EONOUR TECHNOLOGIES LIMITED Vs. MADHYA PRADESH STOCK EXCHANGE

JUDGEMENT

(1.) The writ petition has been filed by the petitioner for the issuance of writ of mandamus, to direct the Stock Exchange of Madhya Pradesh to grant permission for trading their 3,63,27,271 equity shares on their application dated 09.09.2002. But the respondents did not take any action on the application within the stipulated period of 10 weeks. The petitioner therefore approached the Securities appellate Tribunal under Section 22(A) of the Securities Contracts (Regulation) Act,1956. But, the Tribunal returned the papers and refrained from deciding the appeal, since the Managing Director of the petitioner company was known to the sole presiding member of the Tribunal. Since there was no alternative remedy, the petitioner approached this Court for a writ of mandamus as stated above.

(2.) The petitioner is a public limited company; it acquired shares of M/s. I. Trigger Technologies Private Limited, M/s. Web Net Technologies Private Limited, M/s. Linux Solutions Private Limited and M/s System Telecom and Data Services Private Limited on a "Stock Swap" basis in July,2002. Therefore, those companies became wholly owned subsidiaries of the petitioner company; the valuation report in respect of the aforesaid acquisition was given by Chartered Accountants and the valuation was done on 'discounted cash flow method' which is widely accepted method of valuation. The petitioner convened the extraordinary General Meeting on 27.08.2002 for the purpose of allotment of equity shares of the petitioner company to the members of the said four companies towards the Stock Swap and in consideration of the purchase of shares entered into an agreement. The notice of convening of EGM contains all necessary disclosures required to be made in respect of preferential allotment of shares as per SEBI (Disclosures and Investors) guidelines 2000. At the EGM, petitioner company approved the allotment of 3,63,27,271 equity shares of Rs.2 each at a premium of Rs.9/- to the promoters of the aforesaid four companies and the said pricing was also in accordance with the pricing formula prescribed under SEBI guidelines. The petitioner made application for listing of 3,63,27,271 equity shares with various Stock Exchanges. Madras Stock Exchange on 24.09.2002 and from Ahmadabad Stock Exchange on 07.02.2003 gave the approval. The respondent ought to have immediately granted the listing approval; the delay beyond the statutory prescribed period amounts to gross failure to exercise the discretion vested with the respondent; and it causes gross and irreparable hardship to the petitioner and the investors. The fairness of the valuation has been approved by this Court in the scheme of amalgamation sanctioned in the Company Petition Nos.281 to 284 of 2002, by which the four companies were amalgamated with the System Telecom and Data Services Private Limited, by order dated 10.03.2003 by this Court. The respondent failed in its duty to grant the listing within time prescribed. The respective Stock Exchanges have to accord permission within 10 weeks from the date of filing of the application. The appeal filed under Section 22(A) of the Securities Contracts (Regulation) Act to the Securities Appellate Tribunal was returned on the ground that the sole member presiding the said Tribunal is personally known to the petitioner. The petitioner has no other option except to approach this Court and hence the present writ petition.

(3.) (a) The respondent in its counter denied all the averments, and stated further that the writ petition is not maintainable. The Stock Exchange recognized under Securities Contracts (Regulation) Act, 1956, is not a public body or discharges any public duties and hence not amenable to writ jurisdiction; it is not the "State" or instrumentality of the State Government; the writ petition involved disputed questions of fact; that this Court has no territorial jurisdiction; the issue of shares at Chennai cannot be a basis for writ jurisdiction, merely because shares have been allotted by the petitioner and the Registered members of the petitioner company is maintained at Chennai does not confer jurisdiction; there was no representation or statement made subsequent to the application; the return of the securities appellate Tribunal amount to refusal of appeal and since the appellate Tribunal is at Mumbai, the petitioner can invoke only the jurisdiction of Mumbai High Court; non-joinder of SEBI which is the regulatory authority is fatal; the alternative remedy against the order of appellate tribunal was not exhausted and hence the writ petition is not maintainable. The petitioner is adopting different yardstick for valuation of the four companies. Hence, it is not acted fairly in the interest of investors of the petitioner's company. The allotment of shares made by the petitioner is not in accordance with the resolution passed in EGM held on 27.08.2002. As per the notice of EGM received by the respondent, the proposed allottees are some companies, but the details submitted by the petitioner for listing the shares are shown to be allotted to a different set of persons. The notice convening the EGM of the petitioner did not contained all the disclosures required under the law for preferential allotment as per SEBI(Disclosure and Investor protection) Guidelines, 2000. The identity of the persons proposed to be allotted were not disclosed in the original notice. The notice furnished to this Court contains alterations which goes to show that the petitioner is not been bona fide in approaching this Court. 3(b). Further it is stated that on the perusal of the financial performance of the petitioner company vis-a-vis, the four companies acquired would indicate that the shares of the petitioner were allotted in gross undervaluation of the petitioner company to the detriment of its investors; higher valuation has been adopted for the four unlimited private companies that were acquired. The higher price of the shares of the petitioner company were recorded at Rs.401 at Madhyapradesh Stock Exchange in March, 2000, Rs.492 at Madras Stock Exchange and Rs.634.75 at Mumbai Stock Exchange in July, 2000, but the allotment of the petitioner share at Rs.11 to the companies is not justifiable and it is a case of gross undervaluation and patently against the interest of the investors; the allotment of the shares either on preferential allotment basis or on a "Stock Swap" basis; the petitioner cannot take the benefit of it. By adopting different yardstick for the valuation of the shares of the acquiring companies, the petitioner had not adopted on fair means detrimental to the shareholders interest. In the event of the petitioner filing the valuation report of their own shares by an independent valuer on the same lines as done in the case of four companies, the respondent will consider the application on merits. The reason for not granting listing permission was the irregularities in issue and allotment of shares. The respondent is ready to consider the same within the parameters and regulations prescribed by the SEBI, if the application is submitted after complying all the requirements stated above.