2002 (4) TMI 796 - HC - Companies Law

Issues Involved:
1. Legality of the transfer of shares under SEBI Regulations.
2. Maintainability of the writ petition.
3. Applicability of SEBI Regulations, 1997.
4. Exemption under Regulation 3 for promoters.
5. Availability of alternative remedy under the Companies Act.
6. Delay and latches in filing the writ petition.

Issue-wise Detailed Analysis:

1. Legality of the transfer of shares under SEBI Regulations:
The petitioner challenged the transfer of Rs. 9.76 lakhs shares in Fenoplast Ltd. to respondents 4 to 8 (Haridass family) as illegal and violative of Regulation 10 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. The petitioner argued that compliance with Regulation 10 was mandatory, and non-compliance rendered the transaction void. The petitioner sought restoration of the shares to his family.

2. Maintainability of the writ petition:
The respondents contended that the writ petition was not maintainable, arguing that the petitioner should have pursued remedies under Section 111A of the Companies Act, 1956, or continued proceedings before the Company Law Board (CLB). The court examined the scope of writ of mandamus, noting that it is typically used to address wrongful inaction by public authorities. The court emphasized that the existence of alternative remedies does not preclude seeking a writ of mandamus if a legal provision is violated.

3. Applicability of SEBI Regulations, 1997:
The court confirmed that the SEBI Regulations, 1997, were applicable to the transaction in question, as the transfer occurred in March and May 1997, after the regulations came into force on 20-2-1997. Regulation 10 mandates that an acquirer of 15% or more of the voting rights in a company must make a public announcement. The Haridass family, who acquired more than 15% of the voting rights, did not make such an announcement.

4. Exemption under Regulation 3 for promoters:
The respondents argued that the transfer was among existing shareholders and promoters, exempting it from Regulation 10 under Regulation 3(e). The court noted that respondents 3 to 8 were promoters along with the petitioner's family. Regulation 3 exempts inter se transfer of shares among promoters from the requirement of making a public announcement. The court found that the transfer was indeed among promoters, making Regulation 10 inapplicable.

5. Availability of alternative remedy under the Companies Act:
The court highlighted that the Companies Act provides a detailed mechanism for addressing grievances related to the transfer of shares under Section 111A. The petitioner had previously filed a company petition before the CLB but withdrew it. The court questioned the appropriateness of resolving the matter through a writ petition when a specialized agency under the Companies Act was available.

6. Delay and latches in filing the writ petition:
The court observed that the transfer of shares occurred in 1997, the MOU was from 1996, and the writ petition was filed in 2001. The court noted that Section 111A allows applications to be filed within 30 days of the transfer. The delay in filing the writ petition and the absence of any averment that the petitioner and his family had not received the consideration under the MOU were factors against granting discretionary relief. The court emphasized that granting the relief would result in the petitioner retaining the consideration while also reclaiming the shares, highlighting the petitioner's conduct.

Conclusion:
The court dismissed the writ petition, holding that the petitioner had not made a case for the relief claimed. The court found that the transfer of shares was exempt under Regulation 3, the petitioner had alternative remedies under the Companies Act, and the delay and conduct of the petitioner were significant factors against granting relief. No costs were awarded.

← Previous Next →