Listing of Shares on Stock Exchange Requires Shareholder Approval: Supreme Court
The Supreme Court, in Jyoti Limited vs. BSE Limited & Anr., held that debt-to-equity converted shares cannot be listed on the stock market without prior in-principle approval from the company's shareholders under Section 62(1)(c) of the Companies Act, 2013. The Court also emphasized that even with shareholder approval, listing requires approval from the stock exchange under Regulation 28 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
A bench comprising Justices Pankaj Mithal and Sandeep Mehta dismissed Jyoti Limited's appeal against the Securities Appellate Tribunal's (SAT) decision. SAT had rejected the listing of 59,63,636 equity shares issued to an Asset Reconstruction Company (ARC) after converting ₹32.80 crore of debt into equity, citing the lack of shareholder and stock exchange approvals.
The appellant argued that shareholder approval was unnecessary since the debt-to-equity conversion was initiated under Section 9(1) of the SARFAESI Act, 2002, by the ARC. However, the Court found that the company's board had approved the conversion, making shareholder approval mandatory. Furthermore, BSE's approval was also required for listing.
The Court upheld SAT's findings, concluding that both shareholder and stock exchange approvals are prerequisites for listing shares. Accordingly, the appeal was dismissed.