SAT Orders [Week ending 11-11-2011]

This post will focus on 2 recent orders of the SAT that assume some importance in the opinion of the author.
- V.T. Sumasundaram & Anr. vs Madras Stock Exchange & SEBI: This case clarifies the definition of 90% in Regulation 27(3)(d) of the Delisting Regulations, 2009. The Tribunal rejected a literal interpretation of the Clause in light with established norms of Company Law.
- Pooja Malik vs CPIO, SEBI, Mumbai: This case reiterates the application of RTI to orders of SEBI, as well as its application in relation to information obtained from foreign regulators for specific purposes.

V. T. Sumasundaram & Anr. vs Madras Stock Exchange & SEBI : SAT, Mumbai

The main issue in this appeal from the order of the Madras Stock Exchange (“MSE”) was whether “ninety percent shareholders” in Regulation 27(3)(d) of the Delisting Regulations, 2009 referred to 90% of the public shareholders in number or 90% of the public shareholding in value.

Regulation 27 deals with the voluntary delisting of ‘small companies’, which term is explained in the said Regulation. The said Regulation exempts such company from the requirements of Chapter IV of the Regulations (Chapter IV deals with providing the shareholders an Exit Opportunity in the case of Delisting). The company has to comply with certain conditions in addition to those mentioned in Regulation 8. One of them require the Promoter to individually write to all public shareholders informing them of his intention to delist the equity shares, mentioning the exit price and seeking their consent. Vide Regulation 27(3)(d) “At least ninety per cent of such public shareholders” must give their consent for the delisting.

Now the MSE refused the consent to delist the shares since only 125 of the 196 public shareholders had agreed to the delisting. The MSE argued that the appellants required the consent of at least 176 shareholders. The Appellants on the other hand argued that the 125 shareholders represented more than 90% of the public shareholding and as such the delisting should be permitted. The Tribunal held that general principles of Company Law must be upheld, the most important of which was “one share, one vote”. Giving the relevant Regulation a purposive interpretation, the Tribunal held that it must not be read ejusdem generis and it must be interpreted as shareholders representing 90% of the total public shareholding. 

A copy of the  order can be found here [04.11.2011]

Pooja Malik vs CPIO, SEBI, Mumbai: SAT, Mumbai

In this order, the SAT has reiterated principles regarding the applicability of the RTI Act to certain areas of SEBI's operations.

M/s. Informerics Valuation and Rating Pvt. Ltd was denied registration as a Credit Rating Agency by SEBI and the applicant sought copies of the notings and orders filed by the officers in arriving at the decision. SEBI denied the information and one of the arguments it took was that the order was that of SEBI, and not any independent officer, and as such disclosing the identity of the officer was not necessary. On appeal, the Tribunal agreed with SEBI’s reasoning to not provide such information as it would lead to disclosing the identity of the officers concerned.

The applicant also sought information about Coment (Mauritius) Ltd available to SEBI from any source, including FSC Mauritius Supervision, the regulatory authority in Mauritius. SEBI refused to provide the same, and the Tribunal agreed with SEBI on this ground as well. It held that the information that SEBI received from FSC Mauritius Supervision must only be used for the purpose for which it was sought and not for any other purpose. It held that the information received from foreign regulators are highly confidential and should not be disclosed to the public.

A copy of the  order can be found here. [31.10.2011]


From hereon, the posts would be posted weekly.