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The Bombay High Court today directed market regulator Securities and Exchange Board of India (Sebi) and Reliance Power to file their submission on October 22 on a matter pertaining tenability of a recent Sebi circulars on merger and acquisitions.
The Anil Ambani group firm Reliance Power has challenged Sebi's jurisdiction over approving a merger scheme involving its fully-owned subsidiary Reliance Clean Power with itself.
Sebi, through circulars in February and May, had directed all listed companies to seek its approval while undertaking any scheme of arrangement.
Virag Tulzapurkar, counsel for Reliance Power, said as the scheme of amalgamation was filed by unlisted firm Reliance Clean Power it didn't not submit the details of the scheme to stock exchanges or Sebi.
“Whether clause 24F of the listing agreement applies to us is the sole question,” he said
'Clause 24F' of the listing agreement stipulates all listed companies to submit various documents related to the scheme of amalgamation to stock exchanges. A listing agreement is a contract between a listed company and the stock exchange.
Earlier, a listed company undergoing any scheme of amalgamation had to submit the scheme to stock exchanges. The market regulator tweaked the rules in February 2013 directing any listed company involved in a scheme of amalgamation to get the scheme approved from it.
Kumar Desai, counsel for Sebi, said any scheme concerning a listed company has to be filed with the sock exchanges, which then forwards it to Sebi.
Desai said Sebi approval is necessary to ensure whether a scheme its compliant with the Companies Act and other securities regulation and to ensure it is not against interest of public shareholders.
“Since August, when Reliance Power proposed the scheme of amalgamation, 18 listed companies with similar schemes have taken Sebi approval,” he stated.
Tulzapurkar argued that the Sebi circulars are an expansion of the clause 24F and both won't apply to an unlisted firm.
To which Desai said,“The stress is on filing the scheme. A listed company is party to the scheme of amalgamation. Clause 24F has been amended and cannot be read in isolation without two circulars.”
Tulzapurkar also argued whether Sebi can “unilaterally amending a contract (listing agreement) to which it is a not party.”
In the scheme of things
RPower, Sebi to make submission before Bombay HC on Oct 22
Case pertaining to merger between Reliance Power and unlisted arm Reliance Clean Power
RPower of the view that Sebi approval not needed for the merger as scheme filed by unlisted arm
RPower says clause 24F of listing agreement and two Sebi circulars not applicable to unlisted firms
Sebi believes its recent circulars, which directs all listed cos to take its approval for any scheme of arrangements, will be binding
Sebi says who has filed scheme not important as a listed company party to the scheme
