TaxTMI 
TaxTMI 
TaxTMI 
1983 (12) TMI 242
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....therefrom the entries showing the petitioner and respondents Nos. 11 to 14 as holders of the shares indicated against their respective names and direct the first respondent to effect consequential changes in its books of account. The necessary facts leading to the filing of the petitions may be delineated as follows: On March 15, 1974, the first respondent applied under the Capital Issues (Control) Act, 1947 (XXIX of 1947), for the consent of the Central Government for its proposal to issue 13 lakhs equity shares of Rs. 10 each-On March 22, 1974, there was a meeting of the board of directors of the first respondent and item No. 8 of the resolutions passed reads as follows: "Resolved that subject to sanction of the Controller of Capital Issues, 3,38,000 (three lakhs thirty eight-thousand) equity shares of Rs. 10 each be allotted to the Tamil Nadu Industrial Development Corporation Ltd. and 3,22,497 (three lakhs twenty-two thousand four hundred and ninety seven) equity shares of Rs. 10 each be allotted to Thiru B. Ananthaswami, his relatives, friends, associates and directors and nominee directors." On April 22, 1974, the consent of the Central Government through the Controller of....
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....at TIDCO would transfer shares worth Rs 1.3 lakhs (representing 1 per cent, of the total equity capital of the company) to Shri E. C. P. Prabhakar, Shri A. M. Thangaraj, Shri C. Shanmukham, Shri C. Radhakrishnan, Shri J. Jawahar and Shri K. Palanimanickam and the company's accounts may be closed hereafter on 30th September every year, so that, after carrying out the above operations, as on September 30, 1974, the company would not be a subsidiary to TIDCO. Accordingly, the matter was discussed and it was resolved that the annual accounts of the company be hereafter closed on September 30, every year, and that the managing director of the company may take steps to obtain the necessary permission therefore from the income-tax authorities. On September 30, 1974, the petitioner and respondents Nos. 11 to 14 presented applications, five in number, to the first respondent for allotment of equity shares as per the details indicated therein. On October 19, 1974, there was a return of allotments pursuant to section 75(1) of the Act. Putting forth a plea that the allotment of shares was done by resolution dated March 22, 1974, referred to above, and this was in violation of section 3 of Act....
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....rnment on that date, because the consent came only on April 22, 1974, yet we find no concrete argument before us, projecting the stand contrary to the above position. To complete our reasonings as a whole, we feel obliged to advert to these aspects also. Section 3(2)(a) of the Act XXIX of 1947 reads as follows: "3. Control over issue of capital. --........ (2) No company whether incorporated in the States or not, shall except with the consent of the Central Government, -- (a)make an issue of capital in the States;" Section 2(b) defines "issue of capital" in the following terms: " 'issue of capital' means the issuing or creation of any securities whether for cash or otherwise, and includes the capitalisation of profits or reserves for the purpose of converting partly paid-up shares into fully paid-up shares or increasing the par value of shares already issued." Section 2(e) defines "securities" as follows: " 'securities' means any of the following instruments issued, or to be issued, or created or to be created, by or for the benefit of a company, namely: (i)shares, stocks and bonds; (ii)debentures; (iii)mortgage deeds, instruments of pawn, pledge or hypothecation and any....
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....allotment. To take the words of Stirling J., in Spitzel v. Chinese Corporation [1899] 80 LT 347, 351, he says: ' what is an allotment of shares broadly speaking, it is an appropriation by the directors or the managing body of the company of shares to a particular person'." In Sri Gopal Jalan & Co. v. Calcutta Stock Exchange Association Ltd. [1963] 33 Comp. Cas. 862; AIR 1964 SC 250, Sarkar J., after adverting to the dictum of Farwell L.J., in the above decision, laid down as follows (at p. 865, 866 of 33 Comp. Cas.): "It is beyond doubt from the authorities to which we have earlier referred, and there are many more which could be cited to show the same position, that is company law 'allotment' means the appropriation out of the previously unappropriated capital of a company, of a certain number of shares to a person. Till such allotment, the shares do not exist as such. It is on allotment in this sense that the shares come into existence. Learned counsel for the appellant has not been able to cite any case where the word ' allotment' has been used to describe a transaction with regard to an existing share, that is, a share previously brought into existence by appropriation to a p....
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....bring out the express stand projected before the learned judge by the contesting respondents: "...In the instant case, what is contended is that there was only a conditional allotment and not an allotment as such before the sanction of the Controller of Capital Issues under exhibit R-3 was obtained and that, therefore, there is no violation of section 3 of Act 29 of 1947. That is all that was contended by Mr. T. Raghavan, learned counsel for the company. But, I find what is prohibited under section 3 considered together with the definition of issue of capital, is not only the allotment of shares but even the very creation and issue of shares as well. If the company were to make a conditional allotment, it means that it had already created the shares. Then, as rightly pointed out by Mr. Dilip Singh, learned counsel for the petitioner, creation itself is forbidden under section 3. While so, the fact that the company had made only a conditional allotment will presuppose that there was creation and that consequently such creation being forbidden under section 3 of the Act 29 of 1947, even the conditional allotment made under exhibit R-2 is void ab initio." Apart from the above observ....
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....March 22, 1974, and all the relevant resolutions in this behalf dated August 23, 1974, have no independent existence and they only indicate a follow-up action. There were submissions, profuse indeed, made by Mr. T. Dilip Singh, learned counsel for the petitioner, and by Mr. S. Govind Swaminathan, learned counsel for respondents Nos. 15 to 17, on the question of the formalities to be satisfied before there could be a valid allotment of shares. Mr. T. Dilip Singh would draw our attention to very many authorities to impress upon us the proposition that a person must agree in writing to become a member of a company, allotment of shares could be made only by the resolutions of the board since, on principle, the management of the company is vested in the board; and notice of allotment must reach the allottee in one way or the other. In contrast, Mr. S. Govind Swaminathan, learned counsel for respondents Nos. 15 to 17, would submit that it would suffice the purpose if a person agrees in writing to become a member and the allotment need not necessarily be the subject-matter of the resolution of the board and the factum of allotment could also be derived from certain indisputable facts. Th....