Annual listing fee payable despite trading suspension: SAT

Enchante Jewellery Ltd. Vs BSE Ltd. (SAT Mumbai)

In the instant case, the appellant’s securities was suspended w.e.f. January 07, 2002. The appellant failed to discharge its obligation which it was required to pay the annual listing fee inspite of such suspension. We are of the opinion, that listing of securities and trading of securities are two distinct and well understood terms. The securities of a listed company may continue to be listed on the platform of the Exchange but trading in its securities may be suspended for various reasons. The fact that the trading of the securities of the appellant’s company was suspended does not entitle the appellant not to pay the annual listing fee. Even though, the trading was suspended, the securities of the appellant company continued to be listed on the platform of the Exchange which necessarily entails compliance with listing requirements and consequently payment of annual listing fee. Under the listing agreement the appellant is duty bound to pay the annual listing fee till such time the securities are listed on the platform of the Exchange. Admittedly, various compliances have not been made by the appellant and, consequently, the impugned order was passed.

The contention that since the securities of the appellant continues to remain listed during the suspension period the appellant is, thus, not liable to pay any reinstatement fee to the Exchange is incorrect. In this regard, we find that reinstatement fee is one of the requirements for purpose of revocation of suspension in the trading of securities. This requirement of payment of reinstatement fee is also gathered from the Circular dated December 19, 1994 issued by SEBI and Master Circular of listing dated January 18, 2019 wherein it becomes obligatory for a Company whose securities continue to be listed at the Exchange to pay annual listing fee as well as reinstatement fee for considering revocation of suspension in trading in the securities of the company.

SAT held that SEBI is entitled to levy fee for the purpose of revocation of suspension of trading in securities and the same is binding on companies desirous of such revocation. The Bye­law also empowers the respondent to reinstate suspended securities subject to conditions as it deems fit. Further in Clause 43 of the Listing Agreement the respondent is entitled to levy reinstatement fee upon companies seeking revocation of suspension of trading in securities.

FULL TEXT OF THE JUDGMENT/ORDER OF SECURITIES APPELLATE TRIBUNAL

1. The present appeal has been filed against the interim order dated February 11, 2021 passed by the Delisting Committee of the respondent BSE Ltd. wherein the company was granted 30 days time to submit all pending compliances including payment of all outstanding Exchanges dues and to complete the formalities for revocation of suspension of securities of the company as communicated by the Exchange failing which compulsory delisting against the company would be proceeded with in terms of the show cause notice.

2. The facts leading to the filing of the present appeal is, that the trading of the shares of the company was suspended by the respondent on January 07, 2002 soon thereafter the appellant became a sick company on October 28, 2002 in terms of Section 3(1)(o) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA” for convenience). On June 28, 2010 Board for Industrial and Financial Reconstruction (“BIFR”) issued a direction to change the management of the Company. This order was set aside by the Appellate Authority and the matter was remitted again to BIFR to consider the rehabilitation scheme for revival of the Company. On December 19, 2012 BIFR recommended winding up of the company. This order was again set aside by the Appellate Authority.

3. From May 2015 to December 2015 the appellant made numerous representations to the respondent for revocation of its suspension. In response, the respondent through various letters directed the appellant to complete the formalities with regard to revocation of suspension by March 31, 2018 failing which the respondent would proceed to compulsory delist the appellant Company. Since various formalities were not been completed a show cause notice dated April 26, 2018 was issued to show cause why the Company should not be compulsorily deregistered on account of the appellant’s failure to complete the compliances for revocation of suspension. Since the compliances were not made the impugned order was passed.

4. We have heard Shri Gautam Tiwari, the learned counsel for the appellant and Shri Tomu Francis, the learned counsel for the respondent.

5. The main ground of attack is, that the appellant is not entitled to pay annual listing fee during the suspension period. Further, the appellant is not entitled to pay the reinstatement fee as demanded by the respondent.

6. In this regard, we find that the regulatory framework i.e., SCR Act, Bye-laws and Regulations of the Exchange, LODR Regulations empowers the Exchange to levy fees, fines and penalties and a listed entity/ company is duty bound to pay/deposit all such fees/ charges, as applicable, to the Exchange. Pursuant to its listing on the platform of the Exchange, the listed entity/ company consented to and is obligated to make the payment of requisite annual listing fee till the time the securities are listed on the platform of the Exchange. Further, under Section 9(2) (o) of the SCR Act, recognized Stock Exchanges have been conferred the power to make Bye-laws, which can provide for the levy and recovery of fees, fines and penalties. We find that the applicable provisions of the Respondent’s Bye-laws and Regulations provide that an entity listed on the Stock Exchange platform is required to pay the Respondent, the listing fee, failing which, the Respondent can suspend trading in the listed entity’s securities, and such suspension can be revoked subject to compliance with the specified conditions as provided by the Respondent, including payment of the prescribed reinstatement fee. Further, under Section 21 of the SCR Act, an entity listed on the platform of a recognized Stock Exchange is required to comply with the conditions of listing contained in the Listing Agreement. It is notable that pursuant to Clause 38 of the Listing Agreement, the Appellant had consented to payment of annual listing fee to the Respondent and pursuant to Clause 39 of the said Listing Agreement, the Appellant had consented to comply with the Rules, Bye-laws and Regulations of the Respondent. Further, in terms of Clause 43 of the Listing Agreement the Appellant undertook to pay reinstatement fees to the Respondent should its securities be suspended from trading. Furthermore, pursuant to Regulation 14 of the LODR Regulations, the Securities and Exchange Board of India (“SEBI”) requires a listed entity to company to pay all such fees or charges, as applicable, to the recognized Stock Exchange(s), in the manner specified. Relevant Bye-laws and Regulations of the Respondent also provide for payment of such listing fees and further fees for revocation of suspension of trading in securities by companies prescribed by the Respondent. Thus, pursuant to its listing on the platform of the Exchange, the listed entity/ company consented to and was obligated to make the payment of requisite ALF till the time the securities are listed on the platform of the Exchange. The relevant provisions are set out below for ease of reference:-

SCR Act

“Conditions for listing.

21. Where securities are listed on the application of any person in any recognised stock exchange, such person shall comply with the conditions of the listing agreement with that stock exchange.”

LODR Regulations

“Fees and other charges to be paid to the recognized stock exchange(s).

14. The listed entity shall pay all such fees or charges, as applicable, to the recognised stock exchange(s), in the manner specified by the Board or the recognised stock exchange(s).”

BSE Bye-laws and Capital Markets Segment-Regulations

Bye-Laws

Chapter V:

“(8) Fees

Issuers desiring listing of securities on the Exchange shall pay such listing and such other fees and such other deposits as the relevant authority may from time to time determine.”

Regulations (The power to make Regulations flows from Chapter IV Bye-laws (2) of BSE’s Bye-laws)

3.1A6 “The Exchange may also revoke the suspension of trading in securities at any time as may be directed/ provided by the SEBI or as the Exchange may deem fit, in the interest of the investors of the securities market from time to time.

3.1A7 The Exchange shall, for the purpose of revocation of suspension of trading in securities, prescribe fees from time to time, which shall be binding on the companies and the companies shall be required to pay the same for revocation of suspension.

…”

Listing Agreement executed between the Appellant and the Exchange (Exhibit –K to the Appeal)

“38 a) Payment of Listing Fees:

The Company agrees that as soon as its securities are listed on Exchange, it will pay to the Stock Exchange an Initial Listing fee as prescribed in Schedule II hereto annexed and made a part thereof, and that thereafter, so long as the securities continue to be listed on Stock Exchange, it will pay to the Exchange on or before the 30th April, in each year an Annual Listing Fee computed on the basis of the capital of the Company as on 31st March and worked out as provided in Schedule II hereto annexed. The company also agrees that it shall pay the additional Annual Listing Fee, at the time of making application for listing of securities arising out of further issue, as is computed in terms of Schedule II annexed hereto for any addition in the capital after 31st March.

39. The Company agrees that in the event of the application for listing being granted such listing shall be subject to the Rules, Bye-laws and Regulations of the Exchange which now are or hereafter may be in force and the Company further agrees to comply within a reasonable time with such further regulations as may be promulgated by the Exchange as general requirement for new listings.

43. …AND THE COMPANY HEREBY FURTHER AGREES AND DECLARES THAT all or any of its securities listed on the EXCHANGE shall remain on the list entirely at the discretion of the EXCHANGE AND THAT, the Exchange may, in its absolute discretion, suspend or remove the securities from the list at any time and for any reason whatsoever. For the said suspended security to be re-admitted to dealings on the Exchange, the company shall pay to the Exchange such amount as reinstatement fees as may be prescribed by the Exchange from time to time.”

7. In view of the aforesaid provisions, it is clear that the appellant was required to pay the fee levied by the respondent. Further the respondent was also empowered to take action against the defaulting companies for non-payment of the annual listing fee. In the instant case, the appellant’s securities was suspended w.e.f. January 07, 2002. The appellant failed to discharge its obligation which it was required to pay the annual listing fee inspite of such suspension. We are of the opinion, that listing of securities and trading of securities are two distinct and well understood terms. The securities of a listed company may continue to be listed on the platform of the Exchange but trading in its securities may be suspended for various reasons. The fact that the trading of the securities of the appellant’s company was suspended does not entitle the appellant not to pay the annual listing fee. Even though, the trading was suspended, the securities of the appellant company continued to be listed on the platform of the Exchange which necessarily entails compliance with listing requirements and consequently payment of annual listing fee. Under the listing agreement the appellant is duty bound to pay the annual listing fee till such time the securities are listed on the platform of the Exchange. Admittedly, various compliances have not been made by the appellant and, consequently, the impugned order was passed.

8. The contention that since the securities of the appellant continues to remain listed during the suspension period the appellant is, thus, not liable to pay any reinstatement fee to the Exchange is incorrect. In this regard, we find that reinstatement fee is one of the requirements for purpose of revocation of suspension in the trading of securities. This requirement of payment of reinstatement fee is also gathered from the Circular dated December 19, 1994 issued by SEBI and Master Circular of listing dated January 18, 2019 wherein it becomes obligatory for a Company whose securities continue to be listed at the Exchange to pay annual listing fee as well as reinstatement fee for considering revocation of suspension in trading in the securities of the company.

9. The method of calculation of reinstatement fee has been provided in the norms of revocation which states as under:-

“ …Verification of compliances:

The companies are required to comply with extant revocation norms and provisions of the SEBI (listing obligations and disclosure requirements) Regulations, 2015 which inter-alia include the following inter-alia include the following:

…

7. Payment of Fees:

Payment of applicable revocation fees of the exchange as under:

1. Annual listing fees

2. Revocation Processing fees of Rs. 25,000/- plus applicable GST, (to be submitted along with application seeking in principle approval for revocation and valid for a period of one year)

3. Re-instatement fees plus applicable GST, payable after receipt of in principle approval for revocation and prior to approval for resumption of trading (Please REFER NOTES)…”

Note:

The Method of Calculation of Reinstatement Fee (Effective from September 27, 2017):

Note:

• For the companies in respect of which reference has been made to or which under the BIFR reference, a relief is granted to the extent of 50% of the reinstatement fees for the period starting from the date of reference to the BIFR till the date the company has come out of BIFR reference.
• For the companies which are in the process of voluntary winding up or compulsorily winding up and the Exchange has suspended trading based on court order, if such companies do not want to go for winding up but want to go for activation/ revocation after complying with filings under Listing Agreement, the maximum cap of reinstatement fees would be Rs. 5 lakhs plus taxes.”

10. In view of the aforesaid and in view of Regulation 3.1A.7, the respondent is entitled to levy fee for the purpose of revocation of suspension of trading in securities and the same is binding on companies desirous of such revocation. The Bye­law also empowers the respondent to reinstate suspended securities subject to conditions as it deems fit. Further in Clause 43 of the Listing Agreement the respondent is entitled to levy reinstatement fee upon companies seeking revocation of suspension of trading in securities.

11. In view of the aforesaid, we do not find any error in the interim order passed by the Delisting Committee. The appeal fails and is dismissed with no order as to costs.

12. 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.