2004 (6) TMI 634 - Board - Companies Law

Summary

Issues Involved:
1. Rectification of register of members under section 111A of the Companies Act, 1956.
2. Alleged illegal transfer of shares in violation of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.
3. Maintainability of the petition under section 111A(3) of the Companies Act, 1956.
4. Locus standi of the petitioners to file the petition.

Detailed Analysis:

Issue 1: Rectification of Register of Members under Section 111A of the Companies Act, 1956
The petitioners sought rectification of the register of members by removing the name of VLS Finance Ltd. in respect of 2,64,558 equity shares. The petitioners argued that the shares were transferred without their knowledge and in violation of SEBI regulations. They claimed that the transfer was void and illegal as it exceeded the 10% acquisition limit without compliance with the Takeover Regulations. The petitioners filed an application for rectification within the prescribed two-month limit from the date of intimation of transfer.

Issue 2: Alleged Illegal Transfer of Shares in Violation of SEBI Regulations
The petitioners contended that the transfer of shares was in gross violation of the SEBI Takeover Regulations, as the acquisition was more than 16%, with the petitioners' shares accounting for nearly 13%. They argued that any acquisition of shares done except in accordance with the regulations is void and illegal. The SEBI had rejected VLS Finance Ltd.'s application for exemption from making a public offer and imposed a penalty for non-disclosure of acquisition of shares and takeover.

Issue 3: Maintainability of the Petition under Section 111A(3) of the Companies Act, 1956
The respondents argued that the petition was not maintainable as it was filed beyond the two-month limitation period prescribed in section 111A(3). They contended that the shares were transferred in 1998, whereas the petition was filed in January 2000. The respondents also claimed that the petitioners had suppressed facts regarding the loan agreement and deed of pledge, which authorized the transfer of shares in case of default.

Issue 4: Locus Standi of the Petitioners to File the Petition
The respondents argued that the petitioners, being shareholders, did not fall under any of the five categories of persons (depository, company, participant, investor, SEBI) who could file an application for rectification under section 111A(3). They relied on the judgment of the Bombay High Court in Shirish Finance & Investment (P.) Ltd. v. M. Sreenivasulu Reddy, which held that a member of a company has no statutory right under section 111A to seek rectification of the register of members.

Conclusion:
The Board concluded that the petition was not maintainable under section 111A(3) as the petitioners did not fall under any of the five categories authorized to file such an application. Consequently, the petition was dismissed. Additionally, the Board noted that an affidavit filed by the petitioners after the hearing concluded appeared to be an afterthought to defeat the rights of respondent No. 2, and it was not taken into account. There were no orders as to costs.