SECURITIES APPELLATE TRIBUNAL

MUMBAI

SVPCL Ltd.

v.

Bombay Stock Exchange Ltd.

Justice N.K. Sodhi, Presiding Officer

Arun Bhargava and Utpal Bhattacharya, Members

Appeal No. 47 of 2008

May 9, 2008

Section 73 of the Companies Act, 1956, read with section 22A of the Securities Contracts (Regulation) Act, 1956 - Shares - Allotment of, to be dealt in stock exchange - Appellant company in its prospectus had named BSE and NSE as two stock exchanges where it proposed to list its scrip - Accordingly, it applied to both exchanges seeking their permission for listing of its shares - BSE rejected listing application of appellant company by impugned communication and NSE did not pass any order on listing application till date, thus, application for permission filed with NSE was deemed to have been rejected in terms of section 73(5) - Appellant filed instant appeal against order of rejection passed by BSE but it did not file any appeal against deemed rejection by NSE and, thus, order of NSE became final - Whether in view of provision of section 73(1A), if permission for listing is not granted by stock exchange or each such stock exchange, as case may be, before expiry of ten weeks from date of closing of subscription lists, then any allotment made in pursuance to prospectus shall be void - Held, yes - Whether only contingency in which such allotment could, then be saved from being void is referred to in proviso to section 73(1A) and that is, when an appeal is filed before this Tribunal under section 22A of SCRA against decision of any recognized stock exchange refusing permission for listing the shares - Held, yes - Whether since requirement of law is that both exchanges mentioned in prospectus should have granted permission within ten weeks from closing of subscription lists and NSE having rejected application of appellant for listing by a deemed order which had become final, public issue/allotment as a whole must necessarily fail - Held, yes - Whether even if order of BSE were to be set aside and permission on its behalf was granted said order would be of no consequence in light of deemed rejection by NSE and public issue would still not be revived - Held, yes - Whether, in such circumstances, there was no substance in instant appeal and, consequently, it was to be dismissed - Held, yes

FACTS

The appellant was a company registered under the Act with its registered office at Hyderbad. The appellant company in its prospectus had named BSE and NSE as the two stock exchanges where it proposed to list its scrip. As per the requirements of section 73(1), it applied to both these exchanges seeking their permission for the listing of its shares. The BSE rejected the listing application of the appellant company by the impugned communication and NSE did not pass any order on the listing application till date. Thus, the application for permission filed with the NSE was deemed to have been rejected in terms of section 73(5). The appellant in instant appeal challenged the communication sent by the BSE informing that its application seeking listing of equity shares had been rejected as the lead manager responsible for post issue compliances had expressed its inability to certify that section 73 had been complied with. The appellant, however, did not file any appeal against the deemed rejection of NSE to list its equity shares.

HELD

Section 73 requires that every company intending to offer shares to the public for subscription by the issue of a prospectus should make an application to one or more recognized stock exchanges seeking their permission for listing the shares on the stock exchange or each such stock exchange. This application must be made before the issue of the prospectus. Sub-section (1A) of section 73 provides that the company in the prospectus for a public issue of shares shall not only state that an application for permission for listing the shares has been made to one or more recognized stock exchanges but it shall also state the name of the stock exchange or, as the case may be, each such stock exchange. It is also the mandate of this sub-section that if permission for listing is not granted by the stock exchange or each such stock exchange, as the case may be, before the expiry of ten weeks from the date of the closing of the subscription lists, then any allotment made in pursuance to the prospectus shall be void. The only contingency in which such allotment could then be saved from being void is referred to in the proviso to section 73(1A) and that is, when an appeal is filed before this Tribunal under section 22A of the SCRA against the decision of any recognized stock exchange refusing permission for listing the shares. Where such an appeal is filed the allotment shall not be void until the dismissal of the appeal. In other words, the allotment will then be subject to the decision of the appeal. Section 73(5) postulates that an application for permission shall be deemed to have been rejected if it is not disposed of within ten weeks from the date of the closing of the subscription lists which is the time specified in sub-section (1A). This deeming provision is clear and unambiguous and there are no ifs and buts nor does it admit of any exception. From a reading of the provisions of section 73 and from the language in which they are couched, it becomes abundantly clear that they are mandatory. Validity of the allotment of shares made in pursuance to the prospectus has been made dependent upon permission for listing being granted by the stock exchange(s) concerned within ten weeks from the date of the closing of the subscription lists. This period of ten weeks is sacrosanct and cannot be extended for any reason whatsoever nor can any period be excluded therefrom. It would follow that each and every stock exchange named in the prospectus on which the scrip of the company is intended to be listed must grant the permission within ten weeks and if any one of those exchanges, for whatever reason, refuses the permission within that time or if there is a deemed refusal under section 73(5), the entire allotment shall become void. The public issue will, however, be saved or the allotment shall not be void only if the issuer company were to file an appeal against the refusal or deemed refusal of the stock exchange. [Para 2]

In the instant case, the appellant had mentioned the names of NSE and BSE in its prospectus when it offered shares to the public for subscription. It was, therefore, necessary that both these exchanges should have granted permission for the listing of the shares within ten weeks from the closing of the subscription lists. BSE by the impugned communication had rejected the listing application of the appellant against which the instant appeal has been filed. In view of the proviso to sub-section (1A) of section 73, the issue/allotment qua the BSE had not become void due to the pendency of the instant appeal. The application filed with NSE was deemed to have been rejected which rejection could be appealed against under section 22A of SCRA as had been done in the case of BSE but no appeal having been filed, the deemed rejection by NSE had become final. Had an appeal been filed against the deemed refusal by NSE, the issue/allotment under the prospectus would then have been saved in terms of the proviso to sub-section (1A) of section 73 and would have become subject to the decision in the appeal. In the absence of an appeal, the public issue qua the NSE had become void. Since the requirement of the law is that both the exchanges mentioned in the prospectus should have granted the permission within the ten weeks from the closing of the subscription lists and NSE having rejected the application of appellant for listing by a deemed order which has become final, the public issue/allotment as a whole must necessarily fail. Even if the order of BSE was set aside and permission on its behalf was granted said order would be of no consequence in the light of the deemed rejection by NSE and the public issue would still not be revived. This is the mandate of section 73(1A). [Para 3]

The appellant contended that because of a restraint order issued by the Board, it had become impossible for NSE to grant the permission within the specified time and in view of this impossibility the doctrine of lex non cogit ad impossibilia would be attracted and the impossibility was a valid excuse for non compliance with the provisions of section 73(1A). Even if the appellant’s contention was accepted that the restraint order issued by the Board had made it impossible for NSE to grant permission within the requisite period of ten weeks, the allotment/public issue nevertheless became void on the expiration of ten weeks and nothing could save it except an appeal to the Tribunal. Even an impossibility, as pleaded by the appellant would not by itself save the allotment. In that event also, the issuer company should have filed an appeal under section 22A of the SCRA against the refusal or deemed refusal of the exchange and could have taken the ground of impossibility before the Tribunal upon which the latter could have passed appropriate orders. The allotment would then have been subject to the order of the Tribunal in appeal and this was the only way in which the public issue/allotment could have been saved. Grant of permission by NSE within the requisite period might have become impossible but the filing of an appeal against its deemed refusal had not. Since the proviso to section 73(1A) itself has provided a way out, the doctrine of impossibility of performance (lex non cogit ad impossibilia) was not attracted. [Para 5]

In the result, the appeal failed and the same was to be dismissed. [Para 7]