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Authored by Aishwarya Lakshmi VM

In the matter of: Thomas Cook (India) Limited

Date of the order: 11.02.2021.

Provisions involved

(a) Regulation 28 of SEBI (Buy Back of Securities) Regulations, 2018.[i]

(b) Regulation 24(i)(d) of SEBI (Buy Back of Securities) Regulations, 2018.[ii]

(c) Regulation 5(ii) of SEBI (Buy Back of Securities) Regulations, 2018.[iii]

(d) Sections 68, 69 and 70 of the Companies Act, 2013.

Facts of the case

1. On February 26, 2020, the Board of Directors of TCIL had approved the proposal for a buy–back of up-to 2,60,86,965 equity shares (which was 6.90% of paid-up share capital as on 31.12.2019) of the face value of ₹1 each at a price of ₹57.50 per equity share.

2. On March 06, 2020 vide a letter, TCIL filed a Draft Letter of Offer (DLOF) for buy-back with SEBI.

3. Owing to the onset of Covid-19 pandemic, TCIL corresponded with SEBI seeking deferral of the buyback to the quarter ended June 2020.

4. On September 28, 2020, the request for deferral was withdrawn and an application was made seeking withdrawal of the buy-back.

Applicant’s Submissions

1. The Company being in the tourism and travel business industry was severely affected by the onset of Covid-19 pandemic in March 2020.

2. The consolidated and standalone financial figures as on June 30, 2019 and June 30, 2020 were as follows:

  As on 30.06.2019 (in INR) As on 30.06.2020 (in INR)
  Standalone Consolidated Standalone Consolidated
Earnings Before Tax 548 million 399 million (27 million) (1361 million)

The Company also had a severe cash burn of INR 1460 million during the 3-month period from March 2020 to June 2020. The fixed costs were an aggregate of INR 220 million per month.

3. As on the date of making the application the company did not have any surplus and in fact, they wanted to raise more funds either by way of equity or debt. Hence to protect the interest of the investors and to ensure going concern nature of the business, the Company made an application for withdrawal.


Whether the mandatory obligations/compliances flowing from the statute/regulations, can be dispensed with in unforeseen situations such as the Covid–19 pandemic?

Decision of the WTM

1. As per the provisions of the Companies Act, 2013 and the Buyback Regulations, 2018 an offer for buyback has to be completed within one year from the date of passing the resolution. As per Regulation 24(i)(d) of the Buyback Regulations, 2018 the company shall not withdraw letter of offer after filing the draft with SEBI.

2. Under Regulation 28(i) of the Buy–back Regulations, 2018, the Board may relax the strict enforcement of any requirement of the Buy-back Regulations in the  interest  of  investors  and  the  securities market, if the Board is satisfied that inter alia the requirement may cause undue hardship to investors.

3. It is an established principle that law cannot compel the performance of impossible events, evidenced through the Latin maxim “lex non cogit ad impossibilia”/”impotentia excusat legem”.

4. The fundamental tests involved to ensure the applicability of the maxim are as follows:

a) Whether the event was caused beyond the control of the person?

b) Whether the event occurred without the fault of any person?

c) Whether the event resulted in impossibility?

5. In the Order, SEBI observed that all the three conditions were satisfied, and constituted a valid ground for seeking relaxation from ensuring compliance with the Buyback Regulations, and that continuing with the buyback during this substantial financial deterioration will only result in disturbing the interest of the investors.

6. Considering the uniqueness of the situation and on the subjective conditions that the submissions were true and fair, and that there were no fraudulent unfair trade practices in the matter, SEBI permitted the withdrawal of buyback in the interest of the investors and the securities market and also expressly stated in its order that this does not intend to serve as a precedent.

Regulatory issues that are to be noted from this decision of WTM
1.     The law does not compel the performance of impossibilities which are caused due to events beyond the control of the person, without any fault of his own.

2.     SEBI has rightly exercised the power given to it to relax strict compliance with the provisions of the Regulations.

[i] Regulation 28(i): The Board  may,  in  the  interest  of  investors  and  the  securities market,   relax   the   strict   enforcement   of   any   requirement   of   these regulations except the provisions incorporated from the Companies Act, if the Board is satisfied that:

(a)the requirement is procedural in nature; or

(b)the requirement may cause undue hardship to investors.

[ii] Regulation 24(i)(d): the company  shall  not  withdraw  the  offer  to  buy-back  after  the draft   letter   of   offer   is   filed   with   the   Board   or   public announcement of the offer to buy-back is made.

[iii] Regulation 5(ii): Every buy-back shall be completed within a period of one year from the date of  passing  of  the  special  resolution  at  general  meeting,  or  the resolution  passed  by the board  of  directors of  the  company,  as  the case may be.

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