Delisted firms to contest BSE order


The promoters of at least two dozen of the 200 companies that have been compulsorily delisted by the BSE plan to file a writ petition against the Securities and Exchange Board of India (Sebi) and the stock exchange. Their contention is that they are under liquidation and therefore not liable to follow the delisting process, which entails payout to minority shareholders.

Around 45 companies in the list of 200 are undergoing liquidation. These include Alpic Finance, Blue Bird, CFL Capital Financial Services, Dhanus Technologies, Koutons Retail India and DSQ Biotech. Official liquidators have been appointed to wind up the companies’ affairs and to sell-off assets. The assets are being used to pay shareholders followed by the claims of creditors.

“BSE had gone ahead with compulsorily delisting without any prior approval from appellate tribunal. We have not been intimated about it, neither have we been given a chance of a hearing,” said the promoter of one of the companies that has to compulsorily delist. Citing the Companies Act, he added, “We have no role to play in the delisting procedures.”

The Companies Act says no suit or legal proceedings shall be commenced if a company is being wound up. Also, any such move is subject to tribunal approval.

Liquidation also absolves the promoters and employees of the companies, say experts.

An email sent to BSE went unanswered.

“The move is not right for firms that are undergoing liquidation. The company law prohibits legal proceedings if a company under liquidation fails to abide with delisting norms,” said Sandeep Parekh, founder, Finsec Law Advisors.

The move comes at a time Sebi is facing widespread criticism for classifying 331 companies as shell firms and suspending trading without cross-verification. The list was released by the ministry of corporate affairs MCA. BSE had last week issued three different circulars. The first pertained to 117 companies that were suspended for more than 10 years. According to it, promoters of these delisted companies will be required to buy the shares from the public shareholders at the fair value determined by an independent valuer appointed by the exchange.

“Such companies cannot offer the exit option to their shareholders as they are being liquidated,” said JN Gupta, managing partner, SES, a proxy firm. However, the delisting rules allowed the regulator and exchanges to take penal action against promoters in case of wrongdoing, Gupta added.

The second circular is for 28 companies that have remained suspended for more than a decade and are under liquidation. The third circular mentioned 55 companies that have been delisted by the National Stock Exchange (NSE), of which 17 firms are under liquidation.

Compulsorily delisting rules say delisted firms will cease to be listed and therefore not be available for trading. Further, the delisted firm, its whole-time directors, promoters and group companies shall be debarred from accessing the securities market for a period of 10 years from the date of compulsory delisting.

BSE also said till the time the promoters of a company provide an exit option to the public shareholders, it cannot transfer any of equity shares. The regulator can further freeze equity shares and corporate benefits held by the promoter group. The promoters and whole-time directors of such companies are not eligible to become directors of any listed company. Besides, these companies will be moved to the dissemination board of the exchange for a period of five years, as directed by Sebi.

The Business Standard


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