BHAGWATI DEVELOPERS PVT. LTD.versusPEERLESS GENERAL FINANCE & INVESTMENT COMPANY LTD AND ANR.

                     [2013) 7 S.C.R. 547


           BHAGWATI DEVELOPERS PVT. LTD.                            A
                               v.
    PEERLESS GENERAL FINANCE & INVESTMENT
             COMPANY LTD AND ANR.
           (Civil Appeal No. 7445 of 2004)
                                                                    B
                        JULY 15, 2013
           [CHANDRAMAULI KR. PRASAD AND
                V. GOPALA GOWDA, JJ.]

    SECURITIES CONTRACTS (REGISTRATION) ACT,                        C
1956:

     s. 13 - Contract in notified areas illegal in certain
circumstances - Transfer of shares of Peerless General
Finance and Investment Company (Peerless) - Held: In the            D
instant case, the place where the contract for sale of shares
in question has been entered is a notified area for the purpose
of s. 13 -- Further, the contract is not between the members of
a recognized stock exchange and, therefore, as held by the
Company Law Board, is in violation of s. 13.
                                                                    E
     s. 2(h)(i) - 'Securities' - 'Shares of Pearless General
Finance and Investment Company - Held: For shares of a
public limited company to come within the definition of
securities they have to satisfy that they are marketable -
 'Marketability' requires free transferability -- Subject to certain F
limited statutory restrictions, the shareholders possess the
right to transfer their shares, when and to whom they desire -
- It -is this right which satisfies the requirement of free
transferability - Shares of public limited company though not
listed in stock exchange, come within the definition of G
'securities' and, therefore, provisions of the Act would apply
including the indictments contained in s. 13 thereof.

     ss. 2(i) and 16 - 'Spot delivery contract' - Explained -
                              547                                   H
    548    SUPREME COURT REPORTS               [2013] 7 S.C.R.

A Shares of Peerless transferred - Part of consideration passed
  more than 6 years after the transfer - Held: The transaction
  does not come within the expression 'spot delivery contract'
  as defined in s.2(i) and, as such is, in violation of s.16 and
  Notification dated 27.6.1969 - Central Government Notification
B dated 27. 6. 1969.

         On 30.10.1987, respondent no. 2 agreed to transfer
    3530 shares of Peerless General Finance and Investment
    Company (respondent no. 1) to the appellant by way of
    repayment of loan. But the transfer deeds were not
C   properly filled in nor were executed. Meanwhile
    respondent no. 2 received bonus shares and there arose
    a dispute between the appellant and respondent no. 2
    with regard to entitlement to bonus shares. Ultimately, by
    compromise decree dated 28.11.1994, it was decided that
D   respondent no. 2 would retain as absolute owner the
    dividend of the entire shares upto the accounting year
    1989-90 as part of the consideration for the settlement,
    besides a sum of Rs.10 lakh paid by the appellant by pay
    order dated 21.11.1994. Accordingly, the appellant on
E   12.12.1994 lodged the transfer deed in respect of 14120
    shares with Peerless for their transfer. Peerless refused
    to register the same on the ground that the transaction
    was in violation of provisions of the Securities Contracts
    (Registration) Act, 1956. The Company Law Board held
F   that the transfer of shares in favour of the appellant was
    contrary to ss.13 and 16 of the 1956 Act. The Company
    Judge of the High Court also held against the appellant.

      In the instant appeal, the questions for consideration ·
  before the Court were: (i) "whether the provisions of
G Regulation Act will apply to the shares of a public limited
  company which are admittedly not listed on any stock
  exchange?" and (ii) "whether the contract in question is,
  a spot delivery contract".
H
   BHAGWATI DEVELOPERS PVT.·LTD. v. PEERLESS GEN.        549
             FINANCE & INVEST. CO. LTD.

    Dismissing the appeal, the Court                            A

     HELD: 1.1 Section 13 of the Securities Contracts
(Regulation) Act, 1956 lays down that contract in relation
to securities in notified areas is illegal if made otherwise
than between the members of recognized stock
                                                                8
exchange~ It is not in dispute that the place where the
contract for sale of shares in question has been entered is
a notified area for the purpose of s.13 of the Regulation
Act. Further, the contract is not between the members of a
recognized stock exchange. [para 10-11] [558-E; 559-C-E]        C

    1.2 Notwithstanding that the shares of Peerless, a
public limited company in respect of which the appellant
had sought rectification, are not listed in the stock
exchange, if shares come within the definition of
"securities" as defined u/s 2(h)(i) of the Regulation Act,      D
the indictments contained in s.13 would apply. The
Regulation Act was enacted to prevent "undesirable
transaction in securities by regulating business of dealing
therein" and from that one cannot infer that it was to
apply only to the transfer of shares on the stock               E
exchange. [para 15 and 24] [560-F.-F; 565-D-E]

     1.3 The definition of the term "securities" in s.2(h)(i)
of the Regulation Act makes it evident that for shares of
a public limited company to come within the definition of
securities they have to satisfy that they are marketable.       F
The expression "marketable" has been equated with the
word saleable. The number of persons willing to purchase
such shares would not be decisive. What is required is
free transferability. Subject to certain limited statutory
restrictions, the shareholders possess the right to transfer    G
their shares, when and l~ whom they desire. It is this right
which satisfies the requirement of free transferability.
However, when the statute prc~ibits or limits transfer of
shares to a specified category of people with onerous
conditions or restrictions, the right of shareholders -to       H
    550    SUPREME COURT REPORTS                [2013] 7 S.C.R.


A transfer or the.free transferability isjeopardized and in that
  case those shares with these limitations cannot be said
  to be marketable. Therefore, the shares of Public Limited
  Company though not listed in the stock exchange come
  within the definition of securities and, as such, the
B provisions of the Regulation Act would apply. [para 16 and
  18) [561-B-C, G-H; 562-A-C]

        Naresh K. Aggarwala & Co. vs. Canbank Financial
    Services Ltd. and Another 2010 (6) SCR 1 = (2010) 6 SCC
    178 - relied on.
c
        B.K.Holdings (P) Ltd. v. Prem Chand Jute Mills & Ors.
    (1983) 53 Com.Cases 367 (Cal.); East Indian Produce Ltd.
    v. Naresh Acharya Bhaduri & Ors. (1988) 64 Com. Cases
    259 (Cal.) ~ approved.
D
       Brooke Bond India Ltd. v. U.B.Ltd and Ors. (1994) 79
    Com.Cases 346 (BHC) - disapproved.

       Dahiben Umedbhai Patel and Others v. Norman James
  Hamilton and Ors. (1985) 57 Com. Cases 700(BHC) -
E distinguished.

        Black's Law Dictionary (Sixth Edition); and Oxford
    English Dictionary, Vo. 1 p.1728 - referred to.

F     2.1 Section 16(1) of the Regulation Act confers power
  on the Central government to prohibit contracts in certain
  cases. The provision makes it evident that in order to
  prevent undesirable stipulation in specified securities in
  any State or area, the Central Government by notification
  is competent to declare that no person in any State or
G area specified in the notification shall, save with the
  permission of the Central Government, enter into any
  contract for sale or purchase of any security specified in
  the notification. The Central Government in exercise of
  the said power, issued notification dated 27 .6.1969 and
H
   BHAGWATI DEVELOPERS PVT. LTD. v. PEERLESS GEN.      551
             FINANCE & INVEST. CO. LTD.

declared that in the whole of India "no person" shall        A ·.
"save with the permission of the Central Government
enter into any contract for the sale or purchase of
securities other than such spot delivery contract" as is
permissible under the Act, the Rules, bye-laws and the
Regulations of a recognized stock exchange. [para 27-        B
28] [566-E; 567-A-D]
    2.2 Section 2(i) of the Regulation Act, defines "spot
delivery contract" as a contract providing for actual
delivery of securities and the payment of price thereof
either on the same day as the date of contract or on the C
next day. In the instant case, the agreement dated
21.11.1994 between the appellant and respondent no. 2
which formed part of the compromise decree, provides
that the sale of shares took place on 30.10.1987 and in
consideration thereof the appellant paid a sum of Rs. 1O D
lakhs on 21.11.1994 and further the dividend on the entire
shares up to the accounting year 1989-90 amounting to
Rs.8,64,850/- to be retained by respondent no. 2. In the
face of it, the plea of the appellant that the payment of Rs.
10 lakh was made to buy peace, is not fit to be accepted E
and, in fact, that forms part of the consideration for the
sale of shares. Therefore, the transaction does not come
within the expression "spot delivery contract" as defined
u/s 2(i) of the Regulation Act. [para 6,32 and 33] [555-C-
D; 568-B-C, H; 569-A-D]
                                                              F
                      Case Law Reference:
  (1985) 57 Com. Cases        distinguished     Para 12
  700(BHC)
  (1994) 79 Com.Cases 346 disapproved           para 12      G
  (1983) 53 Com.Cases         approved          Para 12
  367 (Cal.)
  (1988) 64 Com. Cases        approved          Para 12
  259 (Cal.)                                                 H
    552     SUPREME COURT REPORTS                [2013) 7 S.C.R.


A      2010 (6) SCR 1               relied on          para 25
        -
        CIVIL APPELLATE JURISDICTION : Civil Appeal No.
    7445 of 2004.

B       From the Judgment and Order dated 30.07.2003 of the
    High Court at Calcutta in ACO No. 76 of 1999.          ·

         Sunil Gupta, Manoj, Aparna Singhal, Mahesh Agarwal,
    Rishi Agrawala, E.C. Agrawala, Aparna Sinha for the Appellant.

C        Bhaskar P. Gupta, Abhijit Chatterjee, S. Sukumaran,
    Anand Sukumar, Bhupesh Kumar Pathak (For K. Rajeev) for
    the Respondents.
          '·
        The Judgment of the Court was delivered by
D
      CHANDRAMAULI KR. PRASAD, J. 1. Appellant
  aggrieved by the judgment and order dated 30th July, 2003
  passed in ACO No.76 of 1999 by the Company Judge, High
  Court of Judicature at Calcutta affirming the judgment and order
E dated 25th November, 1998 passed by the Company Law
  Board, Eastern Region Bench at Calcutta in Original Petition
  No.15(111 )/ERB/1995 is before us with the leave of the Court.

       2. The appellant, Bhagwati Developers Private Limited,
F hereinafter referred to as 'Bhagwati' was earlier known as
  Lodha Services Private Limited. Tuhin Kanti Ghose, hereinafter
  referred to as 'Tuhin', Respondent No.2 herein, approached
  Bhagwati for a loan of Rs.38,83,000/- for purchasing 3530
  equity shares of Respondent No.1, Peerless General Finance
G & Investment Company Limited, hereinafter referred to as
  'Peerless'. As requested, Bhagwati on 25th of July, 1986
  advanced a sum of Rs.38,83,000/- as loan to Tuhin. Bhagwati
  and Tuhin later, on 19th November, 1986 entered into a formal
  agreement in respect of the aforesaid loan and Tuhin assured
  to repay the loan on or before 31st December, 1991. On 30th
H
    BHAGWATI DEVELOPERS PVT. LTD. v. PEERLESS GEN.        553
 FINANCE & INVEST. CO. LTD. [CHANDRAMAULI KR. PRASAD, J.]
  of October, 1987, Tuhin agreed to transfer 3530 shares of A
· Peerless to Bhagwati by way of repayment of the aforesaid loan.
  In the light thereof, Tuhin handed over the original share scrips
  as also the transfer deeds for doing the needful by Bhagwati.
  Tuhin on 30th October, 1987, wrote that Bhagwati would be
  entitled to all the benefits i.e. dividend, bonus shares etc. in 8
  respect of all these shares. It seems that the transfer deeds
  were not properly filled in and executed and accordingly,
  Bhagwati on 28th Decemter, 1987 wrote to Tuhin to put his
  signature in the fresh transfer deeds and return them to it.
  Bhagwati further requested Tuhin to send it shares and
  dividends received by him from Peerless. During these C
  developments, Peerless declared bonus shares in the ratio of
  1:1 and Tuhin being the registered shareholder, received further
  3530 bonus shares. Tuhin, it appears, did not sign the fresh
  transfer deeds and retained the bonus shares. Bhagwati by its
  letter dated 6th of July, 1988 asked Tuhin to furnish fresh transfer D
  deeds in respect of the total shares i.e. 7060 shares. Peerless
  declared further bonus shares in the year 1991 in the ratio of
  1: 1 and Tuhin being the registered shareholder of 7060 shares
  was further allotted 7060 bonus shares. In this way Tuhin
  altogether got 14120 shares.                                         E

        3. When Tuhin did not accede to the request of Bhagwati
  for transferring the entire shares, Bhagwati on 29th May, 1991
  filed a suit in the Court of Civil Judge at Allahabad and obtained
  an ad interim order of injunction restraining Tuhin from claiming    F
  any right, title or interest in respect of the aforesaid 14120
  shares of Peerless. During the pendency of the suit, Tuhin and
  Bhagwati settled their dispute out of Court and executed an
  agreement dated 21st November, 1994, according to which
  Tuhin acknowledged to have sold 3530 equity shares to                G
  Bhagwati on 30th October, 1987 which entitled it to the bonus
  shares declared in the years 1987 and 1991 totaling 14120
· equity shares. In terms of the agreement, an application for
  recording the compromise was filed in the civil suit and for
  passing a decree in terms of the compromise. The trial court         H
    554     SUPREME COURT REPORTS                 [2013) 7 S.C.R.


A acceded to the prayer of Bhagwati and Tuhin and decreed the
  suit in terms of the compromise by judgment and decree dated
  28th November, 1994. The trial court further directed that the
  compromise petition and the agreement between the parties
  shall also form part of the decree. According to the compromise
8 decree,   it was agreed that Tuhin shall retain as absolute owner
  the dividend on the entire shares up to the accounting year
  1989-90 amounting to Rs.8,64,850/- as part of consideration
  for the settlement. In terms of the compromise decree, Bhagwati
  has also paid a further sum of Rs.10 lakh by way of pay order
C dated 21st November, 1994.

        4. Armed with the decree, Bhagwati on 12th December,
   1994 lodged the transfer deeds in respect of 14120 shares with
   Peerless for their transfer. Peerless, however, did not accede
   to the prayer of Bhagwati and by its letter dated 8th February,
D 1995 refused to register the said shares, inter alia, on tile
   ground that the said transfer of shares by Tuhin in favour of ·
   Bhagwati was in violation of the provisions of Securities
   Contracts (Regulation) Act, 1956; hereinafter to be referred to
   as 'the Regulation Act'. According to Peerless, the cqntract for
E ·sale of shares was not a spot delivery contract, signatures of
   Tuhin differed from the signatures on the record of Peerless and
   further the stamps affixed on the instruments of transfer had not
   been cancelled. Bhagwati re-lodged the shares for transfer on
   14th February, 1995 with Peerless but again Peerless did not
F register those shares in the name of Bhagwati.

       5. Bhagwati, aggrieved by that, approached the Company
   Law Board, Eastern Region by filing an application under
  Section 111 of the Companies Act, 1956 hereinafter to be
  referred to as 'the Act' and the Company Law Board by its
G judgment and order dated 25th November, 1998 dismissed the
  said application inter alia holding that transfer of shares in
  favour of Bhagwati was against the provisions of Sections 13
  and 16 of the Regulation Act and as such, illegal. In the opinion
  of the Company Law Board Peerless rightly refused registration
H
   BHAGWATI DEVELOPERS PVI LTD. v. PEERLESS GEN.         555
FINANCE & INVEST. CO. LTD. [CHANDRAMAULI KR. PRASAD, J.]

of transfer. While doing so, the Company Law Board further         A
observed that the shares of a public limited company which are
not registered in the Stock Exchange also come under the
purview of Regulation Act. In this connection, the Company Law
Board observed as follows:
                                                                   B
          "We, therefore, hold that the provisions of the SCR
    Act, 1956, including the provisions of Sections 13, 16 and
    17 of the Act would be applicable to a public limited
    company even though its shares may not be listed on any
    recognized stock exchange."
                                                                   c
     6. As regards the plea of the appellant that the sales of
shares in question is a spot delivery contract, the Company Law
Board taking into account that consideration for sales of shares
having been paid much after the date on which the sales of
shares have taken place, observed that the transaction does        D
not come within the expression, "spot delivery contract" as
defined under Section 2(i) of the Regulation Act. While doing
so, the Company Law Board observed as follows:

          "It is, therefore, obvious that a part of the            E
    consideration for the sale of shares passed on much after
    the date on which the sale of shares is alleged to have
    taken place on 30.10.87. We are unable to accept the
    argument of Mr. Bose that the payment of Rs.10.00 lacs
    was made only to buy peace. We find that the agreement
                                                                   F
    dated 21.11.94 clearly states that the payment of Rs.10.00
    lacs was made as a part of consideration for the sale of
    shares and we fail to see how it can be contended to be
    otherwise. There is other intrinsic evidence in the
    agreement dated 21.11.94 which indicate against the
    contention of Mr. Bose, Learned Advocate for the petitioner    G
    that the entire transaction of sale of shares was completed
    on 30.10.87. Clause 2.1 of the said agreement provides
    that notwithstanding anything contained anywhere in the
    agreement dated 21.11.94 which indicate against the
                                                                   H
    556      SUPREME COURT REPORTS                   [2013] 7 S.C.R.


A         contention of Mr. Bose Learned Advocate for the petitioner
          that the entire transaction of sale of shares was completed
          on 30.10 .87. Clause 2 .1 of the said agreement provides
          that notwithstanding anything contained anywhere in the
          agreement dated 21.11.94. It was agreed that the
B         respondent no.2 would be entitled to retain as absolute
          owner of the dividend on the entire shares up to the
          accounting year 1989-90 amounting to Rs.8,64,850/- as
          part of consideration for the settlement. It is difficult to
          envisage as to how the respondent no.2 could continue to
c         be absolute owner of the shares up to 1989-90 if the sale
          was completed on 30.10.87."

         7. Accordingly, the Company Law Board reached the
    following conclusion:

D               "We, therefore, hold that the contract of sale of
          shares in question does not satisfy the definition of a spot
          delivery contract since part of the consideration passed on
          much after the alleged sale of shares on 30.10.87."

E      .. ~· Assailing the aforesaid judgment and order of the
   Company Law Board, passed in Original Petition No.15(111 )/
   ERB/1995, Bhagwati preferred an appeal before the High
   Court, inter alia, contending that the shares of Peerless, a public
   limtted Company having not been listed on any recognized
   stock exchange, it will .not come within the definition of·
F 'securities' under Section 2(h)(i) of the Regulation Act. Further
   the transaction between it and Tuhin was a case of spot delivery
   contract and therefore, the view taken by the Company Law
   Bo~d on Qoth the counts are erroneous. The Company Judge,
   negated both the contentions and observed that the provisions
G· of the Regulation Act would be applicable to a public limited
   Company even though its share is not listed on any recognized
   stock exchange. Further, the transaction did not satisfy the
   definition of a spot delivery contract since part of consideration
   passed on 21st November, 1994, when Bhagwati made
H payment of Rs.1 O lakh to Tuhin much after the transfer of shares
                        '
   BHAGWATI DEVELOPERS PVT. LTD. v. PEERLESS GEN.        557
FINANCE & INVEST. CO. LID. [CHANDRAMAULI KR. PRASAD, J.]
on 30th October, 1987. To come to the aforesaid conclusion,         A
the High Court also took into account the fact that in terms of
the compromise decree as part of consideration Tuhin retained
as absolute owner all the dividends on the entire shares
including the bonus shares up to the accounting year 1989-90.
The observation of the High Court in this connection reads as       B
follows:

    "In the abovementioned background it is necessary, in my
    view, to note the findings of fact arrived at by the Company
    Law Board. The Company Law Board found, as findings
    of fact, that the provisions of the Securities Contract         C
    {Regulation) Act, 1956 would be applicable to a public
    limited company even though it's shares might not be
    listed on any recognized stock exchange. It was, further,
    held that it was obvious that the part of consideration for
    the sale of shares passed on much after the date on which       D
    the sale of shares took place on October 30, 1987. The
    payment of Rs.10,00,000/-{Rupees ten lakh) only by
    Bhagwati to Tuhin on November 21, 1994 was a part of
    consideration for the sale of the said shares and, further it
    was agreed between the Bhagwati and Tuhin that Tuhin            E
    would be entitled to retain as absolute owner of the
    dividends on the entire shares including the bonus shares
    up to the accounting year 1989-1990 as part of
    consideration. The transaction did not satisfy the definition
    of a spot delivery contract since part of the consideration     F
    passed on much after the transfer of shares on October
    30, 1987. Moreover, the shares transfer forms were all
    dated November 21, 1994, that is, on the date on which
    the consideration of Rs.10,00,000/- {Rupees ten lakh) only
    passed from the Bhagwati to Tuhin. Therefore, the transfer      G
    of shares in question was hit by the provisions of the
    sections 13 and 16 of the Securities Contract {Regulation)
    Act, 1956 and, therefore, was illegal, void and a nullity".

    9. Ultimately, the High Court held as follows:
                                                                    H
    558       SUPREME COURT REPORTS                   [2013) 7 S.C.R.


A         "The Company Law Board has considered all the
          materials placed before it and, thereafter, arrived at the
          findings of fact that the impugned transactions is hit by the
          provisions of the Securities Contracts (Regulation) Act,
          1956 and the guidelines issued by the Government of India.
B         The Company Law Board cannot be termed as perverse
          in the sense that no normal person would have arrived at.
          The Company Law Board found, as findings of fact, that
          the consideration for transfer of shares included
          Rs.10,00,000/- (Rupees ten lakh) only paid by Bhagwati
          to Tuhin on November 21, 1994. The said findings is
c         sustainable from the reasoning given by the Company Law
          Board and, therefore, cannot be interfered with in this
          appeal."

       That is how, the appellant is 'before us with the leave of
D the Court.

       10. It is relevant here to state that the Company Law Board
  has held that transfer of shares in favour of Bhagwati is in the
  teeth of Sections 13 and 16 of the Regulation Act and hence,
E we deem it expedient to refer to the aforesaid provisions one
  after another. Section 13 of the Regulation Act makes contract
  in notified areas illegal in certain circumstances, same reads
  as follows:

          "13. Contracts in notified areas illegal in certain
F         circumstances.- If the Central Government is satisfied,
          having regard to the nature or the volume of transactions
          in securities in any State or States or area, that it is
          necessary so to do, it may, by notification in the Official
          Gazette, declare this section to apply to such State or
G         States or area and thereupon every contract in such State
          or States or area, which is entered into after the date of
          the notification otherwise than between members of a
          recognized stock exchange or recognized stock
          exchanges in such State or States or area or through or
H         with such member shall be illegal:
   BHAGWATI DEVELOPERS PVT. tTD. v. PEERLESS GEN.      559
FINANCE &lNVEST. CO. LTD. [CHANDRAMAULI KR PRASAD, J.]

    Provided that any contract entered into between members         A
    of two or more recognized stock exchanges in such State
    or States or area, shall-

      (i)    be subject to such terms and conditions as may be
             stipulated by the respective stock exchanges with      B
             prior approval of Securities and Exchange Board
             of India;

      (ii)   require prior permission from the respective stock
             exchanges if so stipulated by the stock exchanges
             with prior approval of Securities and Exchange         C
             Board of India."

      11. From a plain reading of the aforesaid provision, it is
evident that contract in relation to securities in notified areas
is illegal if made otherwise than between the members of            o
recognized stock exchange. It is not in dispute that the place
where the contract for sale of shares in question has been
entered is a notified area for the purpose of Section 13 of the
Regulation Act. Further, the contract is not between the
members of a recognized stock exchange.
                                                                    E
      12. In order to overcome this difficulty, Mr. Sunil Gupta,
learned Senior Counsel appearing on behalf of the appellant
submits that the security in question is not marketable and
therefore, does not come within the definition of "securities" as
defined under Section 2(h)(i) of the Regulation Act. According      F
to him, shares of a pub.lie limited company to come within the
definition of securities under the Regulation Act has to be
marketable and for that purpose has necessarily to be listed
in the Stock Exchange. Mr. Gupta further points out that the
aforesaid submission finds support from the judgment of the         G
Bombay High Court in the case of Dahiben Umedbhai Patel
and Others v. Norman James Hamilton and Ors. (1985) 57
Com. Cases 700 (BHC) and in the case of Brooke Bond India
Ltd. v. U.B. Ltd and Ors. (1994) 79 Com. Cases 346 (BHC).
In fairness to him, he has drawn our attention to the decision      H
    560      SUPREME COURT REPORTS                   [2013] 7 S.C.R.


A of Calcutta High Court in the case of B.K. Holdings (P) Ltd. v.
  Prem Chand Jute Mills & Ors. (1983) 53 Com.Cases 367
  (Cal.) and in the case of East Indian Produce Ltd. v. Naresh
  Acharya Bhaduri & Ors. (1988) 64 Com. Cases 259 (Cal.)
  which have taken an altogether contrary view. He contends that
B the Bombay decisions are based on sound reasoning and
  therefore, commend our acceptance.

       13. Mr. Bhaskar P.Gupta, learned Senior Counsel
  representing respondent No.1 submits that the provisions of
C Regulation Act apply to the shares of a public limited company
  which are riot listed on any stock exchange. According to him,
  for secu1 ities of a public limited company to be marketable, it
  does not necessarily require to be sold in any market of a
  specified nature i.e. stock exchange. He submits that it may be
  any area where buyers and sellers are in contact with one
  another and there securities can be sold.

        14. In view of the rival submissions, the first question which
  falls for our determination is as to whether the provisions of
  Regulation Act will apply to the shares of a public limited
E company· which are admittedly not listed on any stock
  exchange?

          15. Admittedly, the shares of Peerless, a public limited
    company in respect of which the appellant had sought
F   rectification are not listed in the stock exchange. In our opinion,
    notwithstanding that if shares come within the definition of
    "securities" as defined under Section 2(h)(i) of the Regulation
    Act, the indictments contained in Section 13 would apply. The
    word, 'securities' has been defined under Section 2(h)(i) of the
    Regulation Act which reads as follows:
G
          "2. Definitions - In this Act, unless the context otherwise
          requires, -

                xxx
H
   BHAGWATI DEVELOPERS PVT. LTD. v. PEERLESS GEN.        561
FINANCE & INVEST. CO. LTD. [CHANDRAMAULI KR. PRASAD, J.]

    "(h) "securities" include-                                        A

            (i) shares, scrips, stocks, bonds, debentures,
            debenture stock or other marketable securities of
            a like nature in or of any incorporated company or
            other body corporate;"                                    B

           xxx"

     16. From a plain reading of the aforesaid provision, it is
evident that for shares of a public limited company to come
within the 'definition of securities they have to satisfy that they   c
are marketable. The word, 'marketable' has not been defined
in the Regulation Act and hence to understand it, we have to
revert to its dictionary meaning. Black's Law Dictionary (Sixth
Edition) explains the word, 'marketable' as follows:
                                                                      D
     "Marketable. Saleable. Such things as may be sold in the
     market; those for which a buyer may be found;
     merchantable."

     17. The compact edition of the Oxford English Dictionary,
Vol.I p.1728 gives the meaning of the expression "marketable"         E
as follows:

     "1. Capable of being marketed that may or can be bought
     or sold; suitable for the market; that finds a ready market;
     that is in demand, saleable.
                                                                      F
     2. Of or pertaining to buying or selling; concerned with
     trade; of price, value, that may be obtained in buying or
     selling."

    18. As is evident from the dictionary meaning set out             G
above, the expression ''marketable" has been equated with the
word saleable. In other words, whatever is capable of being
bought and sold in a market is marketable. The size of the
market is of no consequence. In other words, the number of
persons willing to purchase such shares would not be decisive.        H
    562       SUPREME COURT REPORTS                  [2013) 7 S.C.R.


A One cannot lose sight of the fact that there may not be any
  purchaser even for the listed shares. In such a case can it be
  said that even listed .shares are not marketable? In our opinion
  what is required is free transferability. Subject to certain limited
  statutory restrictions, the shareholders possess the right to
B transfer their shares, when and to whom they desire. It is this
  right which satisfies the requirement of free transferability.
  However, when the statute prohibits or limits transfer of shares
  to a specified category of people with onerous conditions or
  restrictions, right of shareholders to transfer or the free
C transferability·is jeopardized and in that case those shares with
  these limitations cannot be said to be marketable. In our·
  opinion, therefore, shares of public limited company though not
  listed in the stock exchange come within the definition of
  securities and hence, the provisions of Regulation Act apply.
  A Division Bench of the Calcutta High Court in the case of East
0
  Indian Produce Ltd. (supra) relying on its earlier decision in
  the case of B.K.Holdings (P) Ltd. (supra) came to the same
  conclusion and held as follows:

          "In my view to accept the contention of Mr. Dipankar Gupta
E         on this aspect of the case would be to ascribe too narrow
          a meaning to the expression "marketable securities". As
          will be evident from the dictionary meaning set out above
          the expression "marketable" has been equated with
          "saleable". In other words, whatever is capable of being
F         bought and sold in a market is marketable. I see no
          warrant whatsoever for limiting the expression "marketable
          securities" only to those securities which are quoted in the
          stock exchange. This argument of Mr. Gupta, therefore,
          fails."
G
          19. True it is that the Bombay High Court in the case of
    Dahiben Umedbhai Patel (supra) has taken a view that the
    shares of a private company does not possess the character
    of liquidity and, therefore, cannot be said to be marketable.
    Relevant portion of the judgment reads as follows:
H
   . BHAGWATI DEVELOPERS PVT. LTD. v. PEERLESS GEN.      563
FINANCE & INVEST. CO. LTD. [CHANDRAMAULI KR. PRASAD, J.)

     "It is thus clear that the shares of a private company do        A
     not possess the character of liquidity, which means that the
     purchaser of shares cannot be guaranteed that he will be
     registered as a member of the company. Such shares
     cannot be sold in the market or, in other words, they cannot
     be said to be marketable and cannot, therefore, be said          B
     to fall within the definition of "securities" as a "marketable
     security .... "

     20. We must at the outset state that this case relates to a
private company and having regard to the absence of free
transferability, shares were held not to be marketable securities     C
as defined under Section 2(h)(i) of the Regulation Act. This
would be evident from the following passage of the said
judgment:

     " ... A market, therefore, contemplates a free transaction       D
     where shares can be sold and purchased without any
     restriction as to title. The shares which are sold in a market
     must, therefore, have a high degree of liquidity by virtue
     of their character of free transferability. Such character of
     free transferability is to be found only in the shares of a      E
     public company. The definition of a "private company" in
     S. 3 of the Companies Act, 1956, speaks of the
     restrictions for which the articles of the private company
     must provide.
                                                                      F
           xxx
     The restriction with regard to the transfer of the shares is
     a characteristic of a private company .... "

      21. In the present case, we are concerned with a public         G
limited company and the aforesaid judgment clearly indicates
that shares of a public limited company will come within the
definition of securities. This would be evident from the following
passage from the said judgment:
                                                                      H
    564      SUPREME COURT REPORTS                     (2013] 7 S.C.R.


A         "It is thus clear to us that the definition of "securities" will
          only take in shares of a pJblic limited company
          notwithstanding the use of the words "any incorporated
          company or other body corporate" in the definition."
B         22. For all these reasons, we are of the opinion that the
    aforesaid decision of the Bombay High Court is clearly
    distinguishable.
       23. As stated earlier, a learned Single Judge of the
  Bombay High Court in the case of Brooke Bond India Ltd.
C (supra) had followed its earlier Division Bench judgment in
  Dahiben Umedbhai Patel (supra) and expressed a prima
  facie view that transaction of shares of a public limited
  company unlisted on the stock exchange is not intended to be
  covered under the Regulation Act. While doing so, the learned
D Single Judge had referred to the decisions of the Calcutta High
  Court in the case of B.K. Holdings (supra) and East Indian
  Produce Ltd. (supra) but disagreed with the ratio of those
  judgments without assignin;; any reason. The learned Single
  Judge found himse "'Jound to follow the earlier Division Bench
E judgment in the cas< f Dahiben Umedbhai Patel (supra). The
  observation of the learned Single Judge in this connection
  reads as follows:
          "On the contrary, my prima facie view of these two
          judgments accord$ with the submission of Mr. Mehta. I am
F         of the prima facie view that a transaction of shares of a
           public limited company, unlisted on the stock exchange,
           is not intended to be !JOVerned by this Act.
           Mr. Cooper strongly relied on the judgment of the Division
           Bench of the Calcutta High Court in East Indian Produce
G
          Ltd. (1988) 64 Comp. Cas 259 on this issue also. The
          Calcutta High Court relied on an earlier judgment of the
          same High Court in B.K. Holding."" (P) Ltd. v. Prem Chand
          Jute Mills (1983) 53 Comp Cas 367. At that stage, the
          judgment of Mrs. Manohar J. was cited before the learned
H         single judge of the Calcutta High Court. He seemed to take
   BHAGWATI DEVELOPERS PVT. LTD. v. PEERLESS GEN.        565
FINANCE & INVEST. CO. LTD. [CHANDRAMAULI KR. PRASAD, J.]

     the view that the decision of Mrs. Manohar J. in Norman A
     J. Hamilton v. Umedbhai S. Patel (1979) 49 Comp Cas
     1, must be confined to a situation of transfer of shares of
     a private limited company. So far as the decision of the
     Division Bench of the Calcutta High Court in East Indian
     Produce Ltd. (1988) 64 Comp Cas 259 is concerned, it B
     seems to follow the earlier judgment in B.K. Holdings. With
     great respect to the learned Judges of the Calcutta High
     Court, who decided the aforesaid two cases, even if the
     matter were not res integra, I would be inclined to disagree
     with their observations made therein. However, in the view C
     I have taken of the judgments of the learned single judge
     and the appeal judgment of our court, I consider myself
     bound to take the view that the Securities Contracts
     (Regulation) Act, 1956, is not intended to regulate private
     transactions in shares of public limited companies, not
     listed on the stock exchange. This contention also, 0
     therefore, fails."

      24. The Regulation Act was enacted to prevent
"undesirable transaction in securities by regulating business of
dealing therein" and from that one cannot infer that it was to       E
apply only to the transfer of shares on the stock exchange. The
Bombay High Court in this case was greatly influenced by the
fact that the Act was intended to govern transactions in the stock
exchange. As stated earlier, we do not find anything in the
object of the Act to warrant that-conclusion. We, for the reasons    F
stated above, are not inclined to endorse the view of the
Bombay High Court in Brooke Bond India Ltd.(supra).

      25. We are forti,fied in our view from a judgment of this
 Court in the case of Naresh K. Aggarwala & Co. vs. Canbank
 Financial Services Ltd. and Another (2010) 6 SCC 178,               G
 wherein this Court considered the term "securities" as defined
·under Section 2(h)(i) of the Regulation Act, with reference to
 the notification issued under Section 16(2) and held that the
 definition does not make any distinction between listed
                                                                     H
    566       SUPREME COURT REPORTS                     [2013] 7 S.C.R.


A   securities and unlisted securities. Relevant portion of the
    judgment reads as follows:

          "41., ...... A perusal of the abovequoted definition shows
          that it does not make any distinction between listed
          securities and unlisted securities and therefore it is clear
B
          that the circular will apply to the securities which are not
          listed on the stock exchange ..................................."

       26. When the word 'Securities' has been defined under the
  Regulation Act, its meaning would not vary when the same
C word is used at more than one place in the same Statute,
  otherwise it will defeat the very object of the definition Section.
  Accordingly, our answer to the first question set out earlier is
  that the provisions of the Regulation Act would cover unlisted
  Securities of Public Limited Company. In other words, shares
o of Public Limited Company not listed in the stock-exchange is
  covered within the ambit of Regulation Act.

       27. As stated in the preceding paragraph of the judgment,
  the Company Law Board has held that transfer of shares in
E favour of Bhagwati was also against the provisions of Section
  16 of the Regulation Act. Section 16(1) of the Act confers power
  on the Central government to prohibit contracts in certain cases.
  Section 16 reads as follows:

          "16. Power to prohibit contracts in certain cases.- (1)
F         If the Central Government is of opinion that it is necessary
          to prevent undesirable speculation in specified securities
          in any State or area, it may, by notification in the Official
          Gazette, declare that no person in the State or area
          specified in the notification shall, save with the permission
G         of the Central Government, enter into any contract for the
          sale or purchase of any security specified in the
          notification except to the extent and in the manner, if any,
          specified therein.

          (2) All contracts in contravention of the provisions of sub-
H
   BHAGWATI DEVELOPERS PVT LTD. v. PEERLESS GEN.        567
FINANCE & INVEST CO. LTD. [CHANDRAMAULI KR. PRASAD, J.)

    section (1) entered into after the date of the notification     A
    issued thereunder shall be illegal."

     28. From a plain reading of the aforesaid provision it is
evident that in order to prevent undesirable stipulation in
specified securities in any State or area the Central Government    B
by notification is competent to declare that no person in any
State or area specified in the notification shall, save with the
permission of the Central Government, enter into any contract
for the sale or purchase of any security specified in the
notification. The Central Government in exercise of the             C
aforesaid power issued notification dated 27th of June, 1969
and declared that in the whole of India "no person" shall "save
with the permission of the Central Government enter into any
contract for the sale or purchase of securities other than such
spot delivery contract" as is permissible under the Act, the
Rules, bye-laws and the Regulations of a recognized stock           0
exchange. The appellant, therefore, can come out of the rigors
of Section 16 of the Act only when it satisfies that the
transaction comes within the definition of "spot delivery
contract".
                                                                    E
     29. Mr. Sunil Gupta, further submits that the contract in
question is a spot delivery contract and, therefore, does not
come within the mischief of Section 16 of the Regulation Act.
Mr. Bhaskar P. Gupta, joins issue and submits that in view of
the limited rule t.he appellant cannot be allowed to raise the      F
point of spot delivery contract. In this connection, he has drawn
our attention to the order dated 19th of December, 2003. We
are not inclined to sustain this objection of Counsel for the
respondent.

      30. By the aforesaid order while issuing rule this Court G
noted the submission advanced on behalf of the appellant in
regard to the conflicting decisions of the Bombay and Calcutta
High Courts in regard to the question of applicability of
Regulation Act. From the aforesaid it cannot be said that the
limited rule was issued. Further, by order dated 5.11.2004 leave · H
    568      SUPREME COURT REPORTS                   [2013] 7 S.C.R.


A   has been granted by this Court and it has not been confined to
    any specific question. From the aforesaid it cannot be said that
    the appellant has got a limited rule.

          31. On merit, the respondents submit that the contract in
8   question cannot be said to be a spot delivery contract and, in
    this connection, the learned Senior Counsel draws our attention
    to the terms of agreement which formed part of the decree.

       32. The second question, therefore, which falls for our
  determination is as to whether the contract in question is a spot
C delivery contract. This expression is defined under Section 2(i)
  of the Regulation Act. It reads as follows:

          "2. Definitions - In this Act, unless the context otherwise
          requires, -
D               xxx

          (i) "spot delivery contract" means a contract which provides
          for -

                 (a) actual delivery of securities and the payment of
E
                 a price therefor either on the same day as the date
                 of the contract or on the next day, the actual periods
                 taken for the despatch of the securities or the
                 remittance of money therefor through the post being
                 excluded from the computation of the period
F                aforesaid if the parties to the contract do not reside
                 in the same town or locality;

                 (b) transfer of the securities by the depository from
                 the account of a beneficial owner to the account of
G                another beneficial owner when such securities are
                 dealt with by a depository;

                xx x"

      33. According to the definition, a contract providing for
H actual delivery of securities and the payment of price thereof
   BHAGWATI DEVELOPERS PVT. LTD. v. PEERLESS GEN.        569
FINANCE & INVEST. CO. LTD. [CHANDRAMAULI KR. PRASAD, J.]

either on the same day as the date of contract or on the next          A
day means a spot delivery contract. When we consider the facts
of the present case bearing in mind the definition aforesaid,
we find that the contract in question is not a spot del,ivery
contract. True it is that by letter dated 30th of October, 1987
written by Tuhin to Bhagwati, he had stated that the formal            B
agreement had been executed between them on 10th
November, 1986 and as per the agreement he is transferring
the entire 3530 shares of Peerless purchased from the loan
amount and the transfer is in its repayment. However, the
agreement dated 21st November, 1994 between Bhagwati and               c
Tuhin which formed part of the compromise decree provides
that the sale of shares took place on 30th October, 1987 and
in consideration thereof Bhagwati paid a sum of Rs. 10 lakhs
on 21st November, 1994 and further the dividend on the entire
shares up to the accounting year 1989-90 amounting to
Rs.8,64,850 to be retained by Tuhin. In the face of it, the plea       D
of Bhagwati that the payment of Rs. 10 lakh was made to buy
peace, is not fit to be accepted and, in fact, that forms part of
the consideration for the sale of shares. Once we take this view,
the plea of the appellant that it is a spot delivery contract is fit
to be rejected. We agree with the reasoning and conclusion of          E
the Company Law Board and the High Court on this issue.

    34. Both the contentions of the appellant having no
substance, we do not find any merit in this appeal and it is
dismissed accordingly but without any order as to costs.               F

R.P.                                          Appeal dismissed.