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Companies Act, 1956--Section 73--Public Limited company-Listing shares on stock exchange-Procedure-When allotment of shares becomes void-When liability to repay application money and interest arises -Permission-When deemed to be refused or granted. Securities Contracts (Regulation) Act, 1956--Section 22-Appeal When lies -Pending appeal-Effect Companies Act 1956--Section 73. (1A) (2), (2A), (2B), 2 (31), 5- Interest---Payment of--Company 's liabilities--Circumstances--Situation in pre and post Companies (Amendment) Act, 1974-Liability of Directors-Scope of-"An Officer in default"-Construction of- Companies Act, 1956--Section 73(2)-"Forthwith Construction of Legislative intention. Companies Act, 19-56--Section 73(1) (2) (3)-Application money- Company's right or obligation to credit bank accounts-Effect-Purposes for usages of such money. Companies Act, 1956- Section 73 (2)--lnterest-Assessment period Calculation-Starting point- Construction--Legislative intention. Companies Act 1956- Section 73-Ambigious section-Construction --Method. Interpretation of Statute- Ambiguous Section- Construction(Section 73, Companies Act, 1956) Companies Act, 1956- Section 73 (2A)- When applicable - "Due" Construction-"Due" and "payable" not same-"Penal" not penalty--Administrative inconveniences cannot be pleaded. The appellant-company was registered under the Companies Act, 1956. It obtained the consent of the Government of India to issue 7,20,00,000 equity shares of Rs. 10 each at par and 33,90,000 fourteen per cent secured redeemable non-convertible debentures of Rs. 100 each at par. One of the conditions attached to the consent order was "The company shall scrupulously adhere to the time limit of 10 weeks from the date of closure of the subscription list for allotment of all securities and despatch of allotment letters/certificate and refund orders." On 12.7.1990 the company issued prospectus for the issue of the shares and debentures, stating therein that the company had sought the permission of the stock exchanges at Indore, Ahmedabad, Bombay, Calcutta and Delhi for dealing in equity shares and debentures in terms of the prospectus; that interest at the rate of 15% per annum on the excess application money would be paid to the applicants as per the guidelines issued by the Ministry of Finance on July 21, 1983 and September 27, 1985; that the public issue would open on August 20,1990 and close on August 23, 1990; and that it would not be extended beyond August 31,1990. The issue opened on August 20, 1990. The company received 26,32,894 applications for equity shares together with an aggregate sum of Rs. 225,25,51,247 in respect of a public issue of Rs. 25 crores.The share issue was closed on 23rd August 1990. On October 15, 1990 the Board of Directors of the company approved the allotment of shares Prior to.1.11.1990, it secured the requisite permissions of the stock exchanges at Indore, Ahmedabad, Bombay Calcutta and Delhi to deal in the shares offered in the prospectus. The company had to despatch 25,50,604 refund orders, which were printed in Bombay and they were meant to be despatched from Delhi. The company despatched 8,55,226 refund orders from New Delhi at the rate of approx. 1,00,000 refund orders per day. On 26th October, 1990 a consignment of 6,69,999 refund orders were despatched from Bombay to Delhi. As a result of a fire that broke out on the way, many refund orders were destroyed and about 50% of the consignment was missing after the accident. In consultation with the Madhya Pradesh Stock Exchange and the Company's Bank, instructions. were issued by the Company to stop payment of all refund orders with a view to avoiding any possible fraud or misuse. As a result of the countermanding of all the refund orders and the printing of new refund orders, delay occurred in the despatch of newly printed orders. For issuing the refund orders, at the request of the company, the Madhya Pradesh Stock Exchange granted extension of time till November 30,1990 and further extended till 19th December, 1990. The Bombay Stock Exchange refusing to grant extension of time informed the company that it was bound to pay interest by reason of the delay in the despatch of refund orders. The refund orders were not despatched until 12th November, 1990. The Government of India and the Securities and Exchange Board of Jndia--Respondents· Nos. 1 and 2 respectively, insisted that the company should pay interest to the investors for the period of the delay in making the refund in accordance with the provisions of section 73 of the Companies Act from 1st November (the expiry date of the period of 10 weeks from the date of the closure of the subscription lists) till the date of posting of the refund orders . .l The company filed a writ petition in the High Court appeaI pending that the Government might direct the stock exchanges to. delist the shares of the company by reason of its failure to pay interest, and also initiate actions against it. In the High Court, the respondent No. 1 submitted that the liability to pay the excess amounts arose on the expiry of 10 weeks from the date of closure of the subscription lists. The respondent No. 2 contended that the liability arose on the date of allotment. The company-the appellant contended that on the facts of the case, the liability arose only at the end of the period as extended by the Stock Exchange at Indore in terms of the prospectus. The High Court dismissed the writ petition, holding that the company was liable to pay interest at the prescribed rates for the period of delay and the liability for same arose on the expiry of 8 days from the date of allotment of the shares, and not from the date of expiry of 10 weeks, where allotment was made earlier to that date.This appeal was filed by the Company against the High Court's judgment by special leave, on the question, whether the High Court was right in discarding, for computation of interest, the time limit of 10 weeks running from the date of closure of the subscription lists, notwithstanding that the allotment had been made prior to the date of expiry of 10 weeks. The appellant contended that the company was entitled to retain the excess amount for the period mentioned in the prospectus and consequently no liability to pay interest could arise until the expiry of that period; that as the Madhya Pradesh Stock Exchange had extended time for refund till 19th December, 1990, the liability of the company to repay the excess amount did not arise until then; that the interest became payable only after 8 days from the expiry of the period as extended by the Madhya Pradesh Stock Exchange; and that the interest was payable as a penalty and therefore a reasonable and rational construction of the statute to be made in regard to the commencement of the liability of the company to repay the excess amount by taking into account of the relevant circumstances which caused the delay. The respondents submitted that the liability to repay the excess amount arose on the date of allotment of the shares, that the liability arose forthwith and any delay beyond the period of 8 days from the day on which the liability arose attracted interest that the expression 'forthwith' had to be understood as an immediate liability ascertainable with reference to the date of allotment, but subject to a period of grace of 8 days. |
