TMI Blog1980 (7) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... Amar Nath Roy filed on behalf of the company and affirmed on the 8th January, 1980. The material portion for our purpose is clause 3, which provides as follows : "The purchaser shall pay to the seller the agreed price for the said shares at the rate of Rs. 100 (one hundred) per share as follows : ( a ) A/c payee bank draft in favour of the seller for 50% amount of the agreed price will be handed over by the purchaser to Shri Arun Krishna Roy against delivery of blank transfer deeds duly signed by the seller. ( b ) The balance 50% amount of the agreed price will be paid within nine months from the date hereof ..........". After the purchase of the said shares the petitioner duly lodged them with the respondent-company for registration of its name as the owner thereof. The respondent-company, however, sent a communication stating that it was unable to register the said shares in the name of the petitioner-company and returned the share certificates and the transfer deeds. The communication was also stated to be a notice under article 43 of the articles of association of the respondent-company. Hence, the present application praying that the share register of the respondent-c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present petition was entered into, is a "notified area" for the purpose of section 13 of the Act. Sections 16 and 17 of the Act which are equally material for our purpose read as follows : "16. Power to prohibit contracts in certain cases. (1) If the Central Government is of opinion that it is necessary to prevent undesirable speculation in specified securities in any State or area, it may, by notification in the Official Gazette, declare that no person in the State or area specified in the notification shall, save with the permission of the Central Government, enter into any contract for the sale or purchase of any security specified in the notification except to the extent and in the manner, if any, specified therein. (2) All contracts in contravention of the provisions of sub-section (1) entered into after the date of the notification issued thereunder shall be illegal". "17. Licensing of dealers in securities in certain areas. (1) Subject to the provisions of sub-section (3) and to the other provisions contained in this Act, no person shall carry on or purport to carry on whether on his own behalf or on behalf of any other person, the business of dealing in securiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the present case. Mr. Dipankar Gupta, who appeared for the petitioner-company drew my attention to the definition of "marketable securities" as contained in section 2( h ) of the Act. Shortly put, Mr. Gupta's contention was that the prohibition contained in sections 13 and 16 of the Act, which have been set out hereinabove, apply only to those securities which are quoted in the stock exchange. In other words, it is only in respect of those transactions in shares or securities which are quoted in the stock exchange that the interdicts contained in sections 13 and 16 of the Act would apply. Admittedly, the shares of the company in respect of which rectification is sought for in the share register are not quoted in the stock exchange. According to Mr. Gupta the expression "spot delivery contracts" as defined in the Act and as referred to in section 18 thereof also means spot delivery contracts in respect of the shares or securities which are quoted in the stock exchange. Mr. Nag sought to repel this contention of Mr. Gupta by submitting that to attribute the meaning that Mr. Gupta invites me to do to the expression "marketable securities" would be to unduly narrow down its scop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the respondent-company, drew my attention to section 23 of the Act, which provides for the various penalties for contravention of the provisions of the Act, including sections 15 and 16 thereof. According to Mr. Nag, since the statute contains certain prohibitory clause and also penal provisions for the violation thereof, these prohibitions should be held to be mandatory and not merely directory. In support of this proposition, Mr. Nag drew my attention to a decision of the Supreme Court in the case of Mannalal Khetan v. Kedar Nath Khetan [1977] 47 Comp. Cas. 185 ; AIR 1977 SC 536. In that decision, in considering section 108 of the Companies Act, 1956, it was held that negative, prohibitory and exclusive words are indicative of the legislative intent when the statute is mandatory. Negative words are clearly prohibitory and are ordinarily used as a legislative device to make a statutory provision imperative. The words "shall not register" are mandatory in character. The mandatory character is strengthened by the negative form of the language. It cannot be said that the provisions contained in section 108 are directory because non-compliance with the section is not declared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it rather difficult to understand the expression "contract for cash delivery" as used by the learned judge who delivered the judgment on behalf of the Division Bench. As will be noticed from the notification dated the 27th June, 1969, which was the basis of the above judgment and which I, have set out hereinabove, the expression used is "contracts for cash or hand delivery or special delivery apart from spot delivery contracts". Therefore, it is clear that the notification contemplates four distinct types of contracts, viz ., ( i ) spot delivery contracts, ( ii ) contracts for cash, ( iii ) contracts for hand, and ( iv ) contracts for special delivery. There is no such category, as far as I can see, of contracts for cash delivery (an expression used by the Division Bench). In any event, in my view, the Division Bench, on the particular facts of that case, came to the conclusion that the contract in question did not come within the mischief of the above-mentioned notification. I do not see how this decision is of any assistance to the petitioner in the present case. It remains for me to deal with two decisions which were relied on by each party. Mr. Dipankar Gupta for the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a private limited company are not marketable in the sense that before they can be sold to outsiders, they have to be offered to an existing member of the private limited company. That being so, the shares of a private limited company stand as a class apart from other shares of a public limited company. We, in the present case, are concerned with a public limited company. As such, this decision is of no assistance to the petitioner in the present case. In any case, the learned judge has held that what is easily saleable is "marketable". Lastly, Mr. Nag relied on a decision of this court in the case of Turner Morrison Co. v. Shalimar Tar Products ( 1935 ) Ltd. [1980] 50 Comp Cas 296. In that case which is also under section 155 of the Companies Act, 1956, where the legality of transactions in the light of section 13 of the Act was involved, R. Bhattacharya J., at p. 333 observed as follows : "Section 18(1) of the Act says that nothing contained in sections 13, 14, 15 and 17 shall apply to spot delivery contracts. I have already mentioned what spot delivery is according to the Act. Admittedly, in the present case, the transaction dealing with the disputed sale of shares ..... X X X X Extracts X X X X X X X X Extracts X X X X
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