If a company makes allotment of shares against the rules of section 69 and 70, then any allotment is called irregular allotment i.e. allotment:-

(1) the minimum subscription amount has not been received, or 

(2) the amount of 5% has not been received in cash on the application, or 

(3) the amount received has not been deposited in a scheduled bank, or 

(4) ) In case of non-issuance of prospectus, the officiating prospectus has not been sent before the Registrar. 

 Allotment made in the above condition or conditions will be treated as irregular allotment. Effects of irregular allotment, 

1. Contract voidable If the allotment is irregular, then the contract of purchase of shares is voidable at the will of the applicant. The allottee can waive the contract for purchase of shares on the ground of irregular allotment within two months from the date of allotment. The allottee should inform the company in this regard. If the applicant or the allottee does such a thing, which shows the acceptance of allotment, then his right to make the contract of purchase of shares void is forfeited. – 

2. Compensation If any director of the company deliberately makes irregular allocation, then he is liable to compensate the company and the allottee. The company or the allottee can take action against the operator within two years from the date of allotment. 

 3. Compensation by keeping shares, the allottee, by keeping the shares of the company with himself, can also compel the operators who have made irregular allotment in violation of section 69 and 70, to compensate for the damage caused by the irregular allotment. 

 4. Prosecution for getting back the amount If the issue of shares is irregular, void or outside the right, the allottee can withdraw his money from the company on the ground of complete want of consideration. If the allottee has not sold the allotted shares to any other third person, he can also sue the company for the amount received by the company. ,

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