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THE COMPANIES BILL, 1997 PART III PROSPECTUS, ALLOTMENT, LISTING AND OTHER MATTERS RELATING TO THE ISSUE OF SECURITIES SECTIONS : 61-67
61 Prohibition of allotment unless minimum subscription received. – .(1) No allotment shall be made of any securities of a company offered to the public for subscription, unless the amount stated in the prospectus as the minimum amount which, in the opinion of the Board of Directors must be raised by the issue of share capital in order to provide for such matters as may be prescribed, and the sum payable on application for the amount so stated has been paid to and received by the company, whether in cash or by cheque or other instrument which has been paid (2) In the event of any contravention of sub-section(1), every director who is knowingly responsible for such contravention, shall be punishable with imprisonment for a term which may extend to two years and shall also be liable to fine which may extend to ten thousand rupees. (3) The amount so stated in the prospectus shall be reckoned exclusively of any amount payable otherwise than in money, and is in this Act referred to as "the minimum subscription". (4) The amount payable on application on each share shall not be less than twenty five per cent of the nominal amount of the share. (5) All moneys received from applicants for securities shall be deposited and shall continue to be kept deposited in a separate account in a Scheduled Bank until the entire amount payable on applications for securities in respect of the minimum subscription has been received by the company, and where such amount has not been received by the company within the period specified for repayment of amount without interest under sub-section (7), all moneys received from applicants for shares shall be returned in accordance with the provisions of that sub-section. (6) In the event of any contravention of the provisions of sub-section (5), every promoter, director or other person who is knowingly responsible for such contravention shall be punishable with fine which may extend to fifty thousand rupees. (7) If the minimum subscription is not received on the expiry of such period as may be prescribed after the first issue of the prospectus, all moneys received from applicants for securities shall forthwith be repaid to them without interest; and if any such money is not so repaid within eight days thereafter, the directors of the company shall be jointly and severally liable to repay that money with interest at such rate as may be prescribed: Provided that a director shall not be so liable if he proves that the default in the repayment of the money was not due to any misconduct or negligence on his part. (8) Any condition purporting to require or bind any applicant for securities to waive compliance with any requirement of this section shall be void. (9) Nothing in this section shall apply to a public financial institution.
62. Effect of irregular allotment. – (1) An allotment made by a company to an applicant in contravention of the provisions of section 61 shall be voidable at the instance of the applicant, notwithstanding that the company is in the course of being wound up. (2) If any director of a company knowingly contravenes, or wilfully authorises or permits the contravention of, any of the provisions of section 61 with respect to allotment, he shall be liable to compensate the company and the allottee respectively for any loss, damages or costs which the company or the allottee may have sustained or incurred thereby: Provided that proceedings to recover any such loss, damages or costs shall not be commenced after the expiration of two years from the date of the allotment.
63 Applications for, and allotment of, securities . – (1) (a) No allotment shall be made of any securities of a company in pursuance of a prospectus issued generally, and no proceedings shall be taken on applications made in pursuance of a prospectus so issued, until the beginning of the fifth day after the date on which the prospectus is first so issued or such later time, if any, as may be specified in the prospectus: Provided that where, after a prospectus is first issued generally, a public notice is given by some person responsible under section 54 for the prospectus which has the effect of excluding, limiting or diminishing his responsibility, no allotment shall be made until the beginning of the fifth day after the day on which such public notice is first given. (b) Nothing in the foregoing proviso shall be deemed to exclude, limit or diminish any liability that might be incurred in the case referred to therein under the general law or under any other provision of this Act (c) The beginning of the fifth day or such later time as is mentioned in clause (a) or, the beginning of the fifth day as is mentioned in the proviso to that clause, as the case may be, is hereinafter in this Act referred to as "the time of the opening of the subscription lists." (2) In sub-section (1), the reference to the day on which the prospectus is first issued generally shall be construed as referring to the day on which it is first so issued as a newspaper advertisement or in any other manner in accordance with the provisions of sub-section (3) of section 48. (3) The validity of an allotment shall not be affected by any contravention of the foregoing provisions of this section; but, in the event of any such contravention, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty thousand rupees. (4) In the application of this section to a prospectus offering securities for sale, sub-sections (1) to (3) shall have effect with the substitution of references to sale for references to allotment, and with the substitution for the reference to the company and every officer of the company who is in default of a reference to any person by or through whom the offer is made and who is knowingly guilty of, or wilfully authorises or permits, the contravention. (5) An application for the securities of a company, which is made in pursuance of a prospectus issued generally shall not be revocable until after the expiration of the fifth day after the time of the opening of the subscription lists, or the giving, before the expiry of the said fifth day by some person responsible under section 54 for the prospectus, of a public notice having the effect under that section of excluding, limiting or diminishing the responsibility of the person giving it.
(1) Every company, intending to offer securities to the public for subscription by the issue of a prospectus shall, before such issue, make an application to one or more regional stock exchanges including a regional stock exchange for permission for such securities to be dealt in on the stock exchange or each such stock exchange. (2) Where a prospectus, whether issued generally or not, states that an application under sub-section (1) has been made for permission for the securities offered thereby to be dealt in one or more regional stock exchanges, such prospectus shall state the name of the regional stock exchange or, as the case may be, each such stock exchange, and any allotment made on an application in pursuance of such prospectus shall, whenever made, be void, if the permission has not been granted by the regional stock exchange before the expiry of ten weeks from the date of the closing of the subscription lists: Provided that where an appeal against the decision of any regional stock exchange refusing permission for the securities to be dealt in on that stock exchange has been preferred under section 22 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956), such allotment shall not be void until the dismissal of the appeal. Explanation.-- For the purposes of this section "regional stock exchange" means such stock exchange as may be notified by the Securities and Exchange Board; (3) Where a permission has been granted by a regional stock exchange for dealing in any securities, the company shall make the allotment of securities within such period as may be prescribed by the Securities and Exchange Board. (4) Where permission has not been applied for under sub-section (1) or, such permission having been applied for, has not been granted as aforesaid, the company shall forthwith repay without interest all moneys received from applicants in pursuance of the prospectus, and, if any such money is not repaid within eight days after the company becomes liable to repay it, the company and every director of the company who is an officer-in-default shall, on and from the expiry of the eighth day, be jointly and severally liable to repay that money with interest at such rate, as may be prescribed, having regard to the length of the period of delay in making the repayment of such money. (5) Where permission has been granted by a regional stock exchange for dealing in any securities in such stock exchange and the moneys recieved from applicants for securities are in excess of the aggregate of the application moneys relating to the securities in respect of which allotments have been made, the company shall repay the moneys to the extent of such excess forthwith without interest, and if such money is not repaid within eight days, from the day the company becomes liable to pay it, the company and every director of the company who is an officer in default shall, on and from the expiry of the eighth day, be jointly and severally liable to repay that money with interest at such rate, as may be prescribed. (6) If default is made in complying with the provisions of sub-section (5), the company and every officer of the company who is an default shall be punishable with fine which may extend to fifty thousand rupees, and where repayment is not made within six months from the expiry of the eighth day, also with imprisonment for a term which may extend to two years. (7) All moneys received as aforesaid shall be kept in a separate bank account maintained with a Scheduled Bank until permission has been granted, or where an appeal has been preferred against the refusal to grant such permission, until the disposal of the appeal, and the money standing in such separate account shall where permission has not been applied for as aforesaid or has not been granted, be repaid within the time and in the manner specified in sub-section (4); and if default is made in complying with this sub-section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty thousand rupees and where repayment is not made within six months from the expiry of the eighth day, also with imprisonment for a term which may extend to two years.. (8) Moneys standing to the credit of the separate bank account referred to in sub-section (7) shall not be utilised for any purpose other than the following purposes, namely:- (a) adjustment against allotment of securities, where the securities have been permitted to be dealt in on the regional stock exchange specified in the prospectus; or (b) repayment of moneys received from applicants in pursuance of the prospectus, where securities have not been permitted to be dealt in on the regional stock exchange specified in the prospectus, as the case may be, or, where the company is for any other reason unable to make the allotment of securities. (9) Any condition purporting to require or bind any applicant for securities to waive compliance with any of the requirements of this section shall be void. (10) For the purposes of this section, it shall be deemed that permission has not been granted if the application for permission, where made, has not been disposed of within the time specified in sub-section (1). (11) This section shall have effect- (a) in relation to any securities agreed to be taken by a person underwriting an offer thereof by a prospectus, as if he had applied therefor in pursuance of the prospectus; and (b) in relation to a prospectus offering securities for sale, with the following modifications, namely,- (i) references to sale shall be substituted for references to allotment; (ii) the persons by whom the offer is made, and not the company, shall be liable under sub-section (4) to repay money received from applicants, and references to the company's liability under that sub-section shall be construed accordingly; and (iii) for the reference in sub-section (7) to the company and every officer of the company who is in default, there shall be substituted a reference to any person by or through whom the offer is made and who is knowingly guilty of, or wilfully authorises or permits, the default. (12) No prospectus shall state that application has been made for permission for the securities offered thereby to be dealt in on any stock exchange, unless it is a regional stock exchange. (13) In reckoning for the purposes of sections 63 and this section, the fifth day, or the eighth day, after another day, any intervening day which is a public holiday under the Negotiable Instruments Act, 1881 (26 of 1881), shall be disregarded, and if the fifth, or eighth day (as so reckoned) is itself such a public holiday, there shall, for the said purposes, be substituted the first day thereafter which is not such a holiday.
65 Return as to allotments. – (1) Whenever a company having a share capital makes any allotment of its securities, the company shall, within thirty days thereafter,- (a) file with the Registrar, a return of the allotments, stating the number and nominal amount of the securities comprised in the allotment, the names and addresses of the allottees, and the amount, if any, paid or due and payable on each security: Provided that the company shall not show in such return any securities as having been allotted for cash if cash has not actually been received in respect of such allotment; (b) in the case of securities (not being bonus shares) allotted as fully or partly paid up otherwise than in cash, produce for the inspection and examination of the Registrar a contract in writing constituting the title of the allottee to the allotment together with any contract of sale, or a contract for services or other consideration in respect of which that allotment was made, such contracts being duly stamped, and file with the Registrar copies verified in the prescribed manner of all such contracts and a return stating the number and nominal amount of securities so allotted, the extent to which they are to be treated as paid up, and the consideration for which they have been allotted; and (c) file with the Registrar- (i) in the case of bonus shares, a return stating the number and nominal amount of such shares comprised in the allotment and the names and addresses of the allottees and a copy of the resolution authorising the issue of such shares; (ii) in the case of issue of shares at a discount, a copy of the resolution passed by the company authorising such issue together with a copy of the order of the Company Law Tribunal sanctioning the issue; (2) Where a contract such as is mentioned in clause (b) of sub-section (1) is not reduced to writing, the company shall, within thirty days after the allotment, file with the Registrar the prescribed particulars of the contract stamped with the same stamp duty as would have been payable if the contract had been reduced to writing; and those particulars shall be deemed to be an instrument within the meaning of the Indian Stamp Act, 1899 (2 of 1899) and the Registrar may, as a condition of filing the particulars, require that the duty payable thereon be adjudicated under section 31 of that Act. (3) If the Registrar is satisfied that in the circumstances of any particular case, the period of thirty days specified in sub-sections (1) and (2) for compliance is or was inadequate, he may, on application made in that behalf by the company, whether before or after the expiry of the said period, extend that period as he thinks fit; and if he does so, the provisions of sub-sections (1) and (2) shall have effect in that particular case as if for the said period of thirty days, the extended period allowed by the Registrar were substituted. (4) If default is made in complying with this section, every officer of the company who is in default shall be punishable with fine which may extend to five hundred rupees for every day during which the default continues, and in case of contravention of the proviso to clause (a) of sub-section (1), every such officer, and every promoter of the company who is guilty of the contravention shall be punishable with fine which may extend to fifty thousand rupees. (5) Nothing in this section shall apply to the issue and allotment by a company of securities which under the provisions of its articles were forfeited for non-payment of calls.
Commissions and discounts 66 Power to pay certain commissions and prohibition of payment of all other commissions, discounts, etc..- (1) A company may pay a commission to any person in consideration of- (a) his subscribing or agreeing to subscribe, whether absolutely or conditionally, for any securities of the company, or (b) his procuring or agreeing to procure subscriptions, whether absolute or conditional, for any securities of the company, which shall not exceed such percentage as may be prescribed. (2) Save as aforesaid and save as provided in section 70, no company shall allot any of its securities or apply any of its moneys, either directly or indirectly, in payment of any commission, discount or allowance, to any person. (3) Nothing in this section shall affect the power of any company to pay such brokerage as it has heretofore been lawful for a company to pay. (4) A vendor to, promoter of, or other person who receives payment in securities, or money from, a company shall have and shall be deemed always to have had power to apply any part of the securities, or money so received in payment of any commission the payment of which, if made directly by the company, would have been legal under this section. (5) For the removal of doubts, it is hereby declared that no commission shall be paid under clause (a) of sub-section (1) to any person on securities which are not offered to the public for subscription: Provided that where a person has subscribed or agreed to subscribe under clause (a) of sub-section (1) for any securities of the company and before the issue of the prospectus any other person or persons has or have subscribed for any or all of those securities and that fact together with the aggregate amount of commission payable under this section in respect of such subscription is disclosed in such prospectus then, the company may pay commission to the first-mentioned person in respect of such subscription. (6) If default is made in complying with the provisions of this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees.
67 Restrictions on purchase by company,
or loans by company for purchase, of its own securities or its holding
company's securities. – (1) No company limited by shares, and no company limited by guarantee and having a share capital, shall have power to buy its own shares or securities, unless the consequent reduction of capital is effected and sanctioned in pursuance of sections 86 to 90. (2) No public company shall give, whether directly or indirectly, and whether by means of a loan, guarantee, the provision of security or otherwise, any financial assistance for the purpose of, or in connection with, a purchase or subscription made or to be made by any person of or for any shares or securities in the company or in its holding company: Provided that nothing in this sub-section shall be taken to prohibit- (a) the lending of money by a banking company in the ordinary course of its business; or (b) the provision by a company, in accordance with any scheme for the time being in force, of money for the purchase of, or subscription for, fully paid-up shares in the company or its holding company, being a purchase or subscription by trustees of or for shares to be held by or for the benefit of employees of the company, including any director holding a salaried office or employment in the company; or (c) the making by a company of loans, to persons (other than directors or managers) bona fide in the employment of the company with a view to enabling those persons to purchase or subscribe for fully paid -up shares in the company or its holding company to be held by themselves by way of beneficial ownership. (3) No loan made to any person in pursuance of clause (c) of the foregoing provisions shall exceed in amount of his salary or wages at that time for a period of six months. (4) If a company acts in contravention of sub-sections (1) and (2), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to ten thousand rupees. (5) Nothing in this section shall affect the right of a company to redeem any shares issued under section 71 or under any corresponding provision in any previous companies law.
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