SEBI takes strict action against Schneider Electric President Systems Ltd

SEBI takes strict action against Schneider Electric President Systems Ltd

The AO observed that the company had not been in compliance with the provisions of the said SEBI circulars even though it satisfied the listing norms or made a delisting offer under the Delisting Regulations

The Securities and Exchange Board of India (SEBI) directed Schneider Electric President Systems Limited (Company/SEPSL) on 19 January 2021 to either list the equity shares of the company on a stock exchange having nationwide terminals or delist the company within a period of six months from the date of this order, following the procedure prescribed under the SEBI (Delisting of Equity Shares) Regulations, 2009. Some more criteria pertaining to this action have also been directed.

In this matter, post de-notification of Pune Stock Exchange (PSE), the equity shares of the Company were moved to the Dissemination Board of NSE on 22 July 2016. Thereafter, the Company came out with an Exit Offer in terms of the SEBI Circular dated 10 October 2016 (2016 circular) on 'Exclusively listed companies of derecognized/non-operational/exited Stock Exchanges placed in the Dissemination Board (DB) at an exit price of Rs 200.40 per equity share. Later, SEBI received a complaint on behalf of 87 shareholders of Company.

The complainants mainly argued that the language used in the circulars, and SEBI's intention had been to clearly prioritize listing of ELCs over exit. If the circulars were read otherwise, the various rights of a large number of public shareholders of the Company including of trading/liquidity and the ability to question the management and hold it accountable for its performance were being unfairly taken away.

On the other hand, the Company argued that the complainants were nothing but opportunists trying to get an exit from the Company at a higher valuation. The complainants had sufficient time to raise grievances regarding the exit mechanism. However, they did so only on 10 March 2017, i.e., the last day of the exit offer given by the Company, in an obvious attempt to harass the Company for a higher exit price. It was also argued that the Company had rightfully exercised its option to grant exit to its shareholders.

The Adjudicating Officer (AO) opined that the company which was satisfying the eligibility criteria to move to a nationwide stock exchange, could not be allowed to take advantage of the diluted delisting criteria prescribed under the 2016 circular. Had the company complied with the 2012 or 2014 criteria and got itself listed on a nationwide stock exchange, then it would have had to follow the process specified under the delisting regulations for getting delisted.

There was an obligation cast on the Company by the 2014 circular to either migrate to another recognised stock or to delist in compliance with the Delisting Regulations, prior to the exit of the exchanges on which it was listed. The Company could not avoid the said obligations claiming that it was not aware of the exit of the exchanges and such arguments were untenable in law.

The AO also observed that there were no evidence of efforts made by the Company to comply with either of the said options prior to the exit of the BgSE (Bangalore Stock Exchange) and PSE (Pune Stock Exchange). Therefore, admittedly the company had not been in compliance with the provisions of the said SEBI circulars as it neither made any efforts to migrate to a nationwide exchange, even though it satisfied the listing norms of one such exchange, nor made a delisting offer under the Delisting Regulations.

It had been argued on behalf of the Company that listing of shares on a recognized stock exchange is as much a prerogative of the listed company as it is that of the recognized stock exchanges and companies which are listed on RSEs cannot be forced to list their shares on nationwide/recognized stock.

However, having carefully considered the evolution of policy in this regard, the AO was of the view that the question here was not regarding the right of a company to get delisted rather it was regarding the eligibility of a company which was fulfilling the criteria to migrate to a nationwide stock exchange seeking to delist by taking advantage of the diluted delisting norms prescribed under the 2016 circular.

It was summed up that an ELC which was eligible to list on a nationwide stock exchange, could not unilaterally opt for delisting by taking recourse under the 2016 circular. Such companies could delist only through the process laid down in the Delisting Regulations, and not by availing the relaxations under the 2016 circular.