SECURITIES CONTRACTS REGULATION ACT, 1956

Facts: Petitioner by letter had pointed out to the Arbitral Tribunal that the appointment of a third Arbitrator was absolutely necessary and that matter ought to be decided first. The Tribunal held that it was properly constituted and proceeded with the Arbitration proceedings. The grievance made was to the manner of appointment. However, it is contended that the Rules, Bye-laws and Regulations framed by the Stock Exchange and travelled beyond the provisions of the Rules, Bye-laws and Regulations of Mumbai Stock Exchange.

Held: Section 9(4) of the Securities Contract Act requires previous publication of the by-laws before they can come into force. Publication is another incidence of subordinate legislation. Therefore, there is no difficulty in holding that the by-laws framed under Section 9 are subordinate legislation. Section 9 of the Securities Contract Act itself confers power on the Board to make by-laws pertaining to regulation and control of contracts. Bye-laws have been framed under the Securities Contracts (Regulation) Act, 1956. For that purpose, the relevant sections of the Act which need to be referred to are Section 7A of the Securities Contracts (Regulations) Act, 1956 confers a power on a recognised Stock Exchange to make rules restricting voting rights, etc. Section 8 is the power conferred on the Central Government to direct rules to be made and/or to make rules itself after consultation with the Governing bodies of the Stock Exchanges generally or with the governing body of any Stock Exchange in particular for matters specified in Section 3(2), In case the Governing Body fails to make Rules as directed power is conferred under sub-section (2) on the Central Government.

Facts: The plaintiffs had entered into an agreement with the defendants where under the plaintiffs had agreed to sell "1,000 ordinary and 2,300 redeemable cumulative preference shares" of A. MacRae and Co. Private Ltd. Defendants paid to the plaintiffs a sum of Rs. 10,000 on the signing of the agreement. They however, did not pay any of the annual installments as agreed between the parties. The present suit is to recover the amount due to the plaintiffs under the fourth and the fifth installments of price for sale of shares in a private limited company. Apparently, the agreement does not contain any provision regarding acceleration of payment in the event of a default. Hence, separate suits have been filed by the plaintiffs to recover the amounts of the installments as and when the amounts became due.

Held: The shares of a private limited company are not governed by the provisions of this Act, it is not necessary for me to go into this aspect of the question. Under the circumstances, issue is decided in the negative. The contract is legal and binding on the parties, not violative of Section 13 of the Securities Contracts (Regulation) Act, 1956. Apart from the sum of Rs. 10,000, which was paid on the signing of the agreement, no further amount has been paid by the defendants to the plaintiffs.

Facts: R-2 approached Bhagwati for a loan for purchasing 3530 equity shares of R-1. Bhagwati after advancing a sum entered into a formal agreement with Tuhin in respect of the aforesaid loan and Tuhin assured to repay the loan. It seems that the transfer deeds were not properly filled in and executed so Bhagwati asked Tuhin to put his signature in the fresh transfer deeds and return them to it. Tuhin, it appears, did not sign the fresh transfer deeds and retained the bonus shares. Bhagwati re-lodged the shares for transfer with Peerless but again Peerless did not register those shares in the name of Bhagwati. Appellant aggrieved by the judgment passed by the High Court of Judicature at Calcutta affirming the judgment passed by the Company Law Board, Calcutta is before us with the leave of the Court.

Held: a. Shares of Respondent, a public limited company in respect of which Appellant had sought rectification were not listed in stock exchange.
b. Notwithstanding that if shares came within definition of "securities" as defined under Section 2(h)(i) of Regulation Act, then indictments contained in Section 13 of Regulation Act, would apply. Shares of public limited company though not listed in stock exchange came within definition of securities and hence, provisions of Regulation Act were applicable. Therefore, shares of Public Limited Company not listed in stock-exchange was covered within ambit of Regulation Act. Section 16(1) of Act, conferred power on Central government to prohibit contracts in certain cases. Appellant could come out of rigors of Section 16 of Act, only when it satisfied that transaction came within definition of "spot delivery contract" under Section 2(i) of Regulation Act. Contract in question was not a spot delivery contract. Reasoning and conclusion of Company Law Board and High Court did not require any interference.

Facts: The writ petitioners have challenged the decision of the Calcutta Stock Exchange, refusing to grant in principle approval for delisting of the equity shares of the first petitioner. The equity shares of the first writ petitioner is listed with the Calcutta Stock Exchange. Such shares are infrequently traded. The first petitioner has decided to delist its equity shares from the Calcutta Stock Exchange and referred to the provisions of the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009 and submitted that, a stock exchange cannot withhold grant of in principle approval, unfairly. The only grievance of the investors is the non-fixation of the exit price. Exit price is required to be fixed only after the first petitioner receives the in principle approval. Since such approval is still awaited, the sufficiency of such grievance need not be considered at the present moment. It was contended that Calcutta Stock Exchange has exceeded its jurisdiction in purporting to act beyond the statute and the regulations governing it.

Held: In the present case, the impugned decision of the Calcutta Stock Exchange in refusing to grant in principle approval to delist the equity shares of the first petitioner has been contended to be appealable under Section 21A(2) of the Securities Contracts (Regulation) Act, 1956. Stock Exchange had claimed to have consulted with SEBI prior to petitioners being informed with impugned decision. It could not be said that, impugned decision was vitiated by breach of principles of natural justice. Since impugned order was appealable and Petitioners had statutory alternative remedy available, thus no need to interfere in impugned order. Provisions of Section 23L of the Act of 1956 have also been relied upon to suggest that, appeal to the Security Appellate Tribunal would lie against such a decision of a Stock Exchange.

Facts: SEBI conducted a detailed examination on receipt of complaints of misstatements and misleading disclosure in financial statements of Notice 1. He had transferred its stock broking and depository participant businesses to IKAB. Both OSL and IKAB are listed on BSE. It is noted that the Notices while undertaking the aforesaid transaction and on certain other instances had violated the provisions of the Listing Agreement read with section 21 of the Act, 1956. Adjudicating Officer was appointed under Section 23-I(1) to inquire into and adjudge the violations committed by Notices.

Held: Considering all the facts and circumstances of the case together with the replies of Notices and exercising the powers conferred under Section 23-I, a monetary penalty of Rs. 20,00,000/- is imposed under Section 23A and Section 23E of the Act on M/s. Oasis Securities Limited and 5,00,000/- each on Shri Indra Kumar Bagri and Shri Anil Kumar Bagri under Section 23A of the SC(R)A. While determining the quantum of penalty under Section 23A of the SC(R)A against the Notices it is important to consider the factors relevantly as stipulated in Section 23J of the SC(R)A. Penalty imposed is commensurate with the default committed by the Notices.

Facts: Appellants were offering Optionally Fully Convertible Debentures ("OFCD") to all the people who were associated with the SAHARA group. The proposal of issuance of OFCD was approved by way of special resolution passed in terms of Companies Act. It was specifically indicated in the registered Red Herring Prospectus (RHP) by the SIRECL that did not intend to get their securities listed on any recognized stock exchange. Further, it was also stated in the RHP that only those persons to whom the Information Memorandum was circulated and/or approached privately who were connected in any manner with Sahara Group, would be eligible to apply. The same strategy was adopted by SHICL. High Court dismissed Application filed by Appellants for restoration of order passed by SEBI and Securities Appellate Tribunal wherein SEBI held that SHICL/Appellant had not complied with provisions of Regulations of ICDR Regulations and directed Appellant to refund money collected under Prospectus to all investors. SAT upheld the order of SEBI. The Ld. Tribunal took the view that SEBI had jurisdiction over the Saharas since OFCDs issued were in the nature of securities and should have been listed on any of the recognized exchanges within the Country. Hence, this Appeal.

Held: Section 28 was inserted by SCR Act. Section 28(1)(b) is clear that Act would not apply to 'entitlement' of buyer, inherent in convertible bond. Entitlement might be severable, but did not itself qualify as security that could be administered by SCR Act, unless it was issued in detachable format. Therefore inapplicability of SCR Act as contemplated in Section 28(1)(b), was not to convertible bonds, but to entitlement of person to whom such share, warrant or convertible bond had been issued to have shares at his option. Thus Act was inapplicable only to options or rights or entitlement that were attached to bond/warrant and not to bond/warrant itself. Expression "insofar as it entitles person" clearly indicated that it was not intended to exclude convertible bonds as class. Section 28(1)(b) clearly indicated that it was only convertible bonds and share/warrant of type referred to therein that were excluded from applicability of SCR Act and not debentures which were separate category of securities in definition contained in Section 2(h) of SCR Act. Hence provisions of SCR Act would not apply in view of Section 28(1)(b) of SCR Act could not be sustained.

Facts: R-4 who is a promoter of the Petitioner made an application for recognition of the Petitioner as a Stock Exchange. The Petitioner has two promoters, R-3 & R-4. Petitioner applied to SEBI for the grant of recognition as a Stock Exchange. SEBI granted recognition under Section 4 of the SCRA for operating a Stock Exchange for a period of one year. Petitioner's Board of Directors called upon the initial promoters(R-3 & R-4) to reduce their shareholding by cancelling their shares in excess of the prescribed limit, by a scheme of reduction cum arrangement. Petition was filed in this Court for sanctioning a Scheme of Reduction cum Arrangement which stated that though the reducing shareholders had a right to transfer the warrants to other investors or to exercise the option under the warrants, the Petitioner would ensure compliance with the MIMPS Regulations as well as the regulatory regime. Division Bench of this Court disposed of the Writ Petition by directing SEBI to take a final decision on the application submitted by the Petitioner.

Held: The issue pertains to whether options can be traded only on the stock exchange, or whether they can be entered into privately on a negotiated basis. This is in view of Section 18A of the SCRA which provides that contracts in derivatives are legal only if they are traded on a recognised stock exchange. The Court did not pronounce its opinion on this issue because violation of the provisions of Section 18A on the basis that the buy back agreements constitute options in securities or derivatives was not a ground taken in the show cause notice which resulted in the impugned order of the Whole Time Member, nor for that matter, is it a ground in the impugned order itself. This ground was raised only in subsequent submissions. Hence left unanswered.