Voluntary delisting benchmark: a higher stock exchange listing condition can prevail over the general SEBI minimum public shareholding norm.

For voluntary delisting, the applicable public shareholding benchmark was the higher 20 per cent condition in the stock exchange listing arrangement, not the general 10 per cent norm in the SEBI framework. Rule 19(2)(b) of the Securities Contracts (Regulation) Rules, 1957 and the delisting guidelines were read together with the listing agreement and SEBI circular on continued listing. Where the company had expressly accepted a higher minimum non-promoter holding with the recognised stock exchange, that contractual benchmark governed testing delisting eligibility. On the facts, the delisting offer succeeded once shareholding fell below 20 per cent.

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Issues: Whether, for voluntary delisting, the public shareholding benchmark was governed by the 10 per cent norm in the SEBI framework or by the higher 20 per cent requirement fixed in the stock exchange listing arrangement.

Analysis: Rule 19(2)(b) of the Securities Contracts (Regulation) Rules, 1957 requires compliance with the terms and conditions laid down by the recognised stock exchange, apart from the general minimum public offer requirements. The 2003 delisting guidelines regulate the delisting process and make the offer fail only if public shareholding does not fall below the minimum limit specified by the listing conditions or the listing agreement. Clause 40A of the SEBI circular deals with continued listing and preserves the minimum level of non-promoter holding as required at the time of listing. Reading the rule, the guidelines, the circular and the listing agreement together, the higher benchmark fixed by the stock exchange governs continued listing where it is expressly agreed between the company and the exchange.

Conclusion: The applicable benchmark was 20 per cent, not 10 per cent, and the delisting offer succeeded once public shareholding fell below that level.

Final Conclusion: The appeal failed because the stock exchange condition for continuous listing prevailed over the lower general benchmark, making the delisting effective on the facts found.

Ratio Decidendi: Where the listing agreement with a recognised stock exchange prescribes a higher minimum public shareholding for continuous listing, that contractual benchmark prevails for testing delisting eligibility, read with the governing SEBI framework.

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