The order is likely to reduce crores of wealth of millions of small shareholders’ into junk, tied up in 5,152 companies listed exclusively at 22 Regional Stock Exchanges (RSE), according to a release from the Midas Touch Investors Association
Delhi High Court has dismissed a Public Interest Litigation (PIL) regarding companies listed at Regional Stock Exchanges (RSE). The order is likely to reduce the wealth of millions of small shareholders into junk. Their money is invested in 5,152 companies listed exclusively at 22 Regional Stock Exchanges (RSE) whose license to carry on business as a Stock Exchange has either been cancelled or is in the process of being withdrawn by Securities and Exchange Board of India (SEBI). Delisting of 5,152 companies will reduce the companies listed by about 50% leaving around 5,500 companies listed at BSE and NSE.
In the writ petition, the petitioner, Midas Touch Investors Association had objected to the process laid down by SEBI for delisting of companies exclusively listed at RSE, as it had usurped the companies’ shareholders’ fundamental right, conferred under Article 14 and Article 21 of the Constitution of India, to seek Judicial Review.
The petition prayed that appropriate directions be given to SEBI to restore the fundamental rights of the citizens being shareholders to exercise the right of judicial review by filing an appeal against the order of delisting of a listed company as provided under the Securities Contracts (Regulation) Act, 1956.
The Delhi High Court Order was delivered by the bench comprising Chief Justice Mrs G Rohini and Justice Rajiv Endlaw. While dismissing the PIL the court considered an earlier PIL, on a similar matter, which was dismissed by it. The judgement stated that respondents counsel drew our attention to its Order dated 8 July 2014 in W.P. (C) No.3952/2014 titled Atul Agarwal Vs. Union of India. Order dated 8 July 2014 states that: Counsel for Atul Agarwal admitted that he was not aware of any grievance made by any of the shareholders of the companies listed thereon, ....that he (Atul Agarwal) claims to hold license of a commercial pilot “and has been unable to satisfy us as to how he is entitled to file the petition in public interest” and the Hon’ble Court ordered that “We are therefore not inclined to entertain this petition at the behest of the petitioner as a PIL and dismiss the same”.
In the Midas petition the court observed that “it cannot be said that the reliefs claimed in this petition are any different from that claimed in Atul Agarwal supra..... We therefore, do not see any reason to take a different view from that taken by us in Atul Agarwal and dismiss this petition. “
According to Midas Touch, “In the humble view of the petitioner, there has been some oversight in dismissing our (Midas) PIL, as the Order is based on some factual errors.”
The order states “that it cannot be said that the reliefs claimed in this petition are any different from that claimed in Atul Agarwal supra” contains factual error which is evident from perusal of orders in Atul Agarwal and Midas. The reliefs claimed by Midas Touch in its petition and stated in the Hon’ble Court’s Order are distinctly different from those sought by Atul Agarwal. None of the reliefs sought is common. Briefly, reliefs prayed by Midas, but not sought by Atul Agarwal, are:
(i) to direct SEBI to implement the Delisting Regulations, as enunciated in the Circular dated 29th December, 2008
(ii) to restore the fundamental rights of the shareholders of 5,152 companies which were exclusively listed at RSEs
(iii) to direct all RSEs, including the derecognised stock exchanges, to issue orders of delisting individually for all 5,152 companies exclusively listed on those RSEs and who have failed to get themselves listed at BSE or NSE
(iv) to frame a proper mechanism to compensate shareholders of companies listed on RSEs who have suffered huge loss due to de-recognition of various RSEs.
On the issue of non-issue of investor complaints, Midas counsel had also replied to this query from the court when SEBI counsel argued that Midas has not received any complaint from the investors on this issue. Madhumita Bhattacharjee refuted this argument and drew the courts attention to Midas letter to SEBI annexed with the writ petition. It contained a list of 966 investor grievances relating to 161 companies, which had disappeared lock, stock and barrel and requested action by SEBI but no action was taken.
“This will deepen the mistrust of one crore investors in integrity of securities market resulting in his shying away from investment with wide ramifications on Indian economy” said Virendra Jain, President, Midas Touch Investors Association. He further stated that “we have been advised by our counsel to file an Appeal in the Hon’ble Supreme Court against the High Court’s Order. We have accepted her advice and intend to appeal”.