Back
2025 Supreme(Online)(SEBI) 25
SECURITIES AND EXCHANGE BOARD OF INDIA
D K SINGH, VENKATESH NAIK T, JJ
BSE LIMITED – Appellant
Versus
KHODAY INDIA LIMITED – Respondent
ORIGINAL SIDE APPEAL NO.3 OF 2020 | ORIGINAL SIDE APPEAL NO.28 OF 2015
Important Points
Subject
Company Law - Share Capital Reduction and Delisting
Act Referred
Companies Court Rules, 1969: R.6, R.9
Karnataka High Court Act: S.4
Securities Contracts (Regulation) Act, 1956: S.21
Securities Contracts (Regulation) Rules, 1957: R.19A, R.19(2)(b), R.10
SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015: Reg.38
SEBI (Delisting of Equity Shares) Regulations, 2009: Reg.8(1B), Reg.14(1), Reg.15(1)
Headnote
(B) Securities Law - Scope of Company Court jurisdiction - Regulatory authority not necessary party in sanction proceedings under Sections 100-104 - Non-compliance with minimum public shareholding or delisting norms does not invalidate court-sanctioned capital reduction - Parallel regulatory actions permissible without prejudice to scheme implementation. (Paras 34, 37)
Facts of the case:
Listed company failed to maintain 25% minimum public shareholding, pursued capital reduction scheme for delisting bypassing book-building process, obtained court sanction, faced regulatory restrictions, sought directions for record date confirmation post-sanction, stock exchange refused citing instructions, Company Court directed compliance, appeals filed by stock exchange and regulator.
Findings of Court:
Appeals dismissed; directions to confirm record date upheld; company must comply with regulatory requirements including Rule 19A; no adjudication on merits pending Supreme Court proceedings.
Issues: Whether Company Court can direct record date confirmation despite regulatory non-compliance; independence of capital reduction proceedings from delisting regulations; locus of regulator in scheme sanction.
Ratio Decidendi: Capital reduction under Companies Act is domestic affair approved by majority, distinct from securities regulations; court sanction does not shield from regulatory enforcement for minimum public shareholding violations; stock exchange bound to implement court directions absent perversity.
Result: Appeals dismissed.
For the Appellants/Petitioners: SRI M.G. NANJAPPA, FOR SRI N.K. DILIP
SRI RVS NAIK, FOR SRI NITIN PRASAD, SRI VIDUR NAIR
For the Respondents: DR. ADITHYA SONDHI, FOR SRI KARAN JOSEPH, DUSHYANTH NARAYANAN
| Table of Content |
|---|
| 1. appeals against company judge orders on delisting and record date. (Para 1 , 2 , 3 , 4) |
| 2. non-compliance with mps and delisting regulations prejudices public shareholders. (Para 5 , 6 , 7 , 8 , 9 , 10) |
| 3. sebi's challenges to capital reduction scheme and mps violations. (Para 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18) |
| 4. appellants argue scheme circumvents delisting regulations. (Para 19 , 20 , 21 , 22 , 23 , 24 , 25) |
| 5. respondent defends sanctioned capital reduction and record date. (Para 26 , 27 , 28 , 29) |
| 6. mps requirements under scrr rules 19a ensure public shareholding. (Para 30 , 31 , 32 , 33 , 34 , 35) |
| 7. company proceedings distinct from sebi regulatory actions. (Para 36 , 37 , 38 , 39) |
CAV JUDGMENT
(PER: HON'BLE MR. JUSTICE VENKATESH NAIK T)
OSA No.3/2020 is filed by the appellant/BSE Limited (Bombay Stock Exchange Limited) under Section 483 of the Companies Act, 1956 r/w Rules 6 and 9 of the Companies Court Rules, 1969 read with Section 4 of the Karnataka High Court Act to set-aside the order dated 07.02.2020 passed by the learned Company Judge in C.A.No.289/2016 in CoP.No.132/2014, whereas, OSA No.28/2015 is filed by the Security Exchange Board of India('SEBI' for short) to set- aside the order dated 21.09.2015 passed in C.A.No.1415/2014, C.A.No.313/2015, C.A.No.1648/2014, C.A.No.1778/2014 and C.A.No.1416/2014 in CoP No.132/2014.
2. The brief facts of the appellant's case in OSA No.3/2020 are as under:-
The appellant/BSE is a recognized stock exchange as defined under the Securities Contracts (Regulation) Act, 1956 (for short 'SERA'). The respondent/Khoday India Limited is a company incorporated under the Companies Act, 1956 and is engaged in the business of manufacture and sale of Indian Manufactured Liquor. The respondent's authorized share capital is Rs.45,00,00,000/- divided into 4,50,00,000 equity shares of Rs.10/-each. The paid-up capital of the Company is Rs.37,59,12,370/- divided into 3,75,91,237/- equity shares of Rs.10/- each which is fully paid up. The respondent being a listed company was mandated to maintain minimum Public Shareholding(MPS) (atleast 25%) under applicable provisions of law on continuous basis, till the securities are listed with the respondent. MPS is regulated under Rule 19A of the Securities Contracts(Regulation) Rules, 1957 (for short 'SCRR') and Clause 40A of the erstwhile Listing Agreement entered into between the appellant and the respondent, currently Regulation 38 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (for short 'LODR' Regulations) and Section 21 of the SCRA.
3. Since MPS was not maintained, SEBI vide its letter dated 22.12.2012 advised the respondent for necessary compliance. The respondent instead of complying MPS requirement, it has voluntarily delisted its securities with a view to avoid complying with the MPS requirement. Even, SEBI (Delisting of Equity Shares) Regulations, 2009 more specifically, Regulation 8 (1B) and the exchange requirements for voluntary delisting mandates that a listed company needs to comply with all requirements of securities laws including MPS requirement and under the Delisting Regulations, SEBI has prescribed the mode and manner of delisting the securities of a listed company from a stock exchange, thereby, ensuring protection of the interest of shareholders/investors of the said listed company.
4. The respondent - M/s. Khoday India Limited filed C.A. No.289/2016 in Co.P No.132/2014, under Rules 6 and 9 of the Company (Court) Rules, 1959, before the Company Judge to issue a direction to the appellant-M/s. BSE Limited to confirm the 'record date' to be fixed afresh by the respondent and consequently, to issue necessary instructions to the NSDL and CDSL in that regard. In turn, the learned Company Judge directed the appellant to confirm the 'record date', that is to be fixed afresh by the respondent and also directed to issue necessary instructions to NSDL and CDSL in that regard. Being aggrieved by the dire
