9911796707
TMI Blog1999 (10) TMI 656X X X X Extracts X X X X X X X X Extracts X X X X ..... ge Board of India, Mumbai ( SEBI ) as to how these requests for withdrawals were to be disposed of. The petitioner-company approached the Northern Regional Officer of SEBI through the Lead Manager, but no reply came from SEBI. On 23-5-1996, LSE advised the petitioner-company to refund the entire subscription amount as the shares were not listed on the expiry of 70 days of the closure of the issue, i.e., 22-2-1996. The petitioner-company, however, did not do so on the ground that they had excluded all withdrawal requests at the time of filing the basis of allotment with LSE. It was also stated by the petitioner-company that some more withdrawal requests were received, which were also excluded. After this further exclusion, subscription level fell below 100 per cent, but remained above 90 per cent. Since the issue did not remain over - subscribed, as was the case originally, therefore, the petitioner-company unilaterally finalised the allotment on 28-5-1996 and filed the returns of allotment with the Registrar of Companies; Punjab and Himachal Pradesh, Jalandhar. The case of the petitioner-company is that there was no need to consult LSE in finalising the basis of allotment as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to the company which is managed by promoters of the first generation and with the adoption of this procedure, the company will either succeed due to force of its efforts or will fail on its own. It can no longer hold external agencies like LSE responsible of its failure, if it occurs. This opportunity is given keeping in view the interests of the investors, so they may get a fair deal. It is noted that pursuant to the order dated 16-8-1996 of SEBI, LSE did their best in this case and made a professional job." 2. It is the case of the petitioner-company that it complied with the directions contained in the aforesaid order dated 18-2-1997 (Annexure P-11) passed by the Appellate Authority and submitted the requisite documents with the LSE, but, the Appellate Authority issued an ex parte order dated 7-4-1997 (Annexure P-12) modifying its earlier order (Annexure P-11). The order (Annexure P-12), which is relevant in the context, reads as under : "3. The modification order is therefore passed pursuant to letters dated 3-4-1997 of that company and of the letter dated 4-4-1997 of Ludhiana Stock Exchange (LSE) to SEBI which was received on 7-4-1996, wherein, it has been stated th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1 took preliminary objection that disputed questions of fact arise in the writ petition and, therefore, it is not maintainable. Further, that the interest of the investors is paramount and it has to be kept at all times in view while dealing with a company by the SEBI and that the decision taken by respondent No. 1 is, therefore, proper and legal. 7. On merits, it has been averred that there is no, occasion for the petitioner-company to invoke the extraordinary jurisdiction of this Court since alternate remedy of appeal has already been availed of by it; that the petitioner-company could not have finalised the allotment of shares without the basis of allotment being finalised by LSE; that while imposing the conditions by the appellate authority-SEBI vide order dated 18-2-1997 (Annexure P-11), principles of natural justice were duly observed and that the present writ petition has been filed by the petitioner-company in order to delay refunding of monies to the investors. 8. The respondent No. 2 (LSE), in its written statement, also raised the preliminary objection that in view of the disputed questions of facts being involved in the writ petition, the same is not maintai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c money could not be misused. In respect of further security, the petitioner-company, through its Managing Director, undertook that in case any claim from the investor was received by LSE in terms of letter of indemnity, then the same security may be utilised for paying those claims. Certain mandatory requirements of listing were also not complied with. 10. It has been further stated that the petitioner-company opened an account on 12-12-1996 in Vyasa Bank with Rs. 5,000. It (petitioner-company) deposited all the money of the stock invest i.e., Rs. 59,93,000, by 18-12-1996. It furnished the certificate of the bank dated 18-12-1996, but withdrew almost the entire amount leaving behind about Rs. 5,000 in the account on 19-12-1996. The statement of account of Vyasa Bank has been attached with the written statement as Annexure R-2/9. The money had to remain in the account till the approval of the listing was granted by the LSE. The petitioner-company played a trick and fraud by showing the amount standing in Vyasa Bank and then withdrawing the same on the next day. 11. It has been further pleaded in the written statement that the LSE extended time for submission of the docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the plaintiff-company, since the issue did not remain over-subscribed, therefore, it unilaterally finalised the allotment on 28-5-1996. The monies received with the applications for allotment of shares were to be deposited in the special account to be opened by the petitioner-company with the Bankers to the issue, i.e., State Bank of Patiala, only. However, the petitioner-company opened an account with a Scheduled Bank i.e., Vyasa Bank on 12-12-1996 with Rs. 5,000 and deposited all the money of stockinvest , i.e., Rs. 59,93,000 in this Bank by 18-12-1996. However, almost the entire amount was withdrawn by the petitioner-company leaving behind only Rs. 4,940 in Vyasa Bank, as depicted in the Statement issued by the Vyasa Bank (Annexure R-2/9) for the period from 1-1-1996 to 17-1-1997. The money had to remain in the account till the approval of the listing of shares was granted by the LSE. When the LSE did not approve the listing of shares of the petitioner-company as per request made by it in this regard, an appeal was filed before the appellate authority, SEBI by the petitioner-company which was disposed of vide order Annexure P-11 by directing the petitioner-company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany in this regard may be right, but the fact remains that the petitioner-company has not availed the remedy available to it, i.e., by way of filing an appeal before the appellate authority against the order passed by the LSE. 16. The contention of the learned counsel for the petitioner-company is that once it had been shown to the LSE that the amount had been received by it (petitioner-company), though it was withdrawn subsequently, i.e., before the permission of the listing of its shares was granted by the LSE, it cannot be said that the amount was shown to have been received only technically and listing of shares could not be granted by the LSE. 17. On the other hand, the contention of the learned counsel for respondent Nos. 1 and 2 is that the provisions of section 69, read with section 73 of the Companies Act contemplate not merely that the amounts of application money tendered with the share applications should be depo-sited in a separate bank account with scheduled bank, but the same should be deposited in a separate bank account with the scheduled bank which is Banker to the issue and shall be kept deposited with the Banker to the issue till the fulfilment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom applicants for shares shall be returned in accordance with the provisions of that sub-section. In the event of any contravention of the provisions of this sub-section, every promoter, director or other person who is knowingly responsible for such contravention shall be punishable with fine which may extend to five thousand rupees. (5) If the conditions aforesaid have not been complied with on the expiry of the hundred and twenty days after the first issue of the prospectus, all monies received from applicants for shares shall be forthwith repaid to them without interest; and if any such money is not so repaid within one hundred and thirty days after the issue of the prospectus, the directors of the company shall be jointly and severally liable to repay that money with interest at the rate of six per cent per annum from the expiry of the one hundred and thirtieth day: Provided that a director shall not be so liable if he proves that the default in the repayment of the money was not due to any misconduct or negligence on his party. (6) Any condition purporting to require or bind any applicant for shares to waive compliance with any requirement of this section shall be vo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) All monies received as aforesaid shall be kept in a separate bank account maintained with a scheduled bank until the permission has been granted, or where an appeal has been preferred against the refusal to grant such permission, until the disposal of the appeal, and the money standing in such separate account shall, where the permission has not been applied for as aforesaid or has not been granted, be repaid within the time and in the manner specified in sub-section (2); and if default is made in complying with this sub-section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees. (3A) Monies standing to the credit of the separate bank account referred to in sub-section (3) shall not be utilised for any purpose other than the following purposes, namely : ( a )adjustment against allotment of shares where the shares have been permitted to be dealt in on the stock exchange or each stock exchange specified in the prospectus; or ( b )repayment of monies received from applicants in pursuance of the prospectus, where shares have not been permitted to be dealt in on the stock exchange or each st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for one of the two purposes, i.e., for adjustment against allotment of shares and if listing permission is not received from the Stock Exchanges, for refunding the monies to the applicants. Listing permission cannot be granted by a Stock Exchange if the minimum subscription requirement as required by sub-sections (1) to (3) of section 69 is not complied with, as is in the present case. If the listing permission is not granted by even one stock exchange specified in the prospectus or where the company is for any reason unable to make allotment of shares, application monies received from the public have to be refunded within the time limit stipulated in the provisions of section 73. The scheme of sections 69 and 73 would, therefore, suggest that the monies should not be allowed to be handled or manipulated by the company till all the mandatory requirements of sections 69 and 73 are complied with and till the company can proceed to make valid allotment of shares. In other words, the monies must be kept out of the reach of the company and its directors/promoters till the company can make allotment of shares in accordance with the law. This statutory object of the provisions of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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