1980 (7) TMI 213 - HC - Companies Law

Summary

Issues Involved:
1. Rectification of the share register u/s 155 of the Companies Act, 1956.
2. Legality of the share transfer under the Securities Contracts (Regulation) Act, 1956.
3. Interpretation of "marketable securities" and "spot delivery contract".

Summary:

1. Rectification of the Share Register u/s 155 of the Companies Act, 1956:
The petitioner sought rectification of the share register of the respondent-company to reflect the transfer of 1,855 ordinary fully paid-up shares purchased from respondents Nos. 2 to 7. The respondent-company refused to register the shares, citing the illegality of the transfer under the Securities Contracts (Regulation) Act, 1956.

2. Legality of the Share Transfer under the Securities Contracts (Regulation) Act, 1956:
The court examined the relevant provisions of the Securities Contracts (Regulation) Act, 1956, including sections 13, 16, and 18. It was undisputed that the shares were not quoted on any recognized stock exchange and that Calcutta is a "notified area" for the purposes of section 13. The petitioner conceded that the contract was not a "spot delivery contract" as defined in the Act, since 50% of the purchase price was to be paid nine months after the date of transfer. Consequently, the exemption under section 18 was not applicable.

3. Interpretation of "Marketable Securities" and "Spot Delivery Contract":
The petitioner argued that the prohibitions in sections 13 and 16 applied only to securities quoted on the stock exchange. The court rejected this argument, stating that "marketable securities" should not be narrowly interpreted to include only those quoted on the stock exchange. The court referred to dictionary definitions and previous case law to conclude that "marketable" means "saleable" and applies to any securities capable of being bought and sold in a market.

The court also considered the decision in Turner Morrison & Co. v. Shalimar Tar Products (1935) Ltd., which held that transactions not conducted through a recognized stock exchange are illegal under section 13. The court found the facts of the present case identical and held that the transaction was in clear contravention of sections 13 and 16 of the Act.

Conclusion:
The court dismissed the application, holding that the respondent-company was within its rights to refuse registration of the share transfer due to its illegality. The petitioner was ordered to bear the costs.