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TMI Blog2005 (4) TMI 302X X X X Extracts X X X X X X X X Extracts X X X X ..... tion was remitted as application money for allotment of equity shares of the company to the petitioner and, therefore, there is no question of any refund of this amount to the petitioner. According to the company, the petitioner is only entitled to receive the equity shares of the company, which company is still willing and ready to allot and it does not owe any debt . It is in this backdrop that the determination of real nature of transaction between the parties would decide the fate of the company petition. 2. After describing the controversy between the parties, it would be appropriate at this stage to take note of the relevant facts involving this controversy and to know as to how transaction between the parties took place. 3. As per the facts unfolded in the petition, in or about the year 1995 Mr. Shakat Singh, the managing director to the company, met the petitioner on several occasions and also spoke to him over the telephone representing that the company was to establish 56 super speciality hospitals, polyclinics and diagnostic centres in various cities in India and that the company was being promoted by a consortium which included the world s most known healthcare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided to withdraw from the project and made a demand for return of US $ 1 lakh with appropriate interest. The company responded vide fax dated 3rd October, 1996 stating that the petitioner s initial remittance for issue of equity amounting to US $ 1 lakh would be refunded to the petitioner soon after the financial closure of the project which was expected to be in six months and on completing legal formalities under the Foreign Exchange Regulation Act ( FERA ). However, the amount was not returned in spite of innumerable requests and reminders and ultimately statutory legal notice dated 31st March, 1997 was issued under sections 433 and 434 of the Companies Act demanding a sum of US $ 1 lakh along with an interest at 24 per cent per annum within a period of 21 days from the receipt of notice. This notice was replied by the company through its advocates, vide letters dated 15th April, 1997 and 18th April, 1997. Disputes were raised to avoid payment which disputes were not bona fide . Therefore, this petition is filed seeking winding up of the respondent-company alleging that disputes raised are sham and afterthought. 5. In the reply filed by the respondent-company, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf came forward to invest in equity as co-promoter. ( ii )The petitioner has failed to remit the balance amount of US$ 1,50,000 and despite his failure, the respondent-company is still willing to allot him shares for the amount of US $ 1,00,000 remitted by him. ( iii )The company has been unable to allot shares due to petitioner s failure to apply and submit the requisite share application form. ( iv )The company was lawfully entitled to receive the remittance of US $ 1,00,000 from the petitioner by way of his equity participation as a co-promoter. ( v )The company is still willing and ready to allot shares to the petitioner. ( vi )The amount remitted by petitioner, consequent to non-allotment of shares because of petitioner s failure to submit share application form, has been credited to share application account . 7. It is also stated that the respondent is a viable and profit making company having sound financial position and, therefore, attempt of the petitioner to recover the amount is clearly malacious. 8. At the time of arguments counsel for both the parties had highlighted the facts as set out in their respective pleadings. Facts are, by and large, in adm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... January, 1996 and, therefore, in the light of these two factors, he wanted to withdraw from participation in this project and asked for return of his money with appropriate interest. What is crucial, and rather clinching, is the response of the company to this letter. The company s letter dated 3rd October, 1996, reads as following : "Please refer to your fax dated 11th September, 1996. As you have now informed us that you do not wish to take part in the equity of the project any more, you, initial remittance for issuance of equity amounting to US $ 1,00,000 will be refunded to you soon after the financial closure of the project which is expected in six months or so and on completing legal formalities under Indian Foreign Exchange Regulation Act (FERA) regulations." Two aspects are, thus, apparent : ( a )Significantly, the letter is conspicuously silent about the application form sent. There is not even a whisper that wrong copy of the instruction/form was sent to the petitioner and the issue was open for the non-residents as well. ( b )More significantly, the company agreed to pay back the amount. 11. As this amount was not paid even after six months within which per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 15th April, 1997 and this share application form is meant for non-residents with another set of instructions. Falsity of plea taken now is clear from the following : A. The respondent sent the application form for allotment of shares meant for Indian residents. B. When the petitioner pointed out that subscription of shares was meant only for Indian residents as per the form sent, the company never, in response, pointed out that said form was sent inadvertently and there was another form meant for non-residents. On the contrary it agreed to refund the amount, vide letter dated 3rd October, 1996. C. In the reply dated 5th April, 1997 to petitioner s legal notice also it was not stated that the form sent earlier to the petitioner was an inadvertent mistake. On the contrary the stand taken by the company was that there was no such prescribed form of share application made by foreign investors. It would be clear from the following relevant averments made in para 4( viii ) in that reply : "While there is a prescribed form of share application by resident Indians, there is no such prescribed form of share application made by foreign investors applying for equity stake." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission of RBI for this purpose or even receiving the money from an NRI/foreigner is produced and the company had agreed to refund the money. It is clear that the petitioner never became the member of the company which is possible only after the procedure laid down in section 41 of the Act is followed. In the case of Bellary Electric Supply Co. Ltd. v. Kanniram Rawoothmal [1933] Comp. Cas. 45, the Madras High Court stated the proposition of law in the following terms : "But apart from this aspect of the case there is ample authority for the proposition that the mere entry of a shareholder s name in the company s register is insufficient to establish that an allotment of shares was in fact made. An application for shares is an offer and like any other offer must not only be accepted but the acceptance must be communicated to the person making the offer. No Indian case in point has been cited but In re. Universal Banking Corporation it was held that the principles governing the formation of a contract between a company and a member of the public are identical in principle to those regulating the contractual relations between individuals. The facts in the above case are suffici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having valid authority to file these proceedings. Para 1 of this power of attorney reads as under : "To commence, carry on, prosecute, defend, appear or to intervene in all suits, actions, applications, references, appeal or other proceedings in any court of law now pending or which may hereafter be instituted on my behalf or against me or in which I may be interested or concerned or to which I may be a party to represent me before all courts of Civil, Criminal, Revenue or the Insolvency, Jurisdiction before all public officers or authorities, administrative, executive or revenue or before public bodies or corporations and to appoint Pleaders, Attorneys, Advocates, Mukhtiars; Revenue Agents and to sign Vakalatnamas, Mukhtiarnamas, Warrants of Attorney, and also to sign and verify all plaints. Written Statements, Tabular Statements, Petition Accounts, Inventories, Application or other documents and papers, that may be necessary to be filed for the purpose of the said suits, actions or other proceedings and to obtain delivery from courts of law or corporate bodies or public officers of documents, goods, property and money and to give valid discharge thereof." 21. The responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat there is no specific authorisation to file a company petition is ill-founded and reliance on the judgment of this court in the case of J.S. Bhalla v. G.J. Bhawnani 23 [1983] DLT 125 or in the case of Shantilal Khushaldas Bros. (P.) Ltd. v. Smt. Chandanbala Sughir Shah [1993] 77 Comp. Cas. 253 (Bom.) shall also be of no avail. If the earlier power of attorney was not stamped as per Indian Law, it was a mere irregularity, which could be cured. The Supreme Court in the case of United Bank of India v. Naresh Kumar [1996] 6 SCC 660 went to the extent of holding that such a ratification can be proved even at appellate stage. Therefore, I do not find any force in this preliminary submission of the respondent. 23. The petition is admitted to hearing. Citations be published in Statesman (English) and Jansatta (Hindi) for 25th July, 2005. However, this order shall remain in abeyance for a period of six weeks. Time is granted to the respondent to deposit Rs. 50 lakhs with the Registrar General of this Court. In case amount is not deposited within the aforesaid period the petitioner shall take steps for publication of citations. Appointment of provisional liquidat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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