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TMI Blog2019 (4) TMI 1358X X X X Extracts X X X X X X X X Extracts X X X X ..... he first amendment that is by 3rd June, 2013. In order to achieve this target, the Company came out with a Scheme of Arrangement and Amalgamation under Sections 390, 391 and 394 of the Companies Act, 1956 by which the MPS requirements would be achieved. The Scheme was initially sanctioned but was subsequently modified on the intervention of SEBI by the Calcutta High Court. Transfer of shares by IPCL to the Trust was not sufficient compliance of the MPS requirement under Rule 19 and 19A of the SCRR Rules. The Calcutta High Court accordingly directed that in order to achieve the 25% minimum public shareholding in the amalgamated Company 32,63,16,563 shares were required to be sold by the Trust to the public through a public offer. We find from a perusal of the orders of the Calcutta High Court that a specific direction was issued to the Trust to divest its shares by making a public offer. No direction whatsoever was given to the Company or its Directors. Contention of the respondent that if the MPS requirement was not achieved through this public offer pursuant to the direction of the Calcutta High Court it was still open to the Company and its Directors to ensure compliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts stated in Appeal No.290 of 2017 are being taken into consideration. 2. DPSC Ltd. (hereinafter referred to as DPSC ) was incorporated as a Company on 2nd July, 1919 under the Indian Companies Act, 1913 and was primarily engaged in the business of generation, distribution and supply of electrical energy and matters incidental thereto. India Power Corporation Ltd. (hereinafter referred to as IPCL ) is an unlisted Company and is the sole promoter entity of DPSC holding 93% of the shareholding in DPSC. 3. The Securities Contracts (Regulation) Act, 1956 (SCRA) was enacted to prevent undesirable transactions in securities by regulating the business of dealings therein, and by providing for certain other matters connected therewith. Further, for carrying out the mandate of the SCRA, the Securities Contracts (Regulation) Rules, 1957 (hereinafter referred to as SCRR ) were framed by the Central Government. Section 21 of the SCRA mandates the compliance, by all listed companies, of the conditions of the listing agreement with the stock exchange. The SCRR inter-alia prescribes the requirements which are required to be satisfied by the companies for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of listing of the securities, in the manner specified by the Securities and Exchange Board of India. Continuous Listing Requirement. 19A. (1) Every listed company other than public sector company shall maintain public shareholding of at least twenty five per cent.: Provided that any listed company which has public shareholding below twenty five per cent, on the commencement of the Securities Contracts (Regulation) (Amendment) Rules, 2010, shall increase its public shareholding to at least twenty five per cent, within a period of three years from the date of such commencement, in the manner specified by the Securities and Exchange Board of India. Explanation: For the purposes of this sub-rule, a company whose securities has been listed pursuant to an offer and allotment made to public in terms of sub-clause (ii) of clause (b) of sub-rule (2) of rule 19, shall maintain minimum twenty five per cent, public shareholding from the date on which the public shareholding in the company reaches the level of twenty five percent in terms of said sub-clause. ( 2) Where the public sharehold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ket, bonus shares to public shareholders, etc. 8. In the light of the aforesaid amendments in the SCRR, the Company was required to offload its shareholdings to the public, i.e., IPCL was required to reduce its shareholding from 93% to below 75%. In order to achieve this target and comply with the amended Rules, a Scheme of Arrangement and Amalgamation under Section 390, 391 and 394 of the Companies Act, 1956 was issued and filed for sanction before the Calcutta High Court. The Scheme of Arrangement and Amalgamation provided that: ( a) the investment division of IPCL would be transferred to an Independent Trust with independent trustees ( Power Trust ); ( b) Inter alia 38,95,15,856 shares (40%) held by IPCL would be transferred to the Trust; ( c) After that, IPCL would be amalgamated into DPSC which would take over its business. IPCL would cease to exist and the balance shareholding of IPCL in DPSC would get cancelled; ( d) DPSC would issue 112,02,75,823 new shares to the shareholders of the IPCL, after which the holding of the said Trust would be only 24.69%; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reto SEBI decided that necessary clarification would be sought from the Calcutta High Court. Accordingly, SEBI filed an application before the Calcutta High Court on 12th December, 2013 contending that the shares held by the Trust cannot be construed as public shareholding and must be considered as promoter shareholding for the purpose of MPS requirement and accordingly sought modification of the order sanctioning the Scheme of Arrangement and Amalgamation. The Calcutta High Court disposed of the application of SEBI by an order dated 27th January, 2017 directing the Trust to sell 32,63,16,563 shares to the public by 30th April, 2017 in order to achieve the MPS requirement. For facility, the relevant portion of the order dated 27th January, 2017 passed by the Calcutta High Court is extracted hereunder: The trust will cite this order and make a public offer for sale of the said 32,63,16,563 shares. Advertisements in such regard will be published in such newspapers as may be suggested by SEBI within a week of the form of the advertisement being forwarded to the office of SEBI in Kolkata. Such form of the advertisement should be forwarded to the relevant offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant being aggrieved by the order of the WTM dated 25th July, 2017 has filed the present appeal. We have heard Mr. P.N. Modi, Senior Advocate assisted by Mr. Vinay Chauhan, Mr. Kunal Kataria and Mr. K.C. Jacob, Advocates for the appellant and Mr. J.P. Sen, Senior Advocate assisted by Mr. Karan Bhosale, Mr. Balagopal Menon and Mr. Pratik Ingle, Advocates for the respondent at length. Admittedly, after the amendment in SCRR Rules in 2010, promoters in a public listed Company cannot hold more than 75% shares of that Company. The requirement of law was for greater public participation in a listed Company and, therefore, atleast 25% of the shares in a listed Company was required to be held by the public. The amendment stipulated that those Companies with public shareholding of less than 25% was required to achieve the same within a period of 3 years from the date of commencement of the first amendment that is by 3rd June, 2013. In order to achieve this target, the Company came out with a Scheme of Arrangement and Amalgamation under Sections 390, 391 and 394 of the Companies Act, 1956 by which the MPS requirements would be achieved. The Scheme was initially sanctioned but was subsequentl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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