The Companies (Amendment) Ordinance, 1999

• ~ 4] No. 4] REGISTERED NO. DL-33004/99 3fffl1ffi1lr EXTRAORDINARY 'WT 11-~1 PART II - Section 1 ~ ~ ~ PUBLISl IED BY AUTHORITY ~ ~, ~. ~ 7, 1999 , ~ 17, 1920 NEW DELHI, WEDNESDAY, JANUARY 7, 1999 lPAUSi\ 17, 1920 ~ 'WT if f'r-il ~ ~ ~ ~ \ ~ ~ 'q 3fflTT ~ cfi ~ if fflT ~~I Separate paging is given to this Part in order that it may be filed as a separate compilation. MINISTRY OF LAW, JUSTICE AND COMPANY AFFAIRS (Legislative Department) New Delhi, the 7th January, 1999 / Pausa 17, 1920 (Saka) THE ·COMPANIES (AMENDMENT) ORDINANCE, 1999 / (No. I or: 1999) Promulgated by the President in the Forty-ninth Year of the Republic of India. An Ordinance further to amend the Companies Act, 1956. WHEREAS a Bill to con50lidate and amend the law relating to companies and certain other associatio~ pas_ been introduced in Parliament and is (>C?nding consideration before the DcpartmenH'elated Standing Committee on Home Affairs; AND WHEREAS the Companies (Amendment) Ordinance, 1998 was promulgated by the Prc-sidcnl on the 31st day of October, 1998; AND Wl!ER F-•, s the Com panies (Amendment) Bill, 1998 'Y:as introduced in the House of the Fcopk lo replace the :,,~,id Ord\rnn,c:•: , but h:,s not h:. ,.:n 1rn~&d; Short tille and com­ mencemenL Amendment of section 4A. 2 Amendment of section SBA. Insertion of new sections 77A, 77AA and 778. Power of company to purchase its own securities. THE GAZETTE OF INDIA EXTRAORDINARY .[ PART 11-- ,~;.m,•~ Parliament is not in session and the President is satisfied that ciJcwnstanca, exist which render it necessary for him to take i.mmedi!lte action to give effect to the provisions of the Companies (Amendment) Bill, 1998 with certain modifications; • Now, THI!REFORE, in exercise of the powers conferred by clause ( 1) of article 123 of the Constitution. the President is pleased to promulgate the following Ordinance:_ 1. (}) This Ordinance may he ca!Jed the Companies (Amendment) Ordinance, 1999 , . . . (2) It shall be deemed to have come !nto force on the 31st day of October, 1998. 2. In the Companies Act, 1956 (hereinafter referred to as the principal Act), in section 4.A, in sub-section (]), after q_lause (v), the foll6wing clause shall be inserted, namely:_ . "(vi) the lnftastruc~ Development Finance Company Limited, a company formed and registered under this Act.". 3. In section 58A of the principal Act, after sub-section (J 0) and before the Explanation, the following sub-section ~hall be inserted., namely: - "(11) A depositor may, al any time, make a nomination and lhe prov1s10ns of sections 109A and 109B shall, as far as may be, apply to the nomination made under this su b--section. ". 4. After section 77 of the principal Act, the following sections shall be insette<l, namely:- '77 A. (J) Notwithstanding anything contained in this Act, but subjecl lo the provisions of sub-section (2) of this· section and section 77B, a company may purchase its own shares or other specified securities (hcr~inaft.er referred lo as "buy­ back") out of- ( i) i ls free reserves; or (ii) the securities premium a~unt; or (iii) I.he proceeds of any shares or olher spedfied securities: Provided that no buy-back of any kind of shares or other spccifit:d securities shall be mack out of the proceeds of an earlier issue of the same kind ofshares or . same kind of other specified securities. (2) No company · shall purchase its own shares or other specified securities under \ sub-section (J) unless- (a) the buy~back is authorised by its articles; (b) a special t:esolution has been passed in general meeting of the company authorising the buy-back; (c) the buy-back is. or less than twenty-five per cent of the total p:i.id-up capital and free reserves of the, company: SEC. I] THE GAZETIB OF INDIA EXTRAORDINARY Provided that the buy-back of equity shares in any financial year shall not exceed twenty-five per <..-ent. of its to~ paid-up equity capital in that· financial year; (d) the ratio of the debt owed by the company is not more than twice the capital and its ,free. reserves after such buy-back: Provided that the Central Government may prescribe a higher ratio of the debt than that specified under this clause for a class or classes· of companies. Explanation.-For the purposes of this clause, the expression "debt" includes all amounts of unsecured and secured debts; (e) all the shares or other specified securities for buy-back are fully paid0 up; (/) the huy-back of the shares or other specified securities listed on any recognised stock exchange is in accbrdance with the regulations made by the Securities and Exchange Board of India in this behalf; (g) the buy-back in respect of shares • or other specified securities other than those specified in c!ause (f) is in accordance with the guidelines as may be prescribed. (3) The notice of the meeting at which special resolution is proposed to be passed shall be accompanied by an explanatory statement -stating- (a) a full and complete disclosure of all material facts; (b) the necessity for the buy-back; (c) the class of security intended to be purchased under the buy-back; (d) the amount to be invested under the buy-back; and (e) the time limit for completion of buy-back. 3 ( 4) Every buy-back sh.all be completed within twelve months from the date of passing the special resolution under clause (b) of sub-section (2). (5) The buy-back under sub-section (J) 1.pay be-' (a) from the existing security-holders on a proportionate basis; or (b) from the open market; or (c) from odd lots, that is to say, where the lot of securities of a public company, whose shares are listed on a recognised stock exchange, is smaller than such . marketable lot, as may be specified by the stock exch.anie; or (d) by purchasing the securities issued to employees of the compl,Uly pursuant to a scheme of stock option or sweat equity. (6) Where a company bas passed a special resolution under clause (b) of sub-section (2) to buy-back its own shares or other securities under this sectjon, it shall, before making such buy-back, file with- the Registrar and the Securities and Exchange Board of lndia a declaration of solvency in the form as may be prescribed and verified by an affidavit to the effect that the Boan:1 has made a full i.aguiry into the affaiJs of the 4 Transfer of certain sums to capital redemption reserve accounL THE GAZETfE OF INDIA EXTRAORDINARY [PART II--- company as a result of which they have formed and opinion that it is capable of meeting its liabilities and will not be rendere.d insolvent within a period of one year of the date of declaration adopted by the Board, and signe.d by at least two directors of the comp~y, one of whom shall be the managing director, if any: Provided that no declaration of solvency shaH be filed with the Securities and Ex.change Board of India by a company whose shares are not listed on any recognised stock exchange. (7) Where a company buys-back its own securities, it shall eltinguish and physically destroy the securities so bought-back within seven days of the last date of completion of buy-back. (8) Where a company completes a buy-back of its shares or other specified securities under this section, it shall not make further issue of the same kind of shares [including allotment of further shares under clause (a) of sub-section (1) of section 81} or other specified securities within a period of twenty-four months except by way of bonus issue or in the discharge of subsisting obligations such as conversion of warrants, stock option schemes, sweat equity or conversion of preference shares or debentures into equity shares. (9) Where a company buys-back its securities under this section, it shall maintain a register of the securities so bought, the consideration paid for the securities bought-back, the date of cancellation of securities, the date of extinguishing and physically destroying of securities and sucb other particulars as may be prescribed. (JO) A company shall, after the completion of tJ1e buy-back under this section, file with the Registrar and the Securities. and Exchange Board of India, a return containing such particulars relating to the buy-back within thirty days of such completion, as may be prescribed: Provide.cl that no return shall be filed with the Securities and Exchange Board of India by a company whose shares arc not liste.d on any recognised stock exchange. (11) If a company makes default in complying with the provisions of this section or any rules made thereunder, or any regulations made under clause (/) of sub-section (2), the company or any officer of the company who is in default shall be punishable with imprisonment for a term which may extend to two years, or with fme which may extend to fifty thousand rupees, or with both. Explanation.-For the purposes of this section,- (a) "specified securities" includes employees' stock option or other securities as may be notified by the Central Government from time to time; (b) "free reserves" shall have the meaning assign~ to it . in clause (b) of Explanation to section 372A. 77 AA. Where a company purchases its own shares out of free reserves, then a sum equal to the nominal value of the share so purchased shall be transferred to the capital redemption reserve account referre.d to in clause_ (d) of the proviso to sul>­ section (1) of section 80 and details of such transfer shall be disclosed in the balance­ sh_ect. THE GAZElTE OF IND/A EXTRAORDINARY 77B. (1) No company shall directly or indirectly purchase its own shares or other ified securitics- (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, by the company, in repayment-of deposit or interest payable thereon, redemption of debentures, or preference shares or payment of dividend to any shareholder or repayment of any tenn loan or interest payable thereon to any financial institution or bank, is subsisting. (2) No company shall directly or indirectly purchase its own shares or other specified securities in case such company has not complied with provisions of sections 159, 207 and 211. . 5. In section 78 of the principal Act, for the word "share" wherever it occurs, the word "securities" shall be substituted. 5 6. After su:tion 79 of the principal' Act, the following section shall be inserted, ,'/ namely:-- [· w I "79A. (]} Notwithstanding anything contained in section 79, a company may issue sweat equity shares of a class of shares already issued if the following conditions are fulfilled, uamcly:- (a) the issue of sweat equity shares is authorised by a special resolution passed by the company in the general meeting; (b) the resolution specifies the number of shares, current market price, consideration, if any, and the class or classes of director.. or employees to whom such equity shares are to be issued; (c) nol less than one year has, at th~ date of the issue elapsed since the date on which the company was entitled to commence busines.5; (d) the sweat equity shares of a company whose equity shares arc listed on a recogni">ed stock exchange are issued in accordance with the regulations made by the Securities and Exchange Board of India in this behalf: • Provided that in the case of a company whose equity shares are not listed on any recognised st~k exchange, the sweat equity shares are issued in accordance with the guidelines as may be prescribed. Explanation /.-For the purposes of this sub-section, the expression "a company" means company incorporated, formed and registered under this Act and includes its subsidiary company incorporated in a country outside India. Explanation 11.-For the purposes of this Act. the expression "sweat equity shares" means-equity shares issued by the company to employees or directors at a dL=unt or for c.onsideration other than cash for providing know-how or making available rights in the nature of intellectual propctty rights or value additions, by whaiever name caJled. Prohibition for buy­ back in certain circwn­ stances. Amendment of section 78. Insertion of new section 79A. IB.5UC of sweat equity shares. Amendment of section 80. Amendment of section 82. Insertion of new sections 109A and 1098. Nomination of shares. Trans­ mission of shares. 6 [ p AIU fl--­ ========================---========~ THE GAZETfE OF INDJA EXTRAORDINARY (2) All the limitations, restrictions and provisions relating to equity shares shalt be applicable to such sweat equity shares issued WJder sub-section (]).'. 7. In section 80 of the principal Act, in sub-section (]), in clause (c), for the words "share premium account", the words "security premium account" shall be substituted. 8. In scct_ion 82 of the principal Act, for the word "shares", the words "shares or debentures" shall be substituted. 9. After section 109 of the principal Act, the following sections shall be inserted, namely:- " I 09 A. (1) Every holder of shares io, or holder of debentures of, a company may, at any time, nominate, in the prescribed manner, a person to whom his shares in, or debentures of, the company shall vest in the event of his death, (2) Where the shares in, or debentures of, a oompany are held by more than one person jointly, the joint holders may together nominate, in the prescribed manner, a person to whom all the rights in the shares or debentures of the company shall vest in the event of death of all the joint holders. (3) Notwithstanding anything contained in any other law for the time being in force or in any disposition, whether testamentary or otherwise, in respect of such shares in, or debentures of, the company, where a nomination made in the prescribed manner purports to confer on any person the right to vest the shares in, or debentures of, the company, the nominee shall, on the death of the shareholder or holder of debentures of, the company or, as the case may be, on the death of the joint holders become entitled io all the rights in the shares or debentures of the company or, as the case may be, all 'the joint holders, in relation to such shares in, or debentures of the company to the exclusion of all other persons, unless Jhe nomination is varied or cancelled in the prescribed manner. (4) Where the nominee is a minor, it shall be lawful for the holder of the shares, or holder of debentures, to make the nomination to appoint, in the prescribed manner, any person to become entitled to shares in, or debentures of, the company, in the event of his death, during the minority. • I • 1098. (1) Any person who becomes a nominee by virtue of the provisions of section 109A, upon the production of such evidence as may be required by the Board and subject as hereinafter provid~, elect, either- (a) to be registered himself as holder of the share or debenture, as ihe ,!:!ase may be; or (b) to make such transfer of the share or debeniure, as the case may be, as the deceased shareholder or debenture holder, as the case may be, could have made. (2) If the person being a nomine.e, so becoming entitled, elects to be registered as · holder of the share or debenture, himself, a5 the case may be, he shnll deliver or send Insertion of new section 205C. Establish­ ment of Investor Education and Protection Fund. Ih.5ertion of new section 210A. 8 THE GAZETIT: OF INDl1\ EXTRAORDINARY 12. After sr..ction 205B of the principal AcL. the following section shall lx: in..settc<l, namely:- I '205C. (1) lbe Central Government shall estab!L-,h a fund to be called the Invest Education and Protection Fw1d (hereafter in this section referred to as t11e "Fund"tr (2) There shall be credited to the Fund the following amount'>, namely; -­ (a) amounL'i in the w1paid dividend accounts of companies; (b) the application moneys received by companies for allot.men! of any securities and due for refund; (c) matured deposits with companies; (d) matured debentures with companies; (e) the interest accrued on the amounts referred to in clauses (a) to (d); (/) grants and donations given to the Fund by the Central Government, State Governments, 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 amounts referred to in clauses (a) to (d) shall fonn part of the Fund unless such amounts have remained unclaimed and unpaid for a pericxl of seven years from the date they became due for payment. ' Explanation.-For the removal of doubts, it is hereby declared that no claims shall lie against the Fund or the company in respect of individual amounts which were unclaimed and unpaid for a period of seven years from the dates that they first became due for payment and no payment shall be made in respect of any such claims. (3) The Fund shall be utilised for promotion of investor awareness and protection of the interests of investors in accordance with such rules as may be prescribed. (4) The Central Government shall, by notification in the Official Gazelle, specify an authority or committee, with such members as the Central Government may appoint, to administer the Fund, and maintain separate accounts and other relevant records in relation to the Fund in such form as may be prescribed in consultation with the Comptroller and Auditor-General of India. (5) It shall be competent for the authority or committee appointed under sub­ section ( 4) to spend moneys out of the Fund for carrying out the objects for which the Fund has been established.•. 13. After section 210 of the principal Act, the following section sh.all be inserted, namely:- SEC I] ~•- THE GAZETTE OF !NOIA EXTRAORDINARY 9 '2 lOA. (1) The Central Government may, by notification Ln the Official Gazette, constitute an Advisory Committee to be called the National Advisory Committee on Accounting Standards (hereafter in this section referred to as the "Advisory Commiu.ee") to advise the Central Government on the formulation and laying down of accounting policies and accounting standards for adoption by companies or class of companies under this AcL (2) The Advisory Committee shall consist of the following members, namely:­ (a) a Chairperson who shall be a person of eminence well versed in accountancy, finance, business administration, business law, economics or similar discipline; (b) one member each nominated by the Institute of Chartered Accountants of India constituted under the Chartered Accountants Act, 1949, the Institute of Cost and Works Accountants of India constituted under the Cost and Works Accountants Act, 1959 and the Institute of Company Secretaries of India constituted under the Company Secretaries Act, 1980; (c) one representative of the Central Government to be nominated by it; (cf) one representative of the RfJServe Bank of India to be nominated by it; (e) one representative of the Comptroller and Auditor-General of India to be nominated by him; (/) a person who holds or has held the office of professor in accowitancy, finance or business management in any university or deemed university; (g) the Chairman of the Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963 or his nominee; (h) two members to represent the Chambers of Commerce and industry to be nominated by the Central Government; and ( i) one representative of the Securities and Exchange Board of India to be nominated by it. (3) The Advisory Committee shall give its recommendations to the 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 office for such term as may be detencined by the Central Government at the time of their appointment and any vacancy in the membership in the Committee shall be filled by the Central Government in the same manner as the member whose vacancy occurred was filled. (5) The non-official members of the Advisory Committee shall be entitled to such fees, travelling, conveyance and other allowances as are admissible to the officers of the Central Government of the highest rank.•. 14. In section 211 of the principal Act, after sub-section (3), the following sub­ sections shall be inserted, namely: - '(3A) Every profit and loss account and balance-sheet of the company shall comply with the accounting standards. Constitution of National Advisory Committee on Accounting Standards. Amendment of section 211. Amendment of section 2i7. Amendment of section 227. Amendment of section 370. Amendment of sr...crion 372. IO THE GAZETfE OF IND!A EXTRAORDINARY IPAKTll-- (3B) Where the profit and loss account and the balance-sheet of the company do not comply with the accounting standards, such companies shall disclo,,e in its profit and loss account and balance-sheet., the following, namely: - (a) the deviarion from the accounting standards; (b) the reasons for such deviation; and (c) the financial effect, if any, arising due to such deviation. (3C) For the purposes of this section, the expression "accounting standards" means the standards of accounting recrimmended by the Institute of Chartered Accountants of India constituted under the Chartered Accountants Act, 1949, as 1nay be prescribed by the Central Govemment in consultation with the National Advisory Committee 011 Accounting Standards established under sub-section (1) of section 2lOA: Provided that the standard of accounting specified by the Institute of Chartered Accountants of India shall be deemed lo be the Accounting Standard'> until the accounting standards are prescribed by the Central Government 1mder this sub­ section.· 15. In section 217 of the principal Act, after sub-section (2A ), the following sub-­ section shall be inserted. namely:- "(2B) The Board's report shall also specify the reason-; for the failure, if any, to complete the buy-back within the time specified in sub-section (4) of section 77 A.". 16. In section 227 of- lhe principal Act, in sub-section (3),-- (i) after clause (c), the following clause shall be inserted, namely:- "(d) whether, in his opinion, the profit and loss account and balance-sheet comply wi!h the accounting standards referred to in sub-section (3C) of section 21 l."; (ii) in sub-section (4), for the word, brackets and letter "and (c)'', the brackets, letters and word ",(c) and (d)" shall be substituted. 17. In section 370 of the principal Act., after sub-section (5), and before the Explanation, the following sub-se.ction shall be inserted, namely:-- : "(6) Nothing contained in this se.clion shall apply lo a company ou and after !he commencement of the Companies (Amendment) Ordinance, 1999.". 18. In St'./4:tion 372 of the principal Act, after sub-section (14), the following sub­ section shall be inserted. namely:-- " (15) Nothing contained in this se.ction shall apply to a company an il!ld after t.,,~ commencement of the Companies (Amendment) Ordinan-:i::, 1999.". _ ------~~I E C.AZETff OF !'<DIA EXTRAORDINARY :::=:==--=-~=--::_:::--- -··--·-- ·---·- ----~-~--- - -~- ---- :====== src. 1 \ 11 J9. After section .172 o F the principal Act, the following section shall be in.serlc<l, naITlcly: --- ·J72A. (/) No comp; a1y shall. directly or indirectly,-­ •(a) make any Imm lo any othcr-~xly corporate; (h)1g_ivc ~ 1Y guarai:J.!~c •• orprovi<le security, in connection with a Imm made by any lll H. r I"· r-;011 tu, , c0r, to- a1'1 other "''rs on by . L. J • .. w - , any 1x) y corporate; and (c) acquire, by way of suf;}scri"ption1 purchase or otherwise the seclirmcs 1,..,,.,1 o~hcr hndy corporate, exceeding sixty per cent: of its paid: up share capital anJ free rl'scrvcs. or hundred per cent. of its frn: reserves, whichc:H·r is mon.:: Provi<lcd that when: tlk agi,;rq,:atc uf '!he loans and invcsunents so far made, the amounb for which guaranln: or st-eurity so far provided lo or in all other bodie,_-; corporate, along with the im•t·stmn1t, loan. guarantee or security proposed lo be made or givt:n by tht: Board, t:xcn:ds !he aforesaid limits, no investment or loan shall b1.: made or guaranll"c shall be givn1. Pr ·security shall be provided unless previously authoris..:d by a s1x·cial rcsol11tion p,e-;sc1i in a general n'tccting: Provided further that the 811ard may give guarantee, without being previously authorisl'J by a special resolution, ir,--- (u) a r<.:solution is p:L',sed in th<.: meeting of the Board authorising lo give guanmtce in accordance with the prnvi:;ions of !his S\'.ction; (h) there exists exn:ptional • cin:umstanccs which prevent th..: company from obtaining previous authorisation by a, special resolution pa..'>-S\'.<l in a general meeting for giving a guarnntce; and {c) the rc:;.o]ulion of the Bimrd umkr dause (a) is conlinncd within twelve months, in a general mecting nf the company or the annual general meeting held immcdiatdy after passing of ihc Board rcsul11tion, whichever is earlier: Provided also tha! the notice of such resolution shall indicate clearly the spcdlic iimits, th:: particular:; of the body corporat1: in which the investment is proposed lo be made oc· loan or security or glrntanicc lo he given, the purp1.)Sc of the investment, !nun or s~'.l.lfity or guarant,:c, specific sources of funding and such other dctails. (2) No loan or ir1v1:-'>!ment shall tx: made or guvantce or s1:curity givi:n by the company unk:ss !ht.'. resolution sanctioning it is passed al a meeting of I.he Board with th.:· cotL'icn! of ail ihc directors prcs..:nl al !he mcding, and the prior approval of the public financial institution rdcrrc<l to in si.:<:tion 4A, where any tcn:o loan is ~;ubsisting, b obtained: Pr,)vhkd thal prior.- approval of a puhli<.: ftrumcial institution shall not be required where tJ1c aggregate of the loans and inve-'>lmcnL,; so fat made, the amounts for which guarantee or sccutily so far provided to or in all other lxxiics corpqralc, alongwith the invr~u-r1cnts, loan.s, guarantee or security proposed _to be made or given docs nol exceed the limil nf six fy per cent. specified in sub-section (1 ), if lhcrc is no default in :repayment of loan irL'>l.a!mcnL,; 0r paymcni of interest thereon as per the lcm:s and conditions of such !oun lo th;: puhll<: finand::J inslitulion: Insertion of new section 372A. Inter­ corporate loans and investment.-;, 12 THE GAZElTE OF INDIA EXTRAORDINARY Provided also that nothing contained in sub-sections (/) and (2) shall apply to '. (a) any loan made by a holding company lo its wholly owned sub::iidiary; (b) any guarantee gi~en or any security p~o~idcd by a holding co111pany respect of loan made to 1ts wholly owned subsidiary; or (c) acquisition by a holding company, by way of subscription, otherwise, the securities of its wholly owned subsidiary. (!) No loan to any body corporate shall be made at a rate of interest lower than , 1he prcvailmg bank rate, being the standard rate made public under section 49 of the ,. Reserve Bank of India Act, I 934. • , (4) No company, which has defaulted in complying with the provision of section 58A, shall, directly or indirectly,- (a) make any loan to any body corporate; (b) give any gµarantcc, or provide secupty, u1 connection with a loan made by any other person lo, or to any other person by, any body corporate; a11d (c) acquire, by way of subscription, purchase or othe~vise the securities of any other body corporate, till such default is subsisting. (5) (a) Every company shaJI keep a register showing the following particulars in respect of every investment or loan made, guarantee given or security provided by it in relation lo any body corporate under sub-section (]), namely:- (i) the name of the body corporate; '(ii) the amount, terms and pur;pose of the investment or loan or security or guarantee; (iii) the date on which the investment or loan has been made; :and (iv) the date on which the guarantee has been given or securi~ has been provided in connection with . a loan; (b) The parti'5ulars of investment, loan, guarantee or swinty referred to in clause (a) shall be eniered chronologically in the register aforesat<1 within seven days of the making of sue& investment or loan, or the giving of SU£h guarantee or the provision of such security. - (6) The register referred to in sub-section (5) shall ~ kept at the registered office of the company concerned and- - (a) shall be open to inspection at such office; ari§ (b) extracts may be taken therefrom and copies thereof may be required, by any member of the company lo the same extent, in the same manner, and on payment of the same fees as in the case of the register of members of the company; and the provisions of section 163 shall apply accordingly. / :J THE GAZETTE OF INDIA EX.TRAORDINARY -·-·------·--· --- • ' ' ----····· (a) to HJJy l:Ja:n i.u?Jcstn1c..1;~ d,,;,1_:.<:: cotnp1J1y th.e object facUilit:5; fl:n.a.ncing any guarantee gnren or any security ptnvl;.:led ()t .::'-uy ccru1:-:;e of fa1.dusrrirJ insurance eo1npr➔ny, or a 1 '",c.-...,· ',n.,,.-,c,•;,•.t1f','"-~ .. <),,.., - <~ ....... ,"·nn .. ~nv· - .. - ~ ...... ~ ...>a- T ~ <,. ---l~~---;!ee.!,_;;.,,,f cntcrprises'.i or of providing (_ii) a E:'Ol:r,pany ,.vho::se principal bu.s:ine;;;s is the acquisition of ~-: ,_.,. ,:;_u,s., '-:~-,-:v t\_, debe,·iture:-~- ur ,.•iL-~~.- secu.dtics~ (b) to inve~ltn~ni tna£le iu share.s a1lotted in. pursuance of clause: (a) of i-rub­ Y~Jtio.n (1) of S<:-etkJn B 1. (9) )1 default ~-:>; rn·trir- in eotnp1ying ·\vitb_ tne- provlslo:ns of ll1is f,¢.~t1un~ other {h~'.r~ suh-sectkrn (5)~ the <:X)ti1JYHJ.Y arid every offict":t' of the con1p8.ny who is h1 d.ef;Jt.th shall ~:a;\,;~;:::r~)\~!:;~ i~l:.~:::::~:;i~~~:c;~ch may extend to two yca1;; Of with fine which Provided that where a:uy such 1oa:n or :rny loim in cotmectio:u with whieh anv such guarantee or sccurit-1 has lJCen given, or piovi<led by the company, h.as been "repaid in full, no punisbwent by way of imprisonment shall be imposed undei ilii;e; sub­ se.r..:tion, and where such loan has bee:n repi:>id in part, the maximu.m punishment ·which may be hnposed ,mder this sub-section by way of impriso:nxoent shai! be appropriately r:cclucc.d: Provided further that a H per,mus who ~ knowingly pruties to ,my such co:ntravsntion sr,all lx: liable, jointly and severally, to the company for the repay1:nct1t of the loan or for tnaki:ng good the same ;,vhicb the company may have been C-f!Jled upon to pay by virtue of the grnu:au.tcc given or Lhe securities provided by such o::.mp,my. (JO) If default is made in wmplybg with the prov1s1on.s of sub--section (5), the company and every officer of Llie company who is in default shall be punishable with fine which may extend to five thousand rnjY'.,es a.nd also with a further fine which rn.ay extend to five hundred rupees for every day after the first during whkh the default continues. Explanation.-----For the purposes of this secnotl,·--· (a) "loan" h1cludcs debentures ot an.y deposit of ruoney r.nade by (Jue corrJ.pHny with another company, not being a baitldng company; (b) "free reserves" means those reserves which., as ~r la.test audited balance--sheet of the company, are free for distribution as dividend and sh.all include balance to the credit of the securities pretnium acc-01mt but shall not include share appii.cation money.'. / /l..meudl;uemt of llt',dion 642. Rcpw1 and saving. l 4 THE GAZETfE OF INDIA EXTRAORDINARY [PART U-----S.Ec . i J 20~ In srxtion 642 of the principal Act, after sub-~b¼"'.,.ction (3),. the foHo,,\ring sub-­ :.re{;Uon shall be in..<::erted, ruuneiy:- "(4) Every regula.ti.on made by the Securities and Exchange Boatd of Itidia utv.kt this Act sllilll be laid, as soon r.s may be rutct it is mrul.e, 1J-cforc ead; House of Pi<ti!a.'lleni, while it is in session. for a total period of fuitt"j dti.ys which may bl~ i:.:otnprised in oue session or in two ct mote successive s-esskms, ruJ.d if, before the! ,::xpity of tl,.e session immediarely following the session or the m1ct:essive sessiom aforesaid. bod1 Houses agree in nwking any modifi.c.-11ti.o.u in the r,:,guiation or hotl1 Houses agree that the regulation should not be ma.1e, the regulr.d.ion slwlJ. thett-.a:i"tet: h1we effect only in such tm.,dille<l form or oo of no effo,;:t, ~ ilic case tna.y be-; so, hc;.,,,evet, that any such modification or annulment shall he wifuout prejudice to lhe validity of anything previously done under tlw.t regul&lion.". Zt. (/) The Companies (Amendmmt) Ordinance, 1998 is h~rtby rcp..~a.lcd. (2) Notwithstanding such repeai, anything done or 1my acti.ott taken under the prindpal Aet, ilS an.1t::nded by the said Ordinance, shall be deemed to have been done or taker, m,der the ,::•.nrresponding provisions of the principal Act, as amcnd1xi hy this Ordi.u.ance. OrcL 19 of I99S. RAGl!fl!R S INGH, Secy to the GmI. of Indio . •