1. No company shall directly or indirectly purchase its own shares or other specified securities—
a. through any subsidiary company including its own subsidiary companies;
b. through any investment company or group of investment companies; or
c. if a default, is made by the company, in the repayment of deposits accepted either before or after the commencement of this Act, interest payment thereon, redemption of debentures or preference shares or payment of dividend to any shareholder, or repayment of any term loan or interest payable thereon to any financial institution or banking company:
Provided that: the buy-back is not prohibited, if the default is remedied and a period of three years has lapsed after such default ceased to subsist.
2. No company shall, directly or indirectly, purchase its own shares or other specified securities in case such company has not complied with the provisions of sections 92, 123, 127 and 129.
Legal Commentary & Landmark Judgments: Section 70
Section 70 of the Companies Act, 2013 erects absolute statutory prohibitions against share buy-backs conducted through subsidiary or investment entities, as well as during subsisting defaults in repaying public deposits, debentures, bank term loans, or complying with core accounting and reporting mandates.
When filing a share buy-back offer under Form SH-8, secure written 'No Default Certificates' from all lending banks and financial institutions confirming that no term loan or interest default has occurred within the preceding three years. Also audit MCA records to confirm that all Annual Returns (Form MGT-7) and Financial Statements (Form AOC-4) are filed up to date to satisfy Section 70(2).