S.N. Andley, J.
(1) These two appeals have been filed by the Union of India against the common judgment dated August 8, 1969 of Rangarajan, J, allowing two writ petitions Nos. 485 and 486 of 1967 filed by the Allied International Products Ltd., hereinafter referred to as the company' who are 1st Respondent 1n both the appeals. The Delhi Stock Exchange Association Ltd. is the second Respondent 1n L.P.A. No. 72 of 1969 while the Calcutta Stock Exchange Association Ltd. is the second Respondent 1n L.P.A. No. 73 of 1969.
(2) The two stock exchanges had not granted permission to the company for its shares to be dealt in on them. The company filed appeals to the Central Government under section 22 of the Securities Contracts (Regulation) Act. 1956. These appeals were dismissed by orders dated February 23, 1966 on the ground that the aforesaid two stock exchanges had neither granted permission for extended the time as provided by sub-section (1) of section 73 of the Companies Act, 1956, hereinafter referred to as 'the Act'. The writ petitions sought for an appropriate writ. direction or order declaring that section 73 of the Act is ultra virus the Constitution of India or, in the alternative, that the allotment of shares made by the company in pursuance of its prospectus was valid. Prayer was also made for quashing the aforesaid orders of the Central Government and the decision of the two stock exchanges rejecting the enlistment applications of the company and for a direction against the said stock exchanges to grant enlistment to the company's shares. A further prayer was made to declare section 22 of the Securities Contracts (Regulation) Act, 1956 as ultra virus being repugnant to Article 14 of the Constitution. It may be stated that the virus of the aforesaid section 22 were not challenged before the learned Single Judge but it appears that arguments were addressed on the virus of section 73 of the Act. The learned Single Judge, however, did not deal with the virus of section 73 of the Act in view of his conclusion upon its construction and the facts of the case. Although allegations of mala fides were made in the petitions, the question was not argued before the learned Single Judge nor was it argued before us. The question of virus of section 73 of the Act was not argued before us because we intimated to the counsel that if we did not agree with the construction placed by the learned Single Judge upon section 73 of the Act, the matters will have to be remanded to determine that question.
(3) The learned Single Judge quashed the aforesaid orders dated February 23, 1966 of the Central Government and holding that the stock exchanges perform statutory duties imposed by section 73 of the Act, directed the two stock exchanges to list the shares of the company.
(4) The two stock exchanges have not appealed, yet Mr. B. Sen, learned counsel appearing for the Calcutta Stock Exchange Association Ltd., and Mr. B. N. Kirpal, learned counsel appearing for the Delhi Stock Exchange Association Ltd., attempted to argue against the mandamus issued against their respective clients. Objection to this argument was raised by Mr. Palkivala, learned counsel for the company and ultimately it was agreed even by Mr. Niren De, learned Attorney General, who appeared for the appellants as also for the Industrial Finance Corporation of India, Intervenors, that the real question in the appeals was as to the true scope and interpretation of section 73 of the Act and the application of that section to the facts of the case and that a decision on this question should decide the fate of these appeals. It is on this basis that these appeals are being decided.
(5) The company was registered as a public limited company on October 11, 1962. On May'29, 1965 it issued a prospectus. One of the statements made in the prospectus was that 'applications are being made to the Bombay, Calcutta and Delhi Stock Exchanges for permission to deal in and for official quotation of the shares of the company.' This statement immediately attracted the provisions of section 73 of the Act sub-section ( 1 ) of which provides, inter alia, that where a prospectus 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. It is not disputed that this part of sub-section (1) of section 73 of the Act was complied with. The other part of this sub-section which renders the allotment void is attracted if the permission has not been granted before the expiry of the time or the extended time contemolated by this sub-section. The consequence of the allotment becoming void is provided by sub-section (2) and the consequence is that the company has to repay all monies received from applicants in pursuance of the prospectus within eight days after the accrual of the liability and if it is repaid thereafter it has to be repaid with interest. This sub-section also provides for the joint and several liability of the directors in the event of non-payment. That monies received by a company in pursuance of the prospectus are to be treated as monies received on trust is indicated by sub-section (3) of section 73 of the Act which provides that all such monies shall be kept in a separate bank account maintained with a Scheduled Bank for the period specified therein. The mandatory nature of the provisions of section 73 is indicated by sub-section (4) which makes any condition purporting to require or bind any applicant for shares or debentures to waive compliance with any of the requirements of this section void. The only other sub-section which is relevant to the controversy raised in these appeals is sub-section (5) which will be dealt with in detail a little later.
(6) There is no doubt that the prospectus issued by a company contains representations on the part of the company and its directors relating to the prospects of the company in order to induce the investing public to apply for allotment of the shares of the company. Part Iii of the Act contains various sections indicating the consequences upon the representations so made being found to be false and liabilities are imposed not only upon the company but also upon those who are responsible fur issuing the prospectus if any of the statements therein made are false. Section 73 deals with one of such statements made in a prospectus to the effect 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. If application is not made as stated in the prospectus, the consequence is that the allotment becomes void and the company and its directors are liable to repay the amounts received in pursuance of the Prospectus. Sub-section (1) of section 73 further provides that the allotment will be void even where an application for permission has been made but has not been granted.
(7) SUB-SECTION (1) of section 73 is in these terms :-
'WHEREa 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 betore the tenth day after the first issue of the prospectus or, if the permission has not been granted before the expiry of four weeks from the date of the closing of the subscription lists or such longer period not exceeding seven weeks as may, within the said four weeks be notified to the applicant for permission by or on behalf of the stock exchange.'
(8) It is clear from the language of this section that it is open to a stock exchange which wants to take the application into consideration to extend the time to a maximum of seven weeks provided it is so notified by the stock exchange to the company before the expiry of the four week period. For the purpose of construction of this sub-section, we shall consider the section as if it provided for only one period of time, namely, four weeks and then sub-section (1) of this section, in so far as the area of controversy in the present case is concerned would read as under: -
'WHEREa prospectus. .... .States that application. . .. .. will be made for permission for the shares........ offered thereby to be dealt in cm 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 granted before the expiry of four weeks from the date of the closing of the subscription lists. . . . .'
(9) The expression 'has not been granted' postulates the physical existence of the grant of permission. In other words, if there is in fact no grant of permission. In other words, if there is in fact no grant made before the expiry of the period specified, the allotment made in pursuance of the prospectus will be void. The language of the subsection is clear, direct and mandatory. This sub-section will apply in its full force even in the case of silence on the part of the stock exchange concerned for a period of four weeks. The question that one has to answer while considering whether the provisions of this subsection have been complied with or not is whether during the period of four weeks or during the extended period of seven weeks, if notified as provided, there has in fact been a grant. If there is no grant in fact, it would inevitably follow that the provisions of this sub-section have not been complied with and the allotment in question will be void.
(10) The difficulty is created really by sub-section (5) of section 73 of the Act as it stood prior to October 15, 1965 from which date it was amended by Act 31 of 1965. This sub-section as it stood prior to its amendment-and that is the sub-section with which we are concerned-read:
'(5)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.'
(11) The words 'permission shall not be deemed to be refused' were substituted by the words 'it shall not be deemed that permission has not been granted' by the said Amending Act. We would not like to concern ourselves with the reasons for the amendment and would interpret the sub-section as it stood prior to the amendment. It will then be seen that while sub-section (1) uses the expression 'permission has not been granted' the first part of sub-section (5) used the words ''permission shall not be deemed to be refused.'
(12) Section 73, it cannot be doubted, is based upon section 51 of the English Companies Act. 1948 with this difference that while subsection (1) of section 51 of the English Act uses the expression 'permission has been refused', sub-section (1) of section 73 of the Act uses the expression 'permission has not been granted.' The real and short question, thereforee, is whether the expression 'permission has not been granted' used in sub-section (1) of section 73 of the Act means the same thing as or can be equated to' the expression 'permission shall not be deemed to be refused' used in sub-section (5). If these two expressions do not mean the same thing and are not to be equated to each other as a matter of interpretation, sub-section (5) would not be capable of application even if the stock exchange intimates that the application for permission though not at present granted ; will be given further consideration. The learned Attorney General does not accept this position because his argument is that even if there is an intimation by the stock exchange as required by sub-section (5), there must be a grant within the, period or the extended period specified in sub-section (1) to escape the consequence of the allotment being void and for this submission he relies upon the opinion of Buckley in the Thirteenth Edition of his book on the Companies Acts at page 124 that:-
'NOTEthat the sub-section does not say if the permission has not been granted before the expiration of three weeks, etc.' '
(13) It is true that Buckley's opinion tends to support the appellants' contention but in our opinion full play cannot be given to the deeming provision contained in sub-section (5) if this contention is accepted. In fact, sub-section (5) may in some cases be rendered redundant or otiose.
(14) The only obligation undertaken by the company is to make an application to the recognised stock exchange. Sub-section (1) contains at least an implied injunction upon the stock exchange to consider and give a definite decision within the time specified as to whether the application is being granted or not. The activities of the stock exchange are not within the control of the, company and ordinarily a person is not to be condemned for the inaction of another. Even so the Legislature, considering the interest of the subscribers, fixed a ceiling of time by sub-section (1) within which it was to be ascertained whether the permission has been granted or not and, if not granted, the subscribers were entitled to the return of their money. But it seems to us that the Legislature further intended that the subscribers were not to have the return of their money even if there was no grant within the ceiling of time if it was intimated by the Stock Exchange that though it was not granting the permission at present, it will give further consideration to the application. Sub-section (5) of this section was intended to give effect to this intention and to serve this purpose otherwise there was no sense in making a deeming provision that permission shall not be deemed to be refused if the application is being further considered. In our opinion, no argument can be based on the different phraseology used in sub-sections (1) and (5) of this section and the expression 'permission shall not be deemed to be refused' must mean that notwithstanding the non-grant within the ceiling of time, the consequence of rendering the allotment void will not follow if the stock exchange has intimated that the application will be given further consideration. The words 'further consideration' imply that there is no decision of not granting or refusing the permission.
(15) Mr. Palkivala went to the extent of arguing that in a case where an intimation as contemplated by sub-section (5) has been given, the provisions of sub-section (1) will cease to apply under all circumstances. We are not prepared to accept this argument in its amplitude. If this argument is accepted it may lead to a startling result in a case where although the intimation contemplated by sub-section (5) has been given, there is an actual refusal within the ceiling of time. According to the argument, even in such a case, the allotment will not be rendered void. We do not think such a result was contemplated.
(16) In our view, the deeming provision in sub-section (5) that 'permission shall not be deemed to be refused' is directly connected with sub-section (1) and is equivalent to the expression 'permission has not been granted' used in the latter sub-section. thereforee, a case in which the intimation contemplated by sub-section (5) has been given by the stock exchange to the company will not be a case where 'permission has not been granted' and the consequence of the allotment been void would not follow. Once such an intimation has been given it would be immaterial if permission is refused after the expiry of the ceiling of time but such an intimation will not avail if permission is refused within the ceiling of time.
(17) The next question of construction is whether in a case, as in the present case, where the statement is that application will be made to more than one stock exchange, the allotment will be rendered void unless all the stock exchanges grant permission within the ceiling of time. The learned Attorney General has contended that even if one stock exchange out of many does not grant permission within the time, even though the others do, the allotment will stand cancelled. He says that a subscriber is attracted to subscribe by reason of the easy marketability of his shares. For instance, goes the argument, a subscriber in Calcutta may be pursuaded to apply for shares on the understanding that the shares will be listed on the Calcutta Stock Exchange and that if he were to want to deal in the shares he will not have to go to the Bombay Stock Exchange or to the Delhi Stock Exchange. It is urged that the singular includes the plural and if applications are made to various stock exchanges, they must be granted by all of them. We do not find it possibly to accept this argument. It is true that the marketability of a share may induce investment therein but it is too much to say that in the instance given the share will cease to be marketable if it is not listed on the Calcutta Stock Exchange. According to the interpretation that we have. given already, the consequence of the allotment being rendered void would not follow in a case where intimation has been given as required by sub-section (5) but there is a refusal to list after the expiry of the ceiling of time. If that is so, the question of easy marketability is irrelevant.
(18) In a case where applications are given to more than one stock exchange and even one stock exchange grants the permission, the answer to the question whether permission has been granted by 'a recognised stock exchange' for the shares of the company to be dealt in on it must be in the affirmative. Take a case where the statement in the prospectus is that application will be made to a recognised stock exchange but in fact applications are made to more than one stock exchange. It cannot be suggested that merely because the singular includes the plural, refusal to grant by even one stock exchange will attract the consequences contemplated by sub-section (1). Take another case where the statement in the prospectus is that applications will be made to recognised stock exchanges but applications are not made to all recognised stock exchanges. In such a case also the consequences of the sub-section will not follow if application has been made to more than one recognised stock exchange. Conversely, if a statement is made that applications will be made to specified recognised stock exchanges but application is in fact made to only one of such recognised stock exchanges, then the consequences of the section would undoubtedly follow because the company has not acted in compliance with its representation.
(19) Our conclusions on the relevant part of section 73 are:--
(1)That sub-section (1) contemplates a grant of permission in the physical sense within the time or extended time and the absence of a grant within such time either by reason of complete silence on the part of the stock exchange or by an express refusal to grant would attract the consequences contemplated by this sub-section.
(2)The expression 'permission has not been granted' in sub-section (1) is equated to the expression 'permission shall not be deemed to be refused' in sub-section (5).
(3)If the stock exchange intimates before the expiry of the time or the extended time that the application or permission though not at present granted, will be given further consideration, than if there is no refusal within the time or extended time, the consequences of sub-section (1) will not follow even if permission has been refused after the expiry of the, time or extended time. But such consequences will follow if in spite of the intimation contemplated by subsection (5), there is an actual refusal before the time or extended time.
(4)If permission has been refused by one of several recognised stock exchanges stated in the prospectus, the consequences of sub-section (1) will not follow if permission has been granted by any one or more of the other stock exchanges within the time or extended time or one or more of such stock exchanges has intimated that the application for permission though not at present granted, will be given further consideration because in such a case permission cannot be deemed to be refused and it cannot be taken to be a case of non-grant.
(20) We then proceed to examine whether the consequences of subsection (1) of section 73 of the Act can be said to follow in the case of this company. The contention of the learned Attorney General is that there has not been any grant by any of the three stock exchanges, namely, Bombay, Calcutta and Delhi mentioned in the prospectus issued by the company. It is not disputed that the company issued its prospectus on May 29, 1965; it applied to the Bombay, Calcutta and Delhi Stock Exchanges on June 3, 1965; its subscription list was closed on June 21, 1965; the four weeks' period expired on July 19, 1965 and the seven weeks' period expired on August 9, 1965.
(21) Taking the case of the Bombay Stock Exchange first, it appears that this exchange wrote a letter to the company on June 22, 1965 extending the time to seven weeks. The Bombay Stock Exchange also sent an intimation as contemplated by sub-section (5) of section 73 staling that the application was receiving further consideration and asking for certain formalities to be complied with. Even if nothing more had happened, it could not be said that permission had been refused by the Bombay Stock Exchange within the extended time. As a matter of fact that Bombay Stock Exchange granted the company's application on September 13, 1965. that is, after the expiry of the seven weeks' period. Even so, according to the interpretation placed by us, it cannot be said that there was a non-grant as contemplated by sub-section (1) of section 73 in so far as the Bombay Stock Exchange, is concerned. This conclusion is enough to dispose of these appeals but we will examine the facts in relation to the other two stock exchanges also.
(22) Taking the case of the Calcutta Stock Exchange next, it is not disputed that there was no' notification by it extending the period from four weeks to seven weeks and, thereforee, we have to determine whether there can be said to be non-grant or a refusal of permission by the Calcutta Stock Exchange before the expiry of four weeks on July 19, 1965. The Calcutta Stock Exchange sent a notice to its members 'on June 8, 1965 stating that an application had been received from the, company for enlistment of shares. On the same date, it wrote to the company enquiring whether it was prepared to amend its Articles and to make certain arrangements regarding the call on shares and it also enquired whether Government had imposed any restrictions on the transfer of the shares of the company. The company, by its letter dated June 10, 1965, gave the requisite information. On July 1, 1965, the Calcutta Stock Exchange informed the company that the latter had not answered certain queries and that it was only on receipt of the answer to these queries that the application for listing will be placed before the Enlistment Sub-Committee for consideration. By a further letter dated July 12, 1965, the Calcutta Stock Exchange asked for some further information. It is clear from this correspondence that the Calcutta Stock Exchange did not refuse the application of the company before, the expiry of the four week period. The question then arises whether the letters of the Calcutta Stock Exchange referred to can amount to an intimation to the company that the application for 'permission though not at present granted, will be given further consideration'. It is urged by the learned Attorney General that these letters have been signed by the Secretary of the Calcutta Stock Exchange and cannot ever amount to the requisite intimation by the stock exchange. We do not find it possible to accept this extreme contention. The Secretary of the Calcutta Stock Exchange must, we take it, have written these letters for and on behalf of the Exchange. These letters cannot be construed to be letters emanating from the Secretary personally. The inner working or the constitution or by-aws of a particular stock exchange cannot, without imposing an unreasonable burden on an applicant, be said to be the concern of the company, The question is whether these letters are or are not of and from the Calcutta Stock Exchange and the answer must be in the affirmative. That being so, the further question that arises is whether these letters can constitute an intimation within the meaning of sub-section (5) of section 73 of the Act. This sub-section does not provide for a rigid verbal formula. It is to be gathered from the tenor of the communication from a particular stock exchange whether such communication shows that the permission has not been granted at the time when the communication was issued and that the application will receive further consideration. The first consideration that any stock exchange must give. to an application is immediately upon its receipt by it. If upon that consideration, certain information or particulars are asked for it can only be for the purpose of further consideration. It would be open to a stock exchange to refuse the application immediately on its receipt in which case the question of further consideration would not arise. But if the Stock Exchange asks for further information or par- ticulars, it must be for the purpose of further considering the application with a view to see whether the application is to be granted or refused. Asking for further information and particulars also presupposes that the application is not being granted at present. Looked at from this point of view, we are of the view that the aforesaid correspondence emanating from the Calcutta Stock Exchange constitutes an intimation within the meaning of sub-section (5) of section 73 of the Act before the expiry of the four week period. On that view, it must be held that the case is one where it can bo said that permission has not been refused before the expiry of four weeks. The fact that the Calcutta Stock Exchange refused permission on November 5, 1965 long after the expiry of the. relevant period does not affect the matter.
(23) Then we come to the case of the Delhi Stock Exchange which also did not notify an extension and thereforee, in the case of this stock exchange also the relevant period would be four weeks. The Delhi Stock Exchange issued a notice on June 4, 1965 to its members of the application of the company for enlistment. The notice further stated that the matter will be placed before the board for consideration after a week. Copy of this notice was endorsed to the company. By a letter dated July 10, 1965 this stock exchange wrote to the company asking for completion of certain formalities. There was no further communication from the stock exchange before the expiry of the four week period. From these two documents alone it cannot but be inferred that the application of the company must have been considered by the. Board in its meeting and the Board decided to ask for completion of certain formalities for the purpose of further consideration of the application. For the reasons stated while dealing with the case of the Calcutta Stock Exchange, we are of the view that these two documents cannot amount to a non-grant or refusal of permission and constitute an intimation as required by sub-section (5) of section 73 of the Act.
(24) For the above reasons, we hold that the allotment made by the company has not been rendered void by reason of sub-section (1) of section 73 of the Act. Both these appeals are, thereforee, dismissed. In view, however, of the fact that we have not found the interpretation of section 73 of the Act to be easy, we feel that the parties should be left to bear their respective costs, incurred not only in these appeals but also in the proceedings before the learned Single Judge.