2015 (8) TMI 622 - AT - Companies Law

Tribunal Interprets Listing Agreement Clause 16 on Book Closures and Record Dates

Oracle Financial Services Software Limited Versus Securities and Exchange Board of India and Others

The Tribunal held that clause 16 of the listing agreement required a 30-day gap between two book closures and two record dates, not specifically between a ... Declaration of interim dividends – Violation of time gap to be maintained in between closure of books and record date – Held that:- Fact that as per clause 16 of listing agreement word ‘and’ used between words ‘two book closures’ and ‘record dates’, cannot be inferred as gap between book closure and record date – In fact time gap was intended between two book closures and two record dates – BSE & NSE directed to announce record date for interim dividend declared by appellant enabling him to make payment to investors –Appeal disposed of – Decided in favour of Appellant. Issues: Interpretation of clause 16 of the listing agreement regarding the time gap between book closure and record date for dividend declaration.Analysis:1. The appeal raised the issue of whether the appellant violated clause 16 of the listing agreement by fixing a record date less than 30 days after the book closure for the purpose of declaring an interim dividend.2. The appellant, a public limited company, had declared a book closure from 8th September, 2014, to 12th September, 2014, for its 25th Annual General Meeting (AGM) held on 12th September, 2014, where an interim dividend was declared.3. Both stock exchanges, BSE and NSE, opined that the time gap between book closure and record date should be 30 days as per clause 16 of the listing agreement, leading to SEBI informing the appellant of the violation through communications dated 19th September, 2014.4. The crux of the matter was the interpretation of clause 16, which required a 30-day gap between two book closures and record dates, not specifically between a book closure and a record date, as contended by SEBI.5. The Tribunal observed that the word 'two' preceding 'book closures' in clause 16 indicated that the 30-day gap was intended between two book closures and two record dates, not between a book closure and a record date.6. Accepting SEBI's interpretation would lead to potential violations of the Companies Act, 1956, and the Tribunal was not convinced that delaying dividend payment beyond 30 days was necessary to protect investor interests.7. Consequently, the Tribunal directed BSE and NSE to announce the record date as 24th September, 2014, enabling the appellant to pay dividends by 29th September, 2014, while allowing SEBI to pursue further actions on the interpretation of clause 16.8. Upon a request from BSE due to system update constraints, the record date was adjusted to 25th September, 2014, and the Tribunal disposed of the appeal, directing SEBI to pass a final order after hearing the appellant on the merits of the clause 16 interpretation.