Civil Appeal No 3498 of 1991
From the Judgment dated 171871991 of the Bombay High Court in writ petition No 2038 of 1991
G Ramaswamy Attorney General VR Reddy Addl
Solicitor General Anil B Divan KS Cooper and TR Andyaranjina RF Nariman SA Divan BR Agrawala Vinod B Agarwala PN Kapadia Pramod B Agarwala section Krishnachandani Dr Sumat Bhardwaj Ms Sandhaya Mehta for Ms Gagret  Co Ms Sushma Suri AM Khanwilkar MP Bharucha R Karanjawala Mrs M Karanjawala Mrs VS Rekha AR Amin KJ John Dr AM Singhvi and Ajit Pudussery for the appearing parities
493 The Judgment of the court was delivered by THOMMEN J
The question which aries in this appeal from the judgment of the Bombay High Court in writ petition No 2038 of 1991 is when does a company become liable to pay interest under section 73 2A of the the Act
The answer to it depends on the answer to the more fundamental and far more difficult question ie when does a company become liable to repay the money received from applicants for shares or debentures in excess of the aggregate of the application money relating to the allotted shares or debentures
If such excess application money is not repaid within eight days from the days on which the company and every director who is an officer in default  is liable to pay insterest at the specified rates
The period of eight days has to be reckoned in accordance with section 74
But it is not clear when exactly does the liability to repay the excess money arise
Does it arise on the date of the allotment as found by the High Court or on the expiry of 10 weeks from the date of closing of the subscription lists referred to in sub section 1A of section 73 or as contended by the company on the expiry of the period mentioned in the prospectus Whichever is the correct date interest becomes payable by the company and its directors in default  if the excess money is not repaid within the period of grace of eight days from the date on which the company becomes liable to pay it
When does that liability arise is the crucial question
We shall presently examine the relevant provisions of the section but before we do so it may be of interest to refer briefly to the circumstances in which the alleged liability of the appellant company has arisen
The appellant is a company registered under the provisions of the 
The company obtained the consent of the Government of India vide its Order dated May 31 1990 to issue 72000000 equity shares of Rs 10 each at par and 33 90000 fourteen per cent secured redeemable non convertible debentures of Rs 100 each at par
This Order was made by the Government in exercise of its power under the 
One of the conditions attached to the order reads The company shall scrupulously adhere to the time limit of 10 weeks from the date of closure of the subscription list for allotment of all securities and despatch of allotment letterscertificates and refund orders
 A prospectus was issued by the company on 12th July 1990 for the issue of the aforesaid shares and debentures
The prospectus stated amongst 494 other things that the company had sought the permission of the stock exchanges at Indore Ahmedabad Bombay Calcutta and Delhi for dealing in equity shares and debentures in terms of the prospectus that interest at the rate of 15  per annum on the excess application money will be paid to the applicants as per the guidelines issued by the Ministry of Finance on July 21 1983 and September 27 1985 that the public issue will open on August 20 1990 and close on August 23 1990 and that it would not be extended beyond August 31 1990
When the issue thus opened on August 20 1990 it received overwhelming response as a result of which it was about 40 times over subscribed
The company received 2632894 applications for equity shares together with an aggregate sum of Rs 2252551247 in respect of a public issue of Rs 25 crores
In view of this public response the share issue was close on 23rd August 1990
On October 15 1990 the board of directors of the company approved the allotment of shares
Shortly thereafter it secured the requisite permissions of the stock exchanges at Indore Ahmedabad Bombay Calcutta and Delhi to deal in the shares offered in the prospectus
These permissions were obtained prior to November 1 1990
The company had to despatch 2550604 refund orders of an aggregate value of well over Rs 200 crores
These orders which were printed in Bombay were meant to be despatched from Delhi
The company despatched 855226 refund orders from the Sarojini Nagar Post Office  New Delhi at the rate of approx
100000 refund orders per day
On 26th October 1990 a consignment of 669999 refund orders had been despatched from Bombay to Delhi in a brake van of the Paschim Express
A fire broke out on the way in the brake van as a result of which many refund orders were destroyed
Almost 50  of the consignment was missing after the accident
In consultation with the Madhya Pradesh Stock Exchange and the Company s Bankinstructions were issued by the Company to stop payment of all refund orders with a view to avoiding any possible fraud or misuse
As a result of the countermanding of all the multi colored refund orders and the printing of new refund orders with distinctive colours etc delay occurred in the despatch of newly printed orders
At the request of the company the Madhya Pradesh Stock Exchange granted it extension of time till November 301990 for issuing the refund orders
Time for this purpose was further extended by that stock exchange till 19th December 1990
The Bombay Stock Exchange however refused to grant extension of time
It further informed the company that it was bound to pay interest by reason of the delay in the despatch of refund orders
The Securities and Exchange Board of India the second respondent called upon the company by its letter dated March 131991 to pay interest to the investors at varying rates for the period from 1st November which is when the period of 10 weeks from the date of the closure of the subscription lists expired till the date of posting of 495 the refund orders
The refund orders were not despatched until 12th November 1990
The Government of India and the Securities and Exchange Board of India insisted that the company should pay interest to the investors for the period of the delay in making the refund in accordance with the provisions of section 73
Apprehending that the Government might direct the stock exchanges to delist the shares of the company by reason of its failure to pay interest and also initiate actions against it the company filed a petition in the High Court under Article 226 of the Constitution but it was dismissed by the impugned judgment
The Bombay Stock Exchange seems to have understood that the liability of the company arose on the expiry of 10 weeks after the date of closure of the subscription lists
Paragraph 232 of its publication of March 1991 quotes the condition mentioned in the Order of the Government of India dated 3151990which we have extracted aboveto the effect that the liability of the company for despatch for refund orders arose only at the end of 10 weeks from the date of closure of the subscription lists
In the High Court the Union of India and the Securities and Exchange Board of India appeared to have taken a divergent stand on the question
While the Government of India submitted as disclosed in its affidavit and as referred to by the High Court in the impugned judgment that the liability to pay the excess amounts arose on the expiry of 10 weeks from the date of closure of the subscription lists the Securities and Exchange Board of India contended that the liability arose on the date of allotment
In the present appeal however the Union of India support the stand of the Securities and Exchange Board of India
On the other hand the company contended that on the facts of this case the liability arose only at the end of the period as extended by the Stock Exchange at Indore in terms of the prospects
The High Court held 
In our judgment there is no difficulty in fixing the date from which the liability of the company to make repayment arises
In a case where the allotment is completed before expiry of the 10 weeks then from the date of allotment and in case where the allotment is not completed till the expiry of ten weeks from the date of closure of the subscription list then from the date of expiry of ten weeks  The reason stated by the High Court for coming to this conclusion is that the company knew that the excess amount was on the date of allotment and there was no reason why the company should delay payment till the end of 10 weeks in case the allotment was made earlier
The High Court says 496 
In cases where the allotment is completed before expiry of ten weeks then the Company very well knows the excess amount which is to be repaid and consequently the liability accrues forthwith to repay the said amount
In case the Company fails to repay the amount within the grace period of eight days then the Company would be liable to pay interest to the investor inspite of the fact that period of ten weeks from the date of closure of the subscription list is not over  The High Court thus held that the company was liable to pay interest at the prescribed rates for the period of delay and the liability for the same arose on the expiry of 8 days from the date of allotment of the shares and not from the date of expiry of 10 weeks where allotment was made earlier to that date
The High Court did not accept the contention of the company that the time having been extended by the Madhya Pradesh Stock Exchange till 19th December 1990 in accordance with the relevant provisions of the prospectus the company had no liability to pay interest
The question for consideration therefore is whether the High Court was right in discarding for computation of interest the time limit of 10 weeks running from the date of closure of the subscription lists notwithstanding that the allotment had been made as in the present case prior to the date of expiry of 10 weeks
Listing means the admission of the securities of a company to trading privileges on a Stock Exchange
The principal objectives of listing are to provide ready marketability and impart liquidity and free negotiability to stocks and shares ensure proper supervision and control of dealings therein and protect the interests of shareholders and of the general investing public
See para 11
of the Stock Exchange Listing  publication of Bombay Stock Exchange of March 1991
A public limited company has no obligation to have its shares listed on a recognised stock exchange
But if the company intends to offer its shares or debentures to the public for subscription by the issue of a prospectus it must before issuing such prospectus apply to one or more recognised stock exchanges for permission to have the shares or debentures intended to be so offered to the public to be dealt with in each such stock exchange in terms of section 73
We shall now read the provisions of section 73 insofar as they are material Sub section 1 of section 73 read 497 section 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 exchanges 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
 This sub section was inserted by the Companies Amendment Act 1988 with effect from 1561988
It has application only to a company intending to offer shares or debentures to the public for subscription by the issue of a prospectus
Until this sub section was inserted listing of public issues was not compulsory
This original sub section 1 was substituted by the Companies Amendment Act 1974 with effect from 121975 and substituted again and renumbered as the present sub section 1A with effect from 1561988 by the Companies Amendment Act 1988
Sub section 1A reads 731A
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 42 of 1956 such allotment shall not be void until the dismissal of the appeal
 This provision makes it necessary for the company to state in its prospectus the name of each of the recognised stock exchanges whose permission for listing has been sought by the company
Any allotment of shares will become void if permission is not granted by the stock exchange or each such stock exchange as the case may be before the expiry of 10 weeks from the date of the closing of the subscription lists
The validity of the allotment is thus made dependent on securing the requisite 498 permission of each stock exchange whose permission has been sought
The liability to repay the application money arises only upon refusal of the stock exchange to grant the permission sought by the company before the expiry of 10 weeks from the date of closing of the subscription lists
This is clear from sub section 1A read with sub section 5
There is a deemed refusal if permission is not granted by the stock exchange before the expiry of 10 weeks from the date of closing of the subscription lists and upon the expiry of that date any allotment of shares made by the company becomes void
However  from the decision of the stock exchange refusing permission an appeal will lie under section 22 of the 
Pending the decision in appeal the allotment made would not be void and the decision of the concerned stock exchange is made dependent on the result of the appeal
What is significant is that it is the legislative intent to delay the result postulated under sub section IA ie rendering the allotment void until the said period of 10 weeks has expired or until the dismissal of the appeal
Sub section 2 as amended in 1988 reads section 732
Where the permission has not been applied under sub section I or such permission having been applied for has not been granted as aforesaid the company shall forthwith repay without interest all moneys received from applicants in pursuance of the prospectus and if any such money is not repaid within eight days after the company becomes liable to repay it the company and every director of the company who is an officer in default shall on and from the expiry of the eighth day be jointly and severally liable to repay that money with interest at such rate not less than four per cent and not more than fifteen per cent as may be prescribed having regard to the length of the period of delay in making the repayment of such money This sub section requires the company to repay forthwith  all money received from applicants in response to the company s prospectus either where the company has not applied for permission of the recognised stock exchange for listing or where permission has been applied for but not granted
If the company has issued a prospectus without seeking permission for listing it has clearly acted in violation of the mandatory provisions of the Act and the company has no right to receive or retain any amount by way of subscription in pursuance of its prospectus
On the 499 other hand where permission has been sought but has not been obtained within 10 weeks from the date of closing of the subscription lists thereby rendering void any allotment made the company is bound to repay all such money forthwith but without interest
In the event of such money not being repaid within 8 days after the liability to repay arose the company and every director of the company who is an officer in default  are made jointly and severally liable to pay the principal amount as well as interest thereon from the date of expiry of the said 8 days
The interest is payable at the prescribed rates varying from 4 to 15 dependent on the length of the period of delay in making such repayment
This sub section thus postulates two circumstances in which interest becomes payable namely where the permission has not been applied for before issuing the prospectus and the company had thus acted in violation of the law or where permission though applied for has not been granted
In the former case apart from the other consequences which may flow from the company s disobedience of the law the liability to pay interest arises as from the date of receipt of the amounts for the company ought not to have received any such amount in response to the prospectus issued by the company in disobedience of the requirements of sub section I
In the latter case the liability to pay interest does not arise until the expiry of 8 days after the company became liable to repay the amounts received by reason of its failure to obtain the necessary permission as referred to in sub section IA
It may be mentioned in this connection that prior to the amendment of 1988 sub section 2 did not make the company liable to pay interest on the amounts repayable by it in terms thereof but only the directors were liable for payment of such interest apart from the principal amounts
The proviso to the sub section as it stood prior to 1988 exempted a director from such liability if the default was not caused by his misconduct or negligence
As a result of substitution of a proviso of the sub section by the Amendment Act of 1988 the company and every director of the company who is an officer in default  are made jointly and severally liable for payment of the principal amount as well as interest
We shall now read the crucial provision which is sub section 2A S73 2A
Where permission has been granted by the recognised stock exchange or stock exchanges for dealing in any shares or debentures in such stock exchange or each such stock exchange and the moneys received from applicants for shares or debentures are in excess of the aggregate of the application moneys relating to the shares or debentures in respect of which 500 allotments have been made the company shall repay the moneys to the extent of such excess forthwith without interest and if such money is not repaid within eight days from the date the company becomes liable to pay it the company and every director of the company who is an officer in default shall on and from the expiry of the eighth day be jointly and severally liable to repay that money with interest at such rate not less than four per cent and not more than fifteen per cent as may be prescribed having regard to the length of the period of delay in making the repayment of such money
Sub section 2A was inserted by the Companies Amendment Act 1974 which came into force wef 121975
Section 73 as it stood prior to 1975 contained no specific provision compelling the company or its directors to repay the amounts received in excess of the aggregate of the application money relating to the shares or debentures in respect of which allotments have been made
Sub section2A was inserted to cover cases where permission of the stock exchange has been obtained but the shares or debentures have been over subscribed and the company is consequently in possession of excess amounts
The sub section as inserted in 1975 made the company liable to repay the excess amounts forthwith but did not make the company liable to pay interest on such excess amounts
But a liability was cast on the directors
If the excess amount was not repaid within 8 days from the day the company became liable to repay it the directors were made jointly and severally liable to repay such amount with interest
The proviso to sub section 2A which like the proviso to sub section 2 as they stood prior to 1988 provided that a director was not liable to repay the money with interest if he proved that the default in payment of the money was not on account of any misconduct or negligence on his part
Owing to the absence of a specific provision imposing liability on the company to pay interest on the over subscribed amounts and also owing to the absence of any provision to exempt directors who were not directly in charge of the administration of the company and the need to make listing of public issues compulsory further amendments to the section became necessary
Accordingly the Amendment Act of 1988 introduced several amendments to section 73 one of them being the substitution of a part of sub section 2A making the company and every director of the company who is an officer in default  jointly and severally liable to repay the excess money with interest
A director of a company who is an officer in default  appearing in sub section 2A must be understood with reference to 501 the definition of an officer who is in default  contained in section 231 read with section 5
This definition includes the managing director or the wholetime director of a company
So understood the liability imposed under sub section 2A on a director of the company falls only upon a director who is an officer in default  as defined under section 231 read with section 5a b and not upon any other director
The nominees of the Government or financial institutions on the board of directors of the company but not directly in charge of its administration as full time directors are exempted from personal liability
The rate of interest payable under sub section 2A is an seen above not less than 4 per cent and not more than 15 per cent
The sub section requires the company to repay the over subscribed amounts
These amounts are paid by persons who have responded to the prospectus which was issued by the company after making an application for permission in accordance with sub section 1
But when the subscription lists are closed the excess money is ascertained with reference to the actual allotments made and so it becomes repayable as the company has no right to retain it
The question is for the purpose of computing interest did it become repayable upon the date of allotment as found by the High Court and as contended by the respondents or on some other day
The Additional Solicitor General appearing for the Union of India Mr KS Cooper for the Securities  Exchange Board of India Mr TR Andhyarujina for the Bombay Stock Exchange and Dr AM Singhvi for one of the interveners submit that the liability to repay the excess amount arises on the date of allotment of the shares for the statute says that the liability arises forthwith and any delay beyond the period of 8 days from the day on which the liability arose attracts interest
The expression forthwith  has to be understood as an immediate liability ascertainable with reference to the date of allotment but subject to a period of grace of 8 days
Mr Anil B Dewan appearing for the company on the other hand contends that the company is entitled to retain the excess amount for the period mentioned in the prospectus and consequently no liability to pay interest can arise until the expiry of that period
Prospectus is an instrument registered under section 60 of the Act and all statements contained in it are matters permitted to be inserted by the statue
The terms of the prospectus are binding not only upon the company but also upon persons who deal with the company in pursuance of the prospectus
One of those terms concerns the repayment of excess money
It reads 
In case an application is rejected in full the whole of the 502 application money received will be refunded and where an application is rejected in part the balance if any after adjusting money due in the manner provided earlier in this Prospectus on Equity SharesDebentures allotted will be refunded to the applicants within ten weeks of the date of closing of the Subscription List or in the event of unforeseen circumstances within such further time as may be allowed by the Stock Exchange at Indore emphasis supplied In the present case counsel points out time for refund had been extended by the Madhya Pradesh Stock Exchange till 19th December 1990
Accordingly the liability of the company to repay the excess amount did not arise until then
In the circumstances interest became payable only after 8 days from the expiry of the period as extended by the Madhya Pradesh Stock Exchange
If Mr Dewan s argument were to be accepted the company would have incurred no liability to pay interest for time had been extended by the Madhya Pradesh Stock Exchange
But this argument is clearly contrary to the provisions contained in sub section 4 of section 73 of the Act which reads_ section 734
Any condition purporting to require or bind any applicant for shares or debentures to waive compliance with any of the requirements of this section shall be void
In the teeth of that sub section Mr Dewan s argument on the point is totally without merit
Even if sub section 4 had not been inserted in section 73 Mr Dewan s argument in this respect would have been equally unsustainable for no agreement can defeat or circumvent a mandatory requirement of the statute
This is all the more so in view of section 9 which specifically provides that the provisions of the Act override the memorandum or articles of association of the company or any agreement executed or resolution passed by it
The statute requires the company to pay interest in terms of sub section 2A
That provision says that the company should pay excess money forthwith failing which interest becomes payable at the end of 8 days therefrom
Any inconsistent provision in the prospectus is unenforceable and it can be of no avail to the company
It is true that the expression forthwith  does not necessarily and always mean instantaneous
The expression has to be understood in the context of the statute
Where however the statute prescribes the payment 503 of money and the accrual of interest thereon at certain points of time the expression forthwith  must necessarily be understood to be immediate or instantaneous so as to avoid any ambiguity or uncertainty
The right accrues or liability arises exactly as prescribed by the statute
Decisions such as Keshave Nilkanth Joglekar vs The Commissioner of Police Greater Bombay  and Salim vs State of West Bengal   deal with the expression forthwith  in the context of preventive detention demanding a liberal or reasonable construction
But that is not the construction which has to be adopted when forthwith  is used for determining the time and mode of payment of the principal and interest
The legislature intended the expression forthwith  to refer to a particular day on which the liability to repay the principal amount arose and that is the day from which the period of 8 days has to be computed and on the expiry of that period interest begins to accrue
It is further contended on behalf of the company that in any view interest is payable as a penalty and therefore a reasonable and rational construction has to be placed upon the statute in regard to the commencement of the liability of the company to repay the excess amount
Relevant circumstances which caused the delay must be taken into account in this regard
There is no substance in this contention
As stated earlier sub section 2A provides for the accrual of interest and the rates thereof
Unlike sub section 2B provides for punishment by imposition of fine or imprisonment sub section 2A speaks only of interest which is in contradiction to punishment and is not penal in character
It merely provides a mode of calculation of the amounts payable
Any consideration with reference to a penal provision is of no relevance to the liability of the company or its directors to pay interest in terms of sub section 2A
Sub section 2B on the other hand provides for punishment
It reads S732B
If default is made in complying with the provisions of sub section 2A the company and every officer of the company who is in default shall be punishable with fine which may extend to five thousand rupees and where repayment is not made within six months from the expiry of the eighth day also with imprisonment for a term which may extend to one year
This sub section concerns solely with default of compliance with the requirement of sub section 2A namely repayment of excess money
Failure to repay the excess money as required by sub section 2A visits the company and every officer of the company who is in default as 504 defined under section 5 with the stipulated punishment
This is of course in addition to the payment of interest prescribed under sub section 2A
Sub section 5 as it stood prior to 121975 read section 735
For the purpose of this section permission shall not be deemed to be refused if it is intimated that the application for permission though not at present granted will be given further consideration
This sub section was substituted by the Companies Amendment Act 1974 with effect from 121975 reading as follows S735
For the purposes of this section it shall be deemed that permission has not been granted if the application for permission where made has not been disposed of within the time specified in sub section 1
 Sub section 1 referred to in sub section 5 as substituted on 121975 is in fact the present sub section 1A for as stated earlier the original sub section 1 was amended and renumbered as sub section 1A when the present sub section 1 was inserted by the Companies Amendment Act 1988 wef 1561988
Consequently the words the time specified in sub section 1  appearing in sub section 5 as inserted wef 121975 denote the period of 10 weeks mentioned in the present sub section 1A
This means that the permission for listing is deemed not to have been granted ie impliedly refused if the application for permission filed by the company has not been disposed of before the expiry of 10 weeks from the date of the closing of the subscription lists as mentioned under sub section 1A
Sub section 1A postulates that any allotment made becomes void at the end of 10 weeks from the date of the closing of the subscription lists if by that time the requisite permission of the stock exchange has not been obtained
But this consequence is postponed till the dismissal of any appeal preferred under section 22 of the see the proviso to sub section 1A of section 73 of the Act
Nevertheless the permission if not obtained within 10 weeks is deemed not to have been granted
If the permission for listing sought under sub section 1 is not granted the interest payable under sub section 2 is attracted
Sub section 2 says that the liability to repay the money received from applicants arises forthwith either where the permission has not been sought or having been 505 sought it has not been granted
The fact that an appeal is pending does not postpone the result contemplated in sub section 2 in regard to the liability to repay the amounts and the interest accruing thereon if the amounts are not repaid within 8 days after the liability arose
The accrual of interest under sub section 2 is not dependent or consequent on the nullity postulated in sub section 1A
In this connection reference may be made to sub section 3 which reads S733
All moneys 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 emphasis supplied This sub section refers to the obligation of the company to keep all amounts received from the subscribers in a separate bank account maintained with a Scheduled bank
Such money must so remain in the bank until the permission has been granted by the stock exchange or until the disposal of an appeal preferred against refusal to grant permission
Where the permission has not been sought the company has as seen above acted in disobedience of the law and the amounts received from the investors must be credited to the separate bank account and immediately returned to them together with the interest which accrued for the period
But where permission has been sought but not granted the amounts so kept in the bank have to be repaid within the time specified in sub section 2
Default of compliance with this requirement will make the company and every officer in default as defined under section 5 liable to be punished with fine
This will of course be in addition to the liability for payment of interest in terms of sub section 2
The right or obligation of the company to keep the money in the bank is only for the period preceding the decision of the stock exchange on the company s request for permission to list
Once the permission is 506 expressly or impliedly refused the money has to be returned to the applicants notwithstanding the pendency of the company s appeal
The earlier part of the sub section about depositing the money in the bank is controlled by the latter provision in the sub section for returns of the money as required by sub section 2
This is particularly so by reason of the penalty specially provided in sub section 3 in the event of default of compliance with the requirement of that sub section
Sub section 3 may at the first blush appear to be contradictory but it is really not so considering the legislative intent to protect the legitimate claim of the applicants for interest on the money paid by them
The interest provided under sub section 2 is payable to the applicants in terms of that sub section unless the money is returned to them within the specified time not withstanding the pendency of an appeal mentioned in the proviso to sub section 1A
Sub section 3 has to be so understood to be in harmony with the other provisions of section 73
This is all the more explicit from sub section 3A
Sub section 3A says that the company shall not utilise the amounts held in the separate bank account for any purpose other than what is permitted by sub section 3A
Sub section 3A provides S733A
Moneys 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 moneys received from applicants in pursuance of the prospectus where shares have not been permitted to the dealt in on the stock exchange or each stock exchange specified in the prospectus as the case may be or where the company is for any other reason unable to make the allotment of share
The money credited to the separate bank account can be utilised for only two purposes 1 for adjustment against allotment of shares where listing is permitted or 2 for repayment where listing is not permitted or the company is otherwise unable to allot shares
The company has no right to deal with the money in any other manner or keep it longer than permitted by the section
507 The money so kept in the separate bank account is held by the company for and on behalf of the subscribers in a fiduciary capacity
Such amount do not form part of the general assets of the company
The relationship between the applicants and the company in respect of the application money so held in accordance with sub section 3 is that of bailers and bailee and not of creditors and debtor 
See Palmer s Company Law 24th ed
para 2431 1085
Interest does not begin to run under sub section 2 until 8 days have elapsed from the date of expiry of the period of 10 weeks commencing on the date of closure of the subscription lists
The fact that the legislature has so provided in cases where permission has been refused expressly or by reason of the deeming provision is sufficient indication of the legislative intent to give the company reasonable time to repay the money
Companies generally make allotments as soon as practicable after the necessary application has been made to the recognised stock exchange for permission for listing
Upon the issue of the prospectus after making such application amounts are received from the public in consideration of which allotments are made in anticipation of the requisite permission
Greater the reputation of the company larger are the amounts likely to be received
If permission is not granted the entire amounts received from the public have to be forthwith repaid
On the other hand if permission is obtained but the amounts received from the public are in excess of the aggregate of the application money relating to the allotted shares or debentures such excess amounts are forthwith repayable
Whether or not permission will be obtained cannot be ascertained until the period prescribed for the purpose has expired namely 10 weeks from the date of closing of the subscription lists
Until the expiry of those 10 weeks neither the subscribing public nor the company will be in a position to decide whether or not the allotments made are valid
This is a period of uncertainty and it is for that reason that the legislature has in a case of refusal to grant permission provided that the liability to repay the application money arises upon the expiry of 10 weeks
The possibility of an appeal being allowed is as stated above not a ground to delay repayment
It should make no difference whether it is as a result of the permission having been refused or permission having been granted and excess amounts are received by reason of over subscription that repayment of money has to be made by the company
In either event the liability to repay the amounts arises forthwith on the expiry of 10 weeks from the date of closure of the subscription lists and the interest will begin to accrue thereon on the expiry of 8 days therefrom
This construction is in our view just and reasonable from the point of view of both the investor and 508 the company and has the advantage of certainty uniformity and easy application
The condition attached to the Order of the Government of India dated 31st May 1990 which we have extracted above indicates that the time limit of 10 weeks from the date of closure of the subscription lists applied to refund orders as well as to allotment of all securities and despatch of allotment letterscertificates
The Government of India thus understood that the liability of the company to repay the amounts in terms of section 73 arose only at the end of 10 weeks from the date of closure of the subscription lists
This condition presumably applies to repayment under sub section 2 as well as under sub section 2A of section 73
This is fully borne out by the averments contained in the affidavit filed in the High Court on behalf of the Union of India as well as by the oral submissions on its behalf before the High Court on the point
Similar appears to be the stand of the Bombay Stock Exchange as seen from its publication of March 1991 para 232
The letter dated March 13 1991 sent by the Securities and Exchange Board of India the 2nd respondent to the appellant company stating that interest was payable from 1st November 1990 which is the date of expiry of the period of 10 weeks from the date of closure of the subscription lists roughly indicates how the 2nd respondent construed the provision shortly before the proceedings commenced in the High Court
The section is not free from ambiguities and doubts
Having been amended in several respect it has not finally emerged with the clarity that admits of easy construction
But the contemporaneous construction placed upon an ambiguous section by the administrators entrusted with the task of executing the statute is extremely significant
This construction is in our view perfectly consistent with the language and the object of the statute
It is a practical and reasonable construction particularly because it affords the company reasonably sufficient time to complete the formalities for despatch of the refund orders
And the investor who has responded to the invitation contained in the prospectus is not unduly kept waiting for the return of the excess amounts due to him
See Desh Bandhu Gupta  Co  Ors
vs Delhi Stock Exchange Association Ltd  and KP Varghese vs Income Tax Officer Ernakulam  Anr  See also Crawford s Interpretation of Laws 1989 Ed
Neither the date of allotment as found by the High Court nor the date specified in the prospectus as contended by the company is relevant to the commencement of liability for payment of interest on the excess money
509 The liability of a company to repay the excess money under section 732A of the Act arises on the expiry of 10 weeks from the date of the closing of the subscription lists and the interest begins to accrue thereon at the end of 8 days therefrom
Accordingly the liability to repay the excess money in the present case arose on 1111990 which was admittedly the date of expiry of 10 weeks from the date of the closing of the subscription lists and consequently the liability to pay interest at the rate specified in sub section 2A arose on the expiry of 8 days from 1111990
MOHAN J I had the advantage of perusing the draft judgment of my learned brother
I concur with him
However some important points require to be amplified
The points that arises for determination are i the scope of liability under Section 73 2A of the 
ii Meaning of the word forthwith iii Whether the payment of interest is penal in nature iv Whether administrative inconvenience could be pleaded to avoid the statutory liability Section 73 occurs under Para III of the Central Act of 11956 hereinafter referred to as the Act
This section deals with the allotment of shares and debenturs
It has undergone important amendments in 1975 and 1988
Prior to amendment in 1975 Section 73 read as under _ Allotment of shares and debentures to be dealt in on stock exchanges
1 Where a prospectus whether issued generally or not states that application has been or will be made for permission for the shares 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 be notified to the applicant for permission by or on behalf of the stock exchange
2 Where the permission has not been applied for as aforesaid or has not been granted as aforesaid the company shall forthwith repay without interest all moneys received from ap 510 plicants in pursuance of the prospectus and if any such money is not repaid within eight days after the company becomes liable to repay it the directors of the company shall be jointly and severally liable to repay that money with interest at the rate of five per cent per annum from the expiry of the eighth day Provided that a director shall not be liable if he proves that the default in the repayment of the money was not due to any misconduct or negligence on his part
3 All moneys received as aforesaid shall be kept in a separate bank account maintained with a Scheduled Bank so long as the company may become liable to repay it under 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
4 Any condition purporting to require or bind any applicant for shares or debentures to waive compliance with any of the requirements of this section shall be void
5 For the purpose of this section it shall not be deemed that permission has not been granted if it is intimated that the application for permission though not at present granted will be given further consideration
6 This section shall have effect  a in relation to any shares or debentures agreed to be taken by a person underwriting an offer thereof by a prospectus as if he had applied therefor in pursuance of the prospectus and b in relation to a prospectus offering shares for sale with the following modifications namely i reference to sale shall be substituted reference to allotment ii the persons by whom the offer is made and not the company shall be liable under sub section 2 to repay money received from applicants and reference to the company s liability under that sub section shall be construed accordingly and iii for the reference in sub section 3 to the company and every officer of the company who is in default there 511 shall be substituted a reference to any person by or through whom the offer is made and who is knowingly guilty of or wilfully authorises or permits the default
7 No prospectus shall state that application has been made for permission that the shares or debentures offered thereby to be dealt in on any stock exchange unless it is a recognised stock exchange
After amendment in 1975 Section 73 read as follows Allotment of shares and debentures to be dealt in on stock exchanges
1 Where a prospectus whether issued generally or not states that an application has been or will be made for permission for the shares or debentures offered thereby to be dealt in on one or more recognised stock exchanges such prospectus shall state the name or 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 applied for before the 10th day after the first issue of the prospectus or whether such permission has been applied for before that day 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 10 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 share or debentures to be dealt in on that stock exchange has been preferred under section 22 of the 42 of 1956 such allotment shall not be void until the dismissal of the appeal
2 Where the permission has not been applied for as aforesaid substituted for or has not been granted as aforesaid by the Companies Amendment Act 1974 wef 121975 substituted for five per cent ibid
2A Where permission has been granted by the recognised stock exchange or stock exchanges for dealing in any shares or debentures in such stock exchange or each such stock exchange and the moneys received from applicants for shares or debentures are in excess of the aggregate of the applicant moneys relating to the shares or debentures 512 in respect of which allotment has been made the company shall repay the moneys to the extent of such excess forthwith without interest and if such money is not repaid within eight days from the day the company becomes liable to pay it the Directors of the Company shall be jointly and severally liable to repay the money with interest at the rate of twelve per cent per annum from the expiry of the said eighth day  Provided that a Director shall not be liable if he proves the the default in the payment of the money was not due to any misconduct or negligence on his part
2B If default is made in complying with the provisions of sub section 2A the company and every officer of the company who is in default he shall be punishable with fine which may extend to five thousand rupees and where repayment is not made within six months from th expiry of the eighth day also with imprisonment for a term which may extend to one year
3 All moneys 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 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 Moneys 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 moneys received from applicants in pursuance of the prospectus where shares have not been permitted to be dealt in on the stock exchange or each stock 513 exchange specified in the prospectus as the case may be or where the company is for any other reason unable to make the allotment of share
4 Any condition purporting to require or bind applicant for shares or debentures to waive compliance with any of the requirement of the section shall be void
5 For the purpose of this section it shall be deemed that permission has not been granted if the application for permission where made has not been imposed of within the time specified in sub section 1
6 This section shall have effect a In relation to any shares or debentures agreed to be taken by a person underwriting an offer thereof by a prospectus as if he had applied therefor in pursuance of the prospectus and b In relation to a prospectus offering shares for sale with the following modifications namely i References to sale shall be substituted for references to allotment ii The persons by whom the offer is made and not the company shall be liable under sub section 2 to repay money received from applicants and references to the company s liability under that sub section shall be construed accordingly and iii For the reference in sub section 3 to the company and every officer of the company who is in default there shall be substituted a reference to any person by or through whom the offer is made and who is knowingly guilty of or wilfully authorises or permits the default
7 No prospectus shall state that application has been made for permission for the shares or debentures offered thereby to be dealt in on any stock exchange unless it is a recognised stock exchange
 After amendment in 1988 Section 73 reads as under Allotment of shares and debenture to be dealt in on stock exchange
Every company intending to offer shares or debentures to the public for subscription by the issue of a 514 prospectus shall before such issue make an application to one or more recognised stock exchanges for permission for the shares or debentures intending to the so offered to be dealt with in the stock exchange or each such stock exchange
1A Where a prospectus whether is 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 exchange such prospectus shall state the name of the 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 Regulations Act 1956 42 of 1956 such allotment shall not be void until the dismissal of the appeal
2 Where the permission has not been applied for under sub section 1 or such permission having been applied for has not been granted as aforesaid the company shall forthwith repay without interest all moneys received from applicants in pursuance of the prospectus and if any such money is not repaid within eight days after the company become liable to repay it the company and every director of the company who is an officer in default shall on and from the expiry of the eighth day be jointly and severally liable to repay that money with interest at such rate not less than four per cent and not more than fifteen pr cent as may be prescribed having regard to the length of the period of delay in making the repayment of such money
2A Where permission has been granted by the recognised stock exchange or stock exchanges for dealing in any shares or debentures in such stock exchange or each such stock exchange and the moneys received from applicants for shares or debentures are in excess of the aggregate of the application moneys relating to the shares or debentures in respect of which allotments have been made the company shall repay the moneys to the extent of such excess forthwith without interest and if 515 such money is not repaid within eight days from the day the company becomes liable to pay it the company and every director of the company who is an officer in default shall on and from the expiry of the eighth day be jointly and severally liable to repay that money with interest at such rate not less than four per cent and not more than fifteen per cent as may be prescribed having regard to the length of the period of delay in making the repayment of such money
2B If default is made in complying with the provisions of sub section 2A the company and every officer of the company who is in default shall be punishable with fine which may extend to five thousand rupees and where repayments is not made within six months from the expiry of the eighth day also with imprisonment for a term which may extend to one year
3 All moneys 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 Moneys 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 moneys received from applicants in pursuance of the prospectus where shares have not been permitted to be dealt in on the stock exchange or each stock exchange specified in the prospectus as the case may be or where the company is for any other reason unable to make the allotment of share
4 Any condition purporting to require or bind any applicant 516 for shares or debentures to waive compliance with any of the requirement of this section shall be void
5 For the purposes of this section it shall be deemed that permission has not been granted if the application for permission where made has not been disposed of within the time specified in sub section 1
6 This section shall have effect a in relation to any shares or debentures agreed to be taken by a person under writing an offer thereof by a prospectus as if he had applied therefore in pursuance of the prospectus and b in relation to a prospectus offering shares for sale with the following modifications namely i reference to sale shall be substituted for references to allotment ii the persons by whom the offer is made and not the company shall be liable under sub section 2 to repay money received from applicants and references to the company s liability under that sub section shall be construed accordingly and iii for the reference in sub section 3 to the company and every officer of the company who is in default there shall be substituted a reference to any person by or through whom the offer is made and who is knowingly guilty of or wilfully authorises or permits the default
7 No prospectus shall state that application has been made for permission for the shares or debentures offered thereby to be dealt in on any stock exchange unless it is a recognised stock exchange
As the section reads now every company is required while it offers for public subscription issues of shares or debentures by means of a prospectus to make an application for listing the security in one or more recognised stock exchanges
Should the stock exchange not grant the permission for listing before the expiry of 10 weeks from the date of closing the subscription lists no allotment could be made
In other words the stock exchange has a say in the matter of listing
It also requires to be stated that the company besides the Director is made liable for failure to repay the application money or the excess application money along with interest
517 Notes on clauses read as under  Clause 10 provides for compulsory listing of all public issues with recognised stock exchanges
Presently listing of public issues is not compulsory
Further  as per the existing provisions only the directors are liable for failure to repay the application money or the excess application money within the specified time if the company fails to pay
It is proposed to make the company in addition to the directors who commit the default liable to repay the application money or excess application money alongwith interest at a rate between 4 to 15 depending upon the period of delay with a view to ensuring that ordinary directors like nominee of govt
financial institutions do not attract penal provisions it is further proposed that only the directors who is an officer in default should be liable for prosecution
As per provision to sub section 1 an appeal may be preferred under section 22 of the Stock Securities Contracts Regulations Act 1956
Such an appeal may be i against the decision of stock exchange refusing permission  and ii if the stock exchange fails to dispose of the application for permission within 10 weeks from the date of closing of the subscription lists
This 10 weeks become important because of the deemed rejection under sub section 5
Sub section 1A mentions the date of closing of the subscription lists
Thus it is a crucial date for determining the expiry of 10 weeks for the grant of permission by stock exchange
Equally that becomes the crucial date for calculating the time for preferring an appeal under section 22 of the  as aforesaid against the refusal of permission
No doubt neither in this section nor elsewhere it is stated as to when the company is required to close subscription lists
Of course that will depend upon the facts of each case
Section 69 of the Act states that unless minimum subscription is received no allotment shall be made of any share capital of the company offered to the public for subscription
In fact sub section 5 of the said section states categorically as follows  If the conditions aforesaid have not been complied with on the expiry of one hundred and twenty days after the first issue of the prospectus all moneys received from applicants for shares shall be forthwith repaid to them without interest and if 518 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 part
One thing that is striking as far as the sub section is concerned is the repayment without interest before the expiry of 150 days after the first issue of the prospectus and the repayment with interest within 130 days after the issue of the prospectus or specific in their terms unlike Section 73
It cannot be gain said that the prospectus of the company is an important document provided for under the statute
Section 236 defines prospectus as follows  prospectus means any document described or issued as a prospectus and includes any notice circular advertisement or other document inviting deposits from the public or inviting offers from the public for the subscription or purchases of any shares in or debentures of a body corporate
SEction 60 deals with registration of prospectus
Under sub section 3 it is provided that the Registrar shall not register a prospectus unless the requirements of sections 55 56 57 and 58 and sub sections 1 and 2 have been complied with
Section 62 deals with civil liability for misstatements in prospectus while section 63 deals with criminal liability for misstatement in prospectus
In the background of the legal provisions section 73 will have to be analysed with regard to the liability to pay interest
The date of allotment according to Mr Andhyarujina and Mr Cooper is the relevant date
Therefore according to the learned counsel the crucial issue is the allotment
It is also submitted that when permission is granted it is only a categorisation
It has already been seen that under section 695 specific dates have been mentioned as 120 and 130 respectively
Sub section 2A of Section 73 does not mention any specific day
It also requires to be noticed under sub section 1A of this very section 10 weeks from the date of closing of the subscription lists is mentioned
Both under sub section 2 and 2A no such time has been prescribed
Prior to 1988 sub section 1 contemplated two situations i application to stock exchange being made after issue within 10 days of issue or ii 519 application made before the issue and 10 weeks for stock exchange to grant the application
Of course if the application is not granted within 10 weeks there will be deemed rejection under sub section 5
But unfortunately after the amendment of sub section 1 and 1A sub section 2 has not been amended with reference to these amended provisions
As the law stands at present the question of issue of prospectus without an application to stock exchange cannot arise at all
As careful reading of sub section 2A will clearly disclose that the said section comes into operation only where permission has been granted by the recognised stock exchange or exchanges
These words where permission has been granted are of great significance
Therefore the contention that on the date of allotment the liability to pay interest arises may not be correct
Nor again it would be correct to contend that the mechanics of refund liability to pay arises on the date of allotment since there is a failure of consideration in respect of shares not allotted
On allotment the money may become due
Thereafter the money is held in a fiduciary capacity
But the more important question is does it become payable We will now refer to Black s Legal Dictionary as to the meaning of the word due and payable 5th Ed 448 are as under  Due Just proper regular lawful sufficient reasonable as in the phrases due care due process of owing payable justly owed
That which one contracts to pay or perform to another that which law or justice requires to be paid or done
Owed or owing as distinguished from payable
A debt is often said to be due from a person where he is the party owing it or primarily bound to pay whether the time for payment has or has not primarily bound to pay whether the time for payment has or has not arrived
The same thing is true of the phrase due and owing
Payable
A bill or note is commonly said to be due when the time for payment of it has arrived
The word due always imports a fixed and settled obligation or liability but with reference to the time for its payment there is considerable ambiguity in the use of the term the precise signification being determined in each case from the context
It may mean that the debt or claim in question is now presently or immediately matured and enforceable or that it matured at some time in the past and yet remains unsatisfied or that it is fixed and certain but the day appointed for its payment has not yet arrived
But commonly and in the absence of any qualifying expressions the word due is re 520 stricted to the first of these meanings the second being expressed by the term overdue and the third by the word payable
Payable Capable of being paid suitable to be paid admitting or demanding payment justly due legally enforceable
A sum of money is said to be payable when a person is under an obligation to pay it
Payable may therefore signify an obligation to pay at a future time but when used without qualification term normally means that the debt is payable at once as opposed to owing
As a matter of fact these words assumed great significance under section 60 of Transfer of Property Act
The section was amended by Act 20 of 1929
The word due in the section has been substituted for the word payable in order to make it clear that a mortgagor cannot redeem within the term of the mortgage
When the right of redemption arises the right of redemption arises when the principal money secured by the mortgage that has become due and may be exercised at any time thereafter subject of course to the law of limitation
In English law the mortgagor cannot redeem before the time fixed for payment
Nevertheless there were a considerable number of Indian cases in which it was held that the time fixed in the deed was fixed for the convenience of the mortgagor and that he could redeem before that time unless there was an express stipulation to the contrary
These cases are bad law for th view taken in other case that the mortgagor cannot redeem before the time fixed for payment is confirmed by the decision of Judicial Committee in Bhaktawar Begam vs Husaini Khanam 1914 36 All 195
41 IA 84 followed in Bir Mohammad vs Nagoor  25 IC 576 which treats Rose Ammal vs Rajarathnam 1900 23 Mad 23 as overruled
In in Baroda Board  Paper Mills Ltd vs Income Tax Officer
Circle I Warde E Ahmedabad and others it is held as under  Mr AL Shah who appears for the liquidator in OJ Appeal No 2 of 1975 has urged before us that the legislature has used in the context of the priority of debts two distinct sets of words debt due and due and payable and proper meaning should be given to these sets of words namely debt due and due and payable and distinction must be made when the legislature has used two different terminologies namely due in the beginning of the clause and due and payable at the end of the clause
He also wants us to dissect the phrase due and 521 payable and he wants to emphasize that the debt must have become due in the narrower sense of the word of having come into existence and having been payable with reference to enforceability of payment and in this sense relying upon the decision of DA Desai J he has urged before us that the debt must be existing at the relevant date and the event which brought the debt into existence must have occurred within the twelve months preceding the relevant date and it must also have become payable meaning thereby that its payment could have been enforced against the company within the twelve months before the relevant date
In view of the decisions that we have already referred to particularly the passage from People vs Arguello as approved by the Supreme Court in Kesoram Industries  case and in Raman Iron Foundry s case it is not possible for us to accept this contention of Mr Shah
In our opinion the only meaning that could be attached to the word due occurring in section 530 is that it must be presently due and the words due and payable mean the same thing namely  that it must be presently payable
Therefore so far as section 5301 a is concerned the revenue taxess or rate due from the company to the Central or State Government or to a local authority must be presently payable that is that the liability could be enforced as at the relevant date and secondly it must have so become presently payable within the twelve months immediately preceding the relevant date
In this connection we may refer to the case in Union of India vs Air Foam Industries P Ltd   1271 para 7 which reads as follows  The first thing that strikes one on looking at Clause 18 is its heading which reads Recovery of Sums Due
It is true that a heading cannot control the interpretation of a clause if its meaning is otherwise plain and unambiguous but it can certainly be referred to as indicating the general drift of the clause and affording a key to a better understanding of its meaning
The heading of Clause 18 clearly suggests that this clause is intended to deal with the subject of recovery of sums due
Now a sum would be due to the purchaser when there is an existing obligation to pay it in present
It would be profitable in this connection to refer to the concept of a debt  for a sum due is to be found in Webb vs Stenton where Lindley L J  a debt is a sum of money which is now payable or will become payable in the future by reason of a 522 present obligation
There must be debitum in presenti solvendum may be in presenti or in future that is immaterial
There must be an existing obligation to pay a sum of money now or in future
The following passage from the judgment of the Supreme Court of California in People vs Arguello 1869 37 Calif 524 which was apporoved by this Court in Kesoram Industies vs Commr
of Wealth Tax  1966 SC 1370 clearly brings out the essential characteristics of a debt
Standing alone the word debt  is as applicable to a sum of money which has been promised at a future day as to a sum now due and payable
If we wish to distinguish between the two we say of the former that it is a debt owing and of the latter that it is a debt due
This passage indicates that when there is an obligation to pay a sum of money at a future date it is a debt owing but when the obligation is to pay a sum of money in praesenti it is a debt due
A sum due would therefore mean a sum for which there is an existing obligation to pay in presenti or in other words which is presently payable
Recovery of such sums is the subject matter of Clause 18 according to the heading That is the dominant idea running through the entire Clause 18
We will now refer to Venkataramiya s Law Lexicon and Legal Maxims Vol I 713 714
Due means payable immediately or a debt contracted but payable at a future time
In Wharton s Law Lexicon 14th Edn it s meaning is stated to be anything owing
That which one contracts to pay or perform to another that which law or justice requires to be paid or done
It should be observed that a debt is said to be due  the instant that it has existence as a debt it may be payable at a future time
Therefore it cannot be contended on the strength of Section 530 due  and payable  is one and the same even under S732 A
However as contended if the liability to pay interest arises from the date of allotment and the grace period after eight days what is to happen in cases where permission is refused by the stock exchange For the grant of such permission 10 weeks are available
Therefore a company making allotment prior to the grant of permission cannot be mulcted with the liability when the section itself comes into play upon the grant of permission
Therefore some definite date is required
It cannot be lost sight of that where permission is refused in the first instance there is also the right of appeal under Section 22 of the Securities Contracts Regulations Act 1956
This too has got an important bearing
It cannot be held that after allotment the mechanics 523 of refund would come into play and again after rejection of permission the money on all applications should be refunded once over again
Equally the contention of Mr Anil Divan that the stock exchange will have power to extend the time cannot be accepted
It may be a practice to do so
But it does not mean the stock exchange can act contrary to clear wording to this section
More so when Sub section 4 is clear in its terms
Merely because the intending applicants agree to abide by the prospectus that cannot be binding in the teeth of this Sub section
For the sake of competition reference may be made to the corresponding provision of English Law
Buckley on the Companies Acts 14th Ed
I while dealing with Section 51 which is the corresponding provision state as follows  The Act does not require the prospectus to fix any time for closing the subscription lists and unless and until an issue is fully subscribed there is nothing in law to require the company to close the lists
It is the common practice however at any rate in the case of prospectuses issued generally to state in the prospectus that the lists will be closed on or before a particular date
In any case to which this section applies the company will by reason of sub s3 be unable to employ any money received from shareholders until either permission to be listed has been obtained or the lists have been closed and the period indicated in sub section 1 has expired without the permission having been refused
Note that the sub section does not say if the permission has not been granted before the expiration of three weeks etc  Presumable in practice the stock exchange when it has an application for permission to be listed under consideration and has not either granted or refused permission within the three weeks period indicated above will notify the applicant under sub section 1 of an extension of the period
An allotment within this section is void not voidable as in an allotment in breach of Section 47 sub section 3 in Re Nanwa Gold Mines Ballantyne vs Nanwa Gold Mines Ltd applications to subscribe for shares were invited on the footing that if a resolution for reduction of capital was not passed or not confirmed by the court the application moneys would be refunded and meanwhile would be retained in a separate account
The moneys were in fact put in a separate account in the names of the company and its registrars
The conditions 524 were not fulfilled and shortly afterwards a receiver was appointed in a debenture holders  action
Harman J held that the moneys in the separate account were repayable to the subscribers in full basing his decision on the terms of the invitation and not on the provisions of this sub section but he expressed the view that the payment into a separate account in compliance with the sub section would probably have the same effect
Palmer s Company Law 1982 Vol I 264 states as follows Refusal of Application to Deal Where a prospectus states that application has been or will be made for the shares or debentures to be dealt with on the stock exchange any allotment made on an application under the prospectus shall be void
1 if permission has not been applied for before the third day after the first issue of the prospectus or 2 if permission is refused before the expiration of three weeks subject to the extension by the stock exchange to six weeks from the date of the closing of the subscription lists Sec
51 1
It should be noted that under case 2 above the allotment is not void if the stock exchange merely defers the decision on permission to deal or does not arrive at a decision within the stated time
During the periods stated in cases 1 and 2 above the application money received by the company from shareholders who applied for shares has to be kept on separate account Sec
51 3  that appears as Harman J observed in Re Nanwa Gold Mines Ltd to be an attempt to erect so to speak by statute a kind of trust for applicant consequently the application money thus kept on separate account does not form part of the general assets of the company which are charged by a debenture secured by a floating charge
The relationship between the applicants and the company which holds the application moneys on separate account is that if bailers and bailee and not of creditors and debtor
Now we will refer to the case in Nanwa Gold Mines Ltd Ballantyne vs Nanwa Gold Mines Ltd 1955 I WLR 1080  1085
Sub section 3 provides that where money is sent in on a provisional application All money received as aforesaid shall 525 be kept in a separate bank account so long as the company may become liable to repay it under the last foregoing sub section 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 liable to a fine not exceeding five hundred pounds
That appears to be an attempt to erect so to speak by statute a kind of trust for applicants in a case of this sort
It is irrelevant here because in this case the directors promised to do this very thing No doubt that was only a compliance with the statute but they did promise to do so and I think that their promise is of contractual effect so I need not consider whether if there was no promise but only the statutory obligation the position would be the same
I incline to think it would be so and that the object of section 513 was to provide protection for persons who pay money on the faith of promises of this kind
As to the present position with regard to the liability to refund under Sec
73 2A it is important to bear in mind that two notifications have come to be issued in exercise of powers conferred under Section 642
Notification No GSR 614 E dated 3rd October 1991 called the Companies Central Government s General Rules and Forms Second Amendment 1991 which came into force on 1st November 1991
In the above notification it is stated as under If the company does not receive application money for at least 90 of the issued amount the entire subscription will be refunded to the applicants within ninety days from the date of closure of the issue
If there is delay in the refund of application money by more than 8 days after the company becomes liable to pay the excess amount the company will pay interest for the delayed period at prescribed rates in sub section 2 and 2A of Section 73
No statement made in this Form shall contravene any of the provisions of the  and the rules made thereunder
Signature of Directors Again notification No SO 666E dated October 3 1991 issued under sub section 1 of Section 641 with amendments in Schedule II to the said Act under Part I General Information stated as under f Declaration about the issue of allotment lettersrefunds within a period of 10 weeks and interest in case of any delay 526 in refund at the prescribed rate under Section 7322A Thus the liability of the company to repay the excess amount under section 732A will arise only on the expiry of 10 weeks from the date of the closure of subscription lists
The interest begins to accrue thereupon at the end of 8 days
As the meaning of the word forthwith we will now refer to Bouvier s Law Dictionary for the meaning of the word forthwith
FORTHWITH
As soon as by reasonable exertion confined to the object it may be accomplished
Approved in Dickerman vs Trust Co  176 US 193  This is the import of the term it varies of course with every particular cases 4 Tyrwh 837 Edwards vs Ins Co See Seammon vs Ins
Co 101 III 621  Bannect vs Ins 67 NY 274 Pennsylvanis R Co vs Reichert  Meriden Silver Plate Co vs Flory  It is not as promptly as immediately in some cases it might mean within a reasonable time We will also refer to 193 Soutern Reporter 339 and 16 Soutern Reporter 33  35 Col I As regards compliance with statute requiring petition for judicial review of an executive committee s denial of primary election contest to be filled forthwith the term forthwith is a relative one and means within such time as to permit that which is to be done to be done lawfully and according to the practical and ordinary course of things to be performed or accomplished and it is not to be used by way of a penalty when accidental interventions of which party is not to be charged with foresight have upset what otherwise would have been reasonable calculations regarding available time
Laws 1035 exhibit Secs c 10
Forthwith is not susceptible of a fixed time definition and the surrounding facts and circumstances must be taken into consideration in determining the question and forthwith may be minutes hours days or even weeks
Therefore it cannot be said that forthwith means EO instanti
It cannot but be held that the payment of interest is only compensatory and not penal
Merely because clause 10 to which a reference has already been made uses the word penal it cannot be amount to penalty
As useful reference can be made in Mahalaxmi Sugar Mills Co Ltd vs Commissioner of Income Tax Delhi New Delhi  4
Penalties if any person defaults in payment of excess imposed under sub section 1 of Sec 3 or  contravenes any provision of any rule made under this Act he shall without prejudice to his liability therefore under sub section 5 of Sec
3 be liable to imprisonment upto six months or to a fine not exceeding rupees five thousand or both and in the case of continuing contravention in to a further fine not exceeding rupees five thousand or both and in the case of continuing contraventio in to a further fine not exceeding rupees one thousand 527 for each day during which the contravention continues
It is apparent that section 32 requires the payment of cess on the date prescribed under the rules
Rule 4 of the UP Sugarcane Cess Rules 1956 provides that the cess due on the sugarcane entering into the premises during the first fortnight to each calendar year must be deposited in the government treasury by the twenty second day of that month and the cess due for the remainder of the month must be deposited before the seventh day of the next following month
If the cess is not paid by the specified date then by virtue of section 33 the arrear of cess will carry interest at the rate of six per cent per annum from the specified date to the date of payment
Section 35 is a very different provision
It does not deal with the interest paid on the arrears of cess but provides for an additional sum recoverable by way of penalty from a person who default in making payment of cess
It is a thing apart from an arrear of cess and the interest due thereon
Now the interest payable on an arrear of cess under section 33 is in reality part and parcel of the liability to pay cess
It is an accretion to the cess
The arrear of cess carries interest if the cess is not paid within the prescribed period a larger sum will become payable as cess
The enlargement of the cess liability is automatic under section 33
No specific order is necessary in order that the obligation to pay interest is as certain as the liability to pay cess
As soon as the prescribed date is crossed without payment of the cess interest begins to accrue
It is not a penalty for which provisions has been separately made by section 35
Nor is it a penalty within the meaning of section 4 which provides for a criminal liability and a criminal prosecution
The penalty payable under section 35 lies in the discretion of the collecting officer or authority
In the case of the penalty under section 4 no prosecution can be instituted unless under section 51 a complaint is made by or under the authority of the Cane Commissioner of the District Magistrate
There is another consideration distinguishing the interest payable under section 33 from the penalty imposed under section 35
Section 36 provides that the officer or authority empowered to collect the cess may forward to the Collector a certificate under his signature specifying the amount of arrears including interest due from any person and on receipt of such certificate the Collector is required to proceed to recover the amount specified from such person as if it were an arrear of land revenue
The words used in section 36 are specifying the amount of arrears including interest that is to say that the interest is part of the arrear of cess
In the case of a penalty imposed under section 35 a separate provision for recovery has been made under section 37
Although the manner of recovery of a penalty provided by section 37 is the same as the manner of recovery provided by section 36 of the arrears of cess the Legislature dealt with it as something distinct from the recovery of the arrears of cess including 528 interest
In truth the interest provided for under s33 is in the nature of compensation paid to the Government for delay in the payment of cess
It is not by way of penalty
The provision for penalty as a civil liability has been made under section 35 and for penalty as a criminal offence under s4
The Delhi High Court proceeded entirely on the basis that the interest bore the character of a penalty
It was according to the learned Judges penal interest
The learned Judge failed to notice section 35 and s4 and the other provisions of the Cess Act
The last question will be that in view of the clear terms of the statute whether the administrative inconvenience could be pleaded
This could be decided with reference to the case in Sanjeev Coke Manufacturing Co vs Bharat Coking Coal Ltd  Another   1029 as follows 
But in the ultimate analysis we are not really to concern ourselves with the hollowness or the self condemnatory nature of the statements made in the affidavits filed by the respondents to justify and sustain the legislation
The deponents of the affidavits filed into Court may speak for the parties on whose behalf they swear to the statement
They do not speak for the Parliament
No one may speak for the Parliament and Parliament has said what it intends to say only the Court may say what it the Parliament meant to say
None else
Once a statute leaves Parliament House the Court s is the only authentic voice which may echo interpret the Parliament
This the court will do with reference to the language of the statute and other permissible aids
The executive Government may place before the court their understanding or misunderstanding of what Parliament has said or intended to say or what they think was Parliament s object and all the facts and circumstances which in their view led to the legislation
When they do so they do not speak for Parliament
No Act of Parliament may be struck down because of the understanding of Parliamentary intention by the executive government or because their the Government s spokesmen do not bring out relevant circumstances but indulge in empty and self defeating affidavits
They do not and they cannot bind Parliament
Validity of legislation is not to be judged merely by affidavits filed on behalf of the State but by all the relevant circumstances which the court may ultimately find and more especially by what may be gathered from what the legislature has itself said  529 Therefore it has to be held that administrative inconvenience can hardly be any ground
Viewing the statutory provisions form the above perspective I agree with my learned brother that the liability to repay the excess amount arose on November 1 1990 and the liability to pay interest arose on the expiry of eight days from November 1 1990
ORDER For the reasons stated by us in our separate but concurring judgments dated 421992 we allow the appeal to the limited extent indicated by us and the judgment of the High Court shall stand altered accordingly
In the circumstances of this case we make no order as to costs
VPR Appeal allowed


Summary:
Rule 2 of the Bombay Prohibition Manufacture of Spirit Gujarat Rules 1963 framed by the State Government in exercise of powers conferred under Section 58A of the Bombay Prohibition Act dealt with grant of licence for working of distillery for the manufacture of spirit
One of the conditions for grant of licence was that the cost of maintenance of staff viz payment of salary and allowances was to be paid to the Government by the licensees
This was challenged by the appellant and the High Court upheld the levy as being within the legislative competence of the State
Aggrieved against the High Court s order the appellant has preferred the present appeal
The appellants contended that since the judgement appealed against proceeded on privilege theory it cannot withstand the principle laid down in Synthetic  Chemicals case and that levy as a fee under Entry 8 of list II of Seventh Schedule or excise duty under Entry 51 is different than the cost of supervision charged under Section 58A of the Bombay Prohibition Act
Dismissing the appeal this Court 392 HELD 11 Even though the power to levy tax or duty on industrial alcohol is vested in the Central Government the State was till left with power to lay down regulations to ensure that non potable alcohol that is industrial alcohol was not diverted and misused as substitute for potable alcohol
This is enough to justify a provision like 58A of the Bombay Prohibition Act
394 D 12 Principle of occupied field precluded State from trenching on any power which was already covered by Central legislation
But in absence of any provision in Industries Development  Regulation Act touching upon regulation or ensuring that industrial alcohol was not divered the State was competent to legislate on it under Entry 33 list III of VII Schedule
394 F G 13 Trade and commerce and supply and distribution of goods are exclusive state subject under entries 26 and 27 of List II of VII Schedule
But both are subject to entry 33 of List III
What is covered in entry 33 is excluded from List II
And the power to legislate in respect of what is covered by List III is enjoyed both by Central and State legislatures subject to Article 246 of the Constitution
Since section 58A can be traced to regulatory power of the State exercisable under entry 33 of List III the challenge to its validity is liable to fail
Thus Section 58A of the Bomaby Prohibition Act is valid and is not violative of any constitutional provision
395 B C
14 It cannot be said that no cost for supervision could be demanded unless the power to issue licence for production was found to exist in State
395 d Synthetics  Chemicals Ltd  Ors vs State of UP  Ors   followed