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Applicability of Section 42 (6)


19-Jul-2025 (In Corporate Law)
I have a known case where the start up company backdated a board resolution approving allotment of shares to allotee , however the same is not followed up with any letter of allotment through formal means . Allotee is not aware whether she has been alloted any shares as there is no communication. Now the company goes ahead and files PAS 3 without allotee's knowledge. Can allotee demand refund of application money if she is not communicated the allotment post 60 days of sending application money
Answers (3)

Answer #1
794 votes
Yes, the allottee can rightfully demand a refund of the application money. As per provisions under the Companies Act, 2013, if shares are not allotted within 60 days from receipt of application money and no communication is made, the amount should be refunded within 15 days thereafter. Non-refund within this period attracts penal interest. Filing PAS-3 without the knowledge of the allottee and absence of a proper allotment letter or share certificate is a serious procedural lapse. The allottee can issue a legal notice and proceed under Section 42(6) and other relevant provisions.
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Advocate Adarsh Kumar

Adv. Adarsh Kumar

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Answer #2
671 votes
Legal Position: As per Section 42(6) of the Companies Act, 2013 (for private placement): “If the company does not allot the securities within sixty days from the date of receipt of the application money, it shall refund the application money within fifteen days from the expiry of sixty days. If it fails to do so, it shall be liable to repay the money with interest @ 12% p.a. from the 76th day.”
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Advocate Prateek Pal

Adv. Prateek Pal

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Answer #3
586 votes
If the company failed to allot shares and communicate the allotment within 60 days of receiving the application money, the allottee is entitled to a refund under Section 39 of the Companies Act, 2013. Filing PAS-3 without informing the allottee and without issuing a formal allotment letter is a procedural lapse.
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Advocate Arshnit Sandhu

Adv. Arshnit Sandhu

LawRatoDelhi | 25+ Answers
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