1993 (9) TMI 279 - Commission - Companies Law

Allotment of shares - Prohibition of, in certain cases - District Forum held that collection being far less than 90 per cent of target fixed in consultation with CCI, it was bounden duty of appellant-corporation not to have issued any shares or debentures and instead it should have returned moneys to various applicants within prescribed period with interest - Appellant was, accordingly, directed by District Forum to refund amount received from complainant, together with interest - Whether where convertible debentures were issued to complainant on 15-1-1990, when amended section 69 of Companies Act providing for refund of application money in case of collection being less than 90 per cent of targeted figure fixed with CCI s approval, was not applicable, there was lack of proper application of mind by District Forum while interpreting said provision, and consequently, matter could be remanded for fresh decision - Held, yes

Summary

Issues: Interpretation of section 69 of the Consumer Protection Act, 1986 in relation to minimum subscription requirements for public share capital offerings.

In this judgment delivered by the Punjab State Consumer Disputes Redressal Commission, the appellant, a corporation, appealed against multiple orders of the District Forum, Bhatinda, regarding complaints related to a public issue of convertible debentures. The complainant alleged that the corporation failed to meet the required subscription amount and sought a refund with interest. The District Forum had ruled in favor of the complainant, citing the corporation's obligation under section 69 of the Companies Act, 1956, to refund amounts if the minimum subscription was not met. The appellant contended that the District Forum misinterpreted the law as the amended section 69 was not applicable at the time of the public issue. The Commission acknowledged merit in the appellant's argument, emphasizing the distinction between the statutory provision and the guidelines issued by the Ministry of Finance. The Commission found that the District Forum erred in its interpretation of section 69 and set aside the orders, remitting the cases for a fresh decision, allowing parties the opportunity to present evidence.

The Commission analyzed the relevant legal provisions, specifically section 69 of the Companies Act, 1956, which prohibits the allotment of shares unless the minimum subscription amount has been received. The Commission highlighted the corporation's obligation to refund application money if the minimum subscription was not met within a specified period. Additionally, the Commission referenced clauses 9 and 10 of the guidelines for issuing fresh share capital, which outlined the refund process for undersubscribed issues. The Commission noted that the guidelines specified the refund conditions for issues after a certain date, indicating that the amended section 69 was not applicable retroactively to the appellant's case.

Ultimately, the Commission found that the District Forum had misapplied section 69 and directed a fresh decision based on the correct interpretation of the law. The Commission emphasized the importance of legal clarity and remanded the cases for further proceedings, allowing parties to present additional evidence if necessary. The Commission allowed the appeals, set aside the District Forum's orders, and instructed a reevaluation of the complaints in accordance with the law, with each party bearing their respective costs.