Prasad,
Stocks can stop trading on the exchanges for multiple reasons, to list a few:
- Amalgamation with another entity, for example Bank of Rajasthan when it merged with ICICI Bank, you would have gotten 1 ICICI Bank share for 4.52 shares of BOR. So BOR stopped trading on the exchanges, but you had shares of ICICI Bank now.
- Delisting from the exchanges by offering a share buy back from the public. This is usually done when the promoters have significant stake, and they want to restructure their business. But, you can tender the shares in the buy back, and get your money back, usually such buy backs are always at a premium to the market price.
- Finally, the 3rd kind, which I guess you are referring to, the companies with scrupulous management who are suspended from trading on the exchange for non compliance to regulations. If you invest money into such a company, that firstly gets suspended and then closes down, you will have to write it off as a loss, there is nothing you can do about it. Even if the stock was trading on the exchanges, and the company closes down, the value of the share would go to 0.
Hope this helps,