Securities and Exchange Board of India (SEBI) has denied Reliance Industries Limited, a waiver to delist the shares of bankrupt textile firm Alok Industries, which it had purchased in a Rs 5050-crore deal in March 2019.
Earlier, the National Company Law Appellate Tribunal (NCLAT) bench headed by Justice S J Mukhopadhaya had sought the view of the SEBI.
The SEBI ruling has come as a relief to minority shareholders of Alok Industries who have opposed the delisting of shares by Reliance Industries Limited.
It may be recalled that two retail investors in Alok Industries, claiming to represent an informal group of more than a thousand retail investors, had approached the NCLAT opposing Reliance’s move to delist the textile firm, arguing that it would erode value of the stakes held by minority shareholders.
Though the resolution professional who managed Alok Industries’ bankruptcy case had set a five-year moratorium on delisting its shares while calling for expressions of interest, the successful resolution applicant Reliance Industries had subsequently sought exemption to this condition.
After the Ahmedabad bench of the National Company Law Tribunal (NCLT) did not consider Reliance’s petition while approving the resolution proposal, the company moved the NCLAT seeking a waiver.
The NCLAT directed the SEBI to implead in the case and offer its views. This is because SEBI had made certain exemptions applicable when the resolution plan clearly specified delisting of shares and provided for an exit option to public shareholders at a specified price.
Later, Reliance approached the NCLAT, predicating its arguments on SEBI’s earlier notification which had relaxed delisting conditions for companies facing insolvency proceedings.
However, after its views were sought, SEBI told the NCLAT recently that delisting regulations shall not apply for cases under Insolvency and Bankruptcy Code (IBC) if it was done in accordance with Regulation 3 (3) “provided such resolution plan must be approved under Section 31 of IBC…”
The market regulator also added that the resolution plan must lay down “specific procedure to complete delisting of such shares or provide an exit option to the existing public shareholders at a price specified in the resolution plan.”