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TMI Blog2025 (3) TMI 690X X X X Extracts X X X X X X X X Extracts X X X X ..... um dated 29 September 2020 which specifically deliberated upon the merits of providing an alternative mode of delisting and the safeguards to be built in when opting for this route. The Board memorandum specifically discussed three key safeguards for protecting the interest of public shareholders. viz a) regarding the valuation of shares being not less than 60-days volume weighted average price (VWAP) of the companies; b) the voting threshold being 66% of the public shareholders of the listed subsidiary in addition to the usual requirement of 75% amongst all shareholders of the listed subsidiary in terms of Section 230 of the Act; c) the shares of the holding company (in this case ICICI Bank) are frequently traded which ensures the shareholders have the ability to freely exit the holding company at any time by selling the shares in the stock market - The Appellants' claim reverse book building RBB would have guaranteed a better price is mere speculative as is held valuation is not an exact science and is subject to professional judgment and can vary from one valuer to another and as long as recognized methods are adhered to, valuation cannot be faulted as held in Indiabulls Real Es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were entitled to propose the Scheme in terms of Reg. 37. In Sahara India Real Estate Corporation Limited & Ors. v. Securities and Exchange Board of India, [2012 (9) TMI 559 - SUPREME COURT] the Hon'ble Supreme Court has held that on the subject of protecting the interests of investors, the SEBI Act, 1992 is a standalone legislation, and SEBI's powers thereunder are not fettered by any other law, including the Companies Act. Breach of legal provisions by ICICI Bank in the course of the outreach initiative - HELD THAT:- The Administrative Warning Letter dated 6 June 2024 does not in any manner suggest ICICI Bank has resorted to any illegal methods or has interfered with or attempted to influence the voting process or the free will of the shareholders of ICICI Securities. There is nothing in the administrative warning which can be said to be connected to the voting process or the outcome of the voting. Further SEBI has nowhere stated the voting would stand invalidated on account of the outreach initiative, nor has SEBI referred to any circumstance that would invalidate the votes cast by the shareholders of ICICI Securities. At best, the SEBI may have taken exception to the mode of ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valuation is a complex issue best left to experts, and the joint valuation report met regulatory requirements. iii) The relaxation granted by SEBI was within its regulatory powers, and the Court cannot sit in appeal over SEBI's decisions. iv) No evidence of undue influence found from ICICI Bank's outreach initiative, and SEBI's administrative warning did not suggest any legal breach. v) The disclosure of SEBI's relaxation was deemed sufficient, and the shareholders had all necessary information for informed voting. vi) The participation of ICICI group employees and mutual funds in voting was appropriate and had a negligible impact on the outcome. vii) The appellant's lack of entitlement to object under Section 230(4) was upheld, and the scheme's approval by the majority of shareholders was emphasized.
Appeal dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant against the scheme were dismissed. Besides these appeals we have also decided Company Appeals (AT) No.333/2024 and No. 334/2024 filed by the Quantum Mutual Fund and others, primarily against the acceptance of the scheme of arrangment by the Ld. NCLT. 2A. We have gone through the averments made in the appeals as also the arguments advanced by Ld. counsels. The crux of the contentions raised by the appellant in all these four appeals can be summed up as follow. a) the prejudice is caused to the public shareholders as the scheme takes away the right to reverse book building; b) there being an unfair valuation and swap ratio; c) the relaxation granted by SEBI being not valid; d) the outreach exercise by ICICI Bank and SEBI administrative warning shows undue influence caused by the company over its shareholders; e) non-disclosure of the relaxation granted by SEBI; f) the participation of employees and mutual funds of ICICI group in the voting as public shareholders was bad; Qua contention a) it is the Appellant's case the valuation is unfair and the reverse book building process (RBB) may have yielded a better price. This argument is in the teeth of the regulatory rational ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ghtful consideration introduced the alternate mechanism of delisting through a scheme of arrangement under Reg. 37. More so the Ld. NCLT also noted the argument on RBB is entirely speculative, since stock exchange trading platform is considered to be the best price discovery mechanism. Further, the Ld. NCLT per order dated 21.08.2024 observed the shareholders of ICICI Securities would also benefit indirectly by receiving shares of ICICI Bank and merger will lead to an increase in the intrinsic value of ICICI Bank, which would reflect in the traded price consequent upon implementation of Scheme. Thus it is entirely baseless to argue that any prejudice is being caused to the public shareholders. 5. Qua contention (b) we may note the joint valuation report has been prepared by 2 (two) independent and registered valuers who adopted a comprehensive methodology by applying a combination of internationally recognized and commonly used methods. The valuation was supported by fairness opinions issued by two SEBI registered merchant bankers. The valuation of ICICI Securities is in accordance with the minimum requirement prescribed under Reg. 37(2)(j) of the Delisting Regulations i.e., the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies. At best, the SEBI may have taken exception to the mode of carrying out a outreach and not the outreach per se nor even the objective of such outreach. 8. In Amir Chand Vs Smt Sucheta Kirplani, 1960 SCC OnLine Punjab it was held no amount of 'influence' can possibly have the impact of invalidating a vote so long as the free agency of the shareholder is not impaired. It has been held that mere suggestions, friendly influence, appeals or even solicitation do not amount to undue influence and any influence which exists from attachment or respect or which results from arguments or appeals to reason and judgment is not an undue influence. In any case, the fact the Appellant has himself voted against the Scheme shows the Appellant was in no manner influenced, let alone 'unduly influenced', by the outreach exercise. Lastly, SEBI has explicitly stated in its submissions it did not find any evidence of undue influence or solicitation or misleading of voters by ICICI Bank and thus the Appellant's contention that the administrative warnings indicate the shareholders were coerced is entirely baseless. 9. Qua contention (e) we may note the NOC by NSE and BSE reproduced SEBI's observations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on thereof is met. 11. Qua contention (f) we note only those funds of ICICI Prudential which held 21,675 shares as on the record date have cast their votes. This constitutes 0.0067% of the paid-up capital of ICICI Securities, and therefore, their participation had negligible impact on the overall voting. The definition of "public shareholding" under Rule 2(e) of the Securities Contract (Regulation) Rules, 1957, does not exclude employees holding ESOP shares, nor does Rule 2(d) classify them as promoters or part of the promoter group. Since no such exclusion exists, the argument that employee shareholders should not be considered "public shareholders" does not hold good. 12. To conclude, not only is the Appellant not entitled in terms of the proviso to Section 230(4) to object to the Scheme, but the Appellant has also failed to demonstrate any illegality in either the process followed for sanctioning of the Scheme or in the terms of the Scheme itself. The Impugned Order is a detailed, well-reasoned order which has effectively dealt with all the contentions raised by the Appellant whilst noting that the Appellant is not entitled to object to the Scheme. 13. Lastly we may note, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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