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Judgment
Tarun Agarwala, Presiding Officer
There is a delay in the filing of the appeal. For the reasons stated in the application and in view of the order of Supreme Court in Suo Moto Writ Petition (Civil) No. 3 of 2020 dated March 23, 2020, March 8, 2021, April 27, 2021 and January 10, 2022, the delay in the filing of the appeal is condoned. The application is allowed.
The appellant is aggrieved by the order dated November 27, 2020 whereby the Delisting Committee directs that dealings in the securities of a Company be restrained and withdrawn in terms of Regulation 22(1) of SEBI (Delisting of Equity Shares) Regulations, 2009 (‘Delisting Regulations’ for short) read with Rule 21(b) of the Securities Contract Regulations Rules, 1957.
The brief facts leading to the filing of the present appeal is, that the National Stock Exchange of India Limited (‘NSE’ for short) issued a show cause notice dated August 26, 2020 to the appellant Company to show cause as to why the appellant Company should not be compulsorily delisted under Regulation 22(1) of the Delisting Regulations on the ground of continuous non-compliance with respect to the requirements under the Listing Regulations as specified in Annexure 1 to the show cause notice. Thereafter, the respondent sent an e-mail to the appellant Company on September 4, 2020 stating therein that reply has not been received by the respondent.
It transpires that the Delisting Committee considered the matter on September 24, 2020 and thereafter passed the impugned order on November 27, 2020 directing compulsorily delisting of the appellant Company under Regulation 22(1) of the Delisting Regulations.
We have heard Mrs. Rinku Valanju, the learned counsel for the appellant and Shri Gaurav Joshi, the learned senior counsel for the respondent.
The appellant contends that no opportunity of hearing was provided by the Delisting Committee before passing the impugned order and therefore the said order is violative of the principles of natural justice as embodied under Article 14 of the Constitution of India. In this regard Regulation 22(1) of the Delisting Regulations provides as under:-
“22. (1) A recognised stock exchange may, by order, delist any equity shares of a company on any ground prescribed in the rules made under section 21A of the Securities Contracts (Regulation) Act, 1956 (42 of 1956):
Provided that no order shall be made under this sub-regulation unless the company concerned has been given a reasonable opportunity of being heard.”
The proviso to Regulation 22(1) of the Delisting Regulations clearly indicates that no order directing delisting of the shares of the Company shall be made unless the Company is given a reasonable opportunity of being heard.
In the instant case, we find from paragraph 3.1 of the impugned order that the Company was given an opportunity of personal hearing vide show cause notice to appear before the Delisting Committee on September 24, 2020. The Committee also observed that the Company was not present in the personal hearing before the Committee and accordingly proceeded to pass the impugned order ex parte.
The show cause notice dated August 26, 2020 directs the appellant to show cause and file a reply in writing on or before September 5, 2020. No date was fixed in the show cause notice, namely, September 24, 2020 for hearing or requiring the appellant to appear before Delisting Committee. The show cause notice clearly indicated that the appellant was required to file a reply on or before September 5, 2020.
Consequently, the finding given in paragraph 3.1 of the impugned order that the appellant Company was given an opportunity of personal hearing vide show cause notice to appear before the Committee on September 24, 2020 is incorrect and cannot be sustained.
The contention of the learned senior counsel for the respondent that adequate opportunity was given to the appellant vide show cause notice dated August 26, 2020 which complies with the requirement of Regulation 22(1) of the Delisting Regulations is totally erroneous. The show cause notice of August 26, 2020 only directs the appellant Company to file a reply on or before September 5, 2020. The show cause notice does not given an opportunity of personal hearing as per proviso to Regulation 22(1) of the Delisting Regulations. The proviso clearly stated that no order shall be passed under Regulation 22(1) unless the Company has been given a reasonable opportunity of being heard. It means that the Delisting Committee is required to give a notice for hearing which admittedly no such notice was issued.
In Pagita Leasing & Finance Company Ltd. Vs Bombay Stock Exchange in Appeal no. 387 of 2017 decided on May 3, 2019 a delisting order was passed under Regulation 22(1) without issuing notice and without giving an opportunity of hearing. This Tribunal held as under:-
“20. A perusal of the aforesaid provisions indicates that no order of delisting shall be passed unless the company is given a reasonable opportunity of being heard. Thus, even though the public notice has been published in the daily newspapers under Regulation 22(4) asking the company to file objection, if any, it is still imperative for the Delisting Committee to provide an opportunity of hearing before passing the impugned order. By not giving an opportunity of hearing, the impugned order is violative of the principles of natural justice and cannot be sustained.”
The said decision is squarely applicable in the instant case.
Consequently, we are of the opinion that the impugned order is violative of principles of natural justice since no notice of hearing or opportunity of hearing was provided to the appellant Company.
For the reasons stated aforesaid, the impugned order cannot be sustained and is quashed. The appeal is allowed. The matter is remitted to the Delisting Committee to decide the matter afresh after giving a notice and opportunity of hearing to the appellant Company.
This order will be digitally signed by the Private Secretary on behalf of the bench and all concerned parties are directed to act on the digitally signed copy of this order. Certified copy of this order is also available from the Registry on payment of usual charges.