Appellant JUDGMENTaggrieved by the judgment and order dated 30th July, 2003 passed in ACO No.76 of 1999 by
the Company Judge, High Court of Judicature at
Calcutta affirming the judgment and order dated 25th
November, 1998 passed by the Company Law Board,
Eastern Region Bench at Calcutta in Original
Petition No.15(111)/ERB/1995 is before us with the
leave of the Court.
The appellant, Bhagwati Developers Private
Limited, hereinafter referred to as ‘Bhagwati’ was
earlier known as Lodha Services Private Limited.
Tuhin Kanti Ghose, hereinafter referred to as
’Tuhin’, Respondent No.2 herein, approached Bhagwati
for a loan of Rs.38,83,000/- for purchasing 3530
equity shares of Respondent No.1, Peerless General
Finance & Investment Company Limited, hereinafter
referred to as ‘Peerless’. As requested, Bhagwati on
25th of July, 1986 advanced a sum of Rs.38,83,000/-
as loan to Tuhin. Bhagwati and Tuhin later, on 19th
November, 1986 entered into a formal agreement in respect of the JUDGMENTaforesaid loan and Tuhin assured to
repay the loan on or before 31st December, 1991. On
30th of October, 1987, Tuhin agreed to transfer 3530
shares of Peerless to Bhagwati by way of repayment
of the aforesaid loan. In the light thereof, Tuhin
handed over the original share scrips as
also the transfer deeds for doing the needful by
Bhagwati. Tuhin on 30th October, 1987, wrote that
Bhagwati would be entitled to all the benefits i.e.
dividend, bonus shares etc. in respect of all these
shares. It seems that the transfer deeds were not
properly filled in and executed and accordingly,
Bhagwati on 28th December, 1987 wrote to Tuhin to
put his signature in the fresh transfer deeds and
return them to it. Bhagwati further requested Tuhin
to send it shares and dividends received by him from
Peerless. During these developments, Peerless
declared bonus shares in the ratio of 1:1 and Tuhin
being the registered shareholder, received further
3530 bonus shares. Tuhin, it appears, did not sign
the fresh transfer deeds and retained the bonus
shares. Bhagwati by its letter dated 6th of July, 1988 asked Tuhin to furnish fresh transfer deeds in
respect of the total shares i.e.7060 shares.
Peerless declared further bonus shares in the year
1991 in the ratio of 1:1 and Tuhin being the
registered shareholder of 7060 shares was further
allotted 7060 bonus shares. In this way Tuhin
altogether got 14120 shares.
When Tuhin did not accede to the request of
Bhagwati for transferring the entire shares,
Bhagwati on 29th May, 1991 filed a suit in the Court
of Civil Judge at Allahabad and obtained an ad
interim order of injunction restraining Tuhin from
claiming any right, title or interest in respect of
the aforesaid 14120 shares of Peerless. During the
pendency of the suit, Tuhin and Bhagwati settled
their dispute out of Court and executed an agreement
dated 21st November, 1994, according to which Tuhin
acknowledged to have sold 3530 equity shares to
Bhagwati on 30th October, 1987 which entitled it to
the bonus shares declared in the years 1987 and 1991
totaling 14120 equity shares. In terms of the JUDGMENT agreement, an application for recording the
compromise was filed in the civil suit and for
passing a decree in terms of the compromise. The
trial court acceded to the prayer of Bhagwati and
Tuhin and decreed the suit in terms of the
compromise by judgment and decree dated 28th
November, 1994. The trial court further directed
that the compromise petition and the agreement
between the parties shall also form part of the
decree. According to the compromise decree, it was
agreed that Tuhin shall retain as absolute owner the
dividend on the entire shares up to the accounting
year 1989-90 amounting to Rs.8,64,850/- as part of
consideration for the settlement. In terms of the
compromise decree, Bhagwati has also paid a further
sum of Rs.10 lakh by way of pay order dated 21st
November, 1994.
Armed with the decree, Bhagwati on 12th
December, 1994 lodged the transfer deeds in respect
of 14120 shares with Peerless for their transfer.
Peerless, however, did not accede to the prayer of Bhagwati and by its letter dated 8th February, 1995
refused to register the said shares, inter alia, on
the ground that the said transfer of shares by Tuhin
in favour of Bhagwati was in violation of the
provisions of Securities Contracts (Regulation) Act,
1956; hereinafter to be referred to as ‘the
Regulation Act’. According to Peerless, the contract
for sale of shares was not a spot delivery contract,
signatures of Tuhin differed from the signatures on
the record of Peerless and further the stamps
affixed on the instruments of transfer had not been
cancelled. Bhagwati re-lodged the shares for
transfer on 14th February, 1995 with Peerless but
again Peerless did not register those shares in the
name of Bhagwati.
Bhagwati, aggrieved by that, approached the
Company Law Board, Eastern Region by filing an
application under Section 111 of the Companies Act,
1956 hereinafter to be referred to as ’the Act’ and
the Company Law Board by its judgment and order
dated 25th November, 1998 dismissed the said application inter alia holding that transfer of
shares in favour of Bhagwati was against the
provisions of Sections 13 and 16 of the Regulation
Act and as such, illegal. In the opinion of the
Company Law Board Peerless rightly refused
registration of transfer. While doing so, the
Company Law Board further observed that the shares
of a public limited company which are not registered
in the Stock Exchange also come under the purview of
Regulation Act. In this connection, the Company Law
Board observed as follows:
“We, therefore, hold that the
provisions of the SCR Act, 1956,
including the provisions of
Sections 13,16 and 17 of the Act
would be applicable to a public
limited company even though its
shares may not be listed on any
recognized stock exchange.”
As regards the plea of the appellant that the
sales of shares in question is a spot delivery
contract, the Company Law Board taking into account
that consideration for sales of shares having been
paid much after the date on which the sales of
shares have taken place, observed that the JUDGMENT transaction does not come within the expression,
“spot delivery contract” as defined under Section
2(i) of the Regulation Act. While doing so, the
Company Law Board observed as follows:
“It is, therefore, obvious that a
part of the consideration for the sale
of shares passed on much after the date
on which the sale of shares is alleged to have taken place on 30.10.87. We are unable to accept the argument of Mr. Bose that the payment of Rs.10.00 lacs was made only to buy peace. We find that the agreement dated 21.11.94 clearly states that the payment of Rs.10.00 lacs was made as a part of consideration for the sale of shares and we fail to see how it can be contended to be otherwise. There is other intrinsic evidence in the agreement dated 21.11.94 which indicate against the contention of Mr. Bose, Learned Advocate for the petitioner that the entire transaction of sale of shares was completed on 30.10.87. Clause 2.1 of the said agreement provides that notwithstanding anything contained anywhere in the agreement dated 21.11.94 which indicate against the contention of Mr. Bose Learned Advocate for the petitioner that the entire transaction of sale of shares was completed on 30.10.87. Clause 2.1 of the said agreement provides that notwithstanding anything contained anywhere in the agreement dated 21.11.94. It was agreed that the respondent no.2 would be entitled toretain JUDGMENTas absolute owner of the dividend on the entire shares up to the accounting year 1989-90 amounting to Rs.8,64,850/- as part of consideration for the settlement. It is difficult to envisage as to how the respondent no.2 could continue to be absolute owner of the shares up to 1989-90 if the sale was completed on 30.10.87.”
Accordingly, the Company Law Board reached the
following conclusion:
“We, therefore, hold that the
contract of sale of shares in
question does not satisfy the
definition of a spot delivery
contract since part of the
consideration passed on much after
the alleged sale of shares on
30.10.87.”
Assailing the aforesaid judgment and order of
the Company Law Board, passed in Original Petition
No.15(111)/ERB/1995, Bhagwati preferred an appeal
before the High Court, inter alia, contending that
the shares of Peerless, a public limited Company
having not been listed on any recognized stock
exchange, it will not come within the definition of JUDGMENT
‘securities’ under Section 2(h)(i) of the Regulation
Act. Further the transaction between it and Tuhin
was a case of spot delivery contract and therefore,
the view taken by the Company Law Board on both the
counts are erroneous. The Company Judge, negated
both the contentions and observed that the
provisions of the Regulation Act would be applicable
to a public limited Company even though its share is
not listed on any recognized stock exchange.
Further, the transaction did not satisfy the
definition of a spot delivery contract since part of
consideration passed on 21st November, 1994, when
Bhagwati made payment of Rs.10 lakh to Tuhin much
after the transfer of shares on 30th October, 1987.
To come to the aforesaid conclusion, the High Court
also took into account the fact that in terms of the
compromise decree as part of consideration Tuhin
retained as absolute owner all the dividends on the
entire shares including the bonus shares up to the
accounting year 1989-90. The observation of the High
Court in this connection reads as follows:
“In the abovementioned background
it is necessary, in my view, to
note the findings of fact arrived
at by the Company Law Board. The
Company Law Board found, as
findings of fact, that the
provisions of the Securities
Contract (Regulation) Act, 1956
would be applicable to a public
limited company even though it’s
shares might not be listed on any
recognized stock exchange. It was,
further, held that it was obvious
that the part of consideration for
the sale of shares passed on much
after the date on which the sale of
shares took place on October
30,1987. The payment of
Rs.10,00,000/-(Rupees ten lakh)
only by Bhagwati to Tuhin on
November 21, 1994 was a part of
consideration for the sale of the
said shares and, further it was
agreed between the Bhagwati and
Tuhin that Tuhin would be entitled
to retain as absolute owner of the
dividends on the entire shares
including the bonus shares up to
the accounting year 1989-1990 as
part of consideration. The
transaction did not satisfy the
definition of a spot delivery
contract since part of the
consideration passed on much after
the transfer of shares on October
30,1987. Moreover, the shares
transfer forms were all dated
November 21, 1994, that is, on the
date on which the consideration of
Rs.10,00,000/- (Rupees ten lakh)
only passed from the Bhagwati to
Tuhin. Therefore, the transfer of shares in question was hit by the
provisions of the sections 13 and
16 of the Securities Contract
(Regulation) Act, 1956 and,
therefore, was illegal, void and a
nullity”.
Ultimately, the High Court held as follows:
“The Company Law Board has
considered all the materials placed
before it and, thereafter, arrived
at the findings of fact that the
impugned transactions is hit by the
provisions of the Securities
Contracts (Regulation) Act, 1956
and the guidelines issued by the
Government of India. The Company
Law Board cannot be termed as
perverse in the sense that no
normal person would have arrived
at. The Company Law Board found, as
findings of fact, that the
consideration for transfer of
shares included Rs.10,00,000/-
(Rupees ten lakh) only paid by
Bhagwati to Tuhin on November 21,
1994. The said findings is
sustainable from the reasoning
given by the Company Law Board and,
therefore, cannot be interfered
with in this appeal.”
That is how, the appellant is before us with
the leave of the Court.
It is relevant here to state that the Company JUDGMENT Law Board has held that transfer of shares in favour
of Bhagwati is in the teeth of Sections 13 and 16 of
the Regulation Act and hence, we deem it expedient
to refer to the aforesaid provisions one after
another. Section 13 of the Regulation Act makes
contract in notified areas illegal in certain
circumstances, same reads as follows:
“13. Contracts in notified areas illegal in certain circumstances.If the Central Government is satisfied, having regard to the nature or the volume of transactions in securities in any State or States or area, that it is necessary so to do, it may, by notification in the Official Gazette, declare this section to apply to such State or States or area and thereupon every contract in such State or States or area, which is entered into after the date of the notification otherwise than between members of a recognized stock exchange or recognized stock exchanges in such State or States or area or through or with such member shall be illegal:
Provided that any contract entered into between members of two or more recognized stock exchanges in such State or States or area, shall(i) JUDGMENTbe subject to such terms and
conditions as may be
stipulated by the respective
stock exchanges with prior
approval of Securities and
Exchange Board of India;
(ii) require prior permission
from the respective stock
exchanges if so stipulated
by the stock exchanges with
prior approval of Securities
and Exchange Board of
India.”
From a plain reading of the aforesaid
provision, it is evident that contract in relation
to securities in notified areas is illegal if made
otherwise than between the members of recognized
stock exchange. It is not in dispute that the
place where the contract for sale of shares in
question has been entered is a notified area for
the purpose of Section 13 of the Regulation Act.
Further, the contract is not between the members
of a recognized stock exchange.
In order to overcome this difficulty, Mr.
Sunil Gupta, learned Senior Counsel appearing on
behalf of the appellant submits that the security JUDGMENT in question is not marketable and therefore, does
not come within the definition of “securities” as
defined under Section 2(h)(i) of the Regulation
Act. According to him, shares of a public limited
company to come within the definition of
securities under the Regulation Act has to be
marketable and for that purpose has necessarily to
be listed in the Stock Exchange. Mr. Gupta
further points out that the aforesaid submission
finds support from the judgment of the Bombay High
Court in the case of Dahiben Umedbhai Patel and
others v. Norman James Hamilton and Ors. (1985) 57
Com. Cases 700(BHC) and in the case of Brooke
Bond India Ltd. v. U.B.Ltd and Ors. (1994) 79
Com.Cases 346 (BHC). In fairness to him, he has
drawn our attention to the decision of Calcutta
High Court in the case of B.K.Holdings (P) Ltd. v.
Prem Chand Jute Mills & Ors. (1983) 53 Com.Cases
367 (Cal.) and in the case of East Indian Produce
Ltd. v. Naresh Acharya Bhaduri & Ors. (1988) 64
Com. Cases 259 (Cal.) which have taken an
altogether contrary view. He contends that the Bombay decisions are based on sound reasoning and
therefore, commend our acceptance.
Mr.Bhaskar P.Gupta, learned Senior Counsel
representing respondent No.1 submits that the
provisions of Regulation Act apply to the shares
of a public limited company which are not listed
on any stock exchange. According to him, for
securities of a public limited company to be
marketable, it does not necessarily require to be
sold in any market of a specified nature i.e.
stock exchange. He submits that it may be any area
where buyers and sellers are in contact with one
another and there securities can be sold.
In view of the rival submissions, the first
question which falls for our determination is as
to whether the provisions of Regulation Act will
apply to the shares of a public limited company
which are admittedly not listed on any stock
exchange?
Admittedly,JUDGMENTthe shares of Peerless, a public
limited company in respect of which the appellant
had sought rectification are not listed in the
stock exchange. In our opinion, notwithstanding
that if shares come within the definition of
“securities” as defined under Section 2(h)(i) of
the Regulation Act, the indictments contained in
Section 13 would apply. The word, ‘securities’ has
been defined under Section 2(h)(i) of the
Regulation Act which reads as follows:
“2. Definitions – In this Act,
unless the context otherwise
requires, -
x x x
“(h) “securities” include-
(i) shares, scrips, stocks,
bonds, debentures, debenture
stock or other marketable
securities of a like nature in
or of any incorporated company
or other body corporate;”
x x x”
From a plain reading of the aforesaid JUDGMENT provision, it is evident that for shares of a
public limited company to come within the
definition of securities they have to satisfy that
they are marketable. The word, ‘marketable’ has
not been defined in the Regulation Act and hence
to understand it, we have to revert to its
dictionary meaning. Black’s Law Dictionary (Sixth
Edition) explains the word, ‘marketable’ as
follows:
“Marketable. Saleable. Such things
as may be sold in the market;
those for which a buyer may be
found; merchantable.”
The compact edition of the Oxford English
Dictionary, Vol.I p.1728 gives the meaning of the
expression “marketable” as follows:
“1. Capable of being marketed that
may or can be bought or sold;
suitable for the market; that
finds a ready market; that is in
demand, saleable.
2. Of or pertaining to buying or
selling; concerned with trade; of
price, value, that may be obtained in buying or selling.”
As is evident from the dictionary meaning
set out above, the expression “marketable” has
been equated with the word saleable. In other
words, whatever is capable of being bought and
sold in a market is marketable. The size of the
market is of no consequence. In other words, the
number of persons willing to purchase such shares
would not be decisive. One cannot lose sight of
the fact that there may not be any purchaser even
for the listed shares. In such a case can it be
said that even listed shares are not marketable?
In our opinion what is required is free
transferability. Subject to certain limited
statutory restrictions, the shareholders possess
the right to transfer their shares, when and to
whom they desire. It is this right which
satisfies the requirement of free transferability.
However, when the statute prohibits or limits
transfer of shares to a specified category of people with onerous conditions or restrictions,
right of shareholders to transfer or the free
transferability is jeopardized and in that case
those shares with these limitations cannot be said
to be marketable. In our opinion, therefore,
shares of public limited company though not listed
in the stock exchange come within the definition
of securities and hence, the provisions of
Regulation Act apply. A Division Bench of the
Calcutta High Court in the case of East Indian
Produce Ltd. (supra) relying on its earlier
decision in the case of B.K.Holdings (P) Ltd.
(supra) came to the same conclusion and held as
follows:
“In my view to accept the
contention of Mr. Dipankar Gupta
on this aspect of the case would
be to ascribe too narrow a meaning
to the expression “marketable
securities”. As will be evident
from the dictionary meaning set
out above the expression
“marketable” has been equated with
“saleable”. In other words,
whatever is capable of being
bought and sold in a market is
marketable. I see no warrant
whatsoever for limiting the expressionJUDGMENT“marketable securities”
only to those securities which are
quoted in the stock exchange.
This argument of Mr. Gupta,
therefore, fails.”
True it is that the Bombay High Court in the
case of Dahiben Umedbhai Patel (supra) has taken a
view that the shares of a private company does not
possess the character of liquidity and, therefore,
cannot be said to be marketable. Relevant portion
of the judgment reads as follows:
“It is thus clear that the shares
of a private company do not
possess the character of
liquidity, which means that the
purchaser of shares cannot be
guaranteed that he will be
registered as a member of the
company. Such shares cannot be
sold in the market or, in other
words, they cannot be said to be
marketable and cannot, therefore,
be said to fall within the
definition of “securities” as a
“marketable security….”
We must at the outset state that this case
relates to a private company and having regard
to the absence of free transferability, shares
were held not to be marketable securities as
defined under Section 2(h)(i) of the Regulation
Act. This would be evident from the following
passage of the said judgment:
“…A market, therefore,
contemplates a free transaction
where shares can be sold and
purchased without any restriction
as to title. The shares which are
sold in a market must, therefore,
have a high degree of liquidity by
virtue of their character of free
transferability. Such character
of free transferability is to be
found only in the shares of a
public company. The definition of
a “private company” in S. 3 of the
Companies Act, 1956, speaks of the
restrictions for which the
articles of the private company
must provide.
x x x
The restriction with regard to the
transfer of the shares is a
characteristic of a private
company….”
In the present case, we are concerned with a
public limited company and the aforesaid judgment
clearly indicates that shares of a public limited JUDGMENT company will come within the definition of
securities. This would be evident from the
following passage from the said judgment:
“It is thus clear to us that the
definition of “securities” will
only take in shares of a public
limited company notwithstanding
the use of the words “any
incorporated company or other body
corporate” in the definition.”
For all these reasons, we are of the opinion
that the aforesaid decision of the Bombay High
Court is clearly distinguishable.
As stated earlier, a learned Single Judge of
the Bombay High Court in the case of Brooke Bond
India Ltd. (supra) had followed its earlier
Division Bench judgment in Dahiben Umedbhai Patel
(supra) and expressed a prima facie view that
transaction of shares of a public limited company
unlisted on the stock exchange is not intended to
be covered under the Regulation Act. While doing
so, the learned Single Judge had referred to the JUDGMENT decisions of the Calcutta High Court in the case
of B.K. Holdings (supra) and East Indian Produce
Ltd.(supra) but disagreed with the ratio of those
judgments without assigning any reason. The
learned Single Judge found himself bound to follow
the earlier Division Bench judgment in the case of
Dahiben Umedbhai Patel (supra). The observation
of the learned Single Judge in this connection
reads as follows:
“On the contrary, my prima facie
view of these two judgments
accords with the submission of Mr.
Mehta. I am of the prima facie
view that a transaction of shares
of a public limited company,
unlisted on the stock exchange, is
not intended to be governed by
this Act.
Mr. Cooper strongly relied on the
judgment of the Division Bench of
the Calcutta High Court in East
Indian Produce Ltd. (1988) 64
Comp. Cas 259 on this issue also.
The Calcutta High Court relied on
an earlier judgment of the same
High Court in B.K. Holdings (P)
Ltd. v. Prem Chand Jute Mills
(1983) 53 Comp Cas 367. At that
stage, the judgment of Mrs.
Manohar J. was cited before the
learned single judge of the
Calcutta High Court. He seemed to take JUDGMENTthe view that the decision of
Mrs. Manohar J. in Norman J.
Hamilton v. Umedbhai S. Patel
(1979) 49 Comp Cas 1, must be
confined to a situation of
transfer of shares of a private
limited company. So far as the
decision of the Division Bench of
the Calcutta High Court in East
Indian Produce Ltd. (1988) 64 Comp
Cas 259 is concerned, it seems to
follow the earlier judgment in
B.K. Holdings. With great respect
to the learned Judges of the
Calcutta High Court, who decided
the aforesaid two cases, even if
the matter were not res integra, I
would be inclined to disagree with
their observations made therein.
However, in the view I have taken
of the judgments of the learned
single judge and the appeal
judgment of our court, I consider
myself bound to take the view that
the Securities Contracts
(Regulation) Act, 1956, is not
intended to regulate private
transactions in shares of public
limited companies, not listed on
the stock exchange. This
contention also, therefore,
fails.”
The Regulation Act was enacted to prevent
“undesirable transaction in securities by
regulating business of dealing therein” and from
that one cannot infer that it was to apply only to
the transfer of shares on the stock exchange. The JUDGMENT Bombay High Court in this case was greatly
influenced by the fact that the Act was intended
to govern transactions in the stock exchange. As
stated earlier, we do not find anything in the
object of the Act to warrant that conclusion. We,
for the reasons stated above, are not inclined to
endorse the view of the Bombay High Court in
Brooke Bond India Ltd.(supra).
We are fortified in our view from a judgment
of this Court in the case of Naresh K. Aggarwala &
Co. vs. Canbank Financial Services Ltd. and
Another (2010) 6 SCC 178, wherein this Court
considered the term “securities” as defined under
Section 2(h)(i) of the Regulation Act, with
reference to the notification issued under Section
16(2) and held that the definition does not make
any distinction between listed securities and
unlisted securities. Relevant portion of the
judgment reads as follows:
“41……..A perusal of the abovequoted definition shows that
it does not make any distinction
between listed securities and
unlisted securities and therefore
it is clear that the circular will
apply to the securities which are
not listed on the stock
exchange……………………………..”
When the word ‘Securities’ has been defined
under the Regulation Act, its meaning would not
vary when the same word is used at more than one
place in the same Statute, otherwise it will
defeat the very object of the definition Section.
Accordingly, our answer to the first question set
out earlier is that the provisions of the
Regulation Act would cover unlisted Securities of
Public Limited Company. In other words, shares of
Public Limited Company not listed in the stock-
exchange is covered within the ambit of
Regulation Act.
As stated in the preceding paragraph of the
judgment, the Company Law Board has held that transfer of shares in favour of Bhagwati was also
against the provisions of Section 16 of the
Regulation Act. Section 16(1) of the Act confers
power on the Central government to prohibit
contracts in certain cases. Section 16 reads 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.”
From a plain reading of the aforesaid
provision it is evident that in order to prevent
undesirable stipulation in specified securities in JUDGMENT any State or area the Central Government by
notification is competent to declare that no
person in any 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. The Central Government in
exercise of the aforesaid power issued
notification dated 27th of June, 1969 and declared
that in the whole of India “no person” shall “save
with the permission of the Central Government
enter into any contract for the sale or purchase
of securities other than such spot delivery
contract” as is permissible under the Act, the
Rules, bye-laws and the Regulations of a
recognized stock exchange. The appellant,
therefore, can come out of the rigors of Section
16 of the Act only when it satisfies that the
transaction comes within the definition of “spot
delivery contract”.
Mr. Sunil Gupta, further submits that the contract in question is a spot delivery contract
and, therefore, does not come within the mischief
of Section 16 of the Regulation Act. Mr. Bhaskar
P. Gupta, joins issue and submits that in view of
the limited rule the appellant cannot be allowed
to raise the point of spot delivery contract. In
this connection, he has drawn our attention to the
order dated 19th of December, 2003. We are not
inclined to sustain this objection of Counsel for
the respondent.
By the aforesaid order while issuing rule
this Court noted the submission advanced on behalf
of the appellant in regard to the conflicting
decisions of the Bombay and Calcutta High Courts
in regard to the question of applicability of
Regulation Act. From the aforesaid it cannot be
said that the limited rule was issued. Further,
by order dated 5.11.2004 leave has been granted by
this Court and it has not been confined to any
specific question. From the aforesaid it cannot
be said that the appellant has got a limited rule.
On merit, the respondents submit that the
contract in question cannot be said to be a spot
delivery contract and, in this connection, the
learned Senior Counsel draws our attention to the
terms of agreement which formed part of the
decree.
The second question, therefore, which falls
for our determination is as to whether the
contract in question is a spot delivery contract.
This expression is defined under Section 2(i) of
the Regulation Act. It reads as follows:
“2. Definitions – In this Act,
unless the context otherwise
requires, -
x x x
(i) “spot delivery contract” means
a contract which provides for –
(a) actual delivery of
securities and the payment of a
price therefor either on the
same day as the date of the
contract or on the next day,
the actual periods taken for
the despatch of the securities or the remittance of money
therefor through the post being
excluded from the computation
of the period aforesaid if the
parties to the contract do not
reside in the same town or
locality;
(b) transfer of the 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;
x x x”
According to the definition, a contract
providing for actual delivery of securities and
the payment of price thereof either on the same
day as the date of contract or on the next day
means a spot delivery contract. When we consider
the facts of the present case bearing in mind the
definition aforesaid, we find that the contract in
question is not a spot delivery contract. True it
is that by letter dated 30th of October, 1987
written by Tuhin to Bhagwati, he had stated that
the formal agreement had been executed between
them on 10th November, 1986 and as per the agreement he JUDGMENTis transferring the entire 3530
shares of Peerless purchased from the loan amount
and the transfer is in its repayment. However,
the agreement dated 21st November, 1994 between
Bhagwati and Tuhin which formed part of the
compromise decree provides that the sale of shares
took place on 30th October, 1987 and in
consideration thereof Bhagwati paid a sum of Rs.
10 lakhs on 21st November, 1994 and further the
dividend on the entire shares up to the accounting
year 1989-90 amounting to Rs.8,64,850 to be
retained by Tuhin. In the face of it, the plea of
Bhagwati that the payment of Rs. 10 lakh was made
to buy peace, is not fit to be accepted and, in
fact, that forms part of the consideration for the
sale of shares. Once we take this view, the plea
of the appellant that it is a spot delivery
contract is fit to be rejected. We agree with the
reasoning and conclusion of the Company Law Board
and the High Court on this issue.
Both the contentions of the appellant having
no substance, we do not find any merit in this
appeal and it is dismissed accordingly but without
any order as to costs.