2002 (8) TMI 836 - Board - Companies Law

CLB Orders Prompt Share Transfer Registration

Redwood Holdings (P.) Ltd. Versus Sandesh Ltd.

The CLB directed the respondent-company to register the transfer of shares within one month as the petitioner's acquisition was below the 5% threshold and ... - Issues Involved:1. Refusal to register transfer of shares.2. Alleged violation of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.3. Jurisdiction of Company Law Board (CLB) versus SEBI.4. Free transferability of shares under Section 111A of the Companies Act, 1956.5. Allegations of acting in concert.Detailed Analysis:1. Refusal to register transfer of shares:The petitioner sought an order to direct the respondent-company to register the transfer of 3000 equity shares and update the register of members accordingly. The respondent-company refused the registration, alleging violations of SEBI regulations. The petitioner contested this refusal, arguing that the respondent-company provided no concrete evidence of such violations.2. Alleged violation of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997:The respondent-company claimed that the petitioner exceeded the 5% limit of share acquisition as prescribed by SEBI regulations, by acting in concert with other companies. The petitioner denied these allegations and requested the respondent to substantiate their claims with concrete evidence. The petitioner argued that SEBI Takeover Code is for the protection of shareholders and not for companies to misuse to prevent inconvenient investors.3. Jurisdiction of Company Law Board (CLB) versus SEBI:The CLB noted that under SEBI regulations, only SEBI has the authority to investigate and pass orders regarding any breaches of the regulations. The CLB emphasized that SEBI can initiate investigations suo motu or upon receiving complaints and can issue directions if any violations are found. The CLB acknowledged that the respondent-company had filed a complaint with SEBI, but SEBI had not taken any action, indicating no apparent violation of the Takeover Code.4. Free transferability of shares under Section 111A of the Companies Act, 1956:The petitioner argued that shares are freely transferable under Section 111A of the Companies Act and that the respondent-company had no right to refuse the transfer without valid reasons. The CLB agreed, stating that the grounds for refusal are limited under Section 111A(3) of the Companies Act. The CLB found that the respondent-company's refusal was based on insufficient and unsubstantiated claims.5. Allegations of acting in concert:The respondent-company alleged that the petitioner and other companies were acting in concert, citing common brokers, same-day stamp paper purchases, and common auditors as evidence. The petitioner denied these allegations, and the CLB found the respondent's claims to be neutral and insufficient to prove concerted action. The CLB concluded that there was no substantial evidence to support the respondent's allegations of acting in concert.Conclusion:The CLB directed the respondent-company to register the transfer of the shares within one month, as the petitioner's acquisition was below the 5% threshold and there was no substantial evidence of violation of SEBI regulations. The CLB emphasized the principle of free transferability of shares and found the respondent's refusal unjustified. The CLB also directed the respondent to register the transfer of shares in two similar petitions filed by other companies.