M/S. DISCOVERY WEALTH MANAGEMENT SERVICES PVT. LTD. & ORS. versus MIS. PADMINI ENGINEERING PVT. LTD. & ORS.

Citation: [2014] 14 S.C.R. 265 · Decided: 10-12-2014 · Supreme Court of India · Bench: DIPAK MISRA · Disposal: Dismissed

Judgment (excerpt)

[2014] 14 S.C.R. 265 
MIS. DISCOVERY WEALTH MANAGEMENT SERVICES 
A 
PVT. LTD. & ORS. 
v. 
MIS. PADMINI ENGINEERING PVT. LTD. & ORS. 
(Civil Appeal No. 5027 of 2008) 
B 
DECEMBER 10, 2014 
[DIPAK MISRA AND UDAY UMESH LALIT, JJ.] 
Securities Contracts (Regulation) Rules, 1956: 
r.19(2)(b)- Securities and Exchange Board of India (Listing C 
of Securities) Guidelines, 2003: clauses 8.1 to 8.5, 12.1 -
Delisting of shares- BSE did not al/ow the delisting of shares 
of Hefla· Ltd. as level of public shareholding in Hella India 
did not go below 10% - Held: The offer of delisting would fail 
if the public shareholding does not fall below the minimum D 
. listing conditions or the listing agreement- In the instant case, 
as per the agreement between the company He//a India and 
BSE, the level of public shareholding fixed for continuous 
listing was 20% ~ On failure of "Hella India" to maintain the 
level of 20%,. the condition for continuous listing would be E 
violated and breached and Hella Ltd. would be eligible to 
get de/isted. 
Dismissing the appeal, the Court 
HELD: 1. On a perusal of the agreement between F 
Hella Ltd. and the BSE, it is clear that the benchmark 
had been determined fixed at 20 per cent. It is not in 
dispute that the public shareholding has reduced to 
18.63 per cent, which is less than 20 per cent. Clause 
40A(i) provides that the listing company accepts the G 
conditions to maintain on a continuous basis the 
minimum level of non-promoter holding at the level of 
public shareholding as required at the time of listing. It 
clearly conveys the meaning that if there is a benchmark 
265 
H 
266 
SUPREME COURT REPORTS 
[2014] 14 S.C.R. 
A in the agreement, the same has to be maintained. 2003 
guidelines are applicable and prescribe the procedure 
for delisting of securities. As per the procedure 
~rescribed, any promoter who desires delisting has to 
make an offer for purchase of shares in terms of clauses 
B 8.1 to 8.3. The said exercise has to be completed within 
a period specified in clauses 8.1 and 8.5. The whole 
process has to be monitored by the Stock Exchange and 
the Registrar and transfer agency has to asc_ert_ain the 
genuineness of the physical securities tendered, etc. 
c Clause 8.8 of 2003 guidelines stipulate that required level 
.of public shareholding must fall below the level of 
continuous listing. Clause 12.1 of2003 guidelines states 
that the offer of delisting would fail if the public 
shareholding does not fall below the minimum limit 
o specified by the listing conditions or the listing 
agreement. It is quite vivid that the 2003 guidelines do 
not prescribe or fix the required level of public. 
shareholding of continuous listing though the said limit 
must be breached for an offer of delisting to succeed. 
E [Paras 8, 16, 17][275-G-H; 276-A-B, D-H] 
.3 .. Rule 19(2)(b) provided that at least 10% of each 
class or kind of securities must be offered to public for 
subscription through advertisement in newspaper 
during the time specified and the applications received 
F pursuant to such offer should be allotted as per the 
conditions postulated. The proviso engrafts states that 
in case the company does not fulfill the conditions, it 
. .shall offer at least 25% of each of the securities to th.e 
public for subscription through advertisement in 
G newspaper, etc. within the time stipulated. The opening 
words of sub-rule (2) of Rule 19 read "apart from 
complying with such other terms and c"onditions as may 
be laid down by a recognized' stock exchange. These 
words have their own importance. It is clear that 
H 
DISCOVERY WEALTH MANAGEMENT SERVICES P. 
267 
LTD. v.PADMINI ENGINEERING P. LTD. 
sub-rule (2) gives primacy to the terms and conditions A 
as may be laid down by the recognized stock exchange 
in that regard. In the instant case, as per the agreement 
between the company "Hella India" and BSE, the level 
of public shareholding fixed for continuous listing was 
20%. The said limit of 20%, is a higher Ii mil On failure of B 
"Hella India" to maintain·the level of 20%, the condition 
for continuous listing would be violated and breached. 
Public holding of 10% would not have satisfied the 
requirement of rule 19(2). Therefore, when harmoniously 
interpreted, the listing requirement i.e. the agreement c 
with BSE with rule 19(2) along with 2003 Guidelines, it is 
apparent that the condition for continuous listing would 
not have been followed by "Hella India", if the public

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