Section 73 - Allotment of shares and debentures to be dealt in on stock exchange. - Companies Act, 1956

Allotment of shares and debentures to be dealt in on stock exchange. 73. [1] [(1) Every company, intending to offer shares or debentures 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 the shares or debentures intending to be so offered to be dealt with in the stock exchange or each such stock exchange.] [2] [ [3] [(1A)] Where a prospectus, whether issued generally or not, states that an [4] [application under sub-section (1) has been] made for permission for the shares or debentures offered thereby to be dealt in one or more recognized 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, [5] [* * *] 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 shares or debentures 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.] [6] (2) Where the permission has not been [7] [applied under sub-section (1)] [8] [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, [9] [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 four per cent and not more than fifteen per cent, as may be prescribed, [10] having regard to the length of the period of delay in making the repayment of such money.] [11] [* * *] [12] [(2A) Where permission has been granted by the recognized stock exchange or stock exchanges for dealing in any shares or debentures in such stock exchange or each such stock exchange and the moneys recieved from applicants for shares or debentures are in excess of the aggregate of the application moneys relating to the shares or debentures 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, [13] [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 four per cent and not more than fifteen per cent, as may be prescribed, [14] having regard to the length of the period of delay in making the repayment of such money.] [15] [* * *] [16] (2B) If default is made in complying with the provisions of sub-section (2A), the company and every officer of the company who is in default shall be punishable with fine which may extend to [17] [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 one year.] (3) All moneys received as aforesaid shall be kept in a separate bank account maintained with a Scheduled Bank [18] [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 (2)]; 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 [19] [fifty thousand rupees]. [20] [(3A) Moneys standing to the credit of the separate bank account referred to in sub-section (3) shall not be utilised for any purpose other than the following purposes, namely: (a) adjustment against allotment of shares, where the shares have been permitted to be dealt in on the stock exchange or each stock exchange specified in the prospectus; or (b) repayment of moneys received from applicants in pursuance of the prospectus, where shares 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 share.] (4) Any condition purporting to require or bind any applicant for shares or debentures to waive compliance with any of the requirements of this section shall be void. [21] [(5) 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).] (6) This section shall have effect __ (a) in relation to any shares or debentures 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 shares 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 (2) 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 (3) 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. (7) No prospectus shall state that application has been made for permission for the shares or debentures offered thereby to be dealt in on any stock exchange, unless it is a recognised stock exchange. ------------------------------------- Notes:- [1] Inserted by the Companies (Amendment) Act, 1988, section 10, w.e.f. 15-6-1988. [2] Substituted by Act 41 of 1974, section 8, for sub-section (1), w.e.f. 1-2-1975. [3] The renumbered by the Companies (Amendment) Act, 1988, original sub-section (1) as (1A) by the section 10, w.e.f. 15-6-1988. [4] Substituted for the words "application has been, or will be," by the Companies (Amendment) Act, 1988, section 10, w.e.f. 15-6-1988. [5] Substituted for the words The words "if the permission has not been applied for before the tenth day after the first issue of the prospectus, or, where such permission has been applied for before that day" omitted by the Companies (Amendment) Act, 1988, section 10, w.e.f. 15-6-1988. [6] Prosecution powers are exercisable, delegated to DCA and SEBI officials concurrently, vide Notification No. 727(E), dated 18-9-2000. [7] Substituted by the Companies (Amendment) Act, 1988, for the words "applied for as aforesaid". section 10, w.e.f. 15-6-1988 [8] Substituted by the Companies (Amendment) Act, 1974, 41 of 1974, section 8, for the words "or has not been granted as aforesaid", w.e.f. 1-2-1975. [9] Substituted by the Companies (Amendment) Act, 1988, section 10, w.e.f. 15-6-1988 for the words "the directors of the company shall be jointly and severally liable to repay that money with interest at the rate of twelve per cent per annum from the expiry of the eighth day:". [10] Vide Rule 4D of the Companies (Central Government's) General Rules and Forms, 1956 has prescribed 15% per annum rate of interest has been prescribed. [11] Omitted by the Companies (Amendment) Act, 1988, section 10, w.e.f. 15-6-1988. Prior to omission it read: "Provided that a director shall not be liable if he proves that the default in the repayment of the money was not due to any misconduct or negligence on his part." [12] Inserted by the Companies (Amendment) Act, 1974, 41 of 1974, section 8, w.e.f. 1-2-1975. [13] Substituted by the Companies (Amendment) Act, 1988, section 10, w.e.f. 15-6-1988 for the words "the directors of the company shall be jointly and severally liable to repay the money with interest at the rate of twelve per cent per annum from the expiry of the said eighth day:". [14] Rule 4D of the Companies (Central Government's) General Rules and Forms, 1956 has prescribed 15% per annum rate of interest has been prescribed. [15] Omitted by the Companies (Amendment) Act, 1988, section 10, w.e.f. 15-6-1988. Prior to omission it read: "Provided that a director shall not be liable if he proves that the default in the repayment of the money was not due to any misconduct or negligence on his part." [16] Prosecution powers are exercisable, delegated to DCA and SEBI officials concurrently. vide Notification No. 727(E), dated 18-9-2000. [17] Substituted for "five thousand rupees" by the Companies (Amendment) Act, 2000, w.e.f. 13-12-2000. [18] Substituted for so long as the company may become liable to repay it under sub-section (2) by the Companies (Amendment) Act, 1974, 41 of 1974, section 8, w.e.f. 1-2-1975. [19] Substituted for "five thousand rupees" by the Companies (Amendment) Act, 2000, w.e.f. 13-12-2000. [20] Inserted by the Companies (Amendment) Act, 1974, 41 of 1974, section 8, w.e.f. 1-2-1975. [21] Substituted by Companies (Amendment) Act, 1974 41 of 1974, section 8, for sub-section (5), w.e.f. 1-2-1975.