Listed securities transfer law: section 22A overrides inconsistent Companies Act provisions, but rectification remains an equitable remedy.

Section 22A of the Securities Contracts (Regulation) Act, 1956 operates as a special regime for listed securities and prevails over inconsistent aspects of section 108 of the Companies Act, 1956. The company's power under section 22A(3) is a regulated, directory discretion rather than an absolute mandate, requiring good-faith consideration under the statutory procedure. An instrument of transfer bearing uncancelled adhesive stamps is treated as not duly stamped and, in law, as unstamped under the Indian Stamp Act, 1899. Even so, rectification of the register is an equitable remedy and may be refused where the company acted under the statutory process in good faith and the surrounding circumstances, including delay and prejudice, do not justify interference.

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Issues: (i) whether section 22A of the Securities Contracts (Regulation) Act, 1956 overrides section 108 of the Companies Act, 1956 in relation to listed securities; (ii) whether the company's power to refuse registration under section 22A(3) is discretionary or mandatory; (iii) whether an instrument of transfer bearing uncancelled adhesive stamps is not duly stamped within the meaning of section 108 of the Companies Act, 1956 and section 22A of the Securities Contracts (Regulation) Act, 1956; (iv) whether rectification of the register can be granted on the ground that the transfer instruments were not duly stamped; and (v) whether the applications were unsustainable for non-joinder of transferors.

Issue (i): whether section 22A of the Securities Contracts (Regulation) Act, 1956 overrides section 108 of the Companies Act, 1956 in relation to listed securities

Analysis: Section 22A was introduced to secure free transferability of listed securities and created a special regime confined to listed companies and fully paid-up securities without lien. Its language restricted refusal to the grounds stated in the section and employed a distinct scheme, including a non obstante clause and a mandatory procedure for notice or reference to the Company Law Board. The legislative object, the change in language from section 108, and the statutory scheme showed that the later provision was intended to operate as a special law governing the field covered by it.

Conclusion: Section 22A of the Securities Contracts (Regulation) Act, 1956 prevails over section 108 of the Companies Act, 1956 to the extent of inconsistency in relation to listed securities.

Issue (ii): whether the company's power to refuse registration under section 22A(3) is discretionary or mandatory

Analysis: The word "may" in section 22A(3) had to be read with sub-section (4), which required the company to form a good-faith opinion within two months and, depending on the ground, either register the transfer, intimate defects, or make a reference to the Company Law Board. Since the section did not permit an immediate rejection and prescribed a structured decision-making process, the power was not one of absolute discretion. At the same time, the company was not bound to refuse registration mechanically in every case; the statutory context showed a limited, regulated discretion.

Conclusion: The power under section 22A(3) is directory and not mandatory.

Issue (iii): whether an instrument of transfer bearing uncancelled adhesive stamps is not duly stamped within the meaning of section 108 of the Companies Act, 1956 and section 22A of the Securities Contracts (Regulation) Act, 1956

Analysis: The expression "duly stamped" in both enactments had to be read with the Indian Stamp Act, 1899, because that Act alone prescribed the duty and the legal consequences of uncancelled adhesive stamps. Under section 2(11), a duly stamped instrument must bear the proper stamp affixed in accordance with law, and under section 12 an adhesive stamp not cancelled so that it cannot be reused is deemed to be unstamped. The statutory fiction therefore governed the meaning of the expression in the transfer provisions.

Conclusion: An instrument with uncancelled adhesive stamps is not duly stamped and is treated in law as unstamped.

Issue (iv): whether rectification of the register can be granted on the ground that the transfer instruments were not duly stamped

Analysis: Rectification is an equitable and discretionary remedy, and the Court had to consider the whole background, including the company's own conduct, the good-faith scrutiny undertaken under section 22A(4), the lapse of time, and the prejudice that would result to the transferees. The company had registered the transfers after forming an honest opinion in the statutory framework applicable to listed securities. In that setting, the register could not be treated as wrong merely because the company later sought to rely on the stamping defect. The equitable relief was also affected by delay and the surrounding circumstances, and the challenge that the company was estopped from seeking relief was considered in the overall equities of the case.

Conclusion: Rectification was not warranted and the appellant was not entitled to that relief.

Issue (v): whether the applications were unsustainable for non-joinder of transferors

Analysis: A necessary party is one in whose absence no effective order can be made, whereas a proper party is one whose presence is useful for complete adjudication. The transferors were not indispensable to determine whether the company could seek rectification on the ground that the transfer deeds were not duly stamped. Their presence was not necessary for an effective decision on the issue raised.

Conclusion: The applications were not unsustainable for non-joinder of transferors.

Final Conclusion: The appeal failed on the substantive issues, and the refusal to grant rectification was sustained in law and in equity. The Court also granted leave to appeal to the Supreme Court on the ground of a substantial question of law of general public importance.

Ratio Decidendi: In relation to listed securities, section 22A of the Securities Contracts (Regulation) Act, 1956 creates a special statutory regime that overrides inconsistent aspects of section 108 of the Companies Act, 1956, and an uncancelled adhesive stamp renders a transfer instrument unstamped under the Indian Stamp Act, 1899; however, rectification of the register remains an equitable relief to be refused where the company acted under the statutory procedure in good faith and the surrounding circumstances do not justify interference.

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