The SEBI possesses the authority to impose regulatory measures on companies under the Dissemination Board, and actions described in the relevant circular do not constitute penal provisions but rather serve to protect shareholder interests.

JUDGMENT

The writ petition is preferred challenging Ext.P4 Circular issued by Securities and Exchange Board of India (for short SEBI) and Exts.P11 to P14 proceedings of National Stock Exchange of India Ltd (for short NSE) pursuant to Ext.P4 Circular by the SEBI.

2. The petitioner company was incorporated under the provisions of the Travancore Companies Act in the year 1944, engaged in Tea and Rubber Plantation within the State of Kerala.

3. The petitioners were originally listed with the Madras Stock Exchange (for short MSE), which has become non-operational since the 1990s. The petitioner company's shares were not traded in the MSE after 1992. Thereafter, there was no listing agreement with the MSE. In such circumstances, on 06.09.2002, the Company passed a resolution to delist the Company from MSE, which was intimated through a letter dated 23.09.2002.

4. Thereafter, the SEBI took the initiative to de-recognise Stock Exchanges with an annual turnover of less than ₹100 crores. Accordingly, the MSE was de-recognised. This action was taken by SEBI on its own volition. SEBI had issued certain guidelines for allowing the Exclusive Listed Companies (ELCs) to get listed on a Nationwide Stock Exchange. The stipulation for getting listed on the NSE included a minimum paid-up capital of ₹3 crores. In light of the de-recognition of MSE, ELCs were given the option to get listed on the NSE or BSE (Bombay Stock Exchange), or to exit from the Dissemination Board(DB). However, due to insufficient share capital and the lack of trading activity on any stock exchange for over 20 years, the company had been incurring accumulated losses. Consequently, it was not possible for the company to issue the required share capital for the purpose of listing.

5. Moreover, the promoters' shareholding is already 80%. Therefore, it was not practical for small companies like the petitioner to raise additional capital or to demonstrate the ability to raise it. In this regard, SEBI offered a mechanism for companies that could not get listed on the NSE or BSE to move to the DB. This mechanism allows willing buyers and sellers the opportunity to disseminate their offers using the services of the brokers associated with the Stock Exchange hosting the DB. The DB is available with the NSE or BSE, and only companies listed on an existing stock exchange would be moved to it.

6. SEBI intended to give wide publicity about the DB, in which only the shareholders of the ELCs would be able to sell their shares through a Recognised Stock Exchange using recognised buyers and sellers. Although the company was moved to the DB effective from 01.12.2014, its shares were not traded. This was because the company had already submitted its resolution for de-listing from the MSE back in September 2002. Furthermore, the company was not given any notice of transfer by the MSE to the DB of the NSE. Since the MSE was de-recognised in the light of the Ext.P2 Circular, SEBI moved the remaining companies listed on the MSE to the DB of the NSE. The petitioner company was under the impression that they would automatically cease to be listed and would simply remain in the DB, where willing buyers and sellers would get an opportunity to disseminate their offers. The promoters of the company were not fully aware of the consequences of moving to the DB. They were under the impression that they would be able to trade their shares within the DB structure. This misunderstanding was compounded by the subsequent Circular dated 17.04.2015, issued by SEBI, which merely informed that the companies would continue to be placed on the DB.

7. It is further submitt