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Capital Market and Securities Laws · Delisting of Equity Shares

Compulsory Delisting of Equity Shares by Stock Exchanges

Updated 11 October 2026 · Fact-checked

Compulsory delisting is the removal of a company's securities from a stock exchange by the exchange itself, not at the company's request. Under section 21A SCRA, the exchange must record reasons and give the company a hearing. The company or an aggrieved investor can appeal to SAT within fifteen days of the decision.

Understand Compulsory Delisting by Stock Exchanges

Delisting means permanently removing a company's securities from a stock exchange, so they are no longer traded there. There are two broad kinds. In voluntary delisting, the company or its promoters choose to leave. In compulsory delisting, the exchange takes the decision, usually because the company has defaulted on its obligations.

The legal base is section 21A of the Securities Contracts (Regulation) Act, 1956 (SCRA). A recognised stock exchange may delist securities, after recording the reasons, on the grounds prescribed under the Act. The grounds are not listed in section 21A itself. They are prescribed in the rules and SEBI regulations. In practice, typical grounds include serious or repeated non-compliance with listing requirements, and the company's securities being suspended or not traded for a long period. Do not quote exact thresholds unless your study material gives them.

The proviso to section 21A(1) is a natural justice safeguard: securities of a company shall not be delisted unless the company has been given a reasonable opportunity of being heard. Without a hearing, the delisting is open to challenge.

Section 21A(2) gives a remedy. A listed company or an aggrieved investor may appeal to the Securities Appellate Tribunal (SAT) against the exchange's delisting decision within fifteen days from the date of the decision. The proviso says SAT may allow the company to file within a further period not exceeding one month, if SAT is satisfied that the company was prevented by sufficient cause. Sections 22B to 22E of the SCRA apply to such appeals as far as may be.

Compulsory delisting hurts public shareholders, who are left holding shares that cannot be traded on the exchange. Section 21A does not set out any exit mechanism for them. That subject falls under SEBI's delisting regulations, which are not part of section 21A, so check your study material for the exact process before you write details. For the exam, remember the core idea: the exchange acts with recorded reasons, the company is heard, and SAT hears appeals.

Key rules to remember

Power to delist (section 21A(1), SCRA)
Recognised stock exchange + recorded reasons + prescribed ground = delisting
The grounds are prescribed, not listed in section 21A. Reasons must be recorded.
Hearing safeguard (proviso to section 21A(1))
No delisting without a reasonable opportunity of being heard
Applies to the company concerned. Failure to hear makes the decision open to challenge.
Appeal period (section 21A(2))
Appeal to SAT within 15 days of the decision
The proviso lets SAT allow the company, if prevented by sufficient cause, to file within a further period not exceeding one month.
Who can appeal (section 21A(2))
Listed company or aggrieved investor
Both can appeal, not only the company.
Procedure for appeals
Sections 22B to 22E of SCRA apply as far as may be
These sections govern the appeal procedure before SAT.

How to solve Compulsory Delisting by Stock Exchanges questions

Use this order for any question on compulsory delisting. It matches the ICSI answer style: provision, facts, conclusion.

  1. 1Identify whether the delisting is initiated by the exchange (compulsory) or by the company or promoter (voluntary).
  2. 2State the power: section 21A of the SCRA allows a recognised stock exchange to delist securities after recording reasons, on prescribed grounds.
  3. 3Match the facts to a ground, such as serious non-compliance with listing requirements or prolonged suspension. Say the grounds are prescribed.
  4. 4Check the hearing: was the company given a reasonable opportunity of being heard? If not, the decision is vulnerable.
  5. 5State the remedy: appeal to SAT by the listed company or aggrieved investor within fifteen days. If the company was prevented by sufficient cause, SAT may allow it to file within a further period not exceeding one month.
  6. 6If the question asks about public shareholders, say their position falls under SEBI's delisting regulations and give details only as taught in your study material.
  7. 7Write a clear conclusion that answers the exact question asked.

Quickest way: Four-line answer frame

When to use it: Use when time is short, or for a 3 to 5 mark short note.

  1. Line 1: Section 21A SCRA lets a recognised stock exchange delist securities, with recorded reasons, on prescribed grounds.
  2. Line 2: The company must first get a reasonable opportunity of being heard.
  3. Line 3: The company or an aggrieved investor may appeal to SAT within fifteen days. SAT may allow the company, if prevented by sufficient cause, to file within a further period not exceeding one month.
  4. Line 4: The exit for public shareholders is a matter for SEBI's delisting regulations. Add details only from your study material.

Common mistakes in Compulsory Delisting by Stock Exchanges

  • Saying the grounds for delisting are listed in section 21A.

    Students assume the section contains the full list.

    Fix: Write that section 21A allows delisting on grounds prescribed under the Act. Name grounds only as examples from your study material.

  • Forgetting the hearing requirement.

    Students focus on the exchange's power and skip the proviso.

    Fix: Always add: no delisting without a reasonable opportunity of being heard.

  • Writing that only the company can appeal.

    Students think of delisting as a company matter.

    Fix: Section 21A(2) allows both a listed company and an aggrieved investor to appeal.

  • Naming the wrong appellate authority, such as the Central Government or NCLT.

    Section 22 older text mentions the Central Government, and students mix it up.

    Fix: For delisting, the appeal lies to the Securities Appellate Tribunal.

  • Mixing up the time limits: fifteen days, one month or thirty days.

    Both the main period and the extension appear in the same sub-section.

    Fix: Remember: fifteen days to file. The proviso lets SAT allow the company, if prevented by sufficient cause, to file within a further period not exceeding one month. Do not say the extension applies to every appellant.

  • Treating compulsory and voluntary delisting as the same.

    Both end with shares leaving the exchange.

    Fix: State who initiates it. In compulsory delisting, the exchange decides. In voluntary delisting, the company or promoter applies and makes an exit offer.

Worked examples

Example 1

Alpha Textiles Ltd's shares were delisted by a recognised stock exchange for non-compliance with listing requirements. The company was never given a chance to explain. Advise the company.

Show the solution
  1. Provision: under section 21A(1) of the SCRA, a recognised stock exchange may delist securities after recording reasons, on prescribed grounds.
  2. Safeguard: the proviso says securities shall not be delisted unless the company has been given a reasonable opportunity of being heard.
  3. Facts: the company was not heard, so the proviso was not complied with.
  4. Remedy: under section 21A(2), the company may appeal to the Securities Appellate Tribunal within fifteen days from the date of the decision.
  5. If the company was prevented by sufficient cause from filing in time, SAT may allow it to file within a further period not exceeding one month.

Answer: The delisting is open to challenge because the company was not heard. Alpha Textiles Ltd should appeal to SAT within fifteen days of the decision. If it is prevented by sufficient cause, SAT may allow it to file within a further period not exceeding one month.

Example 2

An exchange delisted the shares of Beta Foods Ltd on 1 March. An investor who holds its shares wants to appeal on 25 March. Can the investor appeal, and is the appeal in time?

Show the solution
  1. Who can appeal: section 21A(2) allows a listed company or an aggrieved investor to appeal, so the investor is eligible.
  2. Time limit: the appeal must be filed within fifteen days from the date of the decision.
  3. Count: fifteen days from 1 March ends on 16 March. The appeal on 25 March is nine days late.
  4. Extension: the proviso to section 21A(2), on its text, lets SAT allow a further period not exceeding one month only where it is satisfied that the company was prevented by sufficient cause. It does not mention an investor.
  5. Conclusion: the investor is eligible to appeal but is nine days late. Whether the proviso can save a late appeal by an investor is doubtful on the text.

Answer: The investor is entitled to appeal to SAT, but 25 March is beyond fifteen days, so the appeal is nine days late. The proviso on a further period refers only to the company being prevented by sufficient cause, so relief for a late investor's appeal is doubtful.

Exam tips

  • Quote section 21A(1) and 21A(2) by number. Examiners reward the exact provision.
  • Always add the hearing safeguard. It is the point most often missed.
  • For a difference between voluntary and compulsory delisting, use a short two-column style in bullets: who initiates, who decides, exit for shareholders.
  • End with a one-line conclusion that applies the rule to the facts.
  • Do not invent thresholds, years or amounts for grounds or fair value. If unsure, describe the rule in words.

Practice questions from Delisting of Equity Shares

Compulsory Delisting by Stock Exchanges: frequently asked questions

What is the difference between voluntary and compulsory delisting?

In voluntary delisting, the company or promoter chooses to leave the exchange and offers an exit to public shareholders. In compulsory delisting, the stock exchange removes the securities, usually because of default by the company.

Which section of the SCRA deals with compulsory delisting?

Section 21A of the Securities Contracts (Regulation) Act, 1956. It lets a recognised stock exchange delist securities after recording reasons, on prescribed grounds, after giving the company a hearing.

Where can a delisted company appeal?

A listed company or an aggrieved investor can appeal to the Securities Appellate Tribunal within fifteen days of the exchange's decision. If the company was prevented by sufficient cause, SAT may allow it to file within a further period not exceeding one month.

What happens to public shareholders after compulsory delisting?

Section 21A does not set out an exit process for them. Their position falls under SEBI's delisting regulations, which are outside the section. Check your study material for the detailed process before you write about it.