NCLAT issues notice to ICICI Securities in delisting case

Mumbai: The National Company Law Appellate Tribunal (NCLAT) on Tuesday issued a notice to ICICI Securities following an appeal by the minority shareholders against the tribunal’s order approving the financial broking firm’s delisting.

A bench, led by justices Yogesh Khanna and Ajai Das Mehrotra, were hearing petitions filed by Manu Rishi Gupta and Quant Mutual Fund, the two minority shareholders, against the 21 August order of the National Company Law Tribunal (NCLT).

The two shareholders own 0.002% and 0.08%, respectively, of ICICI Securities’ paid-up equity share capital.

In its August order, the Mumbai bench of the National Company Law Tribunal dismissed applications filed by minority shareholders opposing the delisting of ICICI Securities, while allowing the company to go ahead with the plan.

Arun Kathpalia, senior counsel for ICICI Securities, informed the tribunal that the objections against the delisting scheme were filed by the shareholders before NCLT which rejected it.

He said the appeal was filed against the scheme, and the NCLT ‘s dismissal of the objections had not been challenged by the shareholders. There is a serious challenge to the maintainability of their petition, he said.

Kathpalia added that under the Companies Act section 230(4), any objection to the compromise or arrangement shall and only be made by people who hold not less than 10% of the shareholding.

“If they (minority shareholders) are ineligible they cannot challenge the scheme here (in NCLAT)… A person aggrieved can only be a person whose legal right has been infringed, and legal right can be infringed only if one has the right in the first place,” the senior counsel said.

The counsel for the shareholders informed the court that the NCLT order had been challenged in its entirety.

The bench agreed to hear the matter on merits.

Also Read: ICICI Securities case: Is shareholder activism maturing in India?

In June 2023, ICICI Securities announced its plan to delist and merge with its parent ICICI Bank. The plan was approved by shareholders in March 2024, with 72% of minority shareholders voting in favor of the plan. On 29 June 2023, the board of ICICI Bank approved the plan.

The delisting plan included ICICI Securities becoming a wholly-owned subsidiary of ICICI Bank. As part of the plan, shareholders were to receive 67 shares of ICICI Bank for every 100 shares of ICICI Securities held.

However, shareholders like Manu Rishi Gupta and Quantum Mutual Fund had opposed the proposed delisting of ICICI Securities in two different petitions, claiming that the swap will negatively impact minority shareholders. Guptha and Quantum Mutual Fund, respectively, own 0.002% and 0.08% of ICICI Securities’ paid-up equity share capital. 

ICICI Securities contested the applications, stating that the applicants had no locus in the matter. 

Discussions on the stock’s actual value were sparked by the fact that, at the time of the announcement, the price of ICICI Securities’ shares was slightly above the ₹520 initial public offering (IPO) issue price.

As the proposal advanced, the shareholders highlighted concerns regarding the depressed valuation and share-swap ratio of ICICI Securities. They also questioned the fairness of the deal, especially given the stock’s low price relative to its potential.

In November, the Reserve Bank of India approved delisting ICICI Securities and making it ICICI Bank’s wholly-owned subsidiary, subject to certain conditions.

Later, it also received ‘no objection’ letters from the stock exchanges for delisting shares of the broking arm on 29 November, 2023.