Prior approval and deemed approval under company law control share acquisition, application defects, and share registration disputes.

Prior approval under section 108A of the Companies Act, 1956 was required where acquisition of equity shares by a body corporate under the same management, together with its existing holding, exceeded 25% of paid-up equity share capital. A request for approval was not shown to be defective merely because the Central Government sought additional particulars; the sixty-day period under section 108E was not extended unless a real defect in the prescribed application was identified and communicated, and deemed approval followed on expiry without refusal. In a petition under section 155, the Central Government was neither a necessary nor a proper party because the dispute concerned refusal to register shares, and the existing record was sufficient.

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Issues: (i) whether prior approval of the Central Government was required for acquisition of the 1,26,000 equity shares under section 108A of the Companies Act, 1956; (ii) whether the application for approval was defective so as to postpone the sixty-day period under section 108E of the Companies Act, 1956; and (iii) whether the Central Government was a necessary party and the record before it was required for disposal of the section 155 petition.

Issue (i): whether prior approval of the Central Government was required for acquisition of the 1,26,000 equity shares under section 108A of the Companies Act, 1956.

Analysis: Section 108A restricts acquisition of equity shares where the intended acquisition, together with existing holding under the same management, exceeds twenty-five per cent of the paid-up equity share capital. The disputed acquisition was by a body corporate under the same management already holding more than twenty-five per cent. The fact that the acquirer already controlled a substantial holding did not remove the statutory embargo.

Conclusion: Prior approval was required, and the acquisition attracted the statutory control under section 108A.

Issue (ii): whether the application for approval was defective so as to postpone the sixty-day period under section 108E of the Companies Act, 1956.

Analysis: The statutory scheme creates a presumption of approval unless refusal is communicated within sixty days. The particulars demanded by the Central Government did not amount to a pointed-out deficiency in the prescribed application, and paragraph 10 of Form 7C required details of the person from whom the shares were proposed to be acquired, not the names of the beneficial owners or trustees. The additional information sought did not suspend or extend the statutory period.

Conclusion: The application was not shown to be defective, and approval was presumed on expiry of sixty days without communicated refusal.

Issue (iii): whether the Central Government was a necessary party and the record before it was required for disposal of the section 155 petition.

Analysis: The relief in the company petition was directed against the company's refusal to register the shares, not against any order of the Central Government. The presence of the Central Government was not required for complete adjudication, and the existing correspondence was sufficient; a roving inquiry into the departmental file was unwarranted.

Conclusion: The Central Government was neither a necessary nor a proper party, and calling for the entire record was unnecessary.

Final Conclusion: The special appeal failed, the company court's order was sustained, and the transfer and voting rights in favour of the transferee were maintained.

Ratio Decidendi: Where the statutory scheme prescribes deemed approval if refusal is not communicated within the specified time, mere departmental enquiry or request for additional information does not extend the period unless a real deficiency in the prescribed application is identified and communicated.

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