• On June 18, 2021, in exercise of the powers conferred by Section 30 of the Securities Contracts (Regulation) Act, 1956, the Central Government through Ministry of Finance notified the following amendments into the Securities Contracts (Regulation) Rules, 1957 (SCRR):
    • Amendment in Rule 19 Sub-rule (2) Clause (b) which deals with the requirements with respect to the listing of securities on a recognized stock exchange:
      • Insertion of the words 'but less than or equal to one lakh crore rupees' after the words 'four thousand crore rupees' in Sub-Clause (iii)
      • Insertion of Sub-clause (iv) after Sub-clause (iii) and before the provisos of Rule 19 Sub-rule (2) Clause (b), wherein the minimum offer and allotment to public in case of companies with post issue capital at offer price of above INR 1 lakh crore is reduced from 10 % of issue to 5% along with value of INR 5,000 crore
      • The amendment further adds a proviso after Sub-clause (iv) stating that for these companies, the time period to bring the public shareholding up to 25% is increased from 3 years to 5 years
      • Insertion of the words 'referred to in Clause (b)' after the words 'applicant company' in the third proviso
    • Amendment in Rule 19A Sub-rule (5) which deals with continuous listing requirements:
      • A proviso has been inserted which directs that the public shareholding in every listed company should not fall below 5% as a result of implementation of the resolution plan approved under Section 31 of IBC
      • Substitution of the word 'twelve' for the word 'eighteen' in the proviso of Sub-rule (5) of Rule 19A, which means that if the public shareholding falls below 10 % due to implementation of resolution plan approved under Section 31 of IBC, it should be brought up to 10 % within a period of 12 months instead of the earlier timeline of 18 months (it is to be noted that the time period of 3 years to bring the public shareholding to 25 % in such case remains the same)
  • These amendments are a welcome step to boost initial or further listings and are an opportunity for retail investors. The government's initiatives have eased the listing norms for listed companies with a market capitalization of over INR 1 lakh crore. The amendment with respect to IBC amounts to putting a condition on resolution plans and has been introduced in order to avoid wild speculation in the stock prices of listed companies and protect the investor's interest.


Rakesh Kumar Agarwal & Ors v. Devendra P Jain

Order dated June 01, 2021 [Company Appeal (AT) (Insolvency) No. 1034 of 2020]

Background facts

  • Asis Logistics Ltd (Corporate Debtor), filed an Application for initiation of Corporate Insolvency Resolution Process (CIRP) under Section 10 of the Insolvency and Bankruptcy Code, 2016 (IBC). The NCLT Ahmedabad bench admitted the Application and passed an order to initiate the CIRP of Corporate Debtor. However, due to the failure to receive a Resolution Plan, NCLT, Ahmedabad Bench passed order liquidating the Corporate Debtor on August 28, 2019. Accordingly, Devendra P Jain, the Resolution Professional, was appointed as the Liquidator of the Corporate Debtor.
  • During the liquidation process, Rakesh Kumar Agarwal and others (Appellants), in the capacity of being the promoters of the Corporate Debtor, submitted a scheme of arrangement under Section 230 of the Companies Act, 2013, and the same was approved by the stakeholders and an application for approval of the scheme was filed before the NCLT.
  • The said Application was dismissed as withdrawn in view of Notification1 dated January 06, 2020 issued by Government of India whereby an amendment was made in Regulation 2B of Insolvency and Bankruptcy Board of India (IBBI) (Liquidation Process) Regulations 2016 (Liquidation Regulations), by virtue of which a promoter and guarantor, including the Appellants, became ineligible to submit a scheme in the liquidation process of the Corporate Debtor.
  • Subsequently, the Government of India vide notification dated June 01, 2020 introduced certain amendment to the Micro, Small and Medium Enterprises Development Act, 2006 (MSME Act), whereof the limits for an entity to be classified as MSME was enhanced. Accordingly, the Appellant filed an application seeking permission to propose a scheme and a direction to consider the said scheme in view of the amendment.
  • NCLT vide order dated October 15, 2020 (Impugned Order) rejected the application on the ground that the Corporate Debtor at such stage cannot take the benefit of being a MSME on basis of retrospective effect of the notification dated June 01, 2020, when the Corporate Debtor did not fall under the criteria of MSME at the time of filing of application under Section 10 of IBC.
  • Aggrieved by the Impugned Order, the Appellant filed an Appeal before the National Company Law Appellate Tribunal (NCLAT).

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1. Notification No. IBBI/2019-20/GN/REG053

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