This section has been notified w.e.f. 12/9/2013 . As per provisions of section 38 any person making application in fictitious name/ multiple applications in different combinations of his name for acquiring / subscribing shares of a company shall be liable for punishment u/s 447 which is imprisonment and fine . Detailed section can be read as under:
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 sub-section (3) shall be credited to the Investor Education and Protection Fund.
Section 447 can be read as under though still not operational
Punishment for fraud.
Without prejudice to any liability including repayment of any debt under this Act or any other law for the time being in force, any person who is found to be guilty of fraud, shall be punishable with imprisonment for a term which shall not be less than six months but which may extend to ten years and shall also be liable to fine which shall not be less than the amount involved in the fraud, but which may extend to three times the amount involved in the fraud:
Provided that where the fraud in question involves public interest, the term of imprisonment shall not be less than three years.
Explanation.—For the purposes of this section—
(i) | "fraud" in relation to affairs of a company or any body corporate, includes any act, omission, concealment of any fact or abuse of position committed by any person or any other person with the connivance in any manner, with intent to deceive, to gain undue advantage from, or to injure the interests of, the company or its shareholders or its creditors or any other person, whether or not there is any wrongful gain or wrongful loss; | |
(ii) | "wrongful gain" means the gain by unlawful means of property to which the person gaining is not legally entitled; | |
(iii) | "wrongful loss" means the loss by unlawful means of property to which the person losing is legally entitled. |
Which can be read as under though still not operational
Punishment for fraud.
Without prejudice to any liability including repayment of any debt under this Act or any other law for the time being in force, any person who is found to be guilty of fraud, shall be punishable with imprisonment for a term which shall not be less than six months but which may extend to ten years and shall also be liable to fine which shall not be less than the amount involved in the fraud, but which may extend to three times the amount involved in the fraud:
Provided that where the fraud in question involves public interest, the term of imprisonment shall not be less than three years.
Explanation.—For the purposes of this section—
(i) | "fraud" in relation to affairs of a company or any body corporate, includes any act, omission, concealment of any fact or abuse of position committed by any person or any other person with the connivance in any manner, with intent to deceive, to gain undue advantage from, or to injure the interests of, the company or its shareholders or its creditors or any other person, whether or not there is any wrongful gain or wrongful loss; | |
(ii) | "wrongful gain" means the gain by unlawful means of property to which the person gaining is not legally entitled; | |
(iii) | "wrongful loss" means the loss by unlawful means of property to which the person losing is legally entitled. |
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