40. Securities to be dealt with in stock exchanges.
(1) Every company making public offer shall, before making such offer, make an
application to one or more recognised stock exchange or exchanges and obtain permission
for the securities to be dealt with in such stock exchange or exchanges.
(2) Where a prospectus states that an application under sub-section (1) has been
made, such prospectus shall also state the name or names of the stock exchange in which the
securities shall be dealt with.
(3) All monies received on application from the public for subscription to the securities
shall be kept in a separate bank account in a scheduled bank and shall not be utilised for any
purpose other than—
(a) for adjustment against allotment of securities where the securities have been
permitted to be dealt with in the stock exchange or stock exchanges specified in the
prospectus; or
(b) for the repayment of monies within the time specified by the Securities and
Exchange Board, received from applicants in pursuance of the prospectus, where the
company is for any other reason unable to allot securities.
(4) Any condition purporting to require or bind any applicant for securities to waive
compliance with any of the requirements of this section shall be void.
(5) If a default is made in complying with the provisions of this section, 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 imprisonment for a term which may extend to one year or with fine which
shall not be less than fifty thousand rupees but which may extend to three lakh rupees, or
with both.
(6) A company may pay commission to any person in connection with the subscription
to its securities subject to such conditions as may be prescribed.