BEFORE THE SECURITIES APPELLATE TRIBUNAL
MUMBAI
Appeal No. 102 of 2007
Date of decision : 31.3.2008
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Mac Charles (India) Ltd.
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…… Appellant
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Versus
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Bombay Stock Exchange Limited
Securities and Exchange Board of India
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…Respondents
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Mr. J.J. Bhatt Advocate with Mr. M.S. Reddy Company Secretary for the Appellant.
Mr P.N. Modi Advocate with Mr. Sagar Divekar Advocate for Respondent No.1.
Mr. Devanshu P. Desai Advocate with Ms. Dhwani Mehta Advocate for Respondent no.2.
Coram : Justice N.K. Sodhi, Presiding Officer
Arun Bhargava, Member
Utpal Bhattacharya, Member
Per : Justice N.K. Sodhi, Presiding Officer (Oral)
This appeal filed under section 22A of the Securities Contracts (Regulation) Act, 1956 is directed against the order dated 5.2.2007 passed by the Bombay Stock Exchange Limited (for short BSE) rejecting the request of the appellant company for listing 10 lakh equity shares allotted by it on a preferential basis to one of its promoters namely, Mr. C. B. Pardhanani. One of the main grounds on which the request of the company was turned down is that the preferential allotment was in violation of clause 13.1A of the Securities and Exchange Board of India (Disclosure and Investors Protection) Guidelines, 2000 (for short the guidelines). Another ground on which BSE declined to list the preferential allotment is that the company failed to submit the bank statement to evidence the receipt of the share allotment monies by it. It is pertinent to mention here that trading in the scrip of the company had been suspended by BSE on account of non-payment of the listing fee of Rs.15,000/- for the financial year 2005-06. That amount was paid on 30.9.2005 and the order of suspension was revoked and we are not concerned with that aspect. When this appeal came up for hearing before us on 31.10.2007 it was argued on behalf of BSE that when the preferential allotment was made in favour of Mr. Pardhanani, the necessary disclosures had not been made to the shareholders who had authorized the board of directors to make the allotment. It was contended that the company had not disclosed to its shareholders the shareholding pattern before and after the allotment of preferential shares and that it had also not disclosed the time schedule within which the allotment was to be made. It is not in dispute that the guidelines require such disclosures to be made. The company then held an extra ordinary general meeting on 25.6.2007 in which the necessary disclosures were made and the shareholders ratified their earlier decision taken in the annual general meeting held on 26.12.2000. The fact that the shareholders have ratified their earlier decision is not in dispute. What is now contended is that the shareholders were not informed in the explanatory statement attached to the notice convening the extra ordinary general meeting on 25.6.2007 that the amount received against the preferential allotment was not in cash but for consideration other than cash and, therefore, the shareholders could not be said to have taken an informed decision in this regard. In the facts and circumstances of this case, we are not inclined to accept this contention. Our primary concern was to ensure whether the company had received the necessary amount against the preferential allotment made in favour of Mr. Pardhanani. We had directed the company to file an affidavit stating as to whether the amount was received by it or not. A detailed affidavit dated 7.12.2007 has been filed alongwith all the supporting documents stating therein that the preferential allotee had assigned a debt due to him in favour of the company and that in settlement of that debt the company acquired land and building at no. 80, 3rd Cross, Lavell Road, Bangalore for Rs.2,21,32,817. It is also pointed out that the acquired property was registered in the name of the company in September 2000. It is not in dispute that the company sold the acquired property in the year 2002 for a sum of Rs.2,75,00,000/- which is in excess of the amount which Mr. Pardhanani had to pay to the company towards the preferential allotment of 10 lakh shares. The total amount due from him towards preferential allotment was Rs.2,32,80,000/-. Apart from the affidavit, the company has also produced a certificate from its statutory auditors certifying that the aforesaid amount was received in the year 2002 on the sale of the property. The veracity of this certificate is not being disputed by BSE. This being the position, we are satisfied that the company received the amount against the preferential allotment though in the year 2002. Since the amount received is far in excess of the amount that was due to it on account of the preferential allotment, we do not think that the company or the general body of the shareholders have in any manner suffered. Excess amount takes care of the delay in the receipt of the funds. Moreover, in view of the ratification by the shareholders in the subsequent extra ordinary general meeting held on 25.6.2007 there seems to be no ground to deny the company its right to get the shares listed.
In the result, we allow the appeal and direct BSE to list 10 lakh shares allotted to Mr. Pardhanani on preferential basis. There is no order as to costs.
Sd/-
Justice N.K. Sodhi
Presiding Officer
Sd/-
Arun Bhargava
Member
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Utpal Bhattacharya
Member
31.3.2008
ddg/-