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TMI Blog2024 (5) TMI 798X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the Demat Accounts of the petitioners. 3. Learned counsel appearing for the petitioners takes the court through the provisions of Section 98 of the 2015 Regulations, Chapter V of SEBI (Delisting of Equity Shares) Regulations, 2021 (hereinafter referred to as the "2021 Regulations'') and Circular No. SEBI/HO/CFD/CMD/CIR/P/2020/12 dated January 22, 2020. 4. It is argued that the petitioner is a listed entity under Section 2(1)(p) of the 2015 Regulations. 5. Section 98 of the same provides the actions to be taken by the respective stock exchanges in the manner specified in circulars or guidelines issued by the Board if a listed entity of any other person thereof contravenes the provisions of the Regulations. Under Clause 1 (c), freezing of promoter/promoter group holding of designated securities, as may be applicable, in coordination with depositories, is also contemplated. 6. It is argued that a perusal of the said provisions and the listing agreement of the proforma respondent no. 5-Company dated February 19, 1968 will show that the designated securities of the company were 4300 ordinary shares. The Circular of 2020, issued in aid of the 2015 Regulations, lays down the action ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecember 1, 2023. 12. Despite such public notices, which were published on the official website of Respondent no. 1, neither the company nor its promoters/ directors took the requisite steps for regularizing the non-compliances. Thus, respondent no. 1 was constrained to issue the direction upon the depositories by the notice dated January 1, 2024 to freeze the Demat Accounts of the promoters/directors. 13. It is reiterated by respondent no. 1 that proceedings pertaining to delisting the equity shares of the company have not commenced and accordingly, no steps have been taken in terms of Regulation 34 of the 2021 Regulations, which relates to consequences of compulsory delisting. Such consequences are punitive in nature, whereby the promoters and/or the whole-time directors of the defaulting company can be debarred from accessing the security market and/or seeking listing of a equity shares and/or to act as intermediary in the security market for a period of ten years from the date of delisting. The said consequences are not mentioned in the notice dated January 1, 2024. 14. Respondent no. 1, it is argued, as a measure of protection to the investors and the public at large, is ves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andard Operating Procedure for suspension and revocation of trading of specified security. As a first resort in case of non-compliances, freezing of the entire shareholding of the promoters and promoter group is envisaged. 19. Under Clause 4 of the said Circular, the SEBI stipulates that in order to ensure effective enforcement of the Listing Regulations, the depositories, on receipt of intimation from the concerned recognized stock exchange, shall freeze or unfreeze, as the case may be, not only the entire shareholding of the promoters in such non-compliant listed entity but all other securities held in the Demat Account of the promoter(s) as well. Hence, the source of power of the respondent no. 1 to do so with regard to the Demat Accounts of petitioner no. 1, held jointly or otherwise, cannot be denied. 20. The argument of the petitioners that no panel has been formed under Section 32 of the 2021 Regulations is a non-issue, since admittedly the process of compulsory delisting has not yet commenced. Such stand of the respondent no. 1 is also vindicated by the fact that the consequences under Section 34 have not even been threatened against the petitioners. 21. Apart from Claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xure-I of the 2020 Circular having been given to the petitioners. However, the notices contemplated under Clause 5 of Annexure-I are intended to make the defaulting company and its promoters aware of the status of the company and the threatened action under the concerned Circulars. The first notice, even as per Clause 5, is to be issued to the non-compliant listed entity. Upon expiry of the said notice, however, notices are to be given "to the promoter(s)" to ensure compliance with the requirements. 28. Although all other compliances were done by the respondent no. 1, at the last stage prior to the freezing of the accounts of the petitioners, the CSE failed to comply with the stipulation in Clause 5 of Annexure-I of the 2020 Circular which mandates the Stock Exchange to issue notices to the promoter(s) of the non-complaint entities to ensure complaint with the requirements and pay fines within ten days from the date of the notice. 29. In the present case, petitioner no. 1 has subsequently issued e-mails to the respondent no. 1, showing his willingness to deposit the fines. Although no such intention appears from the conduct of the petitioners to comply with the other formalities, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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