Endorsing the Calcutta High Courts decision in the case, Bhagwati Developers Ltd vs Peerless General Finance & Investment Co, the Supreme Court has held that shares of an unlisted public limited company come within the definition of securities and, therefore, fall under the purview of the the Securities Contracts (Regulation) Act 1956.
In this case, Bhagwati Developers (BD) had given a loan of around R39 lakh to one Tuhin Kanti Ghose for purchasing shares of Peerless. Pursuant to Tuhin transferring his 14,120 shares, including bonus shares, to BD by way of repayment of the loan, the latter had lodged transfer deeds in respect of shares with Peerless for transfer. However, the latter did not accede to the request on the ground that transfer of shares by Tuhin in favour of BD was in violation of the provisions of the Act.
Bhagwati moved the Company Law Board, which in 1998 dismissed its application holding that transfer of shares in favour of BD was against the provisions of the Act and, as such, illegal. It said that Peerless had rightly refused registration of transfer and the shares of a public limited company, which are not registered in any stock exchange, also come under the purview of the Act. CLB also rejected Bhagwatis plea that the sales of shares is a spot delivery contract, saying consideration for sales of shares had been paid much after the date on which the sales of shares had taken place, thus the transaction does not come within the expression, spot delivery contract as defined under Section 2(i) of the 1956 Act, which was enacted to prevent undesirable transaction in securities. Both the HC and the apex court upheld by the CLBs view, while dismissing the appeal of BD.
The Supreme Court in a huge batch of cases has rejected appeals filed by aspirants from various states seeking Indian Oil Corporations retail outlet dealership.
In these cases, the claim for ownership arose out of a 2002 policy for selection of retail outlet dealers of IOC. The aspirants having large plots of land had applied for outlets. The government of India approved IOCs decision to run 83 outlets for which sites had been taken over and facilities were installed. However, the government in 2006 formulated a new policy whereby the concept of offering full dealership to land owners was abandoned and the aspirants were denied dealership.
Even the Supreme Court upheld the governments contention that they had not been given any letter of intent (LoI) in accordance with the earlier policy.
Aspirants submitted that they had invested huge amounts on the legitimate expectation that they would get dealership, but that promise was not kept by the government. However, IOC argued that the concept of legitimate expectation has no role to play where the action is a matter of public policy or in the public interest, unless the action taken amounted to an abuse of power.
Land acquisition bid quashed
Quashing the Chandigarh administrations notifications for acquisition of land for setting up of a technology park, the Supreme Court said that proper procedure was not followed by the administration under the Land Acquisition Act.
The Chandigarh administration had issued notification in October 2002 for the acquisition of 71.96 acre land belonging to various persons including Flying Sikh Milkha Singh for various purposes including the Chandigarh Technology Park. While land owners had filed detailed objections, the administration went ahead with the acquisition on the basis of the Land Acquisition Officers (LAO) recommendations.
The land owners then moved Punjab and Haryana High Court, which upheld the decision of the authority. However, the apex court, on appeal, quashed the notifications after taking note of the landowners plea that the report of the LAO was vitiated due to total non-application of mind by the concerned officer to large number of substantive objections raised by them. The top court said: we have no hesitation to hold that the LAO failed to discharge the statutory duty cast upon him to prepare a report after objectively considering the objections filed under Section 5A(1) and submissions made by the objectors during the course of personal hearing.