New Delhi, June 08: The Companies Amendment Bill 2003 proposes a stiff penalty for misusing of Initial Public Offer proceeds or using them for any purpose other than what they were raised for. "We have suggested a number of penalties in the bill to bring more transparency into the system. For example, if IPO proceeds are not used for the purpose they have been raised for, then we can recover twice the amount of proceeds raised," Company Affairs secretary V K Dhall said here.
He also mentioned section 63 of the bill which makes any mis-statement in the prospectus punishable with imprisonment as well as a fine.

As per the bill, "where prospectus issued... includes any untrue statement, every person who authorised the issue of prospectus shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to Rs 50,000 or both".
Dhall said stiff penalties have also been proposed for defaults on inter-corporate loans and deposits. As per section 372(A) of the bill, any such default entitles the defaulter to imprisonment of up to two years or up to Rs 50,000 fine. Bureau Report