Civil Appeal No 350 of 1974
Appeal by Certificate from the Judgment and Order dated 2930 8 1973 of the Gujarat High Court in Special Civil Application No 163 of 1973
MHBaig Rajiv Shakdhar RSasi Prabhu for Ms SA Shroff  Co for the Appellants
PS Poti Bimal Roy Jad
Anip Sachthey and Ms Rashmi Dhariwal for the Respondents
The Judgment of the Court was delivered by MOHAN J
This is an appeal by certificate granted by the High Court of Gujarat at Ahmedabad under articles 1321 and 133 1a of the Constitution of India
It is directed against the judgment dated 2930th August 1973 in special Civil Application No 163 of 1973
The facts leading to this appeal are briefly as under The Appellant is a company registered under Indian 
It is engaged in the business of manufacturing resins chemicals sodium carboxy methyl cellulose and certain other chemicals
Industrial alcohol is one of the raw materials used by the appellant company
Though till the year 1969 the appellant was purchasing industrial alcohol from the market it installed its own distillery from may 1970 at Bilimora within the State of gujarat
This was for the purpose of manufacturing industrial alcohol from molasses
On July 3rd 1969 the second respondent the Director of Prohibition and excise Gujarat State Ahmedabad issued a licence to the appellant for manufacturing spirit
In accordance with the conditions No 2 and 3 of the licence the 2nd respondent appointed a staff of 9 persons
The said staff consisted of one Inspector one Sub Inspector one Nayak one jamadar and five constables to supervise the manufacture of spirit in the 678 appellant s distillery plant
The appellant was also required to provide residential accommodation to the supervisory staff within the factory premises
On July 3rd 1969 the 2nd respondent asked the appellant to deposit the supervisory charges
From time to time these supervisory charges were also deposited in accordance with the directions of 2nd respondent
It requires to be stated at this stage that the levy of supervisory charges is traceable to section 58A of Bombay Prohibition Act of 1949
The Section says Sec58A  The State government may be general or special order direct that the manufacture import export transport storage sale purchase use collection or cultivation of any intoxicant denatured spirituous preparation hemp mhowra flowers or molasses shall be under the supervision of such Prohibition and Excise or Police Staff as it may deem proper to appoint and that the cost of such staff shall be paid to the State Government by person manufacturing importingexportingtransporting storingselling purchasing using collecting or cultivating the intoxicant denatured spirituous preparation hemp mhowra flowers or molasses Provided that the State Government may exempt any class of persons or institution from paying the whole or any part of the cost of such staff Section 143 of the said Act confers power for making rules
Rules have been framed called Bombay Prohibition Manufacture of Spirit GujaratRules 1963
These rules inter alia regulate the working of distilleries manufacturing spirit
Rule 2 provides for the licence
Condition Nos2 and 3 of the licence require payment of the supervisory staff and for provision of quarters for the residential accommodation of the staff respectively
The appellant filled Civil Application No 163 of 1973 in the High court of Gujarat challenging the constitutional validity of Section 58A of the Act
By the impugned judgment the said petition was dismissed
Hence the present civil appeal
679 The arguments of the appellant briefly stated will boil down to this
It has been categorically laid down in Synthetics  Chemicals Ltd vs State of UP  Ors 1989 Supp 1 SCR 623 that in respect of industrial alcohol the states have no power to impose the impost as is sought to be done in the instant case
The theory of privilege as adumbrated by the High court can no longer be sustained in view of the judgement
Even otherwise there is no quid pro quo
In countering the submissions it is argued on behalf of the State that Synthetics and Chemicals Ltd etc
supra dealt merely with the vend fees
That is not the case here
The maintenance of the Staff contemplated under Section 58A of the Act is primarily for the purpose of ensuring that while dealing with industrial alcohol no attempt shall be made to divert nonpotable alcohol
Therefore by regulatory measures the States sees to it that industrial alcohol is not diverted for the use as potable alcohol
Such a regulatory measure is perfectly valid as seen from Southern Pharmaceuticals  Chemicals vs State of Kerala  This decision was noted with approval in Synthetics  Chemicals Ltd Etc
Supra
However such a power was sustained though not on police power but as a regulatory measure
As regards the services rendered the appellants are precluded from contending that the services did not make the impost since the High Court has noted that it was not contended before it that there was not sufficient quid pro quo between the quantum of impost and the services rendered to the manufacturer or businessman
We are relieved of the necessity of deciding the correctness of these submissions by a detailed judgment since identical points were raised in Civil Appeal No 503 of 1974 Sh
Bileshwar Khand Udyog Khedut Sahakari Mandali Ltd vs The State of Gujarat  Anr to which one of us Mohan J was a party
The said Civil Appeal has been dismissed considering these aspects and upholding the validity of Section 58A
The said judgment will squarely cover this case as well
We fully concur with the reasons contained therein
In Synthetics  Chemicals Ltd etc
supra concerning the power to make regulations in order that non potable alcohol may not be diverted for use as potable alcohol the following observations are found at page 681 680 The position with regard to the control of alcohol industry has undergone material and significant change after the amendment of 1956 to the IDR Act
After the amendment the state is left with only the following powers to legislate in respect of alcohol a it may pass any legislation in the nature of prohibition of potable liquor referable to entry 6 of list II and regulating powers
b it may lay down regulations to ensure that non potable alcohol is not diverted and misused as a substitute for potable alcohol
c the State may charge excise duty on potable alcohol and sales tax under entry 52 of list II However sales tax cannot be charged on industrial alcohol in the present case because under the Ethyl Alcohol price Control Orders sales tax cannot be charged by the State on industrial alcohol
d however in case State is rendering any service as distinct from its claim of so called grant of privilege it may charge fees based on quid pro quo
 In this connection we may also usefully refer to southern Pharmaceuticals  Chemicals supra
This case related to the constitutional validity of Sections 12 A 12 B14e  f 68 A of Kerala Abkari Act 1 of 1077 and Rules 13 and 16 of the Kerala Rectified Spirit Rules 1972
One of the contentions raised was that the provision contained under Section 14 e of the Act for the collection of supervisory charges was clearly invalid inasmuch as a They are in conflict of Rule 45 of Central Excise Rules and b They could not be sustained as fee as there was no quid pro quo
In the said judgment at page 1875 para27 Southern Pharmaceuticals  Chemicals supra reads as under  A fee may be charged for the privilege or benefit conferred 681 or service rendered or to meet the expenses connected there with
A fee my be levied to meet the cost of supervision and may be something more
It is in consideration for the privilege licence or service
Again in para 29 it was stated thus There is a broad co relationship between the fee collected and the cost of the establishment under Section 14e of the Act it is provided that the commissioner with the previous approval of the Government may prescribe the size and nature of the establishment necessary for supervision of a manufactory and the cost of the establishment and other incidental charges in connection with such supervision be realised from the licensee
There can be no doubt that the supervisory staff is deployed in a bonded manufactory by the Government for its own protection to prevent the leakage of revenue but there is no denying the fact that a licensee undoubtedly receives a service in return
The cost of the establishment levied under Section 14e of the Act is to be collected from the licensee in the manner provided by Rule 164 of the Kerala Rectified Spirit Rules 1972relevant part of which reads 4 All the transactions in the spirit store shall be conducted only in the presence of an Excise Officer not below the rank of an Excise Inspector
Such officer shall be assisted by at least two Excise Guards
The cost of establishment of such officer and the guards shall be payable by the licensee in advance in the first week of every month as per counter signed challan to be obtained from such officer
The rate at which the cost of establishment is to be paid by the licensee shall be fixed by the Commissioner from time to time and intimated to the licensee in writing  There is admittedly no provision made in the Central Rules for the recovery of supervisory charges perhaps because as the Court observed in the Hyderabad Chemicals and Pharmaceutical s case  supra it was felt that the duty on medicinal and toilet preparations containing alcohol 682 would be sufficient to defray the cost of such supervision
But the absence of such a provision in the Central Rules as we have already indicated does not deprive the State from making a provision in that behalf
It is true that the supervisory charges are in the nature of a compulsory exaction from a licensee and the collections are not credited to a separate fund but are taken to the consolidated fund of the State and are not separately appropriated towards the expenditure incurred in redering the service
However as observed in Government of Madras vs Zenith Lamp  Electricals Ltd  1973 SC 724 followed in State of Rajasthan vs Sajjanlal Panjawat1974 2 SCR 741 AIR that by itself is not decisive by reason of ART
266 of the Constitution
It is equally true that normally a fee is uniform and no account is taken of the paying capacity of the recipient of the service but absence of uniformity will not make it a tax if co relationship is established see Commissioner HRE Madras vs Lakshmindra Thirtha Swamiar of Shirur Mutt and Government of Madras vs
Zenith Lamp and Electricals Ltd  and  supra
The cost of supervision would necessarily vary with the nature and extent of the business carried on by a licensee
Therefore the supervisory charges can be sustained even if they are regarded as a fee for services rendered by the State or its instrumentalities
 In dealing with Synthetics Chemical case supra the following observations were made Learned Advocates General for the States of Gujarat and Kerala have also made their submissions and referred to several decision and the concept of police power and contented that imposition of a fee would be the most effective method of regulating intoxicating liquor other than alcohol
According to the Advocate General of Kerala that would be justified as the reasonable measure in regard to intoxicating liquor
According to him it has been accepted by courts all along that the police power  of the State enables regulations to be made regarding manufacture transport possession 683 and sale of intoxicating liquor
Such police power could be exercised as to impose reasonable restriction as to effectuate the power
He referred to the observations of this Court in Cooverjee BBharucha vs The Excise Commissioner and the Chief Commissioner Ajmer  Ors  which quoted the passage from Crowley vs Christensen1890 24 Lawyers  Edn 620
Reference was also made to Hari Shanker s case supra
Where this Court quoted Vol
38 of the American Jurisprudence where it was stated that the higher the fee is imposed for a licence better is the regulation
Reliance was also placed on P N Kaushal s case supra
It was contended that it has been accepted by this Court that the police power is excercisable for regulation of an activity of a legislature within the permissible field or impost as regulatory measure
It may be valid though it may neither be fee nor a tax in the limited sense of the term
See the observations of this court in Southern Pharmaceuticals  Chemicals
Trichur  Ors etc
vs State of Kerala  Ors
etc1982 1 SCR 519 at 537 
Regarding regulatory measures in connection with medicinal preparations containing alcohol it was observed by this Court that the impugned provisions had to be enacted to ensure that the Rectified spirit is not misused under the pretext of being used for toilet and medicinal preparations containing alcohol
Such a regulation is a necessary concomitant of the police power of the State to regulate such trade or business which is inherently dangerous to public health
The American doctrine of police power is not perhaps applicable as such in India but power of sovereignty to regulate as part of the power of the competent legislature to effectuate its aim are there
It is true that that in the State of West Bengal vs Subodh Gopal Bose  Ors 1954V SCR 587 at 601 604 and Kameshwar Prasad  Ors vs The State of Bihar  Anr  the concept of police power was accepted as such but this doctrine was not accepted in India as an independent power but was recognised as part of the power of the State to legislate with respect to the matters enumerated in the State and Concurrent Lists subject to constitutional limitations
It 684 was that the American jurisprudence of police power as distinguished from specific legislative power is not recognised in our Constitution and is therefore contrary to the scheme of the Constitution
In interpreting the provisions of our Constitution we should go by the plain words used by the Constitution makers and the importing of expression like police power  which is a term of variable and indefinite connotation can only make the task of interpretation more difficult
It was contended that in enacting a law with respect to intoxicating liquor as part of the legislative power measures of social control and regulation of private rights are permissible and as such may even amount to prohibition
We are of the opinion that we need not detain ourselves on the question whether the States have the police power or not
We must accept the position that the States have the power to regulate the use of alcohol and that power must include power to make provisions to prevent and or check industrial alcohol being used as intoxicating or drinkable alcohol
The question is whether in the grab of regulations a legislation which is in pith and substance as we look upon the instant legislation fee or levy which has no connection with the cost or expenses administering the regulation can be imposed purely as regulatory measure
Judges by the pith and substance of the impugned legislation we are definitely of the opinion that these levies cannot be treated as part of regulatory measures
in this view of the matter we do not detain ourselves with examining the numerous American decisions to which our attention was drawn by learned counsel very elaborately and thoroughly
 This is an added reasoning to uphold the validity of Section 58A
Turning to the second argument about the absence of quid pro quo we need only extract the following from the judgment of the High Court Section 58A of the Bombay Prohibition Act creates a statutory duty of supervision and incidentally provides for recovering from a manufacturer or a businessman the cost of supervision which is primarily necessitated by the manufacturer 685 or businessman having been permitted under a licence to carry on lawfully a business or industrial activity which would otherwise have been unlawful
We need not go into the details of this aspect because it has not been contended before us that if the levy under Section 58A is held to be a fee there is no sufficient quid pro quo between the quantum of the impost and the services rendered to the manufacturer or businessman
 In the result the appeal fails and is dismissed with cost
VPR Appeal dismissed


Summary:
The appellant company was registered under the 
It obtained the consent of the Government of India to 482 issue 72000000 equity shares of Rs 10 each at par and 33 90 000 fourteen per cent secured redeemable non convertible debentures of Rs 100 each at per
One of the conditions attached to the consent order was 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 On 1271990 the company issued prospectus for the issue of the shares and debentures stating therein 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 prospects that interest at the rate of 15  per annum on the excess application money would 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 would open on August 20 1990 and close on August 23 1990 and that it would not be extended beyond August 31 1990
The issue opened on August 20 1990
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
The shares issue was close on 23rd August 1990
On October 151990 the Board of Directors of the company approved the allotment of shares
Prior to 1111990 it secured the requisite permissions of the stock exchanges at Indore Ahmedabad Bombay Calcutta and Delhi to deal in the shares offered in the prospects
The company had to despatch 2550604 refund order which were printed in Bombay and they were meant to be despatched from Delhi
The company despatched 855226 refund orders from New Delhi at the rate of approx
100000 refund orders per day
On 26th October 1990 a consignment of 669999 refund orders were despatched from Bombay to Delhi
As a result of a fire that broke out on the way many refund orders were destroyed and about 50  of the consignment was missing after the accident
In consultation with the Madhya Pradesh Stock Exchange and the Company s Bank instructions were issued by the Company to 483 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 refund orders and the printing of new refund orders delay occurred in the despatch of newly printed orders
For issuing the refund orders at the request of the company the Madhya Pradesh Stock Exchange granted extension of time till November 301990 and further extended till 19th December 1990
The Bombay Stock Exchange refusing the grant extension of time informed the company that it was bound to pay interest by reason of the delay in the despatch of refund orders
The refund orders were not despatched until 12th November 1990
The Government of India and the Securities and Exchanges Board of India Respondents Nos 1 and 2 respectively 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 of the from 1st November the expiry date of the period of 10 weeks from the date of the closure of the subscription lists till the date of posting of the refund orders
The company filed a writ petition in the High Court 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
In the High Court the respondent No 1 submitted that the liability to pay the excess amount arose on the expiry of 10 weeks from the date of closure of the subscription lists
The respondent No 2 contended that the liability arose on the date of allotment
The company the appellant contended that on the facts of the case the liability arose on at the end of the period as extended by the Stock Exchanges at Indore in terms of the prospectus
The High Court dismissed the writ petition holding that the company was liable to pay interest at the prescribed rates for the period of delay and the liability for 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
484 This appeal was filed by the Company against the High Court s judgment by special leave on the question 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 prior to the date of expiry of 10 weeks
The appellant contended that the company was entitled to retain the excess amount for the period mentioned in the prospectus and consequently no liability to pay interest could arise until the expiry of that period that as the Madhya Pradesh Stock Exchange had extended time for refund till 19th December 1990 the liability of the company to repay the excess amount did not arise until then that the interest became payable only after 8 days from the expiry of the period as extended by the Madhya Pradesh Stock Exchange and that the interest was payable as a penalty and therefore a reasonable and rational construction of the statute to be made in regard to the commencement of the liability of the company to repay the excess amount by taking into account of the relevant circumstances which caused the delay
The respondents submitted that the liability to repay the excess amount arose on the date of allotment of the shares that the liability arose forthwith and any delay beyond the period of 8 days from the day on which the liability arose attracted interest that the expression forwith  had 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
Allowing the appeal this Court HELD  101 As per Dr Justice TK Thommen  A public limited company has no obligation to have its shares listed on a recognised stock exchange
But if the company intend 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
496 G 102 Sub section 1 of section 73 as amended by the 485 Companies Amendment Act 1988 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
497 B C 103
Sub section 1A of Section 73 as amended by the Companies Amendment Act 1988 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
497 G 104
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 made dependent on securing the requisite permission of each stock exchanges whose permission has been sought
497 G 498 A 105
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
498 A 106 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
498B 107
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 
Nevertheless the permission if not obtained with 10 weeks is deemed not to have been granted
504 F G 108
It is the legislative intent to delay the result postulated under sub section 1A ie rendering the allotment void until the period of 10 weeks has expired or until the dismissal of the appeal
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 486 section 2A arose on the expiry of 8 days from 1111990
498 C D 201
From the decision of the stock exchange refusing permission an appeal will lie under section 22 of the Securities Contracts RegulationAct 1956
498 C 202
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
498 C 203
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
505 A 301 Sub section 1A of Section 73 postulates two circumstances in which interest becomes payable namely where the permission has not been applied for before issuing the prospects and the company has 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 subsection 1
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 1A
499 C D 302
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 section 2A was inserted by the Companies AmendmentAct 1974 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 amended sub section made the company liable to repay the excess amounts forthwith but did not made 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 487 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
500 C E 303
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
500 F H 304
A director of a company who is an officer in default  appearing in sub section 2A must be understood with reference to the definition of an officer who is in default  contained in section 2 31 read with section 5
This definition includes the managing director or the whole time director of a company
500 H 501 A 305
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 2 31 read with section 5a b and not upon any other director
The nominees of the Government of 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
501 A B 306
Sub section 2A provides for the accrual of interest and the rates thereof
Unlike sub section 2B providing for punishment by imposition of fine or imprisonment sub section 2A speaks only of interest which is in contra distinction 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 of its directors to pay interest in terms of sub section 2A
503 E 488 307
Sub section 2B 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 defined under section 5 with the stipulated punishment
This is of course in addition to the payment of interest prescribed under sub section 2A
503 H 504 A 308
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 notwithstanding the pendency of an appeal mentioned in the proviso to sub section 1A
Subsection 3 has to be so understood to be in harmony with the other provisions of section 73
506 C 309
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 sought it has not been granted
504 H 505 A 310
The accrual of interest under sub section 2 is not dependent or consequent on the nullity postulated insub section 1A
505B 401
The expression forthwith  does not necessarily and always mean instantaneous
The expression has to be understood in the context of the statue
Where however the statute prescribes the payment 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
502 H 503 A 402
When forthwith  is used for determining the time and mode of payment of the principal and interest a liberal or reasonable construction not to be adopted
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
503 B C 489 Keshav Nilkanth Joglekar vs The Commissioner of Police Greater Bombay  and Salim vs State of West Bengal   distinguished
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 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 return 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
505 H 506 B 502
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
506 G H Palmer s Company Law 24th ed
para 2431 19551 WLR 1080 referred to
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
507 B C 602
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 490 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 been is a case of refusal to grant permission provided that the liability to repay the application money arises upon the expiry of 10 weeks
507 D G 603
The possibility of an appeal being allowed is 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
It either event the liability to repay the amounts arises forth with 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 just and reasonable from the point of view of both the investor and the company and has the advantage of certainty uniformity and easy application
507 G 508 A 7
The section 73 is not free from ambiguities and doubts
Having been amended in several respects 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 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
508 E G Desh Bandu Gupta  Co  ors
vs Delhi Stock Exchange Association Ltd  and KP Varghese vs Income Tax Officer Ernakulam  Anr   referred to
491 Crawford s Interpretation of Laws 1989 Ed
referred to
As per Mr Justics section Mohan Concurring 101
Sub section 2A of Section 73 of the comes into operation only where permission has been granted by the recognised stock exchange or exchanges
The 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
519 B C 102
The liability of the company to repay the excess amount under Section 73 2A 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
526 A 201
The word due in the section 73 has been substituted for the word payable in order to make it clear that a mortgagor cannot redeem within the term of the mortgage
The right of redemption arises when the principal money secured by the mortgage has become due and may be exercised at any time thereafter subject of course to the law of limitation
520 C D 202 Due means payable immediately or a debt contracted but payable at a future time
A debt is said to be due the instant that it has existence as a debt it may be payable at a future time it cannot be contended on the strength of Section 530 due  and payable  is one and the same even under section 732 a
522 E F Black s Legal Dictionary 5th Edition 488 Venkataramiah s Law Lexicon and Legal Maxims Vol
I 713 714 Wharton s Law Lexicon 14th Edition Buckley on the Companies Acts 14th Edition Volume I referred to
Bhaktawar Begum vs Husaini Khanam 191436 All 195 41 IA 84  Bir Mohammad V Nagoor  which over ruled Rose Ammal vs Rajarathnam  Baroda Board  Paper Mills Ltd vs Income Tax Officer Circle I Ward E Ahmedabad and others 1976 46 company cases 492 25 Union of India vs Air Foam Industries P Ltd   1271 Para 7 referred to
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
It cannot be said that forthwith means EO instanti
526 E F Dickerman vs Trust Co  176 US 193   4 Tyrwh
837 Edwards vs Ins
Co  Seammon vs Ins
Co 101 III 621   Bennect vs Ins  Pennsylvanis RCo
vs Reichert 58 Md 261 Meriden Silver Plate Co vs Flory  193 Soutern Reporter 339 and 16 Soutern Reporter 33  35 Col I Laws 1035 Ex Secs C 10 referred to
Bouvier s Law Dictionary Referred to 4
It cannot but be held that the payment of interest is only compensatory and not penal
Merely because clause 10 uses the word penal it cannot be amount to penalty
526 F Mahalaxmi Sugar Mills Co Ltd vs Commissioner of Income Tax Delhi New Delhi   referred to
In view of the clear terms of the statute the administrative inconvenience cannot be pleaded
528 B C Sanjeev Coke Manufacturing Co vs Bharat Cooking Coal Ltd  Another  1029 referred to