Answer based on following passage.

Earn Limited, with an authorised capital of 10,00,000 is divided into equity shares of ₹ 10 each, issued 50,000 equity shares at a premium of 3 per share payable as follows.

On application - 3 per share
On allotment - 5 per share (including Premium)
On first and final call- Balance amount.

Applications were received for 60,000 shares. The Directors allotted the shares to all applicants on pro-rata basis. All money received except I call on 1,000 shares issued to Ravi.

Identify the subscription related to Earn Limited in above case.

Over Subscription

The correct answer is Option (1) → Over Subscription.

In this case, the applications received for 60,000 shares exceed the issued shares, which are 50,000. This means the company has received more applications than the number of shares it has available to allot, and the allotment was made on a pro-rata basis. Hence, the subscription is Over Subscription because there were more applications (60,000) than the shares issued (50,000).

Oversubscription refers to a situation in which the demand for a particular financial instrument exceeds the supply or the number of available shares. There are instances when applications for more shares of a company are received than the number offered to the public for subscription. This usually happens in respect of shares issue of well-managed and financially strong companies and is said to be a case of ‘Over Subscription’. In such a condition, three alternatives are available to the directors to deal with the situation: (1) they can accept some applications in full and totally reject the others; (2) they can make a pro-rata allotment to all; and (3) they can adopt a combination of the above two alternatives which happens to be the most common course adopted in practice.