IMPORTANT CASE LAWS ABOUT AN INVITATION TO BE TERMED AS AS INVITATION TO PUBLIC

COMPANY LAW.

 

  • Pramatha Nath Sanyal vs. Kali Kumar Dutt[1]: In this case an advertisement given in a newspaper for inviting application to purchase the remaining shares of the company was termed to be a proper invitation to the public as per the Companies Act and while deciding the case the Court had penalized the the directors of the company for not complying with the mandatory provision of filing a copy of the advertisement with the Registrar of the Company.

 

  • South of England Natural Gas and Petroleum Co. Ltd[2]: In this case 3000 copies of a document in the form of prospectus were sent and distributed among the members of a particular gas company only. The Court in this had held the word ‘public’ was a general word which included any part/section of the public. It further stated that if any document inviting persons to buy shares is issued for instance to all advocates/doctors/foreigners living in India or to all the citizens of the country or to all shareholders of a specific company it shall deemed to be a public issue invite as per the provisions of the Act and the document which was sent above was a prospectus as per the Act.

 

  • Stock and Other Securities Investments Co. Ltd. vs Christopher[3]: The Court had stated that any circular which is issued by any company to the shareholders of other companies for acquiring their shares held in those companies and also for issuing its own shares in exchange of those acquired shares will not amount to be an invitation to the public and such a circular shall not be termed as a prospectus. The shares for which the circular was issued were the unissued shares of the company and thus they could not be the subject of an offer for purchase. Hence, the circular was not a prospectus but a mere communication of an offer for exchanging shares of one company with that of the other.

 

  • Rattan Singh vs. Managing Director, Moga Transport Co. Ltd[4]: It was decided in this case that an offer to purchase one’s kith and kin cannot be termed as an invitation to the public. An offer for buying shares which is made to an individual as such does not come within the purview of the definition of the word ‘public’ as used in Section 57. (corresponding section of the Companies Act, 2013- Sec. 23 and Sec. 42)

 

  • Nash vs. Lynde[5]: In this case several copies of a document marked ‘strictly confidential’ which contained details of a proposed issue of shares, were sent along with application forms by the Managing Directors, who in turn, had given it to their clients which were then passed on to a relation. Thus, The House of Lords had held that these documents were circulated privately within a small circle of the friends of the directors and there was no issue to the public. Hence, any action for compensation by the allottee for loss sustained by reason of omission in the document will not prevail.

  (Written by- Shajeeda Tajdeen)

[1] AIR 1925 Cal.714

[2] (1911) 1 Ch.573

[3] (1956) I.W.L.R 237

[4] (1959) 29 Com Cases 165

[5] (1929) A.C. 158

Leave A Comment