At least half a dozen firms were granted relief by the Securities Appellate Tribunal (SAT) on Friday, after they approached the tribunal against the August 7 circular of capital markets regulator Sebi which had listed them among 331 firms suspected to be shell companies.
The tribunal as an interim relief stayed the Sebi circular and directed the stock exchanges to reverse the trading ban on the stocks of Parsvnath Developers, Kavit Industries, Pincon Spirit, Signet Industries, SQS India BFSI, KKalpana Industries (India) and allow them to trade. All of these firms were named in the list of 331 suspected shell firms that were put under stage six of the graded surveillance measures by the bourses after Sebi circular. These scrips were not available for trading this month.
SAT, however, clarified that its interim stay order does not restrict Sebi and the stock exchanges from investigating and taking action against these companies named by the Ministry of Corporate Affairs (MCA) as suspected shell firms.
“It is made clear that this order shall not come in the way of Sebi as well as the stock exchanges to investigate the case of the appellant company and initiate proceedings if deemed fit,” said the orders passed by SAT in each case.
The SAT order on Friday said that all the six companies have already made a representation to Sebi in connection with its circular. SAT has now directed Sebi “to dispose of” the representations made by the firms in accordance with law. Sebi’s circular came after the ministry of corporate affairs (MCA) on June 9 shared a list of 331 listed companies that are suspected to be shell entities and directed Sebi to investigate the companies and take necessary action against them under the Sebi Act.
According to the Sebi circular to stock exchanges, the suspected shell companies will be subject to independent audit and a forensic audit to examine their financials. After the completion of the audits, if the exchanges do not find evidence that these companies indeed exist, they would be delisted. The companies will not be permitted to deal in any security on exchange platform and its holding in any depository account will be frozen till the delisting process is completed.