SEBI is empowered to protect investor interests through regulations, although the enforceability must consider the promoters' practical ability to comply.

JUDGMENT

This writ petition is filed by 17 exclusively listed Companies of de-recognised/non operational/exit stock exchanges which have been placed in the Dissemination Board challenging Exhibit P10 circular issued by the Securities and Exchange Board of India (SEBI). It is contended that the petitioners are mostly plantation Companies formed as Joint Stock Companies which were incorporated in some cases as early as in the year 1919 with a paid up share capital of Rs.50 lakhs or less. It is stated that the Companies were listed with the erstwhile Madras Stock Exchange Limited. The SEBI had taken steps for de-recognising stock exchanges with a turn over of less than Rs.1,000 crores by Exhibit P2 circular. The exclusively listed Companies were enabled to get listed in nationwide stock exchanges where the stipulation was that they should have paid up capital of at least Rs.3 crores. Since the petitioner Companies could not raise such share capital, they were moved to the Dissemination Board of the Stock Exchange by virtue of Exhibit P4 circular. The petitioners were WP(C).336/17 2 required to pay the listing fee and they have paid the same. It is stated that by Exhibit P10 circular, the SEBI has provided that the Exclusively Listed Companies (ELCs) which were currently on the Dissemination Board will be allowed to raise capital for meeting the listing requirements through preferential allotment rule in consonance with the SEBI regulations. It is stated that the ELCs which failed to list on nationwide stock exchanges shall provide exit to its investors as per paragraph 4.d of the circular. Paragraph 4.d provides the procedure to provide exit to investors, which reads as follows:

“4.d. Procedure to provide exit to investors:

In order to protect the interest of all shareholders of such ELCs, an exit mechanism to investors of such ELCs shall be as prescribed in Annexure-A to this circular. Accordingly, all ELCs shall be required to ensure compliance with the procedure for exit. The oversight and monitoring of such exit mechanism shall be carried out by the designated stock exchange.

I. Designated stock exchanges shall further ensure that the promoters have made adequate efforts in terms of the above provisions for providing exit to their shareholders before removing ELCs from the DB.

ii. The designated stock exchange shall display the list of companies willing to provide exit WP(C).336/17 3 to their investors on their website on a monthly basis.”

2. The ELCs were directed to indicate their intention to comply with listing or to provide exit and submit their plan of action to designated stock exchanges within three months. Paragraph 6 of Exhibit P10 circular provides for action against Companies remaining on the Dissemination Board. Paragraph

6 reads as follows:

“6. Action against companies remaining on the DB a. Any promoter or director whose company is on the DB and has failed to demonstrate adequacy of efforts for providing exit to their sharehiolders in conformity with the exit mechanism as provided in this circular shall be liable for the following actions:

The company, its directors, its promoters and the companies which are promoted by any of them shall not directly or indirectly associate with the securities market or seek listing for any equity shares for a period of ten years from the exit from the DB.

Freezing of shares of the promoters/directors.

List of the directors, promoters etc. of all non- compliant companies as available from the details of the company with nationwide stock exchanges shall be disseminated on SEBI website and shall also be shared with other respective agencies.

Attachment of bank accounts/other assets of promoters/directors of the companies so as to compensate the investors.”

WP(C).336/17 4

3. Annexures A-ii to A-x provide for a public announcement by the promoter of the Company with regard to the investor exit option. The promoter was required to open an escrow account in favour of the independent valuer/designa