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2013 (2) TMI 115 - DELHI HIGH COURTWithdrawal of the share application money - the petitioner submitted that it is well settled that the prospectus is an invitation to offer and that an applicant desirous of applying for shares of a listed company can withdraw his offer prior to its acceptance - whether the date of closure is to be taken into account for determining whether or not the petitioner company achieved the minimum subscription - Held that:- A share application is like any other offer which would require acceptance of the offer made. The acceptance of an offer of this nature can only be brought about, inter alia by allotment of shares made in favour of the applicant by some overt method. Like in any other transaction between two individuals before an offer is accepted, the offerer is entitled to revoke the offer. This is precisely what happened in the present case. The minimum subscription clause is inserted in a prospectus to protect the interest of the investors, which is why Section 69 of the Companies Act provides that if minimum subscription is not achieved, a company issuing the prospectus cannot proceed to allotment of shares. The argument advanced on behalf of respondent no.1/company that on receipt of the share application form, a concluded contract came into existence, is a submission which is completely misconceived because if it was so the concerned company would have to, as of necessity, allot to the applicant, without fail, the exact number of shares for which a request is lodged. As is well known, on very many occasions the opposite happens. This is legitimate since in law, a share application is only an offer. Therefore, the minimum subscription clause appearing in the prospectus would have to yield to the right of an applicant to withdraw his offer before its acceptance. The prospectus issued by a company was an invitation to offer and if the application for shares is made, pursuant to issuance of a prospectus, it was only an offer which could be withdrawn at any stage before its acceptance. Thus minimum subscription would have to be calculated after taking into account the requests made for withdrawal of share application.[See Official Liquidator of Bellary Electric Supply Co. Ltd. Vs. Kanniram Rawoothmal and A. Sirkar vs Parjoar Hosiery Mills Ltd. (1932 (9) TMI 11 - HIGH COURT OF MADRAS) Undoubtedly, in this case like in other public issues, there are rejections by a Registrar based on various technical grounds. If as per the clause of minimum subscription, the minimum subscription had to be calculated as on the date of closure, it would be well impossible to carry out that exercise as more often than not the rejections are made even after the date of closure. Therefore, if the minimum subscription amount is not reached, which is the case in the present petition, then surely no allotment can be made. Withdrawal can only take place if its is accepted by the company and since in the present case, the withdrawal request was accepted by the Registrar the order of the Chairman SEBI had to be reversed. Once a request is triggered for withdrawal of a share application, in law, it requires no acceptance. The only bar which is statutorily introduced, is one, provided under section 72(5) of the Companies Act. The bar is also put in place for a limited period of time i.e., till the closing of the 5th day of the opening of the subscription list. It is no one’s case before the authorities below that withdrawal applications were not received after the expiry of the eclipse period, as provided in section 72(5) of the Companies Act - Thus the order of the Chairman SEBI dated 22.05.1998 would have to be sustained and the directions contained therein for refund of the money to the share applicants would have to be implemented.
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