SAT rejects SEBI’s review plea in Schneider Electric delisting case

PALAK SHAH Mumbai | Updated on February 24, 2020

Regulator had filed the plea after 60 days, against the prescribed 30 days


The Securities and Appellate Tribunal (SAT) has rejected a review petition filed by SEBI in a matter involving investor complaints against Schneider Electric President Systems.


 SEBI filed its review with SAT on February 7 for an order passed by the tribunal in November 2019. If anybody wants to seek a review of the SAT order, they have to approach the same forum in 30 days. In case of appeal on merits, the same has to be done in 60 days. In this case, it was Supreme Court under Section 15Z of SEBI Act where the appeal had to be filed, experts said. 


Instead, SEBI filed a review on February 7, well after the deadline for even an appeal expired; which got rejected by the SAT. Experts say, that 'the regulator could now seek an appeal from the rejection of the review, thereby, ever-greening the matter.'   


In its November 2019 verdict regarding Schneider Electric President Systems, SAT had observed that none of the authorities, including SEBI and the stock exchanges, had discharged ‘any of their responsibilities’, including listing or monitoring the exit opportunity to shareholders of a company listed on regional stock exchanges (RSEs).

The case background

The Schneider Electric case was the second instance in 2019, where the shareholders of an RSE-listed company had moved SAT for ‘poor treatment’ of their complaint.

SAT had observed that the treatment of the case by SEBI and the exchanges made it wonder “if public shareholders of RSE-listed companies were children of a lesser God.” It was of the view that the continued listing, exit and valuation of shares of companies on RSEs cannot be treated as individual investor complaints by SEBI. It further asked the regulator to pass a reasoned order in three months.

A key fact that emerged in the matter, which will positively impact lakhs of investors, is that companies on RSEs have to first make a ‘genuine’ effort to list on national stock exchanges such as the BSE and the NSE. They should initiate an exit opportunity ‘only’ if they fail in this task.

Schneider was listed on the Bangalore and Pune stock exchanges, both of which subsequently closed down. Some shareholders had argued that under a SEBI circular, “it is mandatory for excursively listed companies on RSEs to seek listing on national level stock exchanges and, only for genuine reasons, alternatively, they can provide an exit option to the shareholders as per SEBI Delisting Guidelines/Regulations, after taking shareholders’ approval for the same within a time-frame to be specified by SEBI.” 

Alleged lack of effort

The shareholders had further argued that Schneider never made any effort to list on the national exchanges though it was eligible to get listed on the BSE. Rather, it communicated to its shareholders otherwise, and decided to exit/delist with an “undervalued offer to the public shareholders”. The valuation conducted by Schneider was contested as it did not take into account the complete assets and strengths of the company.

The shareholders, in their application to SAT, provided detailed evidence of how Schneider did not make any effort to list on the BSE or the NSE. They also said the self-valuation of its shares did not take all factors into account. “Instead of carrying out at least an examination, SEBI has treated these representations as just ordinary SCORES (SEBI Complaints Redress System) complaints like individual investors’ complaints such as non-receipt of shares, dividend etc, and the regulator and national level stock exchanges adopted a completely unconcerned approach and directed the appellants to approach the Bangalore Stock Exchange and Pune Stock Exchange (which are not even functional) or the company Schneider (which itself is against the public shareholders).”

“What appears on record is that the company prepared a plan of exit, got a valuation done and provided an exit option. No authority seems to have discharged any of their responsibilities including monitoring,” SAT said in its order.

Published on February 24, 2020

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