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2020 (11) TMI 1013 - AT - SEBIValidity of Ex-parte adinterim order dated October 20, 2020 passed by the Whole Time Member - attachment of demat accounts and bank accounts of respondent - Section 11 and 11B of the Securities and Exchange Board of India Act, 1992 - HELD THAT - The direction of the WTM to deposit a sum of ₹ 1292.46 crore is wholly arbitrary and has been passed without any application of mind. Admittedly, the sale consideration has to be distributed to the shareholders of the Company after meeting the tax liability, indemnity, transaction cost, debt outstanding etc. According to the Company which is recorded in the impugned order, the total amount comes to ₹ 1026.44 crore and the balance left for distribution of the shareholders is ₹ 854.40 crore which amount is also reflected in the annual report 2018-19 as well as in the report of BSE dated December 12, 2019 - the direction to deposit the entire sale consideration of ₹ 1292 is neither appropriate nor beneficial to the survival of the Company at this stage. The fact that 50% of the sale consideration is also required to be distributed to the promoters and promoters group has not been disputed by the respondent. The respondent knowing fully well that a substantial amount was parked in fixed deposits, the direction to the appellant to deposit ₹ 1292. 46 crore in an escrow account is neither just nor proper especially when there is no specific finding on diversion of funds. The written note submitted by SEBI further indicates that a sum of ₹ 1002 crore is lying in fixed deposits - the direction to deposit further amount would cripple the Company and bring it to down to its knees which is neither in the interest of the Company nor in the interest of its shareholders. The appellant no. 1 Company shall deposit a sum of ₹ 500 crore in a separate escrow account within 10 days from today, the details of which would be supplied to SEBI and to the stock exchanges - Appeal allowed.
Issues Involved:
1. Validity of SEBI's ex-parte ad-interim order directing the deposit of ?1292.46 Crore in an escrow account. 2. Adequacy of the information provided by the appellant to SEBI and the forensic auditor. 3. SEBI's handling of the delisting application and its relation to the forensic audit. 4. The role and interest of the intervener in the proceedings. Issue-wise Detailed Analysis: 1. Validity of SEBI's Ex-parte Ad-interim Order: The appellant challenged SEBI's ex-parte ad-interim order dated October 20, 2020, which directed the appellant company to deposit ?1292.46 Crore into a special escrow account. The Tribunal found this direction arbitrary and without application of mind. The order was based on the assumption that the entire sale consideration should be deposited, ignoring that 50% of the sale consideration would go to the promoters and promoter group. The Tribunal noted that SEBI's calculation based on the floor price of ?63.77 per share was erroneous and did not consider the actual discovered price in the delisting process, which could be higher. The Tribunal concluded that the direction to deposit ?1292.46 Crore was not justified and quashed the order. 2. Adequacy of Information Provided: SEBI contended that the appellant had not provided adequate information regarding the sale consideration and its distribution. The appellant argued that all necessary information was supplied, but some documents were delayed due to the pandemic and ongoing statutory audits. The Tribunal found that the appellant had parked ?854.41 Crore in fixed deposits and had provided this information to SEBI. The Tribunal directed the appellant to cooperate fully with the forensic auditor and supply all requisite documents within ten days. 3. SEBI's Handling of the Delisting Application: The Tribunal noted that SEBI had not processed the delisting application, waiting for the forensic audit report. The Tribunal emphasized that the delisting application and the forensic audit are separate issues. The delisting price is determined through a reverse book-building process, and SEBI should not interfere in the price determination. The Tribunal directed SEBI to process the delisting application simultaneously with the forensic audit and pass appropriate orders within six weeks. 4. Role and Interest of the Intervener: The intervener, holding 30.7% of the company's shares, sought to be made a respondent, arguing that their complaint led to the impugned order. The Tribunal ruled that the intervener was not a necessary party but allowed them to be heard. The Tribunal acknowledged the intervener's interest in the distribution of the sale proceeds and allowed their participation to the extent of being heard. Conclusion: The Tribunal quashed SEBI's order directing the deposit of ?1292.46 Crore and provided a detailed framework for resolving the issues. The appellant was directed to deposit ?500 Crore in an escrow account and fully cooperate with the forensic audit. SEBI was instructed to process the delisting application concurrently with the forensic audit. The Tribunal emphasized the need to protect the interests of all shareholders while ensuring the company's operational viability.
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