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TMI Blog2020 (11) TMI 1013X X X X Extracts X X X X X X X X Extracts X X X X ..... ial 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. - Misc. Application No. 437 of 2020 (Intervener Application) And Misc. Application No. 411 of 2020 (Urgency Application) And Appeal No. 413 of 2020 - - - Dated:- 9-11-2020 - Tarun Agarwala, D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end and buy-back of equity shares. It is alleged that these options were not tax efficient and consequently the promoter and the promoter group, namely, appellant nos. 2 and 3 showed their intention to buy the 49% shares of the minority shareholders in order to provide an exit opportunity to the minority shareholders of appellant no. 1 Company. It may be stated here that the promoter and promoter group of the appellant no. 1 Company hold 51% of the total shareholding of the Company and 49% of the shares are held by the public shareholders. 5. This intention of the promoters to buyout the shares of the minority shareholders was also indicated to the stock exchange on September 4, 2019 and subsequently the board of directors passed a resolution on September 10, 2019 indicating that the Company would be delisted and that 49% of the shares of the public would be bought by the promoters, namely, appellant nos. 2 and 3. The floor price of ₹ 63.77 paise was also determined in accordance with Regulation 15(2) of the SEBI (Delisting of Equity Shares) Regulations, 2009 ( Delisting Regulations for short). 6. Subsequently, a resolution of the board of directors was approved by 99. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under the Delisting Regulations does not commensurate with the funds available with the Company. Accordingly, SEBI by an order dated July 17, 2020 appointed Grant Thornton Bharat LLP (erstwhile Grant Thornton India LLP) as the forensic auditor for financial years ending March 31, 2019 and March 31, 2020. The appellants were accordingly directed to cooperate with the forensic auditor and supply the necessary information. 9. It transpires that the forensic auditor requested the appellant company to supply various documents some of which were supplied but majority of the documents were not supplied. It was contended that the business transfer agreement, share purchase agreement and other documents relating to the sale consideration were not readily available and the same was sought from the purchaser. Further, on account of Covid pandemic, the appellant was unable to provide the requisite documents to the forensic auditor. It was further contended that the appellant had not refused to cooperate with the forensic auditor but only sought time to locate and procure the documents so that the same could be provided to the forensic auditor. 10. It seems that on the basis of some re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmation / documents to the forensic auditor / SEBI within seven working days. The Audit Committee of PDL is directed to ensure that all date / information may be provided to the forensic auditor / SEBI within seven working days. 11. The appellant being aggrieved by the aforesaid ex-parte ad-interim directions has filed the present appeal which has been taken up today on an urgent application being made. Since direction no. 1 was not complied within the stipulated period as directed in the impugned order the respondent has attached the demat accounts and bank accounts of respondent nos. 2 and 3 in furtherance of direction no. 4 of the impugned order, for which purpose an additional affidavit was filed during the course of hearing of this appeal. 12. We have heard Shri Janak Dwarkadas, the learned senior counsel for appellants and Shri Rafique Dada, the learned senior counsel for the respondent including Shri P.N. Modi, the learned senior counsel appearing for interveners through video conference. 13. An intervention application has been filed on behalf of TVS Capital Funds Private Limited and Anr. seeking to intervene in the present proceedings and prayed that they should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nity, transaction cost and debt outstanding, the appellant had parked a sum of ₹ 854.41 crore in a fixed deposit which fact was made known to the stock exchanges and which is admitted by BSE in its report. It was submitted that the account number was mentioned in the report of BSE but the report observed that the name of the bank has not been mentioned and therefore the transaction appears to be suspicious. The contention that evasive replies were supplied was totally erroneous and that full particulars were provided. It was also submitted that on October 20, 2020 full particulars of an amount of ₹ 701.27 crore kept in the fixed deposits were duly supplied to the respondent which fact has not been considered while passing the impugned order. It was, thus, contended that the finding that the whereabouts of the sale consideration was not known or that there was a possibility for diversion of funds is patently erroneous and is based on surmises and conjectures. 18. The contention that requisite documents were not being supplied to the forensic auditor is again incorrect. It was urged that the appellants are always willing to cooperate with the forensic auditor and suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mination of the discovered price, the acquirer at their discretion may accept the discovered price or offer a higher price or make a counter offer through appellant no. 1 Company in accordance with the Delisting Regulations. On this basis, it was urged by the learned senior counsel that BSE in its report committed an error in holding that the delisting offer was only 310.81 crore. Further, the respondent have not considered the offer of the acquirers which an unconditional offer of ₹ 100 per share and thus total amount which would be distributed to the minority shareholders would work out to approximately ₹ 490 crore. 20. It was, thus, urged that if the distribution of the sale consideration is given to the minority shareholders it would be approximately ₹ 427 crore and the price offered under the Delisting Regulations would come to ₹ 492 crore by the acquirers. On this basis, it was urged that the direction of the WTM directing the appellants to deposit ₹ 1292 crore was based on non application of mind and was liable to be set aside. 21. It was also urged that the delisting application ought to have been decided at the earliest as it was in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from the sale proceeds such as payments made to advisors, provisions relating to indemnity obligations, tax liability and their appropriateness. Since the said information was not supplied to the forensic auditor the impugned order was passed. In the written submissions, the respondent contended that evasie replies were given by the appellant relating to the deposits in the escrow account/fixed deposits. It was further stated that after the passing of the impugned order there has been a diversion of funds to various entities and accounts. The respondent however submitted that there is approximately ₹ 1002 crore in fixed deposits with Yes Bank and IndusInd Bank. 25. Shri P.N. Modi, the learned senior counsel for the intervener, on the other hand, contended that the interveners hold 30.70% of the shareholding in the Company and even though they voted in favour of the delisting they are equally open to the distribution of the said sale proceeds by way of buy back or by way of distribution of dividend or a combination thereof. It was, thus, urged that it was necessary for the Company to park some amount in an escrow account in order to safeguard the interest of the minority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the discovered price and not on the basis of offer price. In any case, the appellants have offered to its shareholders ₹ 100/ per share which comes to ₹ 490/ crore which fact has not been taken into consideration by the respondents. Thus, in our view the direction to deposit a sum of ₹ 1292.46 crore is patently erroneous and cannot be sustained. 28. We are also of the opinion that the determination of price of the shares of the Company is the domain of the shareholders and SEBI has no say in it. Further, the submission of the forensic report also has nothing to do so far as the application of the appellant for delisting approval is concerned in as much as the person / entity who has to pay to the shareholders in the event the delisting application is allowed is the acquirer and, on the other hand, the distribution of the sale consideration has to be done by the Company. To that extent the learned senior counsel Shri Rafique Dada s contention on this aspect is correct and justified but, at the same time, the respondent cannot blow hot and cold and this can be seen from the fact that the respondent is not proceessing the delisting application and are awaitin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to decide the matter finally since no factual controversy is involved at this stage. 33. In view of the aforesaid, the impugned order cannot be sustained and is quashed. The appeal is allowed with the following directions:- (i) 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. (ii) The amount so deposited shall not be utilized by the appellants till the submission of the forensic report and the decision taken by the respondent on the distribution of the amount to the shareholders and/or the delisting application. (iii) The appellants shall provide all the necessary information and documents relating to the sale, etc and as asked by the forensic auditor in this regard which is depicted in the impugned order within ten days from today. SEBI will direct the forensic auditor to furnish the forensic report within four weeks from the date of the submission of the documents supplied by the appellants ascertaining the amount received from the sale and the amount distributable to the shareholders after meeting tax liability, indem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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