2015 (6) TMI 858 - AT - Companies Law

Suspension of trading - Non compliance with clause 41 of the Listing agreement and/or Regulation 55A of the Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996 - Serious financial difficulties - Held that - If due to severe financial crisis appellant is unable even to submit the unaudited financial statements for three quarters inspite of repeated penalties imposed against the appellant, then, it is all the more necessary to suspend the trading in the securities of the appellant immediately, because, any delay in suspending the trading in the securities of appellant may harm the interests of investors. Assuming that the financial crisis of the appellant is genuine, permitting the investors to trade in the securities of the appellant without disclosing the unaudited financial status of the appellant would be hazardous to the interests of the investors as well as the securities market and contrary to the policy decision of SEBI. - Decided against the appellant.

Summary

Issues:
1. Non-compliance with Clause 41 of the Listing Agreement leading to suspension of trading in securities.
2. Justifiability of the impugned communication by the National Stock Exchange.
3. Consideration of severe financial crisis as a reason for non-compliance.

Analysis:
1. The appellant challenged the communication from the National Stock Exchange (NSE) stating that trading in their securities would be suspended due to non-compliance with Clause 41 of the Listing Agreement. The appellant had not submitted unaudited financial statements for two consecutive quarters, leading to penalties. The appellant cited dire financial duress, litigations, internal reconstruction, and workforce attrition as reasons for the delay.

2. The appellant argued that the NSE's communication was unjust as it did not consider the financial difficulties highlighted by the appellant. Referring to a SEBI Circular, the appellant contended that the NSE should have provided reasons for rejecting their representation. However, the tribunal found no merit in these arguments, emphasizing the importance of protecting investors' interests and the securities market.

3. Despite the appellant's financial crisis, the tribunal upheld the NSE's decision to suspend trading in the securities. The tribunal reasoned that allowing trading without disclosing the unaudited financial status would pose risks to investors and the market. Therefore, the tribunal dismissed the appeal, highlighting the necessity of immediate suspension to prevent harm to investors' interests.