The Depositories Act, 1996
Administered Ministry: Ministry of Finance / Department of Economic Affairs
Section
Section 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) It extends to the whole of India.
(3) It shall be deemed to have come into force on the 20th day of September, 1995.
Section 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 (15 of 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.
(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 (15 of 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.
1. Ins. by Act 32 of 1999, s. 13 (w.e.f. 16-12-1999).
Section 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 it 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.
(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 it 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.
Section 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.
(2) Every agreement under sub-section (1) shall be in such form as may be specified by the bye-laws.
Section 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.
Section 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.
(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.
Section 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.
1 [(1A) Every depository on receipt of intimation from a participant register any transfer of security in favour of an asset reconstruction company as defined in clause (ba) of sub-section (1) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002) along with or consequent upon transfer or assignment of financial asset of any bank or financial institution under sub-section (1) of section 5 of that Act.
(1B) Every depository, on receipt of intimation from a participant, register any issue of new shares in favour of any bank or financial institution or asset reconstruction company or any other assignee of such bank or financial institution or asset reconstruction company, as the case may be, by conversion of part of their debt into shares pursuant to reconstruction of debts of the company agreed between the company and the bank or financial institution or asset reconstruction company.
Explanation.--For the purpose of this section, the expressions "asset reconstruction company", "bank", and "financial institution" shall have the meanings assigned to them respectively under clauses (ba), (c) and (m) of sub-section (1) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002).]
(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 [(1A) Every depository on receipt of intimation from a participant register any transfer of security in favour of an asset reconstruction company as defined in clause (ba) of sub-section (1) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002) along with or consequent upon transfer or assignment of financial asset of any bank or financial institution under sub-section (1) of section 5 of that Act.
(1B) Every depository, on receipt of intimation from a participant, register any issue of new shares in favour of any bank or financial institution or asset reconstruction company or any other assignee of such bank or financial institution or asset reconstruction company, as the case may be, by conversion of part of their debt into shares pursuant to reconstruction of debts of the company agreed between the company and the bank or financial institution or asset reconstruction company.
Explanation.--For the purpose of this section, the expressions "asset reconstruction company", "bank", and "financial institution" shall have the meanings assigned to them respectively under clauses (ba), (c) and (m) of sub-section (1) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002).]
(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. Ins. by Act 44 of 2016, s. 44 and the Second Schedule (w.e.f. 1-9-2016)
Section 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 the allottee as the beneficial owner of that security.
(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 the allottee as the beneficial owner of that security.
Section 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.
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.]
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.]
1. Subs. by Act 8 of 1997, s. 22, for sub-section (2) (w.e.f. 15-1-1997).
Section 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.
(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.
Section 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).
Section 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.
(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.
Section 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.
(2) Every issuer shall make available to the depository copies of the relevant records in respect of securities held by such depository.
Section 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 its records and shall inform the issuer.
(3) Every issuer shall, within thirty days of the receipt of intimation from the depository and on fulfilment 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.
(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 fulfilment 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.
Section 15 Act 18 of 1891 to apply to depositories.
The Bankers' Books Evidence Act, 1891 shall apply in relation to a depository as if it were a bank as defined in section 2 of that Act.
Section 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.
(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.
Section 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.
(2) The eligibility criteria for admission of securities into the depository shall be specified by the regulations.
Section 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.
(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.
Section 19 Power of Board to give directions in certain cases.
1 [1] 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.
2 [Explanation.--For the removal of doubts, it is hereby declared that power to issue directions under this section shall include and always be deemed to have been included the power to direct any person, who made profit or averted loss by indulging in any transaction or activity in contravention of the provisions of this Act or regulations made thereunder, to disgorge an amount equivalent to the wrongful gain made or loss averted by such contravention.]
3 [(2) Without prejudice to the provisions contained in sub-section (1) and section 19H, the Board may, by order, for reason to be recorded in writing, levy penalty under sections 19A, 19B, 19D, 19E, 19F, 19FA and 19G after holding an inquiry in the prescribed manner.]
(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.
2 [Explanation.--For the removal of doubts, it is hereby declared that power to issue directions under this section shall include and always be deemed to have been included the power to direct any person, who made profit or averted loss by indulging in any transaction or activity in contravention of the provisions of this Act or regulations made thereunder, to disgorge an amount equivalent to the wrongful gain made or loss averted by such contravention.]
3 [(2) Without prejudice to the provisions contained in sub-section (1) and section 19H, the Board may, by order, for reason to be recorded in writing, levy penalty under sections 19A, 19B, 19D, 19E, 19F, 19FA and 19G after holding an inquiry in the prescribed manner.]
1. Section 19 numbered as sub-section (1) thereof by Act 13 of 2018, s. 192 (w.e.f. 8-3-2019).
2. Ins. by Act 27 of 2014, s. 41 (w.e.f. 8-9-2014).
3. Ins. by Act 13 of 2018, s. 192 (w.e.f. 8-3-2019)
2. Ins. by Act 27 of 2014, s. 41 (w.e.f. 8-9-2014).
3. Ins. by Act 13 of 2018, s. 192 (w.e.f. 8-3-2019)
Section 19A Penalty for failure to furnish information, return, etc. 1 docs
2 [19A. Penalty for failure to furnish information, return, etc.--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 3 [or who furnishes or files false, incorrect or incomplete information, return, report, books or other documents], he shall be liable to a penalty 4 [which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which such failure continues subject to a maximum of one crore rupees] 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 bye-laws, fails to file return or furnish the same within the time specified therefor, he 3 [or who furnishes or files false, incorrect or incomplete information, return, report, books or other documents] shall be liable to a penalty 1 [which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which such failure continues subject to a maximum of one crore rupees];
(c) to maintain books of account or records, fails to maintain the same, he shall be liable to a penalty 1 [which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which such failure continues subject to a maximum of one crore rupees].
(a) to furnish any information, document, books, returns or report to the Board, fails to furnish the same within the time specified therefor 3 [or who furnishes or files false, incorrect or incomplete information, return, report, books or other documents], he shall be liable to a penalty 4 [which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which such failure continues subject to a maximum of one crore rupees] 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 bye-laws, fails to file return or furnish the same within the time specified therefor, he 3 [or who furnishes or files false, incorrect or incomplete information, return, report, books or other documents] shall be liable to a penalty 1 [which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which such failure continues subject to a maximum of one crore rupees];
(c) to maintain books of account or records, fails to maintain the same, he shall be liable to a penalty 1 [which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which such failure continues subject to a maximum of one crore rupees].
1. Ins. by Act 13 of 2018, s. 192 (w.e.f. 8-3-2019).
2. Ins. by Act 1 of 2005, s. 17 (w.e.f. 12-10-2004).
3. Ins. by Act 13 of 2018, s. 193 (w.e.f. 8-3-2019).
4. Subs. by Act 27 of 2014, s. 42, for certain words (w.e.f. 8-9-2014).
2. Ins. by Act 1 of 2005, s. 17 (w.e.f. 12-10-2004).
3. Ins. by Act 13 of 2018, s. 193 (w.e.f. 8-3-2019).
4. Subs. by Act 27 of 2014, s. 42, for certain words (w.e.f. 8-9-2014).