A prospectus inviting persons to subscribe for shares in or debentures of a company and including a statement purporting to be made by an expert shall not be issued unless-
(a) He has given his written consent to the issue thereof with the statement included in the form and context in which it is included, and has not withdrawn such consent before the delivery of a copy of the prospectus for registration; and
(b) A statement that he has given and has not withdrawn his consent as aforesaid appears in the prospectus.
58 A - Deposits not to be invited without issuing an advertisement
(1) The Central Government may, in consultation with the Reserve Bank of India, prescribe the limits up to which, the manner in which and the conditions subject to which deposits may be invited or accepted by a company either from the public or from its members.
(2) No company shall invite, of allow any other person to invite or cause to be invited on its behalf, any deposit unless -
(a) Such deposit is invited or is caused to be invited in accordance with the rules made under sub-section (1),2[***]
(b) An advertisement, including therein a statement showing the financial position of the company, has been issued by the company in such form and in such manner as may be3*[prescribed, and]
4*[(c) The company is not in default in the payment of any deposit or part thereof and any interest thereupon in accordance with the terms and conditions of such deposit.]
(3) (a) Every deposit accepted by a company at any time before the commencement of the Companies (Amendment) Act, 1974, in accordance with the directions made by the Reserve Bank of India under Chapter III B of the Reserve Bank of India Act, 1934 (2 of 1934), shall, unless renewed in accordance with clause (b), be repaid in accordance with the5[terms and conditions of such deposit].
(b) No deposit referred to in clause (a) shall be renewed by the company after the expiry of the term thereof unless the deposit is such that it could have been accepted if the rules made under sub-section (1) were in force at the time when the deposit was initially accepted by the company.
(c) Where, before the commencement of the Companies (Amendment) Act, 1974, any deposit was received by a company in contravention of any direction made under Chapter IIIB of the Reserve Bank of India Act, 1934 (2 of 1934), repayment of such deposit shall be made in full on or before the 1st day of April, 1975, and such repayment shall be without prejudice to any action that may be taken under the Reserve Bank of India Act, 1934 for the acceptance of such deposit in contravention of such direction.
6*[(3A) Every deposit accepted by a company after the commencement of the Companies (Amendment) Act, 1998, shall, unless renewed in accordance with the rules made under sub-section (1), be repaid in accordance with the terms and conditions of such deposit.]
(4) Where any deposit is accepted by a company after the commencement of the Companies (Amendment) Act, 1974, in contravention of the rules made under sub-section (1), repayment of such deposit shall be made by the company within thirty days from the date of acceptance of such deposit or within such further time, not exceeding thirty days, as the Central Government may, on sufficient cause being shown by the company, allow.
(5) Where a company omits or fails to make repayment of a deposit in accordance with the provisions of clause (c) of sub-section (3), or in the case of a deposit referred to in sub-section (4), within the time specified in that sub-section, -
(a) The company shall be punishable with fine which shall not be less than twice the amount in relation to which the repayment of the deposit has not been made, and out of the fine, if realised, an amount equal to the amount in relation to which the repayment of deposit has not been made, shall be paid by the court, trying the offence, to the person to whom repayment of the deposit was to be made, and on such payment, the liability of the company to make repayment of the deposit shall to the extent of the amount paid by the court, stand discharged;
(b) Every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to five years and shall also be liable to fine.
(6) Where a company accepts or invites, or allows or causes any other person to accept or invite on its behalf, any deposit in excess of the limits prescribed under sub¬section (1) or in contravention of the manner or condition prescribed under that sub¬section or in contravention of the provisions of sub-section (2), as the case may be, -
(a) The company shall be punishable, -
(i) Where such contravention relates to the acceptance of any deposit, with fine which shall not be less than an amount equal to the amount of the deposit so accepted.
(ii) Where such contravention relates to the invitation of any deposit, with fine which may extend to7*[ten lakh rupees] but shall not be less than8*[fifty thousand rupees];
(b) Every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to five years and shall also be liable to fine.
(7) (a) Nothing contained in this section shall apply to, -
(i) A banking company, or
(ii) Such other company as the Central Government may, after consultation with the Reserve Bank of India, specify in this behalf.
(b) Except the provisions relating to advertisement contained in clause (b) of sub-section (2), nothing in this section shall apply to such classes of financial companies as the Central Government may, after consultation with the Reserve Bank of India, specify in this behalf.
9*[(8) The Central Government may, if it considers it necessary for avoiding any hardship or for any other just and sufficient reason, by order, issued either prospectively or retrospectively from a date not earlier than the commencement of the Companies (Amendment) Act, 1974, grant extension of time to a company or class of companies to comply with, or exempt any company or class of companies from, all or any of the provisions of this section either generally or for any specified period subject to such conditions as may be specified in the order:-
Provided that no order under this sub-section shall be issued in relation to a class of companies except after consultation with the Reserve Bank of India.]
6*[(9) Where a company has failed to repay any deposit or part thereof in accordance with the terms and conditions of such deposit the10*[Tribunal] may, if it is satisfied, either on its own motion or on the application of the depositor, that it is necessary so to do to safeguard the interests of the company, the depositors or in the public interest direct, by order, the company to make repayment of such deposit or part thereof forthwith or within such time and subject to such conditions as may be specified in the order:-
Provided that the10*[Tribunal] may before making any order under this sub-section give a reasonable opportunity of being heard to the company and the other persons interested in the matter.
(10) Whoever fails to comply with any order made by the10*[Tribunal] under sub-section (9) shall be punishable with imprisonment which may extend to three years and shall also be liable to a fine of11*[not less than rupees five hundred] for every day during which such non-compliance continues.]
12*[(11) A depositor may, at any time, make a nomination and the provisions of sections 109A and 109B shall, as far as may be, apply to the nomination made under this sub-section.]
Explanation. -For the purposes of this section "deposit" means any deposit of money with, and includes any amount borrowed by, a company but shall not include such categories of amount as may be prescribed in consultation with the Reserve Bank of India.]
58AA - 13* Small depositors
(1) Every company, which accepts deposits from small depositors, shall intimate to the 14*[Tribunal] any default made by it in repayment of any deposits or part thereof or any interest thereupon.
(2) The intimation under sub-section (1) shall,-
(a) Be given within sixty days from the date of default;
(b) Include particulars in respect of the names and addresses of each small depositor, the principal sum of deposits due to them and interest accrued thereupon. Explanation.-For removal of doubts, it is hereby declared that the intimation under this section shall be given on monthly basis.
(3) Where a company has made a default in repayment of any deposit or part thereof or any interest thereupon to a small depositor, the 14*[Tribunal], on receipt of intimation under sub-section (1) shall,-
(a) Exercise, on its own motion, powers conferred upon it by sub-section (9) of section 58A;
(b) Pass an appropriate order within a period of thirty days from the date of receipt of intimation under sub-section (1):
Provided that 15*[the Tribunal] may pass order after expiry of the period of thirty days, after giving the small depositors an opportunity of being heard:
Provided further that it shall not be necessary for a small depositor to be present at the hearing of the proceeding under this sub-section.
(4) No company shall, at any time, accept further deposits from small depositors, unless each small depositor, whose deposit has matured, had been paid the amount of the deposit and the interest accrued thereupon:-
Provided that nothing contained in this sub-section shall apply to-
(a) Any deposit which has been renewed by the small depositor voluntarily; or
(b) Any deposit, whose repayment has become impracticable due to the death of the small depositor or whose repayment has been stayed by a competent court or authority.
(5) Every company, which has on any occasion made a default in the repayment of a deposit or part thereof or any interest thereupon to a small depositor, shall state, in every future advertisement and application form inviting deposits from the public, the total number of small depositors and amount due to them in respect of which such default has been made.
(6) Where any interest accrued on deposits of the small depositors has been waived, the fact of such waiver shall be mentioned by the company in every advertisement and application form inviting deposits issued after the waiver.
(7) Where a company had accepted deposits from small depositors and subsequent to such acceptance of deposits, obtains funds by taking a loan for the purposes of its working capital from any bank, it shall first utilise the funds so obtained for the repayment of any deposit or any part thereof or any interest thereupon to the small depositor before applying such funds for any other purpose.
(8) Every application form, issued by a company to a small depositor for accepting deposits from him, shall contain a statement to the effect that the applicant had been apprised of -
(a) Every past default by the company in the repayment of deposit or interest thereon, if any, such default has occurred; and
(b) The waiver of interest under sub-section (6), if any, and reasons therefore.
(9) Whoever knowingly fails to comply with the provisions of this section or comply with any order of the 14*[Tribunal] shall be punishable with imprisonment which may extend to three years and shall also be liable to fine for not less than five hundred rupees for every day during which such non-compliance continues.
(10) If a company or any other person contravenes any provision of this section, every person, who at the time the contravention was committed, was a director of the company, as well as the company, shall be deemed to be guilty of the offence and shall be-liable to be proceeded against and punished accordingly.
(11) The provisions of section 58A shall, as far as may be, apply to the deposits made by a small depositor under this section.
Explanation.-For the purposes of this section, "a small depositor" means a depositor who has deposited in a financial year a sum not exceeding twenty thousand rupees in a company and includes his successors, nominees and legal representatives.
58AAA - 16* Default in acceptance or refund of deposits to be cognizable
(1) Notwithstanding anything contained in sections 621 and 624, every offence connected with or arising out of acceptance of deposits under section 58A or section 58AA shall be cognizable offence under the Code of Criminal Procedure, 1973.
(2) No court shall take cognizance of any offence under sub-section (1) except on a complaint made by the Central Government or any officer authorised by it in this behalf.]
58B -17* Provisions relating to prospectus to apply to advertisement
The provisions of this Act relating to a prospectus shall, so far as may be, apply to an advertisement referred to in section 58A.]
(1) If any prospectus is issued in contravention of section 57 or 58, the company, and every person, who is knowingly a party to the issue, thereof, shall be punishable with fine which may extend to1*[fifty thousand rupees].
(2) In sections 57 and 58, the expression "expert" includes an engineer, a valuer, an accountant and any other person whose profession gives authority to a statement made by him.
(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 the prospectus required by section 58 from any person as an expert; and
(b) In the case of a prospectus issued generally also -
(i) A copy of every contract required by clause 16 of 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 clause 32 of that Schedule, a written statement signed by those persons setting out the adjustment and giving the reasons therefore.
(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.
1*[(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) 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 Registrar.
(5) If a prospectus is issued without a copy thereof being delivered under this section to 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 may extend to2*[fifty thousand rupees].
60A -3* Filing of shelf prospectus
(1) Any public financial institution, public sector bank or scheduled bank whose main object is financing shall file a shelf prospectus.
(2) A company filing a shelf prospectus with the Registrar shall not be required to file prospectus afresh at every stage of offer of securities by it within a period of validity of such shelf prospectus.
(3) A company filing a shelf prospectus shall be required to file an information memorandum on all material facts relating to new charges created, changes in the financial position as have occurred between the first offer of securities, previous offer of securities and the succeeding offer of securities within such time as may be prescribed by the Central Government, prior to making of a second or subsequent offer of securities under the shelf prospectus.
(4) An information memorandum shall be issued to the public along with shelf prospectus filed at the stage of the first offer of securities and such prospectus shall be valid for a period of one year from the date of opening of the first issue of securities under that prospectus:-
Provided that where an update of information memorandum is filed every time an offer of securities is made, such memorandum together with the shelf prospectus shall constitute the prospectus.
Explanation.-For the purpose of this section,-
(a) "Financing" means making loans to or subscribing in the capital of, a private industrial enterprise engaged in infrastructural financing or, such other company as the Central Government may notify in this behalf;
(b) "Shelf prospectus" means a prospectus issued by any financial institution or bank for one or more issues of the securities or class of securities specified in that prospectus.]
60B -3* Information memorandum
(1) A public company making an issue of securities may circulate information memorandum to the public prior to filing of a prospectus.
(2) A company inviting subscription by an information memorandum shall be bound to file a prospectus prior to the opening of the subscription lists and me offer as a red-herring prospectus, at least three days before the opening of the offer.
(3) The information memorandum and red-herring prospectus shall carry same obligations as are applicable in the case of a prospectus.
(4) Any variation between the information memorandum and the red-herring prospectus shall be highlighted as variations by the issuing company. Explanation.-For the purposes of sub-sections (2), (3) and (4), "red-herring prospectus" means a prospectus which does not have complete particulars on the price of the securities offered and the quantum of securities offered.
(5) Every variation as made and highlighted in accordance with sub-section (4) above shall be individually intimated to the persons invited to subscribe to the issue of securities.
(6) In the event of the issuing company or the underwriters to the issue have invited or received advance subscription by way of cash or post-dated cheques or stock-invest, the company or such underwriters or bankers to the issue shall not encash such subscription moneys or post-dated cheques or stock invest before the date of opening of the issue, without having individually intimated the prospective subscribers of the variation and without having offered an opportunity to such prospective subscribers to withdraw their application and cancel their post-dated cheques or stock-invest or return of subscription paid.
(7) The applicant or proposed subscriber shall exercise his right to withdraw from the application on any intimation of variation within seven days from the date of such intimation and shall indicate such withdrawal in writing to the company and the underwriters.
(8) Any application for subscription which is acted upon by the company or underwriters or bankers to the issue without having given enough information of any variations, or the particulars of withdrawing the offer or opportunity for cancelling the post-dated cheques or stock invest or stop payments for such payments shall be void and the applicants shall be entitled to receive a refund or return of its post-dated cheques or stock-invest or subscription moneys or cancellation of its application, as if the said application had never been made and the applicants are entitled to receive back their original application and interest at the rate of fifteen per cent, from the date of encashment till payment of realisation.
(9) Upon the closing of the offer of securities, a final prospectus staling therein the total capital raised, whether by way of debt or share capital and the closing price of the securities and any other details as were not complete in the red-herring prospectus shall be filed in a case of a listed public company with the Securities and Exchange Board and Registrar, and in any other case with the Registrar only.]
A company shall not, at any time, vary the terms of a contract referred to in the prospectus or statement in lieu of prospectus, except subject to the approval of, or except on authority given by, the company in general meeting.
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