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TMI Blog2005 (10) TMI 288X X X X Extracts X X X X X X X X Extracts X X X X ..... endants. The said agreement inter alia provided that Hinduja Finance Corporation Ltd. (HFCL) has agreed to offer 10 lakhs shares of the Mody International Paper Ltd. (MIP) held by HFCL in the share capital of MIP to plaintiffs herein who agrees to acquire the same from HFCL @ Rs. 37 per share. The total consideration fixed under the agreement for the aforesaid 10 lakhs shares is sum of Rs. 3.7 crores. The said amount is due and payable by the plaintiffs to HFCL against the delivery of the said shares. Clause 8 of the said agreement inter alia provided that HFCL agrees to take, in consultation with the plaintiffs all such necessary actions/steps as may be required to make the offer for sale of the said MIP shares to Public being 35,45,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esaid and it is not accepted by the plaintiffs for any reason whatsoever, then in such event HFCL shall be free of its obligations to buyback the said from the plaintiffs as per clause 12 of the said agreement. Clause 16 further provides that HFCL agrees to indemnify and keep plaintiffs indemnified for any losses that may be incurred by plaintiffs due to non-compliance by HFCL. Thus it is the case of the plaintiffs that under clause 12 of the agreement there was buyback agreement between the plaintiffs and defendants to repurchase the said shares since defendants failed to list the said shares by 31-12-2003 on the stock exchange. 3. It is further the case of the plaintiffs that sometime in or about 21-10-2003 defendants for the first ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned counsel for the defendant has relied upon the judgment of the F.I. Rebello, J. in Summons for Judgment No. 511 of 1997 in Summary Suit No. 4556 of 1996 being dated 6-4-1999. The learned Single Judge in the aforesaid judgment was considering the identical situation and by considering all earlier judgments including the judgment of the Apex Court in the case of BOI Finance Ltd. v. Custodian [1997] 10 SCC 488 1 has come to the conclusion that the arrangement of buyback is contrary to the provision of Securities Contract (Regulation) Act, 1956 and is unenforceable in law and in that view of the matter summary decree cannot be granted. Summons for Judgment must be dismissed. 6. However, the learned counsel for the plaintiff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gill Co. ( supra ) and in my opinion it directly covers the case in the present matter. The view which has been expressed by the learned Single Judge in the aforesaid judgment after considering the entire case law is that an arrangement of buyback of the share under a contract is not permissible and such an arrangement is hit by the provisions of the Securities Contract (Regulation) Act, 1956 and thus void ab initio . In my view the judgment also covers the case at hand. 9. However, the learned counsel for the plaintiffs sought to distinguish the said judgment by relying on the aforesaid Division Bench judgment. I have perused the said Division Bench judgment also. In my opinion the Division Bench judgment has no application on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )transfer of securities by the depository from the account of a beneficial owner to the account of another beneficial owner when such securities are dealt with by a depository;" 11. The provision of spot delivery contract are pari materia different then the provision of ready delivery contract as provided under the Bombay Securities Contract Control Act, 1925. The provision of section 2(4) which has to be read with section 6 of the Bombay Securities Control Act, 1925 in my opinion as contrast to the provision of section 2( i ) of the Securities Contracts (Regulation) Act, 1956 which provides for prohibition for entering into any contract which is other than the spot delivery provides for different scheme altogether. Under the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel for the plaintiffs that in the light of the judgment of the Division Bench of this Court in the present case the judgment of the learned Single Judge in Gill Co. ( supra ) should not be accepted. Apart from the aforesaid in my view such an arrangement to buyback the shares cannot form a part of Order 37 Rule 2 of the CPC because in effect what is sought is specific performance of the said clauses 12 and 13 of the contract because it requires simultaneously delivery thereof to the opposite party in view thereof, the present suit is not maintainable as summary suit. I am therefore of the opinion that the defendants deserves unconditional leave to defend. I accordingly direct unconditional leave to defend to the defendants. Suit is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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