Minority shareholders with 0.08% stake cannot block delisting scheme approved by 93.82% majority under Section 230

NCLAT Principal Bench dismissed appeal challenging scheme of arrangement between two companies for delisting. Appellants holding 0.08% shares failed to meet minimum shareholding threshold under Section 230(4) of Companies Act 2013 for filing objections. Tribunal held no separate meeting of public shareholders required under Section 230, finding no conflict with SEBI Regulation 37. Scheme approved by 93.82% equity shareholders and 71.89% public shareholders. Court emphasized shareholder democracy principle, noting minority shareholders cannot deprive majority of scheme benefits through frivolous objections.

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ISSUES PRESENTED and CONSIDERED

The Tribunal considered several core legal questions in this judgment:

• Whether the Scheme of Arrangement between ICICI Bank Ltd and ICICI Securities Ltd is prejudicial to public interest, follows due procedure, and is fair and conscionable.
• Whether the Scheme complies with Regulation 37 of SEBI (Delisting of Equity Shares) Regulations, 2021, particularly regarding the requirement that companies be in the same line of business.
• Whether the voting process for the Scheme was conducted legally and without coercion or undue influence.
• Whether the valuation methodology used to determine the share value was fair and transparent.
• Whether the appellants have the requisite shareholding to object to the Scheme under Section 230(4) of the Companies Act, 2013.
• Whether the Scheme required separate meetings for promoter and non-promoter shareholders under Section 230(6) of the Companies Act, 2013.

ISSUE-WISE DETAILED ANALYSIS

Compliance with Regulation 37 of SEBI (Delisting of Equity Shares) Regulations, 2021

The Tribunal examined whether the Scheme adhered to Regulation 37, which requires the listed subsidiary and its holding company to be in the same line of business. The expression "same line of business" is not defined in the Delisting Regulations. However, SEBI granted a relaxation from the strict enforcement of this requirement, considering the regulatory restrictions applicable to ICICI Bank. The Tribunal found that SEBI's decision to grant such relaxation was within its regulatory domain and not justiciable in these proceedings.

Voting Process and Alleged Coercion

The Tribunal addressed allegations of coercion during the voting process, noting SEBI's letters which warned ICICI Bank and ICICI Securities about inappropriate outreach programs. However, SEBI found no evidence of influence or misleading of voters. The Tribunal concluded that the outreach program did not vitiate the voting process and that the voting was conducted legally.

Valuation Methodology

The Tribunal reviewed the valuation methodology used by independent registered valuers and supported by fairness opinions from SEBI registered merchant bankers. The valuation was consistent with the minimum requirements prescribed under Regulation 37(2)(j) of the Delisting Regulations. The Tribunal upheld the valuation, emphasizing that courts should not interfere with technical and complex considerations of valuation, which are best left to experts.

Requisite Shareholding to Object

The Tribunal examined whether the appellants met the minimum threshold of 10% shareholding required to object to a scheme under Section 230(4) of the Companies Act, 2013. The appellants held only 0.08% shareholding, which did not meet the threshold. The Tribunal noted that the threshold was introduced to prevent frivolous objections by shareholders with minuscule holdings. Consequently, the appellants were not entitled to object to the Scheme or maintain an appeal as an 'aggrieved person.'

Separate Meetings for Promoter and Non-Promoter Shareholders

The Tribunal considered whether separate meetings for promoter and non-promoter shareholders were required under Section 230(6) of the Companies Act, 2013. The Tribunal found no conflict between Section 230 and Regulation 37, as the latter imposes additional safeguards without contradicting the Act. The Tribunal concluded that the Scheme did not require separate meetings, as the public shareholders did not constitute a separate class, and the Scheme was a uniform scheme for all equity shareholders.

SIGNIFICANT HOLDINGS

The Tribunal made several significant holdings:

• The Scheme of Arrangement complies with Regulation 37 of SEBI (Delisting of Equity Shares) Regulations, 2021, and any procedural relaxation granted by SEBI is within its regulatory authority.
• The voting process was conducted legally, and SEBI found no evidence of coercion or undue influence.
• The valuation methodology used was fair and consistent with regulatory requirements, and courts should not interfere with expert valuations.
• The appellants do not meet the requisite shareholding threshold to object to the Scheme under Section 230(4) of the Companies Act, 2013.
• The Scheme does not require separate meetings for promoter and non-promoter shareholders, as it is a uniform scheme for all equity shareholders.

The Tribunal dismissed both appeals, affirming the order of the National Company Law Tribunal and closing all pending applications without costs.

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