8.1 Of late, there has been some uneasiness and anxiety amongst the investors owing to a large number of companies having been delisted by the Stock Exchanges, especially by the BSE, on account of non-payment of the listing fees. In several quarters a view has been expressed that, at any cost the delisting should not be resorted to. This may seem to be an extreme view, but it appears to have emanated from the fact that it goes without saying that every case of delisting causes prejudice to the investors. Therefore, in the Committee’s view, the interests of the investors ought to be a predominant, and perhaps the sole, factor that must be given highest priority in the matter of delisting of securities. Further more, no decision of delisting should be taken unless the consequences of the delisting on the investors are taken into consideration and, when necessary, they are involved in the decision making process.

8.2 It is fundamental to the delisting of securities that the investors would be deprived of the facility and benefits of listing and forced to hold on the securities in question rendering them virtually non-liquid. It is therefore imperative that before taking a final decision to delist any securities, whether voluntarily or compulsorily, the holders of those securities are informed of and in appropriate cases, heard on the proposal. Furthermore, any such decision must ensure that the investors’ interests are adequately protected.

8.3 The Committee is of the view that without compromising on the safeguarding of the investors’ interests, the Stock Exchanges should have at least a limited freedom to compulsorily delist securities with proper and adequate checks and balances. It is erroneous to believe that no securities listed on a Stock Exchange should ever be delisted.

8.4 The Committee took cognizance of the fact that non-payment of listing fees could be used as a device, both by the Stock Exchanges and the companies for the delisting of securities, which is detrimental to the interests of the investors. Frequency of payment of the listing fees, is one of the causes of the delisting of securities. It is possible to reduce the number of cases of delisting if this frequency is reduced. Moreover, the Committee is of the view that the Stock Exchanges should be slow in delisting securities for non-payment fees and that delisting should be the last alternative in this case, so that the Stock Exchange should resort to it only if all other remedies to recover the listing fees fail. The Stock Exchange should make efforts by persuasion or by force to recover the fees from the company, such as a civil suit, a winding-up petition, prosecution of the company and its directors/officers, etc. or from any third party on behalf of the company, if it is legally permissible. The Committee

was informed that the BSE has amended its bye-laws to provide for payment of the listing fees by a third party. If its efforts do not bear any fruit, then eventually it may resort to the delisting, after giving adequate advance public notice, in the manner specified in the following paragraph. This would help protect the interests of the investors and minimise the number of companies whose securities would be delisted leaving the holders of the securities high and dry.

8.5 The Committee suggests that an adequate advance public notice should be given of the proposed delisting in two newspapers, one circulating in the whole or substantially the whole of India and one circulating in the region in which the concerned Stock Exchange is located. Moreover, the concerned Stock Exchange should give specific intimation of the proposed delisting to all other Exchanges where the company’s securities are listed. A public notice of the delisting of securities should also be given in the like manner after the delisting is effected.

8.6 However, the Committee is of the opinion that the absence of norms/criteria to be applied and the procedure to be followed by the Stock Exchanges for compulsory delisting of securities, has resulted into some confusion and adoption of different practices and procedures by the Stock Exchanges. The Committee strongly feels that each of the parties who is likely to be affected by the delisting of securities and who has the power to grant (or refuse to grant) a permission for the delisting, such as a listed company, the Stock Exchange and the investors, as well as the regulatory authority, i.e. SEBI, ought to be clear about the law, the norms/criteria and the procedure to be followed for the delisting of securities. In this regard, a check-list prepared by the BSE and modified by the Committee, may be adopted, with or without modifications. The check-list is set out in Annex I.

8.7 There should also be a provision for an appeal against the decision of the Exchange for delisting of securities. An appeal may lie to the Central Government.

The Committee, therefore, recommends that :

1. Specific provisions should be made on the compulsory delisting, and precise procedure should be laid down to be followed by each Stock Exchange in the matter of delisting of any of the securities listed on it. The suggested norms and procedure are set out in Annex I to this Report. There should also be a provision for appeal against the delisting.
2. The Stock Exchanges should not resort to delisting of securities on the ground of non-payment of listing fees unless the efforts made for recovery of the fees by persuasion or force through all other remedies available fail.
4. Mechanism for the compulsory delisting of securities should expressly provide for adequate and effective intimation to be given to the holders of the securities which are proposed to be delisted, and also right of hearing to those holders.
5. Such mechanism should also provide for a remedy to make the investment in the securities liquid after they are delisted. For this purpose, a facility akin to dealings in permitted securities may be considered to provide facility for liquidity of the securities for a certain period after these are delisted.
6. A public notice before and after the delisting of securities should be given by the concerned Stock Exchange.