TMI Blog1999 (7) TMI 660X X X X Extracts X X X X X X X X Extracts X X X X ..... rectify the register of members to place their name in the register of members in respect of these 30,17,767 shares. The petitioners have also sought for directions for payment of all dividends that might have been declared in respect of the said shares as well as the bonus, rights and other entitlements in respect of the said shares. Since the subject-matter in all these appeals is the same, all the ten appeals are being disposed of by this common order. 2. The above referred 10 petitioners, during the period April, 1997 to 9-10-1997 lodged the above 30,17,767 equity shares of ₹ 10 each of the respondent company for effecting the registration of transfers in their name. However, the respondent company failed and refused to record the registration of transfers of the said shares in favour of the petitioners. The respondent company, vide its letter dated 14-10-1997 conveyed the company s decision to refuse to register the transfers of the said shares alleging that the petitioners have violated the provisions of Chapter II and III of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997, by acquiring more than the stipulated percentage of shares in conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oard of directors of the respondent company though the statutory period of 60 days as per the Companies Act and a period of 30 days under listing agreement has expired. It is further submitted by the petitioners that enough time and opportunity was given to the respondent company to substantiate their allegation about the alleged violation of SEBI Take Over Regulations but they have failed to do so. The petitioners have also denied the claim of being business rivals of the respondent company and submitted that the said claim is irrelevant to justify the refusal of transfer of shares and is not covered under the provisions of section 111A. The petitioners have also submitted that in arriving at the conclusion of crossing the limit of 10 per cent as prescribed by SEBI Take Over Regulations, the respondent company has falsely and without any basis included the shares acquired by three private limited companies and three individuals as referred to in Exhibit B to the reply filed by the respondent company. No reason or proof is given in support of the clubbing of these parties with Sun Pharma Group. The petitioners have already admitted that they have acquired 9.37 per cent of the pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for by the SEBI vide its letter dated 15-6-1998. He invited attention to the correspondence between SEBI, respondent and the petitioner attached with the reply of the respondent and submitted that SEBI has been carrying on the investigation in the matter but no action has been initiated by them. It is further submitted that no material has been placed to substantiate allegation as to how company has come to the conclusion that they are acting in concert. He further submitted that this group has nothing to do with three individuals M/s. Ashok R. Bhuta, K.P. Bhuta, Mahesh N. Aswani and three Private Limited companies namely Barkha Finlease Pvt. Ltd., Vadi Finlease Pvt. Ltd. and Sunmarg Securities Pvt. Ltd. and if the shares lodged by them are excluded then the shares acquired by Sun Pharma group acting in concert with others comes to less than 10 per cent and there is no violation of SEBI Take Over Regulations, 1997 as alleged. 6. Shri Seervai further submitted that Sarabhai group holds more than 25 per cent of the Paid Up Capital of the company and why they should be shy of registering the said shares when the same have been acquired within the prescribed limits. He again reiter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondents wrote to the SEBI that these shares have been acquired through the same brokers and lodged by the same persons. In this connection, he invited our attention to the correspondence attached with the reply of the respondent company from where it would be seen that letters of lodgement are identical and that led the company to believe that these persons are acting in concert. Shri Joshi further emphasised that these shares were lodged by the same individuals belonging to Sun Pharma Group by hand delivery and these could not have happened but for the fact that they are acting in concert. He further submitted that the SEBI is already seized of the matter and investigated the same and till such time SEBI s investigation is completed these appeals should be kept in abeyance. He further submitted that let the enquiry by SEBI be over and petitioner should not be shy of SEBI enquiry. He further submitted that in support of the contention that SEBI has closed its enquiry, no proof has been placed on record. Shri Joshi further submitted that as per the proviso to section 111A(2), the respondent company is within its rights to refuse to register the transfer of shares, if there are suf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board may, in the interests of the securities market, withhout prejudice to its rights to initiate action including criminal prosecution under section 24 of the Act give such directions as it deems fit including : (a )directing the person concerned not to further deal in securities ; (b)prohibiting the person concerned from disposing of any of the securities acquired in violation of these Regulations. (c )directing the person concerned to sell the shares acquired in violation of the provisions of these Regulations; (d)taking action against the person concerned. and submitted that if the shares are acquired in violation of the said Take Over Code the SEBI has sufficient powers to take not only criminal prosecution but can also give necessary directions for disposing of such securities, directing the person concerned to sell the share acquired in violation of the provisions of the Take Over Code. He further submitted that even if SEBI is examining the matter why the investors should suffer merely because the company has chosen to make a reference and submitted that the company should be directed to register the transfer of shares and later on if SEBI comes to the conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s incorporated under the Companies Act. Likewise for the three individuals namely Mr. Ashok R. Bhuta, Shri K.P. Bhuta and Shri Mahesh N. Aswani, it has not collected any particulars as to how they are connected with the Sun Pharma Group. The respondent company s contention is that these shares have also been acquired at the same time and have been lodged by the same persons. The respondent company should have acted more responsibly and ought to have collected some more relevant information/particulars by making enquiries before forming any opinion. The respondent company has not taken the pains to collect any further information and they have merely on the plea that these shares have been purchased through same brokers during the same period and have been lodged by the same persons, assumed that these parties are also acting in concert with Sun Pharma Group. The share broker who operates on the Stock Exchange may deal in the shares of a company for several clients at the same time. Therefore, merely on this ground it would not be proper to assume that all those who have acquired the shares through same broker are acting in concert. Further, the name of the individual who lodged the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same has to be examined with reference to the provisions of this section. As we have already pointed out, proviso to sub-section (2) relates to pre-registration issues, while sub-section (3) relates to post-registration issues. In case of post-registration, the register of members can be ordered to be rectified only on three grounds, i.e., if the transfer is in contravention of the provisions of the Securities and Exchange Board of India Act, 1992 (hereinafter the SEBI Act ) or Regulation thereunder, provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter the SICA ) or any other law for the time being in force. In other words, the statute itself has restricted the grounds on which a register can be rectified after registration or transfer. The term sufficient cause as used in the proviso to sub-section (2) has, therefore, to be seen with reference to ground under which register can be rectified after registration. Under these circumstances, only when a company refuses to register the transfer of shares on the grounds that transfer is in violation of the provisions of the SEBI Act or Regulations thereunder, provisions of the SICA or any other law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the investors should not be allowed to suffer when there are sufficient provisions under section 111A(3) to rectify the situation. Further, if after examination/investigation SEBI comes to the conclusion that the shares have been acquired in violation of the SEBI Take Over Code then under Regulation 44 of the said Code they are also empowered to give necessary directions to take remedial measures. In view of this we are not inclined to keep these appeals in abeyance, particularly, having regard to the fact that material placed before us is found to be inadequate to form an opinion of alleged violation of the said Take Over Code. Further, if these appeals are allowed, the shareholding would go only upto 9.37 per cent which would be below 10 per cent ceiling prescribed at that time under the Code. 13. On the basis of available material placed before us, we do not agree with the respondent company s contention that these 10 petitioners acting in concert with others have acquired more than 10 per cent of the share capital of the respondent company and thus, there is a violation of SEBI Take Over Code. Accordingly these appeals are allowed and the respondent company is directed to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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