Union Of India vs Allied International Products LTD.

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1970 Supreme(SC) 441

SUPREME COURT OF INDIA
J.C. SHAH, K.S. HEGDE AND A.N. GROVER, JJ.
Union of India (In both the Appeals) Appellant
Versus
Allied International Products Ltd. and another, Respondents.
Civil Appeals Nos. 1772 and 1773 of 1970, D/-19-10-1970.
1. J. B. Dadachanji,
2. Peter Jefferys,
3. Industrial Development Bank of India,
4. U. P. State Industrial Corporation Ltd. and
5. Industrial Finance Corporation of India, Interveners.
Advocates appeared
Mr. G. B. Daphtary, Senior Advocate, (Mr. S. P. Nayar, Advocate with him), for Appellant, (In both the Appeals), Mr. N. A Palkhivala, Sr. Advocate, (M/s. Santosh Chatterjee, A. M. Parikh and G. S. Chatterjee, Advocates with him), for Respondent No. 1 (In both the appeals); M/s. B. N. Kirpal and Bishamber Lal, Advocates, for Respondent No. 2 (In C. A 1772 of 1970); Mr. B. Sen, Sr. Advocate, (Mr. O. P. Khaitan, Advocate, with him), for Respondent No. 2 (In C. A. 1773 of 1970), Mr. N. A Palkhivala, Sr. Advocate, (Miss Bhuvanesh Kumari, and Mr. Santosh Chatterjee, Advocate and Mr. J. B. Dadachanji, Advocate of M/s. J. B. Dadachanji, and Co. with him), for Intervener No. 1, M. C. Setalvad, Sr. Advocate (Mrs. Santosh Chatterjee, and C. M. Oberoi Advocates and Mr. J. B. Dadachanji Advocate, of M/s, Dadachanji and Co. with him), for Intervener No. 2; Mr. C. K. Daphtary, Sr. Advocate (Mr. I. N. Shroff. Advocate, with him), for Intervener No. 3 M/s A. N. Sinha and Rathin Das, Advocates, for Intervener No. 4; Mr. C. K Daphtary, Senior Advocate, (Mr. S. K Dholakia, Advocate, with him), for Intervener No. 5.

Advocates:
A.M.SHROFF, A.N.SINHA, B.Dadachanji, C.K.DAFTARY, C.N.OBEROI, J.B.DADACHAN, J.J.B.DADACHAN, M.C.SETALVAD, RATHIN DAS, S.K.DHOLAKIA, SANTOSH CHATTERJI

Headnote:“PERMISSION HAS NOT BEEN GRANTED”—SCOPE AND AMBIT OF EXPRESSION- “A RECOGNISED STOCK EXCHANGE” - MEANING OF EXPRESSION - MORE THAN ONE APPLICATIONS FOR QUOTATION OF SHARES MAY BE MADE - PERMISSION FROM MORE THAN ONE STOCK EXCHANGES - SCOPE, AMBIT AND APPLICABILITY
       -the expression “permission has not been granted” in sub-sections (1) and (2) was intended in the context in which it occurs and in the light of the object of the enactment, to mean “permission has been refused”. It is however not enacted in sub-section (1) that if the application is not granted within the time prescribed, it cannot be granted after the expiry of the prescribed period, even if the Exchange has been intimated that it will give further consideration to the application. Sub-section (5) contains a clear implication to the contrary. If the Exchange has intimated within the period prescribed by sub-section (1) that the application will be given further consideration, it is not to be deemed that the application is refused. The exchange is not obliged to give any intimation relating to the consideration of the application before the last day of the prescribed period. If no intimation is given till the last date of the prescribed period no inference of refusal follows: It would then be difficult to hold that if the Exchange intimates that it is considering the application or intends to give further consideration to the application that such an inference may follow. The amendment made by Act 31 of 1965 in sub-section (5) by the substitution of the expression “permission shall not be deemed to be refused” by the expression “it shall not be deemed that permission has not been granted” also gives a clue to the legislative intention that the inference of refusal will not be made if the Exchange has intimated to the applicant that further consideration will be given to the application.
       Also held that the intendment of sub-sections (1) (2) and (5) is plain. If within four weeks from the date of the closing of the subscription list, the Stock Exchange sends no intimation either extending the time or notifying that the application though not at present granted will be given further consideration, the application is deemed to be refused. If the Stock Exchange so desires it may intimate that the period is being extended to seven weeks. The Exchange may say nothing more within the extended period, in which case, on the expiry of the extended period the allotment becomes void. If however, within the four weeks, or within the extended period of seven weeks, the Exchange intimates that even though the application for permission is not at present granted, the application will be given further consideration, the application is not deemed to be refused until it is finally decided, as held in the case of Union of India v. Allied International Products Ltd.,
       -when permission from one or more of the Exchanges is obtained, it carries out the object of the Act. It will be mechanical interpretation wholly divorced from the true object and intendment of the Act to hold that even if permission is secured for quotation of shares in an Exchange, that the allotment will be invalid because another Exchange has not granted the permission. That is true meaning of sub-section (1) is clear from the fact that the penalty for avoidance of allotment of shares is attracted not only where the permission applied for has not been granted, but where no application has been made within the prescribed period,

Judgment

SHAH, J.: On May 29, 1965, the Allied International Products Ltd. -hereinafter called the Company issued a prospectus offering to the public for subscription 5,00,000 equity shares of Rs. 10/- each and 10,000 cumulative preference shares of Rs. 100/- each, and intimating that "applications are being made to Bombay, Calcutta and Delhi Stock Exchanges for permission to deal in for official quotations of the shares of the Company".

2. On June 3, 1965, the Company submitted applications to the Stock Exchanges at Bombay, Calcutta and Delhi (which are recognised Stock Exchanges within the meaning of Section 2 (39) of the Companies Act 1956), for "enlisting" its shares. The subscription list of the Company was closed on June 21. 1965. On June 22, 1965, the Bombay Stock Exchange extended the time for consideration of the application till the expiry of seven weeks from the date of closing of the subscription list and requested the Company to furnish certain particulars to facilitate compliance with S. 73 of the Indian Companies Act, 1956. August 6, 1965, the Exchange informed the Company that the application was receiving further consideration and requested that certain formalities be complied with. On September 13, 1965, the Exchange informed the Company that it had considered and approved the application for "enlisting" its shares.

3. On June 9, l965, the Calcutta Stock Exchange called upon the Company to modify certain Articles of Association and by letter dated July 12, 1965, asked for particulars in respect of specified matters. On July 27, 1965, the Calcutta Stock Exchange granted time for compliance till the end of the seventh week from the date of the closing of the subscription list. On November 5, 1965, the Calcutta Stock Exchange rejected the application of the Company for "enlisting the shares".

4. The Delhi Stock Exchange informed the Company on July 10, 1965, that in order to facilitate compliance with the provisions of Sec. 73 of the Companies Act. 1956, "the allotment of shares should be finalised as soon as possible in consultation with the Stock Exchange". By another letter dated August 9, 1965, the Exchange informed the Company that the matter of "enlistment" of shares was under consideration, and the Company will be intimated of the decision of the Exchange as soon as it is taken. The Delhi Stock Exchange by letter dated December 4, 1965, rejected the application of the Company for "enlistment" of its shares.

5. The Company challenged the orders passed by the Calcutta and Delhi Stock Exchanges rejecting the applications for "enlistment" in separate appeals under Section 22 of the Securities Contracts (Regulation) Act 42 of 1956. The Central Government dismissed the appeals. In the orders recording the dismissal it was recited that the Exchange did not grant the permission for the shares to be "enlisted" before the expiry of four weeks from the date of closing of the subscription list as required by S. 73 (1) of the Companies Act, 1956, and that the Exchange did not notify any extension of time for the grant of the permission within four weeks.

6. The Company then moved petitions in the High Court of Delhi for the issue of writs quashing the order passed by the Central Government in appeals under S. 22 of the Securities Contracts (Regulation) Act, and the orders of the Stock Exchanges rejecting the applications of the Company as void, illegal and of no effect", and for orders directing the Stock Exchanges to "grant enlistment" of the shares of the Company, and further declaring Section 22 of the Securities Contracts (Regulation) Act 42 of 1956, and S. 73 of the Companies Act, 1956, ultra vires the Constitution of India.

7. Rangarajan, J. was of the opinion that grant of permission by the Bombay Stock Exchange was valid, and that allotment of shares did not become void, merely because one out of the three Exchanges alone gave the permission to enlist the Company s shares. The learned Judge quashed the order of t

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