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2015 (4) TMI 685 - HC - Companies LawFailed to listing of shares in the stock exchanges - Breach of directions issued under scheme of arrangement approved under section 391(2) read with section 394 of the Companies Act, 1956 - Minority shareholder seeking exit option - Held that - In the case of Babu Singh 2007 (11) TMI 589 - SUPREME COURT , the Hon ble Apex Court has observed that even though the inherent powers of the Court are very wide their exercise must emanate logically from the underlying legal findings and the judicial result must be seen to be principled and supportable on those findings (underlining mine).The Hon ble Apex Court in the case of Karan Singh 2002 (3) TMI 910 - SUPREME COURT ,has held that the inherent powers of the Court cannot be invoked for reopening settled matters as the Court cannot act as an appellate or revising authority. As far as compulsory listing of the shares of the respondent company is concerned, in the context of the order dated 7.8.2008 passed by the Company Court, it is evident that the Court visualized the possibility of non-listing of the shares of the respondent company for the obvious reason that the jurisdiction of a company Court is limited under section 391(2) read with section 394 of the Act of 1956 to ensuring statutory compliance in the decision making process relating to a scheme ensuring that the scheme is not contrary to public interest. It does not extend to directing autonomous authorities such as SEBI and the Stock Exchanges to exercise their discretion in a particular way / manner. It has been held in the case of the Bombay Stock Exchange 2006 (10) TMI 244 - HIGH COURT OF MADRAS ,that both SEBI and Stock Exchanges have the exclusive jurisdiction to allow or disallow listing of a company s shares based on their lawful conclusions as to whether the statutory requisites mandated for listing have been satisfied/ fulfilled or not. A direction as to listing in the exercise of powers under section 391(2) and section 394 of the Act of 1956 or otherwise under Rule 9 of the Rules of 1959 as sought would be excess of the jurisdiction of the Company Court. Aside of the above, listing of the respondent company's shares on the Stock Exchange/s within a specified time cannot be to my mind held to the raison d etre of the sanctioned scheme dated 8.5.2006. And it has not been even so argued. A scheme sanctioned by the Company Court has its main object / purpose and basic structure (if one may borrow the expression from another context) on the one hand and ancillary / peripheral matters on the other in respect of which delayed implementation or even non-implementation would not make the sanctioned scheme incapable of working satisfactorily . The respondent company is however on record with the averment that the shares would be listed on the Stock Exchanges no sooner it would be appropriate and in the interest of all its shareholders with better business, profits, improved market condition and favourable macro-economic environment. The Hon ble Madras High Court in Pentamedia Graphics Limited 2006 (10) TMI 244 - HIGH COURT OF MADRAS has held that merely because the shares of the company are not listed as provided for in the sanctioned scheme, it would not render it bad or entail the violation of the Court s order. The enunciation of the Madras High Court is premised on the unquestionable legal position that sanctioning of a scheme under section 391(2) read with 394 of the Act of 1956 is a jurisdiction wholly distinct, separate and unrelated to the powers of the Stock Exchanges /SEBI to demand statutory compliances before granting listing permission. In the instant case the issue in the application under consideration is with regard to the applicants being allowed exit option with the price of the shares to be sold in the exercise of such exit option to be determined as per the claim of the applicants either at ₹ 220/-, 156/- or 49.31. There is evidently no remedy provided under the Act of 1956 for the relief claimed by the applicants by resort to a particular Court or Forum by invoking any particular machinery. In the circumstances I am of the considered opinion that the applicants would be well within their rights to approach the jurisdictional Civil Court for ventilating their grievance with regard to the share price for their exit, if so advised. In my considered opinion no direction for listing of shares of the Company with reference to Clause 3.7 of the sanctioned scheme dated 5.8.2006 within a given time frame can therefore be issued by this Court. - Decided against the appellants.
Issues Involved:
1. Listing of shares on stock exchanges. 2. Continuous open exit option for minority shareholders. 3. Appointment of a representative of minority shareholders on the Board of Directors. 4. Compensation for delay in listing shares. Issue-wise Detailed Analysis: 1. Listing of Shares on Stock Exchanges: The applicants requested that the respondent company be directed to list its shares on stock exchanges as per Clause 3.7 of the sanctioned Scheme of Arrangement dated 8.5.2006. The clause mandated listing on NSE and BSE. Despite efforts, the company failed to obtain necessary relaxations from SEBI under Rule 19(2)(b) of the Securities Contract (Regulations) Rules, 1957. The company's AGM on 12.12.2007 resolved to seek deletion of Clause 3.7 due to listing difficulties, but the Company Court on 7.8.2008 ordered the company to initiate the listing process within 18 months. The company faced severe financial setbacks, including the cancellation of its licenses by the Supreme Court, making listing unviable. The court concluded that listing shares within a specified time frame could not be mandated as it was beyond the jurisdiction of the Company Court and dependent on statutory authorities like SEBI and stock exchanges. 2. Continuous Open Exit Option for Minority Shareholders: The applicants sought a continuous open exit option at a fair value, arguing that the company offered an inadequate exit price of Rs. 10 per share. The Company Court's order dated 7.8.2008 provided an exit option if listing did not occur. The respondent company argued that the applicants, having subscribed to additional shares at Rs. 10 per share in March 2011, negated their exit option. The court found that determining the share price for the exit option was a substantive right issue, not a procedural one, and could not be addressed under Rule 9 of the Companies (Court) Rules, 1959. The applicants were advised to approach a jurisdictional Civil Court for grievances regarding share price for their exit. 3. Appointment of a Representative of Minority Shareholders on the Board of Directors: The applicants sought the appointment of a minority shareholder representative on the Board of Directors. The court held that this relief was beyond the scope of Rule 9 of the Companies (Court) Rules, 1959, and thus, not tenable. 4. Compensation for Delay in Listing Shares: The applicants sought compensation for the delay in listing shares, claiming it caused them financial loss. The court found no provision under the Companies Act or any other legislation for such compensation. The court emphasized that the applicants' acquisition of additional shares in March 2011 contradicted their claim of suffering losses due to delayed listing. Conclusion: The court dismissed the application, finding no merit in the claims. It advised the applicants to seek remedies available in law, such as approaching a Civil Court for issues related to share price for exit options. The court reiterated that the inherent powers under Rule 9 of the Companies (Court) Rules, 1959, could not be used to determine substantive rights or compel statutory authorities to act beyond their discretion.
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