BEFORE THE SECURITIES APPELLATE TRIBUNAL MUMBAI Date of Hearing: 20.6.2023 Date of Decision: 4.9.2023 Misc. Application No.463 of 2023 And Misc. Application No.464 of 2023 And Appeal No.471 of 2023 Synthetic Marble and Resin Ltd. 63/2, The Mall, 4th Floor, City Centre, Kanpur, Uttar Pradesh-208001. …Appellant Versus

1. National Stock Exchange of India Ltd. Exchange Plaza, C-1, Block-G, Bandra Kurla Complex, Bandra (East), Mumbai, Maharashtra-400051.

2. Bombay Stock Exchange Ltd. 25th Floor, P.J. Tower, Dalal Street, Mumbai – 400001.

3. National Securities Depository Ltd. Trade World, A Wing, 4th Floor, Kamala Mills Compound, Lower Parel, Mumbai -400013.

4. Central Depository Services (India) Ltd. Marathon Futures, A-Wing, 25th Floor, NM Joshi Marg,

Lower Parel, Mumbai-400013.

5. Scintilla Software Technology Ltd. 113/104, A-1, Krishna Apartment, Swaroop Nagar, Kanpur, Uttar Pradesh-208002.

6. European Software Alliances Ltd. F-10, 1st Floor City Centre, 63/2, The Mall, Kanpur, Uttar Pradesh-208001. …Respondents

Mr. Kunal Kataria, Advocate for the Appellant. Mr. Pradeep Sancheti, Senior Advocate with Mr. Ankit Lohia, Advocate and Mr. Shlok Bodas, Advocates i/b. Parinam Law Associates for the Respondent No.1. Mr. Sagar Divekar, Advocate with Mr. Abhimanyu Mhapankar, Advocate for the Respondent No.2. Mr. Pulkit Sukhramani, Advocate with Ms. Vidhi Jhawar and Mr. Deepank Anand, Advocates i/b. JSA for the Respondent No.3. Mr. Aman Kacheria, Advocate with Mr. Aprajita Mahto, Advocate i/b. Rahul Agarwal for the Respondent No.4. CORAM: Justice Tarun Agarwala, Presiding Officer Ms. Meera Swarup, Technical Member Per: Justice Tarun Agarwala, Presiding Officer

1. For the reasons stated in the application, the delay in

the filing of the appeal is condoned. The application is allowed.

2. The appellant is aggrieved by the communication

dated 22nd July, 2022 issued by the National Stock Exchange of India Ltd. (hereinafter referred to as ‘NSE’) refusing to defreeze the demat account of the Company on the ground that the action for defreezing was taken pursuant to the delisting of the two companies, Scintilla Software Technology Ltd. (hereinafter referred to as ‘SSTL’) and European Software Alliances Ltd. (hereinafter referred to as ‘ESAL’) in terms of Regulation 24 of the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009 pursuant to which the promoters have been debarred from accessing the securities market for a period of 10 years from the date of compulsory delisting. The appellant has consequently prayed for a direction that the stock exchange may be directed to instruct the depositories to defreeze the demat account of the appellant.

3. Facts leading to the filing of the present appeal is, that

there are two listed companies SSTL and ESAL. Trading of the shares in these two companies was suspended on 11th November, 2022 on account of non-compliance of the listing agreement. Respondent no.1, NSE issued a communication to SSTL and ESAL seeking details of its Directors and Promoters. The Respondent no.1 contends that no response was received from these two entities. Thereafter, a letter dated 28th April, 2016 was issued to the appellant informing that ESAL was in non- compliance of the listing agreement on account of which shares would be compulsorily delisted. The said letter also intimated that the appellant was a Promoter. However, this letter returned undelivered as admitted by the respondent in their reply. Subsequently, a show cause notice dated 18th April, 2016 was issued to SSTL and ESAL to show cause why it should not be delisted. A public notice dated 24th April, 2016 was issued. Thereafter, a letter dated 8th March, 2017 was issued to the Company Secretary of these two companies intimating that the Company would be delisted with effect from 24th March, 2017. NSE also intimated NSDL and CDSL i.e. the two depositories about the delisting with effect from 24th March, 2017 vide its letter dated 10th March, 2017.

4. According to respondent no.1, the appellant is shown

as a Promoter in SSTL holding 4,80,000 shares i.e.1.6% of the total shareholding of that Company. In ESAL, the appellant is shown as a Promoter holding 4,80,000 shares i.e.1.92% of the shareholding. These facts are on the basis of the annual reports filed by the Company before the stock exchange for the period from 2001 to 2005.

5. Based on the delisting order which took effect from

24th March, 2017 and as per Section 21A of the Securities Contracts (Regulation) Act, 1956 and the SEBI circular dated 7th September, 2016, the stock exchange were obligated to delist the securities of the Company as per Regulation 24 of the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009 (hereinafter referred to as the ‘Delisting Regulations) read with circular dated 7th September, 2016. The Directors and Promoters of the delisted Company were restrained from directly or indirectly accessing the securities market for a period of 10 years from the date of such delisting. Based on this provision, the demat account of the appellant Company was frozen.

6. The appellant contends that they were unaware of the

delisting order of 24th March, 2017 and came to know about the suspension of its demat account only on 13th April, 2018 when they received an email from its trading member stating that they have received a letter dated 8th June, 2017 from NSDL, a depository informing about the freezing of the appellant’s demat account in accordance with the SEBI circular dated 7th September, 2016. Pursuant to the aforesaid information, the appellant by email dated 11th July, 2018 sought information seeking the reason for freezing of its demat account. NSDL vide email dated 17th July, 2018 advised the appellant to approach NSE.

7. In paragraph 5.6 of the memo of appeal, the

correspondent between NSE and the appellant has been depicted from July, 2018 to 18th October, 2022. The appellant contended that it had a telephonic conversation with Mr. Hiren Shah of the Listing Compliance Department in July, 2018 who informed the appellant that they were shown as a Promoter of the two public entities, namely, SSTL and ESAL and since the shares of these companies were compulsorily delisted on non-compliance of various listing clauses of the listing agreement the appellant was delisted from accessing the securities market for a period of 10 years.

8. Based on the information given the appellant

addressed an email on 29th August, 2018 to NSE contending that they are not Promoters of these two entities. The balance sheet was also submitted showing that they have not made any investment in these two companies. The appellant requested NSE to resolve the issue on an urgent basis and defreeze the demat account. In response to the aforesaid email, NSE vide email dated 30th August, 2018 responded that they will check the record and respond but thereafter, did not respond. The appellant vide letter dated 7th February, 2020 and 26th February, 2020 requested NSE to examine the facts and revoke the suspension of the demat account. It is alleged that no response was given by NSE.

9. It is also stated that on 3rd November, 2020 the

appellant addressed a letter to SEBI requesting to arrange for investigation in the entire matter and exclude the name of the appellant as Promoter of the delisted Company. It seems that no response was given by SEBI to the aforesaid letter.

10. Thereafter, the appellant also made a request to BSE

vide letter dated 15th July, 2021. BSE vide email dated 13th October, 2021 informed the appellant that the Companies were delisted by NSE and, therefore, they should correspond with NSE.

11. The appellant submitted that thereafter the appellant

was communicating with NSE vide letter dated 2nd February, 2022, 4th April, 2022, 6th July, 2022, 21st July, 2022, 3rd August, 2022, 1st September, 2022, but no response was given. NSE vide email dated 2nd September, 2022 informed that they had communicated their response vide email dated 20th July, 2022 which was again supplied to the appellant view email dated 3rd October, 2022 intimating that since the appellant was a Promoter their demat account was frozen.

12. We have heard Mr. Kunal Kataria, Advocate for the

appellant and Mr. Pradeep Sancheti, Senior Advocate assisted by Mr. Ankit Lohia and Mr. Shlok Bodas, Advocates for the respondent no.1, Mr. Sagar Divekar, Advocate assisted by Mr. Abhimanyu Mhapankar, Advocate for the respondent no.2, Mr. Pulkit Sukhramani, Advocate assisted by Ms. Vidhi Jhawar and Mr. Deepank Anand, Advocates for the respondent no.3 and Mr. Aman Kacheria, Advocate assisted by Mr. Aprajita Mahto, Advocate for the respondent no.4.

13. From the correspondence made by the appellant with

the stock exchanges it is apparently clear that NSE has not investigated the matter nor considered the contentions, namely, that the appellant was never a Promoter of the two entities, namely, SSTL and ESAL. We also find that NSE was slow in responding to the letters given by the appellants and only a clear response was given in their alleged letter of 22nd July, 2022. Such response also did not investigate as to how and why the appellant was shown as a Promoter in the two listed companies.

14. Even before this Tribunal, the response of NSE was

clear, namely, that they are unable to do anything in the matter as the appellant was shown as a Promoter as per the data available on the website of BSE as on March end 2005 in which the appellant was shown as a Promoter in SSTL as well as ESAL. It was contended that the respondent has taken steps in terms of the legal provisions and they are unable to modify the same. In a nutshell, it has been stated that so long that the appellants name appears as a Promoter of the delisted companies their demat account shall remain frozen in terms of Regulation 24 of the Delisting Regulations, 2009 read with the SEBI circular dated 7th September, 2016.

15. In the light of the aforesaid, the controversy which

boils down is that the appellant contends that he was never a Promoter in SSTL and ESAL. On the other hand, NSE contends that as per the data available on the website of BSE and the annual report of the two companies from 2001 to 2005 indicates the appellant as Promoter in SSTL and ESAL.

16. The question is whether the entries in the annual

report of the two entities, SSTL and ESAL can be considered as the gospel truth. If the entries are fictitious then what is the remedy available to the entity who is shown wrongly as a Promoter. In this regard, we find that the SEBI Delisting Regulations of 2009 does not take such aspects into consideration.

17. We have perused the Delisting Regulations of 2009

where prior to delisting under Chapter V of the Delisting Regulations a stock exchange under Regulation 22(1) is required to give a reasonable opportunity to the Company before delisting the equity shares of the Company.

18. Normally the Company represents the Promoters

and, therefore, there is sufficient safeguard of compliance of the principles of natural justice but we are considering a situation where a person alleges that he is not a Promoter and that he has wrongly been shown as a Promoter. At the same time, the Company has vanished and is not responding to the show cause notice, etc. We find that there is no provision where the grievance of a person who has wrongly been shown as a Promoter could be addressed.

19. The appellant is faced with a piquant situation. His

demat account has been frozen on the ground that he is shown as a Promoter of two delisted companies. The appellant contends that he is not a Promoter. He makes a request to the stock exchange and the stock exchange states that based on the annual report filed by the two delisted companies where he has been shown as a Promoter the stock exchange cannot look beyond that and, consequently, cannot help the appellant even though the appellant alleges that he has wrongly been shown as a Promoter.

20. In our opinion, there is a lacuna in the existing

Delisting Regulations, 2009 which has been subsequently replaced by the Delisting Regulations of 2021. The Delisting Regulations of 2021 also has no provision for redressal of such grievance. We are of the opinion that SEBI should consider adding a provision for resolving such disputes where an entity comes forward contending that he was never a Promoter and on account of the compulsory delisting is being made to suffer for the defreezing of its demat account for 10 years. We accordingly recommend SEBI to place some mechanism for redressal of such grievance under its Delisting Regulations.

21. However, we have to resolve the present dispute.

We find that under Regulation 43 of the Delisting Regulations, 2021, the Board has the power to issue directions for the strict enforcement of the SEBI Act and the SCRA Act in the interest of the investors in the securities market.

22. Considering the aforesaid provision, we dispose of

the present appeal directing the appellant to file an application/representation under Regulation 43 of the Delisting Regulations, 2021 giving details and evidence for defreezing of its demat account. Upon receipt of the application the Board will investigate and afford an opportunity of hearing to the appellant and after considering all relevant facts and circumstances pass a reasoned order within four months from the date of receiving such application/ representation. The appeal is accordingly disposed of. The misc. application no.464 of 2023 is also accordingly disposed of.

23. This order will be digitally signed by the Private

Secretary on behalf of the bench and all concerned parties are directed to act on the digitally signed copy of this order. Certified copy of this order is also available from the Registry on payment of usual charges. Justice Tarun Agarwala Presiding Officer Ms. Meera Swarup Technical Member RAJALAK Digitally signed SHMI byRAJALAKSHMI 4.9.2023 HARISH NAIR HARISH Date: 2023.09.05RHN NAIR 12:48:16 +05'30'