2025 (2) TMI 524 - HC - SEBI

Steps to be taken for listing the shares on the nationwide stock exchange - de-recognition of MSE - whether the Company has to be granted a reasonable extension to get itself listed with the 5th respondent? - HELD THAT - It is trite even in cases governed by statutes where specified periods are fixed the courts should adopt a liberal and pragmatic approach in considering requests for extension of time or to condone the delay rather than a hyper-technical or pedantic approach. The underlying principle of the various circulars issued by SEBI to the ELCs is to get listed on a nationwide stock exchange or provide an exit option to the shareholders with the intention to protect the interests of the shareholders. There is no material on record that shows that the Company s shareholders have any grievance or have raised any complaint against the Company. True there has been some delay on the part of the Company for which they have given a reasonable explanation which has been accepted by SEBI and NSE atleast till 30.09.2023. After considering the facts the materials on record and the rival submissions made across the Bar Company can be granted one last opportunity to get listed with the fifth respondent. In the aforesaid circumstances notwithstanding Exts.P26 and P34 orders passed by SEBI in the exercise of the extra-ordinary jurisdiction of this Court under Article 226 of the Constitution of India extend the time period fixed in Ext.P22 by a further period of 90 days from the date of this judgment to enable the Company to get itself listed with the 5th respondent. If the Company fails to adhere to the above time frame Exts.P26 and P34 will stand confirmed.

Summary

The judgment addresses the legal issues surrounding the de-recognition of the Madras Stock Exchange (MSE) and the subsequent actions required by the Securities and Exchange Board of India (SEBI) for Exclusively Listed Companies (ELCs) like the petitioner company. The core issues considered include the legality of SEBI's circulars mandating ELCs to either get listed on a nationwide stock exchange or provide an exit option to shareholders, the reasonableness of the timelines imposed, and the appropriateness of the penal actions taken against the company and its promoters/directors.

The relevant legal framework includes SEBI's circulars, particularly the one dated 10.10.2016, which required ELCs to either raise capital for listing on nationwide stock exchanges or provide an exit option to shareholders. The court also referenced prior judgments, including a common judgment dated 12.06.2018, which directed SEBI to consider the company's representation and defer penal action.

The court's interpretation focused on whether the company had made adequate efforts to comply with SEBI's directives and whether the timelines imposed were reasonable. It was noted that the company had faced difficulties in raising the required capital and had sought to list its shares on the SME platform of the NSE or with the Metropolitan Stock Exchange.

Key evidence included the company's valuation report, which assessed the value of its shares, and the various communications and representations made by the company to SEBI and NSE. The court examined these documents to determine whether the company had acted in good faith and made serious efforts to comply with SEBI's requirements.

The court considered competing arguments from SEBI, which contended that the company had been dilatory in its compliance efforts and that further extensions would undermine the regulatory framework. The company argued that the de-recognition of MSE was not its fault and that SEBI's conditions were onerous and impractical.

In its conclusions, the court recognized the company's efforts to comply with SEBI's directives and noted the absence of any shareholder complaints against the company. It emphasized the need for a pragmatic approach in granting extensions, particularly when no statutory time frame was specified for completing the listing process.

Significant holdings of the court included the recognition that SEBI's circulars aimed to protect shareholder interests by requiring ELCs to either list on a nationwide stock exchange or provide an exit option. The court highlighted that the primary objective was to ensure compliance with these requirements in a manner that balanced regulatory goals with the practical realities faced by companies.

The court ultimately decided to grant the company a final extension of 90 days to complete the listing process with the Metropolitan Stock Exchange, noting that this would be the last opportunity for compliance. The judgment underscores the court's willingness to exercise its extraordinary jurisdiction to facilitate compliance while maintaining the integrity of SEBI's regulatory framework.