 bill no 117 of 1985 1- the securities contracts (regulation) amendment '~",' bul, 1985 bill/utther to amend tile secli:r;ms contracts (regulation) act, 1956 be it enacted by parliament in the thirtysixth year of the republic of india as follows:-1 ll) this act 1i1ay be called the securities contracts (regulation) amendment act, 1985 short title add 5 (2) it shall come into (orce on such date as the central (1ovem-ment meat may, by notification in the ofticial gazette, appoint 42 at 1956 z in the securitles contracts (regulation) act, 1956 ,(hereinafter referred to as u1eprincipal act), after section 22, the following section ahall be inserted, namely:-idior tjon of new sectnn 22a '22a (1) iii tbis section, unless the context otherwise are 10 q  -(a) '·cempaay" means a comp&dy whose securities are usted on a recopi_ stock exehange; 15 (b) useearlty" lit  -,urity 01 - eanapuy, beiag a security us  on a recopjsed exehup hat dot bela&' a i!i8ciiitty which' is ot fauy paid 1ip or on  hleb the eo  y buum; free (raosferability and ro,is tralion of transfers of lilted securl ties of companies 1 of 1'56 :in (c) all other words add expressions used in this seetion , and ot twbied ill thiii act but, dejlded in the companjes act, 1158 shan "va the illude melllddp as 81'8 assigned to them in that act (z) subject to the provisions of this seetion,seeurities of com-panles shalt be freely tra~ble (3) notwithstanding anything eontabaed in its arttcles or in section 82 or seeuon 111 of the compadlea act, 1956, but iiibject 1 of 1956 to the other provlslons of tbls section, a eodipady may refuse to !i register the transfer of any of its seeurlues in the name of the transferee on anyone or more of the following grounds and on no other ground, namely::-, (a) that the jnstrument of transfer is not proper or bas 1) not been duly stamped and executed or that the eertlfteate roe- laung to the security has not been dejiverec1 to the company or that any other requirement under the law relating to registration of such transfer has not been complied with; (b) that the transfer of the security is in contravention of any law; (c) that the transler 01 the security is likely to result in such change in tbe composition of ~ board o( directors as would be prejucuclal to the interests of the company or to the public interest: 20 (d) that the ·transfet' of the security is probibitetl by: any order of any courl, tribanal or other authority under any law for the time being in force (4) a company shall, before the expiry· of two months from the date on wmch the il\strument· of transfer of any of its seeul'lties is lodged with it for the purpose of registration of such transfer,!:is not only form, in good faith, its opidjon as to whether iiioh re,wn-uon ought not or ought to be refused on any of tile g1'oiiru mfjlltloned in sub-section (3) but also-(a) if it has fonned the opinion that isuch registatlod ourht not to be so refused, effect sueh registration: 30 - (b) if it has formed the opinlon that such registratiod o  bt to be refused on the ground mentioned in clause (a) of sub~ ·sectlon (1), intimate the traasferor and the transferee by notice in the prescribed form about tih requirements under the 1&w which has or which have to be compilled with for securing sum 35 reg-lstratioll; (c) in any other case make a reference to the compaay law board and forward copies of such reference to the tradsteror and tile transferee (5) ~"ery reference under clause (c)  of sub-sectlou (4) shall be 40 in the prescribed fo~ add contain the prescribed particulars add shall be accompanied by the instrument of transfer of the seeurtties to whleh relates, the doewnentary evidence, if edy  furniahed to the eompany along with the instrument of transfer, and evidence of such other nature and such fees as be pi'e5crlbec1 45 (6) on receipt of a retei-en~·undez: sub-sect;sqil (4), ~ compaay law boant liball, after caasida' iuloiiabie notice to be it, to tile company and also to the transfer aad the traasteree· egfteemed 8dd jiving them a reasonable opportunity to make their repreaentatioas, if !bily, in writing by order direct either that· the transfer shall be registered' by the company or that it need not be ~ by it 5 (7) where on  ret_ 1ulder sub-section (4) the company law board directs that th~ tndfer of the securities to which it relates  10 '(a) shall be reatlt81-ett dy the company, the company will rlveeffeet to the dltectlon within ten days of the receipt of the 'order' as it it wea-e bil order made flil ptmai by the company law board iii exercise of the powers under section 111' 01 the companies aet, 1956; 1 of 1956 (b) need not be registered by the company, the compally "hall, within ten days from the date of such direction, intimtlte the transferor and, the transferee accordingly (8) i( delault is made ir complying with the provisions of flus ~tien, the coiupaay and every officer of the company who is in default shall be punishable will ane which may extend to flve thousauid rupees 20 (9) ii in any reference made wlder clause (e) of sub-section (4) of this sect!on, any penon makes any statement-(c) which is false in any material particular, knowing it to be false; or ' 25 (b) which' omits any material fact knowing it to be material, be shall be pwushable w!th imprisonment for a term which may extend to three days and shall also be liable to flne, 30 (10) for tbe removal of doubts, it is hereby provided that noth-idg in thts seeuou shall apply in relation to any securities ute lnstru~ ment ot transfer in respeet wbereot has been lodged wtih the comp8dy wore the rommencemellt of the securities contracts (re-i1ilation) amendment act, 1985', 3:tn section 24 of the prinppal··act, after su1>-section (2), the follow-amending sub-section shall be inserteg, namely:-mentof 8ection24 "(3) the provisions of this section shall be in addition to, and not in derogation of the provisions of section 22a " amedd--4  in section 3() of the, principal act, in sub-section (2) ,-mentor (a) in clause (h) the word "and" occurring at the end shall be iicctloa 30 , omitted; (b) after clause (h), 'the following clause shall be inserted, 40 namely:-"(114) the form in which a  notice referred to in sub-clause (b) of 'sub-section (4) of section 22a shall be, the particulars which such notice· shall contain, the fonn in which a reference under clause (c) ·of the said sub-6ection (4) shall be, tbe particulars which such reference-, shall contain, and the evidence and the fees which shall accompany such reference; and"  statement of objects and reasons,at pl'esent, sections 82 and 111 of the companies act, 19sg permit board of directors of companies to assume powers under the articles of association to refuse registration of transfer of aec~rities without assigning any reason though there is a provision for appeal 'against i-uch a refusal to the company law board, it places an undue burden on an aggrieved person who often happens to be a small investor, the present position is also not conducive to the free marketability of listed securities and healthy growth of the capital market unrestricted transferability is particularly necessary for securities of public limited companies which are listed on the stock exchanges 2 it was in the above context that it was announced in the budget speech dated 16th march, 1985 ~at 8ecurit14!s' contracts (rerwation) act, 1956 would be amended to ensure free transfer$biuty ofsecurltiell of public limited companies· whose seeurities are listed on' the stock exchanges, for this purpose, it is proposed to incorpo!ate a new' section, namely, section 22a, in the securities contracts (regulation) act, 1956 and also make necessary consequenul amendments in the act, to provide for free transferability· of listed secarit1es 'vith adequate safeguards against undesirable take-over bids or desta~1isation gf management under the proposed provision, companies would be entitled to refuse registration of tranafer in certain circ~tances only, such as that the instrument of transfer is not proper or hu not been duly stamped and executed or that the tranlfe'r is in contravention of any law or is likely to result in change in the composition of the 'board of directors in such a way that it would be prejuqiclal to the interests of companies or to public interest iii case a company wishes to refuse transfer of securities on the ground that any raq;~t under law bas not been complied with it bas to notify the tranderor aw:l the transferee of the same within two months from the lodgment of the instrument of transfer in other cases the company will hiveto make a reference to the company law board and actaecarding to the directions ot the board 3 the bill seeks to achieve the above objeetive new del,hi; vishwanath pratap singh the 15th moy 1985 (to 'uc/a 3 ~n tro d ucej in 10 k sa bha) 1-:i?~se·1, jin·v~·10 ~nd ,11,- ""fqt' ,'ato l,l)u<s·,r ted-d' "requires" 2 page 2, 11ne25"r- ~t  "purpo sa ii '2:l?a~ "purposes'" 3··page2, lina 34;-  m-' 'l th " bm "the"   ' 4 '" page 2, line 43,- aftex-~ :'whlchtj j,hsftl:1t hit" , page 2,11n~ 45,- '  t', " w  aft&:, lias" illaf'tl ,llmay" 6 page 2, lin~ ~,- :1b1: "t~ sfer n l1transferor" 7 , ~ page 3, line ',-"',  for: r't-ronret ti j',!& "transfer"  ' 8  page 3, ~  j • a -b,-i  "-'t "1 j~ i, ,~  ~  9 page 3~·11n6 18"-,, !qt "l>cl lilt ~ "wi th !' 10 ~age' 3" line 22 t -ru ii( c) if ~d ,iica)", 11 page 3, 11n'26,_ ''   fb1: "days" l:smd"years"  , 12 page 3 , line 2) ,-tl:u: "w-t:ih" read "i-11 th " 13 page 6, line 11,-~:r "ralat,~'" 12~ "to" '  _,  )  , new deihi; maz 1~ 19135' "'''', ;' ,'1hj ~i1i seelq! to' ~aiie' prov'i~ion for reference to be made to the c~inp~y ~w¥tp'~rd, by' cc!mpani~sbefure, refusing, on any of the gtoun,ds mentioned' in' the b~lll t~ register' tr'ansfer of securities in the nlinne' of the transf~ree, 'the' bill also confers powers on the company la\\· 'board' to' treat 'such a refetence' as appeal under section 111 of the companies act, 1956, according to ~the provisions of the bill, the company'law'board"is required 'to give not'ice to the 'company, the transferor and' the transferee of securities for a hearing and to h;sue directions auowingor not allowirigthe refusal to the registration ,of transfer, these provisions in the bill would increase the workload of the company law boa1'd,actiilg in a"quasi-juddal capacity keeping in view the minimum requirements of personnel to implement the provisions of tile bill, the financial, commitment qy way of recurring and nonrecurring expenl\iture from the consolidated fund of india is estimated to be of the order of r;;, 35 lakhs as given below:---:-(i) recurring expenditure on account of pay and allowances of staff and officers rs ~80,ooo  ' (ii) non-recurring expenditure on account of additional office accommodation and furniture required for the' officers and' staff , rs 70000 - rs 3,50,000  memorandum regarding delegated legislationclause 4 of the bill seeks to insert a new clause in sub-seetion (2) , of section 30 of the act enabling the central government to make rules providing for the form in which a noti~ referred to in sub-elaaae (b) of sub-section (4) of section 22a shall be, the particulars which suc,h notice shall contain, the foril1- in which a reference under clause ,(c) of the said sub-section (4) shall be, the particulars which such reference shall contain, and the evidence and the fees which shall accompany such reference 2 the matters in respect of, which the central government has been empowered to make rules relate matters of procedural detail delegation of legislative power is, therefore, of a nonna! character  the  - (42 of !956) - - - - - 30 (1) -                                                                                                              -                                                                                - power to make rules  (2) in particular, ~md without prejuctice to the generauty of the foregoing power, such rules may provide for- -   - - (h) the requirements which shall be complied with by public companies for the purpose of getting their securities listed on any stock exlchange; and    - -  a billfurther to amend the securities con'ta"acts (regulation) act, 1956 , , (shri vishw4mth prcitap smgh, mininer of finclnce) l  ' 