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TMI Blog2018 (12) TMI 1374X X X X Extracts X X X X X X X X Extracts X X X X ..... ged illegal acquisition of the shares of the Company by the Appellants (hereinafter referred to as the "Respondents"), in violation of the Regulation 13 of the 'Securities and Exchange Board of India (Prohibition of Insider Trading) Regulation, 1992'. The National Company Law Tribunal (hereinafter referred to as "Tribunal"), on its transfer, after hearing the parties, by impugned judgment dated 5th July, 2017, held the acquisition of shares by the Respondents as being in violation of Regulation 13 of the 'Securities and Exchange Board of India (Prohibition of Insider Trading) Regulation, 1992' and passed the following orders: "ORDER The present Company Petition is allowed. The Respondents having furnished the declaration at a later point of time are hereby barred from exercising their rights as to the shares acquired by them in the Petitioner Company in excess of 5%. The Company is hereby authorised to buyback the shares that the Respondents hold in excess of 5% of the shareholding in the Company at the rate which was prevailing on the date of presentation of the Petition or market value, whichever is higher. The Respondents are directed to hand over the share certificates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Petitioner Company came to learn that the 1st Respondent (1st Appellant) itself had purported to increase its own shareholding and/or voting strength in the Company from 3.131% of the paid-up capital as at 16th January, 2004 to over 5% of the paid up capital of the Company. The Petitioner (Company) submitted that the no mandatory disclosure in compliance with the provisions of the 'Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992', as amended by the Amendment Regulations 2002 for the said increase, had been made by the 1st Respondent (1st Appellant) who was obviously functioning as a combined unit in the matter of acquiring shares of the Company. 4. It was pleaded that on 21st May 2004, the list of Beneficiaries/Beneficial owners (hereinafter referred to as "BENPOS") reported by depositories to the Company indicated that the Respondents (Appellants) had acquired further 2% equity shares of the Company which was in violation of Regulation 13(1) & 13(3) and under Chapter IV of the 'Prohibition of Insider Trading Regulations' of 'Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992'. 5. It was allege ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd of India (Prohibition of Insider Trading) Regulation, 1992', but a disclosure beyond the date due to mistake. 11. According to learned counsel for the Petitioner Company, the statutory period for intimating the 'Securities and Exchange Board of India' under Regulation 13(1) is four working day which admittedly the Appellants failed to intimate. Therefore, according to learned counsel for the Company, the Tribunal rightly cancelled the transfers of shares and directed to transfer in favour of the Company. 12. The Tribunal referred to Section 111A of the Companies Act, 1956 and held that sub-section (3) of Section 111A empowers the Tribunal to direct the parties to undone the mischief. The Tribunal held that the acquisition of shares in excess of 5% of the shareholding was in violation of Regulation 13 of the 'Securities and Exchange Board of India (Prohibition of Insider Trading) Regulation, 1992' 13. The Tribunal having not held that the transfer was in violation of Regulation 7 of the 'Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997' and as admittedly the intimation to the stock exchange was given by the 1st Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eyond four working days on 17th August, 2004 i.e. after filing of the Company Petition. Thus, the intimation to the 'Securities and Exchange Board of India' is in breach of the provisions of Regulation 13(3) aforesaid. 16. Section 111A of the Companies Act, 1956 relates to 'rectification of register on transfer' and reads as follows: "111A. Rectification of Register on transfer: (1) In this section, unless the context otherwise requires, "company" means a company other than a company referred to in sub-section (14) of section 111 of this Act. (2) Subject to the provisions of this section, the shares or debentures and any interest therein of a company shall be freely transferable: Provided that if a company without sufficient cause refuses to register transfer of shares within two months from the date on which the instrument of transfer or the intimation of transfer, as the case may be, is delivered to the company, the transferee may appeal to the Company Law Board and it shall direct such company to register the transfer of shares. (3) The Company Law Board may, on an application made by a depository, company, participant or investor or the Securities and Exchange Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 434(1)(a) of the Companies Act, 2013, which reads as follows: "434. Transfer of certain pending proceedings. - (1) On such date as may be notified by the Central Government in this behalf, - (a) all matters, proceedings or cases pending before the Board of Company Law Administration (herein in this section referred to as the Company Law Board) constituted under sub-section (1) of section 10E of the Companies Act, 1956 (1 of 1956), immediately before such date shall stand transferred to the Tribunal and the Tribunal shall dispose of such matters, proceedings or cases in accordance with the provisions of this Act." 19. Clause (a) of Section 434 (1) makes it clear that on transfer the Tribunal is required to dispose of such matters, proceedings or cases in accordance with the provisions of the Companies Act, 2013 and not in accordance with the provisions of the earlier Act (Companies Act, 1956). 20. After transfer the application under Section 111A of the Companies Act, 1956 is to be dealt with in terms of Section 59 of the Companies Act, 2013, which reads as follows: "59. Rectification of register of members.─ (1) If the name of any person is, without sufficient c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat where the transfer of securities is in contravention of any of the provisions of the 'Securities Contracts (Regulation) Act, 1956', the 'Securities and Exchange Board of India Act, 1992' or the 'Companies Act, 2013' or any other law for the time being in force, the Tribunal can direct the company or a depository to set right the contravention and rectify its register or records concerned. 22. The Tribunal has failed to notice that the petition having filed under Section 111A of the Companies Act, 1956, on transfer was required to deal with the Petitioner in terms of sub-section (4) of Section 59 of the Companies Act, 2013. 23. For the said reason, we hold that the Tribunal exceeded its jurisdiction by annulling the shares and by directing the Respondents (Appellants) to transfer the shares to the Company. If there is contravention of any of the provisions of the Securities Contracts (Regulation) Act, 1956, the 'Securities and Exchange Board of India Act, 1992' or the Companies Act, 2013 or any other law for the time being in force, the Tribunal could have directed the company or a depository to set right the contravention and rectify its register or records concerned. 24. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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