CASE SUMMARY

1. Norman J. Hamilton v. Umedbhai Patel

The present suit is to recover the amount due to the plaintiffs in the form of annual
installments as agreed between the parties. The contentions of defendants were that security in
question is not marketable and, therefore, does not come within the definition of securities as
defined under section 2(h)(i). It was held in this case that the definition of securities under sec
2(h) shows that the securities only includes public companies and not private companies. And
that the contract in question is not a spot delivery contract of Rs. 10 lakhs were made was not fit
and forms part of the consideration for the sale of shares. Once this is taken into consideration
the plea of the appellant that it is a spot delivery contract was rejected.

2. Mysore Fruit Limited v. Cannon Finance Limited

The issue in this case was that the transaction is fraudulent and has been brought about to defeat
the provisions of the Act, that the alleged transaction is illegal, and two companies should be
directed to deposit the attached property with the custodian. It was laid down that the definition
of the term "securities" under section 2(h) would only apply to securities which are marketable.
It was held that essentially marketable means something which can be offered for sale in a
market. It is held that if the definition of the word "securities" is read along with the definition of
"stock exchanges", it becomes clear that the purpose of the Act is to control securities which are
normally dealt with on the stock exchange, i.e. shares of a public limited company. So, it was
construed that the definition of the word "securities" would exclude from its purview shares
which are not marketable such as shares of a private limited company. This is because such
shares are by their nature not freely transferable in the market. Thus, it is clear that forward sale
of shares even of the public limited companies which are not listed on the stock exchange are
prohibited by the Securities Act. Therefore, the transaction alleged to have been entered was
contrary to the provisions of the Securities Act.

3. Naresh Agarwal v. SEBI

The term securities and applicability of a circular issued by Delhi Stock Exchange was discussed
. It was said that there is no distinction between listed and unlisted securities , and it was very
clear that the applicability of circular was to apply to securities which were not listed on stock
exchange. Section 2(h) of SCRA defines other marketable securities of like nature which gives a
clear idea of marketability of securities and gave an expansive meaning to securities i.e. any
security which is capable of being transferrable is marketable.

4. Bhagwati Paper Ltd. v. Peerless Finance Co. Ltd.

It was cited in the judgment that the SCRA applies to public unlisted companies, it is the analysis
of the second that is likely to be more controversial. It is not just a matter of construction of this
particular agreement: it is difficult to see how any agreement to settle a suit filed for a
declaration of title to the shares of a public unlisted company will not be governed by this
judgment. Indeed, the somewhat odd result is this: a contract for the sale of shares is a spot
delivery contract if it is performed in accordance with its terms, but is not a spot delivery
contract if one of the parties is in breach, and the buyer settles the dispute by paying the seller a
fresh sum of money.