# UNION OF INDIA v. ALLIED INTERNATIONAL PRODUCTS LTD. & ANR

- **Citation:** [1971] 2 S.C.R. 661
- **Court:** Supreme Court of India
- **Decided:** 1970-10-19
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/union-of-india-v-allied-international-products-ltd-anr-5219
- **Pages:** 11

## Headnote

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661
UNION OF INDIA
v.
ALLIED INTERNATIONAL PRODUCTS LTD. & ANR.
October 19, 1970
rJ. C. SHAH, K. S. HEGDE AND A. N. GROVER, JJ.]
Companies Act, 1956, s. 13-Stock Exchange extending tim!' fvr con-
,\·ideration of application for enlisting of sl1ares within four weeks of
closing of subscription list-Further intimation given to company withill
seven weeks that application was under consideration-Approval given
after seven weeks-Whether approval valid-Approval hy one of .~everal
exchrmzes to whlclr appficationr made whether valid and suffictefltShareholder whetiiC'r bound hy allotment of Jlwres if st.ock exchanRe convenient to him does not approve application.
Code of Civil Procedure. 0 41, r. 33- Hicli Corm's disCI'elion underPrinciples for exercising.
Interpretation of Statutes-S. 73(1) of Compf.nies Act, 1956 is a Pt11al
provision and mu.~t be strictly construed.
The first respondent-a limited company-issued a prospectus l1flering
its shares to the public for subscription. lt was mentioned in the PrQS·
pectus that the company was applying to the Bombay, Calcutta und Delhi
Stock Exchanges (which were .recognised exchanges within the meaning
of s. 2(39) of the Companies Act, 1956), for enlistmt.lnt of its shares.
On Juoc 3, 1956 the Company submitted the applications. The subscrip·
tion list was closed on June 21, 1965.
On June 22, 1965 the Bombay
Bxchnnge e"tendcd the time for consideration of the application till tbe
expiry of seven weeks from the date of closing of the subac:ription 1ist,
On August 6, 1965 'the Exchange informed the company that the applica·
tion was receiving further consideration.
On September 1.3, 1965 the
Exchange informed the company that its application for enlisting its
shares had been approved.
The CalC'Utta und Delhi Exchanges · rejected
the applications made to them. The company
challenged
the
o!rders
passed by the Calcutta and Delhi Exchanges in appeals to the Central
Government under s. 22 of the Securitir-s Contracts (Regulation) Act,
1956.
The Central Government dismissed the appeals.
The company
fileJ writ petitions in tha High Court.
The Single Judge held that the
grant of permission by the Bombay 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~ He
quashed the order of the Central Government and directed the bsue of
mandamus to the Calcutta and Delhi Exchanges requiring them to enlist
the shares of the company. The Union of India appealed to the Division
Bench. The Calcutta and DeLhi Exchanges acquiesced in the orders passed
against them. The High Court confirmed the order of the Single ludge.
With certificate, the Union of India appealed ~o this Court. 1be queations
that fell for consideration were: (i) whether the permission granted by
the Bombay Exchange after the expiry of seven weeks from the date of
closing of the subscription list violated the provisions of s. 73 ( 1) of the
Companie' Act, 1956 and was on ttat account invalid; (ii) whether the
grant of permission by one out of three Exchanges was sufficient to protect the allotment of shares from being invalid under s. 73 ( 1) of the Oml·
panies Act, 1956; (iii) whether a shareholder who buys shares on the
15-L4l6$up.(P)/7l
662
SUPREME COURT REPORTS
[1971] 2 S.C.R.
representation that the shares would be en1isted in an Exchange convenient to him is bound by the allotment even when the condition of securing quotation in an Exchange convenient to him has not been carried out;
(iv) Whether in the circumstances of the case the Hi¢1 Court ought in
exercise of its power under 0;41 r. 33 of the Code of Civil Procedure,
to have vacated the writ of Mc.ndamus requiring the Calcutta & Delhi
Exchange_s to grant permission fdr quotation of the Company's shares.
HELD: (i) It was not possible to accept the argument that permission for enlistment of shares can be given within the initial period of
four weeks, or if ti

## Text

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661
UNION OF INDIA
v.
ALLIED INTERNATIONAL PRODUCTS LTD. & ANR.
October 19, 1970
rJ. C. SHAH, K. S. HEGDE AND A. N. GROVER, JJ.]
Companies Act, 1956, s. 13-Stock Exchange extending tim!' fvr con-
,\·ideration of application for enlisting of sl1ares within four weeks of
closing of subscription list-Further intimation given to company withill
seven weeks that application was under consideration-Approval given
after seven weeks-Whether approval valid-Approval hy one of .~everal
exchrmzes to whlclr appficationr made whether valid and suffictefltShareholder whetiiC'r bound hy allotment of Jlwres if st.ock exchanRe convenient to him does not approve application.
Code of Civil Procedure. 0 41, r. 33- Hicli Corm's disCI'elion underPrinciples for exercising.
Interpretation of Statutes-S. 73(1) of Compf.nies Act, 1956 is a Pt11al
provision and mu.~t be strictly construed.
The first respondent-a limited company-issued a prospectus l1flering
its shares to the public for subscription. lt was mentioned in the PrQS·
pectus that the company was applying to the Bombay, Calcutta und Delhi
Stock Exchanges (which were .recognised exchanges within the meaning
of s. 2(39) of the Companies Act, 1956), for enlistmt.lnt of its shares.
On Juoc 3, 1956 the Company submitted the applications. The subscrip·
tion list was closed on June 21, 1965.
On June 22, 1965 the Bombay
Bxchnnge e"tendcd the time for consideration of the application till tbe
expiry of seven weeks from the date of closing of the subac:ription 1ist,
On August 6, 1965 'the Exchange informed the company that the applica·
tion was receiving further consideration.
On September 1.3, 1965 the
Exchange informed the company that its application for enlisting its
shares had been approved.
The CalC'Utta und Delhi Exchanges · rejected
the applications made to them. The company
challenged
the
o!rders
passed by the Calcutta and Delhi Exchanges in appeals to the Central
Government under s. 22 of the Securitir-s Contracts (Regulation) Act,
1956.
The Central Government dismissed the appeals.
The company
fileJ writ petitions in tha High Court.
The Single Judge held that the
grant of permission by the Bombay 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~ He
quashed the order of the Central Government and directed the bsue of
mandamus to the Calcutta and Delhi Exchanges requiring them to enlist
the shares of the company. The Union of India appealed to the Division
Bench. The Calcutta and DeLhi Exchanges acquiesced in the orders passed
against them. The High Court confirmed the order of the Single ludge.
With certificate, the Union of India appealed ~o this Court. 1be queations
that fell for consideration were: (i) whether the permission granted by
the Bombay Exchange after the expiry of seven weeks from the date of
closing of the subscription list violated the provisions of s. 73 ( 1) of the
Companie' Act, 1956 and was on ttat account invalid; (ii) whether the
grant of permission by one out of three Exchanges was sufficient to protect the allotment of shares from being invalid under s. 73 ( 1) of the Oml·
panies Act, 1956; (iii) whether a shareholder who buys shares on the
15-L4l6$up.(P)/7l
662
SUPREME COURT REPORTS
[1971] 2 S.C.R.
representation that the shares would be en1isted in an Exchange convenient to him is bound by the allotment even when the condition of securing quotation in an Exchange convenient to him has not been carried out;
(iv) Whether in the circumstances of the case the Hi¢1 Court ought in
exercise of its power under 0;41 r. 33 of the Code of Civil Procedure,
to have vacated the writ of Mc.ndamus requiring the Calcutta & Delhi
Exchange_s to grant permission fdr quotation of the Company's shares.
HELD: (i) It was not possible to accept the argument that permission for enlistment of shares can be given within the initial period of
four weeks, or if time be extended, within seven weeks from the date of
closing of the subscription list, and if permission be not granted by the
E~change within those seven weeks, the allotment becomes void, even if
the Stock Exchanges intimates that it is giving further considelration to
the application. (669 B]
The intendment of sub-ss. ( 1) , ( 2) and ( 5) of s. 7 5 of the Companies Act, 1956 is plain. If within four weeks from the ·date of the
closing of the subscription list, the stock exchange sends no intimation
either extending 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 mor<: during the extended period, in which ca5e, 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 Ex·
change intimates that even though the application for permission is not
at present granted, the application will be given further consideration the
application is not dt:emed to be refused until it is finally granted. [669
C-D]
Being a penal provision s .. 73 ( 1) must be strictly construed. Unless
the statute in clear terms so provides, when the Exchange intimates· its
desire to consider the application further, an infel'c:nce that th~ Exchange
ha.-; still rejected· the application cannot be made. [669 F]
The amendment made by Act 31 of 1965 in sub-s. (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 been
granted" also gives a clue to the legislative intention that the inference o(
refusal shall not be made if the Exchange has intimated to the applicant
that further c~nsideration will be given to the application. [668 H)
.
(ii} It cannot be held that unless .all the applications to different
Exchanges were granted, the allotment ~?f shares must, by virtue of sub-s;
( 1) of s. 73 be invalid.
The object of s. 73 (1) is that the subscribers
to the shares must have facility to approach on Exchange for having
their holding converted whenever they desire.
Even if out of several
exchanges approached, one or more, but not all, have granted tbe application for enlistment, the facility of ensuring quick conversion is still
available. Jt after representing .in the pros~ectus that an application has
been made to a recognised exchange fdr enlistment" or will be made
within the prescribed period. the. company is unable to obtain permission
for . "enlistment" from any Exchange, the allotment will be invalid.
But
sub-s. ( 1) is not intended to mean that it will be invalid even if pennis~
sion is obtained but not from all the. Exchanges to which applications have
been made. [670 ~A-CJ
. (iii) Section 73(1) declares the entire allotment void: it does not
tnke into consideration the right or convenience of individual shareholders.
~
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UNION v. ALLIED PRODUCTS .(Shah, J.)
663
An enquiry whether a shareholder or a class of shareholders was or were
induced to. subscribe for shares on the representation that the company
was applying for enlistment to sevetral e"'changes one of which was con·
venient to him, is irrelevant in determining whether the allotment is reD·
d~reJ invalid for failure to secure compliance with a statutory condition.
f.671 BJ
(iv) An appellate court may in appropriat~ case pass any decree and
make any pder appropriate to the ends of justice, even if a party bas
not appealed against an advene decision. The power may be exercised
by the Court notwithstanding that the appeal is as to a part only of the
decree and may be exercised in favour of all or an~- of the parties, even
though they may not ~ave filed an appeal or objectton. [671 E]
[The Court did not give a final opinion on the question whether in
the present case the discretion was correctly exerci~d by the High Court
because the Calcutta aud Delhi Exchange~ had applied for certificates in
the High Court of Delhi and the application was pending.] [671 01
CIVIL APPELLATE JmuSDICTION: Civil Appeals Nos. 1772
and 1773 of 1970.
Appeals from tilt; judgment and order dated July 24, 1970.
of the Delhi High Court in Letters Patent Appeals Nos. 72 and
73 of 1969.
C. K. Daphtary, S. P. No.yar, for the appellant (in both the
appeals).
N . .A. Palkhivala, Santosh Chatterjee, G. S. Chatterjee and
A.M. Parikh, for respondent No. 1 (in both th·e appeals).
B. N. Kirpal and Bislulmber Lal, for respondent No. 2 (in
C.A. No. 1772 of 1970).
B. Sen and 0. P. Khaitan, for respondent No. 2 (in C.A. No.
1773 of 1970).
. N. A. Palkhivala, Bhuvanesh Kumari,
Santosh Chatterfee,
I. B. Dadachanji, for intervener No 1.
·
M. C. Setalvad, Santosh Chatterjee, C. M. Oberoi and J. B.
Dad4charrji, for intervener No. 2.
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C. K. Daphtary adld I. N. Shro/!1 for intervener No. 3.
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A. N. Sinha and Rtllhin Das, for intervener No. 4.
C. K. Daphtary and S. K. Dholakia, for intervener No. S.
the. Judgment of. the Court. was delivered by-
. Sllalt, I. 0~ · May 29, 1965, the Allied International ProdUcts · Ltd . .....Jlereinafter called 'the Company-issued ·a prospec-
. tus Offering to the public for subscription 5,00,000 equity shares.
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SU~REME COURT REPORTS
(1971] 2 S.C.R.
of Rs .. 10 each and 10,000 cumulative preference shares of Rs •. l(){)
each, and intimating that ''applications are being made to "Bom·
hay, Calcutta and Delhi Stock Exchanges for. permission. to· deal
in for official quotations of the shares of the Company".
Ori June 3, 1965, the. Company submitted applications to
the Stock Exchanges at Bombay, Calcutta and Delhi ()Vhich are
recognised Stock Exchanges within the meaning ot s. 2(39) of
the Companies Act, 1956), for "enlisting'' its shates.
The
subscription list of the Company was closed on June 21, 1965.
On June 22, 1965, the Bombay Stock Ex.change extended the
time for consideration ol the application till the expiry of seven
weeks fro111 the date of closing of the $Ubscription list and request·
ed the Company to furnish certain particulars to facilitate compliance· with s. 73 of the Indian Compam:ies Act, 1956. On
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. J 965.
· th~. Excb,ange informed the Company that it had considered and
approved the application for ''enlisting'' its shares.
On June 9, 1965, 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 Excllan£e 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 rej~cted the application
of the Company for "enlisting" the shares.
The Delhi Stock Exchange inf9rmed the. Company on July
10, 1965, that in order to facilitate compliance with the provt·
sions of s. 73 of the Companies Act, "the allotment of shares
should be finalised as soon as possible in consultation with .the
Stock Exchange". By another letter dated August 9,- 1965, thr
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 taker •.
'The Delhi Stock Exchange by .lctte; dated December 4, 1965,
rejected the application of the Company for "enlistment" ot its
shares.
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The Company .challenged the orders passed by the Calcutta
and Delhi Stock Exchanges rejecting the ·ap~ications for "enlistment", in separate appeals under s. 22 of th~ Securities Cont~a~ts H
(Regulations) Act 42 ·of 1956. The ~en~al 9<>ve~ent ~s
missed the appeals. In t!te orders recordi~g ~s~ssaltt was, rec1t~
·ed that the Exchange dtd not grant the penmss1on lor the shares
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UNION v. ALLIBD PRODUCTS (SJwh, J.)
665
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 Com·
panies Act, 1956, and that the Exchange did not notify any ex·
tension of time for th~ grant of the permission within four weeks.
The Company then moved petitions in the High Court of Delhi
for the issue of writs quashing the orders passed by the Central
Government in appeals under s. 22 oti the Securities Contracts
(Regulation) Act, and the orders of the Stock Exchanges rejecting the application of the Company as "void, illegal and of no
effect", and for orders directing the Stock Exchanges to "grant
~nlistment" of the shares of the Company, and further deQtariJ1g
s. 22 of the Securities Contracts· (Regulation) Act 42 of 1956,
and s. 73 of the Companies Act, 1956, ultra vires the Constitution
of India.
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
D
Exchanges alone gave the permission to "enlist'' the Company's.
shares. The learned Judge quashed the order of the Central
Government and directed ·that writs of mandamus do issue against
the Calcutta and Delhi Stock Exchanges requiring them to "enlist"
the shares of the .company.
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Against the decisiQn of Rangarajan, J., the Union of India
appealed to a Division Bench of the High CotJrt of Delhi.
The
two Exchanges acquiesced in the orders passed .against them. The
High Court confirmed tbe orders of Rangarajan, J. With certificate granted by the High Court, the Union of India. has appealed
to this Court.
In support of these appeals, two principal contentions were
urged on behalf of the Union :
·
( 1) The permission granted by ~e Bombay Stock Exchange after the expiry of seven weeks violated the
proviSions of s. 73· ( 1) of the Companies Act, 19 56
and was on that account invalid; and
(2) that grant of permission by one out of the three
Exchan~es did not protect the allotment of shares
from bemg invalid under s. 73 ( 1) of the Companies
Act, 1956.
The two Stock Exchanges which had acquiesced in the judgment
H of the Rangatajan, J., urged that the order granting writs of
mandamus requiring the two Exchatiges to "enlist" the shares of
the Company was without jurisdiction. Rangarajan, J., it was
L4~6 Sup.CI/70
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SUPREME COURT REPORTS
[1971j 2 S.C.R.
said, could only direct that the applications be considered by the
A
two Exchanges.
The relevant provisions of s. 73 of the Companies Act, 1956,
in force at the date of the ~pplications for pennission for the
shares to be dealt in the Exchanges provided:
" ( 1) Where a prospectus, whether issued generally
or not, states that application has been made or will
be made for permission for the shares or debentures offer·
ed thereby to be dealt in on a recognised stcck: exchange,
any :.~l!otment made on an application in pursu".nce of
the pr•)Spectus shaU, whenever made, be void, if the
penuis~inn has not been applied for before the tenth day
after th_; first issue of thl': r·, < ''-;•ectus, or, if the permission ha~ not been granted btforc rhe expiry of-four weeks
from the date of the closing of the· subscnpuon lists or
such longer period not exceeding seven weeks as may,
within the said four weeks be notified to the applicant for
permission by or on behalf of the Stock Exchange.
( 2) Where the permission has not been applied for
as aforesaid, or has not been granted as aforesaid, the
company shaH
forthwith repay without
interest all
moneys received from applicants in pursuance of the
prospectus, and, if any such money is not repaiJ within eight days aft~r the company tecomes liable to repay
it, the directors of the company shall be jointly a:ncl
severally liable to repay that money with interest at the
rate of five per cent per annum from the expiry of the
eighth day:
Provided
( 5) For the purpose of this section permissiQn shall
not be deemed to be refused, if it is intimated that the
application for permission though not at present grantr.d,
will be given further consideration.
( 7) No prospectus shall state that application has
been made for permission for the shares or debentures
offered thereby to be dealt in on any stock exchange.
unless it is a recognised stock exchange."
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667
By the Securities. Contracts (Regulation) Act ma 1..:.
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set up for extkenEmgh recogn.t t~nfto athn f~r ~ithdrawal of recorr.
ition to Stoc
xc anges an
or o er Incidental matter· su oh
~s the making of rules and bye-Ia:ws of the Exchanges a~d a~
peals against the ?rders of recognised Exchanges.
By s. 22 of
the Act it is .provtded :
"Where a recognised stock exchange actino- in pursuance of any I?~wer given to it _by its bye-laws,"" refuses to
Jist the secunties of any public company, the company
shall be entitled to be furnished with the. reason for such
refusal, and may appeal against the decision of the recognised stock exchange t9 the Central Government,
and the Central Government, may after giving the
stock exchange an opportunity of being heard, vary or
set aside the decision of the recognised stock exchange
and when it does so the stock exchange shall be bound
to act in conformity with the orders of the Central Government.''
D Sub-section (5) of s. 73 of the Companies Act, 1956, is intended
to be explanatory of sub-ss. ( 1) & (2) of s. 73. Before that
sub-section was amended by Act 31 of 1965 different phraseology
was used in sub-ss. (1) & (2) and in sub-s. (5): the former
used the expression "permission has not been granted'', whereas
sub-s. ( 5) used the expression "permission shall not be deemed
£ to.~~ refused". The expression "permission has not been gra~t~
~d •s ambiguous: it may mean "pem1ission ~a~ be.en refused ·
•! may also mean that the application for pemllSSIOn IS under conSideration and has not been disposed of. Spb-sections ( 1 ~ & (2)
or s. 73 were borrowed from s. 51 ()f the English Compames ~ct,
F ~48 with slight modifications.
But the draftsm~n of the I~d:~
hct, for reasons which it is difficult to appreciate, substJiu ~
II. e expression "permission has not been granted" forbthe e(~p)reosf
Ion "pc · ·
·
d •
I
actina su -s
J
a. 73
rm•ss1on has been refuse '.
n en.
"' Eno-ii.;h Act,
l'i' .. the '_Vo~ds used in sub-s. ( 5) of s. 51 of t~? wer: adopted.
In~· pe.rnuss1on shall not be deemed to .b~ refused
been erantG ed"o~r JUdgment, the expression "pcrmtss•on has ~~tt in which it
Occ~n sub-ss. ( 1) & (2) was intended in the co~~ent to mean
"Pe~ia~d in tll<! light of the object of the cnn
'
SSion has been refused".
.
A. S
.
. . the ccononuc developrnc lOck Exchange fuii1Js a vital fu~ct•<:0 ~n "liquify capital by
enab!i~t of a nation : its main function 15 •0 saY a factory or a
11 tailwa g a person who has invested ';laney 10 f his sltare in tile
tnt~rp~· 10 convert it into cash by d•sposut_g ?oint stock comp~
llies • lZe to some one else".
Investment In i c of the shares IS
anno•J attractive to the public, because the ~~~s, and the sh~res
llceu day after day in the Stock Excha "
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SUPREME COURT REPORTS
[1971}2 S.C.~.
quoted on the Exchanges are capable of .almost immediate conversion into money. In modern days a company stands little chance
of inducing the public to subscribe to its capital, unless its shares
are quoted in an approved Stock Exchange. All public companies are ~ous to obtain permission from reputed exchanges
for securing quotations of their shares and the management of a
company is anxious to inform the investing publi~ that the share;)
of the company will be quoted on the Stock exchange. To prevent malpractices, the Parliament enacted legislation which aimed at securing co~trol over the proper functioning of the Stock
Exchanges, ·and also placed stringent restrictions upon the representations made by the companies in issuing prospectus inviting
subscriptions.
The Parliament enacted the Securities Contracts
(Regulation) Act 42 of 1956, and simultaneously made provision in s. 73 of the Companies Act, 1956, for ensuring that representations made in· the prospectus are carried out and fiuidity
of the investment by the holder of stock is ensured by procuring
permission for quotation o,f shares in a recognized stock exchange.
Under sub-s. (1) of s. 73 an application for permission to
secure quotation, if not previously made, shall be made before
the tenth day after the first issue of the prospectus, and if the application is not so made, the allotment is void.
Again if the
Exchange rejects the application within four weeks, . or within
seven weeks after extending the time, the allotment will be· void,
unless within that period the Exchange has informed the Company that further consideration will be given to the application.
It is however not enacted in s. 73 ( 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 intimated that it 'will give further consideration to
the application. Sub-section ( 5) contains a clear implication
to the contrary.
If th~ Exchange has intimated within the period prescribed by sub-s. ( 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 intim·ation is given till the last
date of the prescribed period, no in'ference 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-s. ( 5) by
the substitution of the expression "pennission shall not be deemed
to be· refused" by the expression
11it shall not -be deemed that permission has not 'been granted" also gives a clue to the legislative
intention that the inference of refusal will n'ot be made if the
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UNION v. ALLIED PRODUCTS (Shah, ].)
669
Exchange has intimated to the applicant that further consideration
will be given to the application.
We are unable tO' hold that permission for "enlistment'' of
shares can be given within the ·initial four weeks or if time be
extended within seven weeks from the date of the closing of the
subscription list, and if permission be not granted by the Exchange
within those seven weeks, the allotment becomes void, even if
the Stock Exchange intimates that it is giving further consideration to the application. The intendment of sub-ss. (1), (2) &
( 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, m 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.
The application for allotment of shares and accept-ance thereof constitute a contract between the Company and the applicant.
Section 73 ( 1) of the Companies Act imposes a penalty whereby
the allotment of shares becomes void on the happening of the contingency specified therein. The imposition of. penalty depends
upon the violation of the Exchange and when imposed operates
to invalidate all contracts resulting· from albtment of shares between the applicants for shares and the Company.
Such a provision must be strictly construed.
Unless the statute in clear tenns.
so. provides, when the Exchange intimates its desire to consider
the application further, an inference that the Exchange has still
rejected the apJllication, cannot be made.
It is true that in the prospectus issued by the Company it was
intimated that applications are being made to the Bombay, Calcutta and Delhi Stock Exchanges for pennission for official quo·
tations of the shares of the Company. It is not contended, and
it cai)not reasonably be contended, that only one application for
pemiission to secure quotation of the shares in an ·approved Exchange may be made. The expression "a recognised stock exchange" means "any recognised exchange". More applications
than one for quotation of shares may therefore be made.
In the.
present case, three applications were submitted on June 3, 1965.
Two of these applications were rejected and one was granted.
We
670
SUPREME COURT REPORTS
(1971] 2 S.C.R.
are unable to hold that unless all the applications were granted,
the allotment of shares must, . by virtue of sub~s. ( 1) of s. 73,
·.be invaJid.
The object of s. 73(1) is that the subscribers to the
shares must have facility to approach an Exchange for having
their holdings convertect whenever the.l · desire.
Even if out of
several Exchanges approached, one or more, but not all, have
granted the applicatioc. for "enlistment", the facility Of ensurmg
quick conversion is still available.
If. after representing in ·the;
prospectus that an application has. been made to a recognised
exchange for "enlistment" or will be made within the prescribed
period, the Company is unabie to obtain permission for "enlist~
ment" from any exchange, the allotment will ~ invalid.
But
sub-s. ( 1 ) is not intended to mean that it will be invalid, even if
permission is obtained, but not from all the Exchanges to which
applications have beeL made.
Section 73 ( 1) 1s enacted with the object that the subscribers
will be ensured the facility of easy convertibility of their holdings
when· they have subscribed to the shares on the r~presentation in
the prospectus that an application for quotation of shares has been
or will be .made.
The allotment of shares will be invalid only
when permission for quotation is not obtained.
When permission from one or more of the Exchanges is obtained, it carries
out the object o.f the Act.
It will be a 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, the allotment will be invalid because another exchange has not granted the permission.
That this is the true·
meaning of s. 73 (1) is clear from, the fact that the penalty of
avoidance of allotment of shares is attr~cted not only where the
p~rmission applied for has not been granted, but where no application has been made within the prescribed period.
I.f applications are made to several exchanges, some within the period of
ten days after the first issue of the prospectus, and some beyond,
or that one or more applications, but not an, is or are defective,
and the error is not rectified, it would be un1 ~asonable to hold
that because some of the applications made beyond the tenth day
after the first issue of the prospectus, or are defective, are liable
to be rejected, the applications properly made before some of the
Exchanges are also ineffective and the allotment made may be
invalid.
Counsel for the Calcutta Stock Exchange urged that where a
person is induced to subscribe for shares relyin!! upon a representation that an application is made or intended to be m·ade for
quofation of the shares in an Exchange near his home-town, and
it is found that the application is not m::?de
or if made it is
rejected by the Exchange, ;t w<Ju1.J :·,e ., ·' , .. :.~' 1: :trdsJ•ir t•' the
:a
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F
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UNION V. ALLIED PRODUCTS (Shah, J.)
671
A
shareholder if he is bound by the allotment, even if the condi·
tion of securing quotation in the Exchange convenient to him
is not carried out.
But s. 73 ( 1) declares the entire allotment
void : it' does not take into consideratinn the right or convenience
of individual shareholders.
An enquiry whether a shareholder or
a class of share-holders was or were induced to subscribe for
B
shares on the representation is irrelev<mt in determining whether
the allotment is for failure to secure compliance with a statutory
condition rendered invalid.
We need not consider whether the
individual shareholder who finds that an Exchange convenient to
him has not listed the shares furnishes a cause of action to him
for avoiding the contract.
C
We are in the view we have taken not called upon to decide
D
whether the provisions of s. 73 of the Companies Act, 1956, are
ultra vires, nor do we consider it nece!.sary tc- decide whether s.
22 of the Securities Contracts (Regulation) Act, 1956, is ultra
vires.
It was urged on behalf of the Delhi and Calcutta Stock Exchanges that the High Court ought, in exercise of the power under
0. 41 r. 33 of the Code of CiviL Procedure, to have vacated the
writ of mandamus issued requiring them to grant permission for
quotation of the Company's shares.
An Appellate Court may
in appropriate case pass any decree and make any order appropriate to the ends of justice, even if a party has not appealed
E
against ·an adverse decision.
That power may be exercised by the
Court notwithstandin~ that the appeal is as to a part only of tbe
decree and may be exercised in favour of all or any of the parties~
even though they may not have filed any appeal or objection.
But the jurisdiction is discretionary and the High Court has not
exercised it apparently for
g.Jod JhSOnS. The order passed
against the Union and the two Exchanges were in substance dis-
!inct. Agains.t the Union the order was made quashin~ its· order
10 appeal agatnst the orders of the Exchanges; and against the
F
G
H
Exchanges the order was made directing inclusion of the shares
i~ th~ list of quoted shares.
The Exchanges acquiesced in the
dtrechon.
We need, however, not express any final opinion in this
question.
We are informed at the Bar that the Calcutta Stock
Exchange has applied for certificate to the High Court of Delhi
and that applic~tio~ is pending.
We need not pre-judge the result of that apphcatton or the tl.ppeal, if any, which may be filed
in this Court.
The apr~als fail and are dismissed with costs.
There will be
one hearing fee in favour of the Company. The other parties will
bear their own costs.
G.C.
Appeals di.'lmissed.