1999 (7) TMI 660 - Board - Companies Law

Summary

Issues Involved:
1. Refusal to register transfer of shares.
2. Alleged violation of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997.
3. Clubbing of shares acquired by different entities.
4. Free transferability of shares under Section 111A of the Companies Act, 1956.
5. Sufficient cause for refusal under Section 111A(3) of the Companies Act, 1956.
6. Pending investigation by SEBI.

Issue-wise Detailed Analysis:

1. Refusal to register transfer of shares:
The petitioners lodged 30,17,767 equity shares for registration of transfer, which the respondent company refused, citing alleged violations of SEBI regulations. The respondent company did not provide specific details or evidence for the refusal, nor did it submit a board resolution rejecting the transfer.

2. Alleged violation of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997:
The respondent company claimed that the petitioners violated SEBI regulations by acquiring more than the stipulated percentage of shares in concert with others. However, the company failed to provide concrete evidence or particulars of the alleged concerted acquisition.

3. Clubbing of shares acquired by different entities:
The respondent company included shares acquired by six other entities, alleging they acted in concert with the petitioners. The petitioners denied any connection with these entities. The respondent company presumed concerted action based on the shares being acquired through the same broker and lodged simultaneously, but did not provide further substantiating evidence.

4. Free transferability of shares under Section 111A of the Companies Act, 1956:
The petitioners argued that the shares of a listed company are freely transferable under Section 111A, and the respondent company had no right to refuse the transfer. They contended that the refusal was based on extraneous considerations and not covered under the provisions of Section 111A.

5. Sufficient cause for refusal under Section 111A(3) of the Companies Act, 1956:
The respondent company argued that they had sufficient cause to refuse the transfer, citing the petitioners as business rivals and alleging ulterior motives. However, the Board noted that the grounds for refusal under Section 111A(3) are limited to violations of SEBI regulations, SICA, or any other law. The Board found no sufficient cause for refusal based on the material provided.

6. Pending investigation by SEBI:
The respondent company requested that the appeals be kept in abeyance pending SEBI's investigation. However, the Board decided not to delay the appeals, noting that SEBI had been examining the matter since October 1997 without initiating action. The Board emphasized that investors should not suffer due to prolonged investigations when sufficient provisions exist under Section 111A(3) to rectify the situation.

Judgment:
The Board concluded that the respondent company failed to substantiate the alleged violation of SEBI regulations and that the refusal to register the transfer of shares was without sufficient cause. The appeals were allowed, and the respondent company was directed to register the transfer of the shares within one month from the receipt of the order. No orders as to cost were made.