Judgment

J. S. VERMA

( 1 ) LEAVE granted.

( 2 ) THE short but ticklish question which arises for decision in the present case is the meaning of the word each in the expression "if the permission has not been granted by the stock exchange or each such stock exchange" used in sub-section (1a) of Section 73 of the Companies Act, 1956. This is the real question for decision in the present appeal.

( 3 ) SECTION 73 of the Companies Act, 1956 in so far as it is material is as under:

"73. (1) Every Company intending to offer shares or debentures to the public for subscription by the issue of a prospectus shall, before such issue, make an application to one or more recognised stock exchanges for permission for the shares or debentures intending to be so offered to be dealt with in the stock exchange or each such stock exchange.

(1a) Where a prospectus, whether issued generally or not, states that an application under sub-section (1) has been made for permission for the shares or debentures offered thereby to be dealt in one or more recognised stock exchanges, such prospectus shall state the name of the stock exchange or as the case may be each such stock exchange, and any allotment made on an application in pursuance of such prospectus shall, whenever made, be void, if the permission has not been granted by the stock exchange or each such stock exchange, as the case may be, before the expiry of ten weeks from the date of the closing of the subscription lists :

PROVIDED that where an appeal against the decision of any recognised stock exchange refusing permission for the shares or debentures to be dealt in on that stock exchange has been preferred under section 22 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956), such allotment shall not be void until the dismissal of the Appeal. "

(EMPHASIS supplied)

( 4 ) THE material facts which give rise to the above question are only a few. On 31-5-1994 the appellant-Company issued a prospectus offering to the public for subscription 27,40,000 equity shares of Rs. 10. 00 each in terms of the prospectus, intimating that "applications have been made to the Stock Exchanges at Coimbatore, Bombay and Madras for permission to deal in and for an official quotation in respect of the Equity Shares of the Company now being offered in terms of this prospectus. " The date of closing the subscription mentioned in the prospectus was 19-7-1994. The period of ten weeks from the date of closing of the subscription list prescribed in Section 73 (1a) for grant of permission by the Stock Exchange expired on 27-9-1994. The allotment of shares was finalised on 16-9-1994. Permission was granted by the Coimbatore Stock Exchange on 26-9-1994 and the trading commenced therein on 7-10-1994. Permission was granted by the Madras Stock Exchange on 28-10-1994. However, in spite of reminders issued on 18-8-1994 and 12-9-1994 by the Bombay Stock Exchange to the Company to complete the required formalities the necessary compliance was not made by the Company which resulted in rejection of the Companys application by the Bombay Stock Exchange on 28-9-1994. The city-wise break up of allotment of the shares shows that the number of shares allotted were 17,44,600 in Bombay, 3,45,400 in Coimbatore and 2,89,900 in Madras.

( 5 ) IN this context, the effect of rejection of the application by the Bombay Stock Exchange on the allotment of shares arises for consideration under sub-section (1a) of Section 73. The question is: Whether the entire allotment of shares is rendered void by virtue of Section 73 (1a) because of the rejection of the application by the Bombay Stock Exchange to render ineffective even the grant of permission by the Coimbatore Stock Exchange within the specified period?

( 6 ) IN substance the contention of Shri. P. S. Nariman is, that the consequence of rendering void the allotment made under Section 73 (1a) envisaged by the provision cannot render ineffective the permission granted by the Coimbatore Stock Exchang