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PETITIONER: RAYMOND SYNTHETICS LTD. AND ORS.

       Vs.

RESPONDENT: UNION OF INDIA AND ORS.

DATE OF JUDGMENT04/02/1992

BENCH: THOMMEN, T.K. (J) BENCH: THOMMEN, T.K. (J) MOHAN, S. (J)

CITATION:  1992 AIR  847            1992 SCR  (1) 481  1992 SCC  (2) 255        JT 1992 (1)   463  1992 SCALE  (1)264

ACT:      Companies Act, 1956-Section 73-Public Limited  company- Listing shares on stock exchange-Procedure-When allotment of shares  becomes  void-When liability  to  repay  application money  and  interest  arises-Permission-When  deemed  to  be refused or granted.      Securities Contracts (Regulation) Act, 1956-Section 22- Appeal-When lies-Pending appeal-Effect.      Companies  Act, 1956-Section 73, (1A) (2), (2A),  (2B), 2(31),    5-Interest-Payment    of-Company’s    liabilities- Circumstances-Situation   in   pre   and   post    Companies (Amendment) Act, 1974 - Liability of Directors-Scope  of-"An Officer in default"-Construction.      Companies    Act,    1956-Section    73(2)-"Forthwith"- Construction of-Legislative intention.      Companies  Act, 1956-Section 73(1) (2)  (3)-Application money-Company’s   right   or  obligation  to   credit   bank accounts-Effect-Purposes for usages of such money.      Companies  Act, 1956-Section  73(2)-Interest-Assessment period-Calculation-Starting   point-Construction-Legislation intention.      Companies   Act,  1956-Section  73-Ambiguous   section- Construction-Method.      Interpretation of Statut-Ambiguous section-Construction (Section73, Companies Act, 1956)      Companies  Act, 1956-Section 73  (2A)-When  applicable- "Due"-Construction-"Due" and "payable" not same- "Penal" not penalty-Administrative inconveniences cannot be pleaded.

HEADNOTE:      The   appellant-company   was  registered   under   the Companies  Act,  1956.   It  obtained  the  consent  of  the Government of India to                                                        482 issue  7,20,00,000 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

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letters/certificates and refund orders."      On  12.7.1990  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  26,32,894 applications for equity shares  together with  an aggregate sum of Rs. 225,25,51,247 in respect of  a public issue of Rs. 25 crores.      The  shares  issue was close on 23rd August  1990.   On October  15,1990  the  Board of  Directors  of  the  company approved  the allotment of shares.  Prior to  1.11.1990,  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 25,50,604  refund  order, which  were  printed  in Bombay and they were  meant  to  be despatched  from  Delhi.  The  company  despatched  8,55,226 refund orders from New Delhi at the rate of approx. 1,00,000 refund orders per day.      On 26th October, 1990 a consignment of 6,69,999  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 30,1990 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 Companies Act 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

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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 : 1.01 As per Dr. Justice T.K. 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]      1.02  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]      1.03. Sub-section (1A) of Section 73 as amended by  the Companies  (Amendment) Act, 1988 makes it necessary for  the

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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]      1.04.  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]      1.05.  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]      1.06   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]      1.07.  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 Securities  Contracts (Regulation) Act, 1956.  Nevertheless, the permission, if not obtained with 10 weeks, is deemed not to have been granted. [504 F-G]      1.08.  It is the legislative intent to delay the result postulated  under  sub-section  (1A)  i.e.,  rendering   the allotment void, until the period of 10 weeks has expired  or until the dismissal of the appeal.      1.09.   The liability to repay the excess money in  the present  case  arose on 1.11.1990 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  1.11.1990. [498 C-D]      2.01.  From the decision of the stock exchange refusing permission,  an  appeal  will lie under section  22  of  the Securities Contracts (Regulation)Act, 1956. [498 C]      2.02.   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]      2.03.   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]      3.01   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

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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]      3.02.  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 (Amendment)Act,   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]      3.03.   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]      3.04.   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]      3.05. 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 5(a) (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]      3.06.   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

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    3.07. 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]      3.08.  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]      3.09.  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]      3.10.  The accrual of interest under sub-section (2) is not dependent or consequent on the nullity postulated insub- section (1A). [505B]      4.01.  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]      4.02. 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 v. The Commissioner of Police, Greater  Bombay, [1956] SCR 653 and Salim v. State  of  West Bengal, [1975] 3 SCR 394, distinguished.      5.01.   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]      5.02.  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

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keep it longer than permitted by the section. [506 G-H]      Palmer’s Company Law, 24th ed. para 24.31; 1955(1)  WLR 1080, referred to.      6.01.  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]      6.02.   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]      6.03.   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

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the return of the excess amounts due to him. [508 E-G]      Desh Bandu Gupta & Co. & ors. v. Delhi Stock   Exchange Association  Ltd.,  [1979] 4 SCC 565 and  K.P.  Varghese  v. Income  Tax  Officer, Ernakulam & Anr., [1981]  4  SCC  173, referred to.                                                        491      Crawford’s  Interpretation of Laws, 1989 Ed.  -referred to.      As per Mr. Justics S. Mohan (Concurring)      1.01.  Sub-section (2A) of Section 73 of the  Companies Act  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]      1.02.  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]      2.01.   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]      2.02.   "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 S. 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 v. Husaini Khanam, (1914)36 All.  195; 41  I.A. 84; 23 I.C. 355; Bir Mohammad V. Nagoor, [1914]  27 Mad. L.J. 483; 25 I.C. 576 (which over-ruled Rose  Ammal  v. Rajarathnam, (1900) 23 Mad. 23); Baroda Board & Paper  Mills Ltd. v. Income Tax Officer, Circle I, Ward E, Ahmedabad  and others, 1976 (46) company cases                                                        492 25;  Union  of India v. Air Foam Industries (P)   Ltd.,  AIR 1974 S.C. 1265 & 1271 (Para 7) referred to.      3.  "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  E.O. instanti. [526 E-F]      Dickerman v. Trust Co., 176 U.S. 193, 20 Sup., Ct. 311, 44 L.Ed. 423, 4 Tyrwh. 837; Edwards v. Ins. Co.,  75 Pa 378; Seammon v. Ins. Co., 101, III 621; 11 H.L. Cas. 337; Bennect v.  Ins 67 N.Y. 274; Pennsylvanis R.Co. v. Reichert, 58  Md. 261;  Meriden Silver Plate Co. v. Flory 44 Ohio St.  437,  7 N.E.  753.  7 Dowl. 789" 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.

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    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 v. Commissioner of Income Tax, Delhi, New Delhi, [1980] 3 SCR 421, referred to.      5.  In  view  of the clear terms  of  the  statute  the administrative inconvenience cannot be pleaded. [528 B-C]      Sanjeev  Coke  Manufacturing Co v. Bharat  Cooking Coal Ltd. & Another, [1983] 1 SCR 1000 1029, referred to.

JUDGMENT:      CIVIL APPELLATE JURISDICTION:  Civil Appeal No. 3498 of 1991.      From the Judgment dated 17/18.7.1991 of the Bombay High Court in writ petition No. 2038 of 1991.      G.  Ramaswamy,  Attorney  General,  V.R.  Reddy,  Addl. Solicitor  General,  Anil  B. Divan, K.S.  Cooper  and  T.R. Andyaranjina, R.F. Nariman, S.A. Divan, B.R. Agrawala, Vinod B.   Agarwala,   P.N.  Kapadia,  Pramod  B.   Agarwala,   S. Krishnachandani, Dr. Sumat Bhardwaj, Ms. Sandhaya Mehta  for M/s  Gagret  & Co., Ms. Sushma Suri, A.M.  Khanwilkar,  M.P. Bharucha,  R.  Karanjawala, Mrs. M. Karanjawala,  Mrs.  V.S. Rekha,  A.R.  Amin,  K.J. John, Dr. A.M.  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  Companies  Act, 1956 (the "Act").  The answer to it depends on the answer to the  more fundamental and far more difficult question,  i.e. 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 Companies Act, 1956.  The company obtained the consent of the Government of India vide its Order  dated May  31, 1990 to issue 7,20,00,000 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

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par.  This Order was, made by the Government in exercise  of its power under the Capital Issues (Control) Act, 1947.  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 letters/certificates  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 26,32,894  applications for equity shares together  with  an aggregate  sum of Rs. 225,25,51,247 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 25,50,604  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  8,55,226 refund orders from the  Sarojini  Nagar Post  Office ,  New Delhi at the rate of  approx.   1,00,000 refund orders per day.  On 26th October, 1990 a  consignment of 6,69,999 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 Bank,instructions 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 30,1990  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  13,1991 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

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                                                      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  23.2 of its publication of March 1991 quotes  the condition mentioned in the Order of the Government of  India dated 31.5.1990(which we have extracted above)to 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

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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 1.1. 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          "S. 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 15.6.1988.   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  1.2.1975, and  substituted  again and renumbered as the  present  sub- section  (1A)  with effect from 15.6.1988 by  the  Companies (Amendment) Act, 1988.  Sub-section (1A) reads:          "73(1A).   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

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        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 (Regulation)          Act, 1956 (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  Securities Contracts (Regulation) Act,  1956.   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),   i.e., 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:          "S.  73(2).   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

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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):-          "S.73  (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,

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        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 w.e.f. 1.2.1975. 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 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  2(31)  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  2(31) read with section 5(a) (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

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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. K.S. Cooper,  for  the  Securities  & Exchange  Board  of India, Mr. T.R.  Andhyarujina,  for  the Bombay  Stock Exchange and Dr. A.M. 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 Shares/Debentures 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:_          "S. 73(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".      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

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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   v.   The Commissioner of Police, Greater Bombay, [1975] SCR 653,  and Salim  v. State of West Bengal, [1975] 3 SCR 394, 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:-          "S.73(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 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.

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This is, of course, in addition to the  payment of  interest prescribed under sub-section (2A).      Sub-section (5), as it stood prior to 1.2.1975, read:          "S.  73(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".      This  sub-section  was  substituted  by  the  Companies (Amendment)  Act, 1974 with effect from 1.2.1975 reading  as follows:-          "S.73(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)."      Sub-section  (1)  referred to in  sub-section  (5),  as substituted on 1.2.1975, 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 w.e.f. 15.6.1988.  Consequently,  the words  ‘the time specified in sub-section (1)’ appearing  in sub-section  (5),  as inserted w.e.f. 1.2.1975,  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, i.e., 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 Securities Contracts (Regulation) Act, 1956 (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:-          "S.73(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

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        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:-          "S.73(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

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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 24.31; 1955  (1)  WLR, 1080,1085.      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

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                                                 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 letters/certificates.  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 23.2).   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.  v.  Delhi  Stock   Exchange Association  Ltd.,  [1979] 4 SCC 565 and  K.P.  Varghese  v. Income Tax Officer, Ernakulam & Anr., [1981] 4 SCC 173.  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 73(2A) 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 1.11.1990 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 1.11.1990.      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

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points that arises for determination are:     (i)  the scope of liability under Section 73 (2A) of the          Companies Act.     (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 Companies Act  1956 (Central Act of 1/1956 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,

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        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 Securities Contracts (Regulation)          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          as  aforesaid,  substituted for "or  has  not  been          granted as aforesaid" by the Companies  (Amendment)          Act,  1974, w.e.f. 1.2.1975 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

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             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

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        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.  (1).  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

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        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 2(A), 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.

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        (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

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        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   Securities   Contract (Regulations) Act, 1956, 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 2(36) 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

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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 69(5), specific dates have been mentioned as 120 and 130  respectively.  Sub-section 2(A) of Section 73 does  not mention  any specific day.  It also requires to  be  noticed under  sub-section 1(A) of this very section "10 weeks  from the date of closing of the subscription lists" is mentioned. Both  under sub-section (2) and 2(A), 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 1(A), 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 2(A)  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,

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        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 v. Husaini Khanam, [1914] 36 All. 195. 41 I.A. 84, 23 I.C. 355 followed in Bir Mohammad v. Nagoor, [1914] 27 Mad.  L.J. 483, 25 I.C. 576  which treats Rose Ammal v. Rajarathnam, [1900] 23  Mad. 23 as overruled".      In  1976 (46) Company Cases 25 in Baroda Board &  Paper Mills  Ltd.  v.  Income-Tax  Officer.  Circle  I,   Warde-E, Ahmedabad and others, it is held as under :-          "Mr.  A.L. Shah who appears for the  liquidator  in          O.J.  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          D.A. 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

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        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 v. 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  530(1)  (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 v. Air Foam Industries (P) Ltd., A.I.R. 1974 S.C. 1265 & 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 v. Stenton, [1883]  11  QBD          518  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  v.          Arguello, [1869] 37 Calif 524, which was  apporoved          by  this  Court in Kesoram Industies v.  Commr.  of          Wealth  Tax, [1966] 2 SCR 688 (AIR 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

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        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  S.732  (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. Vol.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-s(3), 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

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        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 v. 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 v. Nanwa Gold Mines Ltd., [1955] I W.L.R. 1080  @ 1085.          "Sub-section (3) provides that where money is  sent          in   on  a  provisional  application:  "All   money

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        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  51(3)  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 2(A) 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          Companies   Act,   1956,   and   the   rules   made          thereunder".                                     "Signature of Directors"      Again,  notification No. S.O. 666(E) 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          letters/refunds  within  a period of 10  weeks  and          interest in case of any delay                                                        526          in  refund  at the prescribed  rate  under  Section          73(2)/2A"      Thus, 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.      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 v. Trust Co., 176 U.S. 193, 20  Sup,

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Ct. 311, 44 L.Ed. 423).  This is the import of the term;  it varies,  of  course, with every particular cases;  4  Tyrwh. 837;  Edwards v. Ins Co., 75 Pa. 378.  See Seammon  v.  Ins. Co., 101, III 621; 11 H.L. Cas. 337.  Bannect v. Ins 67 N.Y. 274;  Pennsylvanis R. Co. v. Reichert, 58 Md.  261;  Meriden Silver  Plate Co. v. Flory 44 Ohio St. 437, 7 N.E. 753.   It is  not as promptly as immediately; in some cases  it  might mean  within a reasonable time; 7 Dowl. 789".  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,  Ex. 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 E.O. 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.   v. Commissioner  of Income Tax, Delhi, New Delhi, [1980] 3  SCR 421.  "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 3(2) requires the payment of  cess on the date prescribed under the rules.  Rule 4 of the  U.P. 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 s. 3(3) 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  3(5)  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 s. 3(3)  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

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prescribed period a larger sum will become payable as  cess. The  enlargement  of the cess liability is  automatic  under section 3(3).  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 s. 3(5).  Nor is it a penalty within  the meaning of s. 4, which provides for a criminal liability and a  criminal prosecution.  The penalty payable under s.  3(5) lies  in  the  discretion  of  the  collecting  officer   or authority.   In  the  case of the penalty  under  s.  4,  no prosecution  can  be  instituted unless, under  s.  5(1),  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  s. 3(3)  from the penalty imposed under s. 3(5).  Section  3(6) 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  s.  3(6)  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 s. 3(5), a  separate provision  for  recovery  has  been  made  under  s.   3(7). Although the manner of recovery of a penalty provided by  s. 3(7)  is the same as the manner of recovery provided  by  s. 3(6)  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  s.3(3) 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  s. 3(5) and for penalty as a criminal  offence  under s.4.   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 s. 3(5) and s.4 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.  v. Bharat Coking Coal Ltd. & Another, [1983] 1 SCR 1000 @ 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

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        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 4.2.1992,  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. V.P.R.                                       Appeal allowed.