not extend the power to pass order, which may recall and frustrate the Scheme of Amalgamation, on any subsequent developments after the Resultant Company has been incorporated putting the clock back. No good ground to interfere. If the appellant wants to seek any relief, he may, if so advised, apply under Section 397/398 of the Act of 1956, subject to his competence, for appropriate orders.

Summary

Issues Involved:
1. Dismissal of the application under Order 9 of the Companies (Court) Rules, 1959.
2. The mandatory nature of Clause 3.7 of the sanctioned scheme.
3. Steps taken by the respondent company for listing its shares.
4. The maintainability of the application under Rule 9 of the Rules of 1959.
5. Potential remedies for the appellant.

Detailed Analysis:

1. Dismissal of the application under Order 9 of the Companies (Court) Rules, 1959:
The appellant sought an order directing the respondent company to list its shares on stock exchanges and provide a continuous open exit option for minority shareholders. The application was dismissed by the learned Company Judge on the grounds that no direction for listing the shares could be given with a time frame. The Judge relied on the judgment of the Madras High Court in Pentamedia Graphics Limited, which emphasized that the intricacies of listing fall within the domain of stock exchanges and SEBI, not the court.

2. The mandatory nature of Clause 3.7 of the sanctioned scheme:
Clause 3.7 of the sanctioned scheme required the listing of all equity shares of the respondent company on NSE and BSE. The appellant argued that the non-listing of shares frustrated the scheme's purpose. However, the court noted that the direction to list shares was not mandatory but rather to "initiate" the process of listing. The court referenced the Madras High Court decision, which clarified that the stock exchange has the exclusive authority to grant recognition for listing, and non-compliance with listing requirements does not violate the court's approval of the scheme.

3. Steps taken by the respondent company for listing its shares:
The respondent company detailed the steps taken to comply with the court's direction to initiate the listing process. These included multiple reviews by the Board of Directors, obtaining legal opinions, and appointing merchant bankers. However, several obstacles, such as market conditions, regulatory scrutiny, and the cancellation of telecom licenses by the Supreme Court, hindered the listing process. Despite these efforts, the company faced significant financial losses and regulatory challenges, making listing unviable.

4. The maintainability of the application under Rule 9 of the Rules of 1959:
The court agreed with the respondent's submission that the application was not maintainable under Rule 9 of the Rules of 1959. The inherent powers of the Company Courts do not extend to passing orders that would recall and frustrate the Scheme of Amalgamation after the Resultant Company has been incorporated.

5. Potential remedies for the appellant:
The court suggested that if the appellant seeks any relief, he may apply under Section 397/398 of the Companies Act, 1956, subject to his competence, for appropriate orders. The court dismissed the special appeal, finding no good ground to interfere with the learned Company Judge's decision.

In conclusion, the court found that the respondent company made sincere efforts to comply with Clause 3.7 of the sanctioned scheme, but unavoidable reasons prevented the listing of shares. The appellant's application was deemed not maintainable, and the court dismissed the special appeal, directing the appellant to seek alternative remedies if desired.