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TMI Blog2022 (9) TMI 1580X X X X Extracts X X X X X X X X Extracts X X X X ..... se has been categorically debarred for the reasons that it failed to comply with the mandatory direction issued by the SEBI in the circular dated 10.10.2016 and 01.08.2017 by which the Appellant was repeatedly cautioned that in case, one of the option is not exercised within the time line prescribed, the necessary action shall be taken as prescribed in clause 6 of the circular dated 10.10.2016. The argument of Counsel for the Appellant not impressed upon that the SEBI was required to follow the provisions of Section 11(4) of the Act before initiating the action in terms of circular dated 10.10.2016 and 01.08.2017 as the said action has been taken in terms of Section 11(1) of the Act. Reference could be had to be the decision of the Hon ble Supreme Court in the case of Sahara India Real Estate Corporation Limited Ors. [ 2012 (9) TMI 374 - SUPREME COURT] in which it was held that sub-section (2) is subservient to sub-section (1) of section 11. Therefore both sub-sections (2A) and (4) will inferentially be subservient to sub-section (1) of section 11 of the SEBI Act. Therefore, the obligation cast on SEBI, to protect the interest of investors in securities, to promote the development ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is ineligible to be a resolution applicant in view of Section 29A(f) of the Insolvency and Bankruptcy Code, 2016 (in short 'Code') has been allowed, I.A. No. 155 of 2021 filed by the Appellant 'Aggarsain Spinners Limited' to place additional documents to clarify the position of the statutory body i.e. Security Exchange Board of India (in short 'SEBI) has been dismissed and CA No. 287 of 2019, filed by the Appellant for accepting its resolution plan has been dismissed holding that the Appellant is ineligible in view of the Section 29-A(f) of the Code. 3. In brief, M/s Phoenix ARC Private Limited (Financial Creditor) filed an application under Section 7 of the Code before the Adjudicating Authority for initiation of Corporate Insolvency Resolution Process (in short 'CIRP) against M/s GPI Textiles Limited (Corporate Debtor). The Application was admitted by the Adjudicating Authority vide its order dated 06.07.2018 and appointed Jalesh Kumar Grover as an Interim Resolution Professional (in short 'IRP') vide its order dated 12.07.2018. Thereafter, with the majority decision of the Committee of Creditors (in short 'CoC') Jalesh Kumar Grover was confirmed as Resolution Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord by Ayat Processors in the matter of the Corporate Debtor. 7. An application bearing I.A. No. 155 of 2021 was filed by the Appellant to clarify the position of the SEBI in the matter. Another application bearing I.A. No. 348 of 2021 was filed by Respondent No. 1 for declaration that the Appellant was ineligible in view of Section 29-A(f) of the Code at the time of submission of resolution plan to the RP, at the time of completion of the said resolution plan by the CoC and had also filed a false affidavit of being Section 29-A compliant. 8. The Appellant is an Exclusively Listed Company (in short ELC) and its shares were listed on the stock exchanges of Jaipur and New Delhi. Consequent upon the closure of regional stock exchanges, the Appellant was moved to Dissemination Board (in short 'DB') of the Bombay Stock Exchange (in short 'BSE'). According to Respondent No. 1, SEBI had given two options to company, moved to DB to either give exit opinion option to the shareholders or to get the Company listed on a nationwide stock exchange. 9. The case set up by Respondent No. 1 against the Appellant is that the Appellant, an ELC was debarred by SEBI for accessing the security market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is presumed that the powers were delegated, the BSE could not have passed the order dated 28.03.2018, debarring the Appellant for a period of 10 years, in terms of Section 29-A(f), without following the mandatory procedure prescribed under Section 11(4) of the Act. Counsel for the Appellant has vehemently argued that the Adjudicating Authority has committed a patent error in declaring the Appellant as ineligible under Section 29-A (f) by holding that the SEBI has prohibited the Appellant for trading in security for accessing the security market and that the notice dated 28.03.2018 has been issued by the BSE as a delegatee of the SEBI. It is submitted that the power to restrain any person from accessing the security market was never delegated by the SEBI to the BSE as the said power is bestowed upon SEBI under Section 11(4)(b) of the Act. It is further submitted that the circular dated 10.10.2016 issued by the SEBI and actions contemplated under para 6 can only be recommended by the designated stock exchange (BSE) but it does not have the power to debar the entities. It is also submitted that Para 8 of the said circular provides for an advice to facilitate compliance. Counsel for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the Appellant is unnecessarily harping upon passing of an order by the SEBI with reasons and in writing for the purpose of debarment which was not required because SEBI has taken administrative action by issuance of circulars dated 10.10.2016 and 01.08.2017 on the basis of which BSE has passed on the notice dated 28.03.2018 which is an administrative act of the SEBI. 18. It is further submitted that during the pendency of these proceedings, the Appellant had filed a writ petition no. 14490 of 2020 before the Punjab and Haryana High Court in which it prayed for the issuance of a writ in the nature of certiorari for quashing the order dated 27.03.2018 by which five promoters/directors of the Appellant Company were debarred for a period of 10 years for non-compliance of the SEBI Circular dated 10.10.2016. However, the said writ petition was dismissed as withdrawn on 22.07.2022. 19. He has pointed out to three emails dated 23.06.2017, 22.08.2017 and 01.02.2018, which came to light from the record of the writ petition, in order to show that the Appellant was interacting with the SEBI or BSE and was found remiss in not fulfilling the conditions or submitting the plan wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity has allowed I.A. No. 342 of 2021 filed by the Resolution Professional (RP) (Sumat Gupta) by which he has sought a declaration that the Appellants are ineligible to submit the resolution plan because of Section 29(A)(f) of the Insolvency and Bankruptcy Code, 2016 (in short 'Code') and dismissed the application of the Appellants bearing I.A. No. 154 of 2022 to place additional documents on record to clarify the position of a statutory body i.e. SEBI and by way of separate order dated 24.05.2022 dismissed the application bearing I.A. No. 458 of 2020 filed by the RP, on behalf of the CoC of M/s Vallabh Textiles Ltd. (Corporate Debtor) for approval of the resolution plan of the present Appellants on the ground that the Appellants have been held ineligible in view of Section 29(A) (f) of the Code in I.A. No. 342 of 2021. 24. In brief, Punjab National Bank (Financial Creditor) filed an application under Section 7 of the Code to initiate the Corporate Insolvency Resolution Process (CIRP) against the M/s Vallabh Textiles Ltd. (Corporate Debtor). The said application was admitted on 12.04.2019 and Sumat Gupta was appointed as IRP. The IRP was confirmed as RP by the CoC in the meeting h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Code by the Respondents as it searched the portal of SEBI as well as other stock exchanges and found the name of the Respondents appearing on the website of the BSE as persons debarred from accessing the securities market for a period of 10 years. It has come on record that the RP received a memo dated 29.10.2020 from the State Bank of India by which he came to know about the disqualification of the Respondents who has never informed him and had rather filed a false affidavit of being Section 29(A) compliant. The Respondents have placed on record the status as updated on 16.02.2021 by SEBI that the order debarring the Respondents from accessing the securities market was revoked but according to the RP, the Respondents were not eligible to submit resolution plan and could not have participated in the CIRP at the time of their ineligibility and subsequent revocation of disqualification was inconsequential. The application bearing I.A. No. 342 of 2021 was allowed by the Adjudicating Authority, inter alia, on the ground that the circulars dated 10.10.2016 and 01.08.2017 of the SEBI laid down the conditions of choosing one of the two options out of which one was regarding raising the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Subsequently, SEBI vide circular dated April 17, 2015 allowed a period of eighteen months' time to ELCs on DB to obtain listing upon compliance with the listing requirements of the nation-wide stock exchanges. 4. SEBI has been receiving representations seeking clarifications on raising of further capital and the process of exit of ELCs from the DB. Therefore, SEBI, in the interest of the investors of such ELCs, clarifies as follows: a. The respective nationwide stock exchanges hosting the ELC on its DB would hereinafter be referred as 'designated stock exchange'. b. The ELCs on the DB would be required to exercise one of the 'two options as mentioned in Para 4.c or 4.d of the circular. c. Raising capital for listing on Nationwide Stock Exchanges. In order to facilitate listing on nationwide stock exchanges, the EL Cs on the DB shall be allowed to raise capital for meeting the listing requirements through preferential allotment route in terms of the provisions under the Issue of Capital and Disclosure Requirements Regulations, 2009 (ICDR). i. For the above purpose the procedures as specified under JCDR shall be followed to the extent possible. Towards this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mechanism as provided in this circular shall be liable for the following actions: • The company, its directors, its promoters and the companies which are promoted by any of them shall not directly or indirectly associate with the securities market or seek listing for any equity shares for a period of ten years from the exit from the DB. • Freezing of shares of the promoters, directors. • List of the directors, promoters etc. of all non-compliant companies as available from the details of the company with nationwide stock exchanges shall be disseminated on SEBI website and shall also be shared with other respective agencies. • Attachment of bank accounts/other assets of promoters/directors of the companies so as to compensate the investors. 7. The provisions of this Circular are applicable to the exclusively listed companies of all de-recognized/non-Operational stock exchanges which are exited/in the process of exit in terms of exit circular dated May 30, 2012. 8. The respective designated stock exchanges shall ensure that all exclusively listed companies on the DB be accordingly advised to facilitate compliance of the above provisions in a time boun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he escrow account shall not be released to the promoter unless all the payments made in respect of shares tendered for the aforesaid period of one year. viii. The promoter shall make payment of consideration within fifteen working days from the date completion of offer. ix. The promoter shall certify to the satisfaction of designated stock exchange that appropriate procedure has been followed for providing exit to shareholders of such companies. Subsequently, the designated stock exchanges upon satisfaction shall remove the company from the dissemination board. x. The exclusively listed companies which have 100% promoter holding shall be removed from the dissemination board on obtaining a compliance certification from any independent professional with regard to the holding of shares of these companies and submit to the designated stock exchanges. xi. The names of the companies providing exit opportunity to its shareholders and their promoters shall be displayed in a separate section on the website of the designated stock exchange." **************** 31. Notice Dated 01st August, 2017 "Securities and Exchange Board of India August 01, 2017 CIRCULAR SEBIIHO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the equity shares, held by the promoters or directors of non-compliant Exclusively one Companies till the promoters of such non-compliant Exclusive Listed Companies provide an exit option to the pub shareholders in compliance with SEBI circular dated October 10, 2016, as certified by the concerned Designated Stock Exchanges ; b. The non-compliant Exclusively Listed Companies, its directors, its promoters and the companies which are promoted by any of them shall not be eligible to access the securities market for the purposes of raising capital till the promoters of such noncompliant Exclusively Listed Companies provide an exit option to the public shareholders in compliance with SEBI circular dated October 10, 2016, as certified by the concerned Designated Stock Exchanges. c. The promoters or directors of non-compliant Exclusively Listed Companies shall not be eligible to remain or become director of any listed company till the promoters of such non-compliant Exclusively Listed Companies provide an exit option to the public shareholders in compliance with SEBI circular dated October 10, 2016, as certified by the concerned Designated Stock Exchanges. 4. For the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess the securities market for the purposes of raising capital till the promoters of such ELCs provide an exit option to the public shareholders in compliance with SEBI circular dated October 10, 2016 · 2. The promoters and directors of non-compliant ELCs shall not be eligible to remain or become director of any listed company till the promoters of such non-complaint ELCs provide exit option to public shareholders. In compliance with SEBI circular dated October 1 O, 2016 · In case Trading Members require any clarifications on the subject matter of this notice, they may please contact to the following: At the exchange: Ms. Siddhi Keluskar - Listing Dept. Tel No. 91-22-22725603 Mail: [email protected]@bseindia.com For, BSE Ltd Bhushan Mokashi Atul Dhotre Senior Manager Additional General Manager Wednesday, March 28, 2018 33. Section 11 of the SEBI Act is reproduced herein below:- "Functions of Board. 11. (1) Subject to the provisions of this Act, it shall be the duty of the Board to protect the interests of investors in securities and to promote the development of, and to regulate the securities market, by such measure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement or understanding with such authority with the prior approval of the Central Government; (j) performing such functions and exercising such powers under the provisions of the Securities Contracts (Regulation) Act, 1956 (42 of 1956), as may be delegated to it by the Central Government; (k) Levying fees or other charges for carrying out the purposes of this section; (l) conducting research for the above purposes; (la) calling from or furnishing to any such agencies, as may be specified by the Board, such information as may be considered necessary by it for the efficient discharge of its functions;] (m) performing such other functions as may be prescribed. [(2A) Without prejudice to the provisions contained in sub-section (2),the Board may take measures to undertake inspection of any book, or register, or other document or record of any listed public company or a public company (not being intermediaries referred to in section 12) which intends to get its securities listed on any recognised stock exchange where the Board has reasonable grounds to believe that such company has been indulging in insider trading or fraudulent and unfair trade practices relating to securities m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be allowed to be attached; (f) direct any intermediary or any person associated with the securities market in any manner not to dispose of or alienate an asset forming part of any transaction which is under investigation: Provided that the Board may, without prejudice to the provisions contained in sub-section (2) or sub-section (2A), take any of the measures specified in clause (d) or clause (e) or clause (f), in respect of any listed public company or a public company (not being intermediaries referred to in section 12) which intends to get its securities listed on any recognised stock exchange where the Board has reasonable grounds to believe that such company has been indulging in insider trading or fraudulent and unfair trade practices relating to securities market : Provided further that the Board shall, either before or after passing such orders, give an opportunity of hearing to such intermediaries or persons concerned.] [(5) The amount disgorged, pursuant to a direction issued, under section 11B of this Act or section 12A of the Securities Contracts (Regulation) Act, 1956 or section 19 of the Depositories Act, 1996, as the case may be, shall be credited to the Invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Listing Operations, BSE Limited, P.J. Towers, Dalal Street, Fort, Mumbai - 400 001. Date: Dear Sir, Sub: Application from the Director, or ELC informing BSE for exercising the option in compliance with SEBI circular SEBI/HO/MRD/DSA/CIR/P/2016/110 dated October 10, 2016 I, Ramesh Kumar, Director, an Indian Inhabitant, aged about 51 years residing at 731, HUDA Sector-11,Panipat (Haryana)PIN132103 with PAN number AFLPK2316K and DIN 01037508 in the capacity of Director hereby submit our plan of action to BSE as required by SEBI in its circular SEBI/HO/MRD/DSA/CIR/P/2016/110 dated October 10, 2016. We will get our company's equity shares listed on any stock exchange having nationwide trading in electronic form and follow prescribe procedure mentioned in the above referred SEBI circular. We undertake lo complete the process within the timelines as prescribed in SEBI Circular SEBI/HO/MRD/DSA/CIR/P/2016/110 dated October 10, 2016. The details of the company are as given below: Sr. No. Particulars Details to be filled in by the ELC 1. Name of the Exclusively Listed Company (ELC) Aggarsain Spinners Limited 2. Date of incorporation 05.11.1993 3. Place of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In view of the same, you are requested to complete the process as intimated to the exchange (action plan) as soon as possible to avoid the initiation of the action against the promoter/directors of the company as prescribed in aforesaid SEBI Circular. For further clarification related to the above, you may contact the following officials at BSE. At the Exchange At the Exchange Ms. Siddiqa Reoon Listing Dept. Tel No. 91-22-22728154 Mail [email protected] or [email protected] Ms. Siddhi Kaluskar Listing Dept. Tel No. 91-22-2272 5603 Mail [email protected] or [email protected] Regards Atul Dhotre Senior Manager Listing Operations (MF & Direct Listing) BSE Limited. P J Tower, Dalal Street, Mumbai - 400001, India Phone (Direct.) 022 22728934 Mobile: 9833722388 www bse.india.com World's Fastest Exchange with a Speed of 6 Microseconds 37. Email dated 01.02.2018: "Non Submission of documents pursuant to plan of action submitted by Exclusively Listed Company (ELCs) Siddiqa Reoon [email protected] Thu, Feb 1, 2018 at 7:44 PM To: Direct listing [email protected] Dear Sir/Madam, SEBI vide i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e clarification to raise the capital and process of exit from the DB. The ELCs hosted by nationwide stock exchange on its DB is referred to as Designated stock exchange and these ELCs were to exercise one of the two options as mentioned in Para 4.c or 4.d of the circular, 4.c deals with Raising capital for listing on Nationwide Stock Exchanges and 4.d, provides procedure to provide exit to investors. The action contemplated for non-compliance either of the two mentioned herein above is specified in Para 6 of the circular which says that "any promoter or director whose company is on the DB and has failed to demonstrate adequacy of efforts for providing exit to their shareholders in conformity with the exist mechanism as provided in this circular shall be liable for the following actions i.e. the company, its directors, its promoters and the companies which are promoted by any of them shall not directly or indirectly associate with the securities market or seek listing for any equity shares for a period of ten years from the exit from the DB." The circular dated 01.08.2017 issued by the SEBI provides that ELCs were required to furnish the plan of action by January 09, 2017 to the Des ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but it constrained to observe that it has been more than six months since they have received intimation of the plan of action from there side and they were yet to receive the supporting remaining documents with respect to completion/implementation of the plan of action. The Appellant was informed that action would be initiated against the promoters/directors of the company as prescribed by the SEBI in the circular dated 01.08.2017 if the remaining supporting documents are not received on or before 07.02.2018. It is argued by Counsel for Respondent that firstly the agitation of the Appellant is that it had no knowledge about the proceeding being carried out against the Appellant by the SEBI/BSE of debarment is incorrect and secondly the impugned notice was issued by the Respondent (BSE) on the basis of the circulars of the SEBI. It is, therefore, submitted that the action taken in this regard falls within the purview of Section 11(1) of the Act and does not attract the provisions of Section 11(4) of the Act as suggested by Counsel for the Appellant. 40. Moreover, the validity of the notice of the BSE cannot be determined in the proceedings before the Tribunal for which the appropri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies market "by such measures as it thinks fit". Furthermore, sub-section (2) of section 11 of the SEBI Act, after making a reference to the measures generally referred to in subsection (1) empowers/authorizes that SEBI "may provide for'' a series of measures, which are delineated in clauses (a) to (m) thereof (of sub-section (2) of section 11 of the SEBI Act). The use of the words "may provide for'' besides indicating the discretion vested in the SEBI, demonstrates that, the measures depicted in clauses (a) to (m) are illustrative and not exhaustive, more so, because subclause (2) of section 11 of the SEBI Act does not dilute the power vested in the SEBI under sub-section (1) thereof. While interpreting sub-section (1) of section 11 of the SEBI Act, it has already been concluded hereinabove, that the measures to be adopted by the SEBI in carrying out its obligations are couched in open-ended terms having no pre-arranged limits, to the discretion of the SEBI. Likewise, sub-sections (2A) and (4) of section 11 of the SEBI Act, commence with the words "without prejudice to the provisions contained in sub-section (2)". This establishes the l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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