R-l/SEBI v. Raghav Seth; Abhishek Singh

1. The petitioners are shareholders of respondent no.2, Bherat Nidhi Limited (a public company, hereafter referred to as 'BNL').

2. BNL was listed on the Delhi Stock Exchange limited (hereafter 'DSE') which has since been de-recognized as a stock exchange. BNL was placed on the Dissemination Board of the Bombay Stock Exchange Limited (hereafter 'BSE') by DSE on account of its de-recognition. E'.NL was. thereafter, removed as it had secured a listing on the Calcutta Stock Exchange Limited (hereafter 'CSE'). The petitioners are, essentially, aggrieved by theremoval of BNL from theDissemination Board o BSE.

3. All the above petitions raise similar issues and the prayers made are similarly worded. The prayers made in W.P. (C) No. 9846/2017 are set out below:-

(i) Issue Writ of Mandamus and/or Certiorari or any othe • appropriate Writ for quashing and/or setting aside the clarification document dated 06.04.2017 issued by Respondent No. 1;

(ii) pass order declaring the removal of Respondent No. !

(iii) pass an order directing the Respondent No.l to remove the listing of Respondent no. 2 from CSE as the same was 7^ not in accordance to exit circular; iv. pass an order directing tlie Respondent No. 1 to brin:; back the Respondent No. 2 in Dissemination Board: pass an order directing the Respondent No. 1 to ensure Respondent No. 2 and/or direct Respondent No. 2to either list itself on stock exchange bearing Nationwide Tradin;^ Terminal or to provide exit route to the Petitioner as per the circulars issued by Respondent no. 1; vi. pass orders directing Respondent No. 1 and Respondent No. 2 to follow the guidelines/directions in the circulars and exit procedure set out vide circulars of Respondert No.l and provide an exit route/ nationwidetrading termint[1] by ensuring that mandate of Section 11 is achieved; vii. to direct the Respondent No. 1 to follow the mandate ofthe Section 11 ofThe Securities and Exchange Board Cf India Act, 1992 and the circulars issued by Respondent No. 1 itself, and take appropriate actions accordingly;

4. On 29.12.2008, respondent no.l (hereafter 'SEBI') issued guidelines for exit option to stock exchanges that had been de-recognized or had become non-operational.

5. On 30.05.2012, SEBI issued a Circular specifying the process for derecognition and exit of such stock exchanges. In terms of paragiaph 2.[2] of the said circular, all stock exchanges where the annual turnover was less than ?1000 crores, could apply to SEBI for voluntary su Tender of recognition and exit within a period of two years from the date of issue of the said circular. The stock exchanges were provided a period o "two years to achieve the prescribed turnover of ?1000 crores on a continuous basis, failing which, it was provided that SEBI would proceed with compulsory exit of such stock exchanges. The stock exchanges that were already derecognized as on 30.05.2012, were required to make an applicatic^n for exit within a period of two months from the date of the circular.

6. The companies that were listed exclusively on such stock exchanges could list on another recognized stock exchange. In the e^ ent such companies failed to do so, they would be moved to the Dissemination Board. This was in the interest of investors of such exclusively listed companies.

7. Para 3.[3] of the said circular dated 30.05.2012 indicated the:)rovisions relating to the Dissemination Board. The said paragraph is set out below:- 3.[3] Dissemination Board: Under this mechanism, a willing buyer and seller will oe given an opportunity to disseminate their offers using ttie services of brokers of stock exchanges hosti ig dissemination board. The mechanism of disseminati 3n board shall be given wide publicity for the benefit ofthe investors of exclusively listed companies. Every stock exchange hosting a dissemination board shall clearly bring out the guidelines in respect of the Dissemination Board on its website. Features of Dissemination Board; i. Exiting Stock Exchanges will be required to enter into an agreement with at least one of the stock exchanges with nationwide trading terminals providing the Dissemination Board. The exiting stock exchange shall pay a one-time ee for the arrangement as may be decided in the agreement. The fee may be based on number of companies moving on to the dissemination board, number of public shareholders in those companies, their paid up capital etc. ii. Exchanges having nationwide trading terminal will not have listing agreement with these companies. Howe^ er, information received from such companies will be disseminated. iii. The buyers/ sellers will be required to register w th broker ofthe exchange where the dissemination board is set up. iv. No contract note is required to be issued for su:h transactions.

V. The matched trades will not be settled through the sto:k exchange/Clearing Corporation mechanism and hence, there will be no recourse to the Settlement/ Trade Guarantee Fund and Investor Protection Fund of tie Exchange for the trades on Dissemination Board vi. The exiting Stock Exchange as well as exchani^e providing dissemination board will give wide publicity about the dissemination board in one leading national daily and one local daily. The stock exchanges hosting dissemination board shall issue uniform operational guidelines for the dissemination board."

8. Thereafter, SEBI issued another Circular dated 22.05.2014 The said Circular was applicable to those stock exchanges which had not achieved the prescribed turnover of ^1000 crores on a continuous basis on or before 30.05.2014. This was in conformity with the earlier circu ar dated 30.05.2012 whereby all such stock exchanges which had not achieved the threshold level of turnover were provided a period of two years 13 achieve the same. Admittedly, DSE was one such stock exchange that did not fulfil the criteria of being recognized and thus, it was required to compK with the directions as set out in the Circular dated 22.05.2014. The said directions are set out below:- "Directions to Stock Exchanges to deal with companies exclusively listed on non-operational stock exchanges

3. In line with the above provisions, the following shall be applicable:i. The exclusively listed companies of such noncompliant stock exchanges may opt for listing in nation-wide exchanges after complying with listing norms of main board or the diluted listing norms, if any, on or before the exit of the exchange, either on voluntary or compulsory basis. Nation-wide stock exchanges shall facilitate the listing of these companies on priority basis in a time bound manner. For this purpose, these nation-wide stock exchanges shall immediately create a separate dedicated cell to expedite processing the listing requests from such companies. ii. Such exclusively listed companies may also opt for voluntary delisting before the de-recognition of the stock exchanges by following the existing delisting norms of SEBI in terms of SEBI (Delisting of Equity Shares) Regulations, 2009. Nation-wide stock exchanges shall provide a platform to these companies to facilitate reverse book building for voluntary delisting using their platform. iii. With a view to facilitate voluntary delisting, if they so desire, it is clarified that for such companies as referred to at Para 2(ii) above, the requirements of 'Minimum Public Shareholding' prescribed in Rules 19(2)(b) and 19A of the Securities Contracts (Regulation) Rules, 1957 and Clause 40A of the Listing Agreement, shall not be applicable. iv. In case of companies exclusively listed in the nonoperational stock exchanges that are not traceable or where the data available is more than three years old, the process of inclusion in list of companies identified, as 'Vanishing' (maintained by Ministry of Corporate Affairs) may be initiated by the respective stock exchanges.

V. As per the 'Exit Circular' the exclusively listed companies, which fail to obtain listing on any other stock exchange, which do not voluntary delist or which are not considered as 'Vanishing companies', will cease to be listed company and will be moved to the dissemination board by the existing stock exchange. It shall be the responsibility of the exchanges which are being derecognized either on voluntary or compulsor>' basis, to place their exclusively listed companies on the dissemination board. These exchanges shall ensure that the database of the exclusively listed company is transferred to SEBI and to those stock exchanges on whose dissemination board, the shares ol" these companies are available."

9. On 10.10.2016, SEBI issued another Circular, inter alia, providing two options to the companies that were placed on Dissemination 3oard: the said companies could either raise capital to list on a Nation-v ide Stock Exchange or provide exit to the investors in the manner as specified in Annexure A to the said Circular. Paragraph 4 of the said circular dated 10.10.2016 is relevant and is set out below;- "4. SEBI has been receiving representations seeking clarifications on raising of further capital and the process ot 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 hos ing the ELC on its DB would hereinafter be referred as 'designated stock exchange'. b. The ELCs on the DB would be required to exerc se one of the two options as mentioned in Para 4.c or 4.d of the circular. c. Raising capital for listing on Nationwide Stcck Exchanges. In order to facilitate listing on nationwide stock exchanges, the ELCs on the DB shall be allowed to raise capital for meeting he listing requirements through preferential allotment route in terms of the provisions under the Issue of Capital and Disclosure Requirements Regulations, 2009 (ICDR). i. For the above purpose the procedures as specified under ICDR shall be followed to the extant possible. Towards this purpose, the designated stock exchange shall be according in principle approval and monitoring compliance with the same. ii. In the process of raising capital through preferential allotment, if the allotment is made to promoters/public such that it is in excess of the threshold limits (5% or 25%) of the Si:Bl (Substantial Acquisition of Shares and Takeovers Regulations), 2011 (SAST), the provisions of SAST Regulation shall not be applicable for the proposed acquisition subject to the overall holding of the promoter group not exceeding 75% of the paid up capital ofthe company. iii. The ELCs which fail to list on the nationv ide stock exchanges under the aforesaid mechanism shall provide exit to its investors as per para AA of the circular. d. Procedure to provide exit to investors: In order to protect the interest of all shareholders of such ELCs, an exit mechanism to investors of such ELCs shall be as prescribed in Annexure-A tc this circular. Accordingly, all ELCs shall be required to ensure compliance with the procedure for exit. The oversight and monitoring of such exit mechanism shall be carried out by the designated stock exchange. i. Designated stock exchanges shall further ensure that the promoters have made adequate efforts in terms of the above provisions for providing exit to their shareholders before removing ELCs from the DB. ii. The designated stock exchange shall display the list of companies willing to provide exit to their investors on their website on a monthly basis."