Debt-to-equity conversion by company needs shareholder approval before resulting shares can be accepted for listing.

A company-led debt-to-equity conversion that increases subscribed capital requires a special resolution of shareholders under Section 62(1)(c) of the Companies Act, 2013 before the resulting equity shares can be accepted for listing. The court treated the conversion as initiated and adopted by the company itself, not as an independent act of the asset reconstruction company, because the company's board resolved to implement the proposal and sought listing of the additional shares. The stock exchange's refusal to accept the listing request for want of the requisite approvals under the listing regulations was therefore justified and sustained.

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Issues: (i) Whether shareholder approval under Section 62(1)(c) of the Companies Act, 2013 was mandatory before the equity shares arising from conversion of debt into shares could be accepted for listing. (ii) Whether the refusal to accept the listing request for want of BSE approval under Regulation 28 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 was justified.

Issue (i): Whether shareholder approval under Section 62(1)(c) of the Companies Act, 2013 was mandatory before the equity shares arising from conversion of debt into shares could be accepted for listing.

Analysis: Section 9(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 enables conversion of debt into shares, but the conversion in the present case was not an independent act of the asset reconstruction company. The company itself agreed to the conversion, its board resolved to implement the proposal, and it then applied for listing of the additional shares. On those facts, the proposal was treated as one initiated by the company, resulting in an increase of subscribed capital. For such a proposal, a special resolution of shareholders was required under Section 62(1)(c) of the Companies Act, 2013.

Conclusion: Shareholder approval was mandatory and was absent; the objection was valid against the appellant.

Issue (ii): Whether the refusal to accept the listing request for want of BSE approval under Regulation 28 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 was justified.

Analysis: The finding that approval of the stock exchange was necessary under Regulation 28 was accepted as correct and not shown to be perverse. In the absence of the requisite shareholder approval and in view of the procedural requirements governing listing, the rejection of the listing request could not be faulted.

Conclusion: The refusal to accept the listing request was justified and stood sustained.

Final Conclusion: The statutory appeal failed on the legal requirements governing conversion of debt into equity and the consequent listing of shares, and the impugned refusal to list the shares was upheld.

Ratio Decidendi: Where a company itself initiates and adopts a debt-to-equity conversion proposal that increases its subscribed capital, shareholder approval by special resolution under Section 62(1)(c) of the Companies Act, 2013 is mandatory before the resulting shares can be accepted for listing.

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