J.P. Devadhar, Presiding Officer
1. This appeal was mentioned yesterday for urgent reliefs. Since none appeared on behalf of respondents, we directed the Registry to place the matter on board today and directed the appellant to give fresh notice to the respondents.
2. Today, counsel for respondents have appeared and sought adjournment to take instructions and to file affidavit in reply. Since counsel for appellant has insisted on considering the issue relating to grant of interim relief in view of urgency in the matter, we have heard counsel on both sides for the limited purpose of granting interim relief.
3. Short question that falls for consideration in this appeal is, whether by impugned communications all dated 19th September, 2014, the respondents are justified in holding that the appellant has violated clause 16 of the listing agreement, on ground that the time gap between the book closure and record date fixed as 24/9/2014 for the purpose of interim dividend is less than 30 days.
4. Facts relevant for the purpose of this appeal are that appellant, a public limited company, was to hold its 25th Annual General Meeting (AGM) on 12th September, 2014 and for that purpose appellant had declared book closure during the period from 8th September, 2014 till 12th September, 2014.
5. On 8th September, 2014 appellant intimated to both the stock exchanges i.e. Bombay Stock Exchange (BSE) and National Stock Exchange (NSE), that in the meeting to be held on 12th September, 2014, Board of Directors of appellant would consider declaration of interim dividend. Thereafter, on 12th September, 2014, AGM was held and on the same day board of directors in their meeting declared interim dividend @ Rs.485 per share and for that purpose fixed the record date as 24th September, 2014 and payment date as 29th September, 2014 and intimated the same to both the stock exchanges. On 12th September, 2014 itself NSE placed on its website that the appellant has informed that interim dividend has been declared by appellant on 12/9/2014 and that the dividend would be paid to the equity shareholders on or before 29th September, 2014. Similarly, on 12th September, 2014 the BSE had announced on its website that the board of directors of the appellant at its meeting held on 12th September, 2014 have declared interim dividend Rs.485 per equity share of Rs.5 each of the company.
6. As per clause 16 of the listing agreement, appellant gave 7 days notice to the stock exchanges regarding the record date fixed as 24/9/2014 and sought their approval in that respect. Since both the stock exchanges were of the opinion that under clause 16 of the listing agreement, time gap between a book closure and a record date should be 30 days and in the present case the time gap being less than 30 days, the issue was referred to Securities and Exchange Board of India (SEBI). By impugned communication dated 19th September, 2014, SEBI informed both the stock exchanges and both the stock exchanges, in turn, by their respective communications, both dated 19th September, 2014 informed appellant that the record date fixed by appellant as September 24, 2014 is violative of clause 16 of listing agreement and accordingly called upon appellant to comply with clause 16 of listing agreement. Challenging the aforesaid order, present appeal is filed.
7. Since the controversy in the appeal relates to interpretation of clause 16 of the listing agreement, we quote clause 16 of the Model Equity Listing Agreement of respondent No.2, which reads thus: ‚The issuer agrees to close its transfer books for purposes of declaration of dividend or the issue of right or bonus shares or issue of shares for conversion of debentures or of shares arising out of right attached to debentures or for such other purposes as the NSE may agree to or require and further agree to close its transfer books at least once a year at the time of the Annual General Meeting if they have not been otherwise closed at any time during the year and to give to NSE the notice in advance of at least seven working days, or of as many days as NSE may from time to time reasonably prescribe, stating the dates of closure of its transfer books (or, when the Transfer books are not to be closed, the date fixed for taking a record of its shareholders or debenture holders) and specifying the purpose or purposes for which the transfer books are to be closed (or the record is to be taken) and to send copies of such notices to the other recognized stock exchanges in India. The Issuer further agrees to ensure that the time gap between two book closures and record dates would be at least 30 days. The Company on whose stocks, derivates are available or whose stocks form part of an index on which derivatives are available, shall give a notice period of at least 7 working days to stock exchanges for corporate actions like mergers, de-mergers, splits and bonus shares.
8. According to the appellant, in view of specific provision contained in clause 16, 30 days time gap applies between two book closures and two record dates and not between a book closure and a record date. Counsel for SEBI strenuously urged before us that plain reading of clause 16 of lsiting agreement makes it ex facie clear that the time gap between a book closure and a record date should be 30 days and in the present case since the time gap is less than 30 days, there is violation of clause 16 of Listing Agreement. According to counsel for SEBI, 30 days time gap applies to the time lag between a book closure and the record date.
9. Prima facie we see no merit in the contentions raised on behalf of the respondents.
10. On perusal of clause 16 of the listing agreement, it is seen that in a year there could be more than one book closure for the purpose of declaration of dividend or the rights issue or bonus shares, etc. If more than one book closure is postulated under clause 16, then obviously time gap of 30 days under clause 16 would be referrable to the time gap between two book closures. Fact that the word ‘and’ is used between the words ‘two book closures’ and ‘record dates’, it cannot be inferred that the time gap should be between a book closure and a record date. If the intention was to keep the time gap of 30 days between a book closure and a record date, then the word ‚two‛ would not have been used prior to the words ‚book closures‛. In other words, the very fact that the word ‚two‛ is used prior to the words ‚book closures‛ is suggestive of the fact that the time gap is intended between two book closures and two record dates and not between a book closure and a record date.
11. It is not in dispute that a company can declare dividend at its general meeting, but the dividend declared in the general meeting cannot exceed the amount recommended by the board. If the contention of respondent-SEBI is accepted, it would mean where a company keeps the transfer book closed at the time of its AGM as per clause 16 of the listing agreement and also seeks to declare dividend, then according to respondents the record date for such dividend should be after 30 days of book closure and payment of dividend should be made thereafter. In such a case, paying dividend beyond 30 days would be violating Section 205A of Companies Act, 1956 and, therefore, we are prima facie of the opinion that the interpretation put forth by the respondents cannot be accepted.
12. Apart from above, in the present case, both the stock exchanges have placed on their respective websites that the appellant had declared interim dividend on 12th September, 2014 and in fact NSE has informed the investors that the payments would be made by 29th September, 2014. Having announced that dividend would be paid on 29/9/2014, it is difficult to envisage as to how the investor interest would be jeopardized if record date is fixed as 24/9/2014 and payments are made on 29/9/2014.
13. In view of our prima facie opinion, we direct both the stock exchanges i.e. BSE & NSE to announce the record date for interim dividend declared by appellant forthwith to be 24th September, 2014 so as to enable the appellant to make payment to the investors by 29th September, 2014. We make
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it clear that passing of our order will not come in the way of SEBI initiating any proceedings against the appellant relating to interpretation of clause 16 of the Listing Agreement and pass appropriate orders in accordance with law. 14. At this stage, counsel for BSE requests that the record date be changed from 24/9/2014 to 25/9/2014 as it would be difficult for the Exchange to update the trading system within such a short time. Counsel for appellant has no objection. In view of the difficulty expressed by BSE, we direct both the BSE and NSE to fix 25th September, 2014 as the record date. 15. Since SEBI is permitted to pass order on merits on the interpretation of clause 16 of Listing Agreement, we see no reason to keep the appeal pending. SEBI is directed to pass order on merits after hearing the appellant. 16. Accordingly, appeal is disposed of in the above terms with no order as to costs.