CHAPTER VII
 
ISSUE, LISTING AND DELISTING OF SECURITIES

 

Matters relating to issue of securities 

34. (1) No person shall issue any securities or make an offer for sale of securities to the public save in compliance with, the provisions of this Act and any regulations thereunder, the provisions of any guidelines and directions made by the Board or terms and conditions stipulated by the Board in that behalf from time to time.

(2) Without prejudice to the provisions of the Companies Act, or other law applicable to an issuer, the Board may, for the protection of investors, specify, by regulations :-

(a) the matters to be disclosed by an issuer in relation to any issue of securities and the form and manner in which such disclosure shall be made;

(b) the requirements to be complied with by an issuer in relation to allotment and listing of such securities, transfers of securities thereof from time to time and matters incidental thereto;

(c) the manner and extent to which selling or underwriting commissions, brokerages, or selling expenses may be charged and recovered, nature of disclosures to be made in that behalf and matters incidental thereto.

 (3) The following persons shall be liable to pay compensation to every person who subscribes for securities on the faith of the offer document issued under sub-section (1) and (2) of the Act, and sustains any loss or damage by reason of any untrue statement contained in the offer document:
    1. the issuer,
    2. every person who is a director or is in management of the issuer company at the time of the issue and who was responsible for the preparation of the offer document;
    3. every person who has authorised himself to be named and is named as a director in the terms of the issue or has agreed to become a director of the issuer company either immediately or after an interval of time of the issue of the securities;
    4. every person who has authorised the issue of the offer document;
    5. every merchant banker and any other intermediary related to the issue involved in the preparation of the offer document and who has authorised the issue;
Provided that where the consent of an expert is required for the issue of the offer document and such expert has given that consent, he shall not, by reason of having given such consent, be liable under this Section as a person who has authorised the issue of the offer document except in respect of an untrue statement, if any purporting to be made by him as an expert.

 

 (4) No person shall be liable under sub-section (3), if he proves – (i) that having consented to become a director of the issuer company, he withdrew his consent before the issue of the offer document, and that it was issued without his authority or consent; or

(ii)that the offer document was issued without his knowledge or consent, and that on becoming aware of its issue, he forthwith gave reasonable public notice that it was issued without his knowledge or consent; or

(iii)that, after the issue of the offer document and before allotment thereunder, he on becoming aware of any untrue statement therein, withdrew his consent to the offer document and gave reasonable public notice of the withdrawal and the reason therefor; or

(iv) that as regards every untrue statement not purporting to be made on the authority of an expert or of a public official document or statement, he has reasonable ground to believe, and did upto the time of the allotment of the securities, as the case may be, believe that the statement was true; and

that as regards every untrue statement purporting to be a statement by an expert or contained in what purports to be a copy of or an extract from a report or valuation of an expert, it was a correct and fair representation of the statement, or a correct copy of, or a correct and fair extract from, the report or valuation; and he had reasonable ground to believe, and did up to the time of the issue of the offer document believe that the person making the statement was competent to make it and that the person had given the consent, if any, required under this Act, and the rules and regulations prescribed thereunder to the issue of the offer document and had not withdrawn that consent before the delivery of the offer document for registration, if so prescribed under this Act, to the defendant’s knowledge, before allotment thereunder; and

that as regards every untrue statement purporting to be a statement made by an official person or contained in what purports to be a copy of or extract form a public official document, it was a correct and fair representation of the statement, or a correct copy of or correct and fair extract from, the document:

 

Provided that this sub-section shall not apply in case of a person liable by reason of his having given consent required of him as may be prescribed under this Act who has authorised the issue of the offer document in respect of an untrue statement, purporting to be made by him as an expert.

 5. Notwithstanding the provisions of sub-section (4) hereinabove, an intermediary or any person in management of an intermediary or any other person (other than the issuer) shall not incur any liability under this Section or any rules or regulations prescribed thereunder if he proves that he had conducted himself diligently in the preparation of the offer document or the authorisation of the issue.

(6) A person, who apart from this sub-section, would under sub-section (3) be liable by reason of his having given consent, if any, and as may be specified under this Act as a person who has authorised the issue of the offer document in respect of an untrue statement, purporting to be made by him as an expert, shall not be so liable, if he proves –

(i) that having given his consent under this Act to the issue of the offer document, he withdrew it in writing before delivery of the offer document for registration;

(ii) that, after delivery of the copy of the offer document for registration and before allotment thereunder, he on becoming aware of any untrue statement therein, withdrew his consent in writing and gave reasonable public notice of the withdrawal and the reason therefor;

 (iii) that he was competent to make the statement and that he has reasonable ground to believe, and did up to the time of the allotment of the securities, believe, that the statement was true.

(7) Where –

(i) the offer document specifies the name of the person as a director of the issuer company, or as having agreed to become a director thereof, and he has not consented to become a director, or has withdrawn his consent before the issue of the offer document, and has not authorised or consented to the issue thereof; or

(ii) the consent, if any, is required and specified under this Act to the issue of the offer document and either he has not given that consent or has withdrawn it before the issue of the offer document;

the directors of the company excluding those without whose knowledge or consent the offer document was issued, and every other person who authorised the issue thereof, shall be liable to indemnify the person referred to in clause (i) or clause (ii) as the case may be, against all damages, costs and expenses to which he may be made liable by reason of his name having being inserted in the offer document or of the inclusion therein of a statement purporting to be made by him as an expert, as the case may be, or in defending himself against any suit or legal proceeding brought against him in respect thereof:

Provided that a person shall not be deemed for the purposes of this sub-section to have authorised the issue of the offer document by reason of his having given the consent, if any, as may be prescribed under this Act to the inclusion therein of a statement purporting to be made by him as an expert.

(8) Without in any manner limiting the scope of the powers under section 11 or any other applicable provisions of this Act, the Board shall be empowered to pass such directions as it may deem fit, in relation to an issue of securities made in violation of the provisions of this Section, including but not limited to annulment or cancellation of the issue, awarding of compensation to an investor, delisting of such securities or such other order or direction as may be appropriate in the context in the best interests of the investors and in public interest.

(9) The exercise of the powers under sub-section (8) above shall be without prejudice to any penalties against the issuer or persons in management of the issuer or any intermediary, under this Act.

(10) The powers under sub-section (8) hereof shall be exercised after providing a reasonable opportunity of being heard to the issuer or the intermediary as the case may be or to any other affected person.

 Private Placement 35. (1) The Board may frame regulations or guidelines pertaining to private placement of securities. The Board may make special provisions for private placement concerning qualified institutional investors if it deems fit.

(2) No person shall issue securities by way of private placement unless such person fully and completely complies with the provisions of this Act and the Regulations or guidelines made by the Board as specified in sub-section (1).

(3) In case of a company issuing securities as and by way of private placement, such company shall be bound also to comply with the provisions of the relevant Companies Act in force at the time of making such issue. The said provisions shall also apply mutatis mutandis, to other issuers of securities.

 Consequences for misstatements 36. (1) If an issuer or persons in management of the issuer or of any intermediary issues or sells or procures the issue or sale of any security in contravention of Section 34 of this Act or any rules or regulations prescribed thereunder such issuer or person in management shall be deemed to have committed an offence which would be punishable with fine which may extend to twenty five lacs rupees and with imprisonment for a term which may extend to five years unless, such person proves his defence as contemplated in sub-section (2) hereof or any other defence available to him under the law in force.

(2) A director or any other persons in management of the issuer responsible for the issue of any security under Section 34 of the Act or any rules or regulations made thereunder shall not incur any liability by reason of any non-compliance with, or the contravention of any requirements of Section 34 of this Act if –

(i) as regards any matter disclosed, he proves that he had no knowledge thereof; or

(ii) he proves that the non-compliance or contravention arose from an honest mistake of fact on his part; or

(iii) the non-compliance or contravention was in respect of matters which, in the opinion of the Court dealing with the case were immaterial, or was other wise such as ought, in the opinion of the Court, having regard to all the circumstances of the case be reasonably excused.
  1. Notwithstanding the provisions of sub-section (2) hereinabove, an intermediary or any person in management of an intermediary who has authorised the issue or the sale of securities under Section 34 of this Act or any rules or regulations prescribed thereunder shall not incur any liability by reason of non-compliance with or non-contravention of any of the requirements of Section 36 of this Act, or any rules or regulations prescribed thereunder if he proves that he had acted diligently whilst authorising such issue or sale.
  2. Nothing in this Section shall limit any liability which the issuer, expert, intermediary or the director or any person in management of the issuer or of the intermediary may incur under the general law or under the Companies Act or under any other provision of this Act apart from this Section.
  3. For avoidance of any doubt, it is declared that the provision of this section shall be supplemental to the provisions of section 34.
 

Conditions of listing

37. (1) Where securities are listed on the application of any person in any recognised stock exchange, such person shall comply with the conditions as to listing and such other conditions as are specified by the stock exchange and by the Board.

(2) The conditions as to listing may provide for payment of lump sum listing fees or initial listing fee as well as the annual listing fee. All the directors or persons in management of the issuer whose securities are to be listed shall be, jointly and severally, liable for payment of listing fees, whether in lump sum or annual listing fee, as may be specified by the stock exchange.

(3) The amount of listing fee, whether in lump sum or otherwise, shall be recoverable from the company as well as its Directors, jointly and severally, as if the same were arrears of land revenue and the collector shall be entitled to take the necessary steps for revaluation of the amounts due in the manner prescribed by Maharashtra Land Revenue Code on issue of a Certificate of Recovery by the stock exchange concerned.

(4) Until such time as listing provisions are freshly specified by the stock exchange or by the Board under this Act, the erstwhile, provisions referred to in rule 19 of the Securities Contracts (Regulation) Rules, 1957 and the form of the listing agreement prescribed by the stock exchange, as in force on the date on which this Act is brought into force shall continue to operate.

 Delisting of securities:- 38. (1) A stock exchange may delist the securities on one or other of the following grounds:- (i) if according to the audited annual accounts of issuer, the issuer has incurred losses during the preceding three consecutive years and its net worth has been reduced to less than its paid up capital or corpus as the case may be;

(ii) if the securities of the issuer have remained infrequently traded during the preceding three years;

(iii) if the issuer has committed breach or has failed to comply with the requirements of any of the listing provisions;

(iv) if the issuer fails to redress complaints of investors despite repeated reminders;

(v) if the issuer or its promoters or directors indulge in unfair trade practices;

(vi) if the issuer or its directors or persons in management indulge in other malpractices such as an issue of fake certificate;

(vii) if the whereabouts of the issuer or its promoters or directors are not known;

(viii) on any other ground which may be specified in the bye-laws of the stock exchange with the prior approval of the Board.

 (2) The stock exchange shall be entitled to impose recurring fine upto five thousand rupees per day until the default in respect of obligations of the applicant under the listing provisions is rectified by the applicant. Such fine shall also be recoverable by the stock exchange as if it were an arrear of land revenue, including from the directors or persons in management of the listed entity personally. The directors or persons in management of the issuer shall be, jointly and severally, liable for payment of such amount of fine in the event of default or breach being committed by the issuer in respect of its obligations under the listing agreement or listing provisions and/or such other document containing conditions for listing.

(3) The above provisions shall be without prejudice to the provisions for prosecution of the offences contained in section 68 of this Act.

(4) The above provisions shall be applicable to all securities presently listed or to be listed by the stock exchange and shall form an integral part of the listing provisions and the applicant as well as all its directors or persons in management shall be bound by the said listing provisions and shall be, jointly and severally, responsible for the same.

(5) The issuer or listed entity shall be entitled to file an appeal before the Board against the order of delisting of shares within 15 days from the date of the decision of the stock exchange delisting the securities and investor who is legitimately aggrieved by the order of delisting, may also file such an appeal with the leave of the Board which may be granted in an appropriate case for sufficient reasons. In all such cases, other provisions pertaining to appeal under Section 39, shall apply mutatis mutandis.

(6) No entity shall resort to voluntary delisting of its securities unless it obtains a specific prior approval of the holders of securities which are sought to be delisted by a special resolution of atleast three fourths in majority and a majority in number passed at a General Meeting, after giving due notice thereof and also after issuance of a special notice in the newspapers setting out the justification for the proposed delisting. In such a case, the entity shall also be bound to comply with all such further conditions, as may be imposed on it, by the Board or by the stock exchange in relation to the proposed delisting.

 Right of Appeal against refusal of Stock Exchanges to list securities of Public Companies 39. (1) Where a recognised stock exchange refuses to list the securities of any body corporate, the entity shall be entitled to be furnished the reasons of such refusal.

(2) An appeal may be filed before the Board against such refusal within 15 days from the date of the decision of the stock exchange refusing to list securities of the entity concerned. In case of a company where the stock exchange has omitted or failed to dispose of the application for listing within the time specified in sub-section (1) of section 73 of the Companies Act, the application for listing of such securities shall be deemed to have been refused. The company concerned in such case shall be entitled to file an appeal against such deemed refusal also before the Board within 15 days from the date of such deemed refusal.

(3) The Board after giving the stock exchange an opportunity of being heard, may:-

(i) vary or set aside the decision of the stock exchange; or

(ii) where the stock exchange has omitted or failed to dispose of the application within the specified time, grant or refuse the permission,

 and where the Board sets aside the decision of the recognised stock exchange or grants the permission for listing, the stock exchange shall act in conformity with the orders of the Board.
  1. Notwithstanding anything contained hereinabove, the Board shall have power to condone the delay in respect of filing of the appeal, after sufficient cause being shown by the appellant, upto a period of one month from the date of expiry of the period of limitation.
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