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21. In sections 57 and 58 of the principal Act, for the words “shares in or debentures of”, the words “securities of” shall respectively be substituted.

22. For section 60 of the principal Act, the following section shall be substituted, namely:—

“60. (1) No prospectus shall be issued by or on behalf of a company or in relation to an intended company unless, on or before the date of its publication, there has been delivered to the Registrar for registration, a copy thereof signed by every person who is named therein as a director or proposed director of the company or by his agent authorised in writing, and having endorsed thereon or attached thereto—

(a) any consent to the issue of prospectus and statement of an expert required under section 58; and

(b) in the case of a prospectus issued generally, also—

(i) a copy of every contract required by Schedule II to be specified in the prospectus, or, in the case of a contract not reduced into writing, a memorandum giving full particulars thereof; and

(ii) where the persons making any report required by Part II of that Schedule have made therein, or have, without giving the reasons indicated therein, any such adjustments as are mentioned in that Schedule, a written statement signed by those persons setting out the adjustments and giving the reasons therefor;

(iii) and such other documents as may be prescribed:

Provided that where a company issues any foreign or Indian Depository Receipt, circular, information memorandum or prospectus containing—

(A) price of the depository receipt issued or proposed to be issued;

(B) amount subscribed or expected to be subscribed;

(C) terms and conditions of conversion of deposit receipt into shares;

(D) other information and particulars of such Indian Depository Receipt, circular, information memorandum or prospectus,

such circular, information memorandum or prospectus shall also be filed along with the prospectus by the company or foreign company proposing to issue the Indian Depository Receipt:

Provided further that the information memorandum or the prospectus issued for subscription by Indian Depository Receipt, shall be governed by the law of the country in which the registered office of the company is situated.

(2) Every prospectus to which sub-section (1) applies shall, on the face of it,—

(a) state that a copy has been delivered for registration as required by this section; and

(b) specify any documents required by this section to be endorsed on or attached to the copy so delivered, or refer to statements included in the prospectus which specify those documents.

(3) The Registrar shall not register a prospectus unless the requirements of sections 55, 56, 57 and 58 and sub-sections (1) and (2) of this section have been complied with and the prospectus is accompanied by the consent in writing of the person, if any, named therein as the auditor, legal adviser, attorney, solicitor, banker or broker of the company or intended company, to act in that capacity.

(4) A copy of every prospectus which has been filed for registration with the Registrar shall simultaneously be filed with the Securities and Exchange Board of India.

(5) No prospectus shall be issued more than ninety days after the date on which a copy thereof is delivered for registration; and if a prospectus is so issued, it shall be deemed to be a prospectus, a copy of which has not been delivered under this section to the Securities and Exchange Board of India or the Registrar.

(6) If a prospectus is issued without a copy thereof being delivered under this section to the Securities and Exchange Board of India or the Registrar or without the copy so delivered having endorsed thereon or attached thereto the required consent or documents, the company, and every person who is knowingly a party to the issue of the prospectus, shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to one lakh rupees.”.    

23. For section 61 of the principal Act, the following section shall be substituted, namely:—

“61. A company shall not, at any time, vary the terms of a contract referred to in the prospectus except subject to the approval of, or except on authority given by the company in general meeting.”.

24. In section 62 of the principal Act,—

(a) in sub-section (1), for the words “shares in or debentures of”, the words “securities of” shall be substituted;

(b) for the words “shares or debentures”, wherever they occur, the word “securities” shall be substituted.                    

25. In section 63 of the principal Act, in sub-section (1), for the words “two years, or with fine which may extend to fifty thousand rupees or with both”, the words “two years, and with fine which may extend to one lakh rupees” shall be substituted.         

26. In section 64 of the principal Act,—

(a) in sub-section (1),—

(i) for the words “any shares in or debentures of”, the words “any securities of” shall be substituted;

(ii) for the words “shares or debentures”, wherever they occur, the word “securities” shall be substituted;

(b) in sub-sections (2) and (3), for the words “shares or debentures” wherever they occur, the word “securities” shall be substituted.

27. For section 67 of the principal Act, the following section shall be substituted, namely:—             

“67. (1) Any reference in this Act or in the articles of a company to offering securities to the public or to invitations to the public to subscribe for securities shall, subject to any provision to the contrary contained in this Act and subject also to the provisions of sub-sections (3) and (5), be construed as including a reference to offering them or to invitations to subscribe for them to any section of the public, whether selected as members or holders of the securities of the company concerned or as clients of the person issuing the prospectus or in any other manner.

(2) Any reference in this Act or in the articles of a company to invitations to the public to subscribe for securities shall, subject as aforesaid, be construed as including a reference to invitations to subscribe for them extended to any section of the public, whether selected as members or holders of the securities of the company concerned or as clients of the person issuing the prospectus or in any other manner.

(3) No offer or invitation shall be treated as made to the public by virtue of sub-section (1) or sub-section (2), as the case may be, if the offer or invitation can properly be regarded, in all the circumstances—

(a) as not being calculated to result, directly or indirectly, in the securities becoming available for subscription or purchase by persons other than those receiving the offer or invitation; or

(b) otherwise as being a domestic concern of the persons making and receiving the offer or invitation:

Provided that nothing contained in this sub-section shall apply in a case where the offer or invitation to subscribe for securities is made to fifty persons or more:

Provided further that nothing contained in the first proviso shall apply to the non-banking financial companies or public financial institutions specified in section 4A.

(4) Notwithstanding anything contained in sub-section (3), the Securities and Exchange Board of India shall, in consultation with the Reserve Bank of India, specify, by notification in the Official Gazette, the guidelines in respect of offer or invitation made to the public by a public financial institution specified under section 4A or non-banking financial company referred to in clause (f) of section 45-I of the Reserve Bank of India, 1934.

(5) Without prejudice to the generality of sub-section (3), a provision
in a company’s articles prohibiting invitations to the public to subscribe for
securities shall not be taken as prohibiting the making to members or debenture-holders of an invitation which can properly be regarded in the manner set-forth in that sub-section.

(6) Where any question arises as to the offer of any securities by a company, including the right to restrain any offer or issue it shall be decided by the company.

(7) The provisions of this Act relating to private companies shall be construed in accordance with the provisions of this section.”.   

28. For section 68 of the principal Act, the following section shall be substituted, namely:—

“68. (1) Any person who either by knowingly or recklessly making any statement, promise or forecast which is false, deceptive or misleading or by any dishonest concealment of material facts, induces or attempts to induce another person to enter into, or to offer to enter into,—

(a) any agreement for or with a view to acquiring, disposing of, subscribing for, or underwriting securities; or

(b) any agreement the purpose or pretended purpose of which is to secure a profit to any of the parties from the yield of securities, or by reference to fluctuations in the value of securities,

shall be punishable with imprisonment for a term which shall not be less than six months but which may extend to five years, and also with fine which may extend to one lakh rupees.

(2) Without prejudice to the provisions contained in sub-section (1) or any other law for the time being in force, the person referred to in that sub-section who makes any statement, a promise or forecast which is false, deceptive or misleading or makes dishonest concealment referred to in that sub-section may, on an order made by the Tribunal or on an application made by the Central Government, be liable to a penalty which shall not be less than twice the amount raised on account of such statement, promise forecast or inducement made to persons under sub-section (1) and such penalty may be recovered from such person and his liability for this purpose shall be unlimited.

(3) The Tribunal shall refund the money to the person or persons who entered into an agreement under sub-section (1) out of the amount of penalty so recovered under sub-section (2).”.

29. For section 68A of the principal Act, the following section shall be substituted, namely:—             

“68A. (1) Any person who—

(a) makes, in a fictitious name or description, an application to a company for acquiring, or subscribing for, any securities therein; or

(b) makes multiple applications to a company in different names or in different combinations of his name or his surname for acquiring or subscribing for, any securities of such company; or

(c) otherwise induces a company to allot, or register any transfer of securities therein to him or any other person in a fictitious name or description,

shall be punishable with imprisonment for a term which shall not be less than six months but which may extend up to five years and also with fine which may extend to fifty thousand rupees.

(2) The provisions of sub-section (1) shall be prominently reproduced in every prospectus issued by the company and in every form of application for securities, which is issued by the company to any person.”.    

30. For section 69 of the principal Act, the following section shall be substituted, namely:—

‘69. (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, has been subscribed, and the sum payable on an 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 by the applicant.

(2) In the event of any contravention of sub-section (1), every promoter, director or other person 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 an application on each security shall not be less than twenty-five per cent. of the nominal amount of the security.

(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), the company and every promoter and officer of the company who is in default, shall be punishable with fine which may extend to fifty thousand rupees and if, any such money is not so repaid within six months from the expiry of the eighth day also with imprisonment for a term which may extend to two years.

(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 company, every promoter and every officer of the company who is in default shall be jointly and severally liable to repay that money with interest at such rate as may be prescribed which shall not be lower than the prevailing bank rate, being the standard rate made public under section 49 of the Reserve Bank of India Act, 1934.

(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.’

31. In section 70 of the principal Act, after sub-section (7), the following sub-section shall be inserted, namely:—

“(8) Nothing contained in this section shall apply on or after the commencement of the Companies (Amendment) Act, 2003.”.        

32. For section 71 of the principal Act, the following section shall be substituted, namely:—             

“71. (1) An allotment made by a company to an applicant, in contravention of the provisions of section 69, shall be voidable at the instance of the applicant, within two months from the date of such allotment.

(2) The allotment shall be voidable as aforesaid, notwithstanding that the company is in the course of being wound up.

(3) If any director of a company knowingly contravenes, or wilfully authorises or permits the contravention of, any of the provisions of section 69 with respect to allotment, he shall, without prejudice to his being liable for fine under that section, 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.”.

33. For section 72 of the principal Act, the following section shall be substituted, namely :—            

“72. (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 56 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 date 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 this Act.

(c) The beginning of the fifth day or such later time as is mentioned in the first paragraph of clause (a), or the beginning of the fifth day 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 56.

(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 be revocable—

(a) within five days of making an application but not later the that date of closure of the public issue; or

(b) within five days of issue of public notice having the effect under section 62 of excluding, limiting or diminishing the responsibility of the person responsible for its issue.

(6) Notwithstanding anything contained in sub-section (5), the promoters as defined in clause (a) of sub-section (6) of section 62 or directors or relatives or associates of such promoters or directors as mentioned in the prospectus, if they have applied in pursuance of the prospectus, shall not be entitled to revoke such applications.”.

34. For section 73 of the principal Act, the following section shall be substituted, namely:—             

 “73. (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 recognised stock exchanges for permission for such securities to be dealt with 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 recognised stock exchanges, such prospectus shall state the name of the 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 stock exchange or each such stock exchange, as the case may be, 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 recognised 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, such allotment shall not be void until the dismissal of the appeal.

(3) Where the permission has been granted by a recognised 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 of India.

(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, not less than six per cent. and not more than twenty per cent. 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 recognised stock exchange or stock exchanges  for dealing in any securities in such stock exchange or each such stock exchange and the moneys received 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, not less than six per cent. and not more than twenty per cent. as may be prescribed, having regard to the length of the period of delay in making the repayment of such money.

(6) All moneys received as aforesaid shall be kept in a separate bank account maintained with a scheduled bank only until the 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 the 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).

(7) If default is made in complying with the provisions of sub-section (5), 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) If default is made in complying with sub-section (6), 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.

(9) Moneys standing to the credit of the separate bank account referred to in sub-section (6) 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 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 stock exchange or each 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:

Provided that the money standing to the credit of the separate bank account shall not be utilised for any of the purposes specified in clause (a) or clause (b) unless a charge is created on the assets of the company in favour of the debenture holder in case such company has issued debenture.

(10) 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.

(11) 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 (2).

(12) If default is made in complying with the proviso to sub-section (9),
every officer of the company who is in default shall be punishable with imprisonment for a term which shall not be less than six months but which may extend to five
years and also with fine which shall not be less than that amount raised by the
issue of the debentures but which may extend to three times the amount raised by the debentures.

(13) 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 willfully authorises or permits, the default.

(14) 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 recognised stock exchange.”.

35. In section 75 of the principal Act,—

(a) in sub-section (1),—

(i) in the opening portion, for the words “its shares”, the words “its securities” shall be substituted;

(ii) in clause (a),—

(a) for the words “shares comprised”, the words “securities comprised” shall be substituted;

(b) for the words “each share”, the words “each security” shall be substituted;

(c) in the proviso, for the words “any shares”, the words “any securities” shall be substituted;

(iii) in clause (b),—

(A) for the words “in the case of shares”, the words, “in the case of securities” shall be substituted;

(B) for the words “amount of shares so allotted”, the words “amount of securities so allotted” shall be substituted;

(iv) in clause (c),—

(A) in sub-clause (i), for the words “shares comprised”, the words “securities comprised” shall be substituted;

(B) for sub-clause (ii), the following sub-clause shall be substituted, namely:—

“(ii) in the case of issue of securities at a discount, a copy of the resolution passed by the company authorising such issue together with a copy of the order of the Tribunal sanctioning the issue.”;

(b) for sub-section (5), the following sub-section shall be substituted, namely:—

“(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 or cancelled for non-payment of calls.”. 

36. For section 76 of the principal Act, the following section shall be substituted, namely:—

“76. (1) A company may pay a commission which shall not exceed such percentage as may be prescribed, 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.

(2) Save as aforesaid and save as provided in section 79, 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 in consideration of commission specified in sub-section (1).

(3) Nothing in this section shall affect the power of any company to pay such brokerage as it had so far 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 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 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.”.

37. In section 77 of the principal Act,—

(a) in sub-section (1), the for the words “shall have power to buy its own shares” the words “shall have power to buy directly or indirectly its own shares” shall be substituted;

(b) after sub-section (1), the following sub-section shall be inserted, namely:—

“(1A) A company (hereafter referred to as purchasing company) shall be deemed to have purchased its own shares if—

(a) the purchasing company makes payment to a stock broker or sub-broker referred to in section 12 of the Securities and Exchange Board of India Act, 1992 for purchase of securities of another company; and

(b) such stock broker or sub-broker purchases the securities of the  purchasing company,—

(i) out of the payments so received by such stock broker or sub-broker from the purchasing company; or

(ii) at any time during the period when such payments were received by the broker or sub-broker from the purchasing company and such payments were not returned to the purchasing company and no separate account of funds of the purchasing company so received was kept by such broker or sub-broker.”.

(c) in sub-section (2), for the words “any shares”, the words “any securities” shall be sub-stituted;

(d) for sub-section (4), the following sub-section shall be substituted, namely:—

“(4) If a company acts in contravention of sub-section (1)  or sub-section (2) or sub-section (3), the company, and every officer of the company who is in default, shall be punishable with fine which shall be three times the aggregate price of its securities purchased by the company or face value of its securities, whichever is higher, and every such officer in default shall also be punishable with imprisonment for a term not less than three months, which may extend to two years.”.

 38. In section 78 of the principal Act, in sub-section (2), after clause (d), the following clause shall be inserted, namely:—

“(e) for buy back of securities under section 77.”.

39. For section 79 of the principal Act, the following section shall be substituted, namely:—

 “79. (1) A company shall not issue securities at a discount except as provided in this section.

(2) A company may issue at a discount securities in the company of a class already issued, if the following conditions are fulfilled, namely:—

(i) the issue of the securities at a discount is authorised by a resolution passed by the company in a general meeting, and sanctioned by the Central Government;

(ii) the resolution specifies the maximum rate of discount at which the securities are to be issued:

Provided that no such resolution shall be sanctioned by the Central Government if the maximum rate of discount specified in the resolution exceeds ten per cent. unless the Central Government is of opinion that a higher percentage of discount may be allowed in the special circumstances of the case;

(iii) not less than one year has at the date of the issue elapsed since the date on which the company was entitled to commence business; and

(iv) the securities to be issued at a discount are issued within two months after the date on which the issue is sanctioned by the Central Government or within such extended time as the Central Government may allow.

(3) Where a company has passed a resolution authorising the issue of securities at a discount it may apply to the Central Government for an order sanctioning the issue; and on any such application, the Central Government, having regard to all the circumstances of the case, if it thinks proper so to do, may make an order sanctioning the issue on such terms and conditions as it thinks fit:

Provided that in the case of revival and rehabilitation of sick industrial companies under Chapter VIA, the provisions of this section shall have effect as if for the words “Central Government”, the word “Tribunal” had been substituted.

(4) Every prospectus relating to the issue of the securities shall contain particulars of the discount allowed on the issue of the securities or of so much of that discount as has not been written off at the date of the issue of the prospectus.

(5) If default is made in complying with the provision 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.”. 

40. In section 80 of the principal Act, in sub-section (6), for the words “which may extend to ten thousand rupees,” the words “which shall not be less than ten thousand rupees but which may extend to three times, the face value of the preference shares in respect of which the default has been made shall be substituted. 

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