Read the following case study and answer the question.
Surya Ltd issued 10,000 equity shares of ₹50 each at a premium of 10%. The company received application for 13,000 shares. The amount was payable as: on application 30%, on allotment 30% plus Premium, on 1st call 10% and Balance on final call. Allotment was made pro-rata for all applicants. Excess application money received is to be adjusted on allotment. Company received all money called except from Manan, an applicant, of 390 shares, Manan Paid only application money. His shares were forfeited and 70% of the forfeited shares were reissued as fully paid for ₹40 each.
Balance of Securities Premium can be utilised for
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Buy Back of Shares
The balance of Securities Premium can be used only for the purposes the law lays down: issuing fully paid bonus shares, writing off preliminary expenses, writing off expenses or commission or discount on issue of securities, paying premium on redemption of preference shares or debentures, and the purchase of its own shares (buy back).
Option (1) Buying of Asset — Incorrect. Buying an asset is not one of the allowed purposes.
Option (2) Conversion of Debentures — Incorrect. The premium may pay the premium on redemption of debentures, but conversion of debentures is not a listed use.
Option (4) Repayment of Debts — Incorrect. Debts are repaid from the company’s funds, not out of securities premium.
NCERT (2026-27 edition):
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