Amrit Praksh Ltd. was incorporated in 1996 and its registered office is in Dehradun. For expanding the business in manufacturing Mobile equipment…

According to Section 39 of the Companies Act, 2013, no allotment of any securities of a company offered to the public for subscription shall be made unless- (1) the amount stated in the prospectus as the minimum amount has been subscribed, and the sums payable on application for the amount so stated have been paid to and received by the company by cheque or other instrument. (2) The amount payable on application on every security shall not be less than five per cent of the nominal amount of the security or such other percentage or amount, as may be specified by the Securities and Exchange Board by making regulations in this behalf. The provisions of Section 40 (1) of the Companies Act, 2013 states that every company making public offer shall, before making such offer, make an application to one or more recognized stock exchange or exchanges and obtain permission for the securities to be dealt with in such stock exchange or exchanges. In the question, Amrit Prakash Ltd. issued shares to public by issuing prospectus, disclosing minimum subscription; and sum payable on application for the amount; and the amount received on share application is more than 5% of the nominal amount (5% of 10 = 0.5 per share) of the security. This clearly indicates that the provisions of subsection (1) and sub-section (2) of Section 39 have been complied with. Further, it revealed that Amrit Prakash Ltd. has applied for listing of shares in recognized stock exchanges which has been rejected. This indicates that the provision of subsection (1) of Section 40 has not been complied with since the Company has made public offer without obtaining permission of one stock exchange. Therefore, this shall be deemed to be irregular allotment of shares. Amrit Prakash Ltd. shall be required to refund the application money to the applicants in the prescribed manner within the stipulated time frame. In case of delay in refund, applicable interest is also payable by the Company. Simultaneously, since the Company has violated the provision of Section 40, the Company shall be punishable with a fine which shall not be less than five lakh rupees but which may extend to fifty lakh rupees and every officer of the Company who is in default shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to three lakh rupees or with both.