SEBI grants relaxation to Prabhat Dairy on provision 8 (1) (d) of Delisting Regulations

SEBI grants relaxation to Prabhat Dairy Limited, from the requirement to comply with the provisions of regulation provision 8 (1) (d) of Delisting Regulations

In this matter, Prabhat Dairy Limited (PDL/Applicant/Company) had requested Securities and Exchange Board of India (SEBI) for relaxation of timelines by one month for filing of the final application as required in terms of regulation 8(1)(d) of SEBI (Delisting of Equity Shares) Regulations, 2009 (Delisting Regulations).

SEBI appointed Grant Thornton Bharat LLP (erstwhile Grant Thornton India LLP) as the forensic auditor to conduct the audit for financial years ending March 31, 2019 and March 31, 2020. Based on the preliminary report submitted by Grant Thornton on account of non-supply of the requisite documents by the Company and also considering the complaints received from the shareholders of the Company, SEBI issued certain direction vide an ex-parte ad interim order.

Being aggrieved by the directions issued under the above mentioned Interim Order, an appeal was preferred before Hon'ble Securities Appellate Tribunal (SAT/Tribunal) and the Hon'ble Tribunal, having heard the parties while quashing the aforesaid Interim Order issued certain directions.

The Adjudicating Officer (AO) opined that PDL had received a letter from the promoters and promoter group proposing to voluntarily delist the equity shares of the Company in accordance with the Delisting Regulations. The delisting approval from the public shareholders by way of a special resolution in terms of regulation 8(1)(d) of Delisting Regulations through postal ballot was obtained by the Company.

As per regulation8 (1) (d)of the Delisting Regulations, PDL is required to make the final application to the concerned stock exchanges within one year of passing the aforesaid special resolution, which fell on October 13, 2020.

PDL was required to strictly comply with the directions issued by the Hon'ble Tribunal, however, the completion of forensic audit exercise had not been achieved on account of non-furnishing of requisite information by the Company to the auditor.

As per the submissions made by the Company in its application, the Company had applied for in-principle approval of its delisting proposal to the stock exchanges in December, 2019. However, certain queries/concerns were raised by the shareholders with regard to the said delisting proposal and subsequently, due to nationwide lockdown from March 2020 the overall process of delisting got hampered and consequently the entire process got delayed, hence, the final application required to be filed in terms of regulation 8(1) (d) of the Delisting Regulations could not be done within the prescribed timeline.

The Company had sought exemption under regulation 25A of the Delisting Regulation from the requirement to comply with the provisions of regulation 8(1)(d), which provides that the Company shall make the final application to the concerned the stock exchange within one year of passing of the special resolution by the shareholders approving the proposal of delisting of the Company and grant extension of 6 months to the special resolution by the shareholders approving the proposal of delisting.

The AO opined that the Applicant Company was essentially seeking an extension of 6 months to the validity and effect of the special resolution passed on October 14, 2019 for the purpose of delisting of the Company so as to complete the delisting process, which was approved by the majority of the shareholders indicating their interest of delisting the equity shares of the Company.

Further, the process of forensic audit was yet to complete. Based on the materials on records and the facts of the case, it was observed that completion of forensic audit (primarily delayed by not providing the requisite information and documents to the forensic auditor) and the outcome of the same appeared to have an impact on the interest of the public shareholders. Since, the process of forensic audit is in progress and incomplete, it would be in the interest of the minority public shareholders of the PDL that forensic audit is completed before the stock exchanges consider the final application for delisting.

Hence, in exercise of powers under sections 11(1) and 11B of the SEBI Act,1992 and regulation 25A of the SEBI (Delisting of Equity Shares) Regulations, 2009, the AO has granted relaxation to the Company i.e. Prabhat Dairy Limited, from the requirement to comply with the provisions of regulation8(1)(d) of Delisting Regulations by granting an extension of 6 months to the special resolution passed for the delisting of the Company i.e. till April 13, 2021(upon expiry of which, the Company shall be required to ensure compliance of all the relevant provisions of Delisting Regulations), subject to compliance with certain conditions as mentioned in this order.