Restriction on Transfer of Shares [Section 108 B

(1) Every body corporate under the same management holding, wl)ether singly or in aggregate, 10 per cent or more of the nominal value of the subscribed equity share capital of any other company, shall, before transferring such shares, give an intimation to the Central Government of their proposal to transfer one or more shares. On receipt of such intimation, if the Central Government is satisfied that as a result of such transfer, a change in the Composition of the Board of Directors of the Company is likely to take place and that such a change would be prejudicial to the interest ofthe company or the public interest, it may by order, direct that

(i) no such share shall be transferred to the proposed transferee, or

(ii) where such shares are held in a company engaged in any industry

specified in schedule XV, shares shall be transferred to the Central Government or to such corporation owned or controlled by that Government as may be Specified in the direction. In such a case the Government will pay the market value prevailing on the date on which direction is made or as may be mutually agreed upon. In case of dispute, value as estimated by the Central Government or the corporation, as the case may be, shall be paid forthwith and the balance, if any, within 30 days from the date when the market value is determined by the Court. If the Central Government does not make any direction within 60 days from the date of receipt by it of the intimation, the provisions with regard to the transfer of such shares shall not apply. The market value shall be paid forthwith if there is no dispute as to such value.

3. Restrictions on the transfer of shares of foreign companies. [Section108C]A body corporate (or bodies corporate under the same management) which holds in the aggregate ten per cent or 1l10re of the nominal value of the equity share capital of a forei3n company, having an established place of business in India, shall not transfer such shares to any citizen of India or any body corporate incorporated in India without the prior approval of the Central Government. The Government will not refuse the approval, unless it is satisfied that

the transfer would be prejudicial to the public interest.

4. Power of Central Government to direct Companies not to give effect to the transfer. Section 108 D provides that if the Central Government is satisfied that as a result of the transfer of any share or block of shares, a change in the controlling interest of the company may be likely to take place and that such change is prejudicial to the interests of the company or to the public interest, it may direct the company not to give effect to the transfer of any such share or block of shares. Where the transfer of such share or block of shares has already been registered, the company shall not permit the transferee to exercise any voting or other rights, attaching to such share or block of shares. Where the transfer of such share or block of shares has not been registered, the company shall not permit the transferor to exercise any voting or other rights attaching to such share or block of shares.

Where any direction is made by the Central Government (as stated above), the share or the block of shares shall stand re-transferred to the transferor who shall refund the price to the transferee. If the refund is not made within thirty days from the date of the direction, the Central Government shall, on the application of the person entitled to get the refund, order the refund of such amount and such order will be enforced as a decree of a Civil Court. On making such refund, the transferor shall be eligible to exercise voting or other rights attaching to such share or block of shares.

5. Time within which refus,1 to be Communicated. [Section 108 E) Where the Central Government does not communicate its disapproval of the request

for according its approval to the proposal for the acquisition of any share referred to in Section l08-A or the transfer of any share referred to in I08-C within a period of si”,1y days from the receipt of request, it shall be presumed to have been granted.

. 6. Exemptions. [Section 108-F). The restrictions envisaged by Section 108-A shall not apply to the transfer of any share to, and nothing in Section I08-B,

Section 108-C or Section 108-D shall apply to the transfer of any share by,

(a) any company in which not less than fifty-one per cent of the share capital is held by the Central Government;

(b) any corporation (not being a company) established by or under any Central Act; and© any financial institution.