the specified period, and It may be noted that for making a subsequent allotment irregular. conditions (b) and (c) stated above are irrelevant. In other
words, subsequent allotment of shares will be tenned as irregular allotment only when it has been made without receiving at least five per cent cash of the
nominal value of shares as application money [Section 69(7)].
The effects of an irregular allotment are as follows:
made by the company becomes voidable at the option of the applicant and can be avoided by him: .
(a) within tvo months of the date of statutory meeting of the company.
(b) within two months of the date of allotment where the company is not required to hold a statutory meeting. The allottee must give notice of his intention
to avoid the contract of allotment within the time specified above. The actual legal proceedings may start later.
The allotment can be avoided even if the company is in the course of winding up.
loss. damage or costs which the company or the nllottee ma have sustained or incurred on account ofirregular allotment provided the party brings a suit
within two years from the date of allotment.
3. Finc. Every director who is knowingly responsible for irre!:,’lliar allotment shall be liable for a fine
(0) upto Rs. 50,000 when offer is made to the public and the allotment is made without depositing the application money in a separate bank account in a
Scheduled Bank and keeping deposited the same till the company obtains the certificate of commencement of business [Sec. 69 (4) J
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