9911796707
TMI Blog2024 (5) TMI 798X X X X Extracts X X X X X X X X Extracts X X X X ..... nnexure-I specifically distinguishes between the first notice, which is to be given to the listed entity itself, and the second notice which is to be given not to the listed entity but the promoter of the non-compliant entity. The said requirement having not been satisfied by the CSE/respondent no. 1, the impugned act of freezing the Demat Accounts of the petitioners was unlawful and not sustainable in the eye of law. It cannot be denied that the stages prior to the same have been duly complied with by respondent no. 1. Hence, the laches on the part of respondent no. 1 can be rectified if a notice as contemplated in Clause 5 of Annexure I is issued prior to freezing the Demat Accounts of the petitioner. Accordingly is allowed on contest, thereby setting aside the Notice dated January 1, 2024, insofar as the petitioners are concerned and the e-mails dated January 3, 2024 and January 5, 2024 issued by the respondent no. 1 and quashing the freezing of the Demat Accounts of the petitioners. Nothing in this order, however, shall preclude respondent no. 1 from proceeding afresh with issuance of a notice to the petitioner no. 1 and the other promoters/promoter group of the proforma respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges 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 to be adopted in case of non-compliance with the Listing Regulations. Annexure-I thereof, at Clauses 5 and 6, mandates certain steps, including issuance of notice upon the non-compliant entity within thirty days of the due date of submission of information and, upon continuance of non-compliance, issuance of notice upon the promoter(s) seeking compliance within ten days thereof. Only upon expiry of the stipulated period, the depositories can be intimated to freeze the entire shareholding and Demat Accounts of the promoters. 7. No such notice, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 vested with ample powers to freeze the holding of the designated securities of the promoters/promoter group of any listed entity. 15. In terms of Regulation 98 (1) (d) of the 2015 Regulations, the SEBI is also empowered to take any other action for contravention of the provisions of the said Regulations. In exercise of such power, the SEBI had published the Circular dated January 22, 2020, annexed at page 97 of the affidavit-in-opposition, issuing directions upon all recognized stock exchanges and the depositories for taking appropriate steps due to complian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sted 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 Clauses 1 and 4 of the 2020 Circular, Annexure-I to the same, in Clauses 5 and 6 thereof, provides for issuance of notices to the non-compliant listed entities within 30 days from the due date of submission of the information and further notice to the promoters to issue compliance with the requirements. Thereafter, on expiry of the stipulated period indicated in the Notices, the recognized Stock Exchange shall forthwith intimate the depositories to freeze the entire shareholding as well as other securities held in Demat Accounts by the promoters of the defaulting entit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, which were amply clarified to the petitioners by the several e-mails, notice and publication made by the CSE, the fact remains that no separate notice was given to the petitioner no. 1/promoter before freezing the Demat Accounts where the petitioner no. 1 is a joint holder. 30. Clause 5 of Annexure-I specifically distinguishes between the first notice, which is to be given to the listed entity itself, and the second notice which is to be given not to the listed entity but the promoter of the non-compliant entity. The said requirement having not been satisfied by the CSE/re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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