JYOTI LIMITEDversusBSE LIMITED & ANR

         [2024] 12 S.C.R. 1117 : 2024 INSC 992

                       Jyoti Limited
                             v.
                     BSE Limited & Anr
                (Civil Appeal No. 4707 of 2022)
                       10 December 2024
       [Pankaj Mithal and Sandeep Mehta, JJ.]


                     Issue for Consideration
Bombay Stock Exchange (BSE) rejected the application of the
appellant for the listing of certain equity shares to the BSE holding
that the appellant had not taken in principle approval from the Stock
Exchange and it also did not take the approval of the shareholders
for the allotment of the shares to the Asset Reconstruction Private
Limited (RARE). Order upheld and confirmed by the Securities
Appellate Tribunal.

                            Headnotes†
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Act, 2002 – s.9(1) – Companies Act,
2013 – s.62(1)(c) – SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015 – Regulation 28:
Held: s.9, SARFAESI Act authorizes RARE to convert portion of
the debt into shares of the borrower company but such authority
is subject to s.62, Companies Act, 2013 which in turn requires a
resolution of the shareholders of the company – However, when
such a proposal is not by the appellant company, the approval of
the shareholders may not be necessary – On facts, the proposal
for increasing the subscribed capital of the company by converting
part of the debt into equity shares was initiated by the appellant
company itself and not actually by RARE – Therefore, the proposal
was that of the company only – Accordingly, as contemplated by
s.62(1)(c), Companies Act, 2013, the approval of the shareholders
would be mandatory before the shares are accepted for listing on the
BSE – Furthermore, the approval of the BSE is necessary in view
of Regulation 28 of the SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015 – No error or illegality committed
either by the BSE or the Securities Appellate Tribunal – Statutory
appeal u/s.22 F, Securities Contracts (Regulation) Act, 1956 is
devoid of merit. [Paras 5, 7-9]
1118                                                            [2024] 12 S.C.R.

                             Supreme Court Reports


                                   List of Acts
        Securitisation and Reconstruction of Financial Assets and
        Enforcement of Security Act, 2002; Companies Act, 2013; SEBI
        (Listing Obligations and Disclosure Requirements) Regulations,
        2015; Securities Contracts (Regulation) Act, 1956.

                                List of Keywords
        Bombay Stock Exchange (BSE); Securities Appellate Tribunal;
        Listing of equity shares; In principle approval from the Stock
        Exchange; Approval of the shareholders for the allotment of
        the shares to the Asset Reconstruction Private Limited (RARE);
        SARFAESI Act; Convert debt into equity shares; Resolution of
        the Board of Directors; Approval of the shareholders mandatory;
        Subscribed capital; Resolution of the shareholders of the company;
        Special resolution; Proposal for increasing the subscribed capital of
        the company; Listing of the equity shares at the Stock Exchange/
        BSE; Approval of the BSE; Statutory appeal.

                               Case Arising From
        CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4707 of 2022
        From the Judgment and Order dated 21.12.2021 of the Securities
        Appellate Tribunal, Mumbai in Appeal No. 224 of 2019

                            Appearances for Parties
        Lakshmeesh S. Kamath, Mrs. Samriti Ahuja, Ms. Aditi Prakash,
        Advs. for the Appellant.
        Pratap Venugopal, Sr. Adv., Ms. Surekha Raman, Amarjit Singh
        Bedi, Shreyash Kumar, Yashwant Sanjenbam, Imilikaba Jamir,
        M/s. K J John And Co, Rahul Gupta, Advs. for the Respondents.

                   Judgment / Order of the Supreme Court

                                       Order

1.      Heard learned counsel for the parties.
2.      Under challenge in this statutory appeal is the judgment and order
        dated 21.12.2021 passed by the Securities Appellate Tribunal, Mumbai
[2024] 12 S.C.R.                                                        1119

                         Jyoti Limited v. BSE Limited & Anr


      in Appeal No. 224 of 2019 titled as “Jyoti Limited Vs. BSE Limited
      and Anr.”.
3.    The appellant-Jyoti Limited applied for listing of certain equity shares
      to the Bombay Stock Exchange1 but the application to that effect
      was not accepted for the reason that the appellant had not taken in
      principle approval from the Stock Exchange and that the appellant
      had not even taken the approval of the shareholders for the allotment
      of the shares to the Asset Reconstruction Private Limited2. The
      above order of the BSE rejecting the application of the appellant
      for the listing of shares was upheld and confirmed by the Securities
      Appellate Tribunal by the order impugned.
4.    In assailing the above orders, the submission of learned counsel
      appearing for the appellant is that Section 9(1) of the Securitisation
      and Reconstruction of Financial Assets and Enforcement of Security
      Act, 20023 permits the RARE to take measures such as conversion
      of any portion of debt into shares of the borrower company i.e., the
      appellant herein and once such power is exercised, the shares have
      to be listed on the Stock Exchange. Further submission of the learned
      counsel for the appellant is that it is only where the company, i.e.,
      the appellant herein, proposes to increase the subscribed capital,
      the consent/ the resolution/approval of the shareholders is required,
      as mandated by Section 62(1)(c) of the Companies Act, 2013. Since
      in the case at hand the appellant company had not proposed to
      increase the subscribed capital rather it is the RARE that has done
      it, no such approval of the shareholders is necessary.
5.    Section 9 of the SARFAESI Act authorizes RARE to convert portion
      of the debt into shares of the borrower company but such authority
      is subject to Section 62 of the Companies Act, 2013 which in turn
      requires a resolution of the shareholders of the company. However,
      when such a proposal is not by the appellant company, the approval
      of the shareholders may not be necessary.
6.    Notwithstanding the above, in the case at hand, it is evident that
      the appellant company had entered into discussion with RARE



1    BSE for short
2    RARE for short
3    SARFAESI Act for short
1120                                                      [2024] 12 S.C.R.

                        Supreme Court Reports


     and it was agreed upon between the parties to convert part of its
     outstanding debts of Rs.32.80 Crore into equity shares. Accordingly,
     a resolution of the Board of Directors of the appellant company was
     passed to the above effect on 02.05.2018 but such an action was
     never endorsed by the shareholders of the company. Thereafter,
     the appellant company itself filed an application before the BSE
     on 15.05.2018 for listing of the shares i.e. 59,63,636 equity shares
     allotted to the RARE.
7.   Having considered the relevant provisions of the law and the
     submissions advanced by the learned counsel for the appellant, we
     find that the conversion of the debt into additional shares had taken
     place with the agreement of the appellant company and RARE, and
     it is on the basis of such an agreement between the parties that a
     resolution was passed on 02.05.2018 by the Board of Directors of
     the appellant company accepting the proposal to convert the debt
     into shares and to allot them in favor of RARE, thus, resulting in
     increase of the equity capital of the appellant company. Even the
     application for listing of the aforesaid additional shares was made by
     the appellant company to the BSE meaning thereby that the proposal
     for increasing the subscribed capital of the company by converting
     part of the debt into equity shares, as aforesaid, was initiated by the
     appellant company itself and not actually by RARE. Therefore, the
     proposal was that of the company only. Accordingly, as contemplated
     by Section 62(1)(c) of the Companies Act, 2013, the approval of the
     shareholders would be mandatory before the shares are accepted
     for listing on the BSE.
8.   Insofar as the other ground for rejection of the application is
     concerned, that is to say, for want of approval of the BSE, the
     Securities Appellate Tribunal has returned a clear finding that the
     approval of the BSE is necessary in view of Regulation 28 of the
     SEBI (Listing Obligations and Disclosure Requirements) Regulations,
     2015 and we do not have different opinion on it rather we accept
     the said finding which is not perverse in any manner.
9.   In view of the aforesaid facts and circumstances, we are of the
     opinion that no error or illegality has been committed either by the
     BSE or the Securities Appellate Tribunal in refusing to accept the
     request of the appellant company for the listing of the shares at
     the Stock Exchange inasmuch as Section 62 of the Companies
[2024] 12 S.C.R.                                                    1121

                      Jyoti Limited v. BSE Limited & Anr


     Act stands duly attracted and in the light of sub-clause (c) of sub-
     section (1) of Section 62 of the Companies Act, special resolution of
     the shareholders is necessary which is lacking in the instant case.
10. The aforesaid order has been passed by us in the peculiar facts and
    circumstances of this case where the appellant company itself has
    passed the resolution and applied for the listing of shares and as
    such is deemed to be the proposer for increasing the share capital.
11. Accordingly, this statutory appeal under Section 22 F of Securities
    Contracts (Regulation) Act, 1956 is devoid of merit and is dismissed.
12. Pending application(s), if any, shall stand disposed of.

     Result of the case: Appeal dismissed.



     †
         Headnotes prepared by: Divya Pandey