[Act No. 22 of Year 1996, dated 20th.
September, 1995]
An
Act to provide for regulation of depositories in securities and for
matters connected therewith or incidental thereto
Be it enacted by Parliament in the
Forty-seventh Year of the Republic of India as follows: -
Comment: The Act seeks to regulate
depositories in securities and matters connected or incidental
thereto.
CHAPTER I : PRELIMINARY
1. Short title, extent and
commencement
(1) This Act may be called the
Depositories Act, 1996.
(2) It extends to the whole of
India.
(3) It shall be deemed to have come into
force on the 20th day of September, 1995.
2. Definitions
(1) In this Act, unless the context
otherwise requires-
(a)
"beneficial owner" means a person whose name is recorded as such
with a depository;
(b) "Board"
means the Securities and Exchange Board of India established under
section 3 of the Securities and Exchange Board of India Act, 1992
(15 of 1992);
(c)
"bye-laws" means bye-laws made by a depository under section
26;
(d) "Company
Law Board" means the Board of Company Law Administration constituted
under section 10E of the Companies Act, 1956 (1 of 1956);
(e)
"depository" means a company formed and registered under the
Companies Act, 1956 (1 of 1956) and which has been granted a
certificate of registration under sub-section (1A) of section 12 of
the Securities and Exchange Board of India Act, 1992 (15 of
1992);
(f) "issuer"
means any person making an issue of securities;
(g)
"participant" means a person registered as such under sub-section
(1A) of section 12 of the Securities and Exchange Board of India
Act, 1992 (15 of
1992);
(h)
"prescribed" means prescribed by rules made under this Act;
(i) "record"
includes the records maintained in the form of books or stored in a
computer or in such other form as may be determined by regulations;
(j)
"registered owner" means a depository whose name is entered as such
in the register of the issuer;
(k)
"regulations" means the regulations made by the Board;
1[(ka) "Securities Appellate Tribunal" means a
Securities Appellate Tribunal established under sub-section (1) of
section 15K of the Securities and Exchange Board of India Act,
1992;]
(l) "security" means such security as may
be specified by the Board;
(m) "service"
means any service connected with recording of allotment of
securities or transfer of ownership of securities in the record of a
depository.
(2) Words and
expressions used herein and not defined but defined in the Companies
Act, 1956 (1 of 1956) or the Securities Contracts (Regulation) Act,
1956 (42 of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992), shall have
the meanings respectively assigned to them in those Acts.
CHAPTER II : CERTIFICATE OF COMMENCEMENT OF
BUSINESS
3. Certificate of commencement of
business by depositories
(1) No
depository shall act as a depository unless it obtains a certificate
of commencement of business from the Board.
(2) A
certificate granted under sub-section (1) shall be in such form as
may be specified by the regulations.
(3) The Board shall not grant a
certificate under sub-section (1) unless it is satisfied that the
depository has adequate systems and safeguards to prevent
manipulation of records and transactions:
PROVIDED that no certificate shall be
refused under this section unless the depository concerned has been
given a reasonable opportunity of being heard.
CHAPTER III : RIGHTS AND OBLIGATIONS OF DEPOSITORIES,
PARTICIPANTS, ISSUERS AND BENEFICIAL OWNERS
4. Agreement between depository
and participant
(1) A depository shall enter into an
agreement with one or more participants as its agent.
(2) Every agreement under sub-section (1)
shall be in such form as may be specified by the bye-laws.
5. Services of
depository
Any person, through a participant, may
enter into an agreement, in such form as may be specified by the
bye-laws, with any depository for availing its services.
6. Surrender of certificate of
security
(1) Any
person who has entered into an agreement under section 5 shall
surrender the certificate of security, for which he seeks to avail
the services of a depository, to the issuer in such manner as may be
specified by the regulations.
(2) The
issuer, on receipt of certificate of security under sub-section (1),
shall cancel the certificate of security and substitute in its
records the name of the depository as a registered owner in respect
of that security and inform the depository accordingly.
(3) A
depository shall, on receipt of information under sub-section (2),
enter the name of the person referred to in sub-section (1) in its
records, as the beneficial owner.
7. Registration of transfer of
securities with depository
(1) Every
depository shall, on receipt of intimation from a participant,
register the transfer of security in the name of the
transferee.
(2) If a
beneficial owner or a transferee of any security seeks to have
custody of such security the depository shall inform the issuer
accordingly.
8. Options to receive security
certificate or hold securities with depository
(1) Every
person subscribing to securities offered by an issuer shall have the
option either to receive the security certificates or hold
securities with a depository.
(2) Where a
person opts to hold a security with a depository, the issuer shall
intimate such depository the details of allotment of the security,
and on receipt of such information the depository shall enter in its
records the name of tile allottee as the beneficial owner of that
security.
9. Securities in depositories to
be in fungible form
(1) All
securities held by a depository shall be dematerialised and shall be
in a fungible form.
2[(2) Nothing contained in sections 153, 153A,
153B, 187B, 187C and 372 of the Companies Act, 1956 (1 of 1956),
shall apply to a depository in respect of securities held it on
behalf of the beneficial owners.]
10. Rights of depositories and
beneficial owner
(1) Notwithstanding anything contained in
any other law for the time being in force, a depository shall be
deemed to be the registered owner for the purposes of effecting
transfer of ownership of security on behalf of a beneficial
owner.
(2) Save as otherwise provided in
sub-section (1), the depository as a registered owner shall not have
any voting rights or any other rights in respect of securities held
by it.
(3) The
beneficial owner shall be entitled to all the rights and benefits
and be subjected to all the liabilities in respect of his securities
held by a depository.
11. Register of beneficial
owner
Every depository shall maintain a
register and an index of beneficial owners in the manner provided in
sections 150, 151 and 152 of the Companies Act, 1956 (1 of
1956).
12. Pledge or hypothecation of
securities held in a depository
(1) Subject
to such regulations and bye-laws, as may be made in this behalf, a
beneficial owner may with the previous approval of the depository
create a pledge or hypothecation in respect of a security owned by
him through a depository.
(2) Every
beneficial owner shall give intimation of such pledge or
hypothecation to the depository and such depository shall thereupon
make entries in its records accordingly.
(3) Any entry
in the records of a depository under sub-section (2) shall be
evidence, of a pledge or hypothecation.
13. Furnishing of information and
records by depository and issuer
(1) Every
depository shall furnish to the issuer information about the
transfer of securities in the name of beneficial owners at such
intervals and in such manner as may be specified by the
bye-laws.
(2) Every
issuer shall make available to the depository copies of the relevant
records in respect of securities held by such depository.
14. Option to opt out in respect
of any security
(1) If a
beneficial owner seeks to opt out of a depository in respect of any
security he shall inform the depository accordingly.
(2) The
depository shall on receipt of intimation under sub-section (1) make
appropriate entries in it records and shall inform the issuer.
(3) Every
issuer shall, within thirty days of the receipt of intimation from
the depository and on fulfillment of such conditions and on payment
of such fees as may be specified by the regulations, issue the
certificate of securities to the beneficial owner or the transferee,
as the case may be.
15. Act 18 of 1891 to apply to
depositories
The Bankers' Books Evidence Act, 1891 (18
of 1891) shall apply in relation to a depository as if it were a
bank as defined in section 2 of that Act.
16. Depositories to indemnify
loss in certain cases
(1) Without
prejudice to the provisions of any other law for the time being in
force, any loss caused to the beneficial owner due to the negligence
of the depository or the participant, the depository shall indemnify
such beneficial owner.
(2) Where the
loss due to the negligence of the participant under sub-section (1)
is indemnified by the depository, the depository shall have the
right to recover the same from such participant.
17. Rights and obligations of
depositories, etc.
(1) Subject
to the provisions of this Act, the rights and obligations of the
depositories, participants and the issuers whose securities are
dealt with by a depository shall be specified by the
regulations.
(2) The eligibility criteria for
admission of securities into the depository shall be specified by
the regulations.
CHAPTER IV : ENQUIRY AND INSPECTION
18. Power of Board to call for
information and enquiry
(1) The Board, on being satisfied that it
is necessary in the public interest or in the interest of investors
so to do, may, by order in writing-
(a) call upon
any issuer, depository, participant or beneficial owner to furnish
in writing such information relating to the securities held in a
depository as it may require; or
(b) authorise
any person to make an enquiry or inspection in relation to the
affairs of the issuer, beneficial owner, depository or participant,
who shall submit a report of such enquiry or inspection to it within
such period as may be specified in the order.
(2) Every
director, manager, partner, secretary, officer or employee of the
depository or issuer or the participant or beneficial owner shall on
demand produce before the person making the enquiry or inspection
all information or such records and other documents in his custody
having a bearing on the subject matter of such enquiry or
inspection.
19. Power of Board to give
directions in certain cases
Save as
provided in this Act, if after making or causing to be made an
enquiry or inspection, the Board is satisfied that it is
necessary-
(i) in the
interest of investors, or orderly development of securities market;
or
(ii) to
prevent the affairs of any depository or participant being conducted
in the manner detrimental to the interests of investors or
securities market,
it may issue
such directions-
(a) to any
depository or participant or any person associated with the
securities market; or
(b) to any issuer,
as may be appropriate in the interest of
investors or the securities market.
CHAPTER V : PENALTY
20. Offences
Whoever contravenes or attempts to
contravene or abets the contravention of the provisions of this Act
or any regulations or bye-laws made thereunder shall be punishable
with imprisonment for a term which may extend to five years or with
fine, or with both.
21. Offences by
companies
(1) Where an
offence under this Act has been committed by a company, every person
who at the time the offence was committed was in charge of, and was
responsible to, the company for the conduct of the business of the
company, as well as the company, shall be deemed to be guilty of the
offence and shall be liable to be proceeded against and punished
accordingly:
PROVIDED that
nothing contained in this sub-section shall render any such person
liable to any punishment provided in this Act, if he proves that the
offence was committed without his knowledge or that he had exercised
all due diligence to prevent the commission of such offence.
(2)
Notwithstanding anything contained in sub-section (1), where an
offence under this Act has been committed by a company and it is
proved that the offence has been committed with the consent or
connivance of, or is attributable to any neglect on the part of, any
director, manager, secretary or other officer of the company, such
director, manager, secretary or other officer shall also be deemed
to be guilty of the offence and shall be liable to be proceeded
against and punished accordingly.
Explanation : For the
purposes of this section-
(a) "company"
means any body corporate and includes a firm or other association of
individuals; and
(b)
"director", in relation to a firm, means a partner in the firm.
CHAPTER VI : MISCELLANEOUS
22. Cognizance of offences by
courts
(1) No court
shall take cognizance of any offence punishable under this Act or
any regulations or bye-laws made thereunder, save on a complaint
made by the Board.
(2) No court
inferior to that of a Metropolitan Magistrate or a Judicial
Magistrate of the First Class shall try any offence punishable under
this Act.
23. Appeals
(1) Any
person aggrieved by 3[ an order of the Board made before
the commencement of the Securities Laws (2nd Amendment) Act, 1999]
under this Act, or the regulations made thereunder may prefer an
appeal to the Central Government within such time as may be
prescribed.
(2) No appeal
shall be admitted if it is preferred after the expiry of the period
prescribed therefor:
PROVIDED that
an appeal may be admitted after the expiry of the period prescribed
therefor if the appellant satisfies the Central Government that he
had sufficient cause for not preferring the appeal within the
prescribed period.
(3) Every
appeal made under this section shall be made in such form and shall
be accompanied by a copy of the order appealed against and by such
fees as may be prescribed.
(4) The
procedure for disposing of an appeal shall be such as may be
prescribed:
PROVIDED that before disposing of an
appeal, the appellant shall be given a reasonable opportunity of
being heard.
23A. Appeal to Securities
Appellate Tribunal
(1) Save as
provided in sub-section (2), any person aggrieved by an order of the
Board made, on and after the commencement of the Securities Laws
(2nd Amendment) Act, 1999, under this Act, or the regulations made
thereunder, may prefer an appeal to a Securities Appellate Tribunal
having jurisdiction in the matter.
(2) No appeal
shall lie to the Securities Appellate Tribunal from an order made by
the Board with the consent of the parties.
(3) Every
appeal under sub-section (1) shall be filed within a period of
forty-five days from the date on which a copy of the order made by
the Board is received by the person referred to in sub-section (1)
and it shall be in such form and be accompanied by such fees as may
be prescribed :
PROVIDED that
the Securities Appellate Tribunal may entertain an appeal after the
expiry of the said period of forty-five days if it is satisfied that
there was sufficient cause for not filing it within that
period.
(4) On
receipt of an appeal under sub-section (1), the Securities Appellate
Tribunal may, after giving the parties to the appeal an opportunity
of being heard, pass such orders thereon as it thinks fit,
confirming, modifying or setting aside the order appealed against.
(5) The
Securities Appellate Tribunal shall send a copy of every order made
by it to the Board and parties to the appeal.
(6) The appeal filed before the
Securities Appellate Tribunal under sub-section (1) shall be dealt
with by it as expeditiously as possible and endeavour shall be made
by it to dispose of the appeal finally within six months from the
date of receipt of the appeal.
23B. Procedure and powers of
Securities Appellate Tribunal
(1) The
Securities Appellate Tribunal shall not be bound by the procedure
laid down by the Code of Civil Procedure, 1908, but shall be guided
by the principles of natural justice and, subject to the other
provisions of this Act and of any rules, the Securities Appellate
Tribunal shall have powers to regulate their own procedure including
the places at which they shall have their sittings.
(2) The
Securities Appellate Tribunal shall have, for the purpose of
discharging their functions under this Act, the same powers as are
vested in a civil court under the Code of Civil Procedure, 1908,
while trying a suit, in respect of the following matters,
namely:
(a) summoning and enforcing the
attendance of any person and examining him an oath;
(b) requiring the discovery and
production of documents;
(c) receiving evidence on
affidavits;
(d) issuing commissions for the
examination of witnesses or documents
(e) reviewing its decisions;
(f)
dismissing an application for default or deciding it ex parte;
(g) setting
aside any order of dismissal of any application for default or any
order passed by it ex parte; and
(h) any other
matter which may be prescribed.
(3) Every
proceeding before the Securities Appellate Tribunal shall be deemed
to be a judicial proceeding within the meaning of sections 193 and
228, and for the purposes of section 196 of the Indian Penal Code,
1860 and the Securities Appellate Tribunal shall be deemed to be a
civil court for all the purposes of section 195 and Chapter XXVI of
the Code of Criminal Procedure, 1973.
23C. Right to legal
representation
The appellate
may either appear in person or authorise one or more chartered
accountants or company secretaries or cost accountants or legal
practitioners or any of its officers to present his or its case
before the Securities Appellate Tribunal.
Explanation: For the
purposes of this section,-
(a) "chartered accountant" means a
chartered accountant as defined in clause (b) of sub-section (1) of
section 2 of the Chartered Accountants Act, 1949 and who has
obtained a certificate of practice under sub-section (1) of section
6 of that Act;
(b) "company
secretary" means a company secretary as defined in clause (c) of
sub-section (1) of section 2 of the Company Secretaries Act, 1980
and who has obtained a certificate of practice under sub-section (1)
of section 6 of that Act;
(c) "cost
accountant" means a cost accountant as defined in clause (b) of
sub-section (1) of section 2 of the Cost and Works Accountants Act,
1959 and who has obtained a certificate of practice under
sub-section (1) of section 6 of that Act;
(d) "legal practitioner" means an
advocate, vakil or an attorney of any High Court, and includes a
pleader in practice.
23D. Limitation
The provisions of the Limitation Act,
1963 shall, as far as may be, apply to an appeal made to a
Securities Appellate Tribunal.
23E. Civil court not to have
jurisdiction
No civil court shall have jurisdiction to
entertain any suit or proceeding in respect of any matter which a
Securities Appellate Tribunal is empowered by or under this Act to
determine and no injunction shall be granted by any court or other
authority in respect of any action taken or to be taken in pursuance
of any power conferred by or under this Act.
23F. Appeal to High
Court
Any person
aggrieved by any decision order of the Securities Appellate Tribunal
may file an appeal to the High Court within sixty days from the date
of communication of the decision or order of the Securities
Appellate Tribunal to him on any question of fact or law arising out
of such order:
PROVIDED that
the High Court may, if it is satisfied that the appellant was
prevented by sufficient cause from filing the appeal within the said
period, allot it to be filed within a further period not exceeding
sixty days.]
24. Power of Central Government
to make rules
(1) The
Central Government may by notification in the Official Gazette, make
rules for carrying out the provisions of this Act.
(2) In
particular, and without prejudice to the generality of the foregoing
power, such rules may provide for all or any of the following
matters, namely,-
(a) the time
within which an appeal may be preferred under sub-section (1) of
section 23;
(b) the form
in which an appeal may be preferred under sub-section (3) of section
23 and the fees payable in respect of such appeal;
(c) the
procedure for disposing of an appeal under sub-section (4) of
section 23;
1[(d) the form in which an appeal may be filed
before the Securities Appellate Tribunal under section 23A and the
fees payable in respect of such appeal.]
25. Power of Board to make
regulations
(1) Without
prejudice to the provisions contained in section 30 of the
Securities and Exchange Board of India Act, 1992 (15 of 1992), the
Board may by notification in the Official Gazette, make regulations
consistent with the provisions of this Act and the rules made
thereunder to carry out the purposes of this Act.
(2) In
particular and without prejudice to the generality of the foregoing
power, such regulations may provide for-
(a) the form
in which record is to be maintained under clause (i) of sub-section
(1) of section 2;
(b) the form
in which the certificate of commencement of business shall be issued
under sub-section (2) of section 3;
(c) the
manner in which the certificate of security shall be surrendered
under sub-section (1) of section 6;
(d) the
manner of creating a pledge or hypothecation in respect of security
owned by a beneficial owner under sub-section (1) of section
12;
(e) the
conditions and the fees payable with respect to the issue of
certificate of securities under sub-section (3) of section 14;
(f) the
rights and obligations of the depositories, participants and the
issuers under sub-section (1) of section 17;
(g) the
eligibility criteria for admission of securities in the depository
under sub-section (2) of section 17.
26. Power of depositories to make
bye-laws
(1) A depository shall, with the previous
approval of the Board, make bye-laws consistent with the provisions
of this Act and the regulations.
(2) In particular, and without prejudice
to the generality of the foregoing power, such bye-laws shall
provide for-
(a) the
eligibility criteria for admission and removal of securities in the
depository;
(b) the
conditions subject to which the securities shall be dealt with;
(c) the
eligibility criteria for admission of any person as a
participant;
(d) the
manner and procedure for dematerialisation of securities;
(e) the
procedure for transactions within the depository;
(f) the
manner in which securities shall be dealt with or withdrawn from a
depository;
(g) the
procedure for ensuring safeguards to protect the interests of
participants and beneficial owners;
(h) the
conditions of admission into and withdrawal from a participant by a
beneficial owner;
(i) the
procedure for conveying information to the participants and
beneficial owners on dividend declaration, shareholder meetings and
other matters of interest to the beneficial owners;
(j) the
manner of distribution of dividends, interest and monetary benefits
received from the company among beneficial owners;
(k) the
manner of creating pledge or hypothecation in respect of securities
held with a depository;
(l) inter se
rights and obligations among the depository, issuer, participants,
and beneficial owners;
(m) the
manner and the periodicity of furnishing information to the Board,
issuer and other persons;
(n) the
procedure for resolving disputes involving depository, issuer,
company or a beneficial owner;
(o) the
procedure for proceeding against the participant committing breach
of the regulations and provisions for suspension and expulsion of
participants from the depository and cancellation of agreements
entered with the depository;
(p) the
internal control standards including procedure for auditing,
reviewing and monitoring.
(3) Where the
Board considers it expedient so to do, it may, by order in writing,
direct a depository to make any bye-laws or to amend or revoke any
bye-laws already made within such period as it may specify in this
behalf.
(4) If the
depository fails or neglects to comply with such order within the
specified period, the Board may make the bye-laws or amend or revoke
the bye-laws made either in the form specified in the order or with
such modifications thereof as the Board thinks fit.
27. Rules and regulations to be
laid before Parliament
Every rule and every regulation made
under this Act shall be laid, as soon as may be after it is made,
before each House of Parliament, while it is in session, for a total
period of thirty days which may be comprised in one session or in
two or more successive sessions, and if, before the expiry of the
session immediately following the session or the successive sessions
aforesaid, both Houses agree in making any modification in the rule
or regulation or both Houses agree that the rule or regulation
should not be made, the rule or regulation shall thereafter have
effect only in such modified form or be of no effect, as the case
may be; so, however, that any such modification or annulment shall
be without prejudice to the validity of anything previously done
under that rule or regulation.
28. Application of other laws not
barred
The provisions of this Act shall be in
addition to, and not in derogation of, any other law for the time
being in force relating to the holding and transfer of
securities.
29. Removal of
difficulties
(1) If any
difficulty arises in giving effect to the provisions of this Act,
the Central Government may, by order published in the Official
Gazette, make such provisions not inconsistent with the provisions
of this Act as appear to it to be necessary or expedient for
removing the difficulty:
PROVIDED that
no order shall be made under this section after the expiry of a
period of two years from the commencement of this Act.
(2) Every order made under this section
shall be laid, as soon as may be after it is made, before each House
of Parliament.
30. Amendments to certain
enactment
The enactment specified in the Schedule
to this Act shall be amended in the manner provided therein.
31. Repeal and saving
(1) The Depositories (Third) Ordinance,
1996 (Ordinance 28 of 1996) is hereby repealed.
(2)
Notwithstanding such repeal, anything done or any action taken under
the said Ordinance shall be deemed to have been done or taken under
the corresponding provisions of this Act.
THE SCHEDULE : AMENDMENTS TO CERTAIN ENACTMENTS
[See section 30]
PART
I
Amendment to the Indian Stamp Act,
1899
[2 of
1899]
Amendment
After section 8, the following section
shall be inserted, namely:-
"8A. Securities not liable to
stamp duty- Notwithstanding anything contained in this Act-
(a) an
issuer, by the issue of securities to one or more depositories
shall, in respect of such issue, be chargeable with duty on the
total amount of security issued by it and such securities need not
be stamped;
(b) where an
issuer issues certificate of security under sub-section (3) of
section 14 of the Depositories Act, 1996, on such certificate duty
shall be payable as is payable on the issue of duplicate certificate
under this Act;
(c) transfer
of registered ownership of shares from a person to a depository or
from a depository to a beneficial owner shall not be liable to any
stamp duty;
(d) the
transfer of beneficial ownership of shares, such shares being shares
of a company dealt with by a depository shall not be liable to duty
under article 62 of Schedule I of this Act.
Explanation : For the
purposes of this section, the expressions "beneficial owner",
"depository", and "issuer" shall have the meanings respectively
assigned to them in clauses (a), (e) and (f) of sub-section (1) of
section 2 of the Depositories Act, 1996."
PART
II
Amendments to the Companies Act, 1956
[1 of
1956]
Amendments
1. In
section 2, after clause (45A) the following clause shall be
inserted, namely:-
"(45B) "Securities and Exchange Board of
India" means the Securities and Exchange Board of India established
under section 3 of the Securities and Exchange Board of India Act,
1992 (15 of 1992)."
2.
After section 2, the following section shall be inserted, namely:-
"2A. Interpretation of certain
words and expressions- Words and expressions used and not
defined in this Act but defined in the Depositories Act, 1996 shall
have the same meanings respectively assigned to them in that Act."
3. In
section 41, after sub-section (2), the following sub-section shall
be inserted, namely:-
"(3) Every person holding equity share
capital of a company and whose name is entered as beneficial owner
in the records of the depository shall be deemed to be a member of
the concerned company."
4. In section 49, in sub-section (5), after clause (b), the
following clause shall be inserted, namely:-
"(c) from holding investments in the name
of a depository when such investments are in the form of securities
held by the company as a beneficial owner."
5. In section 51, the following proviso shall be inserted,
namely:-
"PROVIDED that where the securities are
held in a depository, the records of the beneficial ownership may be
served by such depository on the company by means of electronic mode
or by delivery of floppies or discs."
6. Section 83 shall be omitted.
7. In section 108, after sub-section (2), the following
sub-section shall be inserted, namely:-
"(3) Nothing contained in this section
shall apply to transfer of security effected by the transferor and
the transferee both of whom are entered as beneficial owners in the
records of a depository."
8. In
section 111, after sub-section (13), the following sub-section shall
be inserted, namely:-
"(14) In this section "company" means a
private company and includes a private company which had become a
public company by virtue of section 43A of this Act."
9.
After section 111, the following section shall be inserted,
namely:-
"111 A.
Rectification of register on transfer-
(1) In this
section, unless the context otherwise requires, "company" means a
company other than a company referred to in sub-section (14) of
section 111 of this Act.
(2) Subject
to the provisions of this section, the shares or debentures and any
interest therein of a company shall be freely transferable.
(3) The
Company Law Board may on an application made by a depository,
company, participant or investor or the Securities and Exchange
Board of India within two months from the date of transfer of any
shares or debentures held by a depository or from the date on which
the instrument of transfer or the intimation of transmission was
delivered to the company, as the case may be, after such inquiry as
it thinks fit, direct any company or depository to rectify register
or records if the transfer of the shares or debentures is in
contravention of any of the provisions of the Securities and
Exchange Board of India Act, 1992 (15 of 1992) or regulations made
thereunder or the Sick Industrial Companies (Special Provisions)
Act, 1985 (1 of 1986).
(4) The
Company Law Board while acting under sub-section (3), may at its
discretion make such interim order as to suspend the voting rights
before making or completing such enquiry.
(5) The
provisions of this section shall not restrict the right of a holder
of shares or debentures, to transfer such shares or debentures and
any person acquiring such shares or debentures shall be entitled to
voting rights unless the voting rights have been suspended by an
order of the Company Law Board.
(6)
Notwithstanding anything contained in this section, any further
transfer, during the pendency of the application with the Company
Law Board, of shares or debentures shall entitle the transferee to
voting rights unless the voting rights in respect of such transferee
have also been suspended.
(7) The provisions of sub-sections (5),
(7), (9), (10) and (12) of section 111 shall, so far as may be,
apply to the proceedings before the Company Law Board under this
section as they apply to the proceedings under that section."
10. In section 113, after sub-section (3), the following
sub-section shall be inserted, namely:-
"(4) Notwithstanding anything contained
in sub-section (1), where the securities are dealt with in a
depository, the company shall intimate the details of allotment of
securities to depository immediately on allotment of such
securities."
11. In section 150, in sub-section (1), in clause (b), the
words "distinguishing each share by its number" shall be
omitted.
12. In
section 152, in sub-section (1), in clause (b), the words
"distinguishing each debenture by its number" shall be omitted.
13.
After section 152, the following section shall be inserted,
namely:-
"152A. Register and index of beneficial
owners to be of debenture holder- The register and index of
beneficial owners maintained by a depository under section 11 of the
Depositories Act, 1996, shall be deemed to be an index of members
and register and index of debenture holders, as the case may be, for
the purposes of this Act."
14. In
Schedule II, in Part II, in clause C, after sub-clause 9, the
following sub-clause shall be inserted, namely:-
"9A. The details of option to subscribe
for securities to be dealt with in a depository."
PART
III
Amendments to the Securities Contracts (Regulation) Act,
1956
[42 of
1956]
Amendments
1. In
section 2, for clause (i) the following clause shall be substituted,
namely:-
(i) "spot
delivery contract" means a contract which provides for-
(a) actual
delivery of securities and the payment of a price therefor either on
the same day as the date of the contract or on the next day, the
actual periods taken for the despatch of the securities or the
remittance of money therefor through the post being excluded from
the computation of the period aforesaid if the parties to the
contract do not reside in the same town or locality;
(b) transfer
of the securities by the depository from the account of a beneficial
owner to the account of another beneficial owner when such
securities are dealt with by a depository."
2.
Section 22A shall be omitted.
PART
IV
Amendment to the Income Tax Act, 1961
[43 of
1961]
Amendment
In section 45, after sub-section (2), the
following sub-section shall be inserted, namely:-
"(2A) Where
any person has had at any time during previous year any beneficial
interest in any securities, then any profits or gains arising from
transfer made by the depository or participant of such beneficial
interest in respect of securities shall be chargeable to income-tax
as the income of the beneficial owner of the previous year in which
such transfer took place and shall not be regarded as income of the
depository who is deemed to be the registered owner of securities by
virtue of sub-section (1) of section 10 of the Depositories Act,
1996, and for the purposes of-
(i) section
48, and
(ii) proviso
to clause (42A) of section 2,
the cost of
acquisition and the period of holding of any securities shall be
determined on the basis of the first-in-first-out method.
Explanation: For the
purposes of this sub-section, the expressions "beneficial owner",
"depository" and "security" shall have the meanings respectively
assigned to them in clauses (a), (e) and (l) of sub-section (1) of
section 2 of the Depositories Act, 1996."
PART
V
Amendment to the Benami Transactions (Prohibition) Act,
1988
[45 of
1988]
Amendment
In section 3,
for sub-section (2), the following sub-section shall be substituted,
namely:-
"(2) Nothing
in sub-section (1) shall apply to-
(a) the
purchase of property by any person in the name of his wife or
unmarried daughter and it shall be presumed, unless the contrary is
proved, that the said property had been purchased for the benefit of
the wife or the unmarried daughter;
(b) the
securities held by a-
(i)
depository as a registered owner under sub-section (1) of section 10
of the Depositories Act, 1996;
(ii)
participant as an agent of a depository.
Explanation : The
expressions "depository" and "participants" shall have the meanings
respectively assigned to them in clauses (e) and (g) of sub-section
(1) of section 2 of the Depositories Act, 1996."
PART
VI
Amendments to the Securities and Exchange Board of India Act,
1992
[15 of
19921]
Amendments
1. In section
2, in sub-section (2), for the words, brackets and figures "the
Securities Contracts (Regulation) Act, 1956 (42 of 1956)", the
words, brackets and figures "the Securities Contracts (Regulation)
Act, 1956 or the Depositories Act, 1996" shall be substituted.
2. In section 11, in sub-section (2), in
clause (ba) for the words "depositories, custodians", the words
"depositories, participants, custodians" shall be substituted.
3. In section l2, in sub-section (1A),
for the words "depository, custodian", at both the places where they
occur the words "depository, participant, custodian" shall be
substituted.
4. In section l6, in sub-section (1), for
the words "this Act", the words and figures "this Act or the
Depositories Act, 1996" shall be substituted.
DEPOSITORIES (APPEAL TO CENTRAL GOVERNMENT) RULES,
1998
[28th.
July, 1998]
In exercise of the powers conferred by
section 24, read with section 23, of the Depositories Act, 1996 (22
of 1996), the Central Government hereby makes the following rules,
namely: -
1. Short title and
commencement
(1) These
rules may be called the Depositories (Appeal to the Central
Government) Rules, 1998.
(2) They
shall come into force on the date of their publication in the
Official Gazette.
2. Definitions
In these
rules, unless the context otherwise requires-
(a) "Act"
means the Depositories Act, 1996 (22 of 1996);
(b)
"Authorised Representative" means-
(i) in
relation to an appellant, a person duly authorised by the appellant
to present and appeal on his behalf to the Central Government;
(ii) in
relation to the Board, a person duly appointed by the Board by
notification in the Official Gazette as authorised representative to
appear, plead and act for such authority in any such appeal and any
other person acting on behalf of the person so appointed;
(c) "Board"
means the Securities and Exchange Board of India established under
section 3 of the Securities and Exchange Board of India Act, 1992
(15 of 1992);
(d) "Form"
means the form appended to these rules;
(e)
"Regulations" means the regulations made by the Board under the
Act;
(f) "Rules"
means the rules made under the Act.
3. Form of appeal
Any person aggrieved by an order of the
Board made under the Act or the regulations made thereunder, may
prefer an appeal to the Central Government in the Form.
4. Time within which appeal is to
be preferred
(1) An appeal
shall be preferred by the aggrieved person within a period of thirty
days from the date of communication to him of the order of the Board
made under the Act or regulations.
(2) When the
appeal is preferred after the expiry of the period of thirty days
specified in sub-rule (1), it shall be accompanied by an application
supported by an affidavit setting forth the facts on which the
appellant relies to satisfy the Central Government that he has
sufficient cause for not preferring the appeal within the said
period of thirty days:
PROVIDED that if the Central Government is
satisfied that the appellant had sufficient cause for not preferring
the appeal within the aforesaid period, it may, for reasons to be
recorded in writing, admit the appeal after the aforesaid period but
before the expiry of forty-five days from the date of communication
to him of the order of the Board.
5. Payment of fees
(1) Every
appeal shall be accompanied by a fee of rupees five thousand
only.
(2) The
amount of fees shall be deposited in any Government Treasury or any
branch of the State Bank of
India.
(3) The
amount of the fees shall be deposited under the head "065-Other
Admn. Services-Other Services- other Receipts".
6. Contents of appeal
Every appeal filed under rule 3 shall be
written in English or Hindi and shall set forth concisely under
distinct heads, the grounds of appeal without any argument or
narrative and such grounds shall be numbered consecutively.
7. What to accompany
Form
Every appeal
shall be filed in the Form in duplicate and shall be accompanied by
two copies (at least one of which shall be a certified copy) of the
order of the Board appealed against and other documents to support
the grounds of objection mentioned in the appeal.
Explanation : For the
purpose of this rule "certified copy" includes the copy which was
originally supplied to the appellant as well as a photocopy thereof
duly authenticated by the appellant or his authorised representative
as a true copy.
8. Filing of
affidavits
Where a fact which can not be borne out
by, or is contrary to, the record is alleged, it shall be stated
clearly and concisely and supported by a duly sworn affidavit.
9. Rights of appellant to appear
before the Central Government
(1) Every
appellant may appear before the Central Government in person or
through his authorised representative.
(2) An
appellant may, by writing, authorise-
(a) an
advocate, or
(b) a
chartered accountant, or
(c) a cost
and works accountant, or
(d) a company
secretary, having prescribed qualifications under clause (45) of
section 2 of the Companies Act, 1956 (1 of 1956),
to function
as authorised representative of such party.
10. Authorising a representative
to appear
In an appeal by any appellant, where the
Form is signed by his authorised representative, the appellant shall
append to the Form documents authorising the authorised
representative to appear for him and the said document shall state
what his relationship is with the appellant.
11. Authorisation to be
filed
An authorised representative appearing
for the appellant at the hearing of an appeal shall, unless the
document referred to in rule 10 has been appended, file such a
document before the commencement of the hearing.
12. Procedure for filing
appeal
(1) An appeal
shall be preferred by the appellant or his authorised representative
to the Central Government in person or be sent by registered post
addressed to the Secretary to the Government of India, Department of
Economic Affairs, Ministry of Finance, New Delhi.
(2) An appeal
sent by post under sub-rule (1) shall be deemed to have been
preferred to the Central Government on the day on which it is
received in the office of the Secretary to the Government of India,
Department of Economic Affairs, Ministry of Finance, at Delhi.
13. Furnishing of information and
documents
(1) The Central Government may, before
considering the appeal, require the appellant or the Board or both
to furnish such further information and documents as it considers
necessary.
(2) Parties concerned shall furnish such
information and documents within thirty days of such order.
14. Date and place of hearing of
appeal to be communicated
The Central Government shall communicate,
before considering the appeal, to the appellant or the Board or both
the date and place of the hearing of the appeal and may send a copy
of the appeal to the Board either before or with such
communication.
15. Hearing of appeal
(1) On the
day fixed or on any other day to which the bearing may be adjourned,
the appellant shall be heard in support of the appeal. The Central
Government shall, then, if necessary, hear the Board or its
authorised representative against the appeal, and in such case the
appellant shall be entitled to reply.
(2) In case
the appellant does not appear in person or through an authorised
representative when the appeal is called for hearing, the Central
Government may dispose of the appeal on merits:
PROVIDED that
where an appeal has been disposed of as provided above and the
appellant appears afterwards and satisfies the Central Government
that there was sufficient cause for his non-appearance, when the
appeal was called for hearing, the Central Government shall make an
order setting aside the order and restore the appeal.
16. Orders by Central
Government
The Central
Government Shall-
(a) after considering the appeal
preferred to it under rule 3;
(b) after considering further documentary
evidence referred to in rule 13, and
(c) after giving hearing under rule 15,
pass such orders or give such directions
as may be necessary or expedient to give effect to, or in relation
to, its orders.
17. Order to be signed and
dated
The orders of the Central Government
shall be in writing and shall be signed and dated.
18. Order to be communicated to
the party
(1) The
Central Government shall, after the order is signed, cause it to be
communicated to the appellant and the Board.
(2) Any
person other than appellant or the Board may obtain a copy of the
order on depositing a sum of one hundred rupees under the head "065-
Other Admn. Services -Other Services -Other Receipts".
FORM
APPEAL
[Rule
2(d.) and rule 3]
From
(Mention the name and address of the
appellant here)
To
The Secretary to the Government of
India,
Department of Economics Affairs,
Ministry of Finance, North Block,
New Delhi
Sir,
The appellant
named above, begs to prefer this appeal under section 23 of the
Depositories Act, 1996 (22 of 1996) against order No
____________________ dated ______________ passed by the Securities
and Exchange Board of India under the said Act, and the Securities
and Exchange Board of India (Depositories and Participants)
Regulations, 1996 on the following facts and grounds:
FACTS
(Mention briefly the facts of the case
here. Enclose copy of the order passed by the Board and copies of
letters written by the appellant to the Board and copies of other
relevant documents, if any).
GROUNDS
(Mention here the grounds on
which the appeal is made)
PRAYER
In the light
of what is stated above, the appellant prays that he / she / it may
be granted the following relief.
RELIEF SOUGHT
(specify the relief sought)
The amount of rupees five thousand as
fees for this appeal has been deposited in ____________ vide receipt
No _________________________ dated _______________________
Place :
Date:
(Signature of the Appellant or his authorised representative)
List of documents attached :
1.
2.
3.
(Signature of the Appellant or his authorised
representative)