JUDGMENT :

(Ravi Krishan Kapur, J.)

By consent of the parties both these applications were heard analogously.

CA/4/2021

1. This is an application filed by the Securities and Exchange Board of India (SEBI) seeking the following reliefs:-

(a) Leave of the Court may be granted that apart from the divestment process being adopted by the Trust and in case the Trust is unable to meet the MPS compliance, the Company/its Promoter(s) /Promoters Group/Directors may also be directed to meet the MPS requirements.

(b) To allow SEBI to take necessary action against the Company/its Promoter(s) /Promoters Group/Directors as per the provisions /methods available under Securities Laws in order to meet the MPS requirements.

(c) Ad-interim order in terms of prayers above.

(d) Pass such other order or orders and/or direction/directions as Your Lordship may deem fit and proper.

2. Briefly, by an order dated 17 April, 2013 a scheme of amalgamation was sanctioned by this Court whereby the demerged company Indian Power Corporation Limited (IPCL) was transferred to Power Trust (the Trust), an irrevocable investment Trust and the residual undertaking of the demerged company was merged with Dishergarh Power Supply Corporation Limited (DPSC), the resulting company. Prior to amalgamation, IPCL owned approximately 93% shares in DPSC which had subsequently been transferred to the Trust. Thereafter, under the scheme, the investment division of IPCL was transferred to DPSC.

3. It is alleged that, the scheme sanctioned by this Court (in particular clause 3.3.3 of the scheme), violates the mandatory stipulations that all listed companies must have at least 25% of its shares held by the public. This is also in violation of inter alia the Securities Contract Regulation Act, 1956 and the Securities Contract Regulation Rules, 1957. For convenience, clause 3.3.3 of the scheme provides as follows:

“As the Trustees will hold the Investment Division in an irrevocable trust and shall be managing the Investment Trust in an independent manner, the Trustees shall constitute members of ‘public’ as defined under the Securities Contracts (Regulation) Rules, 1957, in relation to any and all investments held by the Investment Trust.”

4. By an order dated 27 January, 2017, the Court had directed the Trust to cause a public auction for sale of 32,63,16,563 shares. Thus, the Trust was directed to offload part of its shareholding in the market so that there be compliance with the mandatory requirement of having 25% of its shareholding with the public. Thereafter, in a proceeding filed by the independent directors of DPSC before the Securities Appellate Tribunal being Appeal No. 275 of 2017, the Tribunal had directed the applicants to approach this Court for appropriate reliefs.

5. This application has been filed seeking modification of the order dated 27 January, 2013. It is alleged that the modification is required in view of the fact that, notwithstanding the order dated 27 January, 2017, the Trust has failed to offload the entire shares.

6. On behalf of the Trust it is contended that, despite efforts, the Trust has been unable to sell the shares for reasons beyond their control. Hence, the time to comply with the order dated 27 January 2017 be extended.

7. The amended Rule 19(2)(b) and the newly introduced 19(A) of the Securities Contracts (Regulations) Rules 1957 (SCRR) provide as follows:

Requirements with respect to the listing of securities on a recognized stock exchange.

19(2) ………….

(b) (i) At least twenty find per cent of each class or kind of equity shares or debentures convertible into equity shares issued by the company was offered and allotted to public in terms of an offer documents; or

(ii) At least ten per cent of each class or kind of equity shares or debentures convertible into equity shares issued by the company was offered and allotted to public in terms of an offer document if the post issue capital of the company calculated at offer price is more than four thousa