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2015 (6) TMI 259 - HC - Companies LawDelisting of the equity shares - Regulation 5 of the SEBI (Prohibition of Fraudulent and Unfair Practice Relating to Securities Market) Regulations, 2003 - Held that - The allegation of the petitioners that the proposed delisting would cause heavy financial loss cannot be accepted for the reason that in the instant case, acquiring shares or divesting their holding from a company is a voluntary act which is carried out at the option of a shareholder. Neither Spice nor the seventh respondent, have not concededly, forced the petitioners to divest from the company. Spice in its letter dated 06.02.2015, has stated that the delisting and the consequent determination of the offer price, floor price and the final offer price would be in accordance with the extant SEBI regulations, i.e. through book building process and that the shareholders including the petitioners have a right to participate in the same (Regulation 14(1), SEBI (Delisting of Equity Shares) Regulations, 2009). Since the Petitioners have represented to the SEBI, which has not made any order in that regard, it would be inappropriate for this court to assume that the said body would not act, act improperly or act in a manner contrary to the Regulations. Any direction in exercise of judicial review at this stage would be based on the assumption of objective facts. All that this court can do is to require the SEBI to deal with the Petitioners‟ representation, in accordance with law within a reasonable time, having regard to the facts presented to it. It is open to the petitioners to seek appropriate remedies in accordance with law. - Decided against the appellant.
Issues:
1. Mandamus to SEBI for investigation into delisting of equity shares of a company. 2. Allegations of financial loss due to delisting and control of trusts by the promoter. 3. Compliance with SEBI regulations regarding delisting process and public shareholding. 4. Discretionary power of SEBI for investigation under Regulation 5. Issue 1: Mandamus to SEBI for investigation The petitioners sought a mandamus directing SEBI to investigate the proposed delisting of equity shares of a company from stock exchanges. The petitioners alleged inaction by SEBI despite representations and claimed potential financial loss due to the delisting. They argued that certain trusts, listed as public shareholders, were controlled by the promoter, potentially influencing the delisting decision. The petitioners also questioned the trading volume of shares and the interests of shareholders in the delisting process. Issue 2: Allegations of financial loss and trust control The petitioners alleged that the delisting would cause significant financial loss as they had acquired shares at higher prices. They contended that trusts holding shares were controlled by the promoter, violating SEBI regulations. The petitioners highlighted trading volume and liquidity concerns, arguing against the delisting proposal's alignment with shareholder interests. Issue 3: Compliance with SEBI regulations The company defended the delisting process, stating compliance with SEBI regulations and offering shareholders participation in determining the offer price. The company refuted allegations of trust control by the promoter, citing court-approved amalgamation and independent trust operations. The court analyzed the compliance with regulations regarding public shareholding and the delisting process, emphasizing shareholders' rights and the company's obligations under SEBI regulations. Issue 4: Discretionary power of SEBI for investigation The court examined the discretionary power of SEBI under Regulation 5 to order investigations based on reasonable grounds of violations. It noted that SEBI's decision to investigate was discretionary and not compulsive, based on satisfaction of grounds for violation. The court emphasized that SEBI's inaction did not imply impropriety and directed SEBI to address the petitioners' representation within a reasonable time. The court highlighted the limited scope of judicial review and advised the petitioners to seek appropriate remedies in accordance with the law. In conclusion, the court disposed of the writ petition, emphasizing SEBI's discretionary investigative powers and the need for compliance with SEBI regulations in the delisting process, while addressing concerns of financial loss and trust control raised by the petitioners.
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