A P T E R

The Depositories Act, 1996

Objectives
Learning
provisions of The Depositories Act, 199%
Important
obligations of depositories, participants, issuers, and
and
Rights,
beneficialowners
Lo'
theBoard(SEBI) to call for information and enquiry
Powerof
foroffences under the Act by companies
10 Penalty
o
 ofLaw Section
Company under
26.
the Bye-laws 1992.
Act, of
Board recordedinvestor
Administration Beneficial
owner:An
Companies India ries Some Major
Concepts compared
depository ated with fundsrities.
Act
Law mean establishedmeans withwhose of terialisation open through who the its Bank
are the with al HDFC such Limwas ited), Iish with the
Board a inThis operations
ed NSDL. the hrstNSDL menace
the depository. name a istranster The
Act, bye-laws briefly
important to
paperwork. the bank demat ofpromotas efhciency
whole by ries,lation The 638
constituted
1956. means Securities is
environment
transacting risks seems of
knownsimple
India, Bank,
SBI, Ac t dematerialised the
made
under introduced
terms
accounts.
and more
account
his
holdings benefcial accountas
of
in
ownership 1999. Standardand Bank second by CDSL
deposi(Nattoryional
the lead1ng paved of of which to
Parhament Deposproviitdoeries
fake, Indi ina.
the Sectiondepository. with name
a Beneficial
to Part
Securities settlement (electrotniacic)litate
Owner
reters The
underBoard and in is ha[sles This orthrough BSE hnancial the This
by Exchange is
an
below. used considerably cost
certifhcates. Centurion
In of (Cent ral in watoy rged,
VI
less and transfers. deposi
jointly
India, tory in tor Act, Other
ofthChartered legislation
recorded
Section of a of3
Investor
in transacting ofmethodsimilar
normally transterring anyowner
e India. for 1996 the the
Company depository Depository Depository systand ems 1996,
the
the depositoryBanks. Bank with institutions
securities
NSE the holredgulingation Business
form.
stolen secks and
10 as Deposito DP The in Is
Board (BO)
SEBI whose
lower does to Bank, leading establishment extends an
iems portaLegint slations
E such for
associ away holding investor Is It of the joined and It of
has system, Securities to to was of
2. as ina secu dema done
to
started Baroda,
Union country,
banks Li m
estabhands
ite securi
d), ties. curb securi ti
promote enacttoed deposito
.theshall Depositories
ness
1.nessbyexplained
Certificate below.
Important
Provisions
Important ofService
of Board.
A
obtains No securities
allotment
the Board.
Security
Regulationsregister is the in
of the legis
ertificate depository
(/ a
enteredRegistered form securities. Issuer
of
be trom depository Record person eligible
books tors. Depository
depos1tory
fhnancial the (DP) 1992.
means 12(1A) been Act,company
in
the a provisions means of as depository
registration Depos1tory
tered
such certiicate As
of in of the as may includes
or making refers
to
per
reters granted 1956,
Board. the any mean issuer. Owner institutions,
act under
granted Commencement
shall securities such suchwhose stored
be services of
form record service as SEBl to
thunder
e Companies formed
of determined the an DPs. registered.
Section aand the
ofact security the in refers in
to
guidelines, Participant who an certificate
SEBI means
as the records issue to agent which
commencement asa
may
under
Act
of or
connected regulations the
name
to
a any banks. invesoffers
and
a
transfer as
computer
depos1tory depository. I of of Act, regis-
register is by securities.person hae
sspueb-citseedbection of
have
ofwith
may
be made
Registered
depostiory
entered regulations.
maintained Issuer:
making Any
stockbrokers, investors.
depository
services
to
depository
ofery
who (DP;:
participa
Depostory under which
certificate has
through
request their
of
in
a

of
been the
of or electronc
Depository.
securities
organisation An

by bus Bus ownerstiprecording specihed as

issuer, suchiwhoseowner:
in an An
the
brch such the in issue agent
SEBI been as
by nane of of torm
ot
br the A othet form etc, the
of ejstrab
A
investo
and
a a
depository 3. Surrender I. (SectionS]. laws,Depository Any
anServices of 2 the e
rds, neuon A tTespect
ory nametheofIcateregulations.
rity The availthe ment Any
certihcate agreement, person, |Sectio n 4). ParticAgipantre ment
Every one A following
be heads: RBenefi
ghrs and Owners
cianad l Rights
personaccordingly.

the
referred
as
sub-section
under

depository
ofsecurity
under
ofissuer,

that sub-section on
Such
manner
services ofa of
person
under

Certificate who
of
wi

depository such
th
any
throughin
such
agreement
form
in

participants
depository
more
or

shallBetween
beneicial
PapeprtoisctoipriIeas,nutesr,sand cobneeirnmged ratsahcastuinodneprsroviqdutearpddpsosrietvoretoysnutb-sectionhas Board
and s
obligations d
nty ofrehused The
()shall
cial receipt security
shall,on and receipt security, Section
owners |o of Obligations h|Section
eard been3|1. this adequate not
ven ion that i unles
as has form a as
under enter depositories,
participants,
partic1pant, gisect
wner
section
to
in(2),
substitute
and as
a shall the
of
may
(1), depository,
be
for entered
shall
5 for as
specihed
sub-section Depositoryasinto can a
manipulation
gritant
enter registered certificate
inform which of availingspecified its an reasonableunless systems is
no a
in specified by
agent(s). be of certihcate satished
tion cancel
its surrender Security
into may agreement discussed the of
certificate
the of to he the
the records t he an its by enter depository records and that
6|. in informa- deposiowner the of issuer
(1) name
by
seeks
agree services the bye-laws (1) and opportu- shall
certit secu into shall with under safe the under
the the the bye
its of in to beand
2. Owner 2. Securities 2.
1. Rights All
Fungible
Form
1. or
Options
1. 2.Depository1.with
Registration
OWner.
respect have the SaveownershipNotwithstanding
owner tory other (Section
owners 9]. Act, 153B,
of Nothing
dematerialised
i.e., security
[Section of
8]. depository
depository rity, depository.
depository,
Where the Everyan Hold depository
7). rity Ifrity tromEvery
[Section Chapter
the a
ofsecurities1956, 187B,returnablesecurities security issuer
depository
any as
tor shall law allottee
and,
a person
Securities
beneficial
seeks in a
depository
the
ot otherwise to partic1pant,
curitiesvoting ofthe be Depositories
for contained
held shall 187C, Depositories
in
shall onthe the certificates
subscribing
person
Receive
shall
shall to name
haveowner of The
30

as purposesdeemed the
security apply or and held asreceiptdetailsissuer
opts
have
of shall, Transfer
Depositories
rights a time by negotiable theenter inform
custody
d provided
helregistered anything it and in shall by the with the
orregister
on of being onto
a beneficial in of of shall to option
hold
or Security transferee.
a on
byor a372 be its such
allotment to thtransferee
e
it. any
behalf to
in effecting contained
be in
and depository Sections
behalfof depository
in in records intimate
holDepository
d
securities issuer such
of receipt
the of Act,
of a to information, a transfer Securities
the paper securitysecuritieseither Certificate
other owner
sub-section e Beneficial
of thforce, the 153,
fungible owner be of security ofintimation of
accord1ngly
1996
a
transfer Companies in the the to offered
to secuany
rights shall beneicialregistereddeposi in
a beneficialrespect form. shall
in of wireceive
of
secu such
with th secu
153A, form, that name the by the 639
(1), any be a a a
innot of
 640
Furnishing 3. 2. 1.Held Ever
in Register
PledgeCompaniesStion indev
2. Security 1.Option 2. 1. by a right The
Every intormation
13]. oftorybye-laws. the Every hypothecation
and Depository 12). Any make tory depository.
sub-section
(Section a owner Subjet
any Everv depos1tory,
respect as Iiabilitie
depository
in depository
under Theinform If in depos1torvot
its a securities
copies
name
in such
entryentries and benehcial may
a or Aet,enehal benchval
and Part
depository benehcial
records
ub-section to issuer such ot may, Depository I50, of
the depository be to in VI
depository in Opt a
of
of (2) in such
in
pledge
security
a
create wit h
Hypothecation
made such Setion
19S6 Beneficial (NvtionresNt benchts Other
owners shall
held of beneficial
shall manner about the owner
and respect the
Information and shall its a owner or
shall, owner Out records t
a inh e |Section otand Business
shall (1), by make
relevant the shall
be
records
hypothecation
depository ownedpledge regulations Ia1 mauntan 10):hisher shall
of in such as Issuer previous this in
the Owner
owners shall and
nformaccordingly.
make on any seeks
Respect available may transter furnish
evidence of
11|. be
receipt security a accordingly. a by or behalf,
of Section subjected Legislations
entitled
ropriate to
depository
records be at and depository shall hypothecation give
him/herapproval and
mannerregister a securities
the
of opt
specihed such of
to securities to of intimation to Securities
a
suer. of Records a the 152 to to
intimation he/she out inthe intervals the pledge thereupon through bye-laws,
beneficial provided and held al all
entries
Any [Sectionrespectdeposi by issuer under deposi theof of
shall of the an bythe the
the in or of in
a
Depositories 3.
2 Rights
1. 2. 1. Certain
Cases defined inApply
The toThe
Enquiry
tion
1.andPower
Inspection
Enquiry
and Depositories relation transteree,
the the
certihcate intimation
as of Every
ties The aand Subject and |Section right byWhere shall the to
16]. participant law Banker'sBankers'
(a) tors inThe regulations
[Section
17). depository the Without in may such issuer
re;orwriting
curities
held pant, call t he
toBoard, into
eligibility obligations the and the depository
to indemnifyBenehcial the
for
Section to
of conditions be
public
do the issuers to depository,
recover
the
prejudice Books of
specified fromshall,
upon the a
or so, Obligations the under loss time depository Books
securities
as
such
on
interestbeing Board
depository shall
provisions
to 2 s the
,within
beneficial any may, criteria whose of the such Owner orIndemnity
being Evidence
of and
be the sub-section the
due the to that case depoSItory
s by
nformation the to
the on
in issuer, by satisfied specified
securities
depositories,
same participant,
to a in i Evidence the 30
order or to shall for depository Benefhcial the due
provisions
force,
Act if as regulations,
Act, BenchcialOv may pay1ment
ository, asa in of |Section
\5\. days
owner Call admission of from to it
and sol
depository, in the that be by Depositoriesthis ngegligence (1) hte any Loss 1891,shal
were {Secton
be
are the the
relating towritinginterest it for specihed the dealt Act, inegigence Actto he
shall is Owner. on
participant indemnited
participant loss any of a Owner recep
furn1sh is Informà regulations
of with the have
depository banka \4
necesan
of of causother
tm to partu inv c by
seou. o the the oh
t t he b
,in Board
Ausng CeCasrtaines Power
Offences
Penaltyfor
raords,enquireymparnodor.buecfore therwthermanager
Whoever
abets
Companies
Offencesby 20}.boch which shall or
(Section preventtoment the is
(a) ritiesarticipant
detrimental anguiry having direFctiery or, , such owner, iInsspect
uthere , lonorto
partiairpysauntb,mit Juthorse mankye
(b)
orperiod enqui
any
Tor committed
at Where may be
the to person to ofsat1shed provided of or a
Charge
the the
duct of, time
regulations
punishable
extend
contravention
contravenes
interest
|Section19). any
market,
any
interest
securities be
made,
and
Boarindspectionbeariinspection,
ng
other
particemplipantoyee as
may beneficiaor
and the offence
by
an
investors
ofassociated
issuer, depository
may
to
itdepositorythe
being
the of that in
anthis in
to documents on shall,on
or beorof
lenquiryofperson
who relation
in
to
was
offence
of a
to
five with or or as interests
conducted
issue
affairsinvestors,
or
of
market;
it
is
enquiry Give such
the
|Section beneficial of shall inspect
the specified ion
the
ponsible
company,
years,
bye-lawsattempts of may with necessary Act, subject all the
ness
under imprisonment the or
the be the
or
such of or or if informationperson depository, partner,
was provisions partic1pant any Directions in ini to
or appropriate
securities securities investors in orderly
inspection,
or
after 181. his/her owner the depository,
it the
every this with made
thereunder to directions: matter an
committed within a
ofto, Act
contravene the making, making Secretary, order. report affairs
the the person hne, custody or
for of
market: or manner or develop of or issuer such
pany.
company has or a th1s
market
in secu such the
was the
with term Act or the any or
wno been
in 2.
Miscellaneous
2. Cognizance1. diligence proves
his any proceeded guilty as
section Chapter
a consent section offence.
any Notwithstand1ng
that been
2. Appeals
1.
tMagistrate
his Class No punishable No
bve-laws
made (b) Explanation:(apunished
) and
director,
shallsecretary
knowledge punishment
Provided well
prescribed.
the No be made Board Any
Central Company
individuals;and
Director,
partner and shall also neglect committed the
that shall of as 30
expirappeal
y Act court by court or
offence
(),
to the the
there madeperson shall includes
accordingly manager, be be connivance or where the against
that The
(Section interior the made shall deemed other the
on prevent rendert offence
Government
of
shall under, try or Board. under of in
the in means For
lhable or
ottence nothing
company,
Depositories
under a there Offences has by an thatprov1ded and
the aggrieved take a the
to othcer part company anyth1ng
22). Judical
any firelation a the anypun1shed and
od be may this this rm. hrm been offence
periadmitted to purposes[Section be be to
secretary of, of, he
comm1ssion had was contained
offence that under,cognizance At orany proceeded any or
otcommitted such shall shall Act,
with1npreter Act, Magistrate to other body guilry contained committed in
prescribed by ot save any
or by
a
the
direttor, is and under exercised person
thisaccordinglv deemed be 1996
be
if or an punishable a on Courts
of21): orattributable
company,
it such anthe ot hrm,
association orthis of in lhable
is Metropol1tan regulations against theother itthis ot Act.
preterred appeal order ot a any corporate section. manager, with 15Act in such without iable this
theretore. tregulations
ime complaint means offenceotthcer proved all it suh to to 641
the ottence such the has sub due he to be be
as to of under First of
and to an
after may the the or a
 Legislations
642 Part VI Other Business
(c) the
However, an appeal may be
admitted atter manner in
rity shall be which he distribution of dividend.
of Chapter ?30 The
the expiry ot the period
lant satIshes the Central
prescribed if the appel
Government that (1) of Section 6;
sur endered ucenrdtehrcate the
manner
|
and monetary
benefits owners;from
thecompany among beneficialreceived
t 4. If the Depositoies Act,1996 643
not preterring the (d) the manner of f of interest

wIth suchdepositanory orderfals or neglects to

he had suthcient cause for
appeal within the prescribed period.
under this section shall be
ecation in
beneficial respect creating pledgesub-se
of a
manner of creating
pledge or
ationin respect of securities heldhypoth-
the periamendod, orthe Board may within the specicompltieyd
3. Every appeal made
made in such form and shall be
accompanied Section 12; owner under security W

depository;
with a
the form revoke the make the bye-laws or
spec1fied inbye-theaslaorder
ws madeor either in
by a copv of the order appealed
such fees as may be prescribed.
4. The procedure for disposing of an
against and by

appeal shall
(e) the
conditions
respect to
ties under
and the
the issue ot
scerfuebest-ishecatctNpoeanyable l
oversea rights and obligations among the
depository, issuer, participants and benefi- |modi
Sectionficat26ons thereot, the Board thinkssuchtt with
be such as may be prescribed. (f) the
sub-section (3)of of l4;
rights and
cialowners:
manner andthe periodicityyof furnishing Removal of Dificulties
section (1) of obligatiohens Secheion
However, betore d1sposing of an appeal, the ries, n)the
appellant shall be given a reasonable opportu participants and information to the Board, issuer, and other 1. If any
provisiodinsffhculofty arises in giving ettect to the
criteria for undedepority
nity to be heard |Section 23]. (g) the eligibility Section 17: is uers persons;

rities h n)the procedure for resolving disputes

ment may, by this Act, the
order publishedCentral
n theGovern
in the
Power of Central Government to Make (2) of Secrion 17depository admis involving depository, isssuer, company, or a
gazette, make such not offictal
under
(Section 251. henefhcial owner; with the provisions
ot this Act as inconsistent
Rules
1. The Central Government may, by notification
in the offcial gazette, make rules for carrying
Power of
Depositories s Make
to
sub-sectan the procedure for proceeding against the
participant committing breach of the regu-
to be
difculty:
provisions
necessary or appear to it
expedient tor removing the
out the provisions of this Act. 1. Adepository shall, lations and prov1sions for suspension and However, no order shall be made under this
bye-laws previousByealgawrova
of the Board, with the expulsion of participants from the deposi section atter the expiry of a period ot
2. In particular, and without prejudice to the make
provisions of this tory and cancellation of agreements entered trom the
commencement
two vears
generality of the foregoing power, such rules
may provide for all or any of the following 2. In
Act and
particular, and the
generality of the without
corensgiusltaetniotns.wihthe with the depository;
in the internal control standards including
2. Every order
of this Act.
made under this section shall be
laid, as soon as poss1ble after it is
made, betore
matters, namely:
(al the time within which an appeal may be
preferred under sub-section (1) of Section 23; (a) the eligibility
prejudicesuchtobvk:the
foregoing power,
laws shall provide for: the procedure for auditing, reviewing and
monitoring. 3.
each House of Parliament
|Section 29].
Though the depository svstem has ettectively
criteria for : Where the Board considers it expedient so to do, eliminated paper-based certihcates which
(b) the form in which an appeal may be preferred,
under sub-section (3) of Section 23 and the
removal of securites in the admis ion and it may, by order in writing, direct a depository were prone to be fake, forged, and counterteit

fees payable in respect of such appeal;

(b) the conditions depository:
ties shall be subject to which the
to make any bye-laws or to amend or revoke
any bye-laws already made within such period
resulting in bad del1veries, yet alot needs to be
done to make the markets etfhcient and investor
(c) the procedure for disposing of an appeal dealt with; secun as it may specify in this behalf. friendly.
(c) the
under sub-section (4) of Section 23 eligibility
criteria for admission
person as a participant;
(Section 24). (d) the manner and procedure for demAtena.
Power of Board to Make Regulations ization of securities;
1. Without prejudice to the provisions contained in (e) the procedure tor Exercises
Section 30 of the Securities and Exchange Board depository; transactions within te
of India Act, 1992 (15 of 1992), the Board (f) the manner in which . Objective-type Questions
by notifhcation in the official gazette, make
may, securities shall be
with or withdrawn from adepository; delt 1. Beneficial owner me ans
lations consistent with the provisions of thisregu
Act (g) the procedure for ensuring (a) a person whose name is recorded as such with a depository
and the rules made thereunder to carry safeguards u
out the protect the interests of participants an! (b) any person making an issue of secur1ties
sub-section 1A of Section 12 of the SEBI Act
purposes of this Act. beneficial owners; ) a person registered as such under and which has been granted a
2. In particular, and company formed and registered under the Companies Act. 1956
without prejudice to the (h) the conditions of admission into and wt d
certificate of registration under the SEBI Act
generality of the foregoing power, such regula drawal from a participant by a beneku provisions ot the Depositories At may
tions may provide for: Government for carrving out the
OWner; smade by the Central
(a) the form in which record is to provide for Section 23
be
maintained (i) the procedure for conveying informatit preterred under sub-section () ot Section 23 andthe fees
under clause (i) of a ne time within
which an appeal may be under sub-section (3) of
(b) the form in sub-section (1 ) of Section 2; the participants and benefcial owners a (b) the form in which an appeal may be preterred,
which the certificate of dividend declaration, shareholder meti 23
payable in respect of such an appeal sub-section(4) of Section
commencement of business
under sub-section (2) of shall3;be issued and other matters of interestt tothe
kent
(c) the procedure for disposing,of an appeal under
Section Cial owners;
(d) for all or any of the above matters
 of martere 5.(a)
issuer) provisions
these
participant,
the particular. Enumerate
depository
out
issuers Registered
owner
issuer carrying
depository,
matters'.
Ouestions
(d)
4.
in
thesurrendered the participant for,
and in the BoardIssuer for provide
securities
securities
of of depository any rules certain
participants, register 1996:
Act,
be a (b) (d) (f) to makemay regulations'. Objective-type
directions provide
for
shall of as
person the a rules
for removal dematerialization to 3.
(d)
security
depositories, in with Depositories
the
tor maintaincd provideany suchsecurities Government
thesemake
such issue shall
provide and of as that
of enteredas Board to depositories
certificateshalladmission
admission therecorded Board
matters to
may be the
Legislations the Central Answers
to of depositoriesfor of following
terms
under
Board
is obligations procedure isnameissue can the
the
record the for for is of
owner?an name circumstances
the Outline the (d)
2.
the which criteria
criteria whose 'power
by
Business which the making of
by and above whose
above (a)
Beneficial
owner made
aboveby cligibility registered power
made andin manner made
eligibility
nmanner depository (e)
Depository
Act. the
Other n the
person
the
person Questions (c)
II.
Review Participant on bye-laws
tornrights the
Regulations what theDepositories
of of 1.Define
the Comment
ot Bye-lawsthe the theall isa a anya all Explain
VI thethetheall Under The
Part Who
(a)(b) ()d) (a) (b) (c) (d) (a) (b) (c) (d)
4. 2. 3. 4. 5. 1.(a)
8. 5.
644