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TMI Blog2009 (7) TMI 1347X X X X Extracts X X X X X X X X Extracts X X X X ..... estor Protection) Guidelines, 2000 (hereinafter called the Guidelines ). By the order impugned, the petitioners were directed to refund the money collected under the issue made by offer document dated February 15, 2001, to the investors, with interest not below the rate charged by commercial banks for long-term fixed deposits. The brief facts of the case is as follows : By exhibit P2 notice the first petitioner declared an offer for a right issue of its shares to the present shareholders on 1:4 basis. In the said offer the company declared that the person who receives that offer has got a right to renounce the shares offered to him or any of them, in favour of any other person. According to the petitioners such a notice was specifically is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying with the guidelines issued in that respect. On receipt of exhibit P3 notice the first petitioner-company filed an application compounding of the offence before the Company Law Board, under section 621A of the Companies Act. The Company Law Board sought comments of the first respondent on that petition. The first respondent submitted exhibit P4 reply before the Company Law Board. Relying on a decision of the hon ble Supreme Court in Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd. [1981] 51 CC 743; AIR 1981 SC 1298, it is observed that a private company or a section 43A company cannot make an offer of right shares with the right of renunciation in favour of any person, in view of section 3(1)(iii)(c) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore the company is liable to be proceeded with. The petitioner-company submitted exhibit P7 reply to the show-cause notice mainly contending that they have not made any public issue of shares and the offer is only for right issue to the existing shareholders. After considering exhibit P7 reply the first respondent issued exhibit P8 order. In exhibit P8 the first respondent found that the offer made by the company for right issue is an offer made by the company to 50 or more persons and therefore the same shall tantamount to a public offer and it is to be regarded as a public issue made by the company in violation of the guidelines. It is further observed that the offer made for right issue of shares need be construed as an offer to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matters relating to prospectus, statement in lieu of prospectus, return of allotment, issue of shares and redemption of irredeemable preference shares shall be exercised by the Central Government Tribunal or the Registrar of Companies, as the case may be. 5. The first respondent had initiated the proceedings on the premise that the allotment of rights issue made by the first petitioner-company will amount to a public issue and in such case it had violated the provisions of the Companies Act especially sections 56, 60, 69, 72 and 73 read with section 67(3) of the Companies Act and the provisions of the SEBI Guidelines. 6. But before resolving the disputed questions as to whether the offer can be treated as public issue or not, and as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion conferring jurisdiction on the first respondent. Since section 55A confers jurisdiction on the Central Government in respect of matters relating to companies which are not coming within the description of section 55A(a) and (b), the first respondent cannot usurp the jurisdiction vested on the Central Government, on the basis of a contention that the offer for right issue of shares made by the first petitioner-company can be deemed as a public issue. Since the jurisdiction derived by virtue of the substantial provision in the Companies Act does not permit the first respondent for such an action, I do not think that such jurisdiction can be presumed by depending on any constructive provisions. This is especially because the Central Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X
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