law: Companies Act, 1956
  Sec 78    -    
  
  Application of premiums received on issue of securities 
  (1) Where a company issues securities at a
  
  premium, whether for cash or otherwise, a sum equal to the aggregate amount or
  
  value of the premiums on those securities shall be transferred to an account,
  
  to be called " the securities premium account "; and the provisions
  
  of this Act relating to the reduction of the securities capital of a company
  
  shall, except as provided in this section, apply as if the securities premium
  
  account were paid-up securities capital of the company.
  (2) The securities premium account may,
  
  notwithstanding anything in sub-section (1), be applied by the company-- 
  (a) in paying up unissued securities of the
  
  company to be issued to members of the company as fully paid bonus securities ;
  
  
  (b) in writing off the preliminary expenses of
  
  the company ;
  (c) in writing off the expenses of, or the
  
  commission paid or discount allowed on, any issue of securities or debentures
  
  of the company ; or
  (d) in providing for the premium payable on
  
  the redemption of any redeemable preference securities or of any debentures of
  
  the company.
  (3) Where a company has, before the
  
  commencement of this Act, issued any securities at a premium, this section
  
  shall apply as if the securities had been issued after the commencement of this
  
  Act :
  Provided  that any part of the premiums which has
  
  been so applied that it does not at the commencement of this Act form an
  
  identifiable part of the company's reserves within the meaning of Schedule VI,
  
  shall be disregarded in determining the sum to be included in the securities
  
  premium account.