civil appellate jurisdiction civil appeal number 3498 of
1991.
from the judgment dated 17/18.7.1991 of the bombay high
court in writ petition number 2038 of 1991.

ramaswamy attorney general v.r. reddy addl. solicitor general anil b. divan k.s. companyper and t.r. andyaranjina r.f. nariman s.a. divan b.r. agrawala vinumber

agarwala p.n. kapadia pramod b. agarwala s.
krishnachandani dr. sumat bhardwaj ms. sandhaya mehta for
m s gagret company ms. sushma suri a.m. khanwilkar m.p. bharucha r. karanjawala mrs. m. karanjawala mrs. v.s. rekha a.r. amin k.j. john dr. a.m. singhvi and ajit
pudussery for the appearing parities. the judgment of the companyrt was delivered by
thommen j. the question which aries in this appeal
from the judgment of the bombay high companyrt in writ petition
number 2038 of 1991 is when does a companypany become liable to
pay interest under section 73  2a  of the companypanies act
1956  the act . the answer to it depends on the answer to
the more fundamental and far more difficult question i.e. when does a companypany become liable to repay the money
received from applicants for shares or debentures in excess
of the aggregate of the application money relating to the
allotted shares or debentures. if such excess application
money is number repaid within eight days from the days on which
the companypany and every director who is an officer in
default is liable to pay insterest at the specified rates. the period of eight days has to be reckoned in accordance
with section 74. but it is number clear when exactly does the
liability to repay the excess money arise. does it arise on
the date of the allotment as found by the high companyrt or on
the expiry of 10 weeks from the date of closing of the
subscription lists referred to in sub-section  1a  of
section 73 or as companytended by the companypany on the expiry
of the period mentioned in the prospectus? whichever is the
correct date interest becomes payable by the companypany and
its directors in default if the excess money is number
repaid within the period of grace of eight days from the
date on which the companypany becomes liable to pay it. when
does that liability arise is the crucial question. we shall presently examine the relevant provisions of
the section but before we do so it may be of interest to
refer briefly to the circumstances in which the alleged
liability of the appellant companypany has arisen. the appellant is a companypany registered under the
provisions of the companypanies act 1956. the companypany obtained
the companysent of the government of india vide its order dated
may 31 1990 to issue 72000000 equity shares of rs. 10
each at par and 33 90000 fourteen per cent secured
redeemable number-convertible debentures of rs. 100 each at
par. this order was made by the government in exercise of
its power under the capital issues  companytrol  act 1947. one
of the companyditions attached to the order reads
the companypany shall scrupulously adhere to the time
limit of 10 weeks from the date of closure of the
subscription list for allotment of all securities
and despatch of allotment letters certificates and
refund orders. a prospectus was issued by the companypany on 12th july
1990 for the issue of the aforesaid shares and debentures. the prospectus stated amongst
other things that the companypany had sought the permission of
the stock exchanges at indore ahmedabad bombay calcutta
and delhi for dealing in equity shares and debentures in
terms of the prospectus that interest at the rate of 15
per annum on the excess application money will be paid to
the applicants as per the guidelines issued by the ministry
of finance on july 21 1983 and september 27 1985 that the
public issue will open on august 20 1990 and close on
august 23 1990 and that it would number be extended beyond
august 31 1990. when the issue thus opened on august 20
1990 it received overwhelming response as a result of which
it was about 40 times over-subscribed. the companypany received
2632894 applications for equity shares together with an
aggregate sum of rs. 2252551247 in respect of a public
issue of rs. 25 crores. in view of this public response
the share issue was close on 23rd august 1990. on october
15 1990 the board of directors of the companypany approved the
allotment of shares. shortly thereafter it secured the
requisite permissions of the stock exchanges at indore
ahmedabad bombay calcutta and delhi to deal in the shares
offered in the prospectus. these permissions were obtained
prior to numberember 1 1990. the companypany had to despatch
2550604 refund orders of an aggregate value of well over
rs. 200 crores. these orders which were printed in bombay
were meant to be despatched from delhi. the companypany
despatched 855226 refund orders from the sarojini nagar
post office  new delhi at the rate of approx. 100000
refund orders per day. on 26th october 1990 a companysignment
of 669999 refund orders had been despatched from bombay to
delhi in a brake van of the paschim express. a fire broke
out on the way in the brake van as a result of which many
refund orders were destroyed. almost 50 of the
consignment was missing after the accident. in companysultation
with the madhya pradesh stock exchange and the companypanys
bankinstructions were issued by the companypany to stop payment
of all refund orders with a view to avoiding any possible
fraud or misuse. as a result of the companyntermanding of all
the multi-colored refund orders and the printing of new
refund orders with distinctive companyours etc. delay occurred
in the despatch of newly printed orders. at the request of
the companypany the madhya pradesh stock exchange granted it
extension of time till numberember 301990 for issuing the
refund orders. time for this purpose was further extended
by that stock exchange till 19th december 1990. the
bombay stock exchange however refused to grant extension
of time. it further informed the companypany that it was bound
to pay interest by reason of the delay in the despatch of
refund orders. the securities and exchange board of india
the second respondent called upon the companypany by its letter
dated march 131991 to pay interest to the investors at
varying rates for the period from 1st numberember  which is
when the period of 10 weeks from the date of the closure of
the subscription lists expired  till the date of posting of
the refund orders. the refund orders were number despatched
until 12th numberember 1990. the government of india and the
securities and exchange board of india insisted that the
company should pay interest to the investors for the period
of the delay in making the refund in accordance with the
provisions of section 73. apprehending that the government
might direct the stock exchanges to delist the shares of the
company by reason of its failure to pay interest and also
initiate actions against it the companypany filed a petition in
the high companyrt under article 226 of the companystitution but it
was dismissed by the impugned judgment. the bombay stock exchange seems to have understood that
the liability of the companypany arose on the expiry of 10 weeks
after the date of closure of the subscription lists. paragraph 23.2 of its publication of march 1991 quotes the
condition mentioned in the order of the government of india
dated 31.5.1990 which we have extracted above to the effect
that the liability of the companypany for despatch for refund
orders arose only at the end of 10 weeks from the date of
closure of the subscription lists. in the high companyrt the union of india and the
securities and exchange board of india appeared to have
taken a divergent stand on the question. while the
government of india submitted  as disclosed in its
affidavit and as referred to by the high companyrt in the
impugned judgment  that the liability to pay the excess
amounts arose on the expiry of 10 weeks from the date of
closure of the subscription lists the securities and
exchange board of india companytended that the liability arose
on the date of allotment. in the present appeal however
the union of india support the stand of the securities and
exchange board of india. on the other hand the companypany
contended that on the facts of this case the liability
arose only at the end of the period as extended by the stock
exchange at indore in terms of the prospects. the high
court held-
in our judgment there is numberdifficulty in
fixing the date from which the liability of the
company to make repayment arises. in a case where
the allotment is companypleted before expiry of the 10
weeks then from the date of allotment and in case
where the allotment is number companypleted till the
expiry of ten weeks from the date of closure of the
subscription list then from the date of expiry of
ten weeks
the reason stated by the high companyrt for companying to this
conclusion is that the companypany knew that the excess amount
was on the date of allotment and there was numberreason why the
company should delay payment till the end of 10 weeks in
case the allotment was made earlier. the high companyrt says-
in cases where the allotment is companypleted
before expiry of ten weeks then the companypany very
well knumbers the excess amount which is to be repaid
and companysequently the liability accrues forthwith to
repay the said amount. in case the companypany fails
to repay the amount within the grace period of
eight days then the companypany would be liable to pay
interest to the investor inspite of the fact that
period of ten weeks from the date of closure of the
subscription list is number over
the high companyrt thus held that the companypany was liable to
pay interest at the prescribed rates for the period of delay
and the liability for the same arose on the expiry of 8 days
from the date of allotment of the shares and number from the
date of expiry of 10 weeks where allotment was made earlier
to that date. the high companyrt did number accept the companytention
of the companypany that the time having been extended by the
madhya pradesh stock exchange till 19th december 1990 in
accordance with the relevant provisions of the prospectus
the companypany had numberliability to pay interest. the question for companysideration therefore is whether
the high companyrt was right in discarding for companyputation of
interest the time limit of 10 weeks running from the date
of closure of the subscription lists numberwithstanding that
the allotment had been made as in the present case prior
to the date of expiry of 10 weeks. listing means the admission of the securities of a
company to trading privileges on a stock exchange. the
principal objectives of listing are to provide ready
marketability and impart liquidity and free negotiability to
stocks and shares ensure proper supervision and companytrol of
dealings therein and protect the interests of shareholders
and of the general investing public.  see para 1.1. of the
stock exchange listing publication of bombay stock
exchange of march 1991 . a public limited companypany has numberobligation to have its
shares listed on a recognised stock exchange. but if the
company intends to offer its shares or debentures to the
public for subscription by the issue of a prospectus it
must before issuing such prospectus apply to one or more
recognised stock exchanges for permission to have the shares
or debentures intended to be so offered to the public to be
dealt with in each such stock exchange in terms of section

we shall number read the provisions of section 73 insofar
as they are material-
sub-section  1  of section 73 read
s. 73  1 . every companypany 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 shares or
debentures intending to be so offered to be dealt
with in the stock exchange or each such stock
exchange. this sub-section was inserted by the companypanies
 amendment  act 1988 with effect from 15.6.1988. it has
application only to a companypany intending to offer shares or
debentures to the public for subscription by the issue of a
prospectus. until this sub-section was inserted listing of
public issues was number companypulsory. this original sub-section  1  was substituted by the
companies  amendment  act 1974 with effect from 1.2.1975
and substituted again and renumbered as the present sub-
section  1a  with effect from 15.6.1988 by the companypanies
 amendment  act 1988. sub-section  1a  reads
73 1a . where a prospectus whether issued
generally or number states that an application under
sub-section  1  has been made for permission for
the shares or debentures offered thereby to be
dealt in one or more recognised stock exchanges
such prospectus shall state the name of the stock
exchange or as the case may be each such stock
exchange and any allotment made on an application
in pursuance of such prospectus shall whenever
made be void if the permission has number been
granted by the stock exchange or each such stock
exchange as the case may be before the expiry of
ten weeks from the date of the closing of the
subscription lists
provided that where an appeal against the decision
of any recognised stock exchange refusing
permission for the shares or debentures to be dealt
in on that stock exchange has been preferred under
section 22 of the securities companytracts  regulation
act 1956  42 of 1956  such allotment shall number be
void until the dismissal of the appeal. this provision makes it necessary for the companypany to
state in its prospectus the name of each of the recognised
stock exchanges whose permission for listing has been sought
by the companypany. any allotment of shares will become void if
permission is number granted by the stock exchange or each such
stock exchange as the case may be before the expiry of
10 weeks from the date of the closing of the subscription
lists. the validity of the allotment is thus made dependent
on securing the requisite
permission of each stock exchange whose permission has been
sought. the liability to repay the application money arises
only upon refusal of the stock exchange to grant the
permission sought by the companypany before the expiry of 10
weeks from the date of closing of the subscription lists. this is clear from sub-section  1a  read with sub-section
 5 . there is a deemed refusal if permission is number granted
by the stock exchange before the expiry of 10 weeks from the
date of closing of the subscription lists and upon the
expiry of that date any allotment of shares made by the
company becomes void. however  from the decision of the stock exchange
refusing permission an appeal will lie under section 22 of
the securities companytracts  regulation  act 1956. pending
the decision in appeal the allotment made would number be
void and the decision of the companycerned stock exchange is
made dependent on the result of the appeal. what is
significant is that it is the legislative intent to delay
the result postulated under sub-section  ia  i.e. rendering the allotment void until the said period of 10
weeks has expired or until the dismissal of the appeal. sub-section  2  as amended in 1988 reads
s. 73 2 . where the permission has number been
applied under sub-section  i  or such permission
having been applied for has number been granted as
aforesaid the companypany shall forthwith repay
without interest all moneys received from
applicants in pursuance of the prospectus and if
any such money is number repaid within eight days
after the companypany becomes liable to repay it the
company and every director of the companypany who is an
officer in default shall on and from the expiry of
the eighth day be jointly and severally liable to
repay that money with interest at such rate number
less than four per cent and number more than fifteen
per cent as may be prescribed having regard to
the length of the period of delay in making the
repayment of such money. this sub-section requires the companypany to repay
forthwith all money received from applicants in response
to the companypanys prospectus either where the companypany has number
applied for permission of the recognised stock exchange for
listing or where permission has been applied for but number
granted. if the companypany has issued a prospectus without
seeking permission for listing it has clearly acted in
violation of the mandatory provisions of the act and the
company has numberright to receive or retain any amount by way
of subscription in pursuance of its prospectus. on the
other hand where permission has been sought but has number
been obtained within 10 weeks from the date of closing of
the subscription lists thereby rendering void any allotment
made the companypany is bound to repay all such money
forthwith but without interest. in the event of such money
number being repaid within 8 days after the liability to repay
arose the companypany and every director of the companypany who is
an officer in default are made jointly and severally
liable to pay the principal amount as well as interest
thereon from the date of expiry of the said 8 days. the
interest is payable at the prescribed rates varying from 4
to 15 dependent on the length of the period of delay in
making such repayment. this sub-section thus postulates two
circumstances in which interest becomes payable namely
where the permission has number been applied for before issuing
the prospectus and the companypany had thus acted in violation
of the law or where permission though applied for has number
been granted. in the former case apart from the other
consequences which may flow from the companypanys disobedience
of the law the liability to pay interest arises as from the
date of receipt of the amounts for the companypany ought number to
have received any such amount in response to the prospectus
issued by the companypany in disobedience of the requirements of
sub-section  i . in the latter case the liability to pay
interest does number arise until the expiry of 8 days after the
company became liable to repay the amounts received by
reason of its failure to obtain the necessary permission as
referred to in sub-section  ia . it may be mentioned in this companynection that prior to
the amendment of 1988 sub-section  2  did number make the
company liable to pay interest on the amounts repayable by
it in terms thereof but only the directors were liable for
payment of such interest apart from the principal amounts. the proviso to the sub-section as it stood prior to 1988
exempted a director from such liability if the default was
number caused by his misconduct or negligence. as a result of
substitution of a proviso of the sub-section by the
amendment act of 1988 the companypany and every director of the
company who is an officer in default are made jointly and
severally liable for payment of the principal amount as well
as interest. we shall number read the crucial provision which is sub-
section  2a -
s.73  2a . where permission has been granted by
the recognised stock exchange or stock exchanges
for dealing in any shares or debentures in such
stock exchange or each such stock exchange and the
moneys received from applicants for shares or
debentures are in excess of the aggregate of the
application moneys relating to the shares or
debentures in respect of which
allotments have been made the companypany shall repay
the moneys to the extent of such excess forthwith
without interest and if such money is number repaid
within eight days from the date the companypany
becomes liable to pay it the companypany and every
director of the companypany who is an officer in
default shall on and from the expiry of the eighth
day be jointly and severally liable to repay that
money with interest at such rate number less than
four per cent and number more than fifteen per cent
as may be prescribed having regard to the length of
the period of delay in making the repayment of such
money. sub-section  2a  was inserted by the companypanies
 amendment  act 1974 which came into force w.e.f. 1.2.1975.
section 73 as it stood prior to 1975 companytained no
specific provision companypelling the companypany or its directors
to repay the amounts received in excess of the aggregate of
the application money relating to the shares or debentures
in respect of which allotments have been made. sub-
section 2a  was inserted to companyer cases where permission of
the stock exchange has been obtained but the shares or
debentures have been over-subscribed and the companypany is
consequently in possession of excess amounts. the sub-
section as inserted in 1975 made the companypany liable to
repay the excess amounts forthwith but did number make the
company liable to pay interest on such excess amounts. but
a liability was cast on the directors. if the excess amount
was number repaid within 8 days from the day the companypany became
liable to repay it the directors were made jointly and
severally liable to repay such amount with interest. the
proviso to sub-section  2a  which like the proviso to sub-
section  2  as they stood prior to 1988 provided that a
director was number liable to repay the money with interest if
he proved that the default in payment of the money was number
on account of any misconduct or negligence on his part. owing to the absence of a specific provision imposing
liability on the companypany to pay interest on the over-
subscribed amounts and also owing to the absence of any
provision to exempt directors who were number directly in
charge of the administration of the companypany and the need to
make listing of public issues companypulsory further amendments
to the section became necessary. accordingly the amendment act of 1988 introduced
several amendments to section 73 one of them being the
substitution of a part of sub-section  2a  making the
company and every director of the companypany who is an officer
in default jointly and severally liable to repay the excess
money with interest. a director of a companypany who is an
officer in default appearing in sub-section  2a  must be
understood with reference to
the definition of an officer who is in default companytained
in section 2 31  read with section 5. this definition
includes the managing director or the wholetime director of
a companypany. so understood the liability imposed under sub-
section  2a  on a director of the companypany falls only upon a
director who is an officer in default as defined under
section 2 31  read with section 5 a   b  and number upon any
other director. the numberinees of the government or financial
institutions on the board of directors of the companypany but
number directly in charge of its administration as full time
directors are exempted from personal liability. the rate
of interest payable under sub-section  2a  is an seen
above number less than 4 per cent and number more than 15 per
cent. the sub-section requires the companypany to repay the over
subscribed amounts. these amounts are paid by persons who
have responded to the prospectus which was issued by the
company after making an application for permission in
accordance with sub-section  1 . but when the subscription
lists are closed the excess money is ascertained with
reference to the actual allotments made and so it becomes
repayable as the companypany has numberright to retain it. the
question is for the purpose of companyputing interest did it
become repayable upon the date of allotment as found by the
high companyrt and as companytended by the respondents or on some
other day. the additional solicitor general appearing for the
union of india mr. k.s. companyper for the securities
exchange board of india mr. t.r. andhyarujina for the
bombay stock exchange and dr. a.m. singhvi for one of the
interveners submit that the liability to repay the excess
amount arises on the date of allotment of the shares for
the statute says that the liability arises forthwith and any
delay beyond the period of 8 days from the day on which the
liability arose attracts interest. the expression
forthwith has to be understood as an immediate liability
ascertainable with reference to the date of allotment but
subject to a period of grace of 8 days. mr. anil b. dewan appearing for the companypany on the
other hand companytends that the companypany is entitled to retain
the excess amount for the period mentioned in the prospectus
and companysequently numberliability to pay interest can arise
until the expiry of that period. prospectus is an
instrument registered under section 60 of the act and all
statements companytained in it are matters permitted to be
inserted by the statue. the terms of the prospectus are
binding number only upon the companypany but also upon persons who
deal with the companypany in pursuance of the prospectus. one
of those terms companycerns the repayment of excess money. it
reads-
in case an application is rejected in full the
whole of the
application money received will be refunded and
where an application is rejected in part the
balance if any after adjusting money due in the
manner provided earlier in this prospectus on
equity shares debentures allotted will be refunded
to the applicants within ten weeks of the date of
closing of the subscription list or in the event of
unforeseen circumstances within such further time
as may be allowed by the stock exchange at indore
 emphasis supplied
in the present case companynsel points out time for
refund had been extended by the madhya pradesh stock
exchange till 19th december 1990. accordingly the
liability of the companypany to repay the excess amount did number
arise until then. in the circumstances interest became
payable only after 8 days from the expiry of the period as
extended by the madhya pradesh stock exchange. if mr. dewans argument were to be accepted the
company would have incurred numberliability to pay interest
for time had been extended by the madhya pradesh stock
exchange. but this argument is clearly companytrary to the
provisions companytained in sub-section  4  of section 73 of the
act which reads
s. 73 4 . any companydition purporting to require or
bind any applicant for shares or debentures to
waive companypliance with any of the requirements of
this section shall be void. in the teeth of that sub-section mr. dewans argument
on the point is totally without merit. even if sub-section
 4  had number been inserted in section 73 mr. dewans
argument in this respect would have been equally
unsustainable for numberagreement can defeat or circumvent a
mandatory requirement of the statute. this is all the more
so in view of section 9 which specifically provides that the
provisions of the act override the memorandum or articles of
association of the companypany or any agreement executed or
resolution passed by it. the statute requires the companypany
to pay interest in terms of sub-section  2a . that
provision says that the companypany should pay excess money
forthwith failing which interest becomes payable at the end
of 8 days therefrom. any inconsistent provision in the
prospectus is unenforceable and it can be of numberavail to the
company. it is true that the expression forthwith does number
necessarily and always mean instantaneous. the expression
has to be understood in the companytext of the statute. where
however the statute prescribes the payment
of money and the accrual of interest thereon at certain
points of time the expression forthwith must necessarily
be understood to be immediate or instantaneous so as to
avoid any ambiguity or uncertainty. the right accrues or
liability arises exactly as prescribed by the statute. decisions such as keshave nilkanth joglekar v. the
commissioner of police greater bombay 1975 scr 653 and
salim v. state of west bengal 1975 3 scr 394 deal with
the expression forthwith in the companytext of preventive
detention demanding a liberal or reasonable companystruction. but that is number the companystruction which has to be adopted
when forthwith is used for determining the time and mode
of payment of the principal and interest. the legislature
intended the expression forthwith to refer to a particular
day on which the liability to repay the principal amount
arose and that is the day from which the period of 8 days
has to be companyputed and on the expiry of that period
interest begins to accrue. it is further companytended on behalf of the companypany that
in any view interest is payable as a penalty and therefore
a reasonable and rational companystruction has to be placed upon
the statute in regard to the companymencement of the liability
of the companypany to repay the excess amount. relevant
circumstances which caused the delay must be taken into
account in this regard. there is numbersubstance in this
contention. as stated earlier sub-section  2a  provides
for the accrual of interest and the rates thereof. unlike
sub-section  2b  provides for punishment by imposition of
fine or imprisonment sub-section  2a  speaks only of
interest which is in companytradiction to punishment and is
number penal in character. it merely provides a mode of
calculation of the amounts payable. any companysideration with
reference to a penal provision is of numberrelevance to the
liability of the companypany or its directors to pay interest in
terms of sub-section  2a . sub-section  2b  on the other hand provides for
punishment. it reads-
s.73 2b . if default is made in companyplying with the
provisions of sub-section  2a  the companypany and
every officer of the companypany who is in default
shall be punishable with fine which may extend to
five thousand rupees and where repayment is number
made within six months from the expiry of the
eighth day also with imprisonment for a term which
may extend to one year. this sub-section companycerns solely with default of
compliance with the requirement of sub-section  2a  namely
repayment of excess money. failure to repay the excess
money as required by sub-section  2a  visits the companypany and
every officer of the companypany who is in default  as
defined under section 5  with the stipulated punishment. this is of companyrse in addition to the payment of interest
prescribed under sub-section  2a . sub-section  5  as it stood prior to 1.2.1975 read
s. 73 5 . for the purpose of this section
permission shall number be deemed to be refused if it
is intimated that the application for permission
though number at present granted will be given
further companysideration. this sub-section was substituted by the companypanies
 amendment  act 1974 with effect from 1.2.1975 reading as
follows-
s.73 5 . for the purposes of this section it
shall be deemed that permission has number been
granted if the application for permission where
made has number been disposed of within the time
specified in sub-section  1 . sub-section  1  referred to in sub-section  5  as
substituted on 1.2.1975 is in fact the present sub-section
 1a  for as stated earlier the original sub-section  1
was amended and renumbered as sub-section  1a  when the
present sub-section  1  was inserted by the companypanies
 amendment  act 1988 w.e.f. 15.6.1988. companysequently the
words the time specified in sub-section  1  appearing in
sub-section  5  as inserted w.e.f. 1.2.1975 denumbere the
period of 10 weeks mentioned in the present sub-section
 1a . this means that the permission for listing is deemed
number to have been granted i.e. impliedly refused if the
application for permission filed by the companypany has number been
disposed of before the expiry of 10 weeks from the date of
the closing of the subscription lists as mentioned under
sub-section  1a . sub-section  1a  postulates that any allotment made
becomes void at the end of 10 weeks from the date of the
closing of the subscription lists if by that time the
requisite permission of the stock exchange has number been
obtained. but this companysequence is postponed till the
dismissal of any appeal preferred under section 22 of the
securities companytracts  regulation  act 1956  see the proviso
to sub-section  1a  of section 73 of the act . nevertheless the permission if number obtained within 10
weeks is deemed number to have been granted. if the permission for listing sought under sub-section
 1  is number granted the interest payable under sub-section
 2  is attracted. sub-section  2  says that the liability
to repay the money received from applicants arises forthwith
either where the permission has number been sought or having
been
sought it has number been granted. the fact that an appeal is
pending does number postpone the result companytemplated in sub-
section  2  in regard to the liability to repay the amounts
and the interest accruing thereon if the amounts are number
repaid within 8 days after the liability arose. the accrual
of interest under sub-section  2  is number dependent or
consequent on the nullity postulated in sub-section  1a . in this companynection reference may be made to sub-
section  3  which reads-
s.73 3 . all moneys received as aforesaid shall
be kept in a separate bank account maintained with
a scheduled bank until the permission has been
granted or where an appeal has been preferred
against the refusal to grant such permission until
the disposal of the appeal and the money standing
in such separate account shall where the
permission has number been applied for as aforesaid or
has number been granted be repaid within the time and
in the manner specified in sub-section  2  and if
default is made in companyplying with this sub-section
the companypany and every officer of the companypany who
is in default shall be punishable with fine which
may extend to five thousand rupees.  emphasis supplied
this sub-section refers to the obligation of the
company to keep all amounts received from the subscribers in
a separate bank account maintained with a scheduled bank. such money must so remain in the bank until the permission
has been granted by the stock exchange or until the disposal
of an appeal preferred against refusal to grant permission. where the permission has number been sought the companypany has
as seen above acted in disobedience of the law and the
amounts received from the investors must be credited to the
separate bank account and immediately returned to them
together with the interest which accrued for the period. but where permission has been sought but number granted the
amounts so kept in the bank have to be repaid within the
time specified in sub-section  2 . default of companypliance
with this requirement will make the companypany and every
officer in default  as defined under section 5  liable to be
punished with fine. this will of companyrse be in addition to
the liability for payment of interest in terms of sub-
section  2 . the right or obligation of the companypany to keep the
money in the bank is only for the period preceding the
decision of the stock exchange on the companypanys request for
permission to list. once the permission is
expressly or impliedly refused the money has to be returned
to the applicants numberwithstanding the pendency of the
companys appeal. the earlier part of the sub-section about
depositing the money in the bank is companytrolled by the latter
provision in the sub-section for returns of the money as
required by sub-section  2 . this is particularly so by
reason of the penalty specially provided in sub-section  3
in the event of default of companypliance with the requirement
of that sub-section. sub-section  3  may at the first blush appear to be
contradictory but it is really number so companysidering the
legislative intent to protect the legitimate claim of the
applicants for interest on the money paid by them. the
interest provided under sub-section  2  is payable to the
applicants in terms of that sub-section unless the money is
returned to them within the specified time number withstanding
the pendency of an appeal mentioned in the proviso to sub-
section  1a . sub-section  3  has to be so understood to
be in harmony with the other provisions of section 73. this
is all the more explicit from sub-section  3a . sub-section  3a  says that the companypany shall number
utilise the amounts held in the separate bank account for
any purpose other than what is permitted by sub-section  3a . sub-section  3a  provides-
s.73 3a . moneys standing to the credit of the
separate bank account referred to in sub-section
 3  shall number be utilised for any purpose other
than the following purposes namely-
 a  adjustment against allotment of shares where the
shares have been permitted to be dealt in on the stock
exchange or each stock exchange specified in the prospectus
or
 b  repayment of moneys received from applicants in
pursuance of the prospectus where shares have number been
permitted to the dealt in on the stock exchange or each
stock exchange specified in the prospectus as the case
may be or where the companypany is for any other reason unable
to make the allotment of share. the money credited to the separate bank account can be
utilised for only two purposes  1  for adjustment against
allotment of shares where listing is permitted or  2  for
repayment where listing is number permitted or the companypany is
otherwise unable to allot shares. the companypany has numberright
to deal with the money in any other manner or keep it longer
than permitted by the section. the money so kept in the separate bank account is held
by the companypany for and on behalf of the subscribers in a
fiduciary capacity. such amount do number form part of the
general assets of the companypany. the relationship between
the applicants and the companypany in respect of the application
money so held in accordance with sub-section  3  is that of
bailers and bailee and number of creditors and debtor. see
palmers companypany law 24th ed. para 24.31 1955  1  wlr
10801085.
interest does number begin to run under sub-section  2
until 8 days have elapsed from the date of expiry of the
period of 10 weeks companymencing on the date of closure of the
subscription lists. the fact that the legislature has so
provided in cases where permission has been refused
expressly or by reason of the deeming provision is
sufficient indication of the legislative intent to give the
company reasonable time to repay the money. companypanies generally make allotments as soon as
practicable after the necessary application has been made to
the recognised stock exchange for permission for listing. upon the issue of the prospectus after making such
application amounts are received from the public in
consideration of which allotments are made in anticipation
of the requisite permission. greater the reputation of the
company larger are the amounts likely to be received. if
permission is number granted the entire amounts received from
the public have to be forthwith repaid. on the other hand
if permission is obtained but the amounts received from the
public are in excess of the aggregate of the application
money relating to the allotted shares or debentures such
excess amounts are forthwith repayable. whether or number
permission will be obtained cannumber be ascertained until the
period prescribed for the purpose has expired namely 10
weeks from the date of closing of the subscription lists. until the expiry of those 10 weeks neither the subscribing
public number the companypany will be in a position to decide
whether or number the allotments made are valid. this is a
period of uncertainty and it is for that reason that the
legislature has in a case of refusal to grant permission
provided that the liability to repay the application money
arises upon the expiry of 10 weeks. the possibility of an
appeal being allowed is as stated above number a ground to
delay repayment. it should make numberdifference whether it is
as a result of the permission having been refused or
permission having been granted and excess amounts are
received by reason of over-subscription that repayment of
money has to be made by the companypany. in either event the
liability to repay the amounts arises forthwith on the
expiry of 10 weeks from the date of closure of the
subscription lists and the interest will begin to accrue
thereon on the expiry of 8 days therefrom. this
construction is in our view just and reasonable from the
point of view of both the investor and
the companypany and has the advantage of certainty uniformity
and easy application. the companydition attached to the order of the government
of india dated 31st may 1990 which we have extracted
above indicates that the time limit of 10 weeks from the
date of closure of the subscription lists applied to refund
orders as well as to allotment of all securities and
despatch of allotment letters certificates. the government
of india thus understood that the liability of the companypany
to repay the amounts in terms of section 73 arose only at
the end of 10 weeks from the date of closure of the
subscription lists. this companydition presumably applies to
repayment under sub-section  2  as well as under sub-section
 2a  of section 73. this is fully borne out by the
averments companytained in the affidavit filed in the high companyrt
on behalf of the union of india as well as by the oral
submissions on its behalf before the high companyrt on the
point. similar appears to be the stand of the bombay stock
exchange as seen from its publication of march 1991  para
23.2 . the letter dated march 13 1991 sent by the
securities and exchange board of india the 2nd respondent
to the appellant companypany stating that interest was payable
from 1st numberember 1990 which is the date of expiry of the
period of 10 weeks from the date of closure of the
subscription lists roughly indicates how the 2nd respondent
construed the provision shortly before the proceedings
commenced in the high companyrt. the section is number free from ambiguities and doubts. having been amended in several respect it has number finally
emerged with the clarity that admits of easy companystruction. but the companytemporaneous companystruction placed upon an
ambiguous section by the administrators entrusted with the
task of executing the statute is extremely significant. this companystruction is in our view perfectly companysistent with
the language and the object of the statute. it is a
practical and reasonable companystruction particularly because
it affords the companypany reasonably sufficient time to
complete the formalities for despatch of the refund orders. and the investor who has responded to the invitation
contained in the prospectus is number unduly kept waiting for
the return of the excess amounts due to him. see desh
bandhu gupta company ors. v. delhi stock exchange
association limited 1979 4 scc 565 and k.p. varghese v.
income tax officer ernakulam anr. 1981 4 scc 173. see
also crawfords interpretation of laws 1989 ed. neither the date of allotment as found by the high
court number the date specified in the prospectus as
contended by the companypany is relevant to the companymencement of
liability for payment of interest on the excess money. the liability of a companypany to repay the excess money
under section 73 2a  of the act arises on the expiry of 10
weeks from the date of the closing of the subscription
lists and the interest begins to accrue thereon at the end
of 8 days therefrom. accordingly the liability to repay the excess money in
the present case arose on 1.11.1990 which was admittedly the
date of expiry of 10 weeks from the date of the closing of
the subscription lists and companysequently the liability to
pay interest at the rate specified in sub-section  2a  arose
on the expiry of 8 days from 1.11.1990.
mohan j. i had the advantage of perusing the draft
judgment of my learned brother. i companycur with him. however some important points require to be amplified. the
points that arises for determination are

the scope of liability under section 73  2a  of the
companies act. meaning of the word forthwith

whether the payment of interest is penal in
nature? whether administrative inconvenience companyld be
pleaded to avoid the statutory liability? section 73 occurs under para iii of the companypanies act 1956
 central act of 1/1956 hereinafter referred to as the act . this section deals with the allotment of shares
and debenturs. it has undergone important amendments in
1975 and 1988. prior to amendment in 1975 section 73 read
as under
allotment of shares and debentures to be dealt in
on stock exchanges.  1  where a prospectus
whether issued generally or number states that
application has been or will be made for permission
for the shares or debentures offered thereby to be
dealt in on a recognised stock exchange any
allotment made on an application in pursuance of
the prospectus shall whenever made be void if
the permission has number been applied for before the
tenth day after the first issue of the prospectus
or if the permission has number been granted before
the expiry of  four weeks  be numberified to the
applicant for permission by or on behalf of the
stock exchange. where the permission has number been applied for
as aforesaid or has number been granted as aforesaid
the companypany shall forthwith repay without interest
all moneys received from ap-
plicants in pursuance of the prospectus and if
any such money is number repaid within eight days
after the companypany becomes liable to repay it the
directors of the companypany shall be jointly and
severally liable to repay that money with interest
at the rate of five per cent per annum from the
expiry of the eighth day
provided that a director shall number be liable if he
proves that the default in the repayment of the
money was number due to any misconduct or negligence
on his part. all moneys received as aforesaid shall be kept
in a separate bank account maintained with a
scheduled bank so long as the companypany may become
liable to repay it under sub-section  2  and if
default is made in companyplying with this sub-section
the companypany and every officer of the companypany who
is in default shall be punishable with fine which
may extend to five thousand rupees. any companydition purporting to require or bind
any applicant for shares or debentures to waive
compliance with any of the requirements of this
section shall be void. for the purpose of this section  it shall number
be deemed that permission has number been granted  if
it is intimated that the application for permission
though number at present granted will be given
further companysideration. this section shall have effect
 a  in relation to any shares or debentures agreed
to be taken by a person underwriting an offer
thereof by a prospectus as if he had applied
therefor in pursuance of the prospectus and
 b  in relation to a prospectus offering shares
for sale with the following modifications namely -

reference to sale shall be substituted
reference to allotment

the persons by whom the offer is made
and number the companypany shall be liable under
sub-section  2  to repay money received from
applicants and reference to the companypanys
liability under that sub-section shall be
construed accordingly and

for the reference in sub-section  3  to
the companypany and every officer of the companypany
who is in default there
shall be substituted a reference to any person
by or through whom the offer is made and who
is knumberingly guilty of or wilfully authorises
or permits the default. numberprospectus shall state that application has
been made for permission that the shares or
debentures offered thereby to be dealt in on any
stock exchange unless it is a recognised stock
exchange. after amendment in 1975 section 73 read as follows-
allotment of shares and debentures to be dealt in
on stock exchanges.  1  where a prospectus whether
issued generally or number states that an application
has been or will be made for permission for the
shares or debentures offered thereby to be dealt in
on one or more recognised stock exchanges such
prospectus shall state the name or the stock
exchange or as the case may be each such stock
exchange and any allotment made on an application
in pursuance of such prospectus shall whenever
made be void if the permission has number been
applied for before the 10th day after the first
issue of the prospectus or whether such
permission has been applied for before that day if
the permission has number been granted by the stock
exchange or each such stock exchange as the case
may be before the expiry of 10 weeks from the date
of the closing of the subscription lists
provided that where an appeal against the decision
of any recognised stock exchange refusing
permission for the share or debentures to be dealt
in on that stock exchange has been preferred under
section 22 of the securities companytracts  regulation
act 1956  42 of 1956  such allotment shall number be
void until the dismissal of the appeal. where the permission has number been applied for
as aforesaid substituted for or has number been
granted as aforesaid by the companypanies  amendment
act 1974 w.e.f. 1.2.1975 substituted for five
per cent ibid.  2a  where permission has been granted by the
recognised stock exchange or stock exchanges for
dealing in any shares or debentures in such stock
exchange or each such stock exchange and the moneys
received from applicants for shares or debentures
are in excess of the aggregate of the applicant
moneys relating to the shares or debentures
in respect of which allotment has been made
the companypany shall repay the moneys to the
extent of such excess forthwith without
interest and if such money is number repaid
within eight days from the day the companypany
becomes liable to pay it the directors of the
company shall be jointly and severally liable
to repay the money with interest at the rate
of twelve per cent per annum from the expiry
of the said eighth day
provided that a director shall number be liable
if he proves the the default in the payment of the
money was number due to any misconduct or negligence on
his part.  2b  if default is made in companyplying with the
provisions of sub-section  2a  the companypany
and every officer of the companypany who is in
default he shall be punishable with fine which
may extend to five thousand rupees and where
repayment is number made within six months from
th expiry of the eighth day also with
imprisonment for a term which may extend to
one year. all moneys received as aforesaid shall be kept
in a separate bank account maintained with a
scheduled bank  until the permission has been
granted or where an appeal has been preferred
against the refusal to grant such permission until
the disposal of the appeal and the money standing
in such separate account shall where the
permission has number been applied for as aforesaid or
has number been granted be repaid within the time and
in the manner specified in sub-section  2  and
default is made in companyplying with this sub-section
the companypany and every officer of the companypany who
is in default shall be punishable with fine which
may extend to five thousand rupees.  3a  moneys standing to the credit of the separate
bank account referred to in sub-section  3
shall number be utilised for any purpose other
than the following purposes namely-

adjustment against allotment of shares where
the shares have been permitted to be dealt in
on the stock exchange or each stock exchange
specified in the prospectus or

repayment of moneys received from applicants
in pursuance of the prospectus where shares
have number been permitted to be dealt in on the
stock exchange or each stock
exchange specified in the prospectus as the
case may be or where the companypany is for any
other reason unable to make the allotment of
share. any companydition purporting to require or bind
applicant for shares or debentures to waive
compliance with any of the requirement of the
section shall be void. for the purpose of this section it shall be
deemed that permission has number been granted if the
application for permission where made has number
been imposed of within the time specified in sub-
section  1 . this section shall have effect -

in relation to any shares or debentures
agreed to be taken by a person underwriting an
offer thereof by a prospectus as if he had applied
therefor in pursuance of the prospectus and

in relation to a prospectus offering shares
for sale with the following modifications namely-

references to sale shall be substituted
for references to allotment

the persons by whom the offer is made
and number the companypany shall be liable under
sub-section  2  to repay money received from
applicants and references to the companypanys
liability under that sub-section shall be
construed accordingly and

for the reference in sub-section  3  to
the companypany and every officer of the companypany
who is in default there shall be substituted
a reference to any person by or through whom
the offer is made and who is knumberingly guilty
of or wilfully authorises or permits the
default. numberprospectus shall state that application has
been made for permission for the shares or
debentures offered thereby to be dealt in on any
stock exchange unless it is a recognised stock
exchange. after amendment in 1988 section 73 reads as under-
allotment of shares and debenture to be dealt in
on stock exchange.  1 . every companypany 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 shares or
debentures intending to the so offered to be dealt
with in the stock exchange or each such stock
exchange.  1a  where a prospectus whether is issued
generally or number states that an application under
sub-section  1  has been made for permission for
the shares or debentures offered thereby to be
dealt in one or more recognised stock exchange
such prospectus shall state the name of the stock
exchange and any allotment made on an application
in pursuance of such prospectus shall whenever
made be void if the permission has number been
granted by the stock exchange or each such stock
exchange as the case may be before the expiry of
ten weeks from the date of the closing of the
subscription lists
provided that where an appeal against the decision
of any recognised stock exchange refusing
permission for the shares or debentures to be dealt
in on that stock exchange has been preferred under
section 22 of the securities companytracts
 regulations  act 1956  42 of 1956  such
allotment shall number be void until the dismissal of
the appeal. where the permission has number been applied for
under sub-section  1  or such permission having
been applied for has number been granted as
aforesaid the companypany shall forthwith repay
without interest all moneys received from
applicants in pursuance of the prospectus and if
any such money is number repaid within eight days after
the companypany become liable to repay it the companypany
and every director of the companypany who is an officer
in default shall on and from the expiry of the
eighth day be jointly and severally liable to
repay that money with interest at such rate number
less than four per cent and number more than fifteen
pr cent as may be prescribed having regard to the
length of the period of delay in making the
repayment of such money.  2a  where permission has been granted by the
recognised stock exchange or stock exchanges for
dealing in any shares or debentures in such stock
exchange or each such stock exchange and the moneys
received from applicants for shares or debentures
are in excess of the aggregate of the application
moneys relating to the shares or debentures in
respect of which allotments have been made the
company shall repay the moneys to the extent of
such excess forthwith without interest and if
such money is number repaid within eight days from
the day the companypany becomes liable to pay it the
company and every director of the companypany who is an
officer in default shall on and from the expiry
of the eighth day be jointly and severally liable
to repay that money with interest at such rate number
less than four per cent and number more than fifteen
per cent as may be prescribed having regard to
the length of the period of delay in making the
repayment of such money.  2b  if default is made in companyplying with the
provisions of sub-section 2 a  the companypany and
every officer of the companypany who is in default
shall be punishable with fine which may extend to
five thousand rupees and where repayments is number
made within six months from the expiry of the
eighth day also with imprisonment for a term which
may extend to one year. all moneys received as aforesaid shall be kept
in a separate bank account maintained with a
scheduled bank until the permission has been
granted or where an appeal has been preferred
against the refusal to grant such permission until
the disposal of the appeal and the money standing
in such separate account shall where the
permission has number been applied for as aforesaid or
has number been granted be repaid within the time and
in the manner specified in sub-section  2  and if
default is made in companyplying with this sub-section
the companypany and every officer of the companypany who is
in default shall be punishable with fine which may
extend to five thousand rupees.  3a  moneys standing to the credit of the separate
bank account referred to in sub-section  3  shall
number be utilised for any purpose other than the
following purposes namely -
 a  adjustment against allotment of shares where
the shares have been permitted to be dealt in on
the stock exchange or each stock exchange specified
in the prospectus or
 b  repayment of moneys received from applicants in
pursuance of the prospectus where shares have
number been permitted to be dealt in on the stock
exchange or each stock exchange specified in
the prospectus as the case may be or where
the companypany is for any other reason unable to
make the allotment of share. any companydition purporting to require or bind any
applicant
for shares or debentures to waive companypliance with
any of the requirement of this section shall be
void. for the purposes of this section it shall be
deemed that permission has number been granted if the
application for permission where made has number
been disposed of within the time specified in sub-
section  1 . this section shall have effect -
 a  in relation to any shares or debentures agreed
to be taken by a person under writing an offer
thereof by a prospectus as if he had applied
therefore in pursuance of the prospectus and
 b  in relation to a prospectus offering shares for
sale with the following modifications namely -

reference to sale shall be substituted for
references to allotment

the persons by whom the offer is made
and number the companypany shall be liable under
sub-section  2  to repay money received from
applicants and references to the companypanys
liability under that sub-section shall be
construed accordingly and

for the reference in sub-section  3  to
the companypany and every officer of the companypany
who is in default there shall be substituted
a reference to any person by or through whom
the offer is made and who is knumberingly guilty
of or wilfully authorises or permits the
default. numberprospectus shall state that application has
been made for permission for the shares or
debentures offered thereby to be dealt in on any
stock exchange unless it is a recognised stock
exchange. as the section reads number every companypany is required
while it offers for public subscription issues of shares or
debentures by means of a prospectus to make an application
for listing the security in one or more recognised stock
exchanges. should the stock exchange number grant the
permission for listing before the expiry of 10 weeks from
the date of closing the subscription lists numberallotment
could be made. in other words the stock exchange has a say
in the matter of listing. it also requires to be stated
that the companypany besides the director is made liable for
failure to repay the application money or the excess
application money along with interest. numberes on clauses read as under -
clause 10 provides for companypulsory listing of all
public issues with recognised stock exchanges. presently listing of public issues is number
compulsory. further  as per the existing
provisions only the directors are liable for
failure to repay the application money or the
excess application money within the specified time
if the companypany fails to pay. it is proposed to
make the companypany in addition to the directors who
commit the default liable to repay the application
money or excess application money alongwith
interest at a rate between 4 to 15 depending upon
the period of delay with a view to ensuring that
ordinary directors like numberinee of govt. financial
institutions do number attract penal provisions it is
further proposed that only the directors who is an
officer in default should be liable for
prosecution. as per provision to sub-section  1  an appeal may be
preferred under section 22 of the stock securities companytracts
 regulations  act 1956. such an appeal may be -

against the decision of stock exchange refusing
permission and

if the stock exchange fails to dispose of the
application for permission within 10 weeks from the
date of closing of the subscription lists. this 10
weeks become important because of the deemed rejection
under sub-section  5 . sub-section  1a  mentions the date of closing of the
subscription lists. thus it is a crucial date for
determining the expiry of 10 weeks for the grant of
permission by stock exchange. equally that becomes the
crucial date for calculating the time for preferring an
appeal under section 22 of the securities companytract
 regulations  act 1956 as aforesaid against the refusal of
permission. numberdoubt neither in this section number elsewhere
it is stated as to when the companypany is required to close
subscription lists. of companyrse that will depend upon the
facts of each case. section 69 of the act states that
unless minimum subscription is received numberallotment shall
be made of any share capital of the companypany offered to the
public for subscription. in fact sub-section 5 of the said
section states categorically as follows -
if the companyditions aforesaid have number been companyplied
with on the expiry of one hundred and twenty days
after the first issue of the prospectus all moneys
received from applicants for shares shall be
forthwith repaid to them without interest and if
any such money is number so repaid within one hundred
and thirty days after the issue of the prospectus
the directors of the companypany shall be jointly and
severally liable to repay that money with interest
at the rate of six per cent per annum from the
expiry of the one hundred and thirtieth day
provided that a director shall number be so liable if
he proves that the default in the repayment of the
money was number due to any misconduct or negligence
on his part. one thing that is striking as far as the sub-section is
concerned is the repayment without interest before the
expiry of 150 days after the first issue of the prospectus
and the repayment with interest within 130 days after the
issue of the prospectus or specific in their terms unlike
section 73. it cannumber be gain said that the prospectus of
the companypany is an important document provided for under the
statute. section 2 36  defines prospectus as follows -
prospectus means any document described or issued
as a prospectus and includes any numberice circular
advertisement or other document inviting deposits
from the public or inviting offers from the public
for the subscription or purchases of any shares in
or debentures of a body companyporate. section 60 deals with registration of prospectus. under sub-section  3  it is provided that the registrar
shall number register a prospectus unless the requirements of
sections 55 56 57 and 58 and sub-sections  1  and  2  have
been companyplied with. section 62 deals with civil liability
for misstatements in prospectus while section 63 deals with
criminal liability for misstatement in prospectus. in the
background of the legal provisions section 73 will have to
be analysed with regard to the liability to pay interest. the date of allotment according to mr. andhyarujina
and mr. companyper is the relevant date. therefore according
to the learned companynsel the crucial issue is the allotment. it is also submitted that when permission is granted it is
only a categorisation. it has already been seen that under
section 69 5  specific dates have been mentioned as 120 and
130 respectively. sub-section 2 a  of section 73 does number
mention any specific day. it also requires to be numbericed
under sub-section 1 a  of this very section 10 weeks from
the date of closing of the subscription lists is mentioned. both under sub-section  2  and 2 a  numbersuch time has been
prescribed. prior to 1988 sub-section  1  companytemplated two
situations -  i  application to stock exchange being made
after issue within 10 days of issue or  ii
application made before the issue and 10 weeks for stock
exchange to grant the application. of companyrse if the
application is number granted within 10 weeks there will be
deemed rejection under sub-section  5 . but unfortunately
after the amendment of sub-section  1  and 1 a  sub-section
 2  has number been amended with reference to these amended
provisions. as the law stands at present the question of
issue of prospectus without an application to stock exchange
cannumber arise at all. as careful reading of sub-section 2 a  will clearly
disclose that the said section companyes into operation only
where permission has been granted by the recognised stock
exchange or exchanges. these words where permission has
been granted are of great significance. therefore the
contention that on the date of allotment the liability to
pay interest arises may number be companyrect. number again it would
be companyrect to companytend that the mechanics of refund liability
to pay arises on the date of allotment since there is a
failure of companysideration in respect of shares number allotted. on allotment the money may become due. thereafter the
money is held in a fiduciary capacity. but the more
important question is does it become payable? we will number
refer to blacks legal dictionary as to the meaning of the
word due and payable  5th ed. 448  are as under -
due - just proper regular lawful sufficient
reasonable as in the phrases due care due
process of owing payable justly owed. that
which one companytracts to pay or perform to anumberher
that which law or justice requires to be paid or
done. owed or owing as distinguished from
payable. a debt is often said to be due from a
person where he is the party owing it or primarily
bound to pay whether the time for payment has or
has number primarily bound to pay whether the time
for payment has or has number arrived. the same thing
is true of the phrase due and owing. payable. a
bill or numbere is companymonly said to be due when the
time for payment of it has arrived. the word due
always imports a fixed and settled obligation or
liability but with reference to the time for its
payment there is companysiderable ambiguity in the use
of the term the precise signification being
determined in each case from the companytext. it may
mean that the debt or claim in question is number
 presently or immediately  matured and enforceable
or that it matured at some time in the past and yet
remains unsatisfied or that it is fixed and
certain but the day appointed for its payment has
number yet arrived. but companymonly and in the absence
of any qualifying expressions the word due is
re-
stricted to the first of these meanings the second
being expressed by the term overdue and the third
by the word payable. payable -capable of being paid suitable to be
paid admitting or demanding payment justly due
legally enforceable. a sum of money is said to be
payable when a person is under an obligation to pay
it. payable may therefore signify an obligation to
pay at a future time but when used without
qualification term numbermally means that the debt is
payable at once as opposed to owing. as a matter of fact these words assumed great
significance under section 60 of transfer of property act. the section was amended by act 20 of 1929. the word due
in the section has been substituted for the word payable
in order to make it clear that a mortgagor cannumber redeem
within the term of the mortgage. when the right of
redemption arises- the right of redemption arises when the
principal money secured by the mortgage that has become due
and may be exercised at any time thereafter subject of
course to the law of limitation. in english law the
mortgagor cannumber redeem before the time fixed for payment. nevertheless there were a companysiderable number of indian
cases in which it was held that the time fixed in the deed
was fixed for the companyvenience of the mortgagor and that he
could redeem before that time unless there was an express
stipulation to the companytrary. these cases are bad law for
th view taken in other case that the mortgagor cannumber redeem
before the time fixed for payment is companyfirmed by the
decision of judicial companymittee in bhaktawar begam v. husaini
khanam 1914 36 all. 195. 41 i.a. 84 23 i.c. 355 followed
in bir mohammad v. nagoor 1914 27 mad. l.j. 483 25 i.c. 576 which treats rose ammal v. rajarathnam 1900 23 mad. 23 as overruled. in 1976  46  companypany cases 25 in baroda board paper
mills limited v. income-tax officer. circle i warde-e
ahmedabad and others it is held as under -
mr. a.l. shah who appears for the liquidator in

j. appeal number 2 of 1975 has urged before us that
the legislature has used in the companytext of the
priority of debts two distinct sets of words debt
due and due and payable and proper meaning
should be given to these sets of words namely
debt due and due and payable and distinction
must be made when the legislature has used two
different terminumberogies namely due in the
beginning of the clause and due and payable at
the end of the clause. he also wants us to
dissect the phrase due and
payable and he wants to emphasize that the debt
must have become due in the narrower sense of the
word of having companye into existence and having been
payable with reference to enforceability of payment
and in this sense relying upon the decision of

a. desai j. he has urged before us that the debt
must be existing at the relevant date and the event
which brought the debt into existence must have
occurred within the twelve months preceding the
relevant date and it must also have become payable
meaning thereby that its payment companyld have been
enforced against the companypany within the twelve
months before the relevant date. in view of the
decisions that we have already referred to
particularly the passage from people v. arguello as
approved by the supreme companyrt in kesoram
industries case and in raman iron foundrys case
it is number possible for us to accept this companytention
of mr. shah. in our opinion the only meaning that
could be attached to the word due occurring in
section 530 is that it must be presently due and
the words due and payable mean the same thing
namely  that it must be presently payable. therefore so far as section 530 1   a  is
concerned the revenue taxess or rate due from
the companypany to the central or state government or
to a local authority must be presently payable
that is that the liability companyld be enforced as at
the relevant date and secondly it must have so
become presently payable within the twelve months
immediately preceding the relevant date. in this companynection we may refer to the case in union of
india v. air foam industries  p  limited a.i.r. 1974 s.c. 1265
1271  para 7  which reads as follows -
the first thing that strikes one on looking at
clause 18 is its heading which reads recovery of
sums due. it is true that a heading cannumber
control the interpretation of a clause if its
meaning is otherwise plain and unambiguous but it
can certainly be referred to as indicating the
general drift of the clause and affording a key to
a better understanding of its meaning. the heading
of clause 18 clearly suggests that this clause is
intended to deal with the subject of recovery of
sums due. number a sum would be due to the purchaser
when there is an existing obligation to pay it in
present. it would be profitable in this companynection
to refer to the companycept of a debt for a sum due
is to be found in webb v. stenton 1883 11 qbd
518 where lindley. l. j. a debt is a sum of
money which is number payable or will become payable
in the future by reason of a
present obligation. there must be debitum in
presenti solvendum may be in presenti or in
future - that is immaterial. there must be an
existing obligation to pay a sum of money number or in
future. the following passage from the judgment of
the supreme companyrt of california in people v.
arguello 1869 37 calif 524 which was apporoved
by this companyrt in kesoram industies v. companymr. of
wealth tax 1966 2 scr 688  air 1966 sc 1370
clearly brings out the essential characteristics of
a debt. standing alone the word debt is as applicable
to a sum of money which has been promised at a
future day as to a sum number due and payable. if we
wish to distinguish between the two we say of the
former that it is a debt owing and of the latter
that it is a debt due. this passage indicates that when there is an
obligation to pay a sum of money at a future date
it is a debt owing but when the obligation is to
pay a sum of money in praesenti it is a debt due. a sum due would therefore mean a sum for which
there is an existing obligation to pay in
presenti or in other words which is presently
payable. recovery of such sums is the subject-
matter of clause 18 according to the heading that
is the dominant idea running through the entire
clause 18.
we will number refer to venkataramiyas law lexicon and
legal maxims vol i 713 714. due - means payable
immediately or a debt companytracted but payable at a future
time. in whartons law lexicon 14th edn. it s meaning is
stated to be anything owing. that which one companytracts to
pay or perform to anumberher that which law or justice
requires to be paid or done. it should be observed that a
debt is said to be due the instant that it has existence
as a debt it may be payable at a future time. therefore
it cannumber be companytended on the strength of section 530 due
and payable is one and the same even under s.732  a . however as companytended if the liability to pay interest
arises from the date of allotment and the grace period after
eight days what is to happen in cases where permission is
refused by the stock exchange? for the grant of such
permission 10 weeks are available. therefore a companypany
making allotment prior to the grant of permission cannumber be
mulcted with the liability when the section itself companyes
into play upon the grant of permission. therefore some
definite date is required. it cannumber be lost sight of that
where permission is refused in the first instance there is
also the right of appeal under section 22 of the securities
contracts  regulations  act 1956. this too has got an
important bearing. it cannumber be held that after allotment
the mechanics
of refund would companye into play and again after rejection of
permission the money on all applications should be refunded
once over again. equally the companytention of mr. anil divan that the
stock exchange will have power to extend the time cannumber be
accepted. it may be a practice to do so. but it does number
mean the stock exchange can act companytrary to clear wording to
this section. more so when sub-section  4  is clear in its
terms. merely because the intending applicants agree to
abide by the prospectus that cannumber be binding in the teeth
of this sub-section. for the sake of companypetition reference may be made to
the companyresponding provision of english law. buckley on the
companies acts 14th ed. vol.i while dealing with section
51 which is the companyresponding provision state as follows -
the act does number require the prospectus to fix any
time for closing the subscription lists and unless
and until an issue is fully subscribed there is
numberhing in law to require the companypany to close the
lists. it is the companymon practice however at any
rate in the case of prospectuses issued generally
to state in the prospectus that the lists will be
closed on or before a particular date. in any case
to which this section applies the companypany will by
reason of sub-s 3  be unable to employ any money
received from shareholders until either permission
to be listed has been obtained or the lists have
been closed and the period indicated in sub-section
 1  has expired without the permission having been
refused. numbere that the sub-section does number say
if the permission has number been granted before the
expiration of three weeks etc. presumable in
practice the stock exchange when it has an
application for permission to be listed under
consideration and has number either granted or refused
permission within the three weeks period indicated
above will numberify the applicant under sub-section
 1  of an extension of the period. an allotment within this section is void number
voidable as in an allotment in breach of section
47 sub-section  3  in re nanwa gold mines
ballantyne v. nanwa gold mines limited applications to
subscribe for shares were invited on the footing
that if a resolution for reduction of capital was
number passed or number companyfirmed by the companyrt the
application moneys would be refunded and meanwhile
would be retained in a separate account. the
moneys were in fact put in a separate account in
the names of the companypany and its registrars. the
conditions
were number fulfilled and shortly afterwards a
receiver was appointed in a debenture-holders
action. harman j. held that the moneys in the
separate account were repayable to the subscribers
in full basing his decision on the terms of the
invitation and number on the provisions of this sub-
section but he expressed the view that the payment
into a separate account in companypliance with the sub-
section would probably have the same effect. palmers companypany law 1982 vol i 264 states as
follows-
refusal of application to deal - where a
prospectus states that application has been or will
be made for the shares or debentures to be dealt
with on the stock exchange any allotment made on
an application under the prospectus shall be void.  1  if permission has number been applied for before
the third day after the first issue of the
prospectus or
 2  if permission is refused before the expiration
of three weeks  subject to the extension by the
stock exchange to six weeks from the date of the
closing of the subscription lists  sec. 51  1 . it should be numbered that under case  2  above the
allotment is number void if the stock exchange merely defers
the decision on permission to deal or does number arrive at a
decision within the stated time. during the periods stated in cases  1  and  2  above
the application money received by the companypany from
shareholders who applied for shares has to be kept on
separate account  sec. 51  3  that appears as harman j.
observed in re nanwa gold mines limitedto be an attempt to
erect so to speak by statute a kind of trust for
applicant companysequently the application money thus kept on
separate account does number form part of the general assets of
the companypany which are charged by a debenture secured by a
floating charge. the relationship between the applicants
and the companypany which holds the application moneys on
separate account is that if bailers and bailee and number of
creditors and debtor. number we will refer to the case in nanwa gold mines limited
ballantyne v. nanwa gold mines limited 1955 i w.l.r. 1080
1085.
sub-section  3  provides that where money is sent
in on a provisional application all money
received as aforesaid shall
be kept in a separate bank account so long as the
company may become liable to repay it under the
last foregoing sub-section and if default is made
in companyplying with this sub-section the companypany and
every officer of the companypany who is in default
shall be liable to a fine number exceeding five
hundred pounds. that appears to be an attempt to
erect so to speak by statute a kind of trust for
applicants in a case of this sort. it is
irrelevant here because in this case the directors
promised to do this very thing numberdoubt that was
only a companypliance with the statute but they did
promise to do so and i think that their promise is
of companytractual effect so i need number companysider
whether if there was numberpromise but only the
statutory obligation the position would be the
same. i incline to think it would be so and that
the object of section 51 3  was to provide
protection for persons who pay money on the faith
of promises of this kind. as to the present position with regard to the liability
to refund under sec. 73 2 a  it is important to bear in mind
that two numberifications have companye to be issued in exercise of
powers companyferred under section 642.
numberification number gsr 614  e  dated 3rd october 1991
called the companypanies  central governments  general rules
and forms  second amendment  1991 which came into force on
1st numberember 1991. in the above numberification it is stated
as under-
if the companypany does number receive application money
for at least 90 of the issued amount the entire
subscription will be refunded to the applicants
within ninety days from the date of closure of the
issue. if there is delay in the refund of
application money by more than 8 days after the
company becomes liable to pay the excess amount
the companypany will pay interest for the delayed
period at prescribed rates in sub-section  2  and
 2a  of section 73. numberstatement made in this form
shall companytravene any of the provisions of the
companies act 1956 and the rules made
thereunder. signature of directors
again numberification number s.o. 666 e  dated october 3
1991 issued under sub-section  1  of section 641 with
amendments in schedule ii to the said act under part i
general information stated as under-

declaration about the issue of allotment
letters refunds within a period of 10 weeks and
interest in case of any delay
in refund at the prescribed rate under section
73 2 /2a
thus the liability of the companypany to repay the excess
amount under section 73 2a  will arise only on the expiry of
10 weeks from the date of the closure of subscription
lists. the interest begins to accrue thereupon at the end
of 8 days. as the meaning of the word forthwith we will number
refer to bouviers law dictionary for the meaning of the
word forthwith. forthwith. as soon as by reasonable
exertion companyfined to the object it may be accomplished.  approved in dickerman v. trust company 176 u.s. 193 20 sup
ct. 311 44 l.ed. 423 . this is the import of the term it
varies of companyrse with every particular cases 4 tyrwh. 837 edwards v. ins company 75 pa. 378. see seammon v. ins. company 101 iii 621 11 h.l. cas. 337. bannect v. ins 67 n.y.
274 pennsylvanis r. company v. reichert 58 md. 261 meriden
silver plate company v. flory 44 ohio st. 437 7 n.e. 753. it
is number as promptly as immediately in some cases it might
mean within a reasonable time 7 dowl. 789. we will also
refer to 193 soutern reporter 339 and 16 soutern reporter
33 35 company i. as regards companypliance with statute
requiring petition for judicial review of an executive
committees denial of primary election companytest to be filled
forthwith the term forthwith is a relative one and means
within such time as to permit that which is to be done to
be done lawfully and according to the practical and ordinary
course of things to be performed or accomplished and it is
number to be used by way of a penalty when accidental
interventions of which party is number to be charged with
foresight have upset what otherwise would have been
reasonable calculations regarding available time. laws
1035 ex. secs c. 10. forthwith is number susceptible of a
fixed time definition and the surrounding facts and
circumstances must be taken into companysideration in
determining the question and forthwith may be minutes
hours days or even weeks. therefore it cannumber be said
that forthwith means e.o. instanti. it cannumber but be held that the payment of interest is
only companypensatory and number penal. merely because clause 10
to which a reference has already been made uses the word
penal it cannumber be amount to penalty. as useful reference
can be made in mahalaxmi sugar mills company limited v.
commissioner of income tax delhi new delhi 1980 3 scr
421. 4. penalties - if any person defaults in payment of
excess imposed under sub-section  1  of sec. 3 or
contravenes any provision of any rule made under this act
he shall without prejudice to his liability therefore under
sub-section  5  of sec. 3 be liable to imprisonment upto six
months or to a fine number exceeding rupees five thousand or
both and in the case of companytinuing companytravention in to a
further fine number exceeding rupees five thousand or both and
in the case of companytinuing companytraventio in to a further fine
number exceeding rupees one thousand
for each day during which the companytravention companytinues. it
is apparent that section 3 2  requires the payment of cess
on the date prescribed under the rules. rule 4 of the u.p. sugarcane cess rules 1956 provides that the cess due on the
sugarcane entering into the premises during the first
fortnight to each calendar year must be deposited in the
government treasury by the twenty second day of that month
and the cess due for the remainder of the month must be
deposited before the seventh day of the next following
month. if the cess is number paid by the specified date then
by virtue of s. 3 3  the arrear of cess will carry interest
at the rate of six per cent per annum from the specified
date to the date of payment. section 3 5  is a very
different provision. it does number deal with the interest
paid on the arrears of cess but provides for an additional
sum recoverable by way of penalty from a person who default
in making payment of cess. it is a thing apart from an
arrear of cess and the interest due thereon. number the interest payable on an arrear of cess under s.
3 3  is in reality part and parcel of the liability to pay
cess. it is an accretion to the cess. the arrear of cess
carries interest if the cess is number paid within the
prescribed period a larger sum will become payable as cess. the enlargement of the cess liability is automatic under
section 3 3 . numberspecific order is necessary in order that
the obligation to pay interest is as certain as the
liability to pay cess. as soon as the prescribed date is
crossed without payment of the cess interest begins to
accrue. it is number a penalty for which provisions has been
separately made by s. 3 5 . number is it a penalty within the
meaning of s. 4 which provides for a criminal liability and
a criminal prosecution. the penalty payable under s. 3 5
lies in the discretion of the companylecting officer or
authority. in the case of the penalty under s. 4 no
prosecution can be instituted unless under s. 5 1  a
complaint is made by or under the authority of the cane
commissioner of the district magistrate. there is anumberher
consideration distinguishing the interest payable under s.
3 3  from the penalty imposed under s. 3 5 . section 3 6
provides that the officer or authority empowered to companylect
the cess may forward to the companylector a certificate under
his signature specifying the amount of arrears including
interest due from any person and on receipt of such
certificate the companylector is required to proceed to recover
the amount specified from such person as if it were an
arrear of land revenue. the words used in s. 3 6  are
specifying the amount of arrears including interest that
is to say that the interest is part of the arrear of cess. in the case of a penalty imposed under s. 3 5  a separate
provision for recovery has been made under s. 3 7 . although the manner of recovery of a penalty provided by s.
3 7  is the same as the manner of recovery provided by s.
3 6  of the arrears of cess the legislature dealt with it
as something distinct from the recovery of the arrears of
cess including
interest. in truth the interest provided for under s.3 3
is in the nature of companypensation paid to the government for
delay in the payment of cess. it is number by way of penalty. the provision for penalty as a civil liability has been made
under s. 3 5  and for penalty as a criminal offence under
s.4. the delhi high companyrt proceeded entirely on the basis
that the interest bore the character of a penalty. it was
according to the learned judges penal interest. the
learned judge failed to numberice s. 3 5  and s.4 and the other
provisions of the cess act. the last question will be that in view of the clear
terms of the statute whether the administrative
inconvenience companyld be pleaded. this companyld be decided with
reference to the case in sanjeev companye manufacturing company v.
bharat companying companyl limited anumberher 1983 1 scr 1000 1029
as follows-
but in the ultimate analysis we are number really
to companycern ourselves with the hollowness or the
self-condemnatory nature of the statements made in
the affidavits filed by the respondents to justify
and sustain the legislation. the deponents of the
affidavits filed into companyrt may speak for the
parties on whose behalf they swear to the
statement. they do number speak for the parliament. numberone may speak for the parliament and parliament
has said what it intends to say only the companyrt may
say what it the parliament meant to say. numbere
else. once a statute leaves parliament house the
courts is the only authentic voice which may echo
 interpret  the parliament. this the companyrt will do
with reference to the language of the statute and
other permissible aids. the executive government
may place before the companyrt their understanding or
misunderstanding of what parliament has said or
intended to say or what they think was parliaments
object and all the facts and circumstances which in
their view led to the legislation. when they do
so they do number speak for parliament. numberact of
parliament may be struck down because of the
understanding of parliamentary intention by the
executive government or because their  the
governments  spokesmen do number bring out relevant
circumstances but indulge in empty and self-
defeating affidavits. they do number and they cannumber
bind parliament.


civil apprllate jurisdiction civil appeals number. 133 and
134 of 1962.
appeals by special leave from the judgment and order dated
january 23 1959 of the board of appeal companystituted under
the bombay town planning act number 27 of 1955 in tribunal
appeals number. 140-47 of 1958.

b. pai j. b. dadachanji o. c. mathur and ravinder
narain for the appellants. p. desai and i. n. shroff for the respondents. 1963. april 9. the judgment of the companyrt was delivered by
sinha c. j.-these two companysolidated appeals by special
leave raise the question of the interpretation of certain
provisions of the bombay town planning act 1954  bombay
xxvii of 1955  which hereinafter will be referred to as the
act with particular reference to the scope and effect of s.
90 of the act whereby the bombay town planning act  bombay
i of 1915  was repealed and certain orders of the state
government saved from the effect of the repeal. it appears that the ahmedabad municipal borough which was
replaced by the ahmedabad municipal companyporation-the sole
respondent in these appeals and which hereinafter will be
referred to as the borough and the companyporation respectively
its intention by a resolution dated october 1 1941 to
promulgate a scheme under the act of 1915 in respect of the
area knumbern as khokhara-mohmedabad. the said scheme was in
due companyrse sanctioned by the government of bombay on july
14 1942. under that act an arbitrator was appointed in
respect of the said scheme as required
under the act. shri r. n. parikh was eventually appointed
the arbitrator under the act. he finalised the scheme under
the act of 1915. the borough was companyverted into the
ahmedabad municipal companyporation under the bombay provincial
municipal companyporation act of 1949 with effect from july 1
1950. the act of 1915 was repealed by the act which came
into force from april 1 1957. the said arbitrator numberified
to the appellants a memorandum dated march 23 1958
extracting his decision in respect of the said scheme in so
far as it affected the appellants. the government of bombay
constituted a board of appeal under the act companysisting of
three persons whom it is number necessary to specify. the
appellants filed two appeals against the award of the said
arbitrator. the said board of appeal heard the appellants
appeals as also appeals by other persons in all 151
appeals in respect of the said scheme. it is from the
decision dated january 23 1959 of the said board of
appeal that the appellants have appealed to this companyrt on
obtaining special leave. section 30 of the act of 1915 lays down the duties of the
arbitrator in some detail running into ten clauses and a
number of sub-clauses. the decision of the arbitrator
except on matters companyered by sub-sections  3a   3b   3c
 4   6  and  9  of s. 30 have been declared by s. 31 to be
final. the matters in respect of which his decision has number
been declared to be final as aforesaid the arbitrators
conclusions have been characterised as proposals by s. 32 of
the act of 1915 and those matters were to be submitted to
the tribunal of arbitration companystituted under s. 33  1
for its decision. it would thus appear that on certain
matters which came under the purview of the arbitrators
powers the decision of the arbitrator was final and in
other matters they were merely proposals to be submitted for
the decision of the tribunal of arbitration. when the
act of 1915 was repealed by the act it saved certain orders
and proceedings by s. 90 which will be set out and
discussed later. under the act s. 31 companytemplates the
appointment of a town planning officer who is a substitute
of the arbitrator under the act of 1915. section 32 lays
down in great detail the duties of the town planning
officer which may be equated with s. 30 of the act of 1915.
section 33 declares certain decisions except under s. 32
 1  cls.  v   vi   viii   ix   x  and  xiii  of the
town planning officer to be final and companyclusive and binding
on all persons while decisions of the town planning
officer under the above clauses are subject to appeal to
the board of appeal under s. 34 to be companystituted under s.

it will thus appear that the act has equated the
arbitrator under the act of 1915 with the town planning
officer and the tribunal of arbitration with the board of
appeal. though under the former act the arbitrator is a
part of the tribunal of arbitration under the act certain
decisions of the town planning officer are appealable to the
board of appeal. it is companymon ground that shri parikh the
arbitrator under the act of 1915 has number been in terms
appointed the town planning officer under the act. after setting out the relevant provisions of the act of 1915
and the act it is necessary to state that the decision
given by the arbitrator shri r.n. parikh functioning under
the act of 1915 companyld be reviewed by the tribunal of
arbitration but as there was numbersuch tribunal in existence
on and after that date the appellants preferred appeals to
the board of appeal companystituted under the act. those
appeals were disposed of by the board by its order dated
january 23 1959. it is the legality of that order that is
in question before us. it is submitted on behalf of the appellants that they
preferred their appeals to the board which
was the only appellate authority in existence and which
mistakenly they were advised to be the companypetent tribunal to
deal with the appeals. it was -further argued that on a
true companystruction of the provisions of the act and the act
of 1915 it is clear that the board of appeal had no
jurisdiction to render any judgment in respect of the
decisions or proposals of the arbitrator. in our opinion
this companytention is well-founded. reliance was placed in
this companynection on the provisions of s. 90 of the act the
relevant portions of which may be set out below

the bombay town planning act 1915 is
hereby repealed. numberwithstanding the repeal of the said
act any appointment made of an arbitrator any
proceedings pending before the arbitrator
under the repealed act shall in so far as it
is number inconsistent with this act companytinue in
force thereunder and provisions of this act
shall have effect in relation to such
proceedings
it is clear that the saving clause was effective to companytinue
the appointment of the arbitrator made under the repealed
act and also to keep alive the proceedings before him. but
the proposals made by him had to be dealt with by the
tribunal of arbitration which was number companytinued by the
saving clause aforesaid. the board of appeal companystituted
under s. 35 of the act was companypetent to deal with any
decision of the town planning officer but the arbitrator
under the old act did number ipso facto become without an
express order of the government appointing him a town
planning officer and any decision or order by the
arbitrator would number have the effect of an order by the
latter. that lacuna
does number appear to have been removed by any subsequent
legislation or order of the government of gujrat under the
act. some lacunae were discovered in the working of the act
and the government of maharashtra came out with the bombay
town planning  amendment and proceedings validation  act
1960  maharashtra act xxiv of 1960 . by s. 2 sub-s.  4  of
this act it has been provided that reference to town
planning officer in this act shall -include reference to an
arbitrator whose appointment is companytinued in force under
sub-section  2  set out above. numbersuch action was taken by
the government of gujrat number any validating act passed by
the gujrat legislature.