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January 25, 2012
A Listed Company whose trading was suspended till 2009 made Preferential allotment in 2009 and allotted shares for which BSE did not accord approval for listing on the ground of faulty allotment which was held incorrect - Regulations 10, 12 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 read with Regulations 76(2), 76(3) of the SEBI (ICDR) Regulations, 2009. Decided on 09/11/2011 Facts:
  • With a view to raise its resources, the Appellant decided to issue equity shares on preferential basis to the promoters of the company. A resolution was passed to this effect in the extra ordinary general meeting of the shareholders held on September 5, 2009 and it was also intimated to all the three stock exchanges vide letter of the same date.
  • The allotment of the shares on preferential basis also triggered the open offer under Regulations 10 and 12 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (for short the takeover code). The allottees made a public announcement under the takeover code and also submitted the draft letter of offer to the Securities and Exchange Board of India (for short the Board) on August 25, 2009.
  • The open offer was closed on December 14, 2009. Simultaneously, the Appellant also filed an application with BSE on August 27, 2009 for ''in-principle'' approval as per clause 24(a) of the listing agreement for listing .of shares and kept on pursuing the matter with BSE for the said approval but there was no response.
  • The Appellant was in dire need to infuse funds which were delayed and the proposed allottees were reluctant to block their funds any further. Therefore, the Appellant, vide its letter dated December 28, 2009, intimated the BSE that the Appellant would proceed with the preferential allotment of shares under the presumption that the BSE has no objection.
  • Thereafter, vide its letter dated January 19, 2010, the Appellant requested BSE for listing of the said shares on the stock exchange to which BSE responded by calling for some further information and asking for an undertaking from the company to re-compute the issue price of shares on completion of six months of scrip being listed on the exchange and accordingly collect the difference, if any, from the allottees. Being aggrieved by the said direction of BSE, the Appellant has preferred this appeal for setting aside the said decision.
  • It is common case of the parties that scrip of the company, though listed on the stock exchanges since 1992, its trading remained suspended till October 9, 2009 and no pricing data of the scrip was available. The pricing of the equity shares of the company cannot be worked out as per formula as prescribed under Regulation 76(1) of the Regulations due to non-availability of pricing data. Therefore, BSE, relying on the minutes of the meeting held on May 8, 2008 between the Board, BSE and NSE and based on the decision taken in that meeting, asked the company to give an undertaking to re-compute the price of preferential equity shares at the end of six months of listing.
Decision : Appeal Allowed Reason:
  • BSE took ten months to convey its decision, that too, based on the minutes of meeting held on May 8, 2008 which were not made public.
  •  Further, the allotment of the shares under preferential allotment triggered the open offer under Regulations 10 and 12 of the takeover code and the allottees submitted the draft letter of offer with the Board on August 25, 2009.  The Board gave its observations on the letter of offer and did not raise any issue on the price as offered by the proposed allottees.
  • In the absence of any provision for computation of price of preferential shares in respect of scrip which is listed on the stock exchange but whose trading is suspended and the price, as offered by the proposed allottees, having been accepted by the Board in the draft offer letter, the BSE erred in asking the Appellants to furnish an undertaking to revise the price of preferential shares, if necessary, after six months of its listing on the stock exchange on the basis of minutes of the meeting held on May 8, 2008 which were not made public.
  •  In the result, the appeal was allowed and the impugned order was set aside. The Respondent was directed to list the subject shares on its exchange.
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