DEPOSITORIES ACT, 1996
(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.
(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
(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.
(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.
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.
(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.
(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.
(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.
(1) All securities held by a depository shall be dematerialised and shall be in a fungible form.
1[(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 by it on behalf of the beneficial owners.]
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1. Subs. by Act 8 of 1997, sec. 22, for sub-section (2) (w.e.f. 15-1-1997).
(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.
Every depository shall maintain a register and an index of beneficial owners in the manner provided in section 150, section 151 and section 152 of the Companies Act, 1956 (1 of 1956).
(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.
(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.
(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 its 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.
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.
(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.
(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.
(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 in
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.
Any person, who is required under this Act or any rules or regulations or bye-laws made thereunder,—
(a) to furnish any information, document, books, returns or report to the Board, fails to furnish the same within the time specified therefor, he shall be liable to a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less for each such failure;
(b) to file any return or furnish any information, books or other documents within the time specified therefor in the regulations or the bye-laws, fails to file return or furnish the same within the time specified therefor, he shall be liable to a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less;
(c) to mai
If a depository or participant or any issuer or its agent or any person, who is registered as an intermediary under the provisions of section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), and is required under this Act or any rules or regulations made thereunder, to enter into an agreement, fails to enter into such agreement, such depository or participant or issuer or its agent or intermediary shall be liable to a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less for every such failure.]
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1. Ins. by Act 1 of 2005, sec. 17 (w.r.e.f. 12-10-2004).
If any depository or participant or any issuer or its agent or any person, who is registered as an intermediary under the provisions of section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), after having been called upon by the Board in writing, to redress the grievances of the investors, fails to redress such grievances within the time specified by the Board, such depository or participant or issuer or its agent or intermediary shall be liable to a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less.]
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1. Ins. by Act 1 of 2005, sec. 17 (w.r.e.f. 12-10-2004).
If any issuer or its agent or any person, who is registered as an intermediary under the provisions of section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), fails to dematerialise or issue the certificate of securities on opting out of a depository by the investors, within the time specified under this Act or regulations or bye-laws made thereunder or abets in delaying the process of dematerialisation or issue the certificate of securities on opting out of a depository of securities, such issuer or its agent or intermediary shall be liable to a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less.]
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1. Ins. by Act 1 of 2005, sec. 17 (w.r.e.f. 12-10-2004).
If a depository or participant or any issuer or its agent or any person, who is registered as an intermediary under the provisions of section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), fails to reconcile the records of dematerialised securities with all the securities issued by the issuer as specified in the regulations, such depository or participant or issuer or its agent or intermediary shall be liable to a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less.]
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1. Ins. by Act 1 of 2005, sec. 17 (w.r.e.f. 12-10-2004).
If any person fails to comply with the directions issued by the Board under section 19, within the time specified by it, he shall be liable to a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less.]
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1. Ins. by Act 1 of 2005, sec. 17 (w.r.e.f. 12-10-2004).
Whoever fails to comply with any provision of this Act, the rules or regulations or bye-laws made or directions issued by the Board thereunder for which no separate penalty has been provided, shall be liable to a penalty which may extend to one crore rupees.]
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1. Ins. by Act 1 of 2005, sec. 17 (w.r.e.f. 12-10-2004).
(1) For the purpose of adjudging under sections 19A, 19B, 19C, 19D, 19E, 19F and 19G, the Board shall appoint any officer not below the rank of a Division Chief of the Securities and Exchange Board of India to be an adjudicating officer for holding an inquiry in the prescribed manner after giving any person concerned a reasonable opportunity of being heard for the purpose of imposing any penalty.
(2) While holding an inquiry, the adjudicating officer shall have power to summon and enforce the attendance of any person acquainted with the facts and circumstances of the case to give evidence or to produce any document, which in the opinion of the adjudicating officer, may be useful for or relevant to the subject-matter of the inquiry and if, on such inquiry, he is satisfied that the person has failed to comply with the provisions of any of the sections specified in sub-section (1), he
All sums realised by way of penalties under this Act shall be credited to the Consolidated Fund of India.]
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1. Ins. by Act 1 of 2005, sec. 17 (w.r.e.f. 12-10-2004).
(1) Without prejudice to any award of penalty by the adjudicating officer under this Act, if any person contravenes or attempts to contravene or abets the contravention of the provisions of this Act or of any rules or regulations or bye-laws made thereunder, he shall be punishable with imprisonment for a term which may extend to ten years, or with fine, which may extend to twenty-five crore rupees, or with both.
(2) If any person fails to pay the penalty imposed by the adjudicating officer or fails to comply with any of his directions or orders, he shall be punishable with imprisonment for a term which shall not be less than one month but which may extend to ten years, or with fine, which may extend to twenty-five crore rupees, or with both.]
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(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 connivanc
(1) No court shall take cognizance of any offence punishable under this Act or any rules or any regulations or bye-laws made thereunder, save on a complaint made by the Central Government or State Government or the Securities and Exchange Board of India or by any person.
(2) No court inferior to that of a Court of Session shall try any offence punishable under this Act.]
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1. Subs. by Act 1 of 2005, sec. 19, for section 22 (w.r.e.f. 12-10-2004). Section 22, before substitution, stood as under:
“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
Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), any offence punishable under this Act, not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may either before or after the institution of any proceeding, be compounded by a Securities Appellate Tribunal or a court before which such proceedings are pending.]
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1. Subs. by Act 1 of 2005, sec. 19, for section 22 (w.r.e.f. 12-10-2004).
(1) The Central Government may, on recommendation by the Board, if the Central Government is satisfied, that any person, who is alleged to have violated any of the provisions of this Act or the rules or the regulations made thereunder, has made a full and true disclosure in respect of alleged violation, grant to such person, subject to such conditions as it may think fit to impose, immunity from prosecution for any offence under this Act, or the rules or the regulations made thereunder or also from the imposition of any penalty under this Act with respect to the alleged violation:
Provided that no such immunity shall be granted by the Central Government in cases where the proceedings for the prosecution for any such offence have been instituted before the date of receipt of application for grant of such immunity:
Provided further that re
(1) Any person aggrieved by 1[an order of the Board made before the commencement of the Securities Laws (Second 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.
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(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 (Second Amendment) Act, 1999 (32 of 1999), under this Act, or the regulations made thereunder 2[or by an order made by an adjudicating officer under this Act], 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 fee as may be prescribed:
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(1) The Securities Appellate Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908 (5 of 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 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 (5 of 1908), while trying a suit, in respect of the following matters, namely:—
(a) summoning and enforcing the attendance of any person and examining him on oath;
(b) requiring the discovery
The appellant 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 (38 of 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 (56 of 1980) and who has obtained a certificate of practice under sub-section (1) of sect
The provisions of the Limitation Act, 1963 (36 of 1963) shall, as far as may be, apply to an appeal made to a Securities Appellate Tribunal.]
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1. Ins. by Act 32 of 1999, sec. 15 (w.e.f. 16-12-1999).
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.]
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1. Ins. by Act 32 of 1999, sec. 15 (w.e.f. 16-12-1999).
Any person aggrieved by any decision or order of the Securities Appellate Tribunal may file an appeal to the Supreme 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 law arising out of such order:
Provided that the Supreme Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.]
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1. Subs. by Act 1 of 2005, sec. 21, for section 23F (w.r.e.f. 12-10-2004). Earlier section 23F was inserted by Act 32 of 1999, sec. 15 (w.e.f. 16-12-1999). Section 23F, before substitution by Act 1 of 2005, stood as under:
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(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:—
1[(a) the manner of inquiry under sub-section (1) of section 19H;
(aa) 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;
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(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-
(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;
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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.
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.
(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.
The enactment specified in the Schedule to this Act shall be amended in the manner provided therein.
(1) The Depositories (Third) Ordinance, 1996 (Ord. 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.
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