Appeal No. 23 of 2015. Case: 52 Weeks Entertainment Ltd. Vs BSE Limited and Ors.. Securities and Exchange Board of India
| Case Number | Appeal No. 23 of 2015 |
| Counsel | For Appellant: Pradeep Sancheti, Senior Advocate and Vishwanathan Iyer, Advocate i/b Prakash Shah, Advocate and For Respondents: P.N. Modi, Senior Advocate and Ajay Khaire, Advocate i/b The Law Point |
| Judges | J.P. Devadhar, J. (Presiding Officer) and A.S. Lamba, Member |
| Issue | Securities and Exchange Board of India Act, 1992 - Sections 11, 11(1) |
| Judgement Date | March 13, 2015 |
| Court | Securities and Exchange Board of India |
Order:
J.P. Devadhar, J. (Presiding Officer)
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I have perused the decision rendered by Learned Member Shri A.S. Lamba. I agree with the conclusion drawn therein to the effect that the impugned orders cannot be sustained, however, for the reasons recorded herein.
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This appeal is filed to challenge the notice put up by the Bombay Stock Exchange Limited ('BSE' for short) on its website on 01.01.2015. By that notice all the trading members of the BSE were informed that the trading in the securities of 22 companies named thereunder including the trading in the securities of the appellant-company would be suspended with effect from 07.01.2015 until further orders.
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When the appeal was moved before this Tribunal for urgent reliefs, grievance made by the appellant was that the impugned notice is issued without hearing the appellant and without assigning any reasons. Hence we directed the BSE to hear the appellant and record reasons for issuing the impugned notice on 01.01.2015. Accordingly, the BSE has heard the appellant and on 12.01.2015 recorded its reasons for issuing the impugned notice dated 01.01.2015.
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Question therefore to be considered in this appeal is, whether BSE is justified in suspending the trading in the securities of the appellant with effect from 07/01/2015 for the reasons recorded by it on 12.01.2015 after granting post decisional hearing.
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Facts relevant for the purposes of the present appeal are that the appellant is a public limited company engaged in the activity connected with the entertainment market such as film making. Shares of the appellant-company are listed on the BSE. However, trading in the shares of the appellant-company on BSE were suspended during the year 2001-2012 as the appellant was not in a position to pay the Listing fees as also CDSL/NSDL charges, Registrar fees and salary of the employees of the appellant.
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In the last quarter of 2012, the promoters of the appellant-company decided to revive the operations of the appellant-company and with a view to finance the activities connected with the entertainment market, it was decided that the appellant should raise funds by issuing preferential shares to non-promoters subject to complying with all applicable provisions of the Companies Act, SEBI Act and the Regulations framed thereunder as well as the Rules and Regulations of the BSE.
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On being satisfied that the proposal put forth by the appellant was in order, BSE by its letters dated 01.03.2013 and 22.11.2013 granted in principle approval for issuance of 1,79,70,000 and 74,45,000 equity shares of ` 10 each at par to other than promoters on a preferential basis in terms of clause 24(a) of the Listing Agreement. Thereafter, on 03.09.2014, BSE once again deemed it fit to grant in-principle approval for issuance of 53,40,000 equity shares of ` 10 each at a price not less than ` 23 per share to non-promoters on a preferential basis in terms of clause 24(a) of the Listing Agreement. Accordingly, from time to time appellant-company has issued preferential shares to non-promoters. After issuance of the preferential shares, the share capital of the appellant-company rose to 3,48,80,000 shares out of which 3,15,89,450 shares are held by the general public (including preferential shareholders) and 32,90,550 shares are held by the promoters of the appellant-company.
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According to BSE, decision to suspend trading in the securities of the appellant was taken as per the directions given by SEBI contained in the minutes of the SEBI Surveillance Committee Meeting held on 10.12.2014 with the Stock Exchanges. In the said minutes, it is recorded that the SEBI had inter alia appraised the Stock Exchanges regarding the modus operandi of market manipulation that is being perpetrated by certain entities, and to prevent further such damage, SEBI has directed the Stock Exchanges to suspend the trading in the companies, which satisfy one or more of the following parameters:--
a) Non-existent on the address mentioned and does appear to be carrying out any operations.
b) Preferential allotments made. Price of the scrip increased with very low volume during one year period of lock-in. After lock-in huge rise in volumes and exit of preferential allottees. This may be coupled with stock split.
c) Companies having week financials and the price rise in such scrip is not supported by financials.
According to BSE the appellant-company fulfills all the aforesaid three parameters laid down in the minutes of Surveillance Committee Meeting held on 10.12.2014, and therefore the BSE by its notice dated 01.01.2015 has sought to suspend trading in the shares of the appellant-company until further orders.
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Mr. Sancheti, Learned Senior Advocate appearing on behalf of the appellant submitted that the impugned notice dated 01.01.2015 issued by the BSE as well as the reasons recorded subsequently in support of the impugned action cannot be sustained for the following reasons:--
a) Impugned notice published on the BSE website on 01.01.2015 is neither addressed to the appellant nor it contains facts or reasons for suspending the trading in the securities of the appellant. It does not specify the provision of law that is allegedly violated by the appellant and does not specify the period for which the trading in the securities of the appellant shall remain suspended. Such a notice which does not contain facts or reasons for suspending the trading in the shares of the appellant cannot be said to be an order passed in accordance with law and hence unsustainable. In support of the above contentions reliance is placed on the decisions of the Apex Court in case of M/s. Kranti Associates Pvt. Ltd. v. Massod Ahmed Khan and Ors. Reported in (2010) 9 SCC 496 and Assistant Commissioner v. M/s. Shukla Brothers repowered in (2010) 4 SCC 785.
b) According to BSE, minutes of the Surveillance Committee Meeting dated 10/12/2014 is the basis for issuing the impugned notice. The said minutes are not approved by SEBI and are not published for the benefit of the trading members and therefore suspending the trading in the securities of the appellant on the basis of unapproved and unpublished draft minutes of the Surveillance Committee Meeting cannot be sustained. In support of the above contention reliance is placed on decisions of this Tribunal in case of M/s. Kaplana Plastiks Ltd. v. BSE (Appeal No. 78 of 2011 decided on 09.11.2011) and Padmini Engineering Pvt. Ltd. v. BSE & Anr. (Appeal No. 51 of 2006 decided on 27.05.2008).
c) By the impugned notice dated 01.01.2015 trading in the securities of the appellant is sought to be suspended with effect from 07.01.2015. Obviously, there was no grave and emergent situation which required the BSE to suspend trading in the securities of the appellant immediately without hearing the appellant. In such a case, if BSE could wait for seven days, then BSE could very well have issued show cause notice and pass appropriate orders after hearing the appellant. As the BSE has failed to do the needful the impugned notice dated 01.01.2015 is liable to be quashed and set aside.
d) Bye Law 39 framed by BSE, deals with suspension of trading, whereas, Bye Law 21 deals with the prohibition of dealing in securities. In the present case, trading is suspended by BSE and that power could be exercised only by the Governing Board of BSE. Since the impugned action is not taken by the Governing Board of BSE, the impugned action is bad in law. Although Bye law 39 is amended by BSE on 16/01/2014 and instead of the Governing Board the 'Exchange' is empowered to suspend dealings on the Exchange for such period or periods as it may determine, the said amendment does not empower Senior General Manager, (Surveillance and Supervision) of BSE to suspend trading as has been done in the present case. Although, Bye Law 39 refers to the standard operating procedure, for suspension of trading, appellant has not violated any of the criteria specified in the SEBI circular dated 30/09/2013. Therefore, the impugned notice issued by the Senior General Manager, (Surveillance and Supervision) of BSE is without jurisdiction and hence liable to be quashed.
e) Relying on a decision of Gujarat High Court in case of Alka Synthetics Limited v. SEBI reported in (1995) 95 Comp. Cas 663 (Guj) and a decision of Karnataka High Court in case of Bharat Electronics Limited v. BEL Head Officer Staff Association reported in 2001(3) Kar L. J. 201, it is submitted that when an order is passed whether in exercise of its administrative functions or quasi judicial functions, reasons recorded in the said order alone has to be considered and the reasons cannot be supplied by other documents or evidence. In the present case, impugned notice dated 01.01.2015 does not contain any reason and therefore the impugned notice cannot be sustained.
f) In any evident, it is submitted that the first parameter set out in the draft minutes dated 10.12.2014 cannot be said to have been satisfied in the present case, because, the registered office of the appellant is in fact located on First Floor of Tarabai Hall at Marine Drive, which premises is taken on leave and license basis by Sheorey Digital Systems Limited (a group company of the appellant) and part of that premises is being used by the appellant pursuant to the permission in writing granted by Sheorey Digital Systems Limited on 29/07/2013. Documentary evidence such as written permission granted by Sheorey Digital Systems Limited in favour of the appellant to occupy part of the aforesaid premises, print outs from the master data maintained by the registrar of companies showing both the companies (Sheorey Digital Systems Limited and the appellant) at the above address, various business agreements entered into by the appellant with third parties and letters received by the appellant-company at the above address were furnished to the BSE which clearly show that the appellant-company is situated at...
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