9911796707
TMI Blog1998 (5) TMI 414X X X X Extracts X X X X X X X X Extracts X X X X ..... rayers in all these petitions are common, namely: Rectification of the register of members of the respondent-company and to restore the names of the petitioners, whose shares are allegedly wrongfully transferred and other incidental prayers. Since the cause of action the grounds and the prayers are common it was decided to dispose of all the four petitions together. There is also a technical error on the petitioners side inasmuch as they have filed the petition under section 111, whereas the respondent-company being a listed company, the relevant provisions relating to rectification of the register are contained in section 111A(3) and not in section 111. This error being purely technical in nature has been overlooked and the petitions have been considered under section 111A(3). The facts as stated in the petition are that the respondent-company made a public issue in February, 1996 in which the petitioners made their applications and were allotted the shares referred to above. The petitioners were not delivered the share certificates after the allotment inspite of repeated reminders. In the correspondence in this connection, in December, 1996 the company informed that they un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant for our consideration of the case before us. The contention that the transfer has been made as per SEBI guidelines within the promoters group is questioned. According to the petitioner the shares could not have been pledged as alleged by respondents, being promoters quota shares and further from the reply it appears that the respondent-company is in the know of things regarding pledge etc. which means that it was hand in glove with other parties to whom the shares have been allegedly transferred. During the initial hearings having found that the respondent-company is a listed company and that it is claimed that the transfers were effected based on duly executed transfer deeds, we directed the company to offer inspection of the relevant documents evidencing the transfer of the shares in the presence of Bench Officer. We also gave directions to implead the transferees which was done and gave them opportunity to file their replies. After inspection, the petitioners filed further objections, namely, that the respondent did not produce the original board resolution authorising the transfer and furnished only the extract of the minutes of the Board meeting of 28-9-1996. Furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time being in force, within two months from the date of transfer of any shares or debentures held by a depository or from the date on which the instrument of transfer or the intimation of the transmission was delivered to the company, as the case may be, after such inquiry as it thinks fit, direct any depository or company to rectify its register or records. From a reading of this sub-section, it is clear that the CLB may on an application made by an investor (as far as this case is concerned) order rectification in case the transfer of shares is in contravention of certain laws mentioned therein. In other words an investor could apply to the CLB for rectification in case a transfer has been already effected in contraven-tion of any of the laws mentioned in that sub-section. In other words so long as there is no contravention of any of the laws mentioned therein an application cannot lie. On this interpretation of this sub-section there is no disagreement between the parties before us in this case. Another interpre-tation which flows from the language of the section is that apart from the contravention of any of the laws rectification cannot be sought on any other ground which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-sections (1), (2) and (3) that a company is obliged to transfer the shares or debentures since they are freely transfer-able. However, an investor is entitled to seek rectification of the register by revoking the transfer if he can establish that the transfer is in contra-vention of any of the specified laws. In the case of Securities and Exchange Board of India Act, 1992 even a contravention of any of the regulations made thereunder is a valid ground for rectification. In the present case the allegation made by the petitioners is that there is a contravention of the 'SEBI guidelines'. It is a moot question whether the SEBI guidelines constitute 'Regulation' made under the 'SEBI Act. Though such a question was not specifically raised we should ourselves be satisfied on this issue having entertained a doubt on this score. The SEBI Act under section 30 makes provision for framing 'Regulations' by means of notification. 'Section 31 contemplates a procedure for framing regulations including placing the same before both the Houses of Parliament. The SEBI guide-lines issued from time to time do not appear to be in the form of notification and are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hare certificates issued to promoters, friends, relatives and associates shall carry the inscription 'not transferable for the speci- fied period.' (e)A relaxation with regard to inter se transfers amongst the promoters specifically described as such in the prospectus is permissible but the lock-in-period would continue to apply even for such shares. 7. It is the argument of Shri R.S. Bhatia Company Secretary on behalf of the respondents that the impugned transfers are pursuant to this relax- ation for inter se transfers since both the transferors and transferees are allottees under the promoters quota and fall within the category of 'promoters' and hence there is no violation of SEBI guidelines. His argument is based on the concept of 'promoters contribution' which is not confined to the promoters as specifically mentioned in the prospec- tus but extends to their friends, relatives, associates etc. Since both the transferors and the transferees fall within the category of friends and associates who have subscribed under the promoters quota the relaxation covers such transfers. According to him the relaxation not only applies to transfers amongst th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asmuch as the relaxation covers transfer amongst promoters specifically described as such in the prospectus . In line with this relaxation in the Press Release the prospectus also specifically mentions four names who constitute the promoters for whom the relaxation is applicable. In other words in any transfer if these promoters feature both as transferor and transferee such transfers are exempt from the restriction. In case they constitute only one limb, i.e., either as transferor or as transferee even then the relaxation is not available. Thus the facility is intended to be extended to those promoters who are specifically named in the prospectus. The intention is very clear and unambiguous. The facility is not intended to be extended to other allottees. In the impugned transfers none of the promoters specifically mentioned in the prospectus feature either as transferors or transferees whereas their names should feature both as transferor and transferee. As such the exemption is not available to these transfers. Consequently, we have no hesitation in holding that the trans- fers are in clear violation of SEBI guidelines imposing restriction on transfer and prescribing a lock-in-p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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