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Issues Involved: Recognition of share transfers, timing of transfers, surrender of share certificates, motive behind transfers, compliance with Section 536 of the Companies Act, 1956.
Issue-wise Detailed Analysis: 1. Recognition of Share Transfers: The applicant company sought directions on whether to recognize the transfer of 7,396 shares of Siddhpur Mills Co. Ltd. as detailed in annexure "B". The official liquidator raised objections only against four transactions involving 1,000 shares each, transferred to four investment companies. The court permitted the applicant company to register the transfers, excluding the four impugned ones. 2. Timing of Transfers: The official liquidator contended that the transfers were not effected before the specified date of July 1, 1981, when the scheme came into operation. However, documentary evidence including advice notes of brokers, contract notes, bank statements, and affidavits indicated that the transfers were effected in April and May 1979. The court found the evidence unequivocal and concluded that the transfers were indeed effected before the specified date, thus rejecting the first objection. 3. Surrender of Share Certificates: The second objection was that the share certificates were not surrendered at the relevant times. The transferee companies explained that since Siddhpur Mills Co. Ltd. ceased functioning from February 12, 1979, they could not lodge the transfer applications and share certificates until they received a letter from Reliance Textile Industries on March 8, 1982. The court accepted this explanation, noting that it was reasonable to avoid lodging valuable documents with a non-functioning company. Therefore, the second objection was also dismissed. 4. Motive Behind Transfers: The third objection alleged that the transfers were made with an ulterior motive to save on capital gains tax and stamp fees. The court found no evidence supporting this claim and noted that the transactions were effected in April and May 1979, before any scheme of amalgamation was proposed. The court emphasized that the investment companies acted on market information and anticipated schemes of amalgamation, which was a common practice among prudent investors. Thus, the third objection was rejected. 5. Compliance with Section 536 of the Companies Act, 1956: The fourth objection was that the transferee companies did not make necessary applications under Section 536 of the Companies Act, 1956. The court held that it was unnecessary for the transferee companies to make separate applications when Reliance Textile Industries had already made one. The court clarified that it had the discretion to validate transactions made after the presentation of the winding-up petition if they were bona fide and equitable. The court found the impugned transactions to be bona fide, fair, just, and reasonable. Conclusion: The court directed the applicant company to recognize and register the transfers of shares to the four investment companies, dismissing all objections raised by the official liquidator. The transactions were validated under Section 536(2) of the Companies Act, 1956, and the application was disposed of with no order as to costs.
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