2019 (2) TMI 1685 - AT - SEBI

Removal from Dissemination Board of NSE - Illegal buy back of shares - HELD THAT - The appellant did not accept the letter of offer and chose not to sell the shares back to the Company. The buy-back offers were made in the year 2016-17 and after two years the appellant has now filed the present appeal contending that the buy-back offer made by the Company was wholly illegal in as much as the circular dated April 17, 2015 and October 10, 2016 issued by SEBI only permitted the promoters to buyback the shares and did not allow the Company to buy-back the shares. The contention of the learned counsel for the appellant is patently misconceived as we find that SEBI issued a circular dated July 25, 2017 permitting the Company to buyback the shares so as to provide an exit to the public shareholders. In view of the said circular we do not find any illegality being made in the buy-back of the shares by the Company. In any case, we do not find any reason to disturb the arrangement made two years ago at this belated stage. In the light of the aforesaid, we do not see any illegality in the order dated July 2, 2018 removing respondent no. 3 Company from the Dissemination Board.

Summary

Issues:
1. Delay in filing the appeal.
2. Removal of a company from the Dissemination Board by the National Stock Exchange.
3. Legality of the buy-back offer made by the company.
4. Interpretation of SEBI circulars regarding buy-back offers.
5. Applicability of SEBI circular dated July 25, 2017.
6. Justification of the order removing the company from the Dissemination Board.

Delay in filing the appeal:
The appellant filed an appeal against the order passed by the National Stock Exchange (NSE) allowing the removal of a company from the Dissemination Board. A delay of 5 days in filing the appeal was condoned based on the cause shown, and the application was allowed.

Removal of a company from the Dissemination Board:
The appellant, a shareholder of the company in question, contested the order removing the company from the Dissemination Board. The company's shares were placed on the Dissemination Board of NSE after the Madras Stock Exchange surrendered its recognition. The appellant argued that the buy-back offer made by the company was illegal, as SEBI circulars only permitted promoters, not the company, to buy back shares. However, SEBI circular dated July 25, 2017, allowed the company to buy back shares to provide an exit to public shareholders. The tribunal found no illegality in the removal of the company from the Dissemination Board.

Legality of the buy-back offer made by the company:
The appellant contended that the buy-back offer made by the company was illegal as per SEBI circulars. The tribunal noted that the circular dated July 25, 2017, permitted the company to buy back shares to facilitate an exit for public shareholders. Therefore, the tribunal found no illegality in the buy-back process.

Interpretation of SEBI circulars regarding buy-back offers:
The appellant argued that SEBI circulars only allowed promoters, not the company, to buy back shares. However, the tribunal highlighted that the circular dated July 25, 2017, authorized the company to conduct a buy-back to provide an exit opportunity to public shareholders, thus justifying the legality of the buy-back offer.

Applicability of SEBI circular dated July 25, 2017:
The tribunal emphasized the significance of the SEBI circular issued on July 25, 2017, which permitted the company to buy back shares to facilitate an exit for public shareholders. This circular played a crucial role in validating the legality of the buy-back offer made by the company.

Justification of the order removing the company from the Dissemination Board:
After considering the arguments presented, the tribunal concluded that there was no illegality in the order dated July 2, 2018, removing the company from the Dissemination Board. The appeal was dismissed, and no costs were awarded in the circumstances of the case.