Madras High Court disposes writ seeking NSE IPO stay— declines to entertain the writ as it appears to be “premature”

K.R.Srivats New Delhi, Feb 4 New Delhi | Updated on February 04, 2021

National stock exchange (NSE), the country's largest bourse, has neither sought SEBI permission for floating an initial public offering ( IPO) nor has it been granted any such prior permission by the capital markets regulator for embarking on such an exercise.

This position has been revealed by the Madras High Court in a January 8 order while disposing off a writ petition filed by the Chennai Financial Markets and Accountability, which wanted the Court to direct SEBI to exercise its powers to "forbear the IPO of the National Stock Exchange".

Interestingly, even as the court has revealed this position, several intermediaries in the financial markets are now focused on marketing investment opportunities in the unlisted shares of NSE (akin to a pre-IPO private placement), industry sources said. Some capital market observers even wondered how such transactions can materialise when the issuer had not even filed IPO documents with SEBI.

In its January 8 order, the Madras High Court had contended that the writ petition appeared to be "premature" and is “not entertained as such”

“The substance of the submission on behalf of both SEBI and NSE appears to be that the writ petition may be pre-mature. Since it is admitted by the two leading dramatis personae that NSE cannot float an IPO without prior permission from the SEBI and since it is the undisputed position that such permission has not been sought or granted, there is no need to look into whatever the writ petitioner alleges”, the order noted.

However, the High Court has noted this order will not preclude the petitioner from challenging any future decision of NSE to float an IPO. The liberty given to challenge the IPO will be without prejudice to the rights and contentions of NSE, the order added.

SEBI had submitted to the High Court that no IPO of the kind complained by the writ petitioner can be set in motion without its prior permission. On its part, NSE said that it has not obtained the clearance from SEBI as yet and there can be no apprehension that NSE will not comply with the requisite formalities without embarking on such an exercise.

It may be recalled that the writ petitioner had challenged the rationale for the proposed IPO and questioned the propriety thereof. It had sought a stay on the IPO till the completion of the multi agency investigation on the multi crore Colo-Algo scam.

Published on February 04, 2021

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