𝐒𝐡𝐚𝐫𝐞𝐡𝐨𝐥𝐝𝐞𝐫 𝐀𝐩𝐩𝐫𝐨𝐯𝐚𝐥 𝐢𝐬 𝐍𝐨𝐧-𝐍𝐞𝐠𝐨𝐭𝐢𝐚𝐛𝐥𝐞: 𝐒𝐮𝐩𝐫𝐞𝐦𝐞 𝐂𝐨𝐮𝐫𝐭 𝐉𝐮𝐝𝐠𝐦𝐞𝐧𝐭 𝐢𝐧 𝐉𝐲𝐨𝐭𝐢 𝐋𝐢𝐦𝐢𝐭𝐞𝐝 𝐯𝐬. 𝐁𝐒𝐄

The Supreme Court of India, in 𝘑𝘺𝘰𝘵𝘪 𝘓𝘪𝘮𝘪𝘵𝘦𝘥 𝘷. 𝘉𝘚𝘌 & 𝘈𝘯𝘳. (Civil Appeal No. 4707 of 2022), recently upheld the rejection of Jyoti Limited’s listing of equity shares on the Bombay Stock Exchange (BSEIndia) due to the absence of shareholder approval and compliance with regulatory norms.

𝐁𝐚𝐜𝐤𝐠𝐫𝐨𝐮𝐧𝐝:
Jyoti Limited had an agreement with an Asset Reconstruction Company (ARC), RARE, to convert ₹32.80 crores of its outstanding debt into equity shares. Following a resolution passed by its Board of Directors on 02.05.2018, the company applied to BSE for listing 59,63,636 shares allotted to RARE. The BSE rejected the listing application due to the lack of shareholder approval and prior in-principle approval from the exchange. The Securities Appellate Tribunal upheld this decision.

𝐒𝐮𝐩𝐫𝐞𝐦𝐞 𝐂𝐨𝐮𝐫𝐭’𝐬 𝐎𝐛𝐬𝐞𝐫𝐯𝐚𝐭𝐢𝐨𝐧𝐬:
Shareholder approval via a special resolution as prescribed under section 62 (1) (c) of the Companies Act, 2013 is mandatory for increasing subscribed share capital, even in cases of debt-to-equity conversion under SARFAESI. Regulation 28 of SEBI’s Listing Obligations mandates prior in-principle approval from stock exchanges for listing new shares—a requirement that was not met in this case.

𝐊𝐞𝐲 𝐓𝐚𝐤𝐞𝐚𝐰𝐚𝐲𝐬 –

𝐒𝐡𝐚𝐫𝐞𝐡𝐨𝐥𝐝𝐞𝐫 𝐀𝐩𝐩𝐫𝐨𝐯𝐚𝐥 𝐈𝐬 𝐂𝐫𝐮𝐜𝐢𝐚𝐥: Section 62(1)(c) of the Companies Act underscores the necessity of shareholder consent, ensuring compliance with statutory corporate governance norms.

𝐒𝐄𝐁𝐈 𝐂𝐨𝐦𝐩𝐥𝐢𝐚𝐧𝐜𝐞 𝐈𝐬 𝐌𝐚𝐧𝐝𝐚𝐭𝐨𝐫𝐲: Regulatory requirements such as prior in-principle approval cannot be bypassed, reinforcing the need for procedural diligence in equity listings.

This landmark judgment serves as a strong reminder that compliance with corporate and securities laws remains non-negotiable.

Access the full judgment for detailed insights.