New Delhi, August 20, 2021: While disposing of Adjudication Proceedings initiated against the Noticee in exercise of powers conferred under section 15-I of the SEBI Act 1992 read with Rule 5 of SEBI Rules 1995, the Securities and Exchange Board of India has held that adjudicating proceedings cannot be conducted against a company that has been struck off from Registrar of Companies (ROC) List and has been dissolved.
G Ramar (The Adjudicating Officer) observed that adjudication proceedings initiated against Noticee vide the Show Cause Notice (SCN) could not be proceeded with, since as on date of issuance of SCN, Noticee’s name had been stuck-off from ROC list and the company was not in existence.
As per the background of the matter, pursuant to approval of scheme of arrangement between Varun Shipping Company Ltd (VSCL), Tarun Shipping and Industries Ltd (TSIL), Varun Gas Infrastructure Ltd, Varun Global Ltd, Varun Maritime Ltd and Varun Resources Ltd, equity shares were allotted to promoters.
However, such allotment was not covered under the High Court’s approved scheme of arrangement and also was in contravention of a SEBI Circular dated September 3, 2009.
Besides, despite SEBI advising VRL and VGL to either comply with ICDR Regulations 76(2) and 76(3) pertaining to pricing requirements or give present non-promoter public shareholders option to subscribe to additional shares at same conditions at which they had been allotted to promoters so that they did not get undue advantage over shareholders of the companies, the companies failed to do so.
Noticee Sunbeam Talc Pvt. Ltd. was one of the promoters of VGL and VRL at the relevant point in time when alleged contraventions of the SEBI Circular took place, allegedly making Noticee liable for penalty u/s 15HB of SEBI Act. Accordingly, SCN was issued to Noticee and Adjudicating Officer (AO) was appointed.
The Adjudicating officer thus stated that when a company’s name was struck-off from the Registrar of Companies’ (RoC) list and company was also dissolved, then it was a non-existing company and adjudication proceedings against non-existing company was thus nullity.
Quoting Black’s Law Dictionary to explain ‘dissolution’ as termination or winding up, the SEBI reiterated that dissolution of a corporation is termination of its legal existence.
Strike off essentially meant removing the company’s name from the Register maintained by ROC and the company did not exist after being struck-off and could not perform any operations, added the Board.