Despatch of allotment letters/certificates and refund orders to applicants in public issue of share capital ‑ Instructions to check delays - Companies Law - Letter : No. 1/63/SE/87,

Letter : No. 1/63/SE/87, issued by Stock Exchange Division, Department of Economic Affairs, dated 8 ‑ 1 ‑ 1988. Subject:- Despatch of allotment letters/certificates and refund orders to applicants in public issue of share capital ‑ Instructions to check delays 1. As you are aware, it is obligatory upon companies to ensure timely issue and despatch of allotment letters/certificates and refund orders to the applicants after their public issues. Section 73 of the Companies Act, 1956, provides a maximum time limit of 10 weeks for this purpose. 2. Complaints from investors relating to delays in making allotments and sending refund orders continue to come despite efforts made in the past to ensure that this work is done expeditiously. With a view to ensuring proper compliance with the requirement of timely allotment/refund, Government have incorporated some new conditions in the conditions attached to the consent orders for public issue of capital. A copy of the conditions as also of the relevant Press Note are published hereunder for your reference. 3. It is felt that the stock exchanges have a crucial role to play in this regard. Although several agencies are involved in the collection, processing, handling and ultimate disposal of applications, the primary and fundamental responsibility remains that of the applicant company. The stock exchanges must monitor this aspect of the company s activity and take punitive action in cases of delay. 4. It is desired that the stock exchanges should not accept applications for listing which are not accompanied by an undertaking and the scheme as required by the conditions of the consent order. They should also scrutinise the scheme immediately to ensure that it is not a routine compliance and that the company has worked out full details, including financial and personnel requirements, nomination of key persons, time given for key activities, internal system for monitoring and follow up, etc. The Exchanges should then monitor the compliance of all conditions relevant to the subject and set up their own administrative mechanism to ensure that companies, whose reports are not received within the stipulated period, are suitably penalised. In addition to other punishments, Exchanges should at least impose a financial penalty for each day of delay. If changes in their bye‑laws are needed to ensure this, specific proposals may kindly be sent to the Government for approval to seek powers for this and other penalties on erring companies. 5. It would be desirable for the Exchanges to monitor all cases coming within their jurisdiction. However, extra care should be taken in issues which are large, where over subscription may be expected to be substantial on the basis of the Exchange s assessment, and on a post facto basis where there are complaints relating to non‑receipt of allotment letters/refund orders. Exchanges should also carry out random and surprise checks by themselves or in co‑ordination with the local Registrars of Companies and postal authorities to check that there is no discrepancy between the date placed on the letters and the dates on which these are despatched. 6. With a view to safeguarding the interest of the investing public complaints of delay/non‑receipt should be investigated expeditiously and the outcome made known to the complainants. Reports should also be sent to the Registrars of Companies and the Stock Exchange Division of the Finance Ministry in serious cases, and suitable action recommended. Press Note referred to in the letter 1. With a view to further safeguarding the interest of the investing public, the Government have decided to incorporate the following new conditions in the list of conditions attached to the consent order issued by the Controller of Capital Issues for raising securities from the public by companies. The new conditions are the following : (i) The company shall scrupulously adhere to the time limit of 10 weeks from the date of closure of the subscription list for allotment of all securities and despatch of allotment letters/certificates and refund orders. (ii) The company shall, at the time of filing its application for listing to the regional Stock Exchange, furnish an undertaking for compliance of the above condition, along with a scheme incorporating the necessary details of the arrangements for such compliance. This undertaking shall be signed by the Chief Executive or a person authorised by the Board of the company. (iii) The company shall file, with the Executive Director or Secretary of the regional Stock Exchange, within five working days of the expiry of the stipulated period as above, a statement signed by the Chief Executive or a person authorised by the Board certifying that the allotment letters/securities and the refund orders have been despatched within the prescribed time limit as per the condition above. A copy of the statement shall be endorsed to the office of the CCI quoting this consent order and date. (iv) Non‑compliance of conditions above shall be punishable by the Stock Exchange, in addition to the action that may be taken by other competent authorities. 2. The above condition is introduced with a view to ensuring that the companies process the applications of the investing public and despatch the allotment letters/certificates and refund orders expeditiously and take action within the stipulated time-limit. 3. Any company applying to the CCI for grant of consent for issue of securities shall also publicise a nodal authority in the company, who shall oversee arrangements for processing the applications, despatch of allotment letters/certificates and refund orders and also deal with the complaints from the investing public, etc., in this context. 4. The Banks, the Merchant Bankers, Managers, Advisors, Registrars and other agencies associated with the issue are expected to give their utmost attention in ensuring compliance of the new condition in the consent order. 5. The stock exchanges are being directed to monitor the compliance of these conditions. Any violation by the company shall invite penal action from them as also other authorities. Adverse note shall also be taken by the CCI and other concerned agencies of any laxity or default on the part of the companies or any of the agencies associated in handling the issue which may result in delay in despatch of allotment letters/refunds, etc.