Tamilnad Mercantile Bank: Why SAT Rejected Objections To The IPO
No injury or legal wrong has been suffered by TMB's shareholders to injunct the IPO, the SAT said.
No legal right has been infringed, and no injury or legal wrong has been suffered as a result of the market regulator's exemption to Tamilnad Mercantile Bank from filing a fresh DRHP, the Securities Appellate Tribunal said in its detailed order.
In saying so, the appellate tribunal rejected the challenge by six shareholders of TMB, namely Robert and Ardis James Co., East River Holdings Ltd., Swiss Re Investors (Mauritius) Ltd., Kamehameha Mauritius, Cuna Group (Mauritius), and FI Investments.
The appellants not being an “aggrieved person” could not have filed the appeals questioning the legality and veracity of the order.SAT Order
The appellate tribunal said that the six shareholders are aggrieved by the exclusion to participate in the offer for sale, a matter which is already pending before the Bombay High Court.
According to TMB's draft red herring prospectus, filed in September last year, the IPO was proposed to include fresh issue and the OFS. The red herring prospectus filed in August this year did away with the OFS.
The SAT pointed out that the shareholders should not have approached it when a writ petition on the same issue is pending before the high court. The question as to their eligibility to participate in the OFS must be decided by the writ court, the appellate tribunal said.
"The court cannot go into the legality and veracity of the order just because an application for withdrawal of the petition has been filed."
Moreover, no such plea for inclusion of appellants' shares in the OFS was made, the SAT said.
Here's how the events unfolded before the matter landed up in the SAT:
October 2020: TMB sought shareholder approval via special resolution for an initial public offer and OFS.
September 2021: The bank filed the DRHP with the Securities and Exchange Board of India. The OFS did not include shares of 2,544 shareholders who are wound up in litigation, including the six shareholders, before SAT.
November-December 2021: The six shareholders approached SEBI to be included in the resolution by way of representation. They also filed a writ petition before the Bombay High Court on SEBI's inaction and lack of response.
January 2021: The high court directed SEBI to provide a reply as to the representation as soon as requisite information was obtained from the company and shareholders.
May 2022: Some other shareholders sought approval to withdraw from the OFS. TMB's board decided to remove the OFS component altogether. The bank approached SEBI seeking exemption from refiling the offer document reflecting the decision of withdrawal of the OFS. SEBI granted TMB an exemption from filing a fresh DRHP, and communicated the decision to the law firm representing the six shareholders.
June 2022: The six shareholders challenged the exemption with a request to be allowed to participate in the OFS.
Even as the matter was pending before the high court, the six shareholders approached the SAT, which rejected their challenge.
When the writ petition was pending, it was not open to the appellants to file the present appeals questioning the DRHP and or its withdrawal by some of the shareholders with regard to OFS.SAT Order
The shareholders had adequate information as to the exclusion of OFS component as SEBI made communication as to the same.
A reply to the representation made by shareholders was also given by SEBI in compliance with the high court order. Since the appellants did not choose to challenge the decisions then, an opportunity cannot be provided at present when the question is pending before the high court, the appellate tribunal held.