Guddi Logistics Limited offered 1,00,000 equity shares of ₹10 each to a select group of 250 persons, including 60 qualified institutional buyers. The share application money was received by the company on 1st August 2024

Validity of offer to select group of 250 persons. As per section 42(2) of the Companies Act 2013 read with rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014, a private placement shall be made only to a select group of persons who have been identified by the Board, whose numbers shall not exceed 200 in aggregate in a financial year, excluding the qualified institutional buyers and employees of the company being offered securities under a scheme of employee's stock option in terms of provisions of clause (b) of sub-section (1) of section 62 of the Companies Act, 2013 in a financial year subject to such conditions as may be prescribed. It is further clarified that the restrictions aforesaid would be reckoned individually for each kind of security that is equity share, preference share or debenture. In this present case, Guddi Logistics Limited made a private placement offer to 250 persons, including 60 qualified institutional buyers. Excluding these 60 QIBs, the offer was made to 190 select persons, which is within the prescribed limit of 200 persons. Therefore, the offer made to a total of 250 select persons is valid under provisions of the Companies Act, 2013. Objection and Suggestion by the Company Secretary Regarding Utilization of Application Money and Refund with Interest: As per Section 42(6) of the Companies Act, 2013, a company must allot the securities within 60 days from the receipt of the application money. If the company fails to allot the securities within this period, it is required to refund the application money within 15 days from the expiry of the 60-day period. If the refund is not made within these 15 days, the company is liable to pay interest at 12% per annum from the expiry of the 60 days. Additionally, the application money cannot be used for any purpose other than the allotment of securities or for the repayment of monies where the company is unable to allot securities. In the present case, the company failed to allot the shares by 30th September 2024, which is the 60th day from the receipt of the application money on 1st August 2024. The application money should therefore be refunded by 15th October 2024. If not refunded by this date, interest at 12% per annum will be payable from 1st October 2024. Hence, the utilization of the application money for the payment of interest on a cash credit limit is not permissible under the provisions of the Companies Act, 2013, making the company secretary's objection valid. Furthermore, the suggestion to refund the application money with interest at 12% per annum from 1st October 2024, if not refunded by 15th October 2024, is also correct. The view of CFO is therefore not correct.