The promoters of at least two dozen out of the 200 companies that have been compulsorily delisted by BSE, plan to file a writ petition against the market regulator Securities and Exchange Board of India (Sebi) and the stock exchange.
Their contention is that they are currently under liquidation and therefore not liable to follow undergo the delisting process, which entails payout to minority shareholders.
Around 45 companies in the list of 200 are undergoing liquidation. Some of them include Alpic Finance, Blue Bird, CFL Capital Financial Services, Dhanus Technologies, Koutons Retail India, DSQ Biotech and so on.
There are 45 firms in the BSE 200 list which are undergoing liquidation.
In liquidation proceedings, an official liquidator is appointed to wind up the company's business affairs and to sell-off assets. The assets are being used to pay shareholders followed by the claims of creditors.
"BSE had gone ahead with compulsorily delisting without any prior approval from appellate tribunal. We have not been intimated about it neither given a chance of hearing," said promoter of one of the companies that has to be compulsorily delisted. Citing the Companies Act provisions, he further said we have no role to play in the delisting procedures.
The Companies Act says that no suit or legal proceedings shall be commenced if the company is under "winding up" or have appointed official liquidator. Also, any such move is subject to tribunal approval.
The liquidation also absolves the promoters, officials and employees of the companies, say experts.
An email sent to BSE went unanswered.
"The move is not right for firms who are undergoing liquidation. Company law's provision prohibits legal proceedings if the company under liquidation fails to abide the delisting norms," said Sandeep Parekh, founder, Finsec Law Advisors.
The move comes at a time when market regulator Securities and Exchange Board of India ( Sebi) is facing widespread criticism for classifying 331 as shell firms and suspended trading without cross-verification. The list was released by ministry of corporate affairs ( MCA) for allegedly being used as conduits for illicit fund flows.
BSE had last week issued three different circulars. The first circular pertained to 117 companies that have remained suspended for more than ten years. According to it, promoters of these delisted companies will be required to buy the shares from the public shareholders as per the fair value determined by the independent valuer appointed by the exchange.
"Such company's cannot offer exit option to its shareholders as its being liquidated," say JN Gupta, managing partner, SES, a proxy firm.
However, the delisting rules allow the regulator and exchanges to take penal action against the promoters in case of wrongdoing, Jupta added.
The second circular is for 28 companies that have remained suspended for more than a decade and are under liquidation. While third circular mentioned 55 companies that have been delisted by National Stock Exchange (NSE), of which 17 firms are under liquidation.
Compulsorily delisting rules say that delisted firms would cease to be listed and therefore not be available for trading. Further, the delisted company, its whole-time directors, promoters and group companies shall be debarred from accessing the securities market for a period of 10 years from the date of compulsory delisting.
BSE also said that till the time promoters of the company provide an exit option to the public shareholders, it cannot transfer any of equity shares (by way of sale, purchase). The regulator can further freeze of equity shares and corporate benefits held by the promoter group. The promoters and whole-time directors of the such companies are not be eligible to become directors of any listed company. Besides, these companies would be moved to the dissemination board of the exchange for a period of five years as directed by Sebi.