Calcutta High Court
Formerly Known As Dpsc Limited vs Securities And Exchange Board Of India on 10 April, 2025
Author: Rajasekhar Mantha
Bench: Rajasekhar Mantha
OD-3
ORDER SHEET
IN THE HIGH COURT AT CALCUTTA
CIVIL APPELLATE JURISDICTION
ORIGINAL SIDE
APO/105/2023; WITH CA/4/2021; CP/206/2012; IA NO:ACO/2/2024
INDIA POWER CORPORATION LIMITED
FORMERLY KNOWN AS DPSC LIMITED
-VS-
SECURITIES AND EXCHANGE BOARD OF INDIA
BEFORE:
The Hon‟ble JUSTICE RAJASEKHAR MANTHA
And
The Hon‟ble JUSTICE AJAY KUMAR GUPTA
Date: April 10, 2025.
Mr. R. Banerji, Sr. Adv.; Mr. D.N. Sharma, Sr. Adv.; Mr. S. Mandal, Adv., appear.
Mr. T.K. Bose, Sr. Adv.; Mr. P.K. Dutt, Adv.; Mr. S.K. Dutt, Adv.; Mr. S. Banerjee, Adv.,
appear.
Mr. A. Singh, Sr. Adv.; Mr. S. Ganguli, Adv., appear.
Mr. S. Dasgupta, Adv.; Mr. A. Chaudhury, Adv., appear.
1.
The Court: The instant appeal is directed against the judgment and order dated
February 7, 2023, passed by a Single Bench of this Court. The said order was
passed on an application filed by the Securities and Exchange Board of India (SEBI)
being CA/4/2021 under CP/206/2012.
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2. By the said order, inter alia, the SEBI was granted leave to take necessary action
against the company and its promoter group and directors as per the provisions and
methods available under the Security Laws for inability of the company to meet the
MPS requirements.
3. The facts relevant to the case are that on June 4, 2010, rule 19A of the Security
Contract Requirement Rules, 1957 was brought into force, requiring all public listed
companies to ensure and maintain at least 25% of its shareholding amongst the
general public (MPS) at large.
4. The SEBI, by communications to various stock exchanges, required compliance of
rule 19A(supra). Specific communications were addressed to one Dishergarh Power
Supply Co. Ltd. on February 1, 2012, February 30, 2012 and April 15, 2013.
5. In the meantime, the majority shareholders and/or holding company of M/s. DPSC
Ltd., one IPCL and the DPSC Ltd. filed an application under sections 391/392 of the
Companies Act, 1956 (C.P. No.206 of 2012) for the sanction of a scheme for
demerger and/or amalgamation. By and in terms of the said scheme, the
investment division of M/s. IPCL was to be transferred to a trust, proposed by the
applicant named Power Trust. The residual shareholding of IPCL was to merge
with M/s. DPSC Ltd. The name of DPSC was thereafter changed to the name of the
former holding company M/s. IPCL.
6. Clause 3.3.3 (under the heading “Transfer of the Investment Division to the
Investment Trust) of the scheme for amalgamation, inter alia, prescribed that the
MPS requirement of DPSC, now known as IPCL, in terms of rule 19A(supra) should
be deemed to be satisfied by reason of a transfer of shareholding of M/s. DPSC to a
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trust settled under the scheme. The said clause 3.3.3 of the said scheme is set out
hereinbelow:
“As the Trustees will hold the Investment Division in an irrevocable trust and shall
be managing the Investment Trust in an independent manner, the Trustees shall
constitute members of „public‟ as defined under the Securities Contracts
(Regulation) Rules, 1957, in relation to any and all investments held by the
Investment Trust.”
7. The scheme was sanctioned by orders of the Company Court dated April 17, 2013.
Pursuant to such sanction, about 40% of the shares of M/s. DPSC came to be held
by the trust by reason of the scheme.
8. Upon SEBI realizing that the scheme, particularly clause 3.3.3 thereof was an
attempt to bypass the provision of rule 19A(supra), and the Trust could not
constitute members of the public, applied before the Single Bench for recall and/or
modification of the scheme in question.
9. The Company Court, having in essence, realized that it was misled into sanctioning
the scheme to the extent that it violated rule 19A(supra), from time to time allowed
the trust to disinvest and make available to the public at large 25% of the
shareholding in the erstwhile DPSC (now IPCL). The SEBI was admittedly not
notified of C.P. No.206 of 2012.
10. Despite several extensions granted from January 27, 2017 till the year 2023, the
trust could only sell about 6% of the shareholding in M/s. IPCL.
11. There were two intervening proceedings in the meantime. Four independent
directors of M/s. DPSC (now IPCL) applied before the Securities Appellate Tribunal
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challenging the order of the SEBI dated June 4, 2013. By the said order, the SEBI
had imposed several restraints on the said four directors.
12. The Securities Appellate Tribunal disposed of the said appeal on April 3, 2019, inter
alia, stating that since the High Court at Calcutta had approved the scheme in
question, the SEBI was required to approach the High Court for any coercive
measures that it wishes to launch against the directors of DPSC (now IPCL).
13. The other development indicated to Court is that the Power Trust for some
unexplained reasons is stated to have borrowed sums of money from Non-Banking
Financial Companies namely SREI Equipment Finance Ltd. and pledged
32,37,45,165 shares. The purpose for which the loan was availed by the trust
against the pledge of shares has not been explained to this Court.
14. The said M/s. SREI Equipment Finance came under corporate insolvency. On an
application filed under section 9 of the Arbitration and Conciliation Act, 1996, the
said shares pledged to M/s. Srei Equipment Finance Ltd. were directed to be sold
under a Receiver appointed by this Court. The bonafides and legality of the
invocation of the Arbitration Clause by SREI and the concurrence of the trust in
this regard leave many questions unanswered.
15. The SEBI having realized that M/s. IPCL, in its new form and the Power Trust were
attempting by hook or crook to frustrate and/or bypass the compliance of the MPS
under rule 19A(supra), finally applied before the Single Judge seeking the following
reliefs:
(a) Leave of the Court may be granted that apart from the divestment process being
adopted by the Trust and in case the Trust is unable to meet the MPS
5compliance, the Company/its Promoter(s)/Promoters Group/Directors may also
be directed to meet the MPS requirements.
(b)To allow SEBI to take necessary action against the Company/its
Promoter(s)/Promoters Group/Directors as per the provisions/methods available
under Securities Laws in order to meet the MPS requirements.
(c) Ad-interim order in terms of prayers above.
(d)Pass such other order or orders and/or direction/directions as Your Lordship
may deem fit and proper.
16. The Single Bench having realized and noted the conduct of the company, permitted
prayers (a) and (b) of the said application.
17. This Court has carefully considered the arguments advanced by the appellant and
M/s. SEBI as also the learned counsel for M/s. Power Trust.
18. The object and purpose of rule 19A of the SCRRA is primarily to ensure
transparency in corporate management and shareholding. The MPS requirement is
aimed at ensuring that the listed companies have a minimum amount of shares
among the public at large to prevent any attempt at improprieties in the
management and administration of public companies.
19. It appears from the records that SEBI had notified the requirement of compliance of
MPS to at least 105 companies including the DPSC Ltd. some of which have applied
and several are being dealt with in accordance with law. The appellant company is
no exception.
20. This Court has noted that the Single Bench which sanctioned the scheme on April
17, 2013 later on realized that it might have been misled in so far as compliance of
the MPS requirement in the scheme proposed by the appellant in its former avatar.
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21. It is essentially for this purpose and to ensure compliance of the terms and
conditions of sanction of the scheme that sufficient leverage over a period of nearly
six years was given to the appellant and/or Power Trust to ensure 25% of the
shareholding of the former M/s. DPSC Ltd. to be disinvested to the public at large.
22. This Court having carefully considered the orders passed by the Single Bench, is of
the view that the attempts at compliance with such disinvestment to satisfy the
MPS requirement under rule 19A (supra) have not been bona fide. The Court‟s
mind is not free from doubt that the appellant and the Power Trust may have tried
to frustrate the process of compliance of rule 19A(supra) by presenting repeated fait
accompli to this Court.
23. For the reasons stated hereinabove, this Court is of the view that the impugned
judgment and order dated February 7, 2023 calls for no interference.
24. Accordingly, APO/105/2023 stands dismissed. Consequently, ACO/2/2024 also
accordingly stands dismissed. There will be no order as to costs.
25. The interim order already passed shall stand vacated forthwith.
(RAJASEKHAR MANTHA, J.)
(AJAY KUMAR GUPTA, J.)
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