Sections 391 and 392 of the Companies Act, 2013: Foreign Companies, Prospectus Liability and Penalties

Sections 391 and 392 form part of Chapter XXII of the Companies Act, 2013, which deals with companies incorporated outside India. Section 391 extends specified prospectus-related liabilities and, in certain cases, winding-up provisions to foreign companies. Section 392 prescribes monetary punishment where a foreign company contravenes Chapter XXII.

On this page

Section 391 - Application of Sections 34 to 36 and Chapter XX
Meaning of the related provisions
Section 392 - Punishment for contravention
Important amendments
Official resources

Section 391 - Application of Sections 34 to 36 and Chapter XX

Section 391 applies specified provisions of the Companies Act, 2013 to securities-related activities of foreign companies. Under sub-section (1), Sections 34 to 36 apply to a prospectus issued by a company incorporated outside India under Section 389 in the same manner as they apply to a prospectus issued by an Indian company. They also apply to the issue of Indian Depository Receipts by a foreign company.

Section 391(1), in substance: Sections 34, 35 and 36 apply to a prospectus issued by a company incorporated outside India under Section 389 and to the issue of Indian Depository Receipts by a foreign company.

Sub-section (2), subject to Section 376, applies Chapter XX mutatis mutandis to closure of the place of business of a foreign company in India as though it were a company incorporated in India, where the foreign company raised money through an offer or issue of securities under Chapter XXII and the money remains unrepaid or the securities remain unredeemed.

The expression mutatis mutandis means that the relevant provisions apply with the changes necessary to fit the different context. Accordingly, the winding-up framework in Chapter XX is adapted to the closure of the Indian place of business in the circumstances specified by Section 391(2).

What do Sections 34, 35, 36, 376 and 389 cover?

Provision	Subject	Relevance to Section 391
Section 34	Criminal liability for mis-statements in prospectus	Its prospectus liability rules extend to the foreign-company situations specified in Section 391(1).
Section 35	Civil liability for mis-statements in prospectus	Civil consequences for qualifying prospectus mis-statements are likewise applied by Section 391(1).
Section 36	Punishment for fraudulently inducing persons to invest money	Section 391(1) makes this provision applicable to the specified foreign-company securities activity.
Section 376	Power to wind up foreign companies although dissolved	Section 391(2) expressly operates subject to Section 376.
Section 389	Registration of prospectus	Section 391(1)(i) refers to a prospectus issued by a company incorporated outside India under Section 389.

Section 392 - Punishment for Contravention

Section 392 operates without prejudice to Section 391. If a foreign company contravenes Chapter XXII, the company is liable to a fine of not less than Rs. 1,00,000 and up to Rs. 3,00,000. For a continuing offence, an additional fine of up to Rs. 50,000 may be imposed for every day after the first day during which the contravention continues.

Every officer of the foreign company who is in default is liable to a fine of not less than Rs. 25,000 and up to Rs. 5,00,000.

Current penalty position: The Companies (Amendment) Act, 2020 removed the earlier imprisonment component for an officer in default and revised the monetary consequence. The amendment took effect on 21 December 2020.

Person liable	Minimum fine	Maximum fine	Continuing offence
Foreign company	Rs. 1,00,000	Rs. 3,00,000	Additional fine up to Rs. 50,000 for every day after the first during which the contravention continues
Officer in default	Rs. 25,000	Rs. 5,00,000	As provided by the applicable statutory text

Important Amendments to Sections 391 and 392

Section 391(2) - Companies (Amendment) Act, 2017

Sub-section (2) of Section 391 was substituted by Section 79 of the Companies (Amendment) Act, 2017 with effect from 9 February 2018. The substituted provision links the application of Chapter XX to closure of the Indian place of business of a foreign company that has raised money through an offer or issue of securities under Chapter XXII which has not been repaid or redeemed.

Section 392 - Companies (Amendment) Act, 2020

Section 54 of the Companies (Amendment) Act, 2020 amended Section 392 with effect from 21 December 2020. It omitted the words providing for imprisonment of an officer in default and substituted the earlier concluding penalty language so that the maximum fine for an officer in default is Rs. 5,00,000.

Practical Effect of Sections 391 and 392

Together, these provisions help ensure that a foreign company accessing Indian investors or operating within the statutory framework for foreign companies remains subject to prospectus-related responsibility and the compliance requirements of Chapter XXII. Section 391 connects specified substantive provisions to foreign-company activity, while Section 392 supplies the monetary consequence for contravention of the Chapter.

Official Resources

For the authoritative statutory text and subsequent amendments, refer to the Companies Act, 2013 on India Code and the Ministry of Corporate Affairs.

This page is intended as a general legal information resource. Statutory provisions should be read with applicable rules, notifications, amendments and judicial decisions relevant to the facts of a particular matter.