2015 (3) TMI 686 - AT - Companies Law

Violation of clause 16 of the listing agreement - Time gap between the book closure and record date for interim dividend - Held that - On perusal of clause 16 of the listing agreement, it is seen that in a year there could be more than one book closure for the purpose of declaration of dividend or the rights issue or bonus shares, etc. If more than one book closure is postulated under clause 16, then obviously time gap of 30 days under clause 16 would be referrable to the time gap between two book closures. Fact that the word and is used between the words two book closures and record dates , it cannot be inferred that the time gap should be between a book closure and a record date. If the intention was to keep the time gap of 30 days between a book closure and a record date, then the word two would not have been used prior to the words book closures . In other words, the very fact that the word two is used prior to the words book closures is suggestive of the fact that the time gap is intended between two book closures and two record dates and not between a book closure and a record date. Since SEBI is permitted to pass order on merits on the interpretation of clause 16 of Listing Agreement, we see no reason to keep the appeal pending. SEBI is directed to pass order on merits after hearing the appellant.

Summary

Issues: Interpretation of clause 16 of the listing agreement regarding the time gap between book closure and record date for declaring interim dividend.

Analysis:
1. The appeal was filed due to the respondents' claim that the appellant violated clause 16 of the listing agreement by fixing the record date for interim dividend less than 30 days after the book closure. The appellant held its AGM on 12th September 2014 and declared interim dividend on the same day with a record date of 24th September 2014.

2. The key question was whether the time gap of 30 days specified in clause 16 applied between two book closures or between a book closure and a record date. SEBI contended that the time gap should be between a book closure and a record date, leading to the alleged violation by the appellant.

3. The tribunal analyzed the language of clause 16 and concluded that the 30-day time gap requirement pertained to two book closures and two record dates, not between a book closure and a record date. This interpretation was supported by the use of the word "two" before "book closures" in the clause.

4. Additionally, the tribunal noted that accepting SEBI's interpretation would conflict with the Companies Act, as it would delay dividend payments beyond the statutory limit, potentially harming investor interests. The tribunal emphasized that the appellant had already announced the dividend payment date as 29th September 2014, mitigating any perceived harm from the record date being 24th September 2014.

5. As a result, the tribunal directed both stock exchanges to announce the record date as 24th September 2014 to facilitate timely dividend payments by 29th September 2014. The tribunal clarified that SEBI could still pursue proceedings against the appellant for the interpretation of clause 16.

6. Considering a request from the Bombay Stock Exchange (BSE) due to system update constraints, the tribunal modified the record date to 25th September 2014. The appeal was disposed of with SEBI instructed to pass a final order after hearing the appellant, signaling the end of the immediate legal proceedings.