Case: M/s. Discovery Wealth Management Services Pvt. Ltd. &amp; Others Vs. M/s. Padmini Engineering Pvt. Ltd. &amp; Others

price for delisting in accordance with the procedure and also enumerates the role of the stock exchange. 13. At this juncture, it is apt to refer to Clause 12.1 which provides for minimum number of shares to be acquired. The said Clause reads as follows: "12.1 Where the offer for delisting results in acceptance of a fewer number of shares than the total shares outstanding and as a consequence the public shareholding does not fall below the minimum limit specified by the listing conditions or the listing agreement, the offer shall be considered to have failed and no securities shall be acquired pursuant to such offer." 14. The submission of Mr. Bhambhani, as stated earlier, is that as pr the new guidelines the benchmark has to be 10 per cent. For the aforesaid purpose, he has highlighted Clause 40A of the Circular, i.e., conditions for continued listing. 15. Mr. Shyam Divan, learned senior counsel appearing for the respondent nos.1 and 4 and Mr. Arvind Datar, learned senior counsel appearing for SEBI, would contend that Clause 40A has to be read in conjunction with the delisting guidelines. That apart, it is contended by them that Clause 40A(i) and Clause 40A(ii) govern two different situations, and hence, the order of delisting cannot be found fault with. 16. To appreciate the rival submissions raised at the Bar, we have carefully scrutinised Clause 40A of the Circular. Be it stated, the clauses by virtue of the Circular have stood incorporated in the existing agreement. Clause 40A(i), as the language would suggest, provides that the listing company accepts the conditions to maintain a continuous basis the minimum level of non-promoter holding at the level of public shareholding as required at the time of listing. It clearly conveys the meaning that if there is a benchmark in the agreement, the same has to be maintained. Mr. Bhambhani would emphasise on Clause 40A(ii) to contend that the company has to maintain the benchmark at 10 per cent and it can only conceive of delisting if it goes below that. Mr. Datar, per contra, would submit that before the Circular was issued, certain listed companies had less than 10 per cent of non-promoter holding and, therefore, the Circular was issued that they should, within one year, bring it to 10 per cent. The aforesaid submission are to be appreciated in the context of the language employed in the Rule 19(1)(b), 2003 Guidelines and the agreement with the BSE.17. As we find, 2003 guidelines are applicable and prescribe the procedure for delisting of securities. As per the procedure prescribed, any promoter who desires delisting has to make an offer for purchase of shares in terms of clauses 8.1 to 8.3. The said exercise has to be completed within a period specified in clauses 8.1 and 8.5. The whole process has to be monitored by the Stock Exchange and the Registrar and transfer agency has to ascertain the genuineness of the physical securities tendered, etc. Clause 8.8 has its own signification. Clause 8.8 of 2003 guidelines stipulate that required level of public shareholding must fall below the level of continuous listing. Clause 12.1 of 2003 guidelines, states that the offer of delisting would fail if the public shareholding does not fall below the minimum limit specified by the listing conditions or the listing agreement. It is quite vivid that the 2003 guidelines do not prescribe or fix the required level of public shareholding of continuous listing though the said limit must be breached for an offer of delisting to succeed. It is condign to note that clause 12.1 refers to minimum limit specified by the listing condition or the listing agreement.18. As is evincible, Rule 19(2)(b) provides that at least 10% of each class or kind of securities must be offered to public for subscription through advertisement in newspaper during the time specified and the applications received pursuant to such offer should be allotted as per the conditions postulated. The proviso engrafts states that in case the company does not fulfil the conditions, it shall offer at least 25% of each of the securities to the public for subscription though advertisement in newspaper, etc. within the time stipulated. The opening words of sub-rule (2) of Rule 19 read "apart from complying with such other terms and conditions as may be laid down by a recognized stock exchange. an applicant company shall satisfy the stock exchange. These words have their own importance. It is clear that sub-rule (2) gives primacy to the terms and conditions as may be laid down by the recognized stock exchange and the company in question must satisfy the condition imposed by the stock exchange in that regard. As we find, in the instant case, as per the agreement between the company "Hella India" and BSE, the level of public shareholding fixed for continuous listing was 20%. The said limit of 20% is a higher limit. On failure of "Hella India" to maintain the level of 20%, the condition for continuous listing would be violated and breached. Public holding of 10% would not have satisfied the requirement of Rule 19(2). Therefore, when we harmoniously interpret the listing requirement i.e. the agreement with BSE with Rule 19(2) along with 2003 Guidelines, it is apparent and limpid that the condition for continuous listing would not have been followed by "Hella India", if the public shareholding had fallen below 20%. Thus, it has to be held that offer of delisting would be successful and would not fail, if the public shareholding falls below 20%. The 10% limit would not apply in view of Rule 19(2) as the said Rule recognizes the terms and conditions laid down by recognized stock exchange and stipulates that the same must be satisfied for the company to claim continuous listing.19. In view of the aforesaid analysis, we are disposed to think that the construction placed by the learned senior counsel for SEBI commends acceptation and we give the stamp of approval to the same. 20.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]10. To appreciate the said submission of Mr. Bhambhani, scanning of certain facets of the guidelines are absolutely essential.To appreciate the rival submissions raised at the Bar, we have carefully scrutinised Clause 40A of the Circular. Be it stated, the clauses by virtue of the Circular have stood incorporated in the existing agreement. Clause 40A(i), as the language would suggest, provides that the listing company accepts the conditions to maintain a continuous basis the minimum level ofholding at the level of public shareholding as required at the time of listing. It clearly conveys the meaning that if there is a benchmark in the agreement, the same has to be maintained.17. As we find, 2003 guidelines are applicable and prescribe the procedure for delisting of securities. As per the procedure prescribed, any promoter who desires delisting has to make an offer for purchase of shares in terms of clauses 8.1 to 8.3. The said exercise has to be completed within a period specified in clauses 8.1 and 8.5. The whole process has to be monitored by the Stock Exchange and the Registrar and transfer agency has to ascertain the genuineness of the physical securities tendered, etc. Clause 8.8 has its own signification. Clause 8.8 of 2003 guidelines stipulate that required level of public shareholding must fall below the level of continuous listing. Clause 12.1 of 2003 guidelines, states that the offer of delisting would fail if the public shareholding does not fall below the minimum limit specified by the listing conditions or the listing agreement. It is quite vivid that the 2003 guidelines do not prescribe or fix the required level of public shareholding of continuous listing though the said limit must be breached for an offer of delisting to succeed. It is condign to note that clause 12.1 refers to minimum limit specified by the listing condition or the listing agreement.18. As is evincible, Rule 19(2)(b) provides that at least 10% of each class or kind of securities must be offered to public for subscription through advertisement in newspaper during the time specified and the applications received pursuant to such offer should be allotted as per the conditions postulated. The proviso engrafts states that in case the company does not fulfil the conditions, it shall offer at least 25% of each of the securities to the public for subscription though advertisement in newspaper, etc. within the time stipulated. The opening words of(2) of Rule 19 read "apart from complying with such other terms and conditions as may be laid down by a recognized stock exchange. an applicant company shall satisfy the stock exchange. These words have their own importance. It is clear that(2) gives primacy to the terms and conditions as may be laid down by the recognized stock exchange and the company in question must satisfy the condition imposed by the stock exchange in that regard. As we find, in the instant case, as per the agreement between the company "Hella India" and BSE, the level of public shareholding fixed for continuous listing was 20%. The said limit of 20% is a higher limit. On failure of "Hella India" to maintain the level of 20%, the condition for continuous listing would be violated and breached. Public holding of 10% would not have satisfied the requirement of Rule 19(2). Therefore, when we harmoniously interpret the listing requirement i.e. the agreement with BSE with Rule 19(2) along with 2003 Guidelines, it is apparent and limpid that the condition for continuous listing would not have been followed by "Hella India", if the public shareholding had fallen below 20%. Thus, it has to be held that offer of delisting would be successful and would not fail, if the public shareholding falls below 20%. The 10% limit would not apply in view of Rule 19(2) as the said Rule recognizes the terms and conditions laid down by recognized stock exchange and stipulates that the same must be satisfied for the company to claim continuous listing.19. In view of the aforesaid analysis, we are disposed to think that the construction placed by the learned senior counsel for SEBI commends acceptation and we give the stamp of approval to theaforesaid submission are to be appreciated in the context of the language employed in the Rule 19(1)(b), 2003 Guidelines and the agreement with the BSE.