SURAT ELECTRICITY COMPANY LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) THE 1st petitioner- The Surat Electricity Co. Ltd.-and its two directors have challenged the order dated March 6, 1992 passed by the Company Law Board, Western Region Bench at Bombay, on references under section 22a (4) (c) of Securities Contracts (Regulations) Act, 1956 (for short "the Act") by the 1st petitioner, directing the 1st petitioner to register the transfer of 14171 shares covering 1215 transfer deeds in favour of the transferees, in this Writ Petition under Article 226 of the Constitution of India

(2.) THIS petition came up for admission before a Division Bench of this Court on March 31, 1992 and it was represented that in this petition similar issues were raised as were raised in Writ Petition No. 684 of 1991. On that basis, the Bench passed the following order :-

(3.) THE relevant facts, so far as these are necessary for the decision of the Writ petition are as under :-1st petitioner is a Public Limited Company incorporated under the provisions of the Companies Act, 1913. About 50% of the total paid-up equity share capital of the 1st petitioner is held by the Government of Gujarat and other financial institutions. Its securities are listed on recognised Stock Exchanges. Public offer was made by Dhanuka and Mohta groups (the private respondents to the petition, hereinafter referred to as "the transferees") for acquisition of 38790 equity shares equivalent to 30% issued share capital of the 1st petitioner and the public offer indicated that of the 38790 equity shares, 12950 equity shares had already been acquired and that the transferees were willing to acquire the remaining 25840 shares at the price of Rs. 700/- per share. Between August 16, 1989 and August 30, 1991, the transferees lodged 16, 529 shares with the 1st petitioner for transfer in their favour. The Board of Directors of the 1st petitioner at its meetings held from time to time resolved not to register the transfers principally on the ground that the proposal for the acquisition was made with a view to participate in the business and management of the company and for acquiring control and that the intention behind the acquisition is to bring about a change in the composition of the Board of Directors. Since the transfer was refused on the ground mentioned in Section 22a (3) (c) of the Act, references were made by the 1st petitioner to the Company Law Board as envisaged under Section 22a (4) (c) of the Act. The Company Law Board after considering the relevant material, found that one reference pertaining to 760 shares fell in a separate category and dismissed the reference; of the remaining 15769 shares, 1598 shares suffered from procedural defects; and in respect of the remaining 14171 shares, the 1st petitioner was ordered to register the transfer, as stated above.