Failure to return application money
This query is : Resolved
17 August 2013
how much interst should pay after failure to return application money completion of 120 days under sec 69.
and after 60 days as per sebi?
and after 60 days as per sebi?
19 August 2013
Hi
Repayment of share application money and penalty in case of default.—If the company fails to obtain the entire amount payable on applications for shares in respect of minimum subscription on the expiry of 120 days without interest after the issue of prospectus then the company shall forthwith repay all moneys received from applicants for shares with interest at the rate of six per cent p.a. from the expiry of 130 days. [Section 69(5)]
In case default is made in depositing or keeping deposited the application money received, in a Scheduled Bank or in repayment of application money without interest on expiry of 120 days, every promoter, director or any other person who is knowingly responsible for such contravention shall be punishable with fine which may extend to fifty thousand rupees. It has also been provided that a director shall not be so liable if he proves that the default in the repayment of the money was not due to any misconduct or negligence on his part.
The money could not be permitted to be deposited in any bank of the company's choice for that would give an opportunity to the company to resort to manipulations. If listing permission had not been granted by the sock Exchange or where the company was unable to make allotment of shares, the monies received had to be refunded within the time limit stipulated in section 73. If these monies were deposited in any bank of the company's choice there would be no control on the company to withdraw those monies in fragrant violation of the provision of section 69 and 73. [Universal Incast Ltd. v Appellate Authority, SEBI (2000) 38 CLA 332 (P&H)].
Repayment of share application money and penalty in case of default.—If the company fails to obtain the entire amount payable on applications for shares in respect of minimum subscription on the expiry of 120 days without interest after the issue of prospectus then the company shall forthwith repay all moneys received from applicants for shares with interest at the rate of six per cent p.a. from the expiry of 130 days. [Section 69(5)]
In case default is made in depositing or keeping deposited the application money received, in a Scheduled Bank or in repayment of application money without interest on expiry of 120 days, every promoter, director or any other person who is knowingly responsible for such contravention shall be punishable with fine which may extend to fifty thousand rupees. It has also been provided that a director shall not be so liable if he proves that the default in the repayment of the money was not due to any misconduct or negligence on his part.
The money could not be permitted to be deposited in any bank of the company's choice for that would give an opportunity to the company to resort to manipulations. If listing permission had not been granted by the sock Exchange or where the company was unable to make allotment of shares, the monies received had to be refunded within the time limit stipulated in section 73. If these monies were deposited in any bank of the company's choice there would be no control on the company to withdraw those monies in fragrant violation of the provision of section 69 and 73. [Universal Incast Ltd. v Appellate Authority, SEBI (2000) 38 CLA 332 (P&H)].
19 August 2013
Refund of application money in case of non-listing—
Where the permission of listing has not been granted, the company shall forthwith repay without interest all moneys received from applicants in pursuance of the prospectus. All moneys received from applicants shall be repaid within eight days after the company becomes liable to repay it. A company becomes liable to repay such money on expiry of ten weeks after the date of the closing of the subscription lists. Therefore a company shall repay without interest all moneys received within a period of 78 days after the date of the closing of the subscription lists.
If the application money is not repaid within a period of 8 days after the company become liable to repay it, the company and every director of the company who is an officer in default shall, on and from the expiry of 8 days, be jointly and severally liable to repay that money with interest @ 15%. [Section 73(2)]
Refund of application money in case of non-listing—
Where the permission of listing has not been granted, the company shall forthwith repay without interest all moneys received from applicants in pursuance of the prospectus. All moneys received from applicants shall be repaid within eight days after the company becomes liable to repay it. A company becomes liable to repay such money on expiry of ten weeks after the date of the closing of the subscription lists. Therefore a company shall repay without interest all moneys received within a period of 78 days after the date of the closing of the subscription lists.
If the application money is not repaid within a period of 8 days after the company become liable to repay it, the company and every director of the company who is an officer in default shall, on and from the expiry of 8 days, be jointly and severally liable to repay that money with interest @ 15%. [Section 73(2)]
19 August 2013
Refund of excess application moneys in case of over subscription—
Where the permission has been granted by the recognised stock exchange(s) for dealing in any shares or debentures and the moneys received on applications 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 forthwith refund without interest the excess application moneys without interest within 8 days from the day the company becomes liable to pay it. If such excess application money is not refunded within a period of 8 days from the day it becomes liable to pay it, the company and every director of the company who is an officer in default shall, on and from the expiry of 8 days, be jointly and severally liable to repay that money with interest at such rate not less than 4% and not more than 15% having regard to the period of delay in making repayment of such money. [Section 73(2A)]
If default is made in complying with the provisions of section 73(2A), the company and every officer of the company who is in default shall be punishable with fine which may extend to fifty thousand rupees and where repayment is not made within six months from the expiry of 8 days from the day it becomes liable to pay it, also with imprisonment for a term which may extend to one year. [Section 73(2B)]
It is pertinent to note that the Supreme Court has decided in the case of Raymond Synthetics Ltd. v Union of India (1992) 73 Comp Cas 762 (SC), that the liability of a company to repay the excess money under section 73(2A) arises on the expiry of ten weeks from the date of the closing of the subscription lists, and the interest begins to accrue thereon at the end of eight days therefrom. Neither the date of allotment, nor the date specified in the prospectus, is relevant to the commencement of liability for payment of interest on the excess money. The High Court of Punjab and Haryana has held in the case of S.C. Bhatia v P.O. Wadhawa (1998) 92 Comp Cas 511 that a person who is simply a director and not the managing director or whole-time director cannot be prosecuted under section 73(1A)/(2B) of the Companies Act, 1956.
The powers of prosecution under section 73(2B) have been delegated to the officials of SEBI.
The Department of Company Affairs vide its Circular No. 1/93 dated 16.3.1993 has stated that to protect the interest of investors, all the refund orders and cheques to be issued by the company to the investors for the amounts exceeding Rs.1,500 shall be issued by registered post and below that amount be issued under certificate of posting.
Refund of excess application moneys in case of over subscription—
Where the permission has been granted by the recognised stock exchange(s) for dealing in any shares or debentures and the moneys received on applications 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 forthwith refund without interest the excess application moneys without interest within 8 days from the day the company becomes liable to pay it. If such excess application money is not refunded within a period of 8 days from the day it becomes liable to pay it, the company and every director of the company who is an officer in default shall, on and from the expiry of 8 days, be jointly and severally liable to repay that money with interest at such rate not less than 4% and not more than 15% having regard to the period of delay in making repayment of such money. [Section 73(2A)]
If default is made in complying with the provisions of section 73(2A), the company and every officer of the company who is in default shall be punishable with fine which may extend to fifty thousand rupees and where repayment is not made within six months from the expiry of 8 days from the day it becomes liable to pay it, also with imprisonment for a term which may extend to one year. [Section 73(2B)]
It is pertinent to note that the Supreme Court has decided in the case of Raymond Synthetics Ltd. v Union of India (1992) 73 Comp Cas 762 (SC), that the liability of a company to repay the excess money under section 73(2A) arises on the expiry of ten weeks from the date of the closing of the subscription lists, and the interest begins to accrue thereon at the end of eight days therefrom. Neither the date of allotment, nor the date specified in the prospectus, is relevant to the commencement of liability for payment of interest on the excess money. The High Court of Punjab and Haryana has held in the case of S.C. Bhatia v P.O. Wadhawa (1998) 92 Comp Cas 511 that a person who is simply a director and not the managing director or whole-time director cannot be prosecuted under section 73(1A)/(2B) of the Companies Act, 1956.
The powers of prosecution under section 73(2B) have been delegated to the officials of SEBI.
The Department of Company Affairs vide its Circular No. 1/93 dated 16.3.1993 has stated that to protect the interest of investors, all the refund orders and cheques to be issued by the company to the investors for the amounts exceeding Rs.1,500 shall be issued by registered post and below that amount be issued under certificate of posting.
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