Madras Stock Exchange Ltd. Vs. Agate Finance Ltd. a Company Registered Under the Companies Act, 1956 Rep. by Its Director R. Mohan and ors. - Court Judgment

Excerpt:
company - amalgamation - grant of exemption - securities contracts (regulation) rules, 1957, rule 19(2) (b) - conformity with sebi guidelines in clause 8.3.5.1 (iii) - first respondent/transferee company sought for exemption for listing its shares in the appellant mse - single judge allowed petition - appellant contended that in accordance with the new guidelines governed by clause 8.3.5.1(iii) issued by sebi, at least 25 per cent of the paid-up capital of the unlisted transferee company was allotted to the public share-holders of listed transferor company - subject to compliance of the said requirement, the relaxation of strict enforcement of rule 19(2)(b) of the rules would be carried out - after the issuance of the communication first respondent-transferee company has given an undertaking to conclude the case as per the guidelines of the sebi letter - held, at least 25 per cent of the paid-up capital of the unlisted transferee company to be allotted to the public share-holders of listed transferor company for purpose of exemption as per rule 19(2)(b) - first respondent/transferee company directed to comply with its undertaking as agreed and appellant-mse directed to comply with the order of learned single judge - appeal disposed of - t.n. estates (abolition & conversion into ryotwari) act, 1948 [act no. 26/1948]. sections 5(2) & 67; [a.p. shah, cj, mrs. prabha sridevan & p. jyothimani, jj] suo motu revisional powers held, on a bare reading of the provisions of section 5(2) of the act, it is clear that the power conferred on the director by section 5(2) to cancel or revise any of the orders, acts or proceedings of the settlement officer is very wide. in the first place, the director need not necessarily be moved by any party in that behalf, and the power could be exercised either on an application by an aggrieved person or suo motu. for example, if the director comes to know that contrary to the scheme of the act or due to misrepresentation or fraud played, a patta had been granted to a person under the relevant provisions of the act, then to set right that mistake, the director should be enabled to exercise his power so as to effectuate the scheme of the act and to implement the purpose behind the act. the fact that the rule making authority has prescribed procedure in exercise of the powers under section 67 for making an application to the director does not mean that the suo motu power which is explicit in section 5(2) of the act is in any way curtailed or taken away. therefore, the contention of the respondent that making an application is sine qua non for invoking the power under section 5(2) of the act is not tenable. -- t.n. estates (abolition & conversion into ryotwari) act, 1948. sections 5(2) & 67; suo motu revisional powers held, on a bare reading of the provisions of section 5(2) of the act, it is clear that the power conferred on the director by section 5(2) to cancel or revise any of the orders, acts or proceedings of the settlement officer is very wide. in the first place, the director need not necessarily be moved by any party in that behalf, and the power could be exercised either on an application by an aggrieved person or suo motu. for example, if the director comes to know that contrary to the scheme of the act or due to misrepresentation or fraud played, a patta had been granted to a person under the relevant provisions of the act, then to set right that mistake, the director should be enabled to exercise his power so as to effectuate the scheme of the act and to implement the purpose behind the act. the fact that the rule making authority has prescribed procedure in exercise of the powers under section 67 for making an application to the director does not mean that the suo motu power which is explicit in section 5(2) of the act is in any way curtailed or taken away. therefore, the contention of the respondent that making an application is sine qua non for invoking the power under section 5(2) of the act is not tenable. f.m. ibrahim kalifulla, j.1. this original side appeal has been preferred by the madras stock exchange limited (for short, mse), as against the order of the learned single judge dealing with company cases in company application no. 576 of 202 in company petition no. 79 of 2001, dated 20.9.2002.2. the first respondent-transferee company as part of the scheme of amalgamation originally ordered on 20.7.2001, sought for a direction to the appellant-mse for compliance of clause (4)(2) of the scheme of amalgamation and consequently grant exemption to the first respondent-transferee company from rule 19(2)(b) of securities contracts (regulation) rules, 1957 (for short, 'the rules') for listing of its shares in the appellant-mse. while seeking for the above direction, the first respondent-transferee company also brought to the notice of the learned single judge with particular reference to clauses 8.3.5.1 and 8.3.5.3 of the securities and exchange board of india (for short, sebi) guidelines for the purpose of grant of relaxation of rule 19(2)(b) of the rules and stated that such requirement under the above referred to clauses 8.3.5.1 and 8.3.53 of the sebi guidelines was duly complied with.3. it is in the light of the above stand taken on behalf of the first respondent-transferee company, the learned judge directed the appellant-mse for compliance of clause 4(2) of the scheme of amalgamation and consequently grant exemption to it from rule 19(2)(b) of the said rules for the purpose of listing its shares with the appellant-mse.4. in the course of the submissions, learned counsel for the appellant-mse brought to our notice that in accordance with the new guidelines governed by clause 8.3.5.1(iii) issued by the newly impleaded fifth respondent herein, namely sebi, at least 25% of the paid-up capital of the unlisted transferee company is allotted to the public share-holders of listed transferor company, as has been pointed out in the fifth respondent-sebt's communication dated 31.3.2004 addressed to the appellant-mse. in fact, in the said communication, the appellant-mse has been directed to ensure that the first respondent-transferee company complied with the above stipulation as contained in clause 8.3.5.1(iii) of the new guidelines issued by the fifth respondent-sebi. the said communication of the fifth respondent-sebi also made it clear that subject to compliance of the said requirement, the relaxation of strict enforcement of rule 19(2)(b) of the rules would be carried out.5. after the issuance of the communication dated 31.8.2004 by the fifth respondent sebi, the first respondent-transferee company in its letter dated 21.9.2004 addressed to the appellant-mse has given an undertaking to the effect that, 'meanwhile, we undertake to conclude the case against your exchange under cmp. no. 16571 of 2002 and 1731 of 2004 in osa. no. 403 of 2002 at the hon'ble high court of chennai, as per the guidelines of the above referred sebi letter.' even subsequently, the said undertaking was reiterated in their communication dated 1.2.2005 in no uncertain terms which reads that, 'we are taking steps to convene our annual general meeting shortly to discuss and decide, among other things, the necessary steps to increase the public holding in our company to more than 25% either by way of right shares or through book building process or by initial public offering. we undertake to strictly comply with all the criteria as set out in sebi's letter cfd/dil/yg/19324/2004 dated 31.08.2004, addressed to you under copy to us.'6. having regard to such a categoric undertaking letters issued by the first respondent-transferee company, there is no reason as to why the first respondent-transferee company should not be directed to ensure that the compliance reported by it before the learned single judge which persuaded the learned judge to pass the impugned order, should not be directed to be carried out to its full extent without any deviation, by prescribing a time limit in order to enable the appellant-mse herein to comply with the direction of the learned single judge in the order dated 20.9.2002 passed in company application no. 576 of 2002 in company petition no. 79 of 2001 for listing of the first respondent-transferee company.7. with that view, we direct the first respondent-transferee company to comply with its undertaking as agreed in the above referred to passages of the communications referred to therein, within a period of three months from the date of receipt of a copy of this judgment and on such compliance, the appellant-mse is directed to comply with the order of the learned single judge dated 20.9.2002 in company application no. 576 of 2002 in company petition no. 79 of 2001, within four weeks thereafter.8. the original side appeal stands disposed of on the above terms. no costs.