RAYMOND SYNTHETICS LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) PETITIONER No. 1 is a Company registered under provisions of the Companies Act, 1956, while petitioner No. 2 is Managing Director and petitioner No. 3 is General Manager (Finance) and Secretary of the Company. The Company had obtained and industrial licence dated April 18, 1990 under the Industries (Development and Regulation) Act, 1951 for manufacture of Polyester Filament Yarn with an annual capacity of 25,000 tonnes. The Controller of Capital Issues, Government of India by letter dated May 31,1990 consented to the Company issuing 7,20,00,000 equity shares of Rs. 10/- each at par and 33,90,000 14 per cent Secured Redeemable Non-Convertible Debentures of Rs. 100/- each at par. The consent was for an aggregate public issue of securities valued at Rs. 105. 90 crores. The consent letter recites that the consent is qualified by the conditions mentioned in the annexure and the Company shall comply with the terms of the conditions so imposed. One of the condition was that the Company was to scrupulously adhere to the time limit of ten weeks from the date of closure of subscription list for allotment of all securities and despatch of allotment letters/certificates of refund orders. On July 1990 the Company issued prospectus for issue of 7,20,00,000 Equity Shares and 33,90,000 14 per cent Secured Debentures. The prospectus inter alia stated that the applications had been made to the Stock Exchanges at Indore, Ahmedabad, Bombay, Calcutta and Delhi for permission to list the equity shares and debentures offered in terms of the prospectus. This averment was necessary in view of the provisions of sub-section (1) of section 73 of the Companies Act which demands that 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 share or debentures intended to be so offered to be dealt with in the Stock Exchange or each such Stock Exchange. The prospectus sets out that allotment letters, debenture certificates in respect of debentures or share certificates in case of shares allotted, if any, letters of regret together with refund cheques or pay orders will be despatched by post at the applications sole risk or by such other method as may be approved by the relevant authorities within ten weeks from the closure of the subscription list or in the event of unforeseen circumstances, within such period as may be extended by the Stock Exchange at Indore, Madhya Pradesh. The prospectus further provided that payment of interest at the rate of 15% per annum on the excess application money will be made to the applicant as per the guidelines issued by the Ministry of Finance by letter dated July 21, 1983 and modified by letter dated September 27, 1985 addressed to the Stock Exchange. The prospectus sets out that the issue would open on August 20, 1990 and would closed on August 23, 1990, and the closure will not be extended beyond August 31, 1990. The public issue opened in accordance with the prospectus on August 20, 1990 received overwhelming response and 26,32,894 applications for Equity Shares and application money of Rs. 225,52,51,247/- was received. The share issue was over subscribed more than 40 times. In view of the tremendous response from the investing public, the issue was closed on August 23, 1990 which was the earliest date for closing under the terms of the prospectus.

(2.) THE period of ten weeks from the date of closure of the issue as contemplated by the Ministry of Finances letter dated July 21, 1983 as modified by letter dated September 27, 1985 as well as in accordance with the guidelines published by the Stock Exchange for the purposes of listing of shares expired on November 1, 1990. Prior to this date on October 15, 1990 the Board of Directors of the Company had approved the allotment of shares in consultation with the Stock Exchange. The Company thereafter received permission from the Stock Exchange at Indore, Ahmedabad, Bombay. Calcutta and Delhi to deal in the shares offered in the prospectus. The Company began despatching refund orders on or about October 22, 1990 and the number of refund orders required to be despatched were about 25,50,604. On October 23, 1990 the Company addressed letter to Madhya Pradesh Stock Exchange seeking extension upto November 30, 1990 for posting refund orders, share certificates etc. The letter recties that since the number of applications are large, the Company is required to do thorough checking at the computer level and about 25 lakhs refund orders, 3 lakhs share certificate envelopes and equal number of envelopes for other kinds of stationery like allotment letters for debentures are required to be posted and as the posting will be done only from Delhi where the Registrars of the Issue are situate, the despatch will take considerable time. The letter claims that the post officers at Delhi are not equipped to handle that large influx form a single party and consequently despatches will have to be staggered over 25 to 30 days.

(3.) ON October 26, 1990 the Company despatched a consignment of about 6,69,999 refund orders with pre-printed fascimile signatures from Bombay to Delhi in the brake van of 2925 Down Paschim Express. The fire broke out in the brake van between Bhestan and Surat Railway Station and the fire fighting authorities threw out the packages from the brake van. Consequently many of the refund orders were destroyed or scattered on the ground in a severely mutilated and damaged condition. On October 28, 1990 the Company sent representatives to the site of the accident and thereafter a message was sent to the bankers-American Express Bank-to stop payment in respect of refund orders which were despatched by the train. The bankers advised the Company that it would be impossible to ensure that the refund payments only in respect of those which were despatched by the train could be stopped by various branches all over the country and to prevent the misuse of large number of refund orders it is desirable that stop payment instructions should be given by the Company in respect of all refund orders, including those which were despatched by the train. Accordingly, the Company gave instructions to the bankers to countermand payment of all the refund orders.