Section 38 Of Companies Act 2013: Punishment For Personation For Acquisition Of Securities
Updated: Jun 21, 2022
For Preface: Section 38 of the Companies act establishes standards or parameters of penalties for using and allotting the shares in Fictitious Name it says -
A person shall be liable to punishment under section 447 if he :
Makes in a fictitious name an application to a company for acquiring, or subscribing for, any shares therein, or
Otherwise includes a company to allot or register any transfer of shares therein to him or any other person in a fictitious name.
These provisions shall be prominently reported in every prospectus issued by the company and in every form of application of shares issued by the company to any person.
Personation: imitating the mannerisms of another person
Personation of acquisition: Any person who makes or abets making of an application in a fictitious name to a company for acquiring, or subscribing for, its securities.
Section 38 of Companies Act 2013
*38. (1) Any person who—
(a) makes or abets making of an application in a fictitious name to a company for acquiring, or subscribing for, its securities; or
(b) makes or abets making of multiple applications to a company in different names or in different combinations of his name or surname for acquiring or subscribing for its securities; or
(c) otherwise induces directly or indirectly a company to allot, or register any transfer of, securities to him, or to any other person in a fictitious name,
shall be liable for action under section 447.
(2) The provisions of sub-section (1) shall be prominently reproduced in every prospectus issued by a company and in every form of application for securities.
(3) Where a person has been convicted under this section, the Court may also order disgorgement of gain, if any, made by, and seizure and disposal of the securities in possession of, such person.
(4) The amount received through disgorgement or disposal of securities under subsection (3) shall be credited to the Investor Education and Protection Fund.