Refusal of Listing by a Stock Exchange – Judicial Trend


Listing[1] refers to the company’s share being in the list of Stock Exchange for public trading. A company needs to be listed in order to liquidate its ownership. Section 73 of the Companies Act mandates an application to be made to one or more Stock Exchanges whenever a company intended to offer shares to the public. The Company needs to be in compliance with laws and bye–laws[2] relating to the listing in order to get listed. Company need to make a listing agreement[3] with Stock Exchange as well. After reviewing all these requirements, Stock Exchange lists the shares of the applicant company. In the case when any Stock Exchange refuses to list a company, Applicant Company can appeal to central government or Securities Appellate Tribunal against such decision of the stock exchange under section 22 & 22A of Securities Contracts (Regulation) Act, 1956.[4] Central Government Securities Appellate Tribunal after giving the stock exchange an opportunity of being heard, vary or set aside the decision of the stock exchange. Decision of the Securities Appellate Tribunal can be further appealed to Supreme Court of India.[5]

Research Questions:

  1. If there is a question of law or fact as to whether or not the applicant company is in compliance with laws and bye-laws[6]who has the final say whether or not, company should be listed, Stock Exchange or SEBI/Tribunal/Courts/Central Government?
  2. Can a condition provided under bye-laws of a company be held irregular or invalid by tribunal/courts?

The simple and generally followed principle is this that if the applicant company is in compliance with all the laws and bye-laws, its shares are listed and if it is not in compliance with all the laws and bye-laws, it gets the refusal of the Stock Exchange. But, such refusal can be appealed. Stock Exchange needs to disclose grounds of such refusal. In case of appeal against such refusal, the decisions of judiciary in various cases are discussed in this assignment.

This is as for the response to the primary exploration question. If there should arise an occurrence of Pentamedia Graphics Limited v. Bombay Stock Exchange[7] , A Graphics Company had its plan of amalgamation with the other organization, which was endorsed by the high court under clause 24(f) yet the organization was still not recorded by the stock trade. An offer was recorded to Securities Appellate Tribunal and in this way to High Court of Madras against such choice. High Court released the claim and taking after clarification was given. Section 4 of the Securities Contracts Regulation Act engages SEBI to perceive the Stock Exchanges. It additionally controls the tenet making of the said Exchanges. Stock Exchanges are held to be administrative powers. Their byelaws tie purchasers, vendors and intermediaries, as well as outsiders who are influenced by the exchanges in the Stock Exchange. They are qualified for control all matters associated with the matter of the Stock Exchange. The byelaws have the impact of the statutory power. Henceforth, given the mastery in the above field, the elite region of the Stock Exchange to give acknowledgment subject to the consistence of the Securities Laws, the Regulations and the Listing Agreement, with regards to Clause 24(f) of posting understanding[8] is not to be mistaken for the ward of this Court conceding endorsement of the Scheme. The candidates have, undoubtedly, recorded a duplicate of the Scheme and the appeal proposed to be documented. Be that as it may, considering Clause 24(g) of posting assertion[9], even after the gift of endorsement to the Scheme, it is interested in the Stock Exchange to dismiss the supplication for posting, when it is fulfilled that such posting would be violative of the Securities Laws, there is no lack of regard to the request of endorsement conceded by this Court. The power who is to judge on the benefits of posting is skilled to land at a choice regarding the laws relating to the posting. In this perspective of the matter, one needs to take a gander at Section 392 of the Companies Act. Further, if there should be an occurrence of Jindal Securities Pvt Ltd v. Sistema Shyam Teleservices Ltd[10], the candidate organization recorded its application to look for headings for the stock trade to get the organization recorded, yet the court declined to give any such course. Court in authorizing plan of the organization imagined probability of non-posting of shares of the organization in not so distant future for reasons of posting being in area of statutory powers i.e. Stock Exchange. It is all around settled that natural forces of Company Court under Rule 9 of Rules is force identifying with practice and strategy of Court and does not present any force on Court to decide substantive rights. Bearings as to posting in activity of forces under Sections 391(2) and 394 of Act[11] or generally under Rule 9 of Rules would be abundance of ward of Company Court.

The Applicant Company was on record with averment that shares would be recorded on Stock Exchanges. In this manner, Respondent couldn’t be coordinated to rundown its shares in stock trade/s inside determined sensible time allotment. Further if there should be an occurrence of SEBI v. Sterlite Industries (India) Ltd[12] , Stock Exchange did not list shares of the candidate organization as a plan of course of action as to rate of the shares, was held sporadic by the Stock Exchange.

Be that as it may, in request, the Bombay High Court approved the plan and requested the Stock Exchange to list the shares of the organization and held that there was no legitimacy in the dispute of resistance of the rules and laws. In this way, reply to this inquiry would be this that the Court has the last caution and they have energy to decide the response to the inquiry whether or not, the candidate organization is in consistence with laws and bye-laws. In any case, Courts for the most part has a tendency to acknowledge the choice of the Stock Exchange.

In case of Mr.A.Chandrasekaran vs M/S.Yoha Securities Limited[13], National Stock Exchange by its Bye law (3) of Chapter XI of NSE Bye Laws[14] put down a condition that any appeal to the decision of the Stock Exchange can be made only within the limitation period of 1 month to the Arbitration. Applicant Company challenged this bye-law in the Madras High Court. The Validity of the Bye-law was not checked by the court however applying section 34 (4) of the Indian Contract Act[15], High Court ordered National Stock Exchange to restart the arbitration and decide the case on merits. In another Supreme Court Judgement bye-law of the Stock Exchange to delist the company on the basis of suspicion was held invalid by the court as it was against principles of natural justice and also was causing high amount of loss to the applicant company (The grade of the company decreased from AA to F).

The Bye-Laws of any recognised Stock Exchange are not published in official Gazette of India and neither Stock Exchange is a governmental Unit. Its functions have element of public functions. Bye-laws gets power from the Indian Contract Act as there is a contract between the Stock Exchange and the Applicant Company and Securities Contracts (Regulation) Act, 1956 and Companies Act which gives preferential treatment to listed companies and recognises these units. Further, these Stock Exchanges are in implied contract with the SEBI and other governmental units to follow their guidelines. Therefore, Central Government and Tribunals/Courts do have supervisory power over these laws and bye-laws can be invalidated merely on the basis that they are in violation of the spirit of the other company and securities related laws.[16]


For the conclusion, author has opinion that in present system and procedure followed, it can clearly be seen that Stock Exchange has been given its discretion to list or delist a company following the proper procedure and recording proper reasons as to its decision. But the decision is appealable to Tribunal and courts and these organs of the judiciary have more power to alter or change the decision than normal civil appeal.

[1] For the purpose of this assignment, Listing, Listing of shares, List of stocks, Listing of securities or Listing of company conveys the same meaning.

[2] Laws and Bye-laws include SEBI (Listing Obligations And Disclosure Requirements) Regulations, 2015 and other applicable regulations /guidelines/circulars as may be issued by SEBI from time to time, the relevant byelaws / regulations / circulars / notices / guidelines as may be issued by the Exchange from time to time and such other directions, requirements and conditions as may be imposed by SEBI/ Exchange from time to time.

[3] S.2(q) of Securities And Exchange Board Of India (Listing Obligations And Disclosure Requirements) Regulations, 2015 : “listing agreement” shall mean an agreement that is entered into between a recognised stock exchange and an entity, on the application of that entity to the recognised stock exchange, undertaking to comply with conditions for listing of designated securities.

[4] S.22, 22A of Securities Contracts (Regulation) Act, 1956.

[5] Before amendment of 2004, there was provision to appeal to High Court.

[6] Supra 2.

[7] MANU/TN/7566/2006.

[8] Listing Agreement between Bomabay Stock Exchange and Pentamedia Graphics Ltd, Cl. 24(f).

[9] Id, Cl. 24(g).

[10] MANU/RH/0037/2015

[11] S. 391(2), 394, Companies Act, 1956.

[12] 2003 113 CompCas 273 Bom, 2003 45 SCL 475 Bom.

[13] (1995) 97 BomLR 737.

[14] Bye law (3) of Chapter XI of NSE Bye Laws.

[15] S.34 (4) of the Indian Contract Act.

[16] Here ‘Securities related laws’ mean the SEBI Act, 1992, the Securities Contracts (Regulation) Act, 1956, the Depositories Act, 1996 and the provisions of the Companies Act, 1956 which are administered by SEBI under Section 55A thereof, the rules, regulations, guidelines etc. made under these Acts and the Listing Agreement.

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