“Investment is an act of faith.”
Finance Minister Manmohan Singh, interview with Economic Times, July 1991 (to mark the path-breaking reforms that catapulted the Indian economy out of the ‘Hindu rate of growth’ into its current trajectory of higher growth),

While the stock markets may seem more like a casino where investors roll the dice and make some lucky gains, the intent of the stock market is to support the creation of new businesses and new industries by channelising capital from the many millions who have surplus money (savings) to those who need it (founders of companies).

This ‘capital formation’ is a graceful dance between the founders and managements of companies who typically control the company and the vast number or minority shareholders who provide the capital. There is an implicit act of faith in the minds of minority investors that they will not be short-changed by the very founders they extended their financial support to.

Modern day institutions were created to convert this implicit faith into explicit laws.
SEBI, the regulator, exists for the protection of the minority shareholders.
The more modern NSE and the venerable BSE have listing norms that protect the rights of minority shareholders in listing agreements signed by the companies that raise capital from minority shareholders.

The Scheme of Arrangement proposed by ICICI Bank to acquire the ~25% of shares of its listed subsidiary, ICICI Securities via a share swap is a breakdown of every known norm of corporate governance.
Quantum Mutual Fund has objected to this ‘scheme’ and has filed an appeal with the Honourable National Company Law Appellate Tribunal (NCLAT), Principal Bench at New Delhi against the order dated August 21st 2024 issued by the Honourable NCLT Mumbai, which dismissed the objections of Quantum Mutual Fund and approved the Scheme.

Ironically, Quantum Mutual Fund is the only mutual fund house pursuing legal action to protect the rights of minority shareholders. SEBI, BSE, NSE – whose architecture rests on the foundation of protection of minority shareholders – have been silent observers and (as noted in the August 21st, 2024 judgement of the Honourable NCLT Mumbai) ‘The Regulators BSE, NSE, and SEBI have not raised any objection in relation to voting process before us.’
Our appeal to Honourable NCLAT Delhi is to ensure these institutions are in the courtroom to defend the very class of minority shareholders whose rights they are supposed to protect.

I have highlighted the points in a longer explanation of the events which is available here .

We hope this sordid saga of mis-governance will be resolved by clear statements by SEBI to the judiciary on the rights of minority shareholders to restore respectability to the concept of investing as a catalyst for capital formation, rather than a crude act of shoveling money into a licensed casino.

Sincerely,

Ajit Dayal
Founder, Quantum Advisors, Sponsor of Quantum AMC