The Companies (Amendment) Ordinance, 1998

• ' • , •. • • L * - er •com a • • ' • ' • • t• .... -' * rt;; -- ....... o{\if~RUf • E~~KJ'Pl1-RA~RDINARY ~ 11-&o~ 1 PART II - Section 1 1llf\rct;t( 1)- liifitft.a - -C S ; • • ,. - • ~ 48) ~ f<Rtf, ·~1f.iql( ~ 11 ~;._ • .. • • ·:- ":':':· No. 48] -- • . ·- - - ' &J . 'IRY OF LAW,· JUSTICE AND COMPANY AFFAIRS (Legislative Department) ', • . New Delhi, tlze 31~t October,_ 1998/Kartika9, 1920 (Saka) " .. THE COMPANIES (AMENDMENT) ORDINANCE, t998 • • .. 1 No~ 19 oF 1998 •• • • • . . . . . . • . • • • Promulgated by the President in the Forty-ninth Y ea.·r of· the R~public of India. • • • I . . . • An Ordinance further to amend the Compani~ .. A9t~ 1956... .. .. ~- .,· .. ,. WHEREAS a Bill to co11SOlidate ~d amend ~e law relating to ~n;ipanies and certain other associations bas been introduced in Parliament and is. pending consideration before the Department-related Standing ComQ1ittee on Home Affairs;· • . - .. ' I • • • • . . ·- . . . · M'D WHEREAS Parliament is not in . session and the President is sath,iicd that·. circ11mstances exist which render it necessary for· him • to take immediate action to give .. effect to some of the provisions of the said Bill with certain modifications by amending the Companies Act, .1956; . ,. . •, Now THEREFORE in exercise of the powers conferred by clause (1) of article 123 of the Constitution, •the President is pleased to promulgale the following Otd~naur.c:- . 1. (J) This Ordinance may be called the Companies (Amendment) Ch;dinance, 1998. Short title - ~ ~de~- (2) It shall come into force at once. . .. . . • • • J mencemcnt. • , .., • ' • '· . .. . . ... .., _ ~ • ' .. • . . .. • • , .. • ... • . Amendment of sc.c1ion 4A. • • Amendment . of· section S8A. 1 2 - 0 TI-IE GAZE1.l'E OF INDIA EXTRAORDINARY n a I .- . z. In the Compani~ Ac~ 1956 (hcrcinuflth l';rJr:lcfc~1cJ tic:> as ~-plrinbcci_Jl3] -~ct), in SCclion 4A, in sub-section ( J ) .. after clause (,'), e io owmg c nusc sw.u tnscnoo .. namely:.._ . "(vi) the lnfiastructurc Development Pinancc C-?mpany ljmitcd. a company fo - • d ,L. A t II -:, ... llnCd and registcr1:d un _er w~ c; • • ••., ..... . : ..... ., . J. • ln soction 58A of the prin~ipal Act, ~tet sub-section (10) &11d befotc the Explanation, the following suJ>.scct1on shall be IDSCrl~ namely:- I "'(ll) A depositor may, at any time, make a nomination ~d ~e provisions of sections • 109A and 109B shall, as far as may be, apply to th~ nom1nat1on made under this sub.. . ,, · secbon. . \ lmcrtion of new sectiom 77A and 77B. • • Power of company to purchase its own • • sccunbcs. .. . ,., " \_ \ • , , • • . . • • 4. After St'-Clic,,u ·11 of the pnllcipal Act, the following sections shall be inserted, DI~~:- _ . · • ~n A.(l) Notwitmtanding anything containe.d in this Act, but subject lo the provisions of sub-section (2) and section 7789 a company may purchase its own sh~ or . other specified securities (hereinafter ref erred to as •buy-back'') from- .. (1) out ot its free reserves; or • . · (i,) oui of the securities premium account; or (iii) out of the proceeds o~ an earlier i$ue other than ftesh issue of shares made spc.c.ifically f~ buy-back purposc.5. • ., (2) No company shall purchase its own shares or other specified securities under sub-section {I) unl~ (a) the buy-back is authorised by its· articl~; (b) a special . resolution has been (>~ed in general .meeting of the cOlllpany authorising the buy-back; · • : . . • ~¢) the buy-back _docs not ex~eed twenty pve ~r· ~nt. of the total paid-up capital and free rese1\'es of the company purcbasmg its ·own shares or other specified security; _·_ ~-,·. -... • . .. . . ( d) the ratio of • the debt owed by the company is .. not more than twice the _· _· capi.tal and its free resetvcs afte.r such buy-back; . . • _ .. (e) all the shat"CS or other specifi~ securities fully paid-up; • • . . • - . , . (f) the buy-back . is in accordance with the regulations made by the Securities Exchange Board of India in this behalf. · · · · • • . • • • , .. : • . . . • • • , t r '. • TI-IE GAZETTE OF INDIA E ~ Xl'RAORDINARy · • • • ,.,,·on -For the purposes of this ., 0 L . l !If>' • • " ll-SC<:l10 " 3 • f)P a • stock option or other securities n, 5P<'-cificJ S.Ccurit' .. c111P1ore~nl {rein time to time. as • may be noti(i~ "'· 1~ includ~ oovel1Jlll . . "l the Central """ noti<:e of the meeting al which spcc·1 1 1 . 3) s ,,e • ed b . l • a l"Cso Utlo • ~11 be aceompalll y an exp anatory statement stating-n as ~d to be (>aSsc.d ) ~ full and complete disclosure of all mat ·a1 ~ (a en ,acts· ' . ' (b) the necessity for the buy-back; - ( ) the c~ of security intended to he purchased . . c • - • . under the buy-back; (a) the 8DlOUDl to be invested under the bui-back; and (e) the time limit for completion of buy-back. 4) Every buy-back shall be completed wilbin twelve m tbs th! special resolution under sub-section (2). • -_ . _on ... frotn ~ dat~ of ~ing (S} The buy~back under sub-section (J) may be:.... (a) from lhc existing security holders on a proportionate 1. __ •• . . . ~~~ . (b) from the open market; or (c) fr?m odd lots.--that is to say. where the lot of securities in 8 listed public companY is smaller than such market lot as may -be specified by the stock cxcban . . . . . . ~m . (d) by purchasing ~e- securities i~ed to employees of the company pursuant to a scheme of stock opllon or sweat equity. . • (6) Where a company has . passed a special resolution to buy-back its own shares or . other securities under . this section, it shall, before making · such purchases, file with the Registrar and the Securities and Exchange Board of India a declaration of solvency in the form prescribed. verified by an affidavit lo the effect that the Board has made a full uiquiry into the affairs of the company as a result of which it is capable of meeting its liabilities and will not be rendered insolvent within a period of one year of the date of declaration adopted by the Board. and signed by at least two directoci of the company. one of whom shall be the managing director, if any: •• Provided that nc ~Pf:'!~~~,m of . solvr~i· ;;liaij .' oe filed wiili the Securities and Exchange Board of India by a company whose shares are not listed on any recognised stock exchange. • (7) Where a company buy57back its own securities, it shall extinguish and physically destroy the securities so bought-back within seven Clays of the last date of completion of buy.-back. (8) Where a company completes a buy7back of its ·securities under this ~lion, it_ shalt not make further issue of securities within a period of twenty-four months cxc~pt by way of bonus · issue or in the discharge of subsisting obligations such as conversion of wan-ants, stock option schemes sweat equity o.r conversion of prcferc~c shares or debentures into equity shares. • Prohibition' for buy­ back in certain circum­ stances. Insertion of new section 79A. Issue of sweat equity shares. 4 IPA11111 ~ I .,, J•I", ~ THE GAZETTE OF INDIA EXTRAORDINARY {9) Where a <.:llmpany _h~•:vs- l:Jl"K 1b sl:Clilllll~S u11 er_ u11:; .~~·lw~. it shall 013111 .. register of the sccunt1c.s so bought. the cons1Jcrat10n pa.id fr)r th . . ta!1'. :i bou.,bt-back. the date of c:uu..·cllation of securities anJ such other particulan,c lil:<:untics t- IIS tn:ty L , prcscri~d. lit (JO) A company shall, after the completion of the buy-back under this se t' with the Registrar and the Securities and Exchange Bourd of India., a return c 10 ~ ~le such particulars relating to the buy-back within thirty clays of such complctio:onlaintng be prescribed: • as tnay (11) If a company makes default in complying with the provisions of this sec . any rules made thereunder, the company or any officer of the company wh tt~n ?t default shall be pwtlshablc with imprisonment for a tenn which may extend~ IS Ill years, or with fine which may extend to fifty thousand rupees, or with both. 0 two 77B. No company shall purchase its own shares or other specified sccurities­ (a) through any subsidiary company including its own subsidiary companies. . • or (b) through any investment company or group of investment companies; or (c) if a default, in repayment of deposit, redemption of debenture or prcfcre shares' or repayment of a tenn loans to any financial institutions or bank n~ · L-' • • IS SUu:slStmg .. S. After • section' 79 of the principal Act. the following section shall be inserted namely:~ • • ·: "79A. (1) Notwithstanding anything contained in section 79, a company may issue • sweat equity shares of a class of shares already issued if the following conditioll.5 arc fulfilled, namely:;_ • •• . 1 (a) the issue of sweat equity shares is authorised by a resolution passed by the company in the general meeting; _ (b) the resolution specifies the number of shares, their value and the cl!!$ or _ classes of directors or employees to whom sllch equity shares lll'C to ~ issue<l; (c) not less than one year has at the date of the is.c;ue elapsed since the· date on which the company was entitled to commence business; • (d) the sweat equity shares are is.5ued in accordance' with the regulations made by the Securities Exchange Board of India in this behalf. Explanation L- For the purposes of this sul>-section, the expression na company" means the company incorporated, fonned and registered wider this Act and includes its subsidi.aiy company incorporated in a country ~utside India. • Explanation 11.-For the purposes of this sub-section, the expression "sweat equity shares" means equity shares i:'i.5ued at a discount or for consideration other than cash for providing know-bow or making available rights in the nature of intclle<.,'iual property rights or value additions, by whatever ruunc called. 11 nmo·11.~ SSC ·~11.t. OP INDIA • . . .. . .. - . . EXTRAORDINARY . (2) All the limitaJions, tcstricu· • • 5 bl . ons and n • . applies e to sucn sweat equity sh . t•rovll!io1L'I rclatin . •. . · -·. . . · .. . . • . a~i; tssucd under sub. g .10 cquuy shares s1'.all be-· - • section (l).~. 6. In soctioo 82 of the principal Ac • . d _......,,urcs" shall be substituted l. for the Word "shares• th CU"~ - • • • • • c Words "sbatta er Amendment of section 82. . . 7 After section 109 of the ..,..; .. • • r• ... ctpn) Act, the folio • . IJ8Dle)y:- Wlllg SCctiQM sbalJ be imcrtcd, Jmcrtion of new sections lOOA and 1098. • "109A. (I) Evcryli~idcr of shares in. or h Ider • at any _tir:n_e pominatc, in the prescribed tnann:r of dcbcntw-cs of. a company may, Nomination debenture$ of, the-' company shall v~t in the ev~:. :r: ~';.;~om- his shares in. or of shares. (2) Where the sh.arcs in, or debentures f, • . · • • tl th • • b Id o a company are held by more than one person Jom y, c Jomt o crs may together nomin 1 • th • • peISOD to whom all the rights in the shares or debcn~ mof ~rcscnbed manner, a in lhe event of death of all the joint holders. _company shall vest . .. (3) N~twiths~ding_ ~ything contained in any other law. for the ·;ime .being in force ~r m any d1SpOS1tion. whether testamentary or otherwise. in respect of such shares m. or debentures of, the company, where a nomination made in the prescribed manner purports to confer ~:m any person the right to vest the shares in .or debentures of the company, lhc nommcc shall, on the death of the shareholder or bolder of debentures of the company or, as the case may be, on the death of the joint holders become entitled lo ull_ ~e rights in the shares or debentures of the company or, as the case may be, all the Jotnl holders, in relation to such shan:s in, or debentures of the oompany to the exclu.5ion of all . other persons, unless the nomination is varied or_ • cancelled in the prescribed manner. • ( 4') Where the nomitx,:c is a minor, it shall~ lawful for the holder of the shares, or holder of debentures, to make lhe nomination .to appoint in the. prescribed manner any person to become entitled to sl+ares in or debentures of the company, in the event of his death, during the minority. _- • . _ • 109B. (1), Any person who becomes a ~omince by virtue of ~c provisions of section 109A, upon the production of such ~v1dcna: as may be required by_ .. thc_Board and subject as hereinafter provided, elect, either- (a) to 'be registered himself~ holder of the share or debenture~ as the case may~; or • . • . f th ~ or debenture, as the· case may be. as the (b) to make such tranSfcr O ebs Id the case may be could have made. deceased shareholder or debenture O er, as . ' · • Trans­ mission of shares. . t Amendment of section 205A. 6 THE GAZEITE OF INDIA EXTRAORDINARY . -~ ('') The Boord shall, in either case, have lhc same right lo d~lin~ rcg;tration _as it would have had, if the deccru;cd shareholder or debenture ho~~ 5UsJlcnd • case may be, had transfcn-ed lhc share or debenture. as the case may be .:• as tbc death. ' fore bis (3) If the person being a nominee. so becoming entitled. elects to be re . holder of the share or debenture, as the case may be, hitnsclf, he shall dclivgtstetcc1 as to the company a notice in writing signed by him stating that he so elects er or SCnd notice shall be accompanied with the death certificate of the dcccascd sharc~d SUch debenture bolder, as the case may be. qldcr or ( 4) All the limitations, restrictions and provisions of this Ad. relating to th . transfer and the registration of transf ~rs o~ shares or debentures shall be app~i~ht lo any such notice or transfer as aforesa1d as_ 1f the death of the member had not oec le 10 and the notice or transfer were a ttansfer signed by that shareholder or debenture h~ .as the case may be. ct, • (5) A person.. being a nominee, becoming entitled to a share or dcbaiture by of the death of the holde~ ~ be entitled to th~ same dividends and other adv~ _ to which be would be cnbtled if be were the registered holder of the share or debcn: except that he shall not, before being registered a member in respect of his share debc:nturc, be e~titled in respect of it to exercise any right conferred by tnctnbc.ship : . relation to mecbngs. of the company: • • • • Provided that the Board may, at any time, give notice requiring any such pet-son to elect either to be registered himself or to transfer the share or debenture, and if the notice is not complied with within ninety days, the Board may thereafter withhold payment of all dividends, bom.L5es or other moneys payable in respc:ci of the share or debenture, until the requircmcn~ of the notice have been complied with.•. S. In section 205A of the principal Act,- (a) for sul>-sectit>ii' (5); the following sul>-scction shall be substituted, namely:- "(5) Any money ttansfetTCd lo the unpaid dividend account of .a companv in ·pursuance of this · Section which remains unpaid or unclaimed for a period of ·five years from the ·date of such transfer shall be transferred by the company to the Fund established ·under sul>-section (I) of section 205C but a claim to any mooey so transferred lo such. Fund may be preferred to the authority or committee appointed under sul>-section (4) of that section by the person to whom the money is due and shall be dealt with as if such transfer to the Fund bad~ been made."; (b) in sul>-St".ction (6),- ,· (i) for the words "general revenue account of the Central Government", the words, figures and letter "Fund established under . section 205C' shall be substituted; • • (ii) for the worcls "to such officer as the Central Govemrocot ma/ appoint#, the words "authority or committee as the Central Government may appoint" shall be su~~ed; • (c) for sub-section (7), the following sul>-scction shall be sub5tituted, namely:~ . .... . . , . SEC 11 TiffiGA?tn,..,... • "'wL;l l.lj OF INDIA E'\"r,n.. . . . . ~llV\ORl>JNARY . . 7 · • "(7) The co:nPMy shali be . . • .. - . - . , - - under sub-section (4) f cntnlcd lo n rccc· f • • • •• • • d h . 0 section 205C f tpt rom the: aulhorit)' or commithx an su: a receipt shalJ be an cff or an~ mCJ11cy U-cll\Sfcrred bv it lo the Fund thereof. • cctual d1~hu.rgc of the · ;.,.., • t com,~y m rcspcc • 9. In section 205B of the prin 'pal • • account of the Central Government,~ :ct, for the .words •to the general rcven~e /s.!ncndment figures, le!ter and brackels "to the Fun~ ~ply_ to the Central Government", the words, of section · the authonty or the committee appointed lablished undl·r section 205C may apply to 205B. substituted. under sub-section (4) of that section" shall be . . 10. After scctloo 205B of the rin . namely:-:- , · p ctpal Act, the following section shall be inserted, Imation - ~0SC. (1) The Central Govcrmn t shall • Education and Protection Fund (be en . cs~blisb a fund to be called the Investor rcafter • ID this section· rcfcmd to as the "Fund"). (2) There shall be credited to the Fund the followjng amounts, namcly:- (a) amounts in the unpaid dividend accounts of companies; (b) the application moneys received by companies for allotment of any securities and due 1 for refund; _ . · . _ _ (c) matured deposits with companies; (cl) matured debentures with companies; (e) tJi~ interest accrued on the .amounts referred to in clauses (a) to (d); , (/) grants and donations given lo the Fund by the Central Government, State \ Oovemments; companies or any other institutions for the purposes of the Fund; and (g) the interest or other income received out of the investments made from the Fund: Provided that no such a.mounts refetted to in clauses (a) to (d) shall form. part of the Fund unless such amotmts have remained wclaimcd and unpaid for a period of five , years from the date they became due for paymenL (3) Tue Fund shall be utiJic;cd for promotion of investor awarenes.5 and protection of the interests of invt.Stozs in acn...ordance with such rul~ as may be prescribed. (4) The Central Govemmen! ~hall, by r.iotification in the Offici~ Gazette, spec!fy an authority or committee, with su.::h members as the Central Government may appomt, !o administer the Fund, and maintain separate accounts ?'°d ~ther rclcv~t rec~rds m relation to the FWld in such. for.11 as ma!' be presenlM<l w consulta.ion with the Comf(toller and Audhor-Gcner.:J. of India. - • .. (5) It shall be competent (or the authority or: committee a~intcd un~ s~l>=scction (4) to spend moneys out of \he Fund for carrymg out the obJecls for wh,ch the Fund has been established.•. \ of new i section 205C. Estoblish­ D'JCDt of Investor Education and Protection Fund. 8 nm GAZE'ITB OF INDIA EXTRAORDINARY [PARTD- . I, wc:ruoo c,f n-.:,.· st'.Ctioa 210A. u. After scctioo 210 of the principa! Act, Che following section ~ be m.,cricd, ... C-omtitutioo of National Advisory Committee 00 • Aocountiog standards. na.nc:ly:- • • "2I0A. (/) The Cmtral G~vernmcol may, ~y noti~~~tion in ~ Official ~u.ctte, constitute an Advisory Commiuec to be calJe1,1 Ilic NauonaJ Adv~ Comnut1ec on Acoounting standards (hereafter in this section rcfe~ lo as th~ "AdVlSOI')' Committee•) to advise the Central Government on the fo~uJiit;on and l_aymg down of accounting policies and acoounting standards for adoption by compamcs or class of companies under this AcL (2) Tbe Advisory Committee shall comist of the following members, namely:- (a) a Chairperson who shall be a_ person of eminen~ well .v~ ~ ~~tancy, fmancc. business administration. bmmess law, economics or sunilar discipline; (b) ooc member each nominated by the Institute of Chartered Aooountants of India oonstituted uooer the Chartered Accountants Act. 1949, the Instirute of Cost and Works Accountants of India constituted under the· Cost and Works Accountar· Act. 1959 and the Imtitute ofCompany Secretaries of India constiruted under the Cofupany Scctetaries Act, 1980; (c) one rcprcscntative of the Central Government to be nominated by it;. (d) one representative of .the Reserve Bank of India to be nominated by it; (e) one representative of the Comptroller and Auditor-General of India to be ~ina~~~ • (/) a person who holds or has held the office of professor in accountancy, finance or business management .in · any university or deemed wiiversity; (g) the Chainnan of the Central · Boa.rd of Direct Truces constituted under the 38 of 1949 23 of 1959° 56 of 1980: C.entral Boards of Revenue Act, 1963 or his nominee; . 54 of 1963. (h) two members to represent the chambers of commerce and industry to be nanioared by the Central Government; and (1) one representative of the Securities and Exchange Board of India to be nominated by it. (J) The Advisory Committee · shall give its rccomntendations ·1o · lhc Central Government on such matters of accounting policies and standards and auditing as may be referred to it for advice from time to time. .. __ .... ( 4) The .members of the Advisory Committee shall hold <>fficc for such terms as niay be dete~ned by the C~~I Govemm:nt at the time of their appointment .and any vacancy 1n the membership m the Commtttee shaU be filled by the Central Government in the same manner as the member whose vacancy oc-:urred was filled. (.5) The non-official members of the Advisory Committee shall be entitled to such fees, travelling, conveyance and other allowances as arc admissible to the officers of the Ccotml Government of the highest rank. l­ f £ r.-· ~ , 1949- I ' S&C 1) THE GA~ • -«..oL.1 I ~ OF INDIA EY'T-b • ~ . . . . "•IV\ORDJNARY 9 J..2- ln scct100 _211 of the Principal Ac _ . . " sections shall be mscrtcd, namely:- t, after sub-soction (3) th . . , c followLng sub- . •(3A) Every profit and· lass aceount • with the accounting standards. and. balance sheet of the company shall comply . . . (38) Where lhc profit _and le>ss account d - • • • • comply with the accounting standards, su: co': baJ_ancc shc:ct. of the company do not ~ account and balance sheet, the following n parul ':5 shalt disclose in its profit and , amey.- (a) the deviation frorn the accountin • . • 8 Standards; (b) the rca.wris for such deviation; and (c) the financial effect, if any arisin d , • • g . uc to such dcviatioo. , (3C} For the puip05a; of this section, thee . • • standards of accounting recommended b th xp~IOn "acoounting standards" means the constituted under the Chartered Accou!tan~ ~titute of Chartered Accountants of India Central Government in consultati~n with ;t. 19.4?, as may be prescribed by the Accounting Standards established under sub- ~ National Advisory Committee on . . SCCtlon (}) of sccti_on 210A: . Provided that the standard of account· · • · Ac.coontants of India shall be deemed I bemi spe.cified. by _the Institute of Chartered Advisory Committee on Accountin S~dar~ ~ccount~g Standards tmtil the National section 2luA. g .·15 cstsblished under sub-section (1) of ~3. In section 227 of the principal Act, in sub-~tion (3),-· • ' (i) after clause (c), the following clause ~ball be ~cd, namely:- "(d) whether, in his opinion, the profit and loss account and balance sheet complied with the accmmting standards referred to in sub-section (3C) of section 211.•; (ii) in sub-section (4), for the word and brackets and .letter "and (c)", the brai::kets, leUcrs and word u, (c) and (dX' shall be substituted. • Arncodmcnt of section 211. · Amendment of section 227. 14; In sectioo 370 of the principal Act, after ~b-scction (5), and before the Amendment explanation the following sub-section shall be inserted, namely:- ___ _ . _ • . of section 370. *(6) Nothing contained in this section shall apply to a company on and after the commencement of the Companies (Amendment) Ordinance, 1998.". 15. In section 372 of the principal Act, after sub-section (14), the following sub- Amendment section shall be inserted., namely:- of section 372. "(15) Nothing contained in this section shall appl~ to a comp~y on and after the commeoccmCDt of the Companies (Amendment) Ordinance, 1998. • . _ . i ;; : t: 10 nm GAZETIB OF INDIA EXTRAORDINARY Insertion of 16. After section 372 of the principal Acl. the following section shall_ be ihscrtcd new section namely:- . ' 372A. Inter- "372A. (1) No company shall, din:ctly or indircctly,- corporalc loans and (a) make any loan to any body corporate; investments. (b) give any guarantcc, or provide security, in connection with a loan made by an other person to, or to any other person by, any body corporate; and Y (c) acquire. by way of subscriplion, purchase or otherwise the securities of an other body corporate, • Y exceeding sixty per ccn.L of its paid-up share capital and free reserves, • or h\llldn:d per cent. of its free reserves, whichever is more: Provided. that _where the aggregate of the loans an~ invcstmcn':i so far made, the amounts for which • guarantcc or secunty so far provided lo or 1D. all other bodies corporate, along with the investment. loan, guarantee or security proposed to be inadc or given by the Board, exceeds the aforesaid limits, no investment or loan shall be made or guarantee shall _be given or security shall be provided unless prcviOUs)y authorised by a special resolution passed in a general meeting: Provided further that the notice of such resolution shall indicate clearly the specific limits, the particulars of the body corporate in which the investment is proposed to be made or loan or security or guarantee lo be given, the purpose of the investment, loan or security or guarantee, specific sources of funding and such other dc:tai.ls. . (2) No loan lo anybody corporate shall be made at the rate of interest lower than the prevailing bank rate of interest. • • • ,, (3) No Joan or investment shall be made or .guarantee or security given by the Board in pwsuancc of sub-section (J) wtlcss the resolution sanctioning it is p~ at a meeting of the Board with·the consent of all the directors present at the meeting and the prior approval of the public financial institution referred to in section 4A where any term loan is subsisting. • • • (4) (a) Every company shall keep a register showing the following particulars in respect of every investment or loan made, guarantee given or security provided by it in relation to any body cotporatc under sub:-scction (J), namely:,;___ _ (1) the name of the body corporate; (i,) the amount, terms and purpose of the investment or loan or security or guarantee; . ,·· (iii) the da!e on which the investment or loan bas been made; and (iv) the date on which the guarantee bas been given or security has -been provided in connection with a loan. 1 ~ . . 11 (b) T • paruet:lars of invcslnic.,it 1 . shall be cnlcrc-J chronolo11icall .' oan, SU3.t-.ttitcc or SCCUtitv rcr .i • •·· __ L..; r ch · ~ Y m lhc n: • . . acr?\:y lo m ci:.usc (a) JUANng o su mvcsttncnt or loan i;tstcr aforesaid within .L r th -·-'- security ' or the givino f h seven =ys_ o c :iU',il '• ~ O sue guarantee or lhc provision or (5) The register referred to in suL . • 1>-SCClton ( .d\ shall be ~c company oonccrncd and- ... ' kept a1 the registered • office of (a) shall be open to inspection 1 h _ a sue office; and (b) extracts may be taken thcn:from . . and copies thereof may be required, by any member of the conipany to lb payment of the same fees as in the c s;me cx~nt., in the same manner, and on and the provisioos of section 163 shall case 0 1 the rcg!5let of members of the company; app Y accordingly. ( 0) The Central Government ma • . . • Board of India may prescribe .J•linm c~nsultation with the Securities and Exchange • gw e cs ,or the purposes of this scctioo. •• (7) Nothing contained in this section shall l . given or any security provided or any . app y to any loan made., any .guarantee mvcstmenl made by- . ::.) a Janking compan~, or~ insurance company, or a housing finance company mf ~ . ~co~ of lls ~usmcss, or a company established with the sole object o _cmg ustn enterpnscs, or of providing infrastructural facilities; • (b) 8 ·company whose principle business is lhc acquisition of shares ; stock, debentures or other securities; • ' . • (c) a private company, unless it is a subsidiary of a public company; . I (8) If_ default is made in complying with !he provisiom of this section. other than sub-secuon (4), the company and every officer of the company who is in default shall be punishable with imprisonment which may extend to two years or with fine which may extend to fifty thousand ru~: • Provided that where any such loan or any loan in connection with which any such guarantee or security has been given, or provided by the company, bas been repaid in full, no punishment by way of imprisonment shall be imposed under this sub-section, and where such loan has been repaid in part. the maximum punishment which may be imposed under this sub-section by way of imprisonment shall be appropriately reduced: Provided further that all pctsons who arc knowingly parties to any such contravention shall be liable, jointly and severally, to the company for the repayment of the loan or for making good the same which !he company may have been c.allcd upon to pay by virtue .of the guarantee given or the secmities provided by such company. • . (9) If default is made in • complying with the provisions of sub-section ( 4), the _ company and every officer of the company who is in defii:uh shall be punisba?lc w.ilh fine which may extend lo five thousand rupees and also with a ~r ~me which may extend lo five hundred rupees for every' day after the first dunng which .the default continues. ...,, .,.. J2 TIIE GAZE'ITE OF IN{)IA EXTRAORDINARY (PAAT II-Sac. IJ E.xplanation:-For the purposes of lhis scction,- (a) "loan- includes debentures or any deposit of bloncy made by one company with another company, not being a banking company; (b) "free reserves" means those n:.scrvcs which. as per latest audited balance-sheet of the company, arc free for distribution as dividend and shall include balance to the credit of the sc:auitics premium account but shall not include share application J money .. \ . ( . K.R. NARAYANAN, President. RAGHBIR SINGH, Secy. to the Govt. of India. PRINTED BY THE MANAGER GOVE • AND p ' RNMENT OF INDIA PRESS (PLU), MINTO ROAD, NEW DELHI • _ UBLISHED BY IBE CONTROLLER OF PUBLICATIONS, DELHI, 1998. MGIP{PLU)MRND-2794-0RD-31.10.1998: .