In a Public Interest Litigation pertaining to the issue of delisting of securities without protecting the investors and praying for appropriate action against those who dupe such investors, the Delhi High Court held that statutory provisions appropriately provide for a robust mechanism to safeguard the interests of investors, and that “by no stretch of imagination can it be said that the interest of investors is not protected in law”.

A Division Bench of Chief Justice Satish Chandra Sharma and Justice Tushar Rao Gedela observed that there is a transparent legal mechanism in place to deal with the process of delisting of securities, including a remedy to an investor aggrieved by such delisting, under the Securities Contract (Regulations) Act, 1956.

“It empowers the stock exchange to suspend or withdraw admission to the dealings in the securities of a company for breach of or non-compliance of any of the conditions of admission to dealings or any other reason, to be recorded in writing. It also provides for a remedy to the aggrieved company or body corporate to prefer an appeal before the SAT”, added the Bench.

Advocate Nikhil Tyagi appeared for the Petitioner, whereas CGSC Ravi Prakash and Manisha Agrawal Narain along with Senior Advocate Neeraj Malhotra appeared for the Respondent.

Going by the background of the case, the Petitioner had sought direction to the Securities and Exchange Board of India (SEBI) to direct the Bombay Stock Exchange (BSE) to make more stringent and effective alternative penal provisions against promoters and management of the errant listed companies. It was contended that many companies had been suspended from continued listing and many of them had been de-listed without ensuring any protection to investors. This was opposed by SEBI contending that the Centre had already set up a co-ordination and monitoring Committee which had arrived at a certain criterion for identifying a company as a vanishing company. Hence, the present petition.

After considering the submission, the Bench observed that the interest of the investors was certainly protected under the statutory provisions of the Act of 1956 and the Securities and Exchange Board of India Act, 1992.

The Bench noted that SEBI was empowered to take measures in the interest of investors, which included regulating the business in the stock exchange and registering and regulating the working of stock brokers.

Referring to the Act of 1956 which conferred ample amount of power to any recognized stock exchange for providing conditions for listing of securities, the Bench pointed out that the aggrieved investor could also file an appeal before SAT in case of delisting of the security under Section 21A(2) of the Act of 1956.

While navigating through Rule 19 of the Securities Contract (Regulation) Rules, 1957, the High Court stated that it provides for a requirement with respect to the delisting of securities on a recognized stock exchange which empowers the stock exchange to suspend or withdraw the admission to the dealings in the securities of a company for breach of or non-compliance of any of the conditions of admission to dealings or any other reason, to be recorded in writing.

Accordingly, the High Court concluded that the statutory provisions governing the field made it very clear that a transparent mechanism of delisting the securities, adequate participation and/ or representation of public shareholders in the process of delisting was in place, and remedies were also available to the aggrieved investor in the matter of delisting.

Cause Title: Atul Agarwal v. Union of India [Neutral Citation Number: 2023: DHC: 3474-DB]

Click here to read/download Judgment



Delhi High CourtChief Justice Satish Chandra SharmaJustice Tushar Rao Gedela

Pankaj Bajpai