On 1 October 2024, a new chapter unfolded in the ongoing story of ICICI Securities' attempt to delist from the stock market. A minority shareholder, who felt dissatisfied with the previous decision permitting the delisting, appealed to the national company law appellate tribunal (NCLAT), prompting the tribunal to issue a notice to both ICICI Securities and ICICI Bank. This situation escalated from a decision made by the national company law tribunal (NCLT) in Mumbai which approved the delisting on 21 August 2024, raising significant questions about the process.
During the hearing, lawyers argued about whether the shareholder had the right to complain. The counsel for ICICI Bank stated the shareholder did not have sufficient ownership in the company to challenge the delisting, bringing attention to a legal threshold that requires a shareholder to own a certain percentage of shares—10% holding under Section 230.
However, the counsel for the shareholder pointed out that there were problems with how the voting for the delisting was done, citing warning letters from the market regulator Securities and Exchange Board of India (SEBI) on 6 June 2024 which highlighted irregularities in the 27 March 2024 voting process. He argued that the issue of standing should only be considered after confirming statutory compliance, including the integrity of the voting process.
The bench will hear more about this on 19 November 2024.
This development follows NCLT Ahmedabad's order on 19 September 2024, directing ICICI Bank to disclose SEBI's exemption letter dated 20 June 2023, through an affidavit due by 3 October 2024. Also, the Bombay High Court, hearing a writ petition by another ICICI Securities shareholder, Aruna Vinod Modi, has directed SEBI to disclose the exemption letter and allowed Ms Modi to amend her petition. This writ petition is set for a hearing on 21 October 2024.
A key question emerging from these proceedings is why ICICI Bank and ICICI Securities opted for the special provisions under regulation 37 for delisting, which requires the holding and subsidiary companies to be in the same line of business, instead of the standard reverse book building process mandated by SEBI. Critics argue that banking and securities broking are distinct businesses, potentially making the companies ineligible for this special provision.
The ICICI Securities delisting saga has evolved into a complex, multi-forum legal battle involving various stakeholders. What began as objections from minority shareholders has expanded to encompass issues of regulatory compliance, corporate governance, and the interpretation of delisting regulations. The case now spans multiple legal venues, including NCLT in Mumbai and Ahmedabad, NCLAT in Delhi, and the Bombay High Court. The consistent demand for transparency across these forums, particularly regarding the SEBI exemption letter, underscores the growing scrutiny of the regulatory approvals underlying the delisting process.
As the case continues to unfold across various legal venues, it has the potential to set significant precedents for future delisting processes and corporate governance standards in India's evolving corporate landscape. It highlights the intricate interplay between corporate actions, regulatory oversight and shareholder rights in India. The outcomes of these proceedings could potentially set significant precedents for future delisting processes and corporate governance standards in the country.
You may also want to read…