Madhya Pradesh High Court
Kapil Sharma vs Union Of India on 11 October, 2023
Author: Milind Ramesh Phadke
Bench: Milind Ramesh Phadke
1
IN THE HIGH COURT OF MADHYA PRADESH
AT GWALIOR
WP No. 26140 of 2023
(KAPIL SHARMA Vs UNION OF INDIA AND OTHERS)
Dated : 11-10-2023
Shri Divyakant Lahoti, Shri Kumar Vinayakan Gupta and Shri Nitin
Agarwal, Advocates for the petitioner.
Shri Praveen Niwaskar - Deputy Solicitor General for the respondents.
Heard on the question of admission.
1. The present Petition under article 226 of the Constitution of India being preferred aggrieved by the letter/communication dated 28/08/2023, whereby permission to Respondent No.3 with regard to transaction relating to transfer of 2,25,920 equity shares of Peerless General Finance & Investment Co. Ltd. In favour of Respondent No.3, in terms of section 16 of the Security Contracts (Regulations) Act, 1956 (In short SCRA, 1956) read with notification dated 27/06/1969 issued by Respondent No.1/Ministry of Finance was neither rejected nor accorded buton mere technical grounds it was denied.
2. Ld. Counsel for the Petitioner vehemently argued that the Petitioner being a shareholder of Respondent No.3 Company, holding more than 3% of its equity shares, has a substantial interest in the assets owned by the said company and denying the requisite permission to Respondent No.3 Company to transfer 2, 25, 920 shares of Peerless, Respondent No.1 in its name is depriving the Petitioner from earning profits by way of defendants to be earned from the shares held by the Petitioner.
3. It was further argued that Respondents No.1 & 2 failed to appreciate that the present transaction was not ipso facto barred under the provisions of section 16 of SCRA, 1956, even in the proceedings initiated at the behest of Signature Not Verified Signed by: ASHISH PAWAR Signing time: 12-10-2023 06:48:18 PM 2 Respondent No.3 before Company Law Board, Calcutta, which went up till the Hon'ble Supreme Court after been put to test before Judicature of Calcutta high Court, the initial transaction between Tuhin Hanti Ghosh and Respondent No.3, was not held to be an 'Undesirable Transaction' or 'Undesirable Speculation' rather it was held that the said transaction in question was not a 'Spot Delivery Transaction' and only for this reason the said transaction was held to be hit by section 16(2) of SCRA, 1956.
4. Referring to the provisions of section 16 of SCRA, 1956, and notification dated 27/06/1969, Ld. Counsel for the Petitioner argued that the said provisions of section 16 makes it clear that if a transaction does not fall under the scope of four types of transactions i.e. spot delivery, contract for cash, hand delivery and special delivery, then it will not become ipso facto illegal, in fact, Respondent No.1 had been empowered to validate such a transaction under the section and notification and only when the said transaction is refused by Respondent No.1 either prior or ex-post-factothat a transaction becomes illegal under the legal fiction created u/s 16(2) of SCRA, 1956.
5. In furtherance of his arguments Ld. Counsel for the Petitioner contended that since the transaction between Tuhin Kanti Ghosh and Respondent No.3 is not held to be an 'Undesirable Transaction' or 'Undesirable Speculation', Respondent No.1 & 2 can provide ex-post-facto permission as contemplated the SCRA, 1956, as section 16(1) of the Act does not use expression like 'Prior Approval' or 'Prior Permission' from Respondent No.1 & 2 for validation of the transaction, as has been provided in other sections like section 8A, 13 and 13A of SCRA, 1956 and since the legislature has deliberately not added the expression 'Prior' before 'Permission' and is conspicuously absent from section 16 of SCRA, 1956, the said section posses Signature Not Verified Signed by: ASHISH PAWAR Signing time: 12-10-2023 06:48:18 PM 3 no bar on Respondent No.1 & 2 from granting ex-post-factopermission to the transaction of shares.
6. It was further contended that section 28(2) of SCRA, 1956 also empowers Respondent No. 1 to relax/exempt the conditions or provisions of the Act in the interest of trade and commerce and thus, said powers should have been exercised to accord permission to the aforesaid transaction and therefore, denial of such permission on the ground of pendency of a Writ Petition before Delhi High Court at the behest of Respondent No.3, which deals with a separate cause of action to Respondent No.3, and the representation filed by the Petitioner in capacity of an individual shareholder and for securing individual rights, cannot be said to be justified.
7. To bolster his submissions Ld. Counsel for the Petitioner placed reliance in the matter of Life Insurance Co. Ltd. Vs. Escorts Ltd. Reported in (1986) 1 SCC 264, wherein, while dealing with similar/identical provisions of section 29 (1) of Foreign Exchange Regulation Act, 1973, which deals with 'general or special permission' required from Reserve Bank of India for a person who is not a citizen of India but is residing in India or a company (other than Banking Company) which is not incorporated under any law in force in India or in which the non-resident interest is more than 40% or any branch of such company to carry on in India or establish in India any Branch, office or other place of business for carrying on any activity of a trading, commercial or Industrial nature etc., the Hon'ble Supreme Court had held that there is no difficulty in interpreting 'permission' to mean 'permission previous or subsequent' and there is no justification whatsoever for limiting expression 'permission' to 'previous permission' only and what is necessary is that Signature Not Verified Signed by: ASHISH PAWAR Signing time: 12-10-2023 06:48:18 PM 4 permission of Reserve Bank of India is obtained at some stage for the purchase of shares by non-resident companies. Thus, in the conclusion it was held that the permission of Reserve Bank of India contemplated by the FERA could be ex-post-facto.
8. Thus, on the strength of the above arguments it was submitted that when the transaction entered into between Tuhin Kanti Ghosh and Respondent No.3 cannot be termed as an undesirable speculation in specified securities, Respondent No.1 i.e. Union of India is bound to accord permission, but instead the permission is denied which infringes the right of the Petitioner as provided under article 19(1)(g) and article 300A of the Constitution of India.
8. After hearing Ld. Counsel for the Petitioner prima facie it appears to this Court that non-consideration of the representation dated 31/07/2023 preferred by the Petitioner seeking permission u/s 16 of the SCRA, 1956 with regard to transaction relating to 3530 shares of Peerless General Finance Ltd. on the ground of pendency of some Writ Petition No.4342/2017 between Bhagwati Developers Pvt. Ltd. Vs. UOI, is not justified and is not in consonance with the provisions of section 16 of SCRA, 1956.
9. Issue notice to the respondents on payment of process fee by RAD as well as ordinary mode within three working days.
10. In the meanwhile Shri Praveen Niwaskar - Deputy Solicitor General, who has appeared on advance copy prays for time to seek instructions in the matter and to file reply.
11. Notice be made returnable within two weeks.
List the matter on 31.10.2023.
(MILIND RAMESH PHADKE) Signature Not Verified Signed by: ASHISH PAWAR Signing time: 12-10-2023 06:48:18 PM 5 JUDGE Pawar Signature Not Verified Signed by: ASHISH PAWAR Signing time: 12-10-2023 06:48:18 PM