TaxTMI 
TaxTMI 
2022 (9) TMI 1580
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....636 of 2022 and CA (AT) (Ins) No. 637 & 638 of 2022 as the issues involved in both set of appeals are common. However, for the sake of convenience, we are recording the facts of both set of appeals separately. Facts of Company Appeal (AT) (Insolvency) No. 635 & 636 of 2022 2. This appeal is directed against order dated 24.05.2022 passed by the Adjudicating Authority (National Company Law Tribunal, Chandigarh Bench) by which an application bearing I.A. No. 348 of 2021, filed by Respondent No. 1 M/s Shreeji Cotfab Limited for declaration that the Appellant is ineligible to be a resolution applicant in view of Section 29A(f) of the Insolvency and Bankruptcy Code, 2016 (in short 'Code') has been allowed, I.A. No. 155 of 2021 filed by the Appellant 'Aggarsain Spinners Limited' to place additional documents to clarify the position of the statutory body i.e. Security Exchange Board of India (in short 'SEBI) has been dismissed and CA No. 287 of 2019, filed by the Appellant for accepting its resolution plan has been dismissed holding that the Appellant is ineligible in view of the Section 29-A(f) of the Code. 3. In brief, M/s Phoenix ARC Private Limited (Financial Creditor) filed an....
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....ution plan before the Adjudicating Authority. 6. According to RP, he received an email dated 15.06.2021 from Ayat Processors with some documents, stating that the Appellant was ineligible, in view of Section 29-A (f) of the Code because at the time of submissions of resolution plan and approval of the resolution plan by the CoC, it had already been debarred by the SEBI from accessing the securities market. The RP filed an additional affidavit dated 05.07.2021 apprising the Adjudicating Authority regarding the said information and documents brought on record by Ayat Processors in the matter of the Corporate Debtor. 7. An application bearing I.A. No. 155 of 2021 was filed by the Appellant to clarify the position of the SEBI in the matter. Another application bearing I.A. No. 348 of 2021 was filed by Respondent No. 1 for declaration that the Appellant was ineligible in view of Section 29-A(f) of the Code at the time of submission of resolution plan to the RP, at the time of completion of the said resolution plan by the CoC and had also filed a false affidavit of being Section 29-A compliant. 8. The Appellant is an Exclusively Listed Company (in short ELC) and its shares were listed....
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.... Audi alterm partem and is also in violation of Section 11(4) of the SEBI Act, 1992 (in short 'the Act') which provides for an order before such debarment, which should not only be in writing but also to contain reasons. He has also submitted that the fourth proviso to Section 11(4) of the Act mandates for an opportunity of hearing. 14. It is also submitted that there was no delegation of power by SEBI to BSE in circulars dated 10.10.2016 and 01.08.2017 to restrain any person from accessing the securities market and even if, for the sake of argument, it is presumed that the powers were delegated, the BSE could not have passed the order dated 28.03.2018, debarring the Appellant for a period of 10 years, in terms of Section 29-A(f), without following the mandatory procedure prescribed under Section 11(4) of the Act. Counsel for the Appellant has vehemently argued that the Adjudicating Authority has committed a patent error in declaring the Appellant as ineligible under Section 29-A (f) by holding that the SEBI has prohibited the Appellant for trading in security for accessing the security market and that the notice dated 28.03.2018 has been issued by the BSE as a delegatee of the SE....
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....tion of such investigation or enquiry. It is argued that Section 11(4) is more person centric than it is related to the Company. It is further argued that the impugned notice dated 28.03.2018 is based upon the SEBI circular dated 01.08.2017. It is further submitted that Section 11(4) of the Act is subservient to Section 11(1) and has referred to the decision of Hon'ble Supreme Court in the case of Sahara India Real Estate Corporate Limited and Ors. Vs. Securities and Exchange Board of India and Anr. (Civil Appeal No. 9813 of 2011). 17. He has further submitted that the Appellant is unnecessarily harping upon passing of an order by the SEBI with reasons and in writing for the purpose of debarment which was not required because SEBI has taken administrative action by issuance of circulars dated 10.10.2016 and 01.08.2017 on the basis of which BSE has passed on the notice dated 28.03.2018 which is an administrative act of the SEBI. 18. It is further submitted that during the pendency of these proceedings, the Appellant had filed a writ petition no. 14490 of 2020 before the Punjab and Haryana High Court in which it prayed for the issuance of a writ in the nature of certiorari for ....
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....r BSE, and until and unless an order is passed in terms of Section 11(4) of the Act, no action can be taken against the Appellant in terms of Section 29-A(f) of the Code. Facts of Company Appeal (AT) (Insolvency) No. 637 & 638 of 2022 23. These Company Appeal (AT) (Ins) Nos. 637 & 638 of 2022 are filed by Aggarsain Spinners Limited and Mr. Ramesh Garg against two separate orders, passed by the Adjudicating Authority (National Company Law Tribunal, Chandigarh Bench), of the same date i.e. 24.05.2022. In one order dated 24.05.2022, the Adjudicating Authority has allowed I.A. No. 342 of 2021 filed by the Resolution Professional (RP) (Sumat Gupta) by which he has sought a declaration that the Appellants are ineligible to submit the resolution plan because of Section 29(A)(f) of the Insolvency and Bankruptcy Code, 2016 (in short 'Code') and dismissed the application of the Appellants bearing I.A. No. 154 of 2022 to place additional documents on record to clarify the position of a statutory body i.e. SEBI and by way of separate order dated 24.05.2022 dismissed the application bearing I.A. No. 458 of 2020 filed by the RP, on behalf of the CoC of M/s Vallabh Textiles Ltd. (Corporate Deb....
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....tion. It is stated that on 15.06.2021 the RP had received two resolution plans one from Sanjay Garg on whatsapp and other from M/s Aayat Processors on email by which the RP was informed that RAs are not compliant of Section 29(A) of the Code because of which the Respondent company as well its directors have been barred from accessing the securities market w.e.f. 27.03.2018 till further orders, for a period of 10 years. According to the RP, he was prima facie convinced with the documents brought to his notice about the non-compliant of Section 29(A) of the Code by the Respondents as it searched the portal of SEBI as well as other stock exchanges and found the name of the Respondents appearing on the website of the BSE as persons debarred from accessing the securities market for a period of 10 years. It has come on record that the RP received a memo dated 29.10.2020 from the State Bank of India by which he came to know about the disqualification of the Respondents who has never informed him and had rather filed a false affidavit of being Section 29(A) compliant. The Respondents have placed on record the status as updated on 16.02.2021 by SEBI that the order debarring the Respondents ....
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....usively listed companies (ELCs) by allowing them to get listed on nationwide stock exchanges after complying with the diluted listing norms of nationwide stock exchanges, failing which they would be moved to the Dissemination Board (DB). 2. Further, SEBI vide circular dated May 22, 2014, inter-alia, provided that ELCs, on de-recognized/non-operational stock exchanges, can also opt for voluntary delisting by following the existing delisting norms of SEBI. It was also specified that if the ELCs fail to comply with the same, they shall be moved to DB. 3. Subsequently, SEBI vide circular dated April 17, 2015 allowed a period of eighteen months' time to ELCs on DB to obtain listing upon compliance with the listing requirements of the nation-wide stock exchanges. 4. SEBI has been receiving representations seeking clarifications on raising of further capital and the process of exit of ELCs from the DB. Therefore, SEBI, in the interest of the investors of such ELCs, clarifies as follows: a. The respective nationwide stock exchanges hosting the ELC on its DB would hereinafter be referred as 'designated stock exchange'. b. The ELCs on the DB would be required to exercis....
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....st within three months from the date of this circular to the satisfaction of the designated stock exchanges, failing which the designated exchange shall recommend action as specified under Para 6 of this circular. b. The designated stock exchanges shall review the plan of action and ensure completion of the process within 6 months. 6. Action against companies remaining on the DB a. Any promoter or director whose company is on the DB and has failed to demonstrate adequacy of efforts for providing exit to their shareholders in conformity with the exit mechanism as provided in this circular shall be liable for the following actions: * The company, its directors, its promoters and the companies which are promoted by any of them shall not directly or indirectly associate with the securities market or seek listing for any equity shares for a period of ten years from the exit from the DB. * Freezing of shares of the promoters, directors. * List of the directors, promoters etc. of all non-compliant companies as available from the details of the company with nationwide stock exchanges shall be disseminated on SEBI website and shall also be shared with other respective agencies. ....
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....er. vii. The exit offer shall remain open for a period of minimum five working days during which the public shareholders shall tender their shares. The promoter shall open an escrow account in favour of independent valuer/designated stock exchange and deposit therein the total estimated amount of consideration on the basis of exit price and number of outstanding public shareholders. The escrow account shall consist of either cash deposited with a scheduled commercial bank or a bank guarantee, or a combination of both. The amount in the escrow account shall not be released to the promoter unless all the payments made in respect of shares tendered for the aforesaid period of one year. viii. The promoter shall make payment of consideration within fifteen working days from the date completion of offer. ix. The promoter shall certify to the satisfaction of designated stock exchange that appropriate procedure has been followed for providing exit to shareholders of such companies. Subsequently, the designated stock exchanges upon satisfaction shall remove the company from the dissemination board. x. The exclusively listed companies which have 100% promoter holding shall be removed....
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....provided to the public shareholders of ELCs that are non-compliant with the provisions of the said circular dated October 10, 2016 and have not submitted plan of action to the DSEs and in order to protect the interest of investors in ELCs on DB it is hereby directed that, to being with: a. Such ELCs and the Depositories shall not effect transfer, by was 0 sale, pledge, etc., of any of the equity shares and me corporate benefits such, as dividend, rights, bonus shares, split, etc. shall be frozen, for all the equity shares, held by the promoters or directors of non-compliant Exclusively one Companies till the promoters of such non-compliant Exclusive Listed Companies provide an exit option to the pub shareholders in compliance with SEBI circular dated October 10, 2016, as certified by the concerned Designated Stock Exchanges ; b. The non-compliant Exclusively Listed Companies, its directors, its promoters and the companies which are promoted by any of them shall not be eligible to access the securities market for the purposes of raising capital till the promoters of such noncompliant Exclusively Listed Companies provide an exit option to the public shareholders in compliance wit....
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....tors in accordance with the above referred circular. The particulars shared with the Depositories are based on the extent of the data made available by De-recognized/Nonoperational/existed Stock Exchanges / ROC, to BSE: Sr. No. Company Name 1. ACME STAPATHI LTD 2. AGGARSAIN SPINNERD LTD x x x Further the consequences of non-compliant, includes the following:- 1. The non-compliant ELCs, its directors, its promoters and the companies which are promoted by any of them shall not be eligible to access the securities market for the purposes of raising capital till the promoters of such ELCs provide an exit option to the public shareholders in compliance with SEBI circular dated October 10, 2016 * 2. The promoters and directors of non-compliant ELCs shall not be eligible to remain or become director of any listed company till the promoters of such non-complaint ELCs provide exit option to public shareholders. In compliance with SEBI circular dated October 1 O, 2016 * In case Trading Members require any clarifications on the subject matter of this notice, they may please contact to the following: At the exchange: Ms. Siddhi Keluskar - Listing Dept. Tel No. 91-22-22725603 ....
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....ities; (ib) calling for information from, or furnishing information to, other authorities, whether in India or outside India, having functions similar to those of the Board, in the matters relating to the prevention or detection of violations in respect of securities laws, subject to the provisions of other laws for the time being in force in this regard: Provided that the Board, for the purpose of furnishing any information to any authority outside India, may enter into an arrangement or agreement or understanding with such authority with the prior approval of the Central Government; (j) performing such functions and exercising such powers under the provisions of the Securities Contracts (Regulation) Act, 1956 (42 of 1956), as may be delegated to it by the Central Government; (k) Levying fees or other charges for carrying out the purposes of this section; (l) conducting research for the above purposes; (la) calling from or furnishing to any such agencies, as may be specified by the Board, such information as may be considered necessary by it for the efficient discharge of its functions;] (m) performing such other functions as may be prescribed. [(2A) Without prejudice to....
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....ceeding one month, one or more bank account or accounts of any intermediary or any person associated with the securities market in any manner involved in violation of any of the provisions of this Act, or the rules or the regulations made thereunder : Provided that only the bank account or accounts or any transaction entered therein, so far as it relates to the proceeds actually involved in violation of any of the provisions of this Act, or the rules or the regulations made thereunder shall be allowed to be attached; (f) direct any intermediary or any person associated with the securities market in any manner not to dispose of or alienate an asset forming part of any transaction which is under investigation: Provided that the Board may, without prejudice to the provisions contained in sub-section (2) or sub-section (2A), take any of the measures specified in clause (d) or clause (e) or clause (f), in respect of any listed public company or a public company (not being intermediaries referred to in section 12) which intends to get its securities listed on any recognised stock exchange where the Board has reasonable grounds to believe that such company has been indulging in insi....
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.... Gopal Krishan Arora ACBPK4161F * 27.03.2016 16.02.2021 Restrained Director/Promoter of Aggarsain Spinners Ltd. from accessing the securities market till further orders for a period of 10 years. Action initiated due to non-compliance with SEBI Circular SEBI/HO/MRD/DSA/CIR/P/2016/110 dated October 10, 2016. Revoked the directions against the entity as they are compliant 35. Email dated 23.06.2017: "S.C.O. No. 234, Sector 20, Panchkula-134120 Tel 0172-4644666 Fax 0172-4644777 CIN:L1729HR1998PLC034043 Annexure A Date: 23rd June 2017 To, Head - Listing Operations, BSE Limited, P.J. Towers, Dalal Street, Fort, Mumbai - 400 001. Date: Dear Sir, Sub: Application from the Director, or ELC informing BSE for exercising the option in compliance with SEBI circular SEBI/HO/MRD/DSA/CIR/P/2016/110 dated October 10, 2016 I, Ramesh Kumar, Director, an Indian Inhabitant, aged about 51 years residing at 731, HUDA Sector-11,Panipat (Haryana)PIN132103 with PAN number AFLPK2316K and DIN 01037508 in the capacity of Director hereby submit our plan of action to BSE as required by SEBI in its circular SEBI/HO/MRD/DSA/CIR/P/2016/110 dated October 10, 2016. We w....
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....status of the company listing on other stock exchange. The process to be followed by the ELCs is available on the exchange website www.bseindia.com The URL for the same is given below http//www bseindia.com/investors exercising option........ Please note that further the SEBI vide its circular no. SEBI/HO/MRD/DSA/CIR/P/2017/82 dated August 1, 2017 (copy attached) has mentioned the actions to be initiated against Exclusively Listed Companies (ELCs) and its promoters /directors pending listing on stock exchange. In view of the same, you are requested to complete the process as intimated to the exchange (action plan) as soon as possible to avoid the initiation of the action against the promoter/directors of the company as prescribed in aforesaid SEBI Circular. For further clarification related to the above, you may contact the following officials at BSE. At the Exchange At the Exchange Ms. Siddiqa Reoon Listing Dept. Tel No. 91-22-22728154 Mail [email protected] or [email protected] Ms. Siddhi Kaluskar Listing Dept. Tel No. 91-22-2272 5603 Mail [email protected] or [email protected] Regards Atul Dhotre Senior Manager ....
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....Ms. Siddiqa Reoon Listing Dept. Tel No. 91-22-22728154 Mail [email protected] or [email protected] Ms. Siddhi Kaluskar Listing Dept. Tel No. 91-22-2272 5603 Mail [email protected] or [email protected] Siqqiua Reoon Management Trainee Listing Operations (MF & Direct Listing) PJ Tower 20th Floor, Dalal Street, Mumbai - 400001, India Phone (Direct) 022-22728154 World's Fastest Exchange with a speed of 6 Microseconds." 38. The circular dated 10.10.2016 provides for the clarification to raise the capital and process of exit from the DB. The ELCs hosted by nationwide stock exchange on its DB is referred to as Designated stock exchange and these ELCs were to exercise one of the two options as mentioned in Para 4.c or 4.d of the circular, 4.c deals with Raising capital for listing on Nationwide Stock Exchanges and 4.d, provides procedure to provide exit to investors. The action contemplated for non-compliance either of the two mentioned herein above is specified in Para 6 of the circular which says that "any promoter or director whose company is on the DB and has failed to demonstrate adequacy of efforts for providing exit to th....
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....he process of action plan was to be completed within three months from the date of the circular to the satisfaction of the designated stock exchange. It was also informed that initially the time was given up to 09.01.2017 which was subsequently extended up to 30.06.2017. It is also informed that ELCs were required to submit plan of action to the designated stock exchange exercising one of the two options, the implementation of which was to be completed within a period of six months from the June 30, 2017 i.e. by December 31, 2017 but it constrained to observe that it has been more than six months since they have received intimation of the plan of action from there side and they were yet to receive the supporting remaining documents with respect to completion/implementation of the plan of action. The Appellant was informed that action would be initiated against the promoters/directors of the company as prescribed by the SEBI in the circular dated 01.08.2017 if the remaining supporting documents are not received on or before 07.02.2018. It is argued by Counsel for Respondent that firstly the agitation of the Appellant is that it had no knowledge about the proceeding being carried out....
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....on for the instant inference is, that sub-section (2) does not curtail the powers and functions vested with the SEBI under sub-section (1) of section 11 of the SEBI Act as subsection (2) aforementioned commences with the words "Without prejudice to the generality of the foregoing provisions ... ". This expression obviously preserves, the power vested in the SEBI under subsection (1) of section 11 of the SEBI Act, to protect the interest of investors in securities and to promote the development and to regulate the securities market "by such measures as it thinks fit". Furthermore, sub-section (2) of section 11 of the SEBI Act, after making a reference to the measures generally referred to in subsection (1) empowers/authorizes that SEBI "may provide for'' a series of measures, which are delineated in clauses (a) to (m) thereof (of sub-section (2) of section 11 of the SEBI Act). The use of the words "may provide for'' besides indicating the discretion vested in the SEBI, demonstrates that, the measures depicted in clauses (a) to (m) are illustrative and not exhaustive, more so, because subclause (2) of section 11 of the SEBI Act does not dilute the power vested in the ....