Companies Act Case Law Rishyashringa Jewellery Ltd And amp Anr Vs The Stock Exchange Bombay And amp Ors.

PETITIONER:
RISHYASHRINGA JEWELLERY LTD. & ANR.

Vs.

RESPONDENT:
THE STOCK EXCHANGE, BOMBAY & ORS.

DATE OF JUDGMENT31/10/1995

BENCH:
VERMA, JAGDISH SARAN (J)
BENCH:
VERMA, JAGDISH SARAN (J)
VENKATASWAMI K. (J)

CITATION:
1996 AIR 480 1995 SCC (6) 714
JT 1995 (7) 602 1995 SCALE (6)177
ACT:

 

HEADNOTE:

 

JUDGMENT:
JUDGMENT
J.S.VERMA, J.
Leave granted.
The short but ticklish 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.
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 exchange 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)
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/- each in terms of the
prospectus, intimating that “applications have been made to
the Stock Exchange 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 Stack Exchange on 20.10.1994.
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 company’s 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.
In this context, the effect of rejection of the
application by the Bombay Stock Exchange on the allotment of
shares arises for consideration under subsection (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?
The substance the contention of Shri F.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 Exchange within the prescribed period. The reply of
Shri Harish Salve is that the consequence of rendering the
entire allotment void is clearly envisaged where rejection
of the application for permission is by any such stock
exchange to which application has been made. Shri Salve
referred to the legislative history which led to the
insertion of sub-section (1A) to overcome the consequence of
the decision of this court in Union of India Vs. Allied
International Products Ltd. & Anr., 1970 (3) SCC 594, by the
amendment of law in this manner. It is, therefore, necessary
at this stage to refer to the decision of this Court in
Allied International Products’s case (supra).
In Allied International Product’s case (supra) a
similar question arose for decision prior to insertion of
sub-section (1A) in Section 73 when applications were made
for permission to several stock exchange but only one out of
them granted the permission to enlist the company’s share.
That question arose in the context of Section 73 (1), as it
then stood, which was as under:
“(1) Where a prospectus, whether issued
generally or not, states that
application has been made or will be
made for permission for the share or
debentures offered thereby to be dealt
in on a recognised stock exchange, any
allotment made on ” an application in
pursuance of the prospectus shall,
whenever made, be void, if the
permission has not been applied for
before the tenth day after the first
issue of the prospectus, or, if the
permission has not been granted before
the expiry of four weeks from the date
of the closing of the subscription 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.”
It was held by this Court as follows:
“…….. If 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
all, is or are defective, and the error
is not rectified, it would be
unreasonable 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.”
(at page 601)
This precisely the effect of the argument of Shri
Narain even after the change has been made by insertion of
sub-section (1A) in section 73. It has, therefore, to be
seen whether in spite of this change in the law subsequent
to the decision of this Court in Allied International
Products’s case (supra) the position in law remains
unaltered.
The Statement of objects and Reasons for making the
amendment in the Companies Act clearly states as under:
“6. Under the present Bill some other
practices prevalent in the corporate
sector, in so far as they may prove
injurious or undesirable, are also
sought to be checked. The provisions
contained in the Bill designed for this
purpose deal with the following:-
(1) Failure to enlist shares with all
the Stock Exchanges mentioned in a
prospectus. In legislating on this
point, it is proposed to make an
incidental amendment to Securities
Contracts (Regulation) Act, 1956.
In the notes on clauses the portion
relevant for this amendment is as under:
“Clause 7 sub-clauses (i) and (iii)
section 73 prescribes certain time limit
for enlistment with the stock exchanges.
It also contemplates that enlistment has
to be done in all the stock exchanges
mentioned in the prospectus and i case
of failure to do so, the money received
in respect of allotment of shares on the
basis of the prospectus should be
refunded within a specified time. In the
recent judgment in Union of India Vs.
Allied International Products Limited,
the Supreme Court has held that if the
stock exchange had intimated that it
would give further consideration to an
application, the time limit contemplated
by the section will not operate. It has
also held that if any one of the stock
exchanges mentioned in the prospectus
approved the application for enlistment,
it would mean sufficient compliance with
the provisions of section 73 and the
allotment made in pursuance of that
prospectus would be valid.
It has been felt that the decision
of the Supreme Court referred to above
is likely to lead to complications
inasmch as the investing public as well
as under-writing institutions are likely
to lose the protection hitherto enjoyed
by them. Hence section 73 is being
amended suitably.”
(emphasis supplied)
It is, therefore, clear that the effect of the decision
of this Court in Allied International Products Ltd. in this
behalf was sought to be overcome by making a suitable
amendment in Section 73 since it was visualised that the
said decision is likely to lead to complication inasmuch as
the investing public as well as under-writing institutions
were likely to lose the intended protection enjoyed by them.
In other words the effect of the decision in Allied
International Products Ltd that even if any of the stock
exchanges mentioned in the prospectus approved the
application for enlistment it would mean sufficient
compliance with the provisions of Section 73 and allotment
made in pursuances of that prospectus would be valid was
sought to be overcome by amending Section 73 to provide that
enlistment has to be done in all the stock exchanges
mentioned in the prospectus and in the case of failure to do
so the money received in respect of allotment of shares on
the basis of the prospectus should be refunded within a
specified time. Thus the consequence of rendering the entire
allotment of shares void was required to ensue if the
enlistment contemplated in all the stock exchanges mentioned
in the prospectus does not materialise. There can be no
doubt that the clear object of insertion of sub-section (1A)
in Section 73 was overcome the decision in Allied
International Products Ltd. by amending the law in this
manner. The question is whether this object has been
achieved by the language used in sub-section (1A) of Section
73.
The meaning and true purport of the word `each’ in the
relevant expression in Section 73(1A) is to be determined
for this purpose. In Collins Dictionary of the English
Language, the meaning of `each’ is given as “every (one) of
two or more considered individually”; and `every’ means
“each one (of the class specified), without exception”. In
Stroud’s Judicial Dictionary of Words and Phrases the true
meaning of `every’ is “each one of all”.
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” in sub-section (1A) of Section 73
is now to be determined. Sub-section (1A) of Section 73 is
now required that where a prospectus 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’. In other words,
if the application is made only to one stock exchange then
the name of that stock exchange is to be mentioned and where
the prospectus states that application has been made to more
than one recognised stock exchanges then it shall state the
name of each such stock exchange, i.e., every such stock
exchange or in other words, all the stock exchanges to which
the application has been made. The second part of sub-
section (1A) of Section 73 then provides the consequence of
refusal of the permission by saying that any allotment made
on an application in pursuance of such prospectus shall 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 list. This means that any allotment made
shall be void if the permission has not been granted by the
stock exchange where the application is made only to one
stock exchange or each such stock exchange “where the
application is made to more than one stock exchange”. The
expression “each such stock exchange” here must mean the
same as in the earlier part of sub-section (1A) of Section
73, i.e., each every or in other words, all such stock
exchanges. Thus, where the prospectus held out that
enlistment of shares would be in more than one stock
exchange the consequence envisaged in sub-section (1A) of
Section 73 ensues to render void the entire allotment of
shares unless the permission is granted by each and everyone
or all of the stock exchanges named in the prospectus for
enlisting the shares. This is the plain meaning of sub-
section (1A) of Section 73. In short, unless permission is
granted by each or everyone of all the stock exchanges named
in the prospectus for listing of shares to which application
is made by the company, the consequence is to render the
entire allotment void. In other words, if the permission has
not been granted by any one of the several stock exchanges
named in the prospectus for listing of shares the
consequence by virtue of sub-section (1A) of Section 73 is
to render the entire allotment void and the grant of
permission by one of them is inconsequential. This
construction also promotes the object of insertion of under
section 73 by amendment of the law made to overcome the
effect of the decision of this court in Allied International
Products Ltd. The contention of Shri Nariman, learned
counsel for the appellants is, therefore, untenable.
Consequently, the appeal fails and is dismissed. No
costs.

 

 

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