Withdrawal of share applications before allotment must count against minimum subscription and can support refund processing.
A share application under a prospectus is only an offer, so a valid withdrawal made before allotment must be counted when assessing whether minimum subscription under the Companies Act, 1956 has been achieved. Because no concluded contract arises before allotment, the closing date alone does not fix subscription if lawful withdrawals reduce the effective total. A withdrawal request also does not require acceptance by the company; it may be acted on by the Registrar for refund purposes, subject only to the limited statutory bar applicable up to the fifth day after opening of the subscription list. The appellate tribunal's order was set aside and the refund direction restored.
Issues: (i) Whether requests for withdrawal of share applications made before allotment had to be taken into account while determining whether the minimum subscription under the prospectus had been achieved; (ii) whether the withdrawal of share applications required acceptance by the company, or could be acted upon by the Registrar for the purpose of refund.
Issue (i): Whether requests for withdrawal of share applications made before allotment had to be taken into account while determining whether the minimum subscription under the prospectus had been achieved?
Analysis: A share application pursuant to a prospectus is only an offer, and no concluded contract arises until allotment. The minimum subscription clause in the prospectus operates in the context of Section 69 of the Companies Act, 1956, which prevents allotment where the prescribed minimum is not reached. Since an offer may be revoked before acceptance, withdrawal requests received before allotment had to be considered while determining the effective subscription level. The date of closure alone could not be treated as fixing subscription irrespective of valid withdrawals.
Conclusion: The withdrawal requests had to be taken into account, and the minimum subscription requirement was not satisfied on that basis.
Issue (ii): Whether the withdrawal of share applications required acceptance by the company, or could be acted upon by the Registrar for the purpose of refund?
Analysis: A request to withdraw a share application does not require acceptance in law. The only statutory limitation identified was the bar in Section 72(5) of the Companies Act, 1956, which operates only up to the end of the fifth day from the opening of the subscription list. The record did not show that the withdrawal requests were outside that limited statutory window. The Registrar's role in finalising the list necessarily included acting on withdrawal requests and consequent refund where permissible.
Conclusion: The withdrawal did not require acceptance by the company, and the Registrar could act on it for refund purposes.
Final Conclusion: The impugned order of the appellate tribunal was set aside, the refund direction was restored, and the writ petition succeeded.
Ratio Decidendi: A share application made under a prospectus is only an offer revocable before allotment, and valid withdrawal requests must be considered while testing minimum subscription; such withdrawal does not depend on acceptance by the company, save for the limited statutory bar under Section 72(5) of the Companies Act, 1956.
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