TaxTMI 
TaxTMI 
1999 (4) TMI 491
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....who is the Custodian appointed under section 3(1) of the Act, on inquiry with the appellant, came to know that they had received a cheque for a sum of Rs. 20 lakhs from the second respondent for purchase of certain shares, without, however, mentioning the names of the ten shareholders to whom the shares were to be issued. The appellant claimed that they had allotted and sent the necessary share certificates to the second respondent and they also sent photocopies of the share certificates thereof to the Custodian. The Custodian, by letter dated 28-3-1994, informed the appellant that the share certificates would be the property of the second respondent and would stand attached and there should be no transfer in respect of these shares. The Cu....
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....ve been paid towards subscription for shares, the Custodian cannot now claim back the same. The Special Court rejected this conten-tion. The Special Court came to the conclusion that there has been no allotment of shares at all inasmuch as there can be no allotment of shares in blank and in the copies of the share certificates produced before the Special Court no names have been entered. No application had been filed by the second respondent in terms of section 41(2) of the Companies Act, 1956 agreeing to become a member of the company and his name be entered in the register of members. On examination of the register of members, the Special Court found that there were certain suspicious circumstances which clearly indicated the fact that th....
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.... rate and that must be repaid. In conclusion, the Special Court directed the appellant to pay the Custodian for and on behalf of the second respondent a sum of Rs. 20 lakhs together with interest thereon at 18 per cent per annum from 13-11-1991, till payment. 4. Challenging this order several grounds have been raised in the appeal but at the time of hearing only two contentions are put forth before us by learned counsel for the appellant. In the first place, he contended that the Special Court had no jurisdiction to entertain the application of respon- dent No. 1, the Custodian, since the matter did not relate to any offence contemplated under section 3 of the Act. The learned counsel drew our attention to the scheme of the Act to impres....
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....anted and, therefore, on the allotment of shares the money does not belong to respondent No. 2 but to the appellant. In the narration of facts made earlier while referring to the proceedings in the Special Court out of which this appeal arises we have stated the various circum-stances taken note of by the Special Court in not accepting that there had been any allotment of shares. A few of these circumstances are firstly, there can be no allotment of shares to unknown persons; secondly, allotment can be made to a person who becomes a member of the company when an application is made to that effect, and thirdly, no application made to the company by the second respondent in that regard was forthcoming. Cloud of doubts was cast upon the entrie....