The ongoing controversy surrounding the proposed delisting of ICICI Securities Ltd has taken a new turn, with an investor moving the Bombay High Court (HC) to challenge the Securities and Exchange Board of India's (SEBI’s) decision to grant relaxation from delisting rules to ICICI Bank Ltd. This development adds another layer of complexity to a case that has already seen significant debate at the national company law tribunal (NCLT).
As previously covered in detail
here, the delisting proposal of ICICI Securities has faced opposition from minority shareholders who raised concerns about transparency, fairness and regulatory compliance. The case, which we initially reported on hearings at the NCLT on 9th July and 15 July 2024, has now expanded to include this new legal challenge in the HC.
Aruna Modi, a shareholder of ICICI Securities, has filed a writ petition arguing that SEBI "acted beyond its jurisdiction" in granting the exemption to ICICI Bank. The petition contends that regulation 42 of the delisting regulations does not empower SEBI to grant relaxations or exemptions regarding substantive requirements under these regulations.
The arguments presented in Ms Modi's petition echo many of the concerns previously raised by minority shareholders at NCLT. Both sets of objections focus on the questionable nature of SEBI's exemption, particularly regarding the 'same line of business' criterion.
Just as Quantum Mutual Fund and Manu Rishi Guptha argued at NCLT, Ms Modi's petition emphasises the distinct operational differences between ICICI Bank and ICICI Securities.
The lack of transparency in disclosing the grounds for SEBI's exemption, a point of contention in NCLT proceedings, is also central to Ms Modi's petition.
Additionally, both forums have seen arguments about the potential unfairness of the share swap ratio to minority shareholders and concerns about the precedent this delisting could set for future corporate actions. This alignment in arguments across different legal venues underscores the consistency of the objectors' concerns and the multifaceted nature of the legal challenges facing ICICI Bank's delisting proposal.
The petitioner also raised concerns about the lack of transparency, noting that SEBI did not provide a copy of the 20 June 2024 order granting the relaxation or exemption to ICICI Securities.
This legal challenge comes in the wake of the March 2024 approval by public shareholders of both ICICI Bank and ICICI Securities for a scheme of arrangement. Under this scheme, ICICI Bank proposed to delist the broking firm through a share swap deal, offering 67 shares of ICICI Bank for every 100 shares held in ICICI Securities.
The petition warns that SEBI's relaxation of delisting rules in this case could set a precedent encouraging other companies to misuse the delisting regulations. It seeks to have the court declare the scheme of arrangement illegal and void, and to stay SEBI's exemption order until a verdict is reached.
This HC petition adds to the existing challenges filed by Quantum Mutual Fund and Bengaluru-based money manager Manu Rishi Guptha at the NCLT's Mumbai and Delhi benches, respectively.
The case highlights the complex interplay between corporate strategies, regulatory decisions and shareholder rights in India's financial markets. As it progresses through multiple legal forums, it continues to draw attention from investors, regulators, and the broader corporate community, potentially setting significant precedents for future delisting processes and the interpretation of regulatory exemptions.
