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The Rubber (Amendment) Act, 2009

Preamble

The Rubber (Amendment) Act, 20091

[No. 4 OF 2010]

[January 21, 2010]

An Act further to amend the Rubber Act, 1947

Be it enacted by Parliament in the Sixtieth Year of the Republic of India as follows—

Prefatory Note—Statement of Objects and Reasons—

The Rubber Act, 1947 was enforced on 18th April, 1947. Over the years industry has undergone immense changes. In view of the development, suitable amendments in the provisions of the Rubber Act, 1947 are needed.

2. The provisions for registration of estates and licence for planting and replanting of rubber are redundant in the liberalised scenario. The omission of these sections will remove cumbersome restrictions. The existing procedure for assessment and collection of cess is time consuming and complex. Introduction of a self-assessment procedure in place will facilitate smooth collection and avoid delay. Enhancement of penalty for violation of the provisions of the Act and introduction of a new provision for compounding of offences will check illegal transaction and evasion of cess. Ensuring quality standards of natural rubber exported and imported as well as consumed in the domestic market is essential. A single fund in the place of the General fund and the Pool fund will be effective device for quick and smooth flow of money into the fund and it will give fresh impetus to the functioning of the Board.

3. The Rubber (Amendment) Bill, 2009, therefore, seeks to delete obsolete provisions and substituted some of the existing provisions in the Rubber Act, 1947 (XXIV of 1947) so as to further rechristen it to meet the changing scenario.

4. The Bill seeks to achieve the above objects.

——————–

Received the assent of the President of January 21, 2010 and published in the Gazette of India, Extra., Part II, Section 1, dated 22nd January, 2010, pp. 1-5, No. 5

Section 1. Short title and commencement

(1) This Act may be called the Rubber (Amendment) Act, 2009.

(2) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.

Section 2. Amendment of Section 3

In Section 3 of the Rubber Act, 1947 (24 of 1947) (hereinafter referred to as the principal Act),—

(a) After clause (g), the following clause shall be inserted, namely—

‘(ga) “processor” means a person who undertakes the processing of rubber;’;

(b) In clause (k), for the words “fifty acres”, the words “ten hectares” shall be substituted. ‘

Section 3. Amendment of Section 4

In the principal Act, in Section 4, in sub-section (3), after clause (d), the following clause shall be inserted, namely—

“(da) three members to be nominated by the Central Government of whom two shall be from the Department of Commerce and one from Department of Agriculture and Co-operation;”.

Section 4. Amendment of Section 8

In the principal Act, in Section 8,—

(i) in sub-section (2),—

(a) After clause (d), the following clause shall be inserted, namely—

“(da) improving the quality of rubber and implementing the standards for quality, marking, labelling and packing for the rubber produced or processed in, imported into or exported from, India;”;

(b) In clause (e), for the words “and manufactures”, the words “manufacturers and processors” shall be substituted;

(ii) In sub-section (3), in clause (c), for the words “half-yearly reports”, the words

“Annual report” shall be substituted.

Section 5. Substitution of new section for Sections 9, 9-A and 9-B

In the principal Act, for Sections 9,9-A and 9-B, the following section shall be substituted, namely—

“9. Rubber Development Fund.—(1) There shall be a fund to be called the Rubber Development Fund and there shall be credited,—

(a) All sums forming the funds of the Boards immediately before the commencement of the Rubber (Amendment) Act, 2009;

(b) The proceeds of cess paid to the Board by the Central Government under sub-section (7) of Section 12;

(c) Any sum of money that may be paid to the Board by way of grants or loans by the Central Government;

(d) Internal and extra budgetary resources of the Board;

(e) All moneys received and collected under Section 26-A; and

(f) Any other sum that may be levied and collected under this Act and the rules made there under.

(2) The Rubber Development Fund shall be applied—

(a) To meet the expenses of the Board;

(b) To meet the cost of the measures referred to in Section 8;

(c) To meet the expenditure incurred in the performance of its functions under this Act or the rules made there under;

(d) To meet the expenditure for rehabilitation of small growers; and

(e) For making such grants to rubber estates or for meeting the cost of such other assistance to rubber estates as the Board may think necessary for the development of such estates.”.

Section 6. Omission of Section 10

Section 10 of the principal Act shall be omitted.

Section 7. Amendment of Section 12

In the principal Act, in Section 12,—

(i) in sub-section (2),—

(a) For the words “such rubber is used.”, the words “such rubber is used or from the exporter by whom such rubber is exported:” shall be substituted;

(b) The following provisos shall be inserted, namely—

“Provided that the Central Government may, if considered necessary in the public interest, by order for reasons to be recorded in writing, exempt or reduce the duty of excise on rubber exported on such terms and conditions as it deems fit:

Provided further that the Central Government may, by notification in the Official Gazette, specify zero paisa per kilogram as the rate of duty of excise on natural rubber produced in India and procured for export by the exporters of natural rubber for the period from the 1st April, 1961 to the 31st August, 2003.”;

(ii) For sub-section (3), the following sub-section shall be substituted, namely—

“(3) Subject to the provisions of this Act, every owner, exporter or the manufacturer, as the case may be, shall pay the duty of excise to the Board in the manner and for the period referred to in sub-section (4) and, if he fails to do so, the duty may be recovered with the cost of collection and interest at such rates, as may be prescribed, from the owner, exporter or the manufacturer, as the case may be, as an arrear of the land revenue.”;

(iii) In sub-section (4) in clause (b),—

(a) For the words “fifteen days”, the words “thirty days” shall be substituted;

(b) In sub-clause (ii), for the words “rubber used”, the words “rubber acquired” shall be substituted;

(iv) In sub-section (5),—

(a) For the words “owner or manufacturer”, the words “owner, exporter or manufacturer” shall be substituted;

(b) After the words “as may be prescribed”, the following shall be inserted, namely—

“and collect the cess from the owner, exporter or the manufacturer, as the case may be, after issuing a notice and after making such enquiry as it considers necessary, with such rate of interest as fixed under sub-section (3):

Provided that where for any reason, the Board finds that an owner, exporter or manufacturer, as the case may be, has paid cess in excess of what is due from him, it shall be adjusted against the future payment, if any, from him or shall be refunded to him.”.

Section 8. Amendment of Section 13

In the principal Act, in Section 13, in sub-section (1), after the words “The Central Government may”, the words, “if it deems necessary”, shall be inserted.

Section 9. Substitution of new section for Section 17

In the principal Act, for Section 17, the following section shall be substituted, namely—

“17. Implementation of standards for quality, marking, etc., for rubber.—(1) The Board shall implement the standards for quality, marking, labelling and packing for various marketable forms of rubber, for the rubber produced or processed in, imported into or exported from, India.

(2) Any officer of the Board authorised by the Chairman may at any reasonable time inspect the rubber sold or purchased by any dealer or processor at any factory or other premises of a dealer, processor or manufacturer or exporter for the purpose of ensuring the compliance of the standards under sub-section (1).”.

Section 10. Omission of Section 18

Section 18 of the principal Act shall be omitted.

Section 11. Amendment of Section 19

In the principal Act, in Section 19, for the words and figures “Section 15 or Section 17”, the words and figures “or Section 15” shall be substituted.

Section 12. Amendment of Section 21

In the principal Act, in Section 21,—

(a) For the words “any officer of the Board may”, the words “any officer of the Board authorised by the Chairman may” shall be substituted;

(b) For the words “manufacturer, for”, the words “manufacturer or processor, for” shall be substituted.

Section 13. Insertion of new Section 22-A

In the principal Act, after Section 22, the following section shall be inserted, namely—

“22-A. Power of Central Government to issue directions to Board.— Without prejudice to the foregoing provisions of this Act, the Board shall, in the discharge of its functions and duties under this Act, be bound by such directions on questions of policy as the Central Government may give in writing to it from time to time:

Provided that the Board shall, as far as practicable, be given opportunity to express its views before any direction is given under this sub-section.

(2) The decision of the Central Government whether a question is one of the policy or not shall be final.”.

Section 14. Insertion of new Section 24-A

In the principal Act, after Section 24, the following section shall be inserted, namely—

“24-A. Power to delegate.—The Central Government may, by notification in the Official Gazette, direct that any power exercisable and functions performed by it under this Act may be exercised and performed in such cases and subject to such conditions, if any, as may be specified in the notification by such officer or authority as may be specified therein.”.

Section 15. Amendment of Section 25

In the principal Act, in Section 25, in sub-section (2)-

(a) Clause (xx) shall be omitted;

(b) After clause (xxa), the following clause shall be inserted, namely—

“(xxb) the cost of collection and the rate of interest to be recovered in case of delayed payment of duty under sub-section (3) of Section 12;”;

(c) In clause (xxi), the words and figures “or Section 17” shall be omitted.

Section 16. Insertion of new Section 25-A

In the principal Act, after Section 25, the following section shall be inserted, namely—

“25-A. Power to make regulations.—(1) The Board may, with the previous approval of the Central Government, by notification make regulations, not inconsistent with the provisions of this Act and the rules made there under, to carry out its functions.

(2) Every regulation made under sub-section (1) shall be laid before each House of Parliament.”.

Section 17. Amendment of Section 26

In the principal Act, in Section 26, in sub-section (1), for the words “one thousand rupees”, the words “five thousand rupees” shall be substituted.

Section 18. Insertion of new Section 26-A

In the principal Act, after Section 26, the following section shall be inserted, namely—

“26-A. Compounding of offences.—Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), any offence punishable under this Act may, either before the institution of prosecution or with the permission of the court after the institution of the prosecution be compounded by the Board on payment to the Board such sum of money as does not exceed the value of the goods in respect of which contravention has been committed.”.

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The Faridabad Development Corporation Act,1956

Preamble

[28th December, 1956]

An Act to provide for the establishment and regulation of a trading Corporation for the purpose of carrying on and promoting trade and industry in the town of Faridabad, assisting in the rehabilitation of displaced persons settled therein and for matters connected therewith.

 Be it enacted by Parliament in the Seventh Year of the Republic of India as follows:—

1. Short title.

This Act may be called the Faridabad Development Corporation Act, 1956.

2. Definitions.

In this Act, unless the context otherwise requires, —

 (a) “Corporation” means the Faridabad Development Corporation established under section 3;

(b) “Displaced person” means any person who, on account of the setting up of the Dominions of India and Pakistan or on account of civil disturbances or the fear of such disturbances in any area now forming part of Pakistan, has, after the 1st day of March, 1947, left, or been displaced from, his place of residence in such area and who has been subsequently residing in India;

(c) “Faridabad” means the new township at Faridabad in the district of Gurgaon in the State of Punjab the area of which is described in the Schedule;

(d) “Member” means a member of the Faridabad Development Corporation and includes its Chairman;

(e) “Prescribed” means prescribed by rules made under this Act.

3. Incorporation.

(1) With effect from such date as the Central Government may, by notification in the Official Gazette, appoint in this behalf, there shall be established a Corporation by the name of the Faridabad Development Corporation.

(2) The said Corporation shall be a body corporate having perpetual succession and a common seal, and shall by the said name sue and be sued.

 4. Constitution of the Corporation.

The Corporation shall consist of a Chairman and such other members, being not less than four and not more than eight, as the Central Government may, by notification in the Official Gazette, appoint.

5. Term and conditions of service of member.

(1) The term of office and conditions of service of the Chairman and other members shall be such as may be prescribed.

 (2) The chairman or any other member may resign his office by writing under his hand addressed to the Central Government, but he shall continue in office until the appointment of his successor is notified in the Official Gazette.

(3) A casual vacancy created by the resignation of the Chairman or any other member under sub-section (2) or for any other reason shall be filled by fresh appointment.

6. Disqualification for being appointed, or for continuing as, member of the Corporation

 A person shall be disqualified for being appointed, or for continuing as a member of the Corporation if he has, directly or indirectly, any interest in a subsisting contract mad with, or in any work being done for, the Corporation except as a shareholder (other than a director) in an incorporated company;

Provided that where he is a share holder, he shall disclose to the Central Government the nature and extent of shares held by him in such company.

7. Temporary absence of any member.

If any member of the Corporation is by infirmity or otherwise rendered temporarily incapable of carrying out his duties or is absent on leave or otherwise in circumstances not involving the vacation of his appointment, the Central Government may appoint another person to act in his place during his absence.

8. Vacancies amongst members or defect in the constitution not to invalidate acts or proceedings of the Corporation.

No act or proceeding of the Corporation shall be invalid by reason only of the existence of any vacancy amongst its members or any defect in the constitution thereof.

9. Committees of the Corporation.

The Corporation may constitute such committees for general or special purposes as the Corporation deems necessary to carry out the purposes of this Act.

10. Meetings of the Corporation.

(1) The Corporation shall meet for the transaction of business at such times and places as may be prescribed:

Provided that the Chairman may, whenever he thinks fit, and shall, upon the written requisition of not less than two members, call a special meeting.

 (2) The Chairman or, in his absence, any member chosen by the members present from among themselves, shall preside at a meeting of the Corporation.

 (3) All questions which come before any meeting of the Corporation shall be decided by majority of votes of the members present, and in the case of an equality of votes, the Chairman, or in his absence, any other person presiding, shall have a second or casting vote.

 11. Authentication of orders and other instruments of the Corporation.

 All orders and decisions of the Corporation shall be authenticated by the signature of the Chairman or any other member authorised by the Corporation in this behalf, and all other instruments issued by the Corporation shall be authenticated by the signature of the Administrator or any other officer of the Corporation authorised in like manner in this behalf

12. Appointment of Administrator and other officer of the Corporation.

 (1) There shall be an Administrator of the Corporation who shall be appointed by the Central Government.

 (2) The Administrator shall be the chief executive officer of the Corporation and all other officers of the Corporation shall be subordinate to him.

(3) The Administrator shall have the right to take part in the discussions of the Corporation or of any of its committees but shall not have the right to vote at the meetings of the Corporation or of any of its committees:

Provided that when one of the members of the Corporation is appointed under sub-section (1) as the Administrator, such Administrator shall have the rights and privileges of a member.

 (4) The Corporation may appoint such other officers as it may consider necessary for the efficient performance of its functions under this Act.

13. General duty of the Corporation.

 It shall be the general duty of the Corporation to carry on and promote trade, business and industry in Faridabad, to assist in the rehabilitation of displaced persons settled therein and to manage and develop the property of the Union vested in the Corporation.

14. Powers of the Corporation.

(1) The Corporation may exercise all such powers as may be necessary or expedient for the purpose of carrying out is functions under this Act.

(2) Without prejudice to the generality of the foregoing provision, such power shall include the power:—

(a) To acquire and hold such property, both movable and immovable, as the Corporation may deem necessary for efficiently performing its functions under this Act and to make improvements in such property and to transfer by way of sale, lease or otherwise any such property;

(b) To carry on or promote any trade, business or industry;

(c) To give financial or other assistance to persons to enable them to carry on trade, business or industry in Faridabad primarily with a view to providing employment to, and rehabilitating, displaced persons settled therein;

(d) To construct or cause to be constructed residential or other buildings and to sell or let such buildings or cause them to be sold or let, on such terms as may be prescribed;

 (e) To advance loans on such terms and for such purposes as may be prescribed;

 (f) To supply or cause to be supplied, in accordance with the law for the time being in force, electrical energy for domestic and industrial purposes at reasonable rates;

 (g) To take such other measures as the Corporation may deem necessary for the rehabilitation of displaced persons settled in Faridabad;

(h) To take such steps as may be necessary for improving the economic and social conditions of the inhabitants of Faridabad.

 (3) Nothing in this section shall affect the exercise of any power or the performance of any function by any local authority having jurisdiction in Faridabad.

15. Capital of the Corporation.

All non-recurring expenditure incurred by the Central Government or the body known as the Faridabad Development Board for and in connection with the development of Faridabad or for any of the purposes referred to in this Act upto the date of the establishment of the Corporation and declared to be capital expenditure by the Central Government shall be treated as the capital provided by the Central Government to the Corporation.

16. Grants and loans to the Corporation.

The Central Government may, after due appropriation made by Parliament by law in this behalf, make such grants and advance such loans to the Corporation as the Central Government may deem necessary for the performance of the functions of the Corporation under this Act; and all grants made and all loans advanced shall be on such terms and conditions as the Central Government may determine.

 17. Vesting of property in the Corporation.

All property, assets and funds owned or acquired by the Central Government or purporting to have been owned or acquired by the body known as the Faridabad Development Board for the purposes of the development of Faridabad or for any of the purposes referred to in this Act before the establishment of the Corporation shall, on such establishment, vest in the Corporation unless the Central Government otherwise directs in respect of any part of such property, assets or funds.

18. Repayment of capital and loan with interest.

The Corporation shall repay, at such intervals and on such terms as the Central Government may determine, the amount of capital provided under section 15 and all loans advanced under section 16 with interest at such rate as may, from time to time, be fixed by that Government and such repayment of capital or loan or payment of interest shall be deemed to be part of the expenditure of the Corporation.

19. Corporation to have rights and liabilities of the Central Government in certain cases.

(1) All rights, liabilities and obligations of the Central Government which, whether arising out of any contract or otherwise, were acquired or incurred by it in connection with any transaction for the development of Faridabad or for any of the purposes referred to in this Act before the establishment of the Corporation, shall be deemed to have been acquired or incurred by the Corporation and shall be the rights, liabilities and obligations, respectively, of the Corporation.

 (2) All suits or other legal proceedings instituted or which might but for the issue of the notification under sub-section (1) of section 3 have been instituted by or against the Central Government may be continued or instituted by or against the Corporation.

20. Fund of the Corporation.

(1) The Corporation shall have its own Fund and all receipts of the Corporation shall be carried thereto and all payments by the Corporation shall be made therefrom.

 (2) All moneys belonging to the Fund shall be deposited in such bank or invested in such manner as may be decided by the Corporation.

 21. Provision for depreciation and reserve and other funds.

(1) The Corporation shall make such provision for depreciation and for reserve and other funds as the Central Government may from time to time direct.

 (2) The management of these funds, the sums to be carried from time to time to the credit thereof and the application of the moneys comprised therein shall be determined in accordance with such directions as the Central Government may from time to time issue.

22. Power of the Corporation to spend.

The Corporation shall have power to spend such sums as it thinks fit for performing its functions under this Act, and such sums shall be treated as expenditure payable out of the Fund of the Corporation.

23. Budget.

The Corporation shall prepare, in such form and at such time each year as may be prescribed, a budget in respect of every financial year next ensuing showing the estimated receipts and expenditure, and copies thereof shall be forwarded to the Central Government.

24. Annual report.

The Corporation shall prepare in such form and at such time each year as may be prescribed an annual report giving a true and full account of its activities during the previous financial year and copies thereof shall be sent to the Central Government and the Government of the State of Punjab.

25. Accounts and audit.

(1) The Corporation shall cause to be maintained such books of account and other books in relation to its accounts in such form and in such manner as may be prescribed.

 (2) The accounts of the Corporation shall be audited at such times and in such manner as may be prescribed.

26. Amount due to the Corporation to be first charge.

(1) Notwithstanding anything contained in any other law, where a loan has been advanced to any person for the construction of a building or where a building has been transferred to any person, the amount due to the Corporation on account of the loan or transfer together with interest thereon shall be a first charge on the building so constructed or transferred.

(2) The Corporation may also take such further security as it may consider necessary for advancing any loan or for transferring any building.

27. Direction.

For the purposes of this Act, the Central Government may, from time to time, give to the Corporation such general or special directions as the Central Government thinks fit and in the performance of the functions, the Corporation shall comply with such directions.

28. Returns and reports.

The Corporation shall furnish to the Central Government such returns, statistics, accounts and other information with respect to its property or activities as the Central Government may from time to time require.

29. Mode of recovery of moneys due to the Corporation.

When any money is due to the Corporation from any person, then, without prejudice to any other mode of recovery, the Corporation may, after giving that person an opportunity of being heard, issue a certificate to the Collector of the amount due and the Collector shall proceed to recover that amount in the same manner as an arrear of land revenue.

30. Delegation of powers.

The Corporation may, by general or special order in writing, delegate to the Chairman or any other member or any officer of the Corporation, subject to such conditions and limitations (if any) as may be specified in the order, such of its powers and duties under this Act as it may deem necessary for the efficient running of the day-to-day administration of the Corporation.

31. Members and officers of the Corporation to be public servants.

 All members and officers of the Corporation shall, when acting or purporting to act in pursuance of any of the provisions of this Act, be deemed to be public servants within the meaning of section 21 of the Indian Penal Code (45 of 1860).

32. Removal of disqualification for membership of Parliament.

It is hereby declared that the office of the member of the Corporation shall not disqualify its holder for being chosen as, or for being, a member of either House of Parliament.

33. Bar of legal proceedings.

No suit or other legal proceedings shall lie against any member or officer of the Corporation in respect of anything which is good faith done or intended to be done in pursuance of this Act.

34. Validation of certain transactions.

On the establishment of the Corporation under section 3, —

(a) All action purporting to have been taken, and all transactions purporting to have been made, by or with the body known as the Faridabad Development Board (including any action or transaction by which any property, asset or right was purported to have been acquired or any liability or obligation, whether by contract or otherwise, was purported to have been incurred) shall be deemed to have bee validly and lawfully taken or made by or with the Corporation as if this Act were in force and the Corporation were in existence on the day on which such action was taken or transaction was made; and

 (b) In particular, and without prejudice to the generality of the foregoing provision, —

 (i) All property and assets vesting in the body known as the Faridabad Development Board shall vest in the Corporation;

(ii) All rights, liabilities and obligations of the body known as the Faridabad Development Board, whether arising out of any contract or otherwise, shall be the rights, liabilities and obligations, respectively, of the Corporation; and

(iii) All leases granted by, all contracts made with, and all instruments executed on behalf of, the body known as the Faridabad Development Board shall be deemed to have been granted by, made with, or executed on behalf of, the Corporation and shall have effect accordingly.

35. Power to remove difficulties.

If any doubt or difficulty arises in giving effect to the provisions of this Act, the Central Government may, by order, make such provision or give such direction, not inconsistent with the provisions of this Act, as may appear to it to be necessary or expedient for the removal of the doubt or difficulty, and the order of the Central Government, in such cases, shall be final.

36. Power to make rules.

(1) The Central Government may, by notification in the Official Gazette, make rules for carrying out the purposes 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 term of office and other conditions of service of members;

 (b) The terms and conditions of service of the Administrator and other officers of the Corporation.

(c) Meetings of the Corporation and the procedure for conducting business threat;

 (d) The intervals at which, and the terms on which, the capital provided or loan advanced by the Central Government to the Corporation may be repaid, and the rate at which interest may be paid on the capital provided or loan advanced by the Central Government;

 (e) The form and manner in which the budget and the annual report may be prepared;

 (f) The manner in which the accounts of the Corporation may be maintained and audited;

 (g) The form and manner in which returns, statistics, accounts and other information may be furnished to the Central Government;

(h) Any other matter which has to be, or may be, prescribed under this Act.

 (3) All rules made under this section shall, as soon as may be after they are made, be laid before both Houses of Parliament.

37. Schedule. See section 2 (c)

THE SCHEDULE

[See section 2 (c) ]

Areas of Faridabad

Faridabad is included within the following boundaries, namely:

North — Karkhana garden, Railway Station and Rest House, Faridabad, buildings belonging to Shrimati Sushila Devi and abadi Fetehpur Chandela

 East — Delhi-Mathura Road

South — Abadi village Majasar

West — Badkhal Band; Hill of villages Dabwa, Nawadah Koh and Daulatabad; Abadi village Saran

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The Rubber Act, 1947

ACT No.24 OF 19471

[AS ON 1995]

[18th April, 1947.]

An Act to provide for the development 2[under the control of the Union] of the rubber industry 3[***]

WHEREAS it is expedient to provide for the development 4[under the control of the Union] of the rubber industry 3[***]

It is hereby enacted as follows:-

——————–

1. The Act has been extended to Pondicherry on 1-10-1963 vide Reg. 7 of 1963, s.3 and Sch.I; and to Dadra and Nagar Haveli (w.e.f. 1-7-1965) by Reg. 6 of 1963, s.2 and Sch.I.

2. Subs. by Act 54 of 1954, s.2, for under central control.

3. Certain words omitted by s.2, Act 54 of 1954.

4. Subs. by Act 54 of 1954, s. 2, for “under central control”.

Section 1. Short title and extent

(1) This Act may be called the Rubber 1[****] Act. 1947.

(2) It extends to the whole of India 2[except the State of Jammu and Kashmir].

——————–

1. The words “(Production and Marketing)” omitted by s. 3, Act 54 of 1954.

2. Subs. by Act 3 of 1951, s.3 and Sch., for “except Part B States”.

Section 2. Declaration as to expediency of Union control

1[Declaration as to expediency of Union control. It is hereby declared that it is expedient in the public interest that the Union should take under its control the rubber industry.]

——————–

1. Subs. by Act 54 of 1954, s. 2, for the former s.

Section 3. Definitions

In this Act, unless there is anything repugnant in the subject or context,––

(a) “Board” means the 1[***] Rubber Board constituted under this Act;

(b) “Dealer” means any person who deals in rubber, whether wholesale or retail, or holds stocks or rubber, and includes the representative or agent of a dealer;

(c) “Estate” means any area administered as one unit which contains land planted with rubber plants;

2[(cc) “Executive Director” means the Executive Director appointed under this Act;]

(d) “Export ” and ” import” mean respectively taking out of, and bringing into [India] by sea, land or air;

3[(dd) “India” means the territory of India excluding the State of Jammu and Kashmir;]

(e) “Manufacturer” means any person engaged in the manufacture of any article in the making of which rubber is used;

(f) “Owner” includes any agent of an owner and a mortgagee in possession and a lessee of an estate;

(g) “Prescribed” means prescribed by rules made under this Act;

5[(ga) “processor” means a person who undertakes the processing of rubber;]

(h) “Rubber” means––

(i) Crude rubber, that is to say, rubber prepared from the leaves, bark or latex of any rubber plant;

(ii) The latex of any rubber plant, whether fluid or coagulated, in any stage of the treatment to which it is subjected during the process of conversion into rubber;

(iii) Latex (dry rubber content) in any state of concentration,

And includes scrap rubber, sheet rubber, rubber in power and al forms and varieties of crepe rubber, but does not include rubber contained in any manufactured article;

(i) “Rubber plant” includes plants, trees, shrubs or vines of any of the following:––

(i) Hevea Braziliensis (Para Rubber),

(ii) Manihot Glaziovii (Ceara Rubber),

(iii) Castilloa elastica,

(iv) Ficus elastica (Rambong), and

(v) Any other plant which the Board may, by notification in the Gazette of India, declare to be a rubber plant for the purposes of this Act;

(j) “Rubber Production Commissioner” means the Rubber Production Commissioner appointed under this Act;

4[(k) “Small grower” means an owner whose estate does not exceed 6[ten hectares] in area.]

——————–

1. The words “Indian” omitted by s. 5, Act 54 of 1954.

2. Ins. by Act 54 of 1982, s.2 (date to be notified).

3. Ins. by s. 3 and Sch., Act 54 of 1982.

4. lns. by Act 54 of 1954, S. 5.

5. Ins. By Act No. 4 of 2010 w.e.f. 21.1.2010.

6. Subs. Act No. 4 of 2010 w.e.f. 21.1.2010.

Section 4. Constitution of the Board

(1) As soon as may be after the commencement of this Act, the Central Government shall, by notification in the Official Gazette, constitute for the purposes of this Act a Board to be called 1[***] Rubber Board.

(2) The Board shall be a body corporate by the name of the 1[***] Rubber Board having perpetual succession and a common seal, with power to acquire and hold property, both movable and immovable, and to contract, and shall by the said name sue and be sued.

1[(3) The Board shall consist of-

(a) A Chairman to be appointed by the Central Government;

2[(b) Two members to represent the State of 3[Tamil Nadu], one of whom shall be a person representing rubber producing interests;

(c) Eight members to represent the State of Kerala, six of whom shall be persons representing the rubber producing interests, three of such six being persons representing the small growers;]

(d) Ten members to be nominated by the Central Government, of whom shall represent the manufacturers and four labours;

8[“(da) three members to be nominated by the Central Government of whom two shall be from the Department of Commerce and one from Department of Agriculture and Co-operation;]

(e) Three members of Parliament of whom tow shall be elected by the House of the People and one by the Council of States; 4[and]

5[(ee) The Executive Director, ex officio; and]

(f) The Rubber Production Commissioner, ex officio,

(4) The persons to represent the States of 6[Tamil Nadu] and 7[Kerala] shall be elected or nominated as may be prescribed.

(5) Any officer of the Central Government when deputed by that Government in this behalf shall have the right to attend the meetings of the Board and take part in the proceedings thereof but shall not be entitled to vote.

(6) The Board shall elect from among its members a Vice-Chairman who shall exercise such of the powers, and perform such of the functions of the Chairman as may be prescribed or as may be delegated to him by the Chairman.

(7) The members of the Board shall receive from the Board such allowances as may be prescribed.

(8) It is hereby declared that the office of member of the Board shall not disqualify its holder for being chosen as, for being a member of either House of Parliament.]

——————–

1. The word “Indian” omitted by s. 6, Act 54 of 1954.

2. Subs. by the Adaptation of Laws (No. 3) Order, 1956, for the former cls. (b) and (c).

3. Subs. by the Madras State (Alteration of Name) (Adaptation of Laws on Union Subjects) Order, 1970, for “Madras” (w.e.f. 14-1-1969). Subs. by the Madras State (Alteration of Name) (Adaptation of Laws on Union Subjects) Order, 1970, for “Madras” (w.e.f. 14-1-1969)

4. The word in brackets shall stand omitted by Act 54 of 1982, s. 3 (date to be notified).}

5. lns. by s. 3, Act 54 of 1982. (date to be notified).

6. Subs. by the Madras State (Alteration of Name) (Adaptation of Laws on Union Subjects) Order, 1970, for “Madras” (w.e.f. 14-1-1969).

7. Subs. by the Adaptation of Laws (No. 3) Order 1956, for “Travancore-Cochin”.

8. Ins. By Act No. 4 of 2010 w.e.f. 21.1.2010.

Section 5. Vacancies in the Board

(1) If any authority or body fails to make within a reasonable time any nomination which it is entitled to make under section 4, the Central Government may itself nominate a member to fill the vacancy.

(2) Where a member of the Board dies, resigns or is removed, or ceases to reside in lndia, or become incapable of acting the Central Government shall on the recommendation of the authority or body entitled to nominate the member under section 4, or where such recommendation is not made within a reasonable time, then on its own initiative, appoint a person to fill the vacancy.

(4) No act done by the Board shall be questioned on the ground merely of the existence of any vacancy in or defect in the constitution of the Board.

Section 6. Salary and allowances of Chairman

1[Salary and allowances of Chairman. 2[The Chairman] shall be entitled to such salary and allowances and be governed by such conditions of service in respect of leave, permission, provident fund and other matters as may from time to time be fixed by the Central Government { 3[and a person appointed as the part-time Chairman shall be entitled to such honorarium and allowances, if any, and such other conditions of service as may from time to time be fixed by the Central Government].

——————–

1. Subs. by Act 54 of 1954, s. 7.for the former s.

2. The words in brackets shall stand substituted as “A person appointed as the whole-time Chairman” by Act 54 of 1982, s. 4.(date to be notified).

3. lns. by s. 4, Act 54 of 1982 (date to be notified).

Section 6 A. Executive officers of the Board

1[(1) The Central Government may appoint an Executive Director to exercise such powers and perform such duties under the direction of the Board as may be prescribed or as may be delegated to him by the Chairman]

2[(1A) The Central Government shall appoint a Rubber Production Commissioner to exercise such powers and perform such duties under the direction of the Board as may be prescribed.

(2) The Central Government shall appoint a Secretary to the Board to Exercise such powers and perform such duties under the directions of the Board as may be delegated to him by the Chairman.

(3) 3[The Rubber Production Commissioner] and the Secretary to the Board shall be entitled to such salaries and allowances and be governed by such conditions of service regarding leave, pension, provident fund and other matters as may be fixed by the Central Government.

(4) 3[The Chairman] the Rubber Production Commissioner and the Secretary shall on undertake any work unconnected with their duties under this Act except with the permission of the Central Government]

——————–

1. lns. by s. 5, Act 54 of 1982 (date to be notified).

2. Sub-section (1) shall be renumbered as sub-section (1A) thereof by s. 5, ibid. (date to be notified).

3. The word in brackets shall stand substituted as “the Executive Directors, the Rubber Production Commissioner” by s. 5, Act 54 of 1982 (date to be notified).

Section 7. Committees of the Board

1[***]

(2) The Board may appoint such 2Committees as may be necessary for the efficient performance of its duties and functions under this Act.

(3) The Board shall have the power to co-opt as members of any Committee appointed under sub-section (2) such number of persons who not members of the Boards, as it may think fit.

(4) The Board may appoint and authorize agents to discharge on its behalf any of its functions in relation to the marketing or storing of rubber.

——————–

1. Sub-section (1) omitted by Act 54 of 1954

2. The word “other” omitted by Act 54 of 1954 s. 8.

Section 8. Function of the Board

(1) It shall be the duty of the Board to promote by such measure as it thinks fit the development of the rubber industry 1[***]

(2) Without prejudice to the generality of the foregoing provisions, the measures referred to therein may provide for–

(a) Undertaking assisting or encouraging scientific, technological and economic research;

(b) Training students in improved methods of planing cultivation manuring and spraying;

(c) The supply of technical advice to rubber growers;

(d) Improving the marketing of rubber;

3[(da) improving the quality of rubber and implementing the standards for quality, marking, labelling and packing for the rubber produced or processed in, imported into or exported from, India;]

(e) The collection of statistics from owners of estates, dealers 4[manufacturers and processors];

2[(f) Securing better working conditions and the provisions and improvement of amenities and incentives for workers;

(g) Carrying out any other duties which may be vested in the Board under rules made under this Act]

(3) It shall also be the duty of the Board–

(a) To advise the Central Government on all matters relating to the development of the Rubber industry including the import and export of rubber.

(b) To advise the Central Government with regard to participation in any international conference or scheme relating to rubber;

(c) To submit to the Central Government and such other authorities as may be prescribed 5[Annual report] on its activities and the working of this Act.

(d) To prepare and furnish such other reports relating to the rubber industry as may be required by the Central Government from time to time.

——————–

1. The word “so far as regards the production and marketing of rubber” omitted by s. 9, Act 54 of 1954.

2. Ins. by s. 9, Act 54 of 1954.

3. Ins. By Act No. 4 of 2010 w.e.f. 21.1.2010.

4. Subs. by Act No. 4 of 2010 w.e.f. 21.1.2010.

5. Subs. by Act No. 4 of 2010 w.e.f. 21.1.2010.

Section 8 A. Power of the Board to import rubber for sale, or to purchase in the internal market

1[Power of the Board to import rubber for sale, or to purchase in the internal market. lt shall be lawful for the Board with the previous approval of the Central Government to import rubber for sale or to purchase rubber in the internal market at such prices as the Central Government may fix.

——————–

1. lns. by s. 10, Act 54 of 1954.

Section 8 B. Consultation with the Board

Before taking any action touching the affairs of the Board under this Act, the Central Government shall. ordinarily consult the Board].

Section 9. Rubber Development Fund

1[Rubber Development Fund. (1) There shall be a fund to be called the Rubber Development Fund and there shall be credited,—

(a) All sums forming the funds of the Boards immediately before the commencement of the Rubber (Amendment) Act, 2009;

(b) The proceeds of cess paid to the Board by the Central Government under sub-section (7) of Section 12;

(c) Any sum of money that may be paid to the Board by way of grants or loans by the Central Government;

(d) Internal and extra budgetary resources of the Board;

(e) All moneys received and collected under Section 26-A; and

(f) Any other sum that may be levied and collected under this Act and the rules made there under.

(2) The Rubber Development Fund shall be applied—

(a) To meet the expenses of the Board;

(b) To meet the cost of the measures referred to in Section 8;

(c) To meet the expenditure incurred in the performance of its functions under this Act or the rules made there under;

(d) To meet the expenditure for rehabilitation of small growers; and

(e) For making such grants to rubber estates or for meeting the cost of such other assistance to rubber estates as the Board may think necessary for the development of such estates.]

——————–

1. Subs. By. Act No. 4 of 2010 w.e.f. 21.1.2010.

Section 9 A. General fund

1[General fund. (1) To the general fund shall be credited–

(a) All sums forming the funds of the Board immediately before the commencement of the Rubber (Production and Marketing) Amendment Act, 1954 (54 of 1954).

(b) All amount paid to the Board by the Central Government under sub-section (7) of section 12.

(2) The general fund shall be applied-

(a) To meet the expenses of the Board.

(b) To meet the costs of the measures referred to in section 8;

(c) To meet the expenditure incurred in the performance of its functions under this Act or under rules made thereunder; and

(d) For making such grants to rubber estates or for meting the cost of such other assistance to rubber estates as the Board may think necessary for the development of such estates.

——————–

1. lns. by s. 12, Act 54 of 1954

Section 9 B. Pool funds

(1) To the pool fund shall be credited–

(a) All sums relized by sales of rubber imported or puchased under section 8A;

(b) Any other sum which the Board may, which the previous approval of the Central Government transfer from, the general fund to the pool fund.

(2) The pool fund shall be applied only to the rehabilitation of small growers in such manner as may be prescribed].

Section 10. ***

1[***]

——————–

1. Omitted by Act No. 4 of 2010 w.e.f. 21.1.2010.

Section 11. Power to prohibit or control imports and exports of rubber

(1) The Central Government may 1by order published in the Official Gazette make for prohibiting restricting or otherwise controlling the import or export of rubber either generally or in specified classes of cases.

(2) All goods to which any order under sub-section (1) applies shall be deemed it be goods of which the import or export has been prohibit or restricted under section 19 of the Sea Customs Act, 1878 (8 of 1878), and all the provisions of that Act have effect accordingly except that section 183 thereof shall have effect as if for the word “shall” therein the word “may” were substituted.

(3) If any person contravenes any order made under sub-section (1) he shall without prejudice to any confiscation or penalty to which he may be liable under the provisions of the Sea Customs Act, 1878 (8 of 1878) as applied by sub-section (2), be punished with imprisonment for a term which may extend to one year or with fine or with both.

——————–

1. The words “after consulting the Board” omitted by Act 54 of 1954 s. 13.

Section 12. Imposition of new rubber cess

1[Imposition of new rubber cess. (1) With effect from such date as the Central Government may by notification in the Official Gazette appoint there shall be levied as a cess for the purposes of this Act a duty of excise on all rubber produced in lndia production in India at such rate not exceeding 2[two rupees] per kilogram of rubber so produced as the Central Government may fix.

(2) The duty of excise levied under sub-section (1) shall be collected by the Board in accordance with rules made in this behalf either from the owner of the estate on which the rubber is produced or from the manufacturer by whom 3[such rubber is used or from the exporter by whom such rubber is exported].

4[“Provided that the Central Government may, if considered necessary in the public interest, by order for reasons to be recorded in writing, exempt or reduce the duty of excise on rubber exported on such terms and conditions as it deems fit:

Provided further that the Central Government may, by notification in the Official Gazette, specify zero paisa per kilogram as the rate of duty of excise on natural rubber produced in India and procured for export by the exporters of natural rubber for the period from the 1st April, 1961 to the 31st August, 2003.]

5[“(3) Subject to the provisions of this Act, every owner, exporter or the manufacturer, as the case may be, shall pay the duty of excise to the Board in the manner and for the period referred to in sub-section (4) and, if he fails to do so, the duty may be recovered with the cost of collection and interest at such rates, as may be prescribed, from the owner, exporter or the manufacturer, as the case may be, as an arrear of the land revenue.
]
(4) For the purpose of enabling the Board to assess the amount of the duty of excise levied under this section–

(a) The Board shall, by notification in the official Gazette fix a period in respect of which assessment shall be made and

(b) Without prejudice to the provisions of section 20, every owner and every manufacturer shall furnish to the Board a return not later than 6[thirty days] after the expiry of the period to which the return relates stating,–

(i) In the case of an owner the total quantity of rubber produced on the estate in each such period:

Provided that in respect that in respect of an estate situated only partly in lndia the owner shall in the said return show separately the quantity of rubber produced within and outside India;

(ii) In the case of a manufacturer the total quantity of 6[rubber acquired] by him in such period out of the rubber produced in India.

(5) If any 6[owner, exporter or manufacturer] fails to furnish within the time prescribed the return referred to in sub-section (4) or furnishes a return which the Board has reason to believe is incorrect or defective the Board the Board may assess the amount of the duty of excise in such manner as may be prescribed.

7[and collect the cess from the owner, exporter or the manufacturer, as the case may be, after issuing a notice and after making such enquiry as it considers necessary, with such rate of interest as fixed under sub-section (3):

Provided that where for any reason, the Board finds that an owner, exporter or manufacturer, as the case may be, has paid cess in excess of what is due from him, it shall be adjusted against the future payment, if any, from him or shall be refunded to him.]

(6) Any person aggrieved by an assessment made under this section may within three months of the service of the notice under sub-section (3) apply to the District Judge for the cancellation or modification of the assessment and the District Judge shall after giving the Board an opportunity of being heard pass such order (which shall be final) as he thinks proper.

(7) The proceeds of the duty of excise collected under this section reduced by the cost of collection as determined by the Central Government shall first be credited to the Consolidated Fund of lndia and then be paid by the Central Government to the Board for being utilised for the purpose of this Act, if parliament by appropriation made by law in this behalf so provides.]

——————–

1. Subs. by Act 21 of 1960, s. 2, for s. 12 (w.e.f. 1-11-1960).

2. Subs. by Act 33 of 1964 s. 2, for “fifty naye paise”.

3. Subs. by Act No. 4 of 2010 w.e.f. 21.1.2010.

4. Ins. By Act No. 4 of 2010 w.e.f. 21.1.2010.

5. Subs. by Act No. 4 of 2010 w.e.f. 21.1.2010.

6. Subs. by Act No. 4 of 2010 w.e.f. 21.1.2010.

7. Ins. By Act No. 4 of 2010 w.e.f. 21.1.2010.

Section 13. Power to fix maximum and minimum prices for sale of rubber

(1) The Central Government may 3[if it deems necessary] 1by order 2published in the Official Gazette fix the maximum price or the minimum price pr the maximum and minimum prices to be charged in the course of a business of any class specified in the order for rubber of any description so specified.

(2) Any such order may fix different maximum or minimum prices to be charged in the course of business of different classes for the same description of rubber.

(3) If any person buys or sells, or agrees to buy or sell at a price which is more than the maximum price or less than the minimum price fixed under sub-section (1) in that behalf he shall be punishable with imprisonment for a term which may extend to one year or with fine or with both.

——————–

1. The word “after consulting the Rubber Price Advisory Committee constituted under sub-section (1) of section 7” omitted by Act 54 of 1954 s. 15.

2. For such orders, see Gazette of India 1947, Pt. l, p. 1380 and ibid Extraordinary, p. 1383.

3. Ins. By Act No. 4 of 2010 w.e.f. 21.1.2010.

Section 14. Licensing of transactions in rubber

No person shall sell or otherwise dispose of and no person shall buy or otherwise acquire rubber except under and in accordance with the terms of a general or special licence issued by the Board.

1[****]

——————–

1. Proviso omitted by Act 50 of 1949, s. 2.

Section 15. Provisions regarding licences under section 14

(1) Every general licence issued under section 14 shall be published by the Board in the Gazette of lndia and in such newspapers as the Board may direct.

(2) A special licence issued under section 14 shall be valid only for such period as may be specified therein:

Provided that the Board may from time to time extend the period of validity of any such licence

(3) The Board may at any time for reasons to be recorded by it in writing revoke a special licence granted under section 14, and no such revocation it shall be returned to the Board by the person to whom it was issued.

(4) No application for a special licence made by a person who was carrying on business as a dealer or manufacturer immediately before the commencement of this Act shall be rejected by the Board except for special reason to be recorded in writing.

Section 15. Provisions regarding licences under section 14

(1) Every general licence issued under section 14 shall be published by the Board in the Gazette of lndia and in such newspapers as the Board may direct.

(2) A special licence issued under section 14 shall be valid only for such period as may be specified therein:

Provided that the Board may from time to time extend the period of validity of any such licence

(3) The Board may at any time for reasons to be recorded by it in writing revoke a special licence granted under section 14, and no such revocation it shall be returned to the Board by the person to whom it was issued.

(4) No application for a special licence made by a person who was carrying on business as a dealer or manufacturer immediately before the commencement of this Act shall be rejected by the Board except for special reason to be recorded in writing.

Section 17. Implementation of standards for quality, marking, etc., for rubber

1[Implementation of standards for quality, marking, etc., for rubber. (1) The Board shall implement the standards for quality, marking, labelling and packing for various marketable forms of rubber, for the rubber produced or processed in, imported into or exported from, India.

(2) Any officer of the Board authorised by the Chairman may at any reasonable time inspect the rubber sold or purchased by any dealer or processor at any factory or other premises of a dealer, processor or manufacturer or exporter for the purpose of ensuring the compliance of the standards under sub-section (1).]

——————–

1. Subs. by Act No. 4 of 2010 w.e.f. 21.1.2010.

Section 18. ***

1[***]

——————–

1. Omitted by Act No. 4 of 2010 w.e.f. 21.1.2010.

Section 19. Fees for special licences

The Board may levy such fees as may be prescribed for the issue and renewal of special licences under section 14, 1[or Section 15].

——————–

1. Subs. by Act No. 4 of 2010 w.e.f. 21.1.2010.

Section 20. Submission or returns and maintenance of accounts

Subject to such exception as may be prescribed every owner every manufacturer and every holder of a special licence issue under section 14 not being an owner or a manufacturer, shall-

(a) Submit to the Board such returns at such times, in such form, and containing such particulars, as mar be prescribed.

(b) Maintain true and correct accounts and other records pertaining to his estate or business as the case may be in such form as may be prescribed;

1[(c) Permit any person authorized in this behalf by the Central Government or by the Board or any member of the Board authorized by the Chairman in writing or any officer of the Board to inspect the account and records referred to in clause (b)]

Section 21. Inspection of land and premises

1[Inspection of land and premises. Any person authorized in this behalf by the Central Government or by the Board or any member authorized by the Chairman in writing or 2[any officer of the Board authorised by the Chairman may] at any reasonable time inspect any place of business of a dealer or any factory or other premises of a 2[manufacturer or processor, for] the purpose of verifying any statement or return submitted under this Act or for any other purposes of this Act]

——————–

1. Subs. by Act 54 of 1954, s. 17.

2. Subs. by Act No. 4 of 2010 w.e.f. 21.1.2010.

Section 22. Control by the Central Government

(1) All acts of the Board shall be subject to the control of the Central Government which may cancel suspend or modify as it think fir any action taken by the Board.

(2) The records of the Board shall be open to inspection at all reasonable times by any officer authorized in this behalf by the Central Government.

Section 22 A. Power of Central Government to issue directions to Board

1[Power of Central Government to issue directions to Board. Without prejudice to the foregoing provisions of this Act, the Board shall, in the discharge of its functions and duties under this Act, be bound by such directions on questions of policy as the Central Government may give in writing to it from time to time:

Provided that the Board shall, as far as practicable, be given opportunity to express its views before any direction is given under this sub-section.

(2) The decision of the Central Government whether a question is one of the policy or not shall be final.]

——————–

1. Ins. By Act No. 4 of 2010 w.e.f. 21.1.2010.

Section 23. Appeal

Any person aggrieved by an order of the Board refusing to issue or renew or revoking a special licence under the provisions of section 14, section 15 or section 17 may, within sixty days of the making of the order and no payment of the prescribed fee, appeal to the Central Government and the decision of the Central Government thereon, and subject only to such decision the order of the board shall be final and shall not be called in question in any court.

Section 24. Accounts of the Board

(1) The Board shall keep such accounts in such manner and in such form as may be prescribed of all money received and expended by it.

(2) The Board shall cause the accounts to be audited annually by auditors appointed by the Central Government and the auditors shall have the power to disallow any item of expenditure which in their opinion has not been properly incurred under this Act.

(3) The Central Government may, on the application of the Board, allow any item of expenditure disallowed by the auditors under sub-section (2).

Section 24 A. Power to delegate

1[Power to delegate. The Central Government may, by notification in the Official Gazette, direct that any power exercisable and functions performed by it under this Act may be exercised and performed in such cases and subject to such conditions, if any, as may be specified in the notification by such officer or authority as may be specified therein.]

——————–

1. Ins. By Act No. 4 of 2010 w.e.f. 21.1.2010.

Section 25. Power of Central Government to make rules

(1) The Central Government may, by notification in the Official Gazette make 1rules to carry out the purpose of this Act.

2[(2) In particular and without prejudice to the generality of the foregoing power rules made under this section may provide for all or any of the following matters namely:-

(i) Principles regulating the nomination of members of the Board by the Central Government under clause (d) of Sub-section (3) of section 4, and the election or nomination of the members referred to in clause (b) and (C) thereof:

Provided that before making any nomination in the exercise of its powers the Central Government shall call for panel of names from the respective associations recognised by it of the interest referred to in clause (d);

(ii) The term of office of members of the Board the circumstances in which and the authority by which member may be removed and the filling of casual vacancies in the Board.

(iii) The procedure to be followed at meetings of the Board and at committees thereof for the conduct of business and the number of members which shall form, a quorum at any meeting;

(iv) The maintenance by the Board of records of business transacted by the Board and the submission of copies thereof to the Central Government;

(v) The holding of a minimum number of meetings of the Board every year;

(vi) The powers of the Boards its Chairman and committees thereof with respect to the incurring of expenditure and the powers and duties of 2[the Executive Director] the Rubber Production Commissioner and the Secretary of the Board;

(vii) The conditions subject to which the Board may incur expenditure outside lndia;

(viii) The preparation of budget estimates of receipts and expenditure of the Board and the authority by which the estimates are to be sanctioned;

(ix) The maintenance of the accounts of income and expenditure of the Board and the audit of such accounts;

(x) The deposit of the funds of the Board in banks and the investment of such funds;

(xi) The re-appropriation of the estimated saving from any budget head to any other budget head;

(xii) The conditions subject to which the board may borrow funds;

(xiii) The conditions subject to which and the manner in which contracts may be entered into by or on behalf of the Board.

(xiv) The delegation to committees or the chairman or vice-chairman or members or officers of the Board of any of the powers and duties of the Board under this Act;

(xv) The staff which may be employed by the Board and the pay and allowances and leave and other conditions of service of officers and other employees of the Board;

(xvi) The travelling and other allowances of members of the Board and of committees thereof;

(xvii) The purpose for which the funds of the Board may be expended;

(xviii) The maintenance of the registers and other records of the Board and of its various committees;

(xix) The collection of any information or statistics in respect of rubber or any product of rubber;

6[***]

3[(xxa) The cases and circumstances in which the duty of excise under section 12 shall be payable by the owner and the manufacturers respectively the manner in which the duty may be assessed paid or collected the regulation of the production manufacture transport or sale of rubber in so far as such regulation is necessary for the proper levy payment on collection of the duty;]

7[“(xxb) the cost of collection and the rate of interest to be recovered in case of delayed payment of duty under sub-section (3) of Section 12]

(xxi) The form of application for special licences under section 14 8[***] the fees for the grant or renewal of such licences and the forms of such licences;

(xxii) The manner in which rubber shall be graded and marketed;

(xxiii) The fee payable on appeals under section 23;

(xxiv) Any other matter which is to be or may be prescribed.

4[(3) Every rule made under this section 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 5[two successive sessions and if before the expiry of the session in which it is so laid or the session immediately following] both Houses agree of making any modification in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modification 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.]

——————–

1. For the Rubber (Production and Marketing) Rules 1947 See Gazette of lndia 1947 Extraordinary p. 1241.

2. Subs. by Act 54 of 1954 s. 18, for the former sub-section.

3. lns. by Act 21 of 1960, s. 3 (w.e.f. 1-11-1960).

4. Subs. by s. 3. Act 21 of 1960 sub-section (3) (w.e.f. 1-11-1960)

5. The word in bracket shall stand substituted as “two or more successive session, and if, before the expiry of the session immediately following the session or the successive session aforesaid” by Act 54 of 1982.s. 6 (date to be notified).

6. Omitted by Act No. 4 of 2010 w.e.f. 21.1.2010.

7. Ins. by Act No. 4 of 2010 w.e.f. 21.1.2010.

8. Omitted by Act No. 4 of 2010 w.e.f. 21.1.2010.

Section 25 A. Power to make regulations

1[Power to make regulations. (1) The Board may, with the previous approval of the Central Government, by notification make regulations, not inconsistent with the provisions of this Act and the rules made there under, to carry out its functions.

(2) Every regulation made under sub-section (1) shall be laid before each House of Parliament.]

——————–

1. Ins. By Act No. 4 of 2010 w.e.f. 21.1.2010.

Section 26. Penalties

1[(1)] If any person-

(a) Contravenes any provisions of this Act, other than section 11 or section 13 or any rule made under this Act, or

(b) In any report or return to be furnished under this Act, makes any Statement which is false and which he knows to be false or does not believe to be true or

(c) Obstructs any officer of the Board in the discharge of any duty imposed on or entrusted to him by or under this Act, or

(d) Having the control or custody of any account book or other record, fails to produce such books or record when required by any authorized officer to do so.

He shall be punishable with imprisonment for a term which may extend to one year or with fine which may extend to 3[five thousand rupees] or with both.

2[(2) If the person committing any offence under sub-section (1) is 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 exercise all due diligence to prevent the commission of such offence.

(3) Notwithstanding anything contained in sub-section (2), where and offence under sub-section (1) 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 or manager secretary or other officer of the company such director manager secretary or other officer shall also be deemed to be guilty of that 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].

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1. S. 26 was renumbered as sub-section (1) of that Section by Act 54 of 1954, s. 19.

2. lns. By s. 19, Act 54 of 1954.

3. Subs. by Act No. 4 of 2010 w.e.f. 21.1.2010.

Section 26 A. Compounding of offences

1[Compounding of offences. Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), any offence punishable under this Act may, either before the institution of prosecution or with the permission of the court after the institution of the prosecution be compounded by the Board on payment to the Board such sum of money as does not exceed the value of the goods in respect of which contravention has been committed.]

——————–

1. Ins. By Act No. 4 of 2010 w.e.f. 21.1.2010.

Section 27. Procedure for prosecutions

No prosecution for any offence punishable under this Act shall be instituted except by or with the consent of the Central Government or the Board.

Section 27 A. Jurisdiction of Courts

1[Jurisdiction of Courts. No Court inferior to that of a Presidency Magistrate or a Magistrate of the first class shall try any offence punishable under this Act].

——————–

1. lns. by s. 20, Act 54 of 1954.

Section 28. Bar of legal proceedings

No suit, prosecution or other legal proceedings shall lie against the Board or any officer of the Board for anything in good faith done or intended to be done under this Act.

Section 29. Temporary powers of the Central Government

Rep. by the Rubber (Production and Marketing) Amendment Act, 1954 (54 of 1954) s. 21

Bydeb

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002

Section 1. Short title, extent and commencement

[Act No. 2 of 2002]

An Act to regulate securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto.

Be it enacted by Parliament in the Fifty-third Year of the Republic of India as follows :—

(1) This Act may be called the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

(2) It extends to the whole of India.

(3) It shall be deemed to have come into force on the 21st day of June, 2002.

Section 2. Definitions

(1) In this Act, unless the context otherwise requires,—

(a) “Appellate Tribunal” means a Debts Recovery Appellate Tribunal established under sub-section (1) of section 8 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993);

(b) “asset reconstruction” means acquisition by any securitisation company or reconstruction company of any right or interest of any bank or financial institution in any financial assistance for the purpose of realisation of such financial assistance;

(c) “bank” means—

(i) a banking company; or

(ii) a corresponding new bank; or

(iii) the Slate Bank of India; or

(iv) a subsidiary bank; or

(v) such other bank which the Central Government may, by notification, specify for the purposes of this Act;

(d) “banking company” shall have the meaning assigned to it in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);

(e) “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);

(f) “borrower” means any person who has been granted financial assistance by any bank or financial institution or who has given any guarantee or created any mortgage or pledge as security for the financial assistance granted by any bank or financial institution and includes a person who becomes borrower of a securitisation company or reconstruction company consequent upon acquisition by it of any rights or interest of any bank or financial institution in relation to such financial assistance;

(g) “Central Registry” means the registry set up or cause to be set up under sub-section (1) of section 20;

(h) “corresponding new bank” shall have the meaning assigned to it in clause (da) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);

1[(ha) “debt” shall have the meaning assigned to it in clause (g) of Section 2 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993)];

(i) “Debts Recovery Tribunal” means the Tribunal established under sub-section (1) of section 3 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993);

(j) “default” means non-payment of any principal debt or interest thereon or any other amount payable by a borrower to any secured creditor consequent upon which the account of such borrower is classified as non-performing asset in the books of account of the secured creditor 2[***];

(k) “financial assistance” means any loan or advance granted or any debentures or bonds subscribed or any guarantees given or letters of credit established or any other credit facility extended by any bank or financial institution;

(l) “financial asset” means debt or receivables and includes—

(i) a claim to any debt or receivables or part thereof, whether secured or unsecured; or

(ii) any debt or receivables secured by, mortgage of, or charge on, immovable property; or

(iii) a mortgage, charge, hypothecation or pledge of movable property; or

(iv) any right or interest in the security, whether full or part underlying such debt or receivables; or

(v) any beneficial interest in property, whether movable or immovable, or in such debt, receivables, whether such interest is existing, future, accruing, conditional or contingent; or

(vi) any financial assistance;

(m) “financial institution” means—

(i) a public financial institution within the meaning of section 4A of the Companies Act, 1956 (1 of 1956);

(ii) any institution specified by the Central Government under sub-clause (n) of clause (h) of section 2 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993);

(iii) the International Finance Corporation established under the International Finance Corporation (Status, Immunities and Privileges) Act, 1958 (42 of 1958);

(iv) any other institution or non-banking financial company as defined in clause (f) of section 45-1 of the Reserve Bank of India Act, 1934 (2 of 1934), which the Central Government may, by notification, specify as financial institution for the purposes of this Act;

(n) “hypothecation” means a charge in or upon any movable property, existing or future, created by a borrower in favour of a secured creditor without delivery of possession of the movable property to such creditor, as a security for financial assistance and includes floating charge and crystallization of such charge into fixed charge on movable property;

(o) “non-performing asset” means an asset or account of a borrower, which has been classified by a bank or financial institution as substandard, doubtful or loss asset:-

3[(a) in case such bank or financial institution is administered or regulated by any authority or body established, constituted or appointed by any law for the time being in force, in accordance with the directions or guidelines relating to assets classifications issued by such authority or body;

(b) in any other case, in accordance with the directions or guidelines relating to assets classifications issued by the Reserve Bank;]”

(p) “notification” means a notification published in the Official Gazette;

(q) “obliger” means a person liable to the originator, whether under a contract or otherwise, to pay a financial asset or to discharge any obligation in respect of a financial asset, whether existing, future, conditional or contingent and includes the borrower;

(r) “originator” means the owner of a financial asset which is acquired by a securitisation company or reconstruction company for the purpose of securitisation or asset reconstruction;

(s) “prescribed” means prescribed by rules made under this Act;

(t) “property” means—

(i) immovable property;

(ii) movable property;

(iii) any debt or any right to receive payment of money, whether secured or unsecured;

(iv) receivables, whether existing or future;

(v) intangible assets, being know-how, patent, copyright, trade mark, licence, franchise or any other business or commercial right of similar nature;

(u) “qualified institutional buyer” means a financial institution, insurance company, bank, state financial corporation, state industrial development corporation, 4[trustee or securitisation company or reconstruction company which has been granted a certificate of registration under sub-section (4) of Section 3 or any asset management company making investment on behalf of mutual fund] or a foreign institutional investor registered under the Securities and Exchange Board of India Act, 1992 (15 of 1992) or regulations made thereunder, or any other body corporate as may be specified by the Board;

(v) “reconstruction company” means a company formed and registered under the Companies Act, 1956 (1 of 1956) for the purpose of asset reconstruction;

(w) “Registrar of Companies” means the Registrar defined in clause (40) of section 2 of the Companies Act, 1956 (1 of 1956);

(x) “Reserve Bank” means the Reserve Bank of India constituted under section 3 of the Reserve Bank of India Act, 1934 (2 of 1934);

(y) “scheme” means a scheme inviting subscription to security receipts proposed to be issued by a securitisation company or reconstruction company under that scheme;

(z) “securitisation” means acquisition of financial assets by any securitisation company or reconstruction company from any origin nator whether by raising of funds by such securitisation company or reconstruction company from qualified institutional buyers by issue of security receipts representing undivided interest in such financial assets or otherwise;

(za) “securitisation company” means any company formed and registered under the Companies Act, 1956 (1 of 1956) for the purpose of securitisation;

(zb) “security agreement” means an agreement, instrument or any other document or arrangement under which security interest is created in favour of the secured creditor including the creation of mortgage by deposit of title deeds with the secured creditor;

(zc) “secured asset” means the property on which security interest is created;

(zd) “secured creditor” means any bank or financial institution or any consortium or group of banks or financial institutions and includes—

(i) debenture trustee appointed by any bank or financial institution; or

5[(ii) securitisation company or reconstruction company, whether acting as such or managing a trust set up by such securitisation company or reconstruction company for the securitisation or reconstruction, as the case may be; or].”

(iiii) any other trustee holding securities on behalf of a bank or financial institution,

in whose favour security interest is created for due repayment by any borrower of any financial assistance;

(ze) “secured debt” means a debt which is secured by any security interest;

(zf) “security interest” means right, title and interest of any kind whatsoever upon property, created in favour of any secured creditor and includes any mortgage, charge, hypothecation, assignment other than those specified in section 31;

(zg) “security receipt” means a receipt or other security, issued by a securitisation company or reconstruction company to any qualified institutional buyer pursuant to a scheme, evidencing the purchase or acquisition by the holder thereof, of an undivided right, title or interest in the financial asset involved in securitisation;

(zh) “sponsor” means any person holding not less than ten per cent of the paid-up equity capital of a securitisation company or reconstruction company;

(zi) “State Bank of India” means the State Bank of India constituted under section 3 of the State Bank of India Act, 1955 (23 of 1955);

(zj) “subsidiary bank” shall have the meaning assigned to it in clause (k) of section 2 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959).

(2) Words and expressions used and not defined in this Act but defined in the Indian Contract Act, 1872 (9 of 1872) or the Transfer of Property Act, 1882 (4 of 1882) or the Companies Act, 1956 (1 of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992) shall have the same meanings respectively assigned to them in those Acts.

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1. Inserted by Act No. 30 of 2004 w.e.f. 29-12-2004.

2. The words “in accordance with the directions or guidelines issued by the Reserve Bank” Omitted by Act No. 30 of 2004 w.e.f. 29-12-2004.

3. Subs. by Act No. 30 of 2004 w.e.f. 29-12-2004.

4. Subs. by Act No. 30 of 2004 w.e.f. 29-12-2004.

5. Subs. by Act No. 30 of 2004 w.e.f. 29-12-2004.

Section 3. Registration of securitisation companies or reconstruction companies

(1) No securitisation company or reconstruction company shall commence or carry on the business of securitisation or asset reconstruction without—

(a) obtaining a certificate of registration granted under this section; and

(b) having the owned fund of not less than two crore rupees or such other amount not exceeding fifteen per cent of total financial assets acquired or to be acquired by the securitisation company or reconstruction company, as the Reserve Bank may, by notification, specify:

Provided that the Reserve Bank may, by notification, specify different amounts of owned fund for different class or classes of securitisation companies or reconstruction companies:

Provided further that a securitisation company or reconstruction company, existing on the commencement of this Act, shall make an application for registration to the Reserve Bank before the expiry of six months from such commencement and notwithstanding anything contained in this sub-section may continue to carry on the business of securitisation or asset reconstruction until a certificate of registration is granted to it or, as the case may be, rejection of application for registration is communicated to it.

(2) Every securilisation company or reconstruction company shall make an application for registration to the Reserve Bank in such form and manner as it may specify.

(3) The Reserve Bank may, for the purpose of considering the application for registration of a securitisation company or reconstruction company to commence or carry on the business of securitisation or asset reconstruction, as the case may be, require to be satisfied, by an inspection of records or books of such securitisation company or reconstruction company, or otherwise, that the following conditions are fulfilled, namely:—

(a) that the securitisation company or reconstruction company has not incurred losses in any of the three preceding financial years;

(b) that such securitisation company or reconstruction company has made adequate arrangements for realisation of the financial assets acquired for the purpose of securitisation or asset reconstruction and shall be able to pay periodical returns and redeem on respective due dates on the investments made in the company by the qualified institutional buyers or other persons;

(c) that the directors of securitisation company or reconstruction company have adequate professional experience in matters related to finance, securitisation and reconstruction;

(d) that the board of directors of such securitisation company or reconstruction company does not consist of more than half of its total number of directors who are either nominees of any sponsor or associated in any manner with the sponsor or any of its subsidiaries;

(e) that any of its directors has not been convicted of any offence involving moral turpitude;

(f) that a sponsor, is not a holding company of the securitisation company or reconstruction company, as the case may be, or, does not otherwise hold any controlling interest in such securitisation company or reconstruction company;

(g) that securitisation company or reconstruction company has complied with or is in a position to comply with prudential norms specified by the Reserve Bank.

1[(h) that securitisation company or reconstruction company has complied with one or more conditions specified in the guidelines issued by the Reserve Bank for the said purpose.]

(4) The Reserve Bank may, after being satisfied that the conditions specified in sub-section (3) are fulfilled, grant a certificate of registration to the securitisation company or the reconstruction company to commence or carry on business of securitisation or asset reconstruction, subject to such conditions, which it may consider, fit to impose.

(5) The Reserve Bank may reject the application made under sub-section (2) if it is satisfied that the conditions specified in sub-section (3) are not fulfilled:

Provided that before rejecting the application, the applicant shall be given a reasonable opportunity of being heard.

(6) Every securitisation company or reconstruction company, shall obtain prior approval of the Reserve Bank for any substantial change in its management or change of location of its registered office or change in its name:

Provided that the decision of the Reserve Bank, whether the change in management of a securitisation company or a reconstruction company is a substantial change in its management or not, shall be final.

Explanation.—For the purposes of this section, the expression “substantial change in management” means the change in the management by way of transfer of shares or amalgamation or transfer of the business of the company.

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.1. Inserted by Act No. 30 of 2004 w.e.f. 29-12-2004.

Section 4. Cancellation of certificate of registration

(1) The Reserve Bank may cancel a certificate of registration granted to a securitisation company or a reconstruction company, if such company—

(a) ceases to carry on the business of securitisation or asset reconstruction; or

(b) ceases to receive or hold any investment from a qualified institutional buyer; or

(c) has failed to comply with any conditions subject to which the certificate of registration has been granted to it; or

(d) at any time fails to fulfil any of the conditions referred to in cJauses (a) to (g) of sub-section (3) of section 3; or

(e) fails to—

(i) comply with any direction issued by the Reserve Bank under the provisions of this Act; or

(ii) maintain accounts in accordance with the requirements of any law or any direction or order issued by the Reserve Bank under the provisions of this Act; or

(iii) submit or offer for inspection its books of account or other relevant documents when so demanded by the Reserve Bank; or

(iv) obtain prior approval of the Reserve Bank required under subsection (6) of section 3:

Provided that before cancelling a certificate of registration on the ground that the securitisation company or reconstruction company has failed to comply with the provisions of clause (c) or has failed to fulfil any of the conditions referred to in clause (d) or sub-clause (iv) of clause (e), the Reserve Bank, unless it is of the opinion that the delay in cancelling the certificate of registration granted under sub-section (4) of section 3 shall be prejudicial to the public interest or the interests of the investors or the securitisation company or the reconstruction company, shall give an opportunity to such company on such terms as the Reserve Bank may specify for taking necessary steps to comply with such provisions or fulfilment of such conditions.

(2) A securitisation company or reconstruction company aggrieved by the order of 1[***] cancellation of certificate of registration may prefer an appeal, within a period of thirty days from the date on which 2[such order of cancellation] is communicated to it, to the Central Government:

Provided that before rejecting an appeal such company shall be given a reasonable opportunity of being heard.

(3) A securitisation company or reconstruction company, which is holding investments of qualified institutional buyers and whose application for grant of certificate of registration has been rejected or certificate of registration has been cancelled shall, notwithstanding such rejection or cancellation, be deemed to be a securitisation company or reconstruction company until it repays the entire investments held by it (together with interest, if any) within such period as the Reserve Bank may direct.

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1. The words rejection of application for registration or Omitted by Act No. 30 of 2004 w.e.f. 29-12-2004.

2. Subs. by Act No. 30 of 2004 w.e.f. 29-12-2004.

Section 5. Acquisition of rights or interest in financial assets

(1) Notwithstanding anything contained in any agreement or any other law for the time being in force, any securitisation company or reconstruction company may acquire financial assets of any bank or financial institution,—

(a) by issuing a debenture or bond or any other security in the nature of debenture, for consideration agreed upon between such company and the bank or financial institution, incorporating therein such terms and conditions as may be agreed upon between them; or

(b) by entering into an agreement with such bank or financial institution for the transfer of such financial assets to such company on such terms and conditions as may be agreed upon between them.

(2) If the bank or financial institution is a lender in relation to any financial assets acquired under sub-section (1) by the securitisation company or the reconstruction company, such securitisation company or reconstruction company shall, on such acquisition, be deemed to be the lender and all the rights of such bank or financial institution shall vest in such company in relation to such financial assets.

(3) Unless otherwise expressly provided by this Act, all contracts, deeds, bonds, agreements, powers-of-attorney, grants of legal representation, permissions, approvals, consents or no-objections under any law or otherwise and other instruments of whatever nature which relate to the said financial asset and which are subsisting or having effect immediately before the acquisition of financial asset under sub-section (1) and to which the concerned bank or financial institution is a party or which are in favour of such bank or financial institution shall, after the acquisition of the financial assets, be of as full force and effect against or in favour of the securitisation company or reconstruction company, as the case may be, and may be enforced or acted upon as fully and effectually as if, in the place of the said bank or financial institution, securitisation company or reconstruction company, as the case may be, had been a party thereto or as if they had been issued in favour of securitisation company or reconstruction company, as the case may be.

(4) If, on the date of acquisition of financial asset under sub-section (1), any suit, appeal or other proceeding of whatever nature relating to the said financial asset is pending by or against the bank or financial institution, save as provided in the third proviso to sub-section (1) of section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986), the same shall not abate, or be discontinued or be, in any way, prejudicially affected by reason of the acquisition of financial asset by the securitisation company or reconstruction company, as the case may be, but the suit, appeal or other proceeding may be continued, prosecuted and enforced by or against the securitisation company or reconstruction company, as the case may be.

Section 5 A. Transfer of pending applications to any one of Debts Recovery Tribunals in certain cases

1[Transfer of pending applications to any one of Debts Recovery Tribunals in certain cases. (1) If any financial asset, of a borrower acquired by a securitisation company or reconstruction company, comprise of secured debts of more than one bank or financial institution for recovery of which such banks or financial institutions has filed applications before two or more Debts Recovery Tribunals, the securitisation company or reconstruction company may file an application to the Appellate Tribunal having jurisdiction over any of such Tribunals in which such applications are pending for transfer of alt pending applications to any one of the Debts Recovery Tribunals as it deems fit.

(2) On receipt of such application for transfer of all pending applications under sub-section (1), the Appellate Tribunal may, after giving the parties to the application an opportunity of being heard, pass an order for transfer of the pending applications to any one of the Debts Recovery Tribunals.

(3) Notwithstanding anything contained in the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993), any order passed by the Appellate Tribunal under sub-section (2) shall be binding on all the Debts Recovery Tribunals referred to in sub-section (1) as it” such order had been passed by the Appellate Tribunal having jurisdiction on each such Debts Recovery Tribunal.

(4) Any recovery certificate, issued by the Debts Recovery Tribunal to which all the pending applications are transferred under sub-section (2), shall be executed in accordance with the provisions contained in sub-section (23) of Section 19 and other provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) shall, accordingly, apply to such execution.”

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1. Section 5A Inserted by Act No. 30 of 2004 w.e.f. 29-12-2004.

Section 6. Notice to obligor and discharge of obligation of such obligor

(1) The bank or financial institution may, if it considers appropriate, give a notice of acquisition of financial assets by any securitisation company or reconstruction company, to the concerned obligor and any other concerned person and to the concerned registering authority (including Registrar of Companies) in whose jurisdiction the mortgage, charge, hypothecation, assignment or other interest created on the financial assets had been registered.

(2) Where a notice of acquisition of financial asset under sub-section (1) is given by a bank or financial institution, the obligor, on receipt of such notice, shall make payment to the concerned securitisation company or reconstruction company, as the case may be, and payment made to such company in discharge of any of the obligations in relation to the financial asset specified in the notice shall be a full discharge to the obligor making the payment from all liability in respect of such payment.

(3) Where no notice of acquisition of financial asset under sub-section (1) is given by any bank or financial institution, any money or other properties subsequently received by the bank or financial institution, shall constitute monies or properties held in trust for the benefit of and on behalf of the securitisation company or reconstruction company, as the case may be, and such bank or financial institution shall hold such payment or property which shall forthwith be made over or delivered to such securitisation company or reconstruction company, as the case may be, or its agent duly authorised in this behalf.

Section 7. Issue of security by raising of receipts or funds by securitisation company or reconstruction company

(1) Without prejudice to the provisions contained in the Companies Act, 1956 (1 of 1956), the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and the Securities and Exchange Board of India Act, 1992 (15 of 1992), any securitisation company or reconstruction company, may, after acquisition of any financial asset under sub-section (1) of section 5, offer security receipts to qualified institutional buyers (other than by offer to public) for subscription in accordance with the provisions of those Acts.

(2) A securitisation company or reconstruction company may raise funds from the qualified institutional buyers by formulating schemes for acquiring financial assets and shall keep and maintain separate and distinct accounts in respect of each such scheme for every financial asset acquired out of investments made by a qualified institutional buyer and ensure that realisations of such financial asset is held and applied towards redemption of investments and payment of returns assured on such investments under the relevant scheme.

1[(2-A)(a) The scheme for the purpose of offering security receipts under sub-section (1) or raising funds under sub-section (2), may be in the nature of a trust to be managed by the securitisation company or reconstruction company, and the securitisation company or reconstruction company shall hold the assets so acquired or the funds so raised for acquiring the assets, in trust for the benefit of the qualified institutional buyers holding the security receipts or from whom the funds are raised.

(b) The provisions of the Indian Trusts Act, 1882 (2 of 1882) shall, except insofar as they are inconsistent with the provisions of this Act, apply with respect to the trust referred to in clause (a) above.”]

(3) In the event of non-realisation under sub-section (2) of financial assets, the qualified institutional buyers of a securitisation company or reconstruction company, holding security receipts of not less than seventy-five per cent of the total value of the 2[security receipts issued under a scheme by such company], shall be entitled to call a meeting of all the qualified institutional buyers and every resolution passed in such meeting shall be binding on the company.

(4) The qualified institutional buyers shall, at a meeting called under subsection (3), follow the same procedure, as nearly as possible as is followed at meetings of the board of directors of the securitisation company or reconstruction company, as the case may be.

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1. Sub Sec. (2-A) Inserted by Act No. 30 of 2004 w.e.f. 29-12-2004.

2. Subs. by Act No. 30 of 2004 w.e.f. 29-12-2004.

Section 8. Exemption from registration of security receipt

Notwithstanding anything contained in sub-section (1) of section 17 of the Registration Act, 1908 (16 of 1908),—

(a) any security receipt issued by the securitisation company or reconstruction company, as the case may be, under sub-section (1) of section 7, and not creating, declaring, assigning, limiting or extinguishing any right, title or interest, to or in immovable property except insofar as it entitles the holder of the security receipt to an undivided interest afforded by a registered instrument; or

(b) any transfer of security receipts, shall not require compulsory registration.

Section 9. Measures for assets reconstruction

Without prejudice to the provisions contained in any other law for the time being in force, a securitisation company or reconstruction company may, for the purposes of asset reconstruction, having regard to the guidelines framed by the Reserve Bank in this behalf, provide for any one or more of the following measures, namely :—

(a) the proper management of the business of the borrower, by change in, or take over of, the management of the business of the borrower;

(b) the sale or lease of a part or whole of the business of the borrower;

(c) rescheduling of payment of debts payable by the borrower;

(d) enforcement of security interest in accordance with the provisions of this Act;

(e) settlement of dues payable by the borrower;

(f) taking possession of secured assets in accordance with the provisions of this Act.

Section 10. Other functions of securitization company or reconstruction company

(1) Any securitisation company or reconstruction company registered under section 3 may—

(a) act as an agent for any bank or financial institution for the purpose of recovering their dues from the borrower on payment of such fees or charges as may be mutually agreed upon between the parties;

(b) act as a manager referred to in clause (c) of sub-section (4) of section 13 on such fee as may be mutually agreed upon between the parties;

(c) act as receiver if appointed by any court or tribunal:

Provided that no securitisation company or reconstruction company shall act as a manager if acting as such gives rise to any pecuniary liability.

(2) Save as otherwise provided in sub-section (1), no securitisation company or reconstruction company which has been granted a certificate of registration under sub-section (4) of section 3, shall commence or carry on, without prior approval of the Reserve Bank, any business other than that of securitisation or asset reconstruction :

Provided that a securitisation company or reconstruction company which is carrying on, on or before the commencement of this Act, any business other than the business of securitisation or asset reconstruction or business referred to in sub-section (1), shall cease to carry on any such business within one year from the date of commencement of this Act.

Explanation.—For the purposes of this section, “securitisation company” or “reconstruction company” does not include its subsidiary.

Section 11. Resolution of disputes

Where any dispute relating to securitisation or reconstruction or nonpayment of any amount due including interest arises amongst any of the parties, namely, the bank or financial institution or a securitization company or reconstruction company or qualified institutional buyer, such dispute shall be settled by conciliation or arbitration as provided in the Arbitration and Conciliation Act, 1996 (26 of 1996), as if the parties to the dispute have consented in writing for determination of such dispute by conciliation or arbitration and the provisions of that Act shall apply accordingly.

Section 12. Power of Reserve Bank to determine policy and issue directions

(1) If the Reserve Bank is satisfied that in the public interest or to regulate financial system of the country to its advantage or to prevent the affairs of any securitisation company or reconstruction company from being conducted in a manner detrimental to the interest of investors or in any manner prejudicial to the interest of such securitisation company or reconstruction company, it is necessary or expedient so to do, it may determine the policy and give directions to all or any securitisation company or reconstruction company in matters relating to income recognition, accounting standards, making provisions for bad and doubtful debts, capital adequacy based on risk weights for assets and also relating to deployment of funds by the securitisation company or reconstruction company, as the case may be, and such company shall be bound to follow the policy so determined and the directions so issued.

(2) Without prejudice to the generality of the power vested under subsection (1), the Reserve Bank may give directions to any securitisation company or reconstruction company generally or to a class of securitisation companies or reconstruction companies or to any securitisation company or reconstruction company in particular as to—

(a) the type of financial asset of a bank or financial institution which can be acquired and procedure for acquisition of such assets and valuation thereof;

(b) the aggregate value of financial assets which may be acquired by any securitisation company or reconstruction company.

Section 12 A. Power of Reserve Bank to call for statements and information

1[Power of Reserve Bank to call for statements and information. The Reserve Bank may at any time direct a securitisation company or reconstruction company to furnish it within such time as may be specified by the Reserve Bank, with such statements and information relating to the business or affairs of such securitisation company or reconstruction company (including any business or affairs with which such company is concerned) as the Reserve Bank may consider necessary or expedient to obtain for the purposes of this Act.]

——————–

1. Inserted by Act No. 30 of 2004 w.e.f. 29-12-2004.

Section 13. Enforcement of security interest

(1) Notwithstanding anything contained in section 69 or section 69A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of the court or tribunal, by such creditor in accordance with the provisions of this Act.

(2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section (4).

(3) The notice referred to in sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower.

1[(3-A) If, on receipt of the notice under sub-section (2), the borrower makes any representation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within one week of receipt of such representation or objection the reasons for non-acceptance of the representation or objection to the borrower:

Provided that the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the Debts Recovery Tribunal under Section 17 or the Court of District Judge under Section 17-A.]

(4) In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely :—

(a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset;

2[(b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset :

Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt;

Provided further that where the management of whole of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security for the debt;]

(c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor;

(d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt.

(5) Any payment made by any person referred to in clause (d) of subsection (4) to the secured creditor shall give such person a valid discharge as if he has made payment to the borrower.

(6) Any transfer of secured asset after taking possession thereof or take over of management under sub-section (4), by the secured creditor or by the manager on behalf of the secured creditor shall vest in the transferee all rights in, or in relation to, the secured asset transferred as if the transfer had been made by the owner of such secured asset.

(7) Where any action has been taken against a borrower under the provisions of sub-section (4), all costs, charges and expenses which, in the opinion of the secured creditor, have been properly incurred by him or any expenses incidental thereto, shall be recoverable from the borrower and the money which is received by the secured creditor shall, in the absence of any contract to the contrary, be held by him in trust, to be applied, firstly, in payment of such costs, charges and expenses and secondly, in discharge of the dues of the secured creditor and the residue of the money so received shall be paid to the person entitled thereto in accordance with his rights and interests.

(8) If the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fixed for sale or transfer, the secured asset shall not be sold or transferred by the secured creditor, and no further step shall be taken by him for transfer or sale of that secured asset.

(9) In the case of financing of a financial asset by more than one secured creditors or joint financing of a financial asset by secured creditors, no secured creditor shall be entitled to exercise any or all of the rights conferred on him under or pursuant to sub-section (4) unless exercise of such right is agreed upon by the secured creditors representing not less than three-fourth in value of the amount outstanding as on a record date and such action shall be binding on all the secured creditors :

Provided that in the case of a company in liquidation, the amount realised from the sale of secured assets shall be distributed in accordance with the provisions of section 529A of the Companies Act, 1956 (1 of 1956):

Provided further that in the case of a company being wound up on or after the commencement of this Act, the secured creditor of such company, who opts to realise his security instead of relinquishing his security and proving his debt under proviso to sub-section (1) of section 529 of the Companies Act, 1956 (1 of 1956), may retain the sale proceeds of his secured assets after depositing the workmen’s dues with the liquidator in accordance with the provisions of section 529A of that Act:

Provided also that the liquidator referred to in the second proviso shall intimate the secured creditor the workmen’s dues in accordance with the provisions of section 529A of the Companies Act, 1956 (1 of 1956) and in case such workmen’s dues cannot be ascertained, the liquidator shall intimate the estimated amount of workmen’s dues under that section to the secured creditor and in such case the secured creditor may retain the sale proceeds of the secured assets after depositing the amount of such estimated dues with the liquidator :

Provided also that in case the secured creditor deposits the estimated amount of workmen’s dues, such creditor shall be liable to pay the balance of the workmen’s dues or entitled to receive the excess amount, if any, deposited by the secured creditor with the liquidator :

Provided also that the secured creditor shall furnish an undertaking to the liquidator to pay the balance of the workmen’s dues, if any.

Explanation.—For the purposes of this sub-section,—

(a) “record date” means the date agreed upon by the secured creditors representing not less than three-fourth in value of the amount outstanding on such date; (b) “amount outstanding” shall include principal, interest and any other dues payable by the borrower to the secured creditor in respect of secured asset as per the books of account of the secured creditor.

(10) Where dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured creditor may file an application in the form and manner as may be prescribed to the Debts Recovery Tribunal having jurisdiction or a competent court, as the case may be, for recovery of the balance amount from the borrower.

(11) Without prejudice to the rights conferred on the secured creditor under or by this section, the secured creditor shall be entitled to proceed against the guarantors or sell the pledged assets without first taking any of the measures specified in clauses (a) to (d) of sub-section (4) in relation to the secured assets under this Act.

(12) The rights of a secured creditor under this Act may be exercised by one or more of his officers authorised in this behalf in such manner as may be prescribed.

(13) No borrower shall, after receipt of notice referred to in sub-section (2), transfer by way of sale, lease or otherwise (other than in the ordinary course of his business) any of his secured assets referred to in the notice, without prior written consent of the secured creditor.

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1. Sub Section (3-A) Inserted by Act No. 30 of 2004 w.e.f. 29-12-2004.

2. Subs. by Act No. 30 of 2004 w.e.f. 29-12-2004.

Section 14. Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset

(1) Where the possession of any secured asset is required to be taken by the secured creditor or if any of the secured asset is required to be sold or transferred by the secured creditor under the provisions of this Act, the secured creditor may, for the purpose of taking possession or control of any such secured asset, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be situated or found, to take possession thereof, and the Chief Metropolitan Magistrate or, as the case may be, the District Magistrate shall, on such request being made to him—

(a) take possession of such asset and documents relating thereto; and

(b) forward such asset and documents to the secured creditor.

(2) For the purpose of securing compliance with the provisions of subsection (1), the Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use, or cause to be used, such force, as may, in his opinion, be necessary.

(3) No act of the Chief Metropolitan Magistrate or the District Magistrate done in pursuance of this section shall be called in question in any court or before any authority.

Section 15. Manner and effect of take over of management

(1) 1[When the management of business of a borrower is taken over by a securitisation company or reconstruction company under clause (a) of Section 9 or, as the case may be, by a secured creditor under clause (b) of subsection (4) of Section 13] , the secured creditor may, by publishing a notice in a newspaper published in English language and in a newspaper published in an Indian language in circulation in the place where the principal office of the borrower is situated, appoint as many persons as it thinks fit—

(a) in a case in which the borrower is a company as defined in the Companies Act, 1956 (1 of 1956), to be the directors of that borrower in accordance with the provisions of that Act; or

(b) in any other case, to be the administrator of the business of the borrower.

(2) On publication of a notice under sub-section (1),—

(a) in any case where the borrower is a company as defined in the Companies Act, 1956 (1 of 1956), all persons holding office as directors of the company and in any other case, all persons holding any office having power of superintendence, direction and control of the business of the borrower immediately before the publication of the notice under sub-section (1), shall be deemed to have vacated their offices as such;

(b} any contract of management between the borrower and any director or manager thereof holding office as such immediately before publication of the notice under sub-section (1), shall be deemed to be terminated;

(c) the directors or the administrators appointed under this section shall take such steps as may be necessary to take into their custody or under their control all the property, effects and actionable claims to which the business of the borrower is, or appears to be, entitled and all the property and effects of the business of the borrower shall be deemed to be in the custody of the directors or administrators, as the case may be, as from the date of the publication of the notice;

(d) the directors appointed under this section shall, for all purposes, be the directors of the company of the borrower and such directors or as the case may be, the administrators appointed under this section, shall alone be entitled to exercise all the powers of the directors or as the case may be, of the persons exercising powers of superintendence, direction and control, of the business of the borrower whether such powers are derived from the memorandum or articles of association of the company of the borrower or from any other source whatsoever.

(3) Where the management of the business of a borrower, being a company as defined in the Companies Act, 1956 (1 of 1956), is taken over by the secured creditor, then, notwithstanding anything contained in the said Act or in the memorandum or articles of association of such borrower,—

(a) it shall not be lawful for the shareholders of such company or any other person to nominate or appoint any person to be a director of the company;

(b) no resolution passed at any meeting of the shareholders of such company shall be given effect to unless approved by the secured creditor;

(c) no proceeding for the winding up of such company or for the appointment of a receiver in respect thereof shall lie in any court, except with the consent of the secured creditor.

(4) Where the management of the business of a borrower had been taken over by the secured creditor, the secured creditor shall, on realisation of his debt in full, restore the management of the business of the borrower to him.

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1. Subs. by Act No. 30 of 2004 w.e.f. 29-12-2004.

Section 16. No compensation to directors for loss of office

(1) Notwithstanding anything to the contrary contained in any contract or in any other law for the time being in force, no managing director or any other director or a manager or any person in charge of management of the business of the borrower shall be entitled to any compensation for the loss of office or for the premature termination under this Act of any contract of management entered into by him with the borrower.

(2) Nothing contained in sub-section (1) shall affect the right of any such managing director or any other director or manager or any such person in charge of management to recover from the business of the borrower, moneys recoverable otherwise than by way of such compensation.

Section 17. Right to appeal

(1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter, 1[may make an aplication along with such fee as may be prescribed] to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measures had been taken.

2[Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower.

Explanation.-For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under this sub-section.]

3[(2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder.

(3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in sub-section (4) of Section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management of the business to the borrower or restoration of possession of the secured assets to the borrower, it may by order, declare the recourse to any one or more measures referred to in sub-section (4) of Section 13 taken by the secured creditors as invalid and restore the possession of the secured assets to the borrower or restore the management of the business to the borrower, as the case may be, and pass such order as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under sub-section (4) of Section 13].

(4) If, the Debts Recovery Tribunal declares the recourse taken by a secured creditor under sub-section (4) of Section 13, is in accordance with the provisions of this Act and the rules made thereunder, then, notwithstanding anything contained in any other law for the time being in force, the secured creditor shall be entitled to take recourse to one or more of the measures specified under sub-section (4) of Section 13 to recover his secured debt.

(5) Any application made under sub-section (1) shall be dealt with by the Debts Recovery Tribunal as expeditiously as possible and disposed of within sixty days from the date of such application :

Provided that the Debts Recovery Tribunal may, from time to time, extend the said period for reasons to be recorded in writing, so, however, that the total period of pendency of the application with the Debts Recovery Tribunal, shall not exceed four months from the date of making of such application made under sub-section (1).

(6) If the application is not disposed of by the Debts Recovery Tribunal within the period of four months as specified in sub-section (5), any part to the application may make an application, in such form as may be prescribed, to the Appellate Tribunal for directing the Debts Recovery Tribunal for expeditious disposal of the application pending before the Debts Recovery Tribunal and the Appellate Tribunal may, on such application, make an order for expeditious disposal of the pending application by the Debts Recovery Tribunal.

(7) Save as otherwise provided in this Act, the Debts Recovery Tribunal ;v shall, as far as may be, dispose of the application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and the rules made thereunder.

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1. Subs. by Act No. 30 of 2004 w.e.f. 21-6-2002.

2. Inserted by Act No. 30 of 2004 w.e.f. 21-6-2002.

3. Sub Section (2) and (3) subs. by Act No. 30 of 2004 w.e.f. 29-12-2004.

Section 17 A. Making of application to Court of District Judge in certain cases

1[Making of application to Court of District Judge in certain cases. In the case of a borrower residing in the State of Jammu and Kashmir, the application under Section 17 shall be made to the Court of District Judge in that State having jurisdiction over the borrower which shall pass an order on such application.

Explanation.-For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons shall not entitle the person (including borrower) to make an application to the Court of District Judge under this section].

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1. New Section 17-A Inserted by Act No. 30 of 2004 w.e.f. 29-12-2004.

Section 18. Appeal to Appellate Tribunal

(1) Any person aggrieved, by any order made by the Debts Recovery Tribunal 1[under section 17 may prefer an appeal along with such fee as may be prescribed] to the Appellate Tribunal within thirty days from the date of receipt of the order of Debts Recovery Tribunal.

2[Provided that different fees may be prescribed for filing an appeal by the borrower or by the person other than the borrower.]

2[Provided further that no appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal fifty per cent of the amount of debt due from him, as claimed by the secured creditors or determined by the Debts Recovery Tribunal, whichever is less :

Provided also that the Appellate Tribunal may, for the reasons to be recorded in writing, reduce the amount to not less than twenty-five per cent of debt referred to in the second proviso].

(2) Save as otherwise provided in this Act, the Appellate Tribunal shall, as far as may be, dispose of the appeal in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and rules made thereunder.

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1. The words “under Section 17 may prefer an appeal” Subs. by Act No. 30 of 2004 w.e.f. 21-6-2002.

2. Inserted by Act No. 30 of 2004 w.e.f. 21-6-2002.

Section 18 A. Validation of fees levied

1[Validation of fees levied. Any fee levied and collected for preferring, before the commencement of the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004, an appeal to the Debts Recovery Tribunal or the Appellate Tribunal under this Act, shall be deemed always to have been levied and collected in accordance with law as if the amendments made to Sections 17 and 18 of this Act by Sections 10 and 12 of the said Act were in force at all material times].

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1. Inserted by Act No. 30 of 2004 w.e.f. 29-12-2004.

Section 18 B. Appeal to High Court in certain cases

1[Appeal to High Court in certain cases. Any borrower residing in the State of Jamrnu and Kashmir and aggrieved by any order made by the Court of District Judge under Section 17-A may prefer an appeal, to the High Court having jurisdiction over such Court, within thirty days from the date of receipt of the order of the Court of District Judge :

Provided that no appeal shall be preferred unless the borrower has deposited, with the Jammu and Kashmir High Court, fifty per cent of the amount of the debt due from him as claimed by the secured creditor or determined by the Court of District Judge, whichever is less :

Provided further that the High Court may, for the reasons to be recorded in writing, reduce the amount to not less than twenty-five per cent of the debt referred to in the first proviso].

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1. Inserted by Act No. 30 of 2004 w.e.f. 29-12-2004.

Section 19. Right of borrower to receive compensation and costs in certain cases

1[Right of borrower to receive compensation and costs in certain cases. If the Debts Recovery Tribunal or the Court of District Judge, on an application made under Section 17 or Section 17-A or the Appellate Tribunal or the High Court on an appeal preferred under Section 18 or Section 18-A, holds that the possession of secured assets by the secured creditor is not in accordance with the provisions of this Act and rules made thereunder and directs the secured creditors to return such secured assets to the concerned borrowers, such borrower shall be entitled to the payment of such compensation and costs as may be determined by such Tribunal or Court of District Judge or Appellate Tribunal or the High Court referred to in Section 18-B.

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1. Subs. by Act No. 30 of 2004 w.e.f. 29-12-2004.

Section 20. Central Registry

(1) The Central Government may, by notification, set-up or cause to be set-up from such date as it may specify in such notification, a registry to be known as the Central Registry with its own seal for the purposes of registration of transaction of securitisation and reconstruction of financial assets and creation of security interest under this Act.

(2) The head office of the Central Registry shall be at such place as the Central Government may specify and for the purpose of facilitating registration of transactions referred to in sub-section (1), there may be established at such other places as the Central Government may think fit, branch offices of the Central Registry.

(3) The Central Government may, by notification, define the territorial limits within which an office of the Central Registry may exercise its functions.

(4) The provisions of this Act pertaining to the Central Registry shall be in addition to and not in derogation of any of the provisions contained in the Registration Act, 1908 (16 of 1908), the Companies Act, 1956 (1 of 1956), the Merchant Shipping Act, 1958 (44 of 1958), the Patents Act, 1970 (39 of 1970), the Motor Vehicles Act, 1988 (59 of 1988) and the Designs Act, 2000 (16 of 2000) or any other law requiring registration of charges and shall not affect the priority of charges or validity thereof under those Acts or laws.

Section 21. Central Registrar

(1) The Central Government may, by notification, appoint a person for the purpose of registration of transactions relating to securitisation, reconstruction of financial assets and security interest created over properties, to be known as the Central Registrar.

(2) The Central Government may appoint such other officers with such designations as it thinks fit for the purpose of discharging under the superintendence and direction of the Central Registrar, such functions of the Central Registrar under this Act as he may, from time to time, authorise them to discharge.

Section 22. Register of securitisation, reconstruction and security interest transactions

(1) For the purposes of this Act, a record called the Central Register shall be kept at the head office of the Central Registry for entering the particulars of the transactions relating to—

(a) securitisation of financial assets;

(b) reconstruction of financial assets; and

(c) creation of security interest.

(2) Notwithstanding anything contained in sub-section (1), it shall be lawful for the Central Registrar to keep the records wholly or partly in computer, floppies, diskettes or in any other electronic form subject to such safeguards as may be prescribed.

(3) Where such register is maintained wholly or partly in computer, floppies, diskettes or in any other electronic form, under sub-section (2), any reference in this Act to entry in the Central Register shall be construed as a reference to any entry as maintained in computer or in any other electronic form.

(4) The register shall be kept under the control and management of the Central Registrar.

Section 23. Filing of transactions of securitisation, reconstruction and creation of security interest

The particulars of every transaction of securitisation, asset reconstruction or creation of security interest shall be filed, with the Central Registrar in the manner and on payment of such fee as may be prescribed, within thirty days after the date of such transaction or creation of security, by the securitisation company or reconstruction company or the secured creditor, as the case may be:

Provided that the Central Registrar may allow the filing of the particulars of such transaction or creation of security interest within thirty days next following the expiry of the said period of thirty days on payment of such additional fee not exceeding ten times the amount of such fee.

Section 24. Modification of security interest registered under this Act

Whenever the terms or conditions, or the extent or operation, of any security interest registered under this Chapter, are, or is, modified, it shall be the duty of the securitisation company or the reconstruction company or the secured creditor, as the case may be, to send to the Central Registrar, the particulars of such modification, and the provisions of this Chapter as to registration of a security interest shall apply to such modification of such security interest.

Section 25. Securitisation company or reconstruction company or secured creditor to report satisfaction of security interest

(1) The securitisation company or the reconstruction company or the secured creditor as the case may be, shall give intimation to the Central Registrar of the payment or satisfaction in full, of any security interest relating to the securitisation company or the reconstruction company or the secured creditor and requiring registration under this Chapter, within thirty days from the date of such payment or satisfaction.

1[(1-A) On receipt of intimation under sub-section (1), the Central Registrar shall order that a memorandum of satisfaction shall be entered in the Central Register].

(2) 2[If the concerned borrower gives an intimation to the Central Registrar for not recording the payment or satisfaction referred to in sub-section (1), the Central Registrar shall on receipt of such intimation], cause a notice to be sent to the securitisation company or reconstruction company or the secured creditor calling upon it to show cause within a time not exceeding fourteen days specified in such notice, as to why payment or satisfaction should not be recorded as intimated to the Central Registrar.

(3) If no cause is shown, the Central Registrar shall order that a memorandum of satisfaction shall be entered in the Central Register.

(4) If cause is shown, the Central Registrar shall record a note to that effect in the Central Register, and shall inform the borrower that he has done so.

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1. Inserted by Act No. 30 of 2004 w.e.f. 29-12-2004.

2. Subs. by Act No. 30 of 2004 w.e.f. 29-12-2004.

Section 26. Right to inspect particulars of securitisation, reconstruction and security interest transactions

(1) The particulars of securitisation or reconstruction or security interest entered in the Central Register of such transactions kept under section 22 shall be open during the business hours for inspection by any person on payment of such fee as may be prescribed.

(2) The Central Register, referred to in sub-section (1) maintained in electronic form, shall also be open during the business hours for the inspection by any person through electronic media on payment of such fee as may be prescribed.

Section 27. Penalties

If a default is made—

(a) in filing under section 23, the particulars of every transaction of an} 1 securitisation or asset reconstruction or security interest created by a securitisation company or reconstruction company or secured creditor; or

(b) in sending under section 24, the particulars of the modification referred to in that section; or

(c) in giving intimation under section 25,

every company and every officer of the company or the secured creditor and every officer of the secured creditor who is in default shall be punishable with fine which may extend to five thousand rupees for every day during which the default continues.

Section 28. Penalties for non-compliance of direction of Reserve Bank

If any securitisation company or reconstruction company fails to comply with any direction issued by the Reserve Bank 1[under section 12 or Section 12-A], such company and every officer of the company who is in default, shall be punishable with fine which may extend to five lakh rupees and in the case of a continuing offence, with an additional fine which may extend to ten thousand rupees for every day during which the default continues.

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1. Subs. by Act No. 30 of 2004 w.e.f. 29-12-2004.

Section 29. Offences

If any person contravenes or attempts to contravene or abets the contravention of the provisions of this Act or of any rules made thereunder, he shall be punishable with imprisonment for a term which may extend to one year, or with fine, or with both.

Section 30. Cognizance of offence

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.

Section 31. Provisions of this Act not to apply in certain cases

The provisions of this Act shall not apply to—

(a) a lien on any goods, money or security given by or under the Indian Contract Act, 1872 (9 of 1872) or the Sale of Goods Act, 1930 (3 of 1930) or any other law for the time being in force;

(b) a pledge of movables within the meaning of section 172 of the Indian Contract Act, 1872 (9 of 1872);

(c) creation of any security in any aircraft as defined in clause (7) of section 2 of the Aircraft Act, 1934 (24 of 1934);

(d) creation of security interest in any vessel as defined in clause (55) of section 3 of the Merchant Shipping Act, 1958 (44 of 1958);

(e) any conditional sale, hire-purchase or lease or any other contract in which no security interest has been created;

(f) any rights of unpaid seller under section 47 of the Sale of Goods Act, i 1930 (3 of 1930);

(g) 1[any properties not liable to attachment (excluding the properties specifically charged with the debt recoverable under this act)] or sale under the first proviso to sub-section (1) of section 60 of the Code of Civil Procedure, 1908 (5 of 1908);

(h) any security interest for securing repayment of any financial asset not exceeding one lakh rupees;

(t) any security interest created in agricultural land;

(j) any case in which the amount due is less than twenty per cent of the principal amount and interest thereon.

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1. Subs. by Act No. 30 of 2004 we.f. 29-12-2004.

Section 32. Protection of action taken in good faith

No suit, prosecution or other legal proceedings shall lie against any secured creditor or any of his officers or manager exercising any of the rights of the secured creditor or borrower for anything done or omitted to be done in good faith under this Act.

Section 33. 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.

Section 34. 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 Debts Recovery Tribunal or the 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 or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993).

Section 35. The provisions of this Act to override other laws

The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.

Section 36. Limitation

No secured creditor shall be entitled to take all or any of the measures under sub-section (4) of section 13, unless his claim in respect of the financial asset is made within the period of limitation prescribed under the Limitation Act, 1963 (36 of 1963).

Section 37. Application of other laws not barred

The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Companies Act, 1956 (1 of 1956), the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) or any other law for the time being in force.

Section 38. Power of Central Government to make rules

(1) The Central Government may, by notification and in the Electronic Gazette as defined in clause (s) of section 2 of the Information Technology Act, 2000 (21 of 2000), 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 form and manner in which an application may be filed under subsection (10) of section 13;

(b) the manner in which the rights of a secured creditor may be exercised by one or more of his officers under sub-section (12) of section 13;

1[(ba) the fee for making an application to the Debts. Recovery Tribunal under subsection (1) of Section 17;

(bb) the form of making an application to the Appellate Tribunal under subsection (6) of Section 17;

(bc) the fee for preferring an appeal to the Appellate Tribunal under sub-section (1) of Section 18];

(c) the safeguards subject to which the records may be kept under subsection (2) of section 22;

(d) the manner in which the particulars of every transaction of securitisation shall be filed under section 23 and fee for filing such transaction;

(e) the fee for inspecting the particulars of transactions kept under section 22 and entered in the Central Register under sub-section (1) of section 26;

(f) the fee for inspecting the Central Register maintained in electronic form under sub-section (2) of section 26;

(g) any other matter which is required to be, or may be, prescribed, in respect of which provision is to be, or may be, made by rules.

(3) Every rule 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 both Houses agree that the rule should not be made, the rule 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.

——————–

1. Inserted by Act No. 30 of 2004 w.e.f. 29-12-2004.

Section 39. Certain provisions of this Act to apply after Central Registry is set up or cause to be set up

The provisions of sub-sections (2), (3) and (4) of section 20 and sections 21, 22, 23, 24, 25, 26 and 27 shall apply after the Central Registry is set up or cause to be set up under sub-section (1) of section 20.

Section 40. Power to remove 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 may appear to be necessary 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.

Section 41. Amendments to certain enactments

The enactments specified in the Schedule shall be amended in the manner specified therein.

Section 42. Repeal and saving

(1) The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Second) Ordinance, 2002 (Ord. 3 of 2002) is hereby repealed.

(2) Notwithstanding such repeal, any thing 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.

Schedule

THE SCHEDULE

(See section 41)

YearAct No.Short titleAmendment
19561The Companies Act, 1956.In section 4A, in sub-section (1), after clause (vi), insert the following : —
“(vii) the securitisation company or the reconstruction company which has ob¬tained a certificate of registration un¬der sub-section (4) of section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.”.
195642The Securities Contracts (Regulation) Act, 1956.In section 2, in clause (h) after sub-clause (ib), insert the following : —
“(ic) security receipt as defined in clause (zg) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.”.
19861The Sick Industrial Companies (Special Provisions) Act, 1985.In section 15, in sub-section (1), after the proviso, insert the following : —
“Provided further that no reference shall be made to the Board for Industrial and Finan¬cial Reconstruction after the commencement of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, where financial assets have been acquired by any securitisation company or reconstruction company under sub-section (1) of section 5 of that Act :
Provided also that on or after the commence¬ment of the Securitisation and Reconstruc¬tion of Financial Assets and Enforcement of Security Interest Act, 2002, where a reference is pending before the Board for Industrial and Financial Reconstruction, such reference shall abate if the secured creditors, representing not less than three-fourth in value of the amount outstanding against financial assis¬tance disbursed to the borrower of such se¬cured creditors, have taken any measures to recover their secured debt under sub-section (4) of section 13 of that Act.”.
Bydeb

The Securities Contracts (Regulation) Act, 1956

Section 1. Short title, extent and commencement

[Act No.42 OF 1956]

[20-2-1957]

An Act to prevent undesirable transactions in securities by regulating the business of dealing therein, 1[***] by providing for certain other matters connected therewith.

BE it enacted by Parliament in the Seventh Year of the Republic of India as follows:-

——————–

1 Words “by prohibiting options and” omitted by the Security Laws (Amendment) Act, 1995, w.e.f. 25-1-1995.

(1) This Act may be called the Securities Contracts (Regulation) Act, 1956.

(2) It extents to the whole of India.

(3) It shall come into force on such date1 as the Central Government may, by notification in the Official Gazette, appoint.

——————–

1 20-2-1957, vide Notif. No. SRO 528, dated the 16-2-1957, published in Gazette of India, Extraordinary, Part II, dt. 16-2-1957.

Section 2. Definitions

In this Act, unless the context otherwise requires-

(a) “Contract” means a contract for or relating to the purchase or sale of securities;

1[(ac) “Derivative” includes-

7[(aa) “corporatisation” means the succession of a recognised stock exchange, being a body of individuals or a society registered under the Societies Registration Act, 1860 (21 of 1860), by another stock exchange, being a company incorporated for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities carried on by such individuals or society;

(ab) “demutualisation” means the segregation of ownership and management from the trading rights of the members of a recognised stock exchange in accordance with a scheme approved by the Securities and Exchange Board of India;’]

(A) A security derived from a debt instrument, share, loan, whether secured or unsecured, risk instrument or contract for differences or any other form of security;

(B) A contract which derives its value from the process, or index of process, of underlying securities;]

(b) “Government security” means a security created and issued, whether before or after the commencement of this Act, by the Central Government or a State Government for the purpose of raising a public loan and having one of the forms specified in clause (2) of section 2 of the Public Debt Act, 1944 (13 of 1944);

(c) “Member” means a member of a recognised stock exchange;

(d) “Option in securities” means a contract for the purchase or sale of a right to buy or sell, or a right to buy and sell, securities in future, and includes a teji, a mandi, a teji mandi, a galli, a put, a call or a put and call in securities;

(e) “Prescribed” means prescribed by rules made under this Act;

(f) “Recognised stock exchange” means a stock exchange which is for the time being recognised by the Central Government under section 4;

(g) “Rules”, with reference to the rules relating in general to the constitution and management of a stock exchange, includes, in the case of a stock exchange which is an incorporated association, its memorandum and articles of association;

8[(ga) “scheme” means a scheme for corporatisation or demutualisation of a recognised stock exchange which may provide for-

(i) the issue of shares for a lawful consideration and provision of trading rights in lieu of membership cards of members of a recognised stock exchange;

(ii) the restrictions on voting rights;

(iii) the transfer of property, business, assets, rights, liabilities, recognitions, contracts of the recognised stock exchange, legal proceedings by, or against, the recognised stock exchange, whether in the name of the recognised stock exchange or any trustee or otherwise and any permission given to, or by, the recognised stock exchange;

(iv) the transfer of employees of a recognised stock exchange to another recognised stock exchange;

(v) any other matter required for the purpose of, or in connection with, the corporatisation or demutualisation, as the case may be, of the recognised stock exchange];

2[(gb) “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;]

(h) “Securities” include—

(i) Shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate;

3[(ia) Derivative;

(ib) Units or any other instrument issued by any collective investment scheme to the investors in such schemes;]

4[(ic) Security receipt as defined in clause (zg) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.]

9[(id) units or any other such instrument issued to the investors under any mutual fund scheme;]

12[Explanation.—For the removal of doubts, it is hereby declared that “securities” shall not include any unit linked insurance policy or scrips or any such instrument or unit, by whatever named called, which provides a combined benefit risk on the life of the persons and investment by such persons and issued by an insurer referred to in clause (9) of Section 2 of the Insurance Act, 1938 (4 of 1938).]

11[“(ie) any certificate or instrument (by whatever name called), issued to an investor by any issuer being a special purpose distinct entity which possesses any debt or receivable, including mortgage debt, assigned to such entity, and acknowledging beneficial interest of such investor in such debt or receivable, including mortgage debt, as the case may be]

5[(ii) Government securities,

(iia) Such other instruments as may be declared by the Central Government to be securities; and

(iii) Rights or interests in securities;

6[(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 period 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 securities by the depository from the account of a beneficial owner to the account of another beneficial owner when such securities re dealt with by a depository;]

10[(j) ‘Stock exchange’ means-

(a) any body of individuals, whether incorporated or not, constituted before corporatisation and demutualisation under Sections 4-A and 4-B, or

(b) a body corporate incorporated under the Companies Act, 1956 (1 of 1956) whether under a scheme of corporatisation and demutualisation or otherwise, for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities;]

——————–

1 Inserted by Securities Laws (Amendment) Act, 1999 ,w.e.f. 22-2-2000.

2 Inserted by Securities Laws (IInd Amendment) Act, 1999,w.e.f. 16-12-1999.

3 Inserted by Securities Laws (Amendment) Act, 1999,w.e.f. 22-2-2000.

4 Inserted by Securitisation & Reconstruction of Fin. Assets & Enforcement of Security Interest Act, 2002.

5 Substituted for “(ii) Government securitied; and “by the SEBI Act, 1992, w.e.f. 30-1-1992.

6 Substituted by the Depositories Act, 1996, w.e.f. 20-9-1995.

7. Inserted by Act No. 1 of 2005 w.e.f. 6-1-2005.

8. Inserted by Act No. 1 of 2005 w.e.f. 6-1-2005.

9. Inserted by Act No. 1 of 2005 w.e.f. 6-1-2005.

10. Inserted by Act No. 1 of 2005 w.e.f. 6-1-2005.

11. Inserted by Act No 27 of 2007 w.e.f. 28-5-2007.

12. Explanation Inserted by Act 3 of 2010.

Section 2 A. Interpretation of certain words and expressions

1[Interpretation of certain words and expressions. Words and expressions used herein and not defined in this Act but defined in the Companies Act, 1956 or the Securities and Exchange Board of India Act, 1992 or the Depositories Act, 1996 shall have the same meanings respectively assigned to them in those Acts.]

——————–

1 Inserted by Securities Laws (IInd Amendment) Act, 1999,w.e.f. 16-12-1999.

Section 3. Application for recognition of stock exchanges

(1) Any stock exchange, which is desirous of being recognised for the purposes of this Act, may make an application in the prescribed manner to the Central Government.

(2) Every application under sub-section (1) shall contain such particulars as may be prescribed , and shall be accompanied by a copy of the bye-laws of the stock exchange for the regulation and control of contracts and also a copy of the rules relating in general to the constitution of the stock exchange, and in particular, to—

(a) The governing body of such stock exchange, its constitution and powers of management and the manner in which the business is to be transacted;

(b) The powers and duties of the office bearers of the stock exchange;

(c) The admission into the stock exchange of various classes of members, the qualifications for memberships, and the exclusion, suspension, expulsion and re-admission of members there from or thereinto;

(d) The procedure for the registration of partnerships as members of the stock exchange in cases where the rules provide for such membership; and the nomination and appointment of authorised representatives and clerks.

Section 4. Grant of recognition to stock exchanges

(1) If the Central Government is satisfied, after making such inquiry as may be necessary in this behalf and after obtaining such to further information, if any, as it may require,—

(a) That the rules and bye-laws of a stock exchange applying for registration are in conformity with such conditions as may be prescribed with a view to ensure fair dealing and to protect investors;

(b) That the stock exchange is willing to comply with any other conditions (including conditions as to the number of members) which the Central Government, after consultation with the governing body of the stock exchange and having regard to the area served by the stock exchange and its standing and the nature of the securities dealt with by its, may impose for the purpose of carrying out the objects of this Act; and

(c) That it would be in the interest of the trade and also in the public interest to grant recognition to the stock exchange;

It may grant recognition tot he stock exchange subject to the conditions imposed upon it as aforesaid and in such form as may be prescribed.

(2) The conditions which the Central Government may prescribe under clause (a) of sub-section (1) for the grant of recognition to the stock exchanges may include, among other matters, conditions relating to,—

(i) The qualifications for membership of stock exchanges;

(ii) The manner in which contracts shall be entered into and enforced as between members;

(iii) The representation of the Central Government on each of the stock exchanges by such number of persons not exceeding three as the Central Government may nominate in this behalf; and

(iv) The maintenance of accounts of members and their audit by Chartered accountants wherever such audit is required by the Central Government.

(3) Every grant of recognition to a stock exchange under this section shall be published in the Gazette of India and also in the Official Gazette of the State in which the principal office of the stock exchange is situate, and such recognition shall have effect as from the date of its publication in the Gazette of India.

(4) No application for the grant of recognition shall be refused except after giving an opportunity to the stock exchange concerned to be heard in the matter; and the reasons for such refusal shall be communicated to the stock exchange in writing.

(5) No rules of a recognised stock exchange relating to any of the matters specified in sub-section (2) of section 3 shall be amended except with the approval of the Central Government.

Section 4 A. Corporatisation and demutualisation of stock exchanges

1[Corporatisation and demutualisation of stock exchanges. On and from the appointed date, all recognised stock exchanges (if not corporatised and demutualised before the appointed date) shall be corporatised and demutualised in accordance with the provisions contained in Section 4-B :

Provided that the Securities and Exchange Board of India may, if it is satisfied that any recognised stock exchange was prevented by sufficient cause from being corporatised and demutualised on or after the appointed date, specify another appointed date in respect of that recognised stock exchange and such recognised stock exchange may continue as such before such appointed date.

Explanation.-For the purposes of this section, “appointed date” means the date which the Securities and Exchange Board of India may, by notification in the Official Gazette, appoint and different appointed dates may be appointed for different recognised stock exchanges.]

——————–

1. Section 4A Inserted by Act No. 1 of 2005 w.e.f. 6-1-2005.

Section 4 B. Procedure for corporatisation and demutualisation

1[Procedure for corporatisation and demutualisation. (1) All recognised stock exchanges referred to in Section 4-A shall, within such time as may be specified by the Securities and Exchange Board of India, submit a scheme for corporatisation and demutualisation for its approval :

Provided that the Securities and Exchange Board of India, may, by notification in the Official Gazette, specify name of the recognised stock exchange, which had already been corporatised and demutualised, and such stock exchange shall not be required to submit the scheme under this section.

(2) On receipt of the scheme referred to in sub-section (1), the Securities and Exchange Board of India may, after making such enquiry as may be necessary in this behalf and obtaining such further information, if any, as it may require and if it is satisfied that it would be in the interest of the trade and also in the public interest, approve the scheme with or without modification.

(3) No scheme under sub-section (2) shall be approved by the Securities and Exchange Board of India if the issue of shares for a lawful consideration or provision of trading rights in lieu of membership card of the members of a recognised stock exchange or payment of dividends to members have been proposed out of any reserves or assets of that stock exchange.

(4) Where the scheme is approved under sub-section (2), the scheme so approved shall be published immediately by-

(a) the Securities and Exchange Board of India in the Official Gazette;

(b) the recognised stock exchange in such two daily newspapers circulating in India, as may be specified by the Securities and Exchange Board of India,

and upon such publication, notwithstanding anything to the contrary contained in this Act or any other law for {he time being in force or any agreement, award, judgment, decree or other instrument for the time being in force, the scheme shall have effect and be binding on all persons and authorities including all members, creditors, depositors. and employees of the recognised stock exchange and on all persons having any contract, right, power, obligation or liability with, against, over, to, or in connection with, the recognised stock exchange or its members.

(5) Where the Securities and Exchange Board of India is satisfied that it would no! be in the interest of the trade and also in the public interest to approve the scheme under sub-section (2), it may, by an order, reject the scheme and such order of rejection shall be published by it in the Official Gazette :

Provided that the Securities and Exchange Board of India shall give a reasonable opportunity of being heard to all the persons concerned and the recognised stock exchange concerned before passing an order rejecting the scheme.

(6) The Securities and Exchange Board of India may, while approving the scheme under sub-section (2), by an order in writing, restrict-

(a) the voting rights of the shareholders who are also stockbrokers of the recognised stock exchange;

(b) the right of shareholders or a stockbroker of the recognised stock exchange to appoint the representatives on the governing board of the stock exchange;

(c) the maximum number of representatives of the stockbrokers of the recognised stock exchange to be appointed on the governing board of the recognised stock exchange, which shall not exceed one-fourth of the total strength of the governing board.

(7) The order made under sub-section (6) shall be published in the Official Gazette and on the publication thereof, the order shall, notwithstanding anything to the contrary contained in the Companies Act, 1956 (1 of 1956), or any other law for the time being in force, have full effect.

(8) Every recognised stock exchange, in respect of which the scheme for corporatisation or demutualisation has been approved under sub-section (2), shall, either by fresh issue of equity shares to the public or in any other manner as may be specified by the regulations made by the Securities and Exchange Board of India, ensure that at least fifty-one per cent of its equity share capital is held, within twelve months from the date of publication of the order under sub-section (7), by the public other than shareholders having trading rights ;

Provided that the Securities and Exchange Board of India may, on sufficient cause being shown to it and in the public interest, extend the said period by another twelve months.’

——————–

1. Section 4B Inserted by Act No. 1 of 2005 w.e.f. 6-1-2005.

Section 5. Withdrawal of recognition

(1) If the Central Government is of opinion that the recognition granted to a stock exchange under the provisions of this Act should, in the interest of the trade or in the public interest, be withdrawn, the Central Government may serve on the governing body of the stock exchange a written notice that the Central Government is considering the withdrawal of the recognition for the reasons stated in the notice, and after giving an opportunity to the governing body to be heard in the matter, the Central Government may withdraw, by notification in the Official Gazette, the recognition granted to the stock exchange;

Provided that no such withdrawal shall affect the validity of any contract entered into or made before the date of the notification, and the Central Government may, after consultation with the stock exchange, make such provision as it deems fit in the notification of withdrawal or in any subsequent notification similarly published for the due performance of any contracts outstanding on that date.

1[(2) Where the recognised stock exchange has not been corporatised or demutualised or it fails to submit the scheme referred to in sub-section (1) of Section 4-B within the specified time therefor or the scheme has been rejected by the Securities and Exchange Board of India under sub-section (5) of Section 4-B, the recognition granted to such stock exchange under Section 4, shall, notwithstanding anything to the contrary contained in this Act, stand withdrawn and the Central Government shall publish, by notification in the Official Gazette, such withdrawal of recognition :

Provided that no such withdrawal shall affect the validity of any contract entered into or made before the date of the notification, and the Securities and Exchange Board of India may, after consultation with the stock exchange, make such provisions as it deems fit in the order rejecting the scheme published in the Official Gazette under subsection (5) of Section 4-B.]

——————–

1. Sub. Sec. (2) Inserted by Act No. 1 of 2005 w.e.f. 6-1-2005.

Section 6. Power of Central Government to call for periodical returns or direct inquires to be made

(1) Every recognised stock exchange shall furnish to the Central Government such periodical returns relating to its affairs as may be prescribed.

(2) Every recognised stock exchange and every member thereof shall maintain and preserve for such periods not exceeding five years such books of account, and other documents as the Central Government, after consultation with the stock exchange concerned, may prescribe in the interest of the trade or in the public interest, and such books of account, and other documents shall be subject to inspection at all reasonable times by the 1[Securities and Exchange Board of India],

(3) Without prejudice to the provisions contained in sub-section (1) and (2), the 1[Securities and Exchange Board of India], if it is satisfied that it is in the interest of the trade or in the public interest so to do, may order in writing,—

(a) Call upon a recognised stock exchange or any member thereof to furnish in writing such information or explanation relating to the affairs of the stock exchange or of the member in relation to the stock exchange as the 1[Securities and Exchange Board of India], may require; or

(b) Appoint one or more persons to make an inquiry in the prescribed manner in relation to the affairs of the governing body of a stock exchange or the affairs of any of the members of the stock exchange in relation to the stock exchange and submit a report of the result if such inquiry to the Securities and Exchange Board of India within such time as may be specified in the order or, in the case of an inquiry in relation to the affairs of any of the members of a stock exchange, direct the governing body to make the inquiry and submit its report to the Securities and Exchange Board of India.

(4) Where an inquiry in relation to the affairs of a recognised stock exchange or the affairs of any of its members in relation to the stock exchange has been undertaken under sub-section (3)—

(a) Every director, manager, secretary or other officer of such stock exchange;

(b) Every member of such stock exchange;

(c) If the member of the stock exchange is a firm, every partner, manager, secretary or other officer of the firm; and

(d) Every other person or body of persons who has had dealing in the course of business with any of the persons mentioned in clauses (a), (b) and (c), whether directly or indirectly;

Shall be bound to produce before the authority making the inquiry all such books of account, and other documents in his custody or power relating to or having a bearing on the subject-matter of such inquiry and also to furnish the authorities within such time as may be specified with any such statement or information relating thereto as may be required of him.

——————–

1 Substituted for” Central Government” by the SEBI Act, 1992, w.e.f. 30-1-1992.

Section 7. Annual reports to be furnished to Central Government by stock exchanges

Every recognised stock exchange shall furnish the Central Government with a copy of the annual report, and such annual report shall contain such particulars as may be prescribed.

Section 7 A. Power of recognised stock exchange to make rules restricting voting rights, etc

(1) A recognised stock exchange may make rules or amend any rules made by it to provide for all or any of the following matters, namely:

(a) The restriction of voting rights to members only in respect of any matter placed before the stock exchange at any meeting;

(b) The regulation of voting rights in respect of any matter placed before the stock exchange at any meeting so that each member may be entitled to have one vote only, irrespective of his share of the paid-up equity capital of the stock exchange;

(c) The restriction on the right of a member to appoint another person as his proxy to attend and vote at a meeting of the stock exchange; and

(d) Such incidental, consequential and supplementary matters as may be necessary to give effect to any of the matters specified in clauses (a), (b) and (c).

(2) No rules of a recognised stock exchange made or amended in relation to any matter referred to in clauses (a) to (d) of sub-section (1) shall have effect until they have been approved by the Central Government and published by the government in the Official Gazette and, in approving the rules so made or amended, the Central Government may make such modifications therein as it thinks fit, and on such publication, the rules as approved by the Central Government shall be deemed to have been validly made, notwithstanding anything to the contrary contained in the Companies Act, 1956 (1 of 1956).

Section 8. Power of Central Government to direct rules to be made or to make rules

(1) Where, after consultation with the governing bodies of stock exchanges generally or with the governing body of any stock exchange in particular, the Central Government is of opinion that it is necessary or expedient so to do, it may, by order in writing together with a statement of the reasons therefor, direct recognised stock exchanges generally or any recognised stock exchange in particular, as the case may be, to make any rules or to amend any rules already made in respect of all or any of the matters specified in sub-section (2) of section 3 within a period of 1[two] months from the date of the order.

(2) If any recognised stock exchange fails or neglects to comply with any order made under sub-section (1) within the period specified therein, the Central Government may make the rules for, or amend the rules made by, the recognised stock exchange,

(3) Where in pursuance of this section any rules have been made or amended, the rules so made or amended shall be published in the Gazette of India and also in the Official Gazette or Gazettes of the State or States in which the principal office or offices of the recognised stock exchange or exchanges is or are situate, and on the publication thereof in the Gazette of India, the rules so made or amended shall, notwithstanding anything to the contrary contained in the Companies Act, 1956 (I of 1956), or in any other law for the time being in force, have effect, as if they had been made or amended by the recognised stock exchange or stock exchanges, as the case may be.

——————–

1 Substituted for “six” by the Securities Laws (Amendment) Act, 1995, w.e.f. 25-1-1995.

Section 8 A. Clearing corporation

1[Clearing corporation. (1) A recognised stock exchange may, with the prior approval of the Securities and Exchange Board of India, transfer the duties and functions of a clearing house to a clearing corporation, being a company incorporated under the Companies Act, 1956 (1 of 1956), for the purpose of-

(a) the periodical settlement of contracts and differences thereunder;

(b) the delivery of, and payment for, securities;

(c) any other matter incidental to, or connected with, such transfer.

(2) Every clearing corporation shall, for the purpose of transfer of the duties and functions of a clearing house to a clearing corporation referred to in sub-section (1), make bye-laws and submit the same to the Securities and Exchange Board of India for its approval.

(3) The Securities and Exchange Board of India may, on being satisfied that it is in the interest of the trade and also in the public interest to transfer the duties and functions of a clearing house to a clearing corporation, grant approval to the bye-laws submitted to it under sub-section (2) and approve the transfer of the duties and functions of a clearing house to a clearing corporation referred to in sub-section (1).

(4) The provisions of Sections 4, 5, 6, 7, 8, 9, 10, If and 12 shall, as far as may be, apply to a clearing corporation referred to in sub-section (1) as they apply in relation to a recognised stock exchange.]

——————–

1. Section 8-A Inserted by Act No. 1 of 2005 w.e.f. 6-1-2005.

Section 9. Power of recognised stock exchanges to make bye-laws

(1) Any recognised stock exchange may, subject to the previous approval of the Central Government, make bye-laws for the regulation and control of contracts.

(2) In particular, and without prejudice to the generality of the foregoing power, such bye-laws may provide for—

(a) The opening and closing of markets and the regulation of the hours of trade;

(b) A clearing house for the periodical settlement of contracts and differences thereunder, the delivery of and payment for securities, the passing on of delivery orders and the regulation and maintenance of such clearing house;

(c) The submission to the Central Government by the clearing house as soon as may be after each periodical settlement of all or any of the following particulars as the Central Government may, from time to time, require, namely;—

(i) The total number of each category of security carried over from one settlement period to another;

(ii) The total number of each category of security, contracts in respect of which have been squared up during the course of each settlement period;

(iii) The total number of each category of security actually delivered at each clearing;

(d) The publication by the clearing house of all or any of the particulars submitted to the Central Government under clause (c) subject to the directions, if any, issued by the Central Government in this behalf;

(e) The regulation or prohibition of blank transfers;

(f) The number and classes of contracts in respect of which settlements shall be made or differences paid through the clearing house;

(g) The regulation, or prohibition of budlas or carry-over facilities;

(h) The fixing, altering or postponing of days for settlements;

(i) The determination and declaration of market rates, including the opening, closing, highest and lowest rates for securities;

(j) The terms, conditions and incidents of contracts, including the prescription of margin requirements, if any, and conditions relating thereto, and the forms of contracts in writing;

(k) The regulation of the entering into, making, performance, rescission and termination, of contracts, including contracts between members or between a member and his constituent or between a member and a person who is not a member, and the consequences of default or insolvency on the part of a seller or buyer or intermediary, the consequences of a breach or omission by a seller or buyer, and the responsibility of members who are not parties to such contracts;

(l) The regulation of taravani business including the placing of limitations thereon;

(m) The listing of securities on the stock exchange, the inclusion of any security for the purpose of dealings and the suspension or withdrawal of any such securities, and the suspension or prohibition of trading in any specified securities;

(n) The method and procedure for the settlement of claims or disputes, including settlement by arbitration;

(o) The levy and recovery of fees, fines and penalties;

(p) The regulation of the course of business between parties to contracts in any capacity;

(q) The fixing of a scale of brokerage and other chargers;

(r) The making, comparing, settling and closing of bargains;

(s) The emergencies in trade which may arise, whether as a result of pool or syndicated operations or cornering or otherwise, and the exercise of powers in such emergencies, including the power to fix maximum and minimum prices for securities;

(t) The regulation of dealings by members for their own account;

(u) The separation of the functions of the jobbers and brokers;

(v) The limitations on the volume of trade done by any individual member in exceptional circumstances;

(w) The obligation of members to supply such information or explanation and to produce such documents relating to the business as the governing body may require.

(3) The bye-laws made under this section may—

(a) Specify the bye-laws the contravention of which shall make a contract entered into otherwise than in accordance with the bye-laws void under sub-section (1) of section 14;

(b) Provide that the contravention of any of the bye-laws shall render the member concerned liable to one or more of the following punishments, namely:—

(i) Fine;

(ii) Expulsion from membership;

(iii) Suspension from membership for a specified period;

(iv) Any other penalty of a like nature not involving the payment of money.

(4) Any bye-laws made under this section shall be subject to such conditions in regard to previous publication as may be prescribed, and when approved by the Central Government, shall be published in the Gazette of India and also in the Official Gazette of the State in which the principal office of the recognised stock exchange is situate, and shall have effect as from the date of its publication in the Gazette of India;

Provided that if the Central Government is satisfied in any case that in the interest of the trade or in the public interest any bye-law should be made immediately, it may, by order in writing specifying the reasons therefor, dispense with the condition of previous publication.

Section 10. Power of Central Government to make or amend bye-laws of recognised stock exchanges

(1) The Central Government may, either on a request in writing received by it in this behalf from the governing body of a recognised stock exchange or on its own motion, if it is satisfied after consultation with the governing body of the stock exchange that it is necessary or expedient so to do and after recording its reasons for so doing, make bye-laws for all or any of the matters specified in section 9 or amend any bye-laws made by such stock exchange under that section.

(2) Where in pursuance of this section any bye-laws have been made or amended, the due-laws so made or amended shall be published in the Gazette of India and also in the Official Gazette of the State in which the principal office of the recognised stock exchange is situate, and on the publication thereof in the Gazette of India, the bye-laws so made or amended shall have effect as if they had been made or amended by the recognised stock exchange concerned.

(3) Notwithstanding anything contained in this section, where the governing body of a recognised stock exchange objects to any bye-laws made or amended under this section by the Central Government on its own motion, it may, within 1[two]months of the publication thereof in the Gazette of India under sub-section (2) , apply to the Central Government for revision thereof, and the Central Government may, after giving an opportunity to the governing body of the stock exchange to be heard in the matter, revise the bye-laws so made or amended, and where any bye-laws so made or amended are revised as a result of any action taken under this sub-section, the bye-laws so revised shall be published and shall become effective as provided in sub-section (2).

(4) The making or the amendment or revision of any bye-laws under this section shall in all cases be subject to the condition of previous publication;

Provided that if the Central Government is satisfied in any case that in the interest of the trade or in the public interest any bye-laws should be made, amended or revised immediately, it may, by order in writing specifying the reasons therefor, dispense with the condition of previous publication.

——————–

1 Substituted for “six” by the Securities Laws (Amendment) Act, 1995, w.e.f. 25-1-1995.

Section 11. Power of Central Government to supersede governing body of a recognised stock exchange

(1) Without prejudice to any other powers vested in the Central Government under this Act, where the Central Government is of opinion that the governing body of any recognised stock exchange should be superseded, then, notwithstanding anything contained in any other law for the time being in force, the Central Government may serve on the governing body a written notice that the Central Government is considering the supersession of the governing body for the reasons specified in the notice and after giving an opportunity to the governing body to be heard in the matter it may, by notification in the Official Gazette, declare the governing body of such stock exchange to be superseded, and may appoint any person or persons to exercise and perform all the powers and duties of the governing body, and, where more persons than one are appointed, may appoint one of such persons to be the chairman and another to be the vice-chairman thereof.

(2) On the publication of a notification in the Official Gazette under sub-section (1), the following consequences shall ensue, namely;—

(a) The members of the governing body which has been superseded shall, as from the date of the notification of supersession, cease to hold office as such members;

(b) The person or persons appointed under sub-section (1) may exercise and perform all the powers and duties of the governing body which has been superseded;

(c) All such property of the recognised stock exchange as the person or persons appointed under sub-section (1) may, by order in writing, specify in this behalf as being necessary for the purpose of enabling him or them to carry on the business of the stock exchange, shall vest in such person or persons.

(3) Notwithstanding anything to the contrary contained in any law or the rules or bye-laws of the recognised stock exchange the governing body of which is superseded under sub-section (1), the person or persons appointed under that sub-section shall hold office for such period as may be specified in the notification published under that sub-section , and the Central Government may from time to time, by like notification, vary such period.

(4) The Central Government may at any time before the determination of the period of office of any person or persons appointed under this section call upon the recognised stock exchange to re-constitute the governing body in accordance with its rules and on such re-constitution all the property of the stock exchange which has vested in, or was in the possession of, the person or persons appointed under sub-section (1) shall re-vest or vest, as the case may be, in the governing body so re-constituted:

PROVIDED that until a governing body is so re-constituted, the person or persons appointed under sub-section (1) shall continue to exercise and perform their powers and duties.

Section 12. Power to suspend business of recognised stock exchanges

If in the opinion of the Central Government an emergency has risen and for the purpose of meeting the emergency the Central Government considers it expedient so to do, it may, by notification in the Official Gazette, for reasons to be set out therein, direct a recognised stock exchange to suspend such of its business for such period not exceeding seven days and subject to such conditions as may be specified in the notification, and, if, in the opinion of the Central Government, the interest of the trade or the public interest requires that the period should be extended, may, by like notification extend the said period from time to time:

PROVIDED that where the period of suspension is to be extended beyond the first period, no notification extending the period of suspension shall be issued unless the governing body of the recognised association has been given an opportunity of being heard in the matter.

Section 12 A. Power to issue directions

1[Power to issue directions. If, after making or causing to be made an inquiry, the Securities and Exchange Board of India is satisfied that it is necessary-

(a) in the interest of investors, or orderly development of securities market; or

(b) to prevent the affairs of any recognised stock exchange or clearing corporation, or such other agency or person, providing trading or clearing or settlement facility in respect of securities, being conducted in a manner detrimental to the interests of investors or securities market; or

(c) to secure the proper management of any such stock exchange or clearing corporation or agency or person, referred to in clause (b),

it may issue such directions,-

(i) to any stock exchange or clearing corporation or agency or person referred to in clause (b) or any person or class of persons associated with the securities market; or

(ii) to any company whose securities are listed or proposed to be listed in a recognised stock exchange,

as may be appropriate in the interests of investors in securities and the securities market.]

——————–

1. Section 12-A Inserted by Act No. 1 of 2005 w.e.f. 6-1-2005.

Section 13. Contracts in notified areas illegal in certain circumstances

If the Central Government is satisfied, having regard to the nature or the volume of transactions in securities in any 2[State or State or area], that is necessary so to do, it may, by notification in the Official Gazette, declare this section to apply to such 2[State or State or area], and thereupon every contract in such State or area which is entered into after the date of the notification otherwise than 1[between members of a recognised stock exchange or recognised stock exchanges] in such 2[State or State or area] or though or with such member shall be illegal.

3[Provided that any contract entered into between members of two or more recognised stock exchanges in such State or States or area, shall-

(i) be subject to such terms and conditions as may be stipulated by the respective stock exchanges with prior approval of Securities and Exchange Board of India;

(ii) require prior permission from the respective stock exchanges if so stipulated by the stock exchanges with prior approval of Securities and Exchange Board of India.]

——————–

1. Subs. the words ” between members of a recognised stock exchange” by Act No. 1 of 2005 w.e.f. 6-1-2005.

2. Subs. the words “State or area” by Act No. 1 of 2005 w.e.f. 6-1-2005.

3. Inserted by Act No. 1 of 2005 w.e.f. 6-1-2005.

Section 13 A. Additional trading floor

1[Additional trading floor. A stock exchange may establish additional trading floor with the prior approval of the Securities and Exchange Board of India in accordance with the terms and conditions stipulated by the said Board.

Explanation: For the purposes of this section, ‘additional trading floor’ means a trading ring or trading facility offered by a recognised stock exchange outside its area of operation to enable the investors to buy and sell securities through outside its a area of operation to enable the investors to buy and sell securities through such trading floor under the regulatory framework of that stock exchange.]

——————–

1. Inserted by the Securities Laws (Amendent) Act, 1995, w.e.f. 25-1-1995

Section 14. Contracts in notified areas to be void in certain circumstances

(1) Any contract entered into any State or area specified in the notification under section 13 which is in contravention of any of the bye-laws specified in that behalf under clause (a) of sub-section (3) of section 9 shall be void—

(i) As respects the rights of any member of the recognised stock exchange who has entered into such contract in contravention of any such bye-law, and also

(ii) As respects the rights of any other person who has knowingly participated in the transaction entailing such contravention.

(2) Nothing in sub-section (1) shall be construed to affect the right of any person other than a member of the stock exchange to enforce any such contract or to recover any sum under or in respect of such contract if such person had no knowledge that the transaction was in contravention of any of the bye-laws specified in clause (a) of sub-section (3) of section 9.

Section 15. Members may not act as principals in certain circumstances

No member of a recognised stock exchange shall in respect of any securities enter into any contract as a principal with any person other than a member of a recognised stock exchange, unless he has secured the consent or authority of such person and discloses in the note, memorandum or agreement of sale or purchase that he is acting as a principal;

PROVIDED that where the member has secured the consent or authority of such person otherwise than in writing he shall secure written confirmation by such persons of such consent or authority within three days from the date of the contract;

PROVIDED further that no such written consent or authority of such person shall be necessary for closing out any outstanding contract entered into by such person in accordance with the bye-laws, if the member discloses in the note, memorandum or agreement of sale or purchase in respect of such closing that he is acting as a principal.

Section 16. Power to prohibit contracts in certain cases

(1) If the Central Government is of opinion that it is necessary to prevent undesirable speculation in specified securities in any State or area, it may, by notification in the Official Gazette, declare that no person in the State or area specified in the notification shall, save with the permission of the Central Government, enter into any contract for the sale or purchase of any security specified in the notification except to the extent and in the manner, if any, specified therein.

(2) All contracts in contravention of the provisions of sub-section (1) entered into after the date of the notification issued thereunder shall be illegal.

Section 17. Licensing of dealers in securities in certain areas

(1) Subject to the provisions of sub-section (3) and to the other provisions contained in this Act, no person shall carry on or purport to carry on, whether on his own behalf of any other person, the business if dealing securities in any State or area to which section 13 has not been declared to apply and to which the Central Government may, by notification in the Official Gazette, declare this section to apply, except under the authority of a licence granted by the Central Government in this behalf.

(2) No notification under sub-section (1) shall be issued with respect to any State or area unless the Central Government is satisfied, having regard to the manner in which securities are being dealt with in such State or area, that it is desirable or expedient in the interest of the trade or in the public interest that such dealings should be regulated by a system of licensing.

(3) The restrictions imposed by sub-section (1) in relation to dealing in securities shall not apply to the doing of anything by or behalf of a member of any recognised stock exchange.

Section 17 A. Public issue and listing of securities referred to in sub-clause (ie) of clause (h) of Section 2

1[Public issue and listing of securities referred to in sub-clause (ie) of clause (h) of Section 2. (1) Without prejudice to the provisions contained in this Act or any other law for the time being in force, no securities of the nature referred to in sub-clause (ie) of clause (h) of Section 2 shall be offered to the public or listed on any recognised stock exchange unless the issuer fulfils such =eligibility criteria and complies with such other requirements as may be specified by regulations made by the Securities and Exchange Board of India.

(2) Every issuer referred to in sub-clause (ie) of clause (h) of Section 2 intending to offer the certificates or instruments referred therein to the public shall make an application, before issuing the offer document to the public, to one or more recognised stock exchanges for permission for such certificates or instruments to be listed on the stock exchange or each such stock exchange.

(3) Where the permission applied for under sub-section (2) for listing has not been granted or refused by the recognised stock exchanges or any of them, the issuer shall forthwith repay all moneys, if any, received from applicants in pursuance of the offer document, and if any such money is not repaid within eight days after the issuer becomes liable to repay it, the issuer and every director or trustee thereof, as the case may be, who is in default shall, on and from the expiry of the eighth day, be jointly and severally liable to repay that money with interest at the rate of fifteen per cent, per annum.

Explanation.-In reckoning the eighth day after another day, any intervening day which is a public holiday under the Negotiable Instruments Act, 1881 (26 of 1881), shall be disregarded, and if the eighth day (as so reckoned) is itself such a public holiday, there shall for the said purposes be substituted the first day thereafter which is not a holiday.

(4) All the provisions of this Act relating to listing of securities of a public company on a recognised stock exchange shall, mutatis mutandis, apply to the listing of the securities of the nature referred to in sub-clause (ie) of clause (h) of Section 2 by the issuer, being a special purpose distinct entity.]

——————–

1. Inserted by Act No. 27 of 2007 w.e.f. 28-5-2007.

Section 18. Exclusion of spot delivery contracts from sections 13,14, 15 and 17

(1) Nothing contained in sections 13, 14,15 and 17 shall apply to spot delivery contracts.

(2) Notwithstanding anything contained in sub-section (1), if the Central Government is of opinion that in the interest of the trade or in the public interest it is expedient to regulate and control the business of delaying in spot delivery contracts also in any State or area (whether section 13 has been declared to apply to the State or area or not), it may, by notification in the Official Gazette, declare that the provisions of section 17 shall also apply to such State or area in respect of spot delivery contracts generally or in respect of spot delivery contracts for the sale or purchase of such securities as may be specified in the notification, and may also specify the manner in which, and the extent to which, the provisions of that section shall so apply.

Section 18 A. Contracts in derivative

1[Contracts in derivative. Notwithstanding anything contained in any other law for the time being in force, contracts in derivative shall be legal and valid if such contracts are-

(a) Traded on a recognised stock exchange;

(b) Settled on the clearing house of the recognised stock exchange, in accordance with the rules and bye-laws of such stock exchange.]

——————–

1. Inserted by Securities Law (Amendment) Act, 1999, w.e.f. 22-2-2000.

Section 19. Stock exchanges other than recognised stock exchanges prohibited

(1) No person shall, except with the permission of the Central Government, organise or assist in organising or be a member of any stock exchange (other than a recognised stock exchange) for purpose of assisting in, entering into or performing any contracts in securities.

(2) This section shall come into force in any State or area on such date as the Central Government may, by notification in the Official Gazette, appoint.

Section 20. Prohibition of options in securities

1[***]

——————–

1. Omitted by the Securitises Laws (Amendment) Act, 1995, w.e.f. 25-1-1995.

LISTING OF SECURITIED 1[***]

——————–

1 Words “BY PUBLIC COMPANIES” omitted by Securities Laws (Amendment) Act, 1999, w.e.f. 22-2-2000.

Section 21. Conditions for listing

Where securities are listed on the application of any person in any recognised stock exchange, such person shall comply with the conditions of the listing agreement with that stock exchange.

Section 21 A. Delisting of securities

1[Delisting of securities. (1) A recognised stock exchange may delist the securities, after recording the reasons therefor, from any recognised stock exchange on any of the ground or grounds as may be prescribed under this Act:

Provided that the securities of a company shall not be delisted unless the company concerned has been given a reasonable opportunity of being heard.

(2) A listed company or an aggrieved investor may file an appeal before ihe Securities Appellate Tribunal against the decision of the recognised stock exchange delisting the securities within fifteen days from the date of the decision of the recognised stock exchange delisting the securities and the provisions of Sections 22-B to 22-E of this Act, shall apply, as far as may be, to such appeals :

Provided that the Securities Appellate Tribunal may, if it is satisfied that the company was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding one month.]

——————–

1. Inserted by Act No. 1 of 2005 w.e.f. 6-1-2005.

Section 22. Right of appeal against refusal by stock exchanges to list securities of public companies [or collective investment scheme]

Right of appeal against refusal by stock exchanges to list securities of public companies 1[or collective investment scheme]. Where a recognised stock exchange acting in pursuance of any power given to it by its bye-laws, refuses to list the securities of any public company 1[or collective investment scheme], the company 1[or scheme] shall be entitled to be furnished with reasons for such refusal, and may—

(a) Within fifteen days from the date on which the reasons for such refusal are furnished to it, or

(b) Where the stock exchange has omitted or failed to dispose of, within the time specified in sub-section (1) of section 73 of the Companies Act, 1956 (1 of 1956) (hereafter in this section referred to as the “specified time”), the application for permission for the shares or debentures to be dealt with on the stock exchange, within fifteen days from the date of expiry of the specified time or within such further period, not exceeding one month, as the Central Government may, on sufficient cause being shown, allow, appeal to the Central Government against such refusal, omission or failure, as the case may be, and thereupon the Central Government may, after giving the stock exchange an opportunity of being heard—

(i) Vary or set aside the decision of the stock exchange, or

(ii) Where the stock exchange has omitted or failed to dispose of the application within the specified time, grant or refuse the permission,

and where the Central Government sets aside the decision of the recognised stock exchange or grants the permission, the stock exchange shall act in conformity with the orders of the Central Government:

2[PROVIDED that no appeal shall be preferred against refusal, omission or failure, as the case may be, under this section on and after the commencement of the Securities Laws (Ilnd Amendment) Act, 1999.]

——————–

1 Omitted by the Securities Laws (Amendment) Act, 1995, w.e.f. 25-1-1995.

2 Inserted by Securities Laws (IInd Amendment) Act, 1999, vv.e.f. 16-12-1999.

Section 22 A. Right of appeal to Securities Appellate Tribunal against refusal of stock exchange to list securities of public companies

1[Right of appeal to Securities Appellate Tribunal against refusal of stock exchange to list securities of public companies. (1) Where a recognised stock exchange, acting in pursuance of any power given to it by its bye-laws, refuses to list the securities of any company, the company shall be entitled to be furnished with reasons for such refusal, and may,—

(a) Within fifteen days from the date on which the reasons for such refusal are furnished to it, or

(b) Where the stock exchange has omitted or failed to dispose of, within the time specified in sub-section (1 A) of section 73 of the Companies Act, 1956 (1 of 1956) (hereafter in this section referred to as the “specified time”), the application for permission for the shares or debentures to be dealt with on the stock exchange, within fifteen days from the date of expiry of the specified time or within such further period, not exceeding one month, as the Securities Appellate Tribunal may, on sufficient cause being shown, allow,

appeal to the Securities Appellate Tribunal having jurisdiction in the matter against such refusal, omission or failure, as the case may be, and thereupon the Securities Appellate Tribunal may, after giving the stock exchange, an opportunity of being heard,—

(i) Vary or set aside the decision of the stock exchange; or

(ii) Where the stock exchange has omitted or failed to dispose of the application within the specified time, grant or refuse the permission,

And where the Securities Appellate Tribunal sets aside the decision of the recognised stock exchange or grants the permission, the stock exchange shall act in conformity with the orders of the Securities Appellate Tribunal.

(2) Every appeal under sub-section (1) shall be in such form and be accompanied by such fee as may be prescribed.

(3) The Securities Appellate Tribunal shall send a copy of every order made by it to the Board and parties to the appeal.

(4) 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.

——————–

1 Sees. 22A, 22B, 22C, 22D, 22E and 22F inserted by Securities Laws (IInd Amendment) Act, 1999, w.e.f. 16-12-1999.

Section 22 B. 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 (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 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 (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 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 (45 of 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 (2 of 1974).

Section 22 C. Right to legal representation

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 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 (23 of 1959), and who has obtained a certificate of practice under sub-section (1) of section 6 of the Act;

(d) “Legal practitioner” means an advocate, vakil or an attorney of any High Court, and includes a pleader in practice.

Section 22 D. Limitation

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.

Section 22 E. 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.

Section 22 F. Appeal to Supreme Court

1[Appeal to Supreme Court. 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.”]

——————–

1. Subs. by Act No. 1 of 2005 w.e.f. 6-1-2005.

Section 23. Penalties

(1) Any person who—

(a) Without reasonable excuse (the burden of proving which shall be on him) fails to comply with any requisition made under sub-section (4) of section 6; or

(b) Enters into any contract in contravention of any of the provisions contained in section 13 or section 16; or

(c) Contravenes the provisions contained in 7[section 17 or section 17A]; or

1[(d) Enters into any contract in derivative in contravention of section ISA or the rules made under section 30; or]

(e) Owns or keeps a place other than that of a recognised stock exchange which is used for the purpose of entering into or performing any contracts in contravention of any of the provisions of this Act and knowingly permits such place to be used for such purposes; or

(f) Manages, controls, or assists in keeping any place other than that of a recognised stock exchange which is used for the purpose of entering into or performing any contracts in contravention of any of the provisions of this Act or at which contracts are recorded or adjusted or rights or liabilities arising out of contracts are adjusted, regulated or enforced in any manner whatsoever; or

(g) Not being a member of a recognised stock exchange or his agent authorised as such under the rules or bye-laws of such stock exchange or not being a dealer in securities licensed under section 17 wilfully represents to or induces any person to believe that contracts can be entered into or performed under this Act through him; or

(h) Not being a member of a recognised stock exchange or his agent authorised as such under the rules or bye-laws of such stock exchange or not being a dealer in securities licensed under section 17, canvasses, advertises or touts in any manner either for himself or on behalf of any other person for any business connected with contracts in contravention of any of the provisions of this Act; or

(i) Joins, gathers or assists in gathering at any place other than the place of business specified in the bye-laws of a recognised stock exchange any person or persons for making bids or offers or for entering into or performing any contracts in contravention of any of the provisions of this Act;

4[“shall, without prejudice to any award of penalty by the Adjudicating Officer under this Act, on conviction, 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) Any person who enters into any contract in contravention of the provisions contained in section 15 2[or who fails to comply with the provisions of 5[Section 21or Section 21-A] with the orders of] the Central Government under section 22, 3[or with the orders of the Securitised Appellate Tribunal] 6[“shall, without prejudice to any award of penalty by the Adjudicating Officer under this Act, on conviction, 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” ]

——————–

1 Inserted by Securities Laws (Amendment) Act, 1999, w.e.f. 22-2-2000.

2 Substituted for “or who fails to comply with the orders or the Securities and Exchange Board of India under section 21” vide Securitises Laws (Amendment) Act, 1995, w.e.f. 25-1-1995.

3 Inserted by Securitied Laws (IInd Amendment) Act, 1999, w.e.f. 16-12-1999.

4. Subs. by Act No. 1 of 2005 w.e.f. 6-1-2005.

5. The words “Section 21” Subs. by Act No. 1 of 2005 w.e.f. 6-1-2005.

6. Subs. by Act No. 1 of 2005 w.e.f. 6-1-2005.

7. Subs. by Act No. 27 of 2007 w.e.f. 28-5-2007.

Section 23 A. Penalty for failure to furnish information, return, etc

1[Penalty for failure to furnish information, return, etc. Any person, who is required under this Act or any rules made thereunder,-

(a) to furnish any information, document, books, returns or report to a recognised stock exchange, fails to furnish the same within the time specified therefor in the listing agreement or conditions or bye-laws of the recognised stock exchange, 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 maintain books of account or records, as per the listing agreement or conditions, or bye-laws of a recognised stock exchange, fails to maintain the same, 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.]

——————–

1. Inserted by Act No. 1 of 2005 w.e.f. 6-1-2005.

Section 23 B. Penalty for failure by any person to enter into an agreement with clients

1[Penalty for failure by any person to enter into an agreement with clients. If any person, who is required under this Act or any bye-laws of a recognised stock exchange made thereunder, to enter into an agreement with his client, fails to enter into such an agreement, 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 every such failure.]

——————–

1. Inserted by Act No. 1 of 2005 w.e.f. 6-1-2005.

Section 23 C. Penalty for failure to redress Investors’ grievances

1[Penalty for failure to redress Investors’ grievances. If any stockbroker or sub-broker or a company whose securities are listed or proposed to be listed in a recognised stock exchange, after having been called upon by the Securities and Exchange Board of India or a recognised stock exchange in writing, to redress the grievances of the investors, fails to redress such grievances within the time stipulated by the Securities and Exchange Board of India or a recognised stock exchange, he or it 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.]

——————–

1. Inserted by Act No. 1 of 2005 w.e.f. 6-1-2005.

Section 23 D. Penalty for failure to segregate securities or moneys of client or clients

1[Penalty for failure to segregate securities or moneys of client or clients. If any person, who is registered under Section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 3992) as a stockbroker or sub-broker, fails to segregate securities or moneys of the client or clients or uses the securities or moneys of a client or clients for self or for any other client, he shall be liable to a penalty not exceeding one crore rupees.]

——————–

1. Inserted by Act No. 1 of 2005 w.e.f. 6-1-2005.

Section 23 E. Penalty for failure to comply with listing conditions or delisting conditions or grounds

1[Penalty for failure to comply with listing conditions or delisting conditions or grounds. If a company or any person managing collective investment scheme or mutual fund, fails to comply with the listing conditions or delisting conditions or grounds or commits a breach thereof, it or he shall be liable to a penalty not exceeding twenty-five crore rupees.]

——————–

1. Inserted by Act No. 1 of 2005 w.e.f. 6-1-2005.

Section 23 F. Penalty for excess dematerialisation or delivery of unlisted securities

1[Penalty for excess dematerialisation or delivery of unlisted securities. If any issuer dematerialises securities more than the issued securities of a company or delivers in the stock exchanges the securities which are not listed in the recognised stock exchange or delivers securities where no trading permission has been given by the recognised stock exchange, he shall be liable to a penalty not exceeding twenty-five crore rupees.]

——————–

1. Inserted by Act No. 1 of 2005 w.e.f. 6-1-2005.

Section 23 G. Penalty for failure to furnish periodical returns, etc

1[Penalty for failure to furnish periodical returns, etc. If a recognised stock exchange fails or neglects to furnish periodical returns to the Securities and Exchange Board of India or fails or neglects to make or amend its rules or bye-laws as directed by the Securities and Exchange Board of India or fails to comply with directions issued by the Securities and Exchange Board of India, such recognised stock exchange shall be liable to a penalty which may extend to twenty-five crore rupees.]

——————–

1. Inserted by Act No. 1 of 2005 w.e.f. 6-1-2005.

Section 23 H. Penalty for contravention where no separate penalty has been provided

1[Penalty for contravention where no separate penalty has been provided. Whoever fails to comply with any provision of this Act, the rules or articles or bye-laws or the regulations of the recognised stock exchange or directions issued by the Securities and Exchange Board of India for which no separate penalty has been provided, shall be liable to a penalty which may extend to one crore rupees.]

——————–

1. Inserted by Act No. 1 of 2005 w.e.f. 6-1-2005.

Section 23 I. Power to adjudicate

1[Power to adjudicate. (1) For the purpose of adjudging under Sections 23-A, 23-B, 23-C, 23-D, 23-E, 23-F, 23-G and 23-H, the Securities and Exchange Board of India 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 may impose such penalty as he thinks fit in accordance with the provisions of any of those sections.]

——————–

1. Inserted by Act No. 1 of 2005 w.e.f. 6-1-2005.

Section 23 J. Factors to be taken into account by adjudicating officer

1[Factors to be taken into account by adjudicating officer. While adjudging the quantum of penalty under Section 23-I, the adjudicating officer shall have due regard to the following factors, namely:-

(a) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default;

(b) the amount of loss caused to an investor or group of investors as a result of the default;

(c) the repetitive nature of the default.]

——————–

1. Inserted by Act No. 1 of 2005 w.e.f. 6-1-2005.

Section 23 K. Crediting sums realised by way of penalties to Consolidated Fund of India

1[Crediting sums realised by way of penalties to Consolidated Fund of India. All sums realised by way of penalties under this Act shall be credited to the Consolidated Fund of India.]

——————–

1. Inserted by Act No. 1 of 2005 w.e.f. 6-1-2005.

Section 23 L. Appeal to Securities Appellate Tribunal

1[Appeal to Securities Appellate Tribunal. (1) Any person aggrieved, by the order or decision of the recognised stock exchange or the adjudicating officer or any order made by the Securities and Exchange Board of India under Section 4-B, may prefer an appeal before the Securities Appellate Tribunal and the provisions of Sections 22-B, 22-C, 22-D and 22-E of this Act, shall apply, as far as may be, to such appeals.

(2) 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 or decision is received by the appellant and it shall be in such form and be accompanied by such fee 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.

(3) 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.

(4) The Securities Appellate Tribunal shall send a copy of every order made by it to the parties to the appeal and to the concerned adjudicating officer.

(5) 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.]

——————–

1. Inserted by Act No. 1 of 2005 w.e.f. 6-1-2005.

Section 23 M. Offences

1[Offences. (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, for which no punishment is provided elsewhere in this Act, 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.]

——————–

1. Inserted by Act No. 1 of 2005 w.e.f. 6-1-2005.

Section 23 N. Composition of certain offences

1[Composition of certain offences. 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.]

——————–

1. Inserted by Act No. 1 of 2005 w.e.f. 6-1-2005.

Section 24. Offences by companies

(1) Where an offence has been committed by a company, every person who, at the time when 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 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 is proved that the offence has been committed with the consent or connivance of, or is attributable to any gross negligence on the part of any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer of the company, shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

Explanation.— For the purpose of this section, —

(a) ‘Company’ means any body corporate and includes a firm or other association of individuals, and

1[(b) ‘Director’, in relation to a firm, means a partner in the firm.

(i) A firm, means a partner in the firm;

(ii) Any association of persons or a body of individuals, means any member controlling the affairs thereof.]

(3) The provisions of this section shall be in addition to, and not in derogation of, the provisions of section 22A.

——————–

1 Substituted by Securities Laws (Amendment) Act, 1999, w.e.f. 22-2-2000.

Section 25. Certain offences to be cognizable

Notwithstanding anything contained in the Code of Criminal Procedure, 1898 (5 of 1898), any offence punishable under 1[***] section 23 shall be deemed to be cognizable offence within the meaning of that Code.

——————–

1. The words “Sub-section (1) of” Omitted by Act No. 1 of 2005 w.e.f. 6-1-2005.

Section 26. Cognizance of offences by courts

1[Cognizance of offences by courts. (1) No court shall take cognizance of any offence punishable under this Act or any rules or 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 a recognised stock exchange or by any person.

(2) No court inferior to that of a Court of Session shall try any offence punishable under this Act.”]

——————–

1. Section 26 Subs. by Act No. 1 of 2005 w.e.f. 6-1-2005.

Section 27. Title to dividends

(1) It shall be lawful for the holder of any security whose name appears on the books of the company issuing the said security to receive and retain any dividend declared by the company in respect thereof for any year, notwithstanding that the said security has already been transferred by him for consideration, unless the transferee who claims the dividend from the transferor has lodged the security and all other documents relating to the transfer which may be required by the company with the company for being registered in his name within fifteen days of the date on which the dividend became due.

Explanation : The period specified in this section shall be extended—

(i) In case of death of the transferee, by the actual period taken by his legal representative to establish his claim to the dividend;

(ii) In case of loss of the transfer deed by theft or any other cause beyond the control of the transferee, by the actual period taken for the replacement thereof; and

(iii) In case of delay in the lodging of any security and other documents relating to the transfer due to causes connected with the post, by the actual period of the delay.

(2) Nothing contained in sub-section (1) shall affect—

(a) The right of a company to pay any dividend which has become due to any person whose name is for the time being registered in the books of the company as the holder of the security in respect of which the dividend has become due; or

(b) The right of the transferee of any security to enforce against the transferor or any other person his rights, if any, in relation to the transfer in any case where the company has refused to register the transfer of the security in the name of the transferee.

Section 27 A. Right to receive income from collective investment scheme

1[Right to receive income from collective investment scheme. (1) It shall be lawful for the holder of any securities, being units or other instruments issued by the collective investment scheme, whose name appears on the books of the collective investment scheme issuing the said security to receive and retain any income in respect of units or other instruments issued by the collective investment scheme declared by the collective investment scheme in respect thereof for any year, notwithstanding that the said security, being units or other instruments issued by the collective investment scheme, has already been transferred by him for consideration, unless the transferee who claims the income in respect of units or other instruments issued by the collective investment scheme from the transfer or has lodged the security and all other documents relating to the transfer which may be required by the collective investment scheme with the collective investment scheme for being registered in his name within fifteen days of the date on which the income in respect of units or other is instruments issued by the collective investment scheme became due.

Explanation : The period specified in this section shall be extended—

(i) In case of death of the transferee, by the actual period taken by his legal representative to establish his claim to the income in respect of units or other instrument issued by the collective investment scheme;

(ii) In case of loss of the transfer deed by theft or any other cause beyond the control of the transferee, by the actual period taken for the replacement thereof; and

(iii) In case of delay in the lodging of any security, being units or other instruments issued by the collective investment scheme, and other e documents relating to the transfer due to causes connected with the post, e by the actual period of the delay.

(2) Nothing contained in sub-section (1) shall affect—

(a) The right of a collective investment scheme to pay any income from units or other instruments issued by the collective investment scheme which has become due to any person whose name is for the time being registered in the books of the collective investment scheme as the holder of the security being units or other instruments issued by the collective investment scheme in respect of which the income in respect of units or other instruments issued by the collective scheme has become due; or

(b) The right of transferee of any security, being units or other instruments issued by the collective investment scheme, to enforce against the transferor or any other person his rights, if any, in relation to the transfer in any case where the company has refused to register the transfer of the security being units or other instruments issued by the collective investment scheme in the name of the transferee.]

——————–

1 Inserted by Securities Laws (IInd Amendment) Act, 1999, w.e.f. 22-2-2000.

Section 27 B. Right to receive income from mutual fund

1[Right to receive income from mutual fund. (1) It shall be lawful for the holder of any securities, being units or other instruments issued by any mutual fund, whose name appears on the books of the mutual fund issuing the said security to receive and retain any income in respect of units or other instruments issued by the mutual fund declared by the mutual fund in respect thereof for any year, notwithstanding that the said security, being units or other instruments issued by the mutual fund, has already been transferred by him for consideration, unless the transferee who claims the income in respect of units or other instruments issued by the mutual fund from the transferor has lodged the security and all other documents relating to the transfer which may be required by the mutual fund with the mutual fund for being registered in his name within fifteen days of the date on which the income in respect of units or other instruments issued by the mutual fund became due.

Explanation.-The period specified in this section shall be extended-

(i) in case of death of the transferee, by the actual period taken by his legal representative to establish his claim to the income in respect of units or other instrument issued by the mutual fund;

(ii) in case of loss of the transfer deed by theft or any other cause beyond the control of transferee, by the actual period taken for the replacement thereof; and

(iii) in case of delay in the lodging of any security, being units or other instruments issued by the mutual fund, and other documents relating to the transfer due to causes connected with the post, by the actual period of the delay.

(2) Nothing contained in sub-section (1) shall affect-

(a) the right of a mutual fund to pay any income from units or other instruments issued by the mutual fund which has become due to any person, whose name is for the time being registered in the books of the mutual fund as the holder of the security being units or other instruments issued by the mutual fund in respect of which the income in respect of units or other instruments issued by the mutual fund has become due; or

(b) the right of a transferee of any security, being units or other instruments issued by the mutual fund, to enforce against the transferor or any other person, his rights, if any. in relation to the transfer in any case where the mutual fund has refused to register the transfer of the security being units or other instruments issued by the mutual fund in the name of the transferee.”]

——————–

1. Section 27-B Ins. by Act No. 1 of 2005 w.e.f. 6-1-2005.

Section 28. Act not to apply in certain cases

(1) The provisions of this Act shall not apply to—

(a) The Government, the Reserve Bank of India, any local authority or any corporation set up by a special law or any person who has effected any transaction with or through the agency of any such authority as is referred to in this clause;

(b) Any convertible bond or share warrant or any option or right in relation thereto, insofar as it entitles the person in whose favour any of the foregoing has been issued to obtain at his option from the company or other body corporate, issuing the same or from any of its shareholders or duly appointed agents’ shares of the company or other body corporate, whether by conversion of the bond or warrant or otherwise, on the basis of the price agreed upon when the same was issued.

(2) Without prejudice to the provisions contained in sub-section (1), if the Central Government is satisfied that in the interests of trade and commerce or the economic development of the country it is necessary or expedient so to do, it may, by notification in the Official Gazette, specify any class of contracts as contracts to which this Act or any provision contained therein shall not apply, and also the conditions, limitations or restrictions, if any, subject to which it shall not so apply.

Section 29. Protection of action taken in good faith

No suit, prosecution or other legal proceeding whatsoever shall lie in any court against the governing body or any member, office bearer or servant of any recognised stock exchange or against any person or persons appointed under sub-section (1) of section 11 for anything which is in good faith done or intended to be done in pursuance of this Act or of any rules or bye-laws made thereunder.

Section 29 A. Power to delegate

1[Power to delegate. The Central Government may, by order published in the Official Gazette, direct that thepowers (except the power under section 30) exercisable by it under any provision of this Act shall, in relation to such matters and subject to such conditions, if any, as may be specified in the order, be exercisable also by the Securities and Exchange Board of India or the Reserve Bank of India constituted under section 3 of the Reserve Bank of India Act, 1934.]

——————–

1 Substituted by Securities Laws (Amendment) Act, 1999, w.e.f. 22-2-2000.

Section 30. Power to make rules

(1) The Central Government may, by notification in the Official Gazette, make rules for the purpose of carrying into effect the objects of this Act.

(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for—

(a) The manner in which applications may be made, the particulars which they should contain and the levy of a fee in respect of such applications;

(b) The manner in which any inquiry for the purpose of recognising any stock exchange may be made, the conditions which may be imposed for the grant of such recognition, including conditions as to the admission of members if the stock exchange concerned is to be the only recognised stock exchange in the area; and the form in which such recognition shall be granted;

(c) The particulars which should be contained in the periodical returns and annual reports to be furnished to the Central Government;

(d) The documents which should be maintained and preserved under section 6 and the periods for which they should be preserved;

(e) The manner in which any inquiry by the governing body of a stock exchange shall be made under section 6;

(f) The manner in which the bye-laws to be made or amended under this Act shall before being so made or amended be published for criticism;

(g) The manner in which applications may be made by dealers in securities for licences under section 17, the fee payable in respect thereof and the period of such licences, the conditions subject to which licences may be granted, including conditions relating to the forms which may be used in making contracts, the documents to be maintained by licensed dealers and the furnishing of periodical information to such authority as may be specified and the revocation of licences for breach of conditions;

(h) The requirements which shall be complied with

(A) By public companies for the purpose of getting their securities listed on any stock exchange;

(B) By collective investment scheme for the purpose of getting their units listed on any stock exchange;

1[(ha) the grounds on which the securities of a company may be delisted from any recognised stock exchange under sub-section (1) of Section 21-A;

(hb) the form in which an appeal may be filed before the Securities Appellate Tribunal under sub-section (2) of Section 21-A and the fees payable in respect of such appeal;

(hc) the form in which an appeal may be filed before the Securities Appellate Tribunal under Section 22-A and the fees payable in respect of such appeal;

(hd) the manner of inquiry under sub-section (1) of Section 23-I;

(he) the form in which an appeal may be filed before the Securities Appellate Tribunal under Section 23-L and the fees payable in respect of such appeal;]

(i) Any other matter which is to be or may be prescribed.

2[(3) Every rule 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 both House agree that the rule should not be made, the rule 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.]

——————–

1. Substituted by Act No. 1 of 2005 w.e.f. 6-1-2005.

2. Substituted by Act No. 1 of 2005 w.e.f. 6-1-2005.

Section 31. Power of Securities and Exchange Board of India to make regulations

1[Power of Securities and Exchange Board of India 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 Securities and Exchange Board of India 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[(2) In particular, and without prejudice to the generality of the foregoing power, such regulations may provide for all or any of the following matters, namely:-

(a) the manner, in which at least fifty-one per cent, of equity share capital of a recognised stock exchange is held within twelve months from the date of publication of the order under sub-section (7) of Section 4-B by the public other than the shareholders having trading rights under sub-section (8) of that section;

(b) the eligibility criteria and other requirements under Section 17-A.]

(3) 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 regulation or both Houses agree that the regulation should not be made, the 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 regulation.]

——————-

1. Section 31 Inserted by Act No. 1 of 2005 w.e.f. 6-1-2005.

2. Subs. by Act No. 27 of 2007 w.e.f. 28-5-2007.

Bydeb

Securities Contracts (Regulation) Amendment Act, 2007

SECURITIES CONTRACTS (REGULATION) AMENDMENT ACT, 20071

[ACT NO. 27 OF 2007]

[May 28, 2007]

An Act further to amend the Securities Contracts (Regulation) Act, 1956 Be it enacted by Parliament in the Fifty-eighth Year of the Republic of India as follows:-

Prefatory Note-Statement of Objects and Reasons.-Securitisation is a form of financing involving pooling of financial assets and the issuance of securities that are re-paid from the cash flows generated by the assets. This is generally accomplished by actual sale of the assets to a bankruptcy remote vehicle, that is, a special purpose vehicle, which finances the purchase through the issuance of bonds. These bonds are backed by future cash flows of the asset pool. The most common assets for securitisation are mortgages, credit cards, auto and consumer loans, student loans, corporate debt, export receivables, off-shore remittances, etc.

2. Besides other advantages, securitisation (a) allows banks and financial institutions to keep these loans off their balance sheets, thus reducing the need for additional capital; (b) provides banks and financial institutions with alternative forms of funding risk transfer, a new investor base, potential capital relief and capital market development; (c) can reduce lending concentration, improve liquidity and improve access to alternate sources of funding for banks and financial institutions; (d) facilitates attainment of funding at lower cost as a result of isolating the assets from potential bankruptcy risk of the originator; (e) facilitates better matching of assets and liabilities and the development of the long-term debt market; if) provides diversified pools of uniform assets; and (g) has the advantage of converting non-liquid loans or assets which cannot be easily sold to third party investors into liquid assets or marketable securities. Lower funding costs are also a result of movement of investments from less efficient debt markets to more efficient capital markets through the process of securitisation.

3. In India, the securitisation market remains underdeveloped. Although two major legislative initiatives, namely, (a) the amendment to the National Housing Bank Act, 1987 (NHB Act) in the year 2000; and (b) enactment of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), have been taken, the market has not picked up because of the absence of the facility of trading on stock exchanges. The potential buyers get discouraged by the possibility of having to hold the certificate or instrument in respect of securitisation transactions till maturity. This, in turn, restricts the growth of business of housing finance companies and banks.

4. Securitisation transactions under the NHB Act are not covered under the definition of “securities” in the Securities Contracts (Regulation) Act, 1956. As such, trading in certificates or instruments relating to such transactions cannot take place on stock exchanges and buyers of such securitised financial certificates or instruments are left with few exit options. Under the SARFAESI Act, while “security receipts” have been covered under the definition of “securities”, the provisions of the said Act restrict sale and purchase only amongst qualified institutional buyers. Besides, the “security receipts” under the SARFAESI Act can be issued only be a securitisation company or a reconstruction company registered with the Reserve Bank of India. This obviously limits the interest in such receipts and the marker has not taken off at all.

5. Keeping in view the potential of the market, international trends and consultations held with major institutional participants and market experts, it was decided to amend the Securities Contracts (Regulation) Act, 1956 and accordingly, the Securities Contracts (Regulation) Amendment Bill, 2005 was introduced in the Lok Sabha on the 16th December, 2005. The Bill was referred to the Standing Committee on Finance (hereinafter referred to as the “Committee”) on 23rd December, 2005 for examination and report thereon. The Committee presented their report to the Lok Sabha on the 22nd May, 2006.

6. The Standing Committee in its report recognised the need for listing and trading of securitised certificates or instruments on the Stock Exchanges and expressed their agreement with the broad objectives of the proposals contained in the Securities Contracts (Regulation) Amendment Bill, 2005. However, it recommended a modified approach for regulation and development of market for such instruments. Government have examined the recommendations and decided to accept and act upon all of them. Since the approach recommended by the Standing Committee and agreed to by the Government are different from the provisions in the Securities Contracts (Regulation) Amendment Bill, 2005, it is proposed to withdraw the said Bill and to move a revised Bill, viz., the Securities Contracts (Regulation) Amendment Bill, 2006 to amend the Securities Contracts (Regulation) Act, 1956 so as to provide, inter alia, to-

(i) include securitisation certificates or instruments under the definition of “securities” and to insert for the said purpose, a new sub-clause (ie) in clause (h) of Section 2 of the Securities Contracts (Regulation) Act, 1956;

(ii) provide for disclosure based regulation for issue of the securitised certificates or instruments and procedure therefor and to insert for the said purpose, a new Section 17-A in the Securities Contracts (Regulation) Act, 1956 and make consequential amendments in Section 31 to provide regulation making powers to SEBI.

7. The Bill seeks to achieve the above objectives.

——————–

1. Received the assent of the President on May 28, 2007 and published in the Gazette of India, Extra. Part II, Section 1, dated 29th May, 2007, pp. 1-2, No. 32

1. Short title.

This Act may be called the Securities Contracts (Regulation) Amendment Act, 2007.

2. Amendment of Section 2.

In Section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) (hereinafter referred to as the principal Act), in clause (h), after sub-clause (id), the following sub-clause shall be inserted, namely:-

“(ie) any certificate or instrument (by whatever name called), issued to an investor by any issuer being a special purpose distinct entity which possesses any debt or receivable, including mortgage debt, assigned to such entity, and acknowledging beneficial interest of such investor in such debt or receivable, including mortgage debt, as the case may be;”.

3. Insertion of new Section 17-A.

After Section 17 of the principal Act, the following section shall be inserted, namely:-

“17-A. Public issue and listing of securities referred to in sub-clause (ie) of clause (h) of Section 2.-

(1) Without prejudice to the provisions contained in this Act or any other law for the time being in force, no securities of the nature referred to in sub-clause (ie) of clause (h) of Section 2 shall be offered to the public or listed on any recognised stock exchange unless the issuer fulfils such =eligibility criteria and complies with such other requirements as may be specified by regulations made by the Securities and Exchange Board of India.

(2) Every issuer referred to in sub-clause (ie) of clause (h) of Section 2 intending to offer the certificates or instruments referred therein to the public shall make an application, before issuing the offer document to the public, to one or more recognised stock exchanges for permission for such certificates or instruments to be listed on the stock exchange or each such stock exchange.

(3) Where the permission applied for under sub-section (2) for listing has not been granted or refused by the recognised stock exchanges or any of them, the issuer shall forthwith repay all moneys, if any, received from applicants in pursuance of the offer document, and if any such money is not repaid within eight days after the issuer becomes liable to repay it, the issuer and every director or trustee thereof, as the case may be, who is in default shall, on and from the expiry of the eighth day, be jointly and severally liable to repay that money with interest at the rate of fifteen per cent, per annum.

Explanation.-In reckoning the eighth day after another day, any intervening day which is a public holiday under the Negotiable Instruments Act, 1881 (26 of 1881), shall be disregarded, and if the eighth day (as so reckoned) is itself such a public holiday, there shall for the said purposes be substituted the first day thereafter which is not a holiday.

(4) All the provisions of this Act relating to listing of securities of a public company on a recognised stock exchange shall, mutatis mutandis, apply to the listing of the securities of the nature referred to in sub-clause (ie) of clause (h) of Section 2 by the issuer, being a special purpose distinct entity.

4. Amendment of Section 23.

In Section 23 of the principal Act, in sub-section (1), in clause (c), for the word and figures “Section 17”, the words, figures and letter “Section 17 or Section 17-A” shall be substituted.

5. Amendment of Section 31.

In Section 31 of the principal Act, for sub-section (2), the following sub-section shall be substituted, namely:-

“(2) In particular, and without prejudice to the generality of the foregoing power, such regulations may provide for all or any of the following matters, namely:-

(a) the manner, in which at least fifty-one per cent, of equity share capital of a recognised stock exchange is held within twelve months from the date of publication of the order under sub-section (7) of Section 4-B by the public other than the shareholders having trading rights under sub-section (8) of that section;

(b) the eligibility criteria and other requirements under Section 17-A.”

Bydeb

Securities Laws (Amendment) Act, 2004

Section 1. Short title and commencement

SECURITIES LAWS (AMENDMENT) ACT, 20041

[No. 1 OF 2005]

[January 6, 2005]

An Act further to amend the Securities Contracts (Regulation) Act, 1956 and the Depositories Act, 1996

Be it enacted by Parliament in the Fifty-fifth Year of the Republic of India as follows:-

Prefatory Note-Statement of Objects and Reasons.-Although the Securities Contracts (Regulation) Act, 1956 aims to prevent undesirable transactions in securities by regulating the business of dealing therein, the existing mutual organisational structure of stock exchanges (except two exchanges) failed to address the conflict of interests on stock exchanges. The Joint Parliamentary Committee on the stock market scam and matters relating thereto recommended that the process of corporatisation and demutualisation of exchanges should be expedited and underlined the necessity for early implementation of corporatisation and demutualisation of stock exchanges.

2. The Central Government, in its Action Taken Report laid before both Houses of the Parliament, assured that necessary legislative amendments to give effect to the aforesaid recommendation will be made. In view of this, it is proposed to make amendments in the Securities Contracts (Regulation) Act, 1956 for structural transformation of stock exchanges from mutual organisational form to a demutualised form.

3. Since demutualisation separates ownership, voting rights and management from the right of access to trading, it is imperative that the representation of brokers in Board of Directors of Stock Exchanges is either not permitted at all or kept to a minimum.

4. In order to expedite corporatisation and demutualisation of exchanges, the Securities Laws (Amendment) Bill, 2003 was introduced in the Lok Sabha on the 18th August, 2003 to amend the Securities Contracts (Regulation) Act, 1956 and the Depositories Act. 1996, inter alia, which provided for the following matters, namely:-

(a) defining the corporatisation and demutualisation;

(b) limiting the organisational form of a stock exchange to a corporate entity;

(c) specifying the procedure for corporatisation and demutualisation (including approval of scheme for corporatisation and demutualisation by the Securities and Exchange Board of India);

(d) specifying the time limit within which the shares shall be disinvested by stockbrokers under the scheme of corporatisation and demutualisation;

(e) restricting the voting rights of brokers as shareholders, and brokers’ participation on governing boards of stock exchanges so as to plug the loopholes inherent in governance of stock exchanges whose organisational form is mutual;

(f) defining units of mutual funds as “securities”, delisting conditions and consequences of violations and transfer of duties and functions of a clearing house to a clearing corporation;

(g) making certain other provisions in the Securities Contracts (Regulation) Act, 1956, similar to those contained in the Securities and Exchange Board of India (Amendment) Act, 2002, such as, conferring powers upon the Securities and Exchange Board of India to issue directions to stock exchanges and the companies whose securities are listed or proposed to be listed, providing appeal from the orders of the Securities Appellate Tribunal to the Supreme Court, enhancing the penalties specified under the Securities Contracts (Regulation) Act, 1956, and adjudication by an adjudicating authority to impose monetary penalties, making provision for compounding of offences and crediting of amount of penalties into the Consolidated Fund of India, etc.

5. After introduction of the Bill, various suggestions were received from the Securities and Exchange Board of India, the Reserve Bank of India and institutions connected with the securities market. In view of the suggestions and developments in the securities market subsequent to introduction of the aforesaid Bill, it has been decided to-

(i) omit the earlier provisions in the Securities Laws (Amendment) Bill, 2003 relating to-

(A) the definition of “derivatives” which included non-securities based derivatives, such as, those based on rates on indices, in view of the apprehension that the proposed amendment would create further disability to the existing over the counter derivatives;

(B) the spot delivery contracts as the exiting provisions are adequate for regulation of certain category of spot contracts;

(C) non-attachment of investment assets as such provision could be misused to pass off assets of brokers as client assets and thus to frustrate the attachment proceedings;

(D) specific conditions of delisting of securities by stock exchanges and instead provide for delisting in the rules under the Securities Contracts (Regulation) Act, 1956 so as to provide flexibility for regulation of delisting;

(ii) incorporate provision in the Securities Contracts (Regulation) Act, 1956 to provide for penalties for offences and grant of immunity on the lines of Section 24-B of the Securities and Exchange Board of India Act, 1992;

(iii) allow, in certain cases, the members of one stock exchange to enter into contract with members of other stock exchanges subject to such terms and conditions as may be stipulated, with prior approval of Securities and Exchange Board of India, by the respective stock exchanges or after obtaining prior permission from the respective stock exchanges if so stipulated by the stock exchanges with prior approval of Securities and Exchange Board of India;

(iv) make certain amendments in the Depositories Act, 1996 such as, enhancement of existing penalties, make provision for monetary penalty for certain contraventions and provide for crediting penalties into the Consolidated Fund of India, grant of immunity in certain cases by the Central Government and filing of appeal from the Securities Appellate Tribunal to the Supreme Court on the lines of provisions contained in the Securities and Exchange Board of India Act, 1992, etc.

6. Due to dissolution of the 13th Lok Sabha, the said Bill had lapsed. Since Parliament was not in session and it had become necessary to take immediate action to provide for above matters, an Ordinance called the Securities Laws (Amendment) Ordinance, 2004 was promulgated by the President on the 12th October, 2004.

7. The Bill seeks to replace the aforesaid Ordinance.

——————–

1. Received the assent of the President on January 6, 2005 and published in the Gazette of India, Extra., Part II, Section 1, dated 7th January, 2005, pp. l-14, No. 1

(1) This Act may be called the Securities Laws (Amendment) Act, 2004.

(2) It shall be deemed to have come into force on the 12th day of October, 2004.

Section 2. Amendment of Section 2

In Section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) (hereafter in this chapter referred to as the principal Act),-

(i) clause (aa) shall be re-lettered as clause (ac) thereof and before the clause (ac) as so re-lettered, the following clauses shall be inserted, namely:-

‘(aa) “corporatisation” means the succession of a recognised stock exchange, being a body of individuals or a society registered under the Societies Registration Act, 1860 (21 of 1860), by another stock exchange, being a company incorporated for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities carried on by such individuals or society;

(ab) “demutualisation” means the segregation of ownership and management from the trading rights of the members of a recognised stock exchange in accordance with a scheme approved by the Securities and Exchange Board of India;’;

(ii) clause (ga) shall be re-lettered as clause (gb) thereof and before the clause (gb) as so re-lettered, the following clause shall be inserted, namely:-

‘(ga) “scheme” means a scheme for corporatisation or demutualisation of a recognised stock exchange which may provide for-

(i) the issue of shares for a lawful consideration and provision of trading rights in lieu of membership cards of members of a recognised stock exchange;

(ii) the restrictions on voting rights;

(iii) the transfer of property, business, assets, rights, liabilities, recognitions, contracts of the recognised stock exchange, legal proceedings by, or against, the recognised stock exchange, whether in the name of the recognised stock exchange or any trustee or otherwise and any permission given to, or by, the recognised stock exchange;

(iv) the transfer of employees of a recognised stock exchange to another recognised stock exchange;

(v) any other matter required for the purpose of, or in connection with, the corporatisation or demutualisation, as the case may be, of the recognised stock exchange;’;

(iii) in clause

(h), after sub-clause (ic), the following sub-clause shall be inserted, namely:-

“(id) units or any other such instrument issued to the investors under any mutual fund scheme;”;

(iv) for clause

(j), the following clause shall be substituted, namely:-

‘(j) “stock exchange” means-

(a) any body of individuals, whether incorporated or not, constituted before corporatisation and demutualisation under Sections 4-A and 4-B, or

(b) a body corporate incorporated under the Companies Act, 1956 (1 of 1956) whether under a scheme of corporatisation and demutualisation or otherwise,

for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities;’.

Section 3. Insertion of new Sections 4-A and 4-B

After Section 4 of the principal Act, the following sections shall be inserted, namely:-

‘4-A. Corporatisation and demutualisation of stock exchanges.-On and from the appointed date, all recognised stock exchanges (if not corporatised and demutualised before the appointed date) shall be corporatised and demutualised in accordance with the provisions contained in Section 4-B :

Provided that the Securities and Exchange Board of India may, if it is satisfied that any recognised stock exchange was prevented by sufficient cause from being corporatised and demutualised on or after the appointed date, specify another appointed date in respect of that recognised stock exchange and such recognised stock exchange may continue as such before such appointed date.

Explanation.-For the purposes of this section, “appointed date” means the date which the Securities and Exchange Board of India may, by notification in the Official Gazette, appoint and different appointed dates may be appointed for different recognised stock exchanges.

4-B. Procedure for corporatisation and demutualisation.-(1) All recognised stock exchanges referred to in Section 4-A shall, within such time as may be specified by the Securities and Exchange Board of India, submit a scheme for corporatisation and demutualisation for its approval :

Provided that the Securities and Exchange Board of India, may, by notification in the Official Gazette, specify name of the recognised stock exchange, which had already been corporatised and demutualised, and such stock exchange shall not be required to submit the scheme under this section.

(2) On receipt of the scheme referred to in sub-section (1), the Securities and Exchange Board of India may, after making such enquiry as may be necessary in this behalf and obtaining such further information, if any, as it may require and if it is satisfied that it would be in the interest of the trade and also in the public interest, approve the scheme with or without modification.

(3) No scheme under sub-section (2) shall be approved by the Securities and Exchange Board of India if the issue of shares for a lawful consideration or provision of trading rights in lieu of membership card of the members of a recognised stock exchange or payment of dividends to members have been proposed out of any reserves or assets of that stock exchange.

(4) Where the scheme is approved under sub-section (2), the scheme so approved shall be published immediately by-

(a) the Securities and Exchange Board of India in the Official Gazette;

(b) the recognised stock exchange in such two daily newspapers circulating in India, as may be specified by the Securities and Exchange Board of India,

and upon such publication, notwithstanding anything to the contrary contained in this Act or any other law for {he time being in force or any agreement, award, judgment, decree or other instrument for the time being in force, the scheme shall have effect and be binding on all persons and authorities including all members, creditors, depositors. and employees of the recognised stock exchange and on all persons having any contract, right, power, obligation or liability with, against, over, to, or in connection with, the recognised stock exchange or its members.

(5) Where the Securities and Exchange Board of India is satisfied that it would no! be in the interest of the trade and also in the public interest to approve the scheme under sub-section (2), it may, by an order, reject the scheme and such order of rejection shall be published by it in the Official Gazette :

Provided that the Securities and Exchange Board of India shall give a reasonable opportunity of being heard to all the persons concerned and the recognised stock exchange concerned before passing an order rejecting the scheme.

(6) The Securities and Exchange Board of India may, while approving the scheme under sub-section (2), by an order in writing, restrict-

(a) the voting rights of the shareholders who are also stockbrokers of the recognised stock exchange;

(b) the right of shareholders or a stockbroker of the recognised stock exchange to appoint the representatives on the governing board of the stock exchange;

(c) the maximum number of representatives of the stockbrokers of the recognised stock exchange to be appointed on the governing board of the recognised stock exchange, which shall not exceed one-fourth of the total strength of the governing board.

(7) The order made under sub-section (6) shall be published in the Official Gazette and on the publication thereof, the order shall, notwithstanding anything to the contrary contained in the Companies Act, 1956 (1 of 1956), or any other law for the time being in force, have full effect.

(8) Every recognised stock exchange, in respect of which the scheme for corporatisation or demutualisation has been approved under sub-section (2), shall, either by fresh issue of equity shares to the public or in any other manner as may be specified by the regulations made by the Securities and Exchange Board of India, ensure that at least fifty-one per cent of its equity share capital is held, within twelve months from the date of publication of the order under sub-section (7), by the public other than shareholders having trading rights ;

Provided that the Securities and Exchange Board of India may, on sufficient cause being shown to it and in the public interest, extend the said period by another twelve months.’.

Section 4. Amendment of Section 5

Section 5 of the principal Act shall be numbered as subsection (1) thereof and after sub-section (1) as so numbered, the following sub-section shall be inserted, namely:-

“(2) Where the recognised stock exchange has not been corporatised or demutualised or it fails to submit the scheme referred to in sub-section (1) of Section 4-B within the specified time therefor or the scheme has been rejected by the Securities and Exchange Board of India under sub-section (5) of Section 4-B, the recognition granted to such stock exchange under Section 4, shall, notwithstanding anything to the contrary contained in this Act, stand withdrawn and the Central Government shall publish, by notification in the Official Gazette, such withdrawal of recognition :

Provided that no such withdrawal shall affect the validity of any contract entered into or made before the date of the notification, and the Securities and Exchange Board of India may, after consultation with the stock exchange, make such provisions as it deems fit in the order rejecting the scheme published in the Official Gazette under subsection (5) of Section 4-B.”.

Section 5. Insertion of new Section 8-A

After Section 8 of the principal Act, the following section shall be inserted, namely:-

“8-A. Clearing corporation.-(1) A recognised stock exchange may, with the prior approval of the Securities and Exchange Board of India, transfer the duties and functions of a clearing house to a clearing corporation, being a company incorporated under the Companies Act, 1956 (1 of 1956), for the purpose of-

(a) the periodical settlement of contracts and differences thereunder;

(b) the delivery of, and payment for, securities;

(c) any other matter incidental to, or connected with, such transfer.

(2) Every clearing corporation shall, for the purpose of transfer of the duties and functions of a clearing house to a clearing corporation referred to in sub-section (1), make bye-laws and submit the same to the Securities and Exchange Board of India for its approval.

(3) The Securities and Exchange Board of India may, on being satisfied that it is in the interest of the trade and also in the public interest to transfer the duties and functions of a clearing house to a clearing corporation, grant approval to the bye-laws submitted to it under sub-section (2) and approve the transfer of the duties and functions of a clearing house to a clearing corporation referred to in sub-section (1).

(4) The provisions of Sections 4, 5, 6, 7, 8, 9, 10, If and 12 shall, as far as may be, apply to a clearing corporation referred to in sub-section (1) as they apply in relation to a recognised stock exchange.”

Section 6. Insertion of new Section 12-A

After Section 12 of the principal Act, the following section shall be inserted, namely:-

“12-A. Power (a issue directions.-If, after making or causing to be made an inquiry, the Securities and Exchange Board of India is satisfied that it is necessary-

(a) in the interest of investors, or orderly development of securities market; or

(b) to prevent the affairs of any recognised stock exchange or clearing corporation, or such other agency or person, providing trading or clearing or settlement facility in respect of securities, being conducted in a manner detrimental to the interests of investors or securities market; or

(c) to secure the proper management of any such stock exchange or clearing corporation or agency or person, referred to in clause (b),

it may issue such directions,-

(i) to any stock exchange or clearing corporation or agency or person referred to in clause (b) or any person or class of persons associated with the securities market; or

(ii) to any company whose securities are listed or proposed to be listed in a recognised stock exchange,

as may be appropriate in the interests of investors in securities and the securities market.”.

Section 7. Amendment of Section 13

In Section 13 of the principal Act,-

(a) for the words “between members of a recognised stock exchange”, the words “between members of a recognised stock exchange or recognised stock exchanges” shall be substituted;

(b) for the words “State or area” wherever they occur, the words “State or States or area” shall be substituted;

(c) the following proviso shall be inserted, namely:-

“Provided that any contract entered into between members of two or more recognised stock exchanges in such State or States or area, shall-

(i) be subject to such terms and conditions as may be stipulated by the respective stock exchanges with prior approval of Securities and Exchange Board of India;

(ii) require prior permission from the respective stock exchanges if so stipulated by the stock exchanges with prior approval of Securities and Exchange Board of India.”.

Section 8. Insertion of new Section 21-A

After Section 21 of the principal Act, the following section shall be inserted, namely:-

“21-A. Delisting of securities.-

(1) A recognised stock exchange may delist the securities, after recording the reasons therefor, from any recognised stock exchange on any of the ground or grounds as may be prescribed under this Act:

Provided that the securities of a company shall not be delisted unless the company concerned has been given a reasonable opportunity of being heard.

(2) A listed company or an aggrieved investor may file an appeal before ihe Securities Appellate Tribunal against the decision of the recognised stock exchange delisting the securities within fifteen days from the date of the decision of the recognised stock exchange delisting the securities and the provisions of Sections 22-B to 22-E of this Act, shall apply, as far as may be, to such appeals :

Provided that the Securities Appellate Tribunal may, if it is satisfied that the company was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding one month.”.

Section 9. Substitution of new section for Section 22-F

For Section 22-F of the principal Act, the following section shall be substituted, namely:-

“22-F. Appeal to Supreme Court,-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.”.

Section 10. Amendment of Section 23

In Section 23 of the principal Act,-

(a) in sub-section (1), after clause (0, for the words “shall, on conviction, be punishable with imprisonment for a term which may extend to one year, or with fine or with both”, the words “shall, without prejudice to any award of penalty by the Adjudicating Officer under this Act, on conviction, 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” shall be substituted;

(b) in sub-section (2),-

(i) for the word and figures “Section 21,” the words, figures and letter “Section 21 or Section 21-A” shall be substituted.

(ii) for the words “shall, on conviction, be punishable with fine which may extend to one thousand rupees”, the words “shall, without prejudice to any award of penalty by the Adjudicating Officer under this Act, on conviction, 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” shall be substituted.

Section 11. Insertion of new Sections 23-A to 23-O

After Section 23 of the principal Act, the following sections shall be inserted, namely:-

“23-A. Penalty for failure to furnish information, return, etc.-Any person, who is required under this Act or any rules made thereunder,-

(a) to furnish any information, document, books, returns or report to a recognised stock exchange, fails to furnish the same within the time specified therefor in the listing agreement or conditions or bye-laws of the recognised stock exchange, 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 maintain books of account or records, as per the listing agreement or conditions, or bye-laws of a recognised stock exchange, fails to maintain the same, 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.

23-B. Penalty for failure by any person to enter into an agreement with clients.-If any person, who is required under this Act or any bye-laws of a recognised stock exchange made thereunder, to enter into an agreement with his client, fails to enter into such an agreement, 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 every such failure.

23-C. Penalty for failure to redress Investors’ grievances.-If any stockbroker or sub-broker or a company whose securities are listed or proposed to be listed in a recognised stock exchange, after having been called upon by the Securities and Exchange Board of India or a recognised stock exchange in writing, to redress the grievances of the investors, fails to redress such grievances within the time stipulated by the Securities and Exchange Board of India or a recognised stock exchange, he or it 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.

23-D. Penalty for failure to segregate securities or moneys of client or clients.–If any person, who is registered under Section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 3992) as a stockbroker or sub-broker, fails to segregate securities or moneys of the client or clients or uses the securities or moneys of a client or clients for self or for any other client, he shall be liable to a penalty not exceeding one crore rupees.

23-E. Penalty for failure to comply with listing conditions or delisting conditions or grounds.-If a company or any person managing collective investment scheme or mutual fund, fails to comply with the listing conditions or delisting conditions or grounds or commits a breach thereof, it or he shall be liable to a penalty not exceeding twenty-five crore rupees.

23-F. Penalty for excess dematerialisation or delivery of unlisted securities.-If any issuer dematerialises securities more than the issued securities of a company or delivers in the stock exchanges the securities which are not listed in the recognised stock exchange or delivers securities where no trading permission has been given by the recognised stock exchange, he shall be liable to a penalty not exceeding twenty-five crore rupees.

23-G. Penalty for failure to furnish periodical returns, etc.-If a recognised stock exchange fails or neglects to furnish periodical returns to the Securities and Exchange Board of India or fails or neglects to make or amend its rules or bye-laws as directed by the Securities and Exchange Board of India or fails to comply with directions issued by the Securities and Exchange Board of India, such recognised stock exchange shall be liable to a penalty which may extend to twenty-five crore rupees.

23-H. Penalty for contravention where no separate penalty has been provided.-Whoever fails to comply with any provision of this Act, the rules or articles or bye-laws or the regulations of the recognised stock exchange or directions issued by the Securities and Exchange Board of India for which no separate penalty has been provided, shall be j liable to a penalty which may extend to one crore rupees. ;

23-I. Power to adjudicate.-(1) For the purpose of adjudging under Sections 23-A, 23-B, 23-C, 23-D, 23-E, 23-F, 23-G and 23-H, the Securities and Exchange Board of India 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 may impose such ‘ penalty as he thinks fit in accordance with the provisions of any of those sections.

23-J. Factors to be taken into account by adjudicating officer.-While adjudging the quantum of penalty under Section 23-I, the adjudicating officer shall have due regard to the following factors, namely:-

(a) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default;

(b) the amount of loss caused to an investor or group of investors as a result of the default;

(c) the repetitive nature of the default.

23-K. Crediting sums realised by way of penalties to Consolidated Fund of India.- All sums realised by way of penalties under this Act shall be credited to the Consolidated Fund of India.

23-L. Appeal to Securities Appellate Tribunal.-(1) Any person aggrieved, by the order or decision of the recognised stock exchange or the adjudicating officer or any order made by the Securities and Exchange Board of India under Section 4-B, may prefer an appeal before the Securities Appellate Tribunal and the provisions of Sections 22-B, 22-C, 22-D and 22-E of this Act, shall apply, as far as may be, to such appeals.

(2) 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 or decision is received by the appellant and it shall be in such form and be accompanied by such fee 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.

(3) 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.

(4) The Securities Appellate Tribunal shall send a copy of every order made by it to the parties to the appeal and to the concerned adjudicating officer.

(5) 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.

23-M. Offences.-(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, for which no punishment is provided elsewhere in this Act, 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.

23-N. Composition of certain offences.-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.

23-O. Power to grant immunity.-(1) The Central Government may, on recommendation by the Securities and Exchange Board of India, 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 the recommendation of the Securities and Exchange Board of India under this sub-section shall not be binding upon the Central Government.

(2) An immunity granted to a person under sub-section (1) may, at any time, be withdrawn by the Central Government, if it is satisfied that such person had, in the course of the proceedings, not complied with the condition on which the immunity was granted or had given false evidence, and thereupon such person may be tried for the offence with respect to which the immunity was granted or for any other offence of which he appears to have been guilty in connection with the contravention and shall also become liable to the imposition of any penalty under this Act to which such person would have been liable, had not such immunity been granted.”.

Section 12. Amendment of Section 25

In Section 25 of the principal Act, the words, brackets and figure “sub-section (1) of shall be omitted.

Section 13. Substitution of new section for Section 26

For Section 26 of the principal Act, the following section shall be substituted, namely:-

“26. Cognizance of offences by courts.-(1) No court shall take cognizance of any offence punishable under this Act or any rules or 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 a recognised stock exchange or by any person.

(2) No court inferior to that of a Court of Session shall try any offence punishable under this Act.”

Section 14. Insertion of new Section 27-B

After Section 27-A of the principal Act, the following section shall be inserted, namely:-

“27-B. Right to receive income from mutual fund.-(1) It shall be lawful for the holder of any securities, being units or other instruments issued by any mutual fund, whose name appears on the books of the mutual fund issuing the said security to receive and retain any income in respect of units or other instruments issued by the mutual fund declared by the mutual fund in respect thereof for any year, notwithstanding that the said security, being units or other instruments issued by the mutual fund, has already been transferred by him for consideration, unless the transferee who claims the income in respect of units or other instruments issued by the mutual fund from the transferor has lodged the security and all other documents relating to the transfer which may be required by the mutual fund with the mutual fund for being registered in his name within fifteen days of the date on which the income in respect of units or other instruments issued by the mutual fund became due.

Explanation.-The period specified in this section shall be extended-

(i) in case of death of the transferee, by the actual period taken by his legal representative to establish his claim to the income in respect of units or other instrument issued by the mutual fund;

(ii) in case of loss of the transfer deed by theft or any other cause beyond the control of transferee, by the actual period taken for the replacement thereof; and

(iii) in case of delay in the lodging of any security, being units or other instruments issued by the mutual fund, and other documents relating to the transfer due to causes connected with the post, by the actual period of the delay.

(2) Nothing contained in sub-section (1) shall affect-

(a) the right of a mutual fund to pay any income from units or other instruments issued by the mutual fund which has become due to any person, whose name is for the time being registered in the books of the mutual fund as the holder of the security being units or other instruments issued by the mutual fund in respect of which the income in respect of units or other instruments issued by the mutual fund has become due; or

(b) the right of a transferee of any security, being units or other instruments issued by the mutual fund, to enforce against the transferor or any other person, his rights, if any. in relation to the transfer in any case where the mutual fund has refused to register the transfer of the security being units or other instruments issued by the mutual fund in the name of the transferee.”.

Section 15. Amendment of Section 30

In Section 30 of the principal Act,-

(a) in sub-section (2), for clause (ha), the following clauses shall be substituted, namely;-

“(ha) the grounds on which the securities of a company may be delisted from any recognised stock exchange under sub-section (1) of Section 21-A;

(hb) the form in which an appeal may be filed before the Securities Appellate Tribunal under sub-section (2) of Section 21-A and the fees payable in respect of such appeal;

(hc) the form in which an appeal may be filed before the Securities Appellate Tribunal under Section 22-A and the fees payable in respect of such appeal;

(hd) the manner of inquiry under sub-section (1) of Section 23-I;

(he) the form in which an appeal may be filed before the Securities Appellate Tribunal under Section 23-L and the fees payable in respect of such appeal;”.

(b) for sub-section (3), the following sub-section shall be substituted, namely:-

“(3) Every rule 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 both House agree that the rule should not be made, the rule 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.”.

Section 16. Insertion of new Section 31

After Section 30 of the principal Act, the following section shall be inserted, namely:-

“31. Power of Securities and Exchange Board of India 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 Securities and Exchange Board of India 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 the manner in which at least fifty-one per cent of equity share capital of a recognised stock exchange is held within twelve months from the date of publication of the order under sub-section (7) of Section 4-B by the public other than the shareholders having trading rights under sub-section (8) of that section.

(3) 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 regulation or both Houses agree that the regulation should not be made, the 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 regulation.”.

Section 17. Insertion of new Sections 19-A, 19-B, 19-C, 19-D, 19-E, 19-F, 19-G, 19-H, 19-I and 19-J

After Section 19 of the Depositories Act, 3996 (22 of 1996) (hereafter in this chapter referred to as the principal Act), the following sections shall be inserted, namely:-

“19-A, 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 there under,-

(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 maintain books of account or records, fails to maintain the same, 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.

19-B. Penalty for failure to enter into an agreement.-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 there under, 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.

19-C. Penalty for failure to redress Investors’ grievances.-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 agents 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.

19-D. Penalty for delay in (^materialisation or issue of certificate of securities.- 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 dematcrialise 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 there under 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.

19-E. Penalty for failure to reconcile records.-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.

19-F. Penalty for failure to comply with directions issued by Board under Section 19 of the Act.-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.

19-G. Penalty for contravention where no separate penalty has been provided.- Whoever fails to comply with any provision of this Act, the rules or the regulations or bye-laws made or directions issued by the Board there under for which no separate penalty has been provided, shall be liable to a penalty which may extend to one crore rupees.

19-H. Power to adjudicate.-(1) For the purpose of adjudging under Sections 19-A, 19-B, 19-C, 19-D, 19-E, 19-F and 19-G, 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 may impose such penalty as he thinks fit in accordance with the provisions of any of those sections.

19-I. Factors to be taken into account by adjudicating officer.-While adjudging the quantum of penalty under Section 19-H, the adjudicating officer shall have due regard to the following factors, namely:-

(a) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default;

(b) the amount of loss caused to an investor or group of investors as a result of the default;

(c) the repetitive nature of the default.

19-J. Crediting sums realised by way of penalties to Consolidated Fund of India.- All sums realised by way of penalties under this Act shall be credited to the Consolidated Fund of India.”.

Section 18. Substitution of new section for Section 20

For Section 20 of the principal Act, the following section shall be substituted, namely:-

“20. Offences.-(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 there under, 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.”.

Section 19. Substitution of new sections for Section 22

For Section 22 of the principal Act, the following sections shall be substituted, namely:-

“22. Cognizance of offences by courts.-(1) No court shall take cognizance of any offence punishable under this Act or any rules or 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.

22-A. Composition of certain offences.-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.

22-B. Power to grant immunity.-(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 (he prosecution for any such offence have been instituted before the date of receipt of application for grant of such immunity :

Provided further that recommendation of the Board under this sub-section shall not be binding upon the Central Government.

(2) An immunity granted to a person under sub-section (1) may, at any time, be withdrawn by the Central Government, if it is satisfied that such person had, in the course of the proceedings, not complied with the condition on which the immunity was granted or had given false evidence, and thereupon such person may be tried for the offence with respect to which the immunity was granted or for any other offence of which he appears to have been guilty in connection with the contravention and shall also become liable to the imposition of any penalty under this Act to which such person would have been liable, had not such immunity been granted.”.

Section 20. Amendment of Section 23-A

In Section 23-A of the principal Act, in subsection (1), after the words, brackets and figures “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,” and before the words “may prefer an appeal to a Securities Appellate Tribunal having a jurisdiction in the matter,” the words “or by an order made by an adjudicating officer under this Act” shall be inserted.

Section 21. Substitution of new section for Section 23-F

For Section 23-F of the principal Act, the following section shall be substituted, namely:-

“23-F. Appeal to Supreme Court.-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.”.

Section 22. Amendment of Section 24

In Section 24 of the principal Act, in sub-section (2), for clause (a), the following clauses shall be substituted, namely:-

“(a) the manner of inquiry under sub-section (1) of Section 19-H;

(aa) the time within which an appeal may be preferred under sub-section (1) of Section 23;”.

Section 23. Repeal and saving

(1) The Securities Laws (Amendment) Ordinance, 2004 (Ord. 4 of 2004) is hereby repealed.

(2) Notwithstanding such repeal, anything done or any action taken under the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and the Depositories Act, 1996 (22 of 1996), as amended by the said Ordinance, shall be deemed to have been done or taken under the corresponding provisions of those Acts, as amended by this Act.

Bydeb

The Securities and Exchange Board of India (SEBI) Act 1992

Section 1. Short title, extent and commencement

[Act No. 15 OF 1992]

[4th April, 1992]

An Act to provide for the establishment of a Board to protect the interests of investors in securities and to promote the development of, and to regulate, the securities market and for matters connected therewith or incidental thereto.

BE it enacted by Parliament in the Forty-third Year of the Republic of India as follows:-

(1) This Act may be called the Securities and Exchange Board of India Act, 1992.

(2) It extents to the whole of India.

(3) It shall be deemed to have come into force on the 30th day of January, 1992.

Section 2. Definitions

(1) In this Act, unless the context otherwise requires,-

(a) “Board” means the Securities and Exchange Board of India established under section 3;

(b) “Chairman” means the Chairman of the Board;

1[(ba) “Collective investment scheme” means” any scheme or arrangement which satisfies the conditions specified in section 11 AA;]

(c) “Existing Securities and Exchange Board” means the Securities and Exchange Board of India constituted under the Resolution of the Government of India in the Department of Economic Affairs No. 1(44) SE/86, dated the 12th day of April, 1988;

(d) “Fund” means the Fund constituted under section 14;

(e) “Member” means a member of the Board and includes the Chairman;

(f) “Notification” means a notification published in the Official Gazette;

(g) “Prescribed” means prescribed by rules under this Act;

(h) “Regulations” means the regulations made by the Board under this Act;

2[(ha) “Reserve Bank” means the Reserve Bank of India constituted under section 3 of the Reserve Bank o India Act, 1934;]

(i) “Securities” has the meaning assigned to it in section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956).

3[(2) Words and expressions used and not defined in this Act but defined in the Securities Contracts (Regulation) Act, 1956, (42 of 1956) 4[or the Depositories Act, 1996]shall have the meanings respectively assigned to them in that Act]

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1. Inserted by Securities Laws (Amendment) Act, 1999, w.e.f. 2-2-2000.

2. Inserted vide SEBI (Amdt.) Act, 2002, w.e.f. 29-10-2002.

3. Substituted by the Securities Laws (Amendment) Act, 1996, 20-9-1995.

4. Inserted by the Depositories Act, 1996, w.e.f. 20-9-1995.

Section 3. Establishment and incorporation of Board

(1) With effect from such date as the Central Government may, by notification, appoint, there shall be established, for the purposes of this Act, a Board by the name of the Securities and Exchange Board of India.

(2) The Board shall be a body corporate by the name aforesaid, having perpetual succession and a common seal, with power subject to the provisions of this Act, to acquire, hold and dispose of property, both movable and immovable, and to contract, and shall, by the said name, sue or be sued.

(3) The head office of the Board shall be at Bombay.

(4) The Board may establish offices at other places in India.

Section 4. Management of the Board

(1) The Board shall consist of the following members, namely:–

(a) A Chairman;

(b) Two members form amongst the officials of the 1[Ministry] of the Central Government dealing with Finance 2[and administration of the Companies Act, 1956;]

(c) One member form amongst the officials of 3[the Reserve Bank ;]

4[(d) Five other members of whom at least three shall be the whole time members]

(2) The genial superintendence, direction and management of the affairs of the Board shall vest in a Board of members, which may exercise all powers and do all acts and things which may be exercised or done by the Board.

(3) Save as otherwise determined by regulations, the Chairman shall also have powers of general superintendence and direction of the affairs of the Board and may also exercise all powers and do all acts and things which may be exercised or done by that Board.

(4) The Chairman and members referred to in clauses (a) and (d) of sub-section (1) shall be appointed by the Central Government and the members referred to in clauses (b) and (c) of that sub-section shall be nominated by the Central Government and the 5[Reserve Bank ]of India respectively.

(5) The Chairman and the other members referred to in clauses (a) and (d) of sub-section (1) shall be persons of ability, integrity and standing who have shown capacity in dealing with problems relating to securities market or haven special knowledge or experience of law, finance, economics, accountancy, administration or in any other discipline which, in the opinion of the Central Government, shall be useful to the Board.

——————–

1. Substituted for “Ministries” vide SEBI (Amdt.) Act, 2002 w.e.f. 29-10-2002.

2. Substituted for “and law” vide SEBI (Amdt.) Act, 2002 w.e.f. 29-10-2002.

3. Substituted for certain words, vide SEBI (Amdt.) Act, 2002 w.e.f. 29-10-2002.

4. Substituted, vide SEBI (Amdt.) Act, 2002 w.e.f. 29-10-2002.

5. Substituted for “Reserve Bank of India” vide SEBI (Amdt.) Act, 2002 w.e.f. 29-10-2002.

Section 5. Term of office and conditions of service of Chairman and members of the Board

(1) The term of officer and other condition of service of the Chairman and the members referred to in clause (d) of sub-section (1) of section 4 shall be such as may be prescribed.

(2) Notwithstanding anything contained in sub-section (1), the Central Government shall have the right to terminate the services of the Chairman or a member appointed under clause (d) of sub-section (1) of section 4, at any time before the expire of the period prescribed under sub-section (1), by giving him notice of not less than three months in writing or three months’ salary and allowances in lieu thereof, and the Chairman or a member, as the case may be, shall also have the right to relinquish his office, at any time before the expire of the period prescribed under sub-section (1), by giving to the Central Government notice of not less than three months in writing.

Section 6. Removal of member from office

(1) The Central Government shall remove a member from office if he-

(a) Is, or at any time has been, adjudicated as insolvent;

(b) Is of unsound mind and stands so declared by a competent court;

(c) Has been convicted of an offence which, in the opinion of the Central Government, involves a moral turpitude;

(d) Is appointed as a director of a company;

(e) Has, in the opinion of the Central Government, so abused his position as to render his continuation in office detrimental to the public interest:

PROVIDED that no member shall be removed under this clause unless he has been given a reasonable opportunity of being heard in the matter.

Section 7. Meetings

(1) The Board shall meet at such times and places, and shall observe such rules of procedure in regard to the transaction of business at its meetings (including quorum at such meetings) as may be regulation.

(2) The Chairman or, if for any reason, he is unable to attend a meeting of the Board, any other member chosen by the members present from amongst themselves at the meeting shall preside at the meeting.

(3) All questions which come up before any meeting of the Board shall be decided by a majority votes of the members present and voting, and, in the event of an equality of votes, the Chairman, or in his absence, the person presiding, shall have a second or casting vote.

Section 7 A. Member not to participate in meetings in certain case

1[Member not to participate in meetings in certain case. Any member, who is a director of a company and who as such director has any direct or indirect pecuniary interest in any matter coming up for consideration at a meeting of the Board, shall, as soon as possible after relevant circumstances have come to his knowledge, disclose the nature of his interest at such meeting and such disclosure shall be recorded in the proceedings of the Board, and the member shall not take any part in any deliberation or decision of the Board with respect to that matter.]

——————–

1. Inserted by the Securities Laws (Amendment) Act, 1995, w.e.f. 25-5-1995.

Section 8. Vacancies, etc., not to invalidate proceedings of Board

No act or proceeding of the Board shall be invalid merely by reason of-

(a) Any vacancy in, or any defect in the constitution of, the Board; or

(b) Any defect in the appointment of a person acting as a member of the Board; or

(c) Any irregularity in the procedure of the Board not affecting the merits of the case.

Section 9. Officers and employees of the Board

(1) The Board may appoint such other officers and employees as it considers necessary for the efficient discharge of its function under this Act.

(2) The term and other conditions of service of officer and employees of the Board appointed under sub-section (1) shall be such as may be determined by regulations.

Section 10. Transfer of assets, liabilities, etc., of existing Securities and Exchange Board to the Board

(1) On and from the date of establishment of the Board,-

(a) Any reference to the existing Securities and Exchange Board in any law other than this Act or in any contract or other instrument shall be deemed as a reference to the Board;

(b) All properties and assets, movable and immovable, of, or belonging to, the existing Securities and Exchange Board, shall vest in the Board;

(c) All rights and liabilities of the existing Securities and Exchange Board shall be transferred to, and the be rights and liabilities of, the Board;

(d) Without prejudice to the provisions of clause (c), all debts, obligations and liabilities incurred, all contracts entered into and al matters and things engaged to be done by, with or for the existing Securities and Exchange Board immediately before that date, for or in confection with the purpose of the said existing Board shall be deemed to have been incurred, entered into or engaged to be done by, with or for, the Board;

(e) All sums of money due to the existing Securities and Exchange Board immediately before that date shall be deemed to be due to the Board;

(f) All suits and other legal proceedings instituted or which could have been instituted by or against the existing Securities and Exchange Board immediately before that date may be continued or may be instituted by or against the Board; and

(g) Every employee holding any office under the existing Securities and Exchange Board immediately before that date shall hold his office in the Board by the same tenure and upon the same terms and conditions of service as respects remuneration, leave, provident fund, retirement and other terminal benefits as he would have held such office if the Board had not been established and shall continue to do so as an employee of the Board or until the expire of the period of six months from that date if such employee opts not to be the employee of the Board within such period.

(2) Notwithstanding anything contained in the Industrial Disputes Act.1947, (14 of 1947) or in any other law for the time being in force, absorption of any employee by the Board in its regular service under this section shall not entitle such employee to any compensation under that Act or other law and no such claim shall be entertained by any court, tribunal or other authority.

Section 11. Functions of Board

(1) Subject to the provisions of this Act, it shall be the duty of the Board to protect the interests of investors in securities and to promote the development of, and to regulate the securities market, by such measures as it thinks fit.

(2) Without prejudice to the generality of the foregoing provisions, the measures referred to therein may provide for-

(a) Regulating the business in stock exchange and any other securities markets;

(b) Registering and regulating the working of stock brokers, sub-brokers, share transfer agents, bankers to an issue, trustees of trust deeds, registrars to an issue, merchant bankers, underwriters, portfolio managers, investment advisers and such other intermediaries who may be associated with securities markets in any manner;

1[(ba) Registering and regulating the working of the depositories, 2[participants] custodians of securities, foreign institutional investors, credit rating agencies and such other intermediaries as the Board may, by notification, specify in this behalf;]

(c) Registering and regulating the working of 3[venture capital funds and collective investment schemes], including mutual funds;

(d) Promoting and regulating self-regulatory organizations;

(e) Prohibiting fraudulent and unfair trade practices relating to securities markets;

(f) Promoting investors’ education and training of intermediaries of securities markets;

(g) Prohibiting insider trading in securities;

(h) Regulating substantial acquisition of shares and take-over of companies;

(i) Calling for information from, undertaking inspection, conducting inquiries and audits of the 4[stock exchange, mutual funds, other persons associated with the securities market.] intermediaries and self-regulatory organizations in the securities market;

5[(ia) Calling for information and record from any bank or any other persons authority or board or corporation established or constituted by or under any Central, State or Provincial Act in respect of any transaction in securities which are under investigation or inquiry by the Board;]

(j) Performing such functions and exercising such powers under the provision of 6[***] the Securities Contracts (Regulation) Act, 1956, (42 of 1956) as may be delegated to it by the Central Government;

(k) Levying fees or other charges for carrying out the purposes of this section;

(l) Conducting research for the above purposes;

7[(la) Calling from or furnishing to any such agencies, as may be specified by the Board, such information as may be considered necessary by it for the efficient discharge of its functions;]

(m) Performing such other function as may be prescribed.

8[(2A) Without prejudice to the provisions contained in sub-section (2), the Board may take measures to undertake inspection of any book, or register, or other document or record of any listed public company or a public company (not being intermediaries referred to in section 12) which intends to get its securities listed on any recognised stock exchange where the Board has reasonable grounds to believe that such company has been indulging in insider trading or fraudulent and unfair trade practices relating to securities market.]

7[(3) Notwithstanding anything contained in any other law for the time being in force while exercising the powers under 9[clause (i) or clause (ia) of sub-section (2) or sub-section (2A),] the Board shall have 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:—

(i) The discovery and production of books of account and other documents, at such place and such time as may be specified by the Board;

(ii) Summoning and enforcing the attendance of persons and examining them on oath;

(iii) Inspection of any books, registers and other documents of any person 3 referred to in section 12, at any place.]

8[(iv) Inspection of any book, or register or other document or record of the 4; company referred to in sub-section (2A);

(v) Issuing commissions for the examination of witnesses or documents.

(4) Without prejudice to the provisions contained in sub-sections (1), (2), (2A) and (3) and section 11B, the Board may, by an order, for reasons to be recorded in writing, ‘ in the interests of investors or securities market, take any of the following measures, ; either pending investigation or inquiry or on completion of such investigation or ; inquiry, namely:—

(a) Suspend the trading of any security in a recognised stock exchange;

(b) Restrain persons from accessing the securities market and prohibit any person associated with securities market to buy, sell or deal in securities;

(c) Suspend any office-bearer of any stock exchange or self-regulatory organisation from holding such position;

(d) Impound and retain the proceeds or securities in respect of any transaction which is under investigation;

(e) Attach, after passing of an order on an application made for approval, by the judicial Magistrate of first class having jurisdiction, for a period not exceeding one month, one or more bank account or accounts of any intermediary or any person associated with the securities market in any manner involved in violation of any of the provisions of this Act, or the rules or the regulations made thereunder:

PROVIDED that only the bank account or accounts or any transaction entered therein, so far as it relates to the proceeds actually involved in violation of any of the provisions of this Act, or the rules or the regulations made thereunder shall be allowed to be attached;

(f) Direct any intermediary or any person associated with the securities market in any manner not to dispose of or alienate an asset forming part of any transaction which is under investigation:

PROVIDED that the Board may, without prejudice to the provisions contained in sub-section (2) or sub-section (2A), take any of the measures specified in clause (d) or clause (e) or clause (f), in respect of any listed public company or a public company (not being intermediaries referred to in section 12) which intends to get its securities listed on any recognised stock exchange where the Board has reasonable grounds to believe that such ,company has been indulging in insider trading or fraudulent and unfair trade practices relating to securities market:

PROVIDED FURTHER that the Board shall, either before or after passing such orders, give an opportunity of hearing to such intermediaries or persons concerned.]

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1 Inserted by the Securities Laws (Amendment) Act, 1995, w.e.f. 25-1-1995.

2 Inserted by the Depositories Act, 1996, w.c.f. 20-9-1995.

3 Substituted for words “collective investment schemes” by the Securities Laws (Amendment) Act, 1995, w.e.f. 25-1-1995.

4 Substituted by the Securities Laws (Amendment) Act, 1995, w.e.f. 25-1-1995 for “stock exchanges and”,

5 Inserted by SEBI (Amdt.) Act, 2002, w.e.f, 29-10-2002.

6 The words, brackets and figures “the Capital Issues (Control) Act, 1947 (29 of 1947) and” omitted by the Securities Laws (Amendment) Act, 1995, w.e.f. 25-1-1995.

7 Inserted by the Securities Laws (Amendment) Act, 1995, w.-e. f. 25-1-1995.

8 Inserted by SEBI (Amdt.) Act, 2002, w.e.f. 29-10-2002.

9 Substituted for “clause (i) of sub-section (2)” SEBI (Amdt.) Act, 2002, w.e.f. 29-10-2002.

Section 11 A. Board to regulate or prohibit issue of prospectus, offer document or advertisement soliciting money for issue of securities

1[Board to regulate or prohibit issue of prospectus, offer document or advertisement soliciting money for issue of securities. (1) Without prejudice to the provisions of the Companies Act, 1956, the Board may, for the protection of investors,—

(a) Specify, by regulations—

(i) The matters relating to issue of capital, transfer of securities and other matters incidental thereto; and

(ii) The manner in which such matters shall be disclosed by the companies; – ,

(b) By general or special orders—

(i) Prohibit any company from issuing of prospectus, any offer document, or advertisement soliciting money from the public for the issue of securities;

(ii) Specify the conditions subject to which the prospectus, such offer document or advertisement, if not prohibited, may be issued.

(2) Without prejudice to the provisions of section 21 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Board may specify the requirements for listing and transfer of securities and other matters incidental thereto.]

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1 Substituted by SEBI (Amdt.) Act, 2002, w.e.f. 29-10-2002.

1[11AA.Collective investment scheme

(1) Any scheme or arrangement which satisfies the conditions referred to in sub-section (2) shall be a collective investment scheme.

(2) Any scheme or arrangement made or offered by any company under which,—

(i) The contributions, or payments made by the investors, by whatever name called, are pooled and utilised for the purposes of the scheme or arrangement;

(ii) The contributions or payments are made to such scheme or arrangement by the investors with a view to receive profits, income, produce or property, whether movable or immovable, from such scheme or arrangement; (iii) The property, contribution or investment forming part of scheme or arrangement, whether identifiable or not, is managed on behalf of the investors;

(iv) The investors do not have day-to-day control over the management and operation of the scheme or arrangement.

(3) Notwithstanding anything contained in sub-section (2), any scheme or arrangement—

(i) Made or offered by a co-operative society registered under the Co-operative Societies Act, 1912 or a society being a society registered or deemed to be registered under any law relating to co-operative societies for the time being in force in any State;

(ii) Under which deposits are accepted by non-banking financial companies as defined in clause (f) of section 45-1 of the Reserve Bank of India Act, 1934;

(iii) Being a contract of insurance to which the Insurance Act, 1938, applies;

(iv) Providing for any Scheme, Pension Scheme or the Insurance Scheme framed under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952;

(v) Under which deposits are accepted under section 58A of the Companies Act, 1956;

(vi) Under which deposits are accepted by a company declared as a Nidhi or a 31 mutual benefit society under section 620A of the Companies Act, 1956;

(vii) Falling within the meaning of Chit business as defined in clause (d) of section 2 of the Chit Fund Act, 1982;

(viii) Under which contributions made are in the nature of subscription to a mutual fund;

Shall not be a collective investment scheme. ]

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1 Inserted by Securities Laws (Amendment) Act, 1999, w.e.f. 22-2-2000.

Section 11 B. Power to issue directions

Save as otherwise provided in section 11, if after making or causing to be made an enquiry, 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 intermediary or other persons referred to in section 12 being conducted in a manner detrimental to the interests of investors or securities market; or

(iii) To secure the proper management of any such intermediary or person, it may issue such directions—

(a) To any person or class of persons referred to in section 12, or associated with the securities market; or

(b) To any company in respect of matters specified in section 11 A, as may be appropriate in the interests of investors in securities and the securities market.]

Section 11 C. Investigation

1[Investigation. (1) Where the Board has reasonable ground to believe that—

(a) The transactions in securities are being dealt with in a manner detrimental to the investors or the securities market; or

(b) Any intermediary or any person associated with the securities market has violated any of the provisions of this Act or the rules or the regulations made or directions issued by the Board thereunder,

It may, at any time by order in writing, direct any person (hereinafter in this section referred to as the Investigating Authority) specified in the order to investigate the affairs of such intermediary or persons associated with the securities market and to report thereon to the Board.

(2) Without prejudice to the provisions of sections 235 to 241 of the Companies Act, 1956 (1 of 1956), it shall be the duty of every manager, managing director, officer and other employee of the company and every intermediary referred to in section 12 or every person associated with the securities market to preserve and to produce to the Investigating Authority or any person authorised by it in this behalf, all the books, registers, other documents and record of, or relating to, the company or, as the case may be, of or relating to, the intermediary or such person, which are in their custody or power.

(3) The Investigating Authority may require any intermediary or any person associated with securities market in any manner to furnish such information to, or produce such books, or registers, or other documents, or record before it or any person authorised by it in this behalf as it may consider necessary if the furnishing of such information or the production of such books or registers, or other documents, or record is relevant or necessary for the purposes of its investigation.

(4) The Investigating Authority may keep in its custody any books, registers, other documents and record produced under sub-section (2) or sub-section (3) for six months and thereafter shall return the same to any intermediary or any person associated with securities market by whom or on whose behalf the books, registers, other documents and record are produced:

PROVIDED that the Investigating Authority may call for any book, register, other document and record if they are needed again;

PROVIDED FURTHER that if the person on whose behalf the books, registers, other documents and record are produced requires certified copies of the books, registers, other documents and record produced before the Investigating Authority, it shall give certified copies of such books, registers, other documents and record to such person or on whose behalf the books, registers, other documents and record were produced.

(5) Any person, directed to make an investigation under sub-section (1), may examine on oath, any manager, managing director, officer and other employee of any intermediary or any person associated with securities market in any manner, in relation to the affairs of his business and may administer an oath accordingly and for that purpose may require any of those persons to appear before it personally.

(6) If any person fails without reasonable cause or refuses—

(a) To produce to the Investigating Authority or any person authorised by it in this behalf any book, register, other document and record which is his duty under sub-section (2) or sub-section (3) to produce; or

(b) To furnish any information which is his duty under sub-section (3) to furnish; or

(c) To appear before the Investigating Authority personally when required to do so under sub-section (5) or to answer any question which is put to him by the Investigating Authority in pursuance of that sub-section; or

(d) To sign the notes of any examination referred to in sub-section (7),

he shall be punishable with imprisonment for a term which may extend to one year, or with fine, which may extend to one crore rupees, or with both, and also with a further fine which may extend to five lakh rupees for every day after the first during which the failure or refusal continues.

(7) Notes of any examination under sub-section (5) shall be taken down in writing and shall be read over to, or by, and signed by, the person examined, and may thereafter be used in evidence against him.

(8) Where in the course of investigation, the Investigating Authority has reasonable ground to believe that the books, registers, other documents and record of, or relating to, any intermediary or any person associated with securities market in any manner, may be destroyed, mutilated, altered, falsified or secreted, the Investigating Authority may make an application to the Judicial Magistrate of the first class having jurisdiction for an order for the seizure of such books, registers, other documents and record.

(9) After considering the application and hearing the Investigating Authority, if necessary, the Magistrate may, by order, authorise the Investigating Authority—

(a) To enter with such assistance, as may be required, the place or places where such books, registers, other documents and record are kept;

(b) To search that place or those places in the manner specified in the order; and

(c) To seize books, registers, other documents and record, it considers necessary for the purposes of the investigation:

PROVIDED that the Magistrate shall not authorise seizure of books, registers, other documents and record, of any listed public company or a public company (not being the intermediaries specified under section 12) which intends to get its securities listed on any recognised stock exchange unless such company indulges in insider trading or market manipulation.

(10) The Investigating Authority shall keep in its custody the books, registers, other documents and record seized under this section for such period not later than the conclusion of the investigation as it considers necessary and thereafter shall return the same to the company or the other body corporate, or, as the case may be, to the managing director or the manager or any other person, from whose custody or power they were seized and inform the Magistrate of such return:

PROVIDED that the Investigating Authority may, before returning such books, registers, other documents and record as aforesaid, place identification marks on them or any part thereof.

(11) Save as otherwise provided in this section, every search or seizure made under this section shall be carried out in accordance with the provisions of the Code of Criminal Procedure, 1973 (2 of 1974) relating to searches or seizures made under that Code.

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1 Inserted by SEBI (Amdt.) Act, 2002, w.e.f. 29-10-2002.

Section 11 D. Cease and desist proceedings

If the Board finds, after causing an inquiry to be made, that any person has violated, or is likely to violate, any provisions of this Act, or any rules or regulations made thereunder, the Board may pass an order requiring such person to cease and desist from committing or causing such violation:

PROVIDED that the Board shall not pass such order in respect of any listed public company or a public company (other than the intermediaries specified under section 12) which intends to get its securities listed on any recognised stock exchange unless the Board has reasonable grounds to believe that such company has indulged in insider trading or market manipulation.]

Section 12. Registration of stock-brokers, sub-brokers, share transfer agents, etc

(1) No stock-broker, sub-broker, share transfer agent, banker to an issue, trustee of trust deed, registrar to an issue, merchant banker, underwriter, portfolio manager, investment adviser and such other intermediary who may be associated with securities market shall buy, sell or deal in securities except under, and in accordance with, the conditions of a certificate of registration obtained from the Board in accordance with the 1[regulations] made under this Act:

PROVIDED that a person buying or selling securities or otherwise dealing with the securities market as a stock-broker, sub-broker, share transfer agent, banker to an issue, trustee of trust deed, registrar to an issue, merchant banker, underwriter, portfolio manager, investment adviser and such other intermediary who may be associated with securities market immediately before the establishment of the Board for which no registration certificate was necessary prior to such establishment, may continue to do so for a period of three months from such establishment or, if he has made an application for such registration within the said period of three months, till the disposal of such application:

2[PROVIDED FURTHER that any certificate of registration, obtained immediately before the commencement of the Securities Laws (Amendment) Act, 1995, shall be deemed to have been obtained from the Board in accordance with the regulations providing for such registration.

2[(1A) No depository, 3[participants], custodian of securities, foreign institutional investor, credit rating agency, or any other intermediary associated with the securities market as the Board may by notification in this behalf specify, shall buy or sell or deal in securities except under and in accordance with the conditions of a certificate of registration obtained from the Board in accordance with the regulations made under this Act:

PROVIDED that a person buying or selling securities or otherwise dealing with the securities market as a depository, 2[participant], custodian of securities, foreign institutional investor or credit rating agency immediately before the commencement of the Securities Laws (Amendment) Act, 1995, for which no certificate of registration was required prior to such commencement, may continue to buy or sell securities or otherwise deal with the securities market until such time regulations are made under clause (d) of sub-section (2) of section 30.

(1B) No person shall sponsor or cause to be sponsored or carry on or caused to be carried on any venture capital funds or collective investment scheme including mutual funds, unless he obtains a certificate of registration from the Board in accordance with the regulations:

PROVIDED that any person sponsoring or causing to be sponsored, carrying or causing to be carried on any venture capital funds or collective investment scheme operating in the securities market immediately before the commencement of the Securities Laws (Amendment) Act, 1995 for which no certificate of registration was required prior to such commencement, may continue to operate till such time regulations are made under clause (d) of sub-section (2) of section 30.]

4[Explanation.—For the removal of doubts, it is hereby declared that, for the purposes of this section, a collective investment scheme or mutual fund shall not include any unit linked insurance policy or scrips or any such instrument or unit, by whatever name called, which provides a component of investment besides the component of insurance issued by an insurer.]

(2) Every application for registration shall be in such manner and on payment of such fees as may be determined by regulations.

(3) The Board may, by order, suspend or cancel a certificate of registration in such manner as may be determined by regulations:

PROVIDED that no order under this sub-section shall be made unless the person concerned has been given a reasonable opportunity of being heard.

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1 Substituted by the Securities Laws (Amendment) Act, 1995, w.e.f. 25-1-1995, for “rules”.

2 Inserted by the Securities Laws (Amendment) Act, 1995, w.e.f. 25-1-1995.

3 Inserted by the Depositories Act, 1996, w.e.f. 20-9-1995.

4. Inserted by Act No. 3 of 2010.

1[CHAPTER VA

PROHIBITION OF MANIPULATIVE AND DECEPTIVE DEVICES, INSIDER TRADING AND SUBSTANTIAL ACQUISITION OF SECURITIES OR CONTROL

——————–

1 Inserted by SEBI (Amdt.) Act, 2002, w.e.f. 29-10-2002.

Section 12 A. Prohibition of manipulative and deceptive devices, insider trading and substantial acquisition of securities or control

No person shall directly or indirectly—

(a) Use or employ, in connection with the issue, purchase or sale of any securities listed or proposed to be listed in a recognised stock exchange, any manipulative or deceptive device or contrivance in contravention of the provisions of this Act or the rules or the regulations made thereunder;

(b) Employ any device, scheme or artifice to defraud in connection with issue or dealing hi securities which are listed or proposed to be listed on a recognized stock exchange;

(c) Engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person, in connection with the issue, dealing insecurities which are listed or proposed to be listed on a recognized stock exchange, in contravention of the provisions of this Act or the rules or the regulations made thereunder;

(d) Engage in insider trading;

(e) Deal in securities while in possession of material or non-public information or communicate such material or non-public information to any other person, in a manner which is in contravention of the provisions of this Act or the rules or the regulations made thereunder;

(f) Acquire control of any company or securities more than the percentage of equity share capital of a company whose securities are listed or proposed to be listed on a recognized stock exchange in contravention of the regulations made under this Act,]

Section 13. Grants by the Central Government

The Central Government may, after due appropriation made by Parliament by law in this behalf, make to the Board grants of such sums of money as that Government may think fit for being utilized for the purposes of this Act.

Section 14. Fund

(1) There shall be constituted a Fund to be called the Securities and Exchange Board of India General Fund and there shall be credited thereto-

(a) All grants, fees and charges received by the Board under this Act; 1[***]

2[(aa) x x x]

(b) All sums received by the Board from such other sources as may be decided upon by the Central Government.

(2) The Fund shall be applied for meeting—

(a) The salaries, allowances and other remuneration of the members, officers and other employees of the Board;

(b) The expenses of the Board in the discharge of its functions under section 11;

(c) The expenses on objects and for purposes authorised by this Act.

(d) All grants, fees and charges received by the Board under this Act; and

(e) All sums received by the Board from such other sources as may be decided upon by the Central Government.

(3) The Fund shall be applied for meeting-

(a) The salaries, allowances and other remuneration of the members, officers and other employees of the Board;

(b) The expenses of the Board in the discharge of its functions under section 11,

(c) The expenses on objects and for purposes authorised by this Act.

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1 Word “and” omitted by the Securities Laws (Amendment) Act, 1995, w.e.f. 25-1-1995.

2 Clause ‘(aa)’ omitted by SEBI (Amdt.) Act, 2002, w.e.f. 29-10-2002.

Section 15. Accounts and audit

(1) The Board shall maintain proper accounts and other relevant records and prepare and annual statement of accounts in such form as may be prescribed by the Central Government in consultation with the Comptroller and Auditor-General of India.

(2) The accounts of the Board shall be audited by the Comptroller and Auditor-General of India at such intervals as may be specified by him and any expenditure incurred in connection with such audit shall be payable by the Board to the Comptroller and Auditor-General of India.

(3) The Comptroller and Auditor-General of India and any other person appointed by him in connection with the audit of the accounts of the Board shall have the same rights and privileges and authority in connection with such audit as the Comptroller and Auditor-General generally has in connection with the audit of the Government accounts and, in particular, shall have the right to demand the production of books, accounts, connected vouchers and other documents and papers and to inspect any of the offices of the Board.

(4) The accounts of the Board as certified by the Comptroller and Auditor-General of India or any other person appointed by him in this behalf together with the audit report thereon shall be forwarded annually to the Central Government and that Government shall cause the same to be laid before each House of Parliament.

1CHAPTER VIA

PENALTIES AND ADJUDICATION

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1 Chapters VIA and VIB inserted by the Securities Laws (Amendment) Act, 1995, w.e,f 25-1-1995.

Section 15 A. Penalty for failure to furnish information, return, etc

If any person, who is required under this Act or any rules or regulations made thereunder—

(a) To furnish any document, return or report to the Board, fails to furnish the same, he shall be liable to 1[a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less;]

(b) To file any return or furnish any information, books or other documents within the time specified therefor in the regulations, fails to file return or furnish the same within the time specified therefor in the regulations, he shall be liable to 2[a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less;]

(c) To maintain books of account or records, fails to maintain the same, he shall be liable to 3[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 Substituted for “a penalty not exceeding one lakh and fifty thousand rupees for each such failure” by SEBI (Amdt.) Act, 2002, w.e.f. 29-10-2002.

2 Substituted for “a penalty not exceeding five thousand rupees for every day during which such failure continues” by SEBI (Amdt.) Act, 2002, w.e.f. 29-10-2002.

3 Substituted for “a penalty not exceeding ten thousand rupees for every day during which the failure continues” by SEBI (Amdt.) Act, 2002, w.e.f. 29-10-2002.

Section 15 B. Penalty for failure by any person to enter into agreement with clients

If any person, who is registered as an intermediary and is required under this Act or any rules or regulations made thereunder, to enter into an agreement with his client, fails to enter into such agreement, he shall be liable to 1[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 Substituted for “a penalty not exceeding five lakh rupees for every such failure” by SEBI (Amdt.) Act, 2002, w.e.f. 29-10-2002.

Section 15 C. Penalty for failure to redress investors’ grievances

1[Penalty for failure to redress investors’ grievances. If any listed company or any person who is registered as an intermediary, after having been called upon by the Board in writing, to redress the grievances of investors, fails to redress such grievances within the time specified by the Board, such company 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.]

——————–

1 Substituted by SEBI (Amdt.) Act, 2002, w.e.f. 29-10-2002.

Section 15 D. Penalty for certain defaults in case of mutual funds

If any person, who is—

(a) Required under this Act or any rules or regulations made thereunder to obtain a certificate of registration from the Board for sponsoring or carrying on any collective investment scheme, including mutual funds, sponsors or carries on any collective investment scheme including mutual funds, without obtaining such certificate of registration, he shall be liable to a 1[a penalty of one lakh rupees for each day during which he sponsors or carries on any such collective investment scheme including mutual funds, or one crore rupees, whichever is less];

(b) Registered with the Board as a collective investment scheme, including mutual funds, for sponsoring or carrying on any investment scheme, fails to comply with the terms and conditions of certificate of registration, he shall be liable to 2[a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less;]

(c) Registered with the Board as a collective investment scheme, including mutual funds, fails to make an application for listing of its schemes as provided for in the regulations governing such listing, he shall be liable to 3[a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less];

(d) Registered as a collective investment scheme, including mutual funds, fails to despatch unit certificates of any scheme in the manner provided in the regulation governing such despatch, he shall be liable to 4[a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less];

(e) Registered as a collective investment scheme, including mutual funds, fails to refund the application monies paid by the investors within the period specified in the regulations, he shall be liable to 5[a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less];

(f) Registered as a collective investment scheme, including mutual funds, fails to invest money collected by such collective investment schemes in the manner or within the period specified in the regulations, he shall be liable to 4[a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less].

——————–

1 Substituted for “a penalty not exceeding ten thousand rupees for each day during which he carries on any such collective investment scheme including mutual funds, or ten lakh rupees, whichever is higher,” by SEBI (Amdt.) Act, 2002, w.e.f. 29-10-2002.

2 Substituted for “a penalty not exceeding ten thousand rupees for each day during which such failure continues or ten lakh rupees, whichever is higher” by SEBI (Amdt.) Act, 2002, w.e.f. 29-10-2002.

3 Substituted for “a penalty not exceeding five thousand rupees for each day during which such failure continues or five lakh rupees, whichever is higher” by SEBI (Amdt.) Act, 2002, w.e.f. 29-10-2002.

4 Substituted for “a penalty not exceeding one thousand rupees for each day during which such failure continues”, by SEBI (Amdt.) Act, 2002, w.e.f. 29-10-2002.

5 Substituted for “a penalty not exceeding five lakh rupees for each such failure” by SEBI (Amdt.) Act, 2002, w.e.f. 29-10-2002.

Section 15 E. Penalty for failure to observe rules and regulations by an asset management company

Where any asset management company of a mutual fund registered under this Act, fails to comply with any of the regulations providing for restrictions on the activities of the asset management companies, such asset management company shall be liable to 1[a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less.]

——————–

1 Substituted for “a penalty not exceeding five lakh rupees for each such failure” by SEBI (Amdt.) Act, 2002, w.e.f. 29-10-2002.

Section 15 F. Penalty for default in case of stock brokers

If any person, who is registered as a stock broker under this Act,—

(a) Fails to issue contract notes in the form and in the manner specified by the stock exchange of which such broker is a member, he shall be liable to a penalty not exceeding five times the amount for which the contract note was required to be issued by that broker;

(b) Fails to deliver any security or fails to make payment of the amount due to the investor in the manner within the period specified in the regulations, he shall be liable to 1[a penalty of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is less);

(c) Charges an amount of brokerage which is in excess of the brokerage specified in the regulations, he shall be liable to 2[a penalty of one lakh rupees] or five times the amount of brokerage charged in excess of the specified brokerage, whichever is higher.

——————–

1 Substituted for “a penalty not exceeding five thousand rupees for each day during which such failure continues”, by SEBI (Amdt.) Act, 2002, w.e.f. 29-10-2002.

2 Substituted for “a penalty not exceeding five thousand rupees” by SEBI (Amdt.) Act, 2002, w.e.f. 29-10-2002.

Section 15 G. Penalty for insider trading

If any insider who—

(i) Either on his own behalf or on behalf of any other person, deals in securities of a body corporate listed on any stock exchange on the basis of any unpublished price sensitive information; or

(ii) Communicates any unpublished price sensitive information to any person, with or without his request for such information except as required in the ordinary course of business or under any law; or

(iii) Counsels, or procures for any other person to deal in any securities of any body corporate on the basis of unpublished price sensitive information,

shall be liable to a penalty not exceeding 1[twenty five crore rupees or three times the amount of profits made out of insider trading, whichever is higher.]

——————–

1 Substituted for “five lakh rupees” by SEBI (Amdt.) Act, 2002, w.e.f. 29-10-2002.

Section 15 H. Penalty for non-disclosure of acquisition of shares and takeovers

If any person, who is required under this Act or any rules or regulations made thereunder, fails to—

(i) Disclose the aggregate of his share holding in the body corporate before he acquires any shares of that body corporate; or

(ii) Make a public announcement to acquire shares at a minimum price,

he shall be liable to a penalty not exceeding 1[twenty five crore rupees or three times the amount of profits made out of such failure, whichever is higher.]

2[(iii) Make a public offer by sending letter of offer to the shareholders of the concerned company; or

(iv) Make payment of consideration of the shareholders who sold their shares pursuant to letter of offer.]

Section 15 HA. Penalty for fraudulent and unfair trade practices

1[Penalty for fraudulent and unfair trade practices. If any person indulges in fraudulent and unfair trade practices relating to securities, he shall be liable to a penalty not exceeding twenty-five crore rupees or three times the amount of profits made out of such practices, whichever is higher.

——————–

1 Inserted, by SEBI (Amdt.) Act, 2002, w.e.f. 29-10-2002.

Section 15 HB. Penalty for contravention where no separate penalty has been provided

Whoever fails to comply with any provision of this Act, the rules or the regulations 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.]

Section 15 I. Power to adjudicate

(1) For the purpose of adjudging under sections 15A, 15B, 15C, 15D, 15E, 15F, 15G, 1[15H, 15HA and 15HBJ the Board shall appoint any officer not below the rank of a Division Chief 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 may impose such penalty as he thinks fit in accordance with the provisions of any of those sections.

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1 Substituted for “and 15H”, by SEBI (Amdt.) Act, 2002, w,e.f. 29-10-2002.

Section 15 J. Factors to be taken into account by the adjudicating officer

While adjudging quantum of penalty under section 15-I, the adjudicating officer shall have due regard to the following factors, namely:—

(a) The amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default;

(b) The amount of loss caused to an investor or group of investors as a result of the default;

(c) The repetitive nature of the default.

1[15-JA.Crediting sums realised by way of penalties to Consolidated Fund of India

All sums realised by way of penalties under this Act shall be credited to the Consolidated Fund of India.]

——————–

1 Inserted, by SEBI (Amdt.) Act, 2002, w,e.f. 29-10-2002.

Section 15 K. Establishment of Securities Appellate Tribunals

(1) The Central Government shall, by notification, establish one or more Appellate Tribunals to be known as the Securities Appellate Tribunal to exercise the jurisdiction, powers and authority conferred on such Tribunal by or under this Act 1[or any other law for the time being in force).

(2) The Central Government shall also specify in the notification referred to in sub-section (1) the matters and places in relation to which the Securities Appellate Tribunal may exercise jurisdiction.

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1 Inserted by Securities Laws (IInd Amendment) Act, 1999.

Section 15 L. Composition of Securities Appellate Tribunal

1[Composition of Securities Appellate Tribunal. A Securities Appellate Tribunal shall consist of a Presiding Officer and two other members, to be appointed, by notification, by the Central Government:

PROVIDED that the Securities Appellate Tribunal, consisting of one person only, established before the commencement of the Securities and Exchange Board of India (Amendment) Act, 2002, shall continue to exercise the jurisdiction, powers and authority conferred on it by or under this Act or any other law for the time being in force till two other Members are appointed under this section.

——————–

1 Substituted by SEBI (Amdt.) Act 2002, w.e.1.29-10-2002.

Section 15 M. Qualification for appointment as Presiding Officer or Member of Securities Appellate Tribunal

(1) A person shall not be qualified for appointment as the Presiding Officer of a Securities Appellate Tribunal unless he is a sitting or retired Judge of the Supreme Court or a sitting or retired Chief Justice of a High Court:

PROVIDED that the Presiding Officer of the Securities Appellate Tribunal shall be appointed by the Central Government in consultation with the Chief Justice of India or his nominee.

(2) A person shall not be qualified for appointment as Member of a Securities Appellate Tribunal unless he is a person of ability, integrity and standing who has shown capacity in dealing with problems relating to securities market and has qualification and experience of corporate law, securities laws, finance, economics or accountancy:

PROVIDED that a member of the Board or any person holding a post at senior management level equivalent to Executive Director in the Board shall not be appointed as Presiding Officer or Member of a Securities Appellate Tribunal during his service or tenure as such with the Board or within two years from the date on which he ceases to hold office as such in the Board.

Section 15 N. Tenure of office of Presiding Officer and other Members of Securities Appellate Tribunal

The Presiding Officer and every other Member of a Securities Appellate Tribunal shall hold office for a term of five years from the date on which he enters upon his office and shall be eligible for re-appointment:

PROVIDED that no person shall hold office as the Presiding Officer of the Securities Appellate Tribunal after he has attained the age of sixty -eight years:

PROVIDED FURTHER that no person shall hold officer as a Member of the Securities Appellate Tribunal after he has attained the age of sixty-two years.]

Section 15 O. Salary and allowances and other terms and conditions of service of Presiding Officers

The salary and allowances payable to and the other terms and conditions of service (including pension, gratuity and other retirement benefits) of, 1[Presiding Officer and other Members of a Securities Appellate Tribunal] shall be such as may be prescribed:

PROVIDED that neither the salary and allowances nor the other terms and conditions of service of the 1Presiding Officer and other Members of a Securities Appellate Tribunal] shall be varied to their disadvantage after appointment.

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1 Substituted by SEBI (Amdt.) Act 2002, w.e.1.29-10-2002.

Section 15 P. Filling up of vacancies

If, for reason other than temporary absence, any vacancy occurs in 1[the office of the Presiding Officer or any other Member] of a Securities Appellate Tribunal, then the Central Government shall appoint another person in accordance with the provisions of this Act to fill the vacancy and the proceedings may be continued before the Securities Appellate Tribunal from the stage at which the vacancy is filled.

——————–

1 Substituted vide SEBI (Amdt.) Act 2002, w.e.f. 29-10-2002.

Section 15 Q. Resignation and removal

(1) 1[The Presiding Officer or any other Member of a Securities Appellate Tribunal] may, by notice in writing under his hand addressed to the Central Government, resign his office:

PROVIDED that 1[the Presiding Officer or any other Member] shall, unless he is permitted by the Central Government to relinquish his office sooner, continue to hold office until the expiry of three months from the date of receipt of such notice or until a person duly appointed as his successor enters upon his office or until the expiry of his term of office, whichever is the earliest.

(2) The 1[Presiding Officer or any other Member] of a Securities Appellate Tribunal shall not be removed from his office except by an order by the Central Government on the ground of proved misbehaviour or incapacity after an inquiry made by a Judge of the Supreme Court, in which the 1[Presiding Officer or any other Member]concerned has been informed of the charges against him and given a reasonable opportunity of being heard in respect of these charges.

(3) The Central Government may, by rules, regulate the procedure for the investigation of misbehaviour or incapacity of 1[the Presiding Officer or any other Member].

——————–

1 Substituted vide SEBI (Amdt.) Act 2002, w.e.f. 29-10-2002.

Section 15 R. Orders constituting Appellate Tribunal to be final and not to invalidate its proceedings

No order of the Central Government appointing any person as the 1[Presiding Officer or a Member] of a Securities Appellate Tribunal shall be called in question in any manner, and no act or proceeding before a Securities Appellate Tribunal shall be called in question in any manner on the ground merely of any defect in the constitution of a Securities Appellate Tribunal. 15S. Staff of the Securities Appellate Tribunal

(1) The Central Government shall provide the Securities Appellate Tribunal with such officers and employees as that government may think fit.

(2) The officers and employees of the Securities Appellate Tribunal shall discharge their functions under general superintendence of the Presiding Officer.

(3) The salaries and allowances and other conditions of service of the officers and employees of the Securities Appellate Tribunal shall be such as may be prescribed.

——————–

1 Substituted vide SEBI (Amdt.) Act 2002, w.e.f. 29-10-2002.

Section 15 T. Appeal to the Securities Appellate Tribunal

1[(1) Save as provided in sub-section (2), any person aggrieved,—

(a) By an order of the Board made, on and after the commencement of the Securities Laws (IInd Amendment) Act, 1999, under this Act, or the rules or regulations made thereunder; or

(b) 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—

(a) By the Board on and after the commencement of the Securities Laws (IInd Amendment) Act, 1999;

(b) By an Adjudicating Officer, with the consent of the parties.]

(3) Every appeal under sub-section (1) shall be filed within a period of 45 days from the date on which 2[a copy of the order made by the Board or the Adjudicating Officer, as the case may be] is received by him and it shall be in such form and be accompanied by such fee as may be prescribed:

PROVIDED that the Securities Appellate Tribunal may entertain an appeal after the expiry of the said period of 45 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 3[Board, the parties] to the appeal and to the concerned Adjudicating Officer.

(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.

——————–

1 Sub-ss. (1) and (2) substituted by Securities Laws (Ilnd Amendment) Act, 1999.

2 Substituted for “a copy of order made by adjudicating officer” by Securities Laws (IInd Amdt) Act, 1999.

3 Substituted for “parties’ by Securities Laws (Ilnd Amendment) Act, 1999.

Section 15 U. Procedure and powers of the Securities Appellate Tribunal

(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 shall have their sittings.

(2) The Securities Appellate Tribunal shall have, for the purposes 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 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;

(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 (45 of 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 (2 of 1974).

Section 15 V. Right to legal representation

1[Right to legal representation. 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 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.]

——————–

1 Substituted by Securities Laws (IInd Amendment) Act, 1999.

Section 15 X. Presiding Officer, Members and staff of Securities Appellate Tribunals to be public servants

1[Presiding Officer, Members and staff of Securities Appellate Tribunals to be public servants. The Presiding Officer, Members and other officers and employees of a Securities Appellate Tribunal shall be deemed to be public servants within the meaning of section 21 of the Indian Penal Code.]

——————–

1 Substituted vide SEBI (Amdt.) Act, 2002, w.e.f. 29-10-2002.

Section 15 Y. Civil court not to have jurisdiction

No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which an adjudicating officer appointed under this Act or a Securities Appellate Tribunal constituted under this Act 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.

Section 15 Z. Appeal to Supreme Court

1[Appeal to Supreme Court. 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 applicant 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.]

——————–

1 Substituted vide SEBI (Amdt.) Act, 2002, w.e.f. 29-10-2002.

Section 16. Power of Central Government to issue directions

(1) Without prejudice to the foregoing provisions of this Act 1[or the Depositories Act, 1996], the Board shall, in exercise of its powers or the performance of its functions under this Act, be bound by such directions on questions of policy as the Central Government may give in writing to it from time to time:

PROVIDED that the Board shall, as far as practicable, be given an opportunity to express its views before any direction is given under this sub-section.

(2) The decision of the Central Government whether a question is one of policy or not shall be final.

——————–

1 Inserted by the Depositories Act, 1996, w.e.f. 20-9-1995.

Section 17. Power of Central Government to supersede the Board

(1) If at any time the Central Government is of opinion—

(a) That on account of grave emergency, the Board is unable to discharge the functions and duties imposed on it by or under the provisions of this Act; or

(b) That the Board has persistently made default in complying with any direction issued by the Central Government under this Act or in the discharge of the functions and duties imposed on it by or under the provisions of this Act and as a result of such default the financial position of the Board or the administration of the Board has deteriorated; or

(c) That circumstances exist which render it necessary in the public interest so to do, the Central Government may, by notification, supersede the Board for such period, not exceeding six months, as may be specified in the notification.

(2) Upon the publication of a notification under sub-section (1) superseding the Board—

(a) All the members shall, as from the date of supersession, vacate their offices as such;

(b) All the powers, functions and duties which may, by or under the provisions of this Act, be exercised or discharged by or on behalf of the Board, shall until the Board is reconstituted under sub-section (3), be exercised and discharged by such person or persons as the Central Government may direct; and

(c) All property owned or controlled by the Board shall, until the Board is reconstituted under sub-section

(3), vest in the Central Government. “‘ (3) On the expiration of the period of supersession specified in the notification issued under sub-section (1), the Central Government may reconstitute the Board by a fresh appointment and in such case any person or persons who vacated their offices under clause (a) of sub-section (2), shall not be deemed disqualified for appointment:

PROVIDED that the Central Government may, at any time, before the expiration of the period of supersession, take action under this sub-section.

(4) The Central Government shall cause a notification issued under sub-section (10 and a full report of any action under this section and the circumstances leading to such action to be laid before each House of Parliament at the earliest.

Section 18. Returns and reports

(1) The Board shall furnish to the Central Government at such time and in such form and manner as may be prescribed or as the Central Government may direct, such returns and statements and such particulars in regard to any proposed or existing program for the promotion and development the securities market, as the Central Government may, from time to time, require.

(2) Without prejudice to the provision of sub-section (1), the Board shall, within 1[ninety days after the end of each financial year, submit to the Central Government a report in such form, as may be prescribed, giving a true and full account of its activities, policy and programmes during the previous financial year.

(3) A copy of the report received under sub-section (2) shall be laid, as soon as may be after it is received, before each House of Parliament.

——————–

1. Substituted by the Securities Laws (Amendment) Act, 1995, w.e.f. 25-1-1995, for “sixty days”.

Section 19. Delegation

The Board may, by general or special order in writing delegate to any member, officer of the Board or any other person subject to such conditions, if any, as may be specified in the order, such of its powers and functions under this Act (except the powers under section 29) as it may deem necessary.

Section 20. Appeals

(1) Any person aggrieved by 1[an order of the Board made under this Act, or the rules or regulations made thereunder may prefer an appeal to the Central Government within such time as may be prescribed.

(2) N o appeal shall be admitted if it is preferred after the expire of the period prescribed therefor: Provided that an appeal may be admitted after the expire 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 peruse.

(3) Every appeal made under this section shall be made in such form and 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.

——————–

1. Substituted for “an order of the Board made” by Securities Laws (IInd Amdt.) Act, 1999.

Section 20 A. Bar of jurisdiction

1[Bar of jurisdiction. No order passed by the 2[Board or the adjudicating officer] under this Act shall be appealable except as provided in 3[section 15T or section 20] and no civil court shall have jurisdiction in respect of any matter which the 4[Board or the adjudication officer] is empowered buy, or under, this Act to pass any order 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 order passed by the 5[Board or the adjudicating officer] by, or under this Act.]

——————–

1. Inserted by the Securities Laws (Amendment) Act, 1995, w.e.f. 25-1-1995.

2. Substituted for “Board” by Securitised Laws (IInd Amendment) Act, 1999.

3. Substituted for “section 20” by Securitised Laws (IInd Amendment) Act, 1999.

4. Substituted for “Board “by Securities Laws (IInd Amendment) Act, 1999.

5. Inserted by the Securitises Laws (Amendment) Act, 1995, w.e.f. 25-1-1995.

Section 21. Savings

Nothing in this Act shall exempt any person from any suit or other proceedings which might, apart from this Act, be brought against him.

Section 22. Members, officers and employees of the Board to be public servants

All members, officers and other employees of the Board shall be deemed when acting or purporting to act in pursuance of any of the provisions of this Act, to be public servants within the meaning of section 21 of the Indian Penal Code (45 of 1860).

Section 23. Protection of action taken in good faith

No suit, prosecution or other legal proceedings shall lie against the Central Government or any officer of the Central Government or any member, officer or other employee of the Board for anything which is in good faith done or intended to be done under this Act or the rules or regulations made thereunder.

——————–

1 Inserted by the Securities Laws (Amendment) Act, 1995, w.e.f. 25-1-1995.

Section 24. Penalty

1[Penalty. (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 made thereunder, he shall be punishable with imprisonment for a term which may extend to 2[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 3[ten years or with fine which may extend to twenty-five crore rupees or with both.]

——————–

1 Substituted, Securities Laws (Amendment) Act, 1995, w.e.f. 25-1-1995.

2 Substituted for “one year, or with fine, or with both” vide SEBI (Amdt.) Act 2002, w.e.f. 29-10-2002.

3 Substituted for “three years or with fine which shall not be….. with both” vide SEBI (Amdt.) Act 2002, w.e.f. 29-10-2002.

Section 24 A. Composition of certain offences

1[Composition of certain offences. 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.

——————–

1 Inserted, vide SEBI (Amdt.) Act 2002, w.e.f. 29-10-2002.

Section 24 B. Power to grant Immunity

(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 the 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 recommendation of the Board under this sub-section shall not be binding on the Central Government.

(2) An immunity granted to a person under sub-section (1) may, at any time, be withdrawn by the Central Government, if it is satisfied that such person had, in the course of the proceedings, not complied with the condition on which the immunity was granted or had given false evidence, and thereupon such person may be tried for the offence with respect to which the immunity was granted or for any other offence of which he appears to have been guilty in connection with the contravention and shall also become liable to the imposition of any penalty under this Act to which such person would have been liable, had not such immunity been granted.]

Section 25. Exemption from tax on wealth and income

Notwithstanding anything contained in the Wealth Tax Act, 1957 (27 of 1957), the Income Tax Act, 1961 (43 of 1961) or any other enactment for the time being in force relating to tax on wealth, income, profits or gains—

(a) The Board;

(b) The existing Securities and Exchange Board from the date of its constitution to the date of establishment of the Board,

Shall not be liable to pay wealth tax, income tax or any other tax in respect of their wealth, income, profits, or gains derived.

Section 26. Cognisance of offences by courts

(1) No court shall take cognisance of any offence punishable under this Act or any rules or regulations made thereunder, save on a complaint made by the Board. 1[* * *]

(2) No court inferior to that of 2[a Court of Session] shall try any offence punishable under this Act.

——————–

1 Words “with the previous sanction of the Central Government” omitted by the Securities Laws Amendment) Act, 1995, w.e.f. 25-1-1995.

2 Substituted for “a Metropolitan Magistrate or a Judicial Magistrate of the first class”, by SEBI (Amdt.) Actr 2002, w.e.f. 29-10-2002.

Section 27. 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

Section 28. Power to exempt

[Omitted by Securitised Laws (Amendment) Act, 1995, w.e.f. 25-1-1995]

Section 29. Power to make rules

(1) The Central Government may be notification, make rules for carrying out the purposes of this Act

In particular and without prejudice to the generality of the foregoing power such rules and may provide for all or any of the following matters namely:-

(a) The term of office and other conditions of service of the Chairman and the members under sub-section (1) of section 5;

(b) The additional functions that may be performed by the Board under section 11;

(c) [Omitted by the Securities Laws (Amendment) Act, 1995, w.e.f. 25-1-1995]

(d) The manner in which the account of the Board shall be maintained under section 15;

1[(da) The manner of inquiry under sub-section (1) of section 15-1;

(db) The salaries and allowances and other terms and conditions of service of the 2[Presiding Officers, Members] and other officers and employees of the Securities Appellate Tribunal under section 15-O and sub-section (3) of section 15S;

(dc) The procedure for the investigation of misbehaviour or incapacity of the 2[Presiding Officers, or other Members] of the Securities Appellate Tribunal under sub-section (3) of section 15Q;

(dd) The form in which an appeal may be filed before the Securities Appellate Tribunal under section 15T and the fees payable in respect of such appeal;]

(e) The form and the manner in which returns and report to be made to the Central Government under section 18;

(f) Any other matter which is to be, or maybe, prescribed, or in respect of which provision is to be, or may be, made by rules.

——————–

1 Inserted by the Securities Laws (Amendment) Act, 1995, w.e.f. 25-1-1995.

2 Substituted for “Presiding Officers” vide SEBI (Amdt.) Ad 2002, w.e.f. 29-10-2002

Section 30. Power to make regulations

(1) The Board may, 1[* * *] by notification, make regulations consistent with 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 all or any of the following matters, namely: —

(a) The times and places of meetings of the Board and the procedure to be followed at such meetings under sub-section (1) of section 7 including quorum necessary for the transaction of business;

(b) The terms and other conditions of service of officers and employees of the Board under sub-section (2) of section 9;

[(c) The matters relating to issue of capital, transfer of securities and other matters incidental thereto and the manner in which such matters shall be disclosed by the companies under section 11A;

(d) The conditions subject to which certificate of registration is to be issued, the amount of fee to be paid for certificate of registration and the manner of suspension or cancellation of certificate of registration under section 12.]

——————–

1 Words “with the previous approval of the Central Government” omitted by the Securities Laws (Amendment) Act, 1995, w.e.f. 25-1-1995.

2 Substituted by the Securities Laws {Amendment) Act, 1995, w.e.f. 25-1-1995.

Section 31. 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.

Section 32. Application of other laws not barred

The provisions of this Act shall be in addition to and not in derogation of the provisions of any other law for the time being in force.

Section 33. Amendment of certain enactments

(1) [Omitted by Repealing and Amending Act, 2001]

Section 34. Power to remove 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 provision of this Act as many appear to be necessary for removing the difficulty:

Provided that no order shall be made under this section after the expire of five 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.

Section 35. Repeal and saving

(1) The Securities and Exchange Board of India Ordinance, 2002 (Ordinance 6 of 2002) is hereby repealed.

(2) Notwithstanding such repeal of the Securities and Exchange Board of India (Amendment) Ordinance, 2002, anything done or any action taken under the said Ordinance shall be deemed to have done or taken under the principal Act, as amended by this Act.

Schedule

[Section 33]

AMENDMENT OF CERTAIN ENACTMENTS

[Omitted by Repealing ad Amending Act, 2001]

Bydeb

Securities and Insurance Laws (Amendment and Validation) Act, 2010

SECURITIES AND INSURANCE LAWS (AMENDMENT AND VALIDATION) ACT, 20101

[No. 26 of 2010]

[20th August, 2010}

An Act further to amend the Reserve Bank of India Act, 1934, the Insurance Act, 1938, the Securities Contracts (Regulation) Act, 1956 and the Securities and Exchange Board of India Act, 1992

Be it enacted by Parliament in the Sixty-first Year of the Republic of India as follows—

——————–

1. Received the assent of the President on August 20, 2010 and published in the Gazette of India, Extra., Part II, Section 1, dated 23rd August, 2010, pp. 1-4, No. 34

Prefatory Note—Statement of Objects and Reasons.

The Securities and Exchange Board of India Act, 1992 was enacted, inter alia, to provide for the establishment of a Board to protect the interests of investors in securities and to promote the development of, and to regulate, the securities market and for matters connected therewith or incidental thereto. The Insurance Act, 1938, inter alia, contains the law relating to the business of Insurance and the Insurance Regulatory and Development Authority Act, 1999 was enacted, inter alia, to provide for the establishment of an Authority to protect the interests of holders of insurance policies, to regulate, promote and ensure orderly growth of insurance industry and for matters connected therewith or incidental thereto.

2. The Securities and Exchange Board of India (SEBI) issued on the 9th April, 2010, an order against certain insurance companies directing them not to issue any offer document, advertisement, brochure soliciting money from investors or raise money from investors by way of new or additional subscription for any product including ULIPs having an investment component in the nature of mutual funds, till they obtain the requisite certificate of registration from the SEBI. The differences of opinion relating to jurisdiction of the SEBI and the Insurance Regulatory and Development Authority (IRDA) in respect of hybrid or composite instruments or units (by whatever name called) which provides a component of investment and a component of insurance issued by an insurer had arisen.

3. In order to clear uncertainties on the differences of opinion relating to jurisdiction of the securities market regulator, i.e., the SEBI and the insurance regulator, i.e., the IRDA it has become necessary to clarify that the “life insurance business” also include any unit linked insurance policy and accordingly to amend the Insurance Act, 1938, the Securities Contracts (Regulation) Act, 1956 and the Securities and Exchange Board of India Act, 1992 for the said purpose.

4. In order to address the differences of opinion among certain statutory regulators which may arise in future, it was felt necessary to set up a joint mechanism, consisting of the Union Finance Minister as its Chairperson, and Governor, the Reserve Bank of India (RBI), the Chairperson, Secretary, Department of Economic Affairs, Secretary (Financial Services) and Chairpersons of the Insurance Regulatory and Development Authority, Securities and Exchange Board of India and the Pension Fund Regulatory and Development Authority (PFRDA) as its members, for resolving future differences of opinion as to whether any hybrid or composite instrument, having a component of insurance or any other investment or securities market instrument or a component of money market instrument falls within the jurisdiction of the IRDA or SEBI or RBI or PFRDA.

5. As both Houses of Parliament were not in session and immediate action was required to be taken, the President promulgated the Securities and Insurance Laws (Amendment and Validation) Ordinance, 2010 on the 18th June, 2010 to achieve the above objectives.

6. The Bill seeks to replace the aforesaid Ordinance.

CHAPTER I

PRELIMINARY

1. Short title and commencement.

(1) This Act may be called the Securities and Insurance Laws (Amendment and Validation) Act, 2010.

(2) It shall be deemed to have come into force on the 18th day of June, 2010.

CHAPTER II

AMENDMENT TO THE RESERVE BANK OF INDIA ACT, 1934

2. Insertion of new Chapter III-E in Act 2 of 1934.

After Chapter III-D of the Reserve Bank of India Act, 1934, the following chapter shall be inserted, namely—

“CHAPTER III-E

JOINT MECHANISM

45-Y. Joint Mechanism.—

(1) Notwithstanding anything contained in this Act or the Securities and Exchange Board of India Act, 1992 (15 of 1992) or any other law for the time being in force, if any difference of opinion arises as to whether—

(i) any instrument, being derivative referred to in clause (a) or money market instrument referred to in clause (b) or repo referred to in clause (c) or reverse repo referred to in clause (d) or securities referred to in clause (e) of Section 45-U of this Act; or

(ii) any instrument, being policy of life insurance under the Insurance Act, 1938 (4 of 1938) or the rules or regulations made thereunder, or, scrips or any other securities referred to in sub-clauses (i), (ia), (ib), (ic), (id), (ie), (ii), (iia) and (iii) of clause (h) of Section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956),

is hybrid or composite instrument, having a component of money market investment or securities market instrument or a component of insurance or any other instrument referred to in clause (i) or clause (ii) and falls within the jurisdiction of the Reserve Bank of India or the Securities and Exchange Board of India established under Section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) or the Insurance Regulatory and Development Authority established under Section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999) or the Pension Fund Regulatory and Development Authority constituted by the Resolution of the Government of India Number F.No. 1(6) 2007-PR, dated the 14th November, 2008, such difference of opinion shall be referred to a Joint Committee consisting of the following, namely—

(a) the Union Finance Ministerex officio Chairperson
(b) the Governor, Reserve Bank of Indiaex officio Vice-Chairperson
(c) the Secretary, Department of Economic Affairs in the Ministry of Finance, Government of Indiaex officio Member;
(d) the Secretary, Department of Financial Services in the Ministry of Finance, Government of Indiaex officio Member;
(e) the Chairperson, Insurance Regulatory and Development Authorityex officio Member
(f) the Chairman, Securities and Exchange Board of Indiaex officio Member;
(g) the Chairperson, Pension Fund Regulatory and Development Authorityex officio Member;

(2) The Secretary, Department of Financial Services in the Ministry of Finance, Government of India shall be the convener of the meetings of the Joint Committee referred to in sub-section (1).

(3) In case of any difference of opinion referred to in sub-section (1), any Member of the Joint Committee referred to in clauses (&), (e), if) or (g) of that sub-section may make a reference to the Joint Committee.

(4) The Joint Committee shall follow such procedure as it may consider expedient and give, within a period of three months from the date of reference made under sub¬section (3), its decisions thereon to the Central Government.

(5) The decision of the Joint Committee shall be binding on the Reserve Bank of India, the Securities and Exchange Board of India, the Insurance Regulatory and Development Authority and the Pension Fund Regulatory and Development Authority.”

CHAPTER III

AMENDMENT TO THE INSURANCE ACT, 1938

3. Amendment of Section 2 of Act 4 of 1938.

In the Insurance Act, 1938, in Section 2, after clause (11), the following Explanation shall be inserted and shall be deemed to have been inserted with effect from the 9th day of April, 2010, namely—

‘Explanation.—For the removal of doubts, it is hereby declared that “life insurance business” shall include any unit linked insurance policy or scrips or any such instrument or unit, by whatever name called, which provides a component of investment and a component of insurance issued by an insurer referred to in clause (9) of this section.’

CHAPTER IV

AMENDMENT TO THE SECURITIES CONTRACTS (REGULATION) ACT, 1956

4. Amendment of Section 2 of Act 42 of 1956.

In the Securities Contracts (Regulation) Act, 1956, in Section 2, in clause (h), after sub-clause (id), the following Explanation shall be inserted and shall be deemed to have been inserted with effect from the 9th day of April, 2010, namely—

‘Explanation.—For the removal of doubts, it is hereby declared that “securities” shall not include any unit linked insurance policy or scrips or any such instrument or unit, by whatever name called, which provides a combined benefit risk on the life of the persons and investment by such persons and issued by an insurer referred to in clause (9) of Section 2 of the Insurance Act, 1938 (4 of 1938).’.

CHAPTER V

AMENDMENT TO THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992

5. Amendment of Section 12 of Act 15 of 1992.

In the Securities and Exchange Board of India Act, 1992, in Section 12, in sub-section (1-B), the following Explanation shall be inserted and shall be deemed to have been inserted with effect from the 9th day of April, 2010, namely—

“Explanation.—For the removal of doubts, it is hereby declared that, for the purposes of this section, a collective investment scheme or mutual fund shall not include any unit linked insurance policy or scrips or any such instrument or unit, by whatever name called, which provides a component of investment besides the component of insurance issued by an insurer.”.

CHAPTER VI

MISCELLANEOUS

6. Validation.

Notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authority, the provisions of Section 2 of the Insurance Act, 1938 (4 of 1938) or Section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or Section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), as amended by this Act, shall have and shall be deemed to always have effect for all purposes as if the provisions of the said Acts, as amended by this Act, had been in force at all material times and accordingly any unit linked insurance policy or scrips or any such instrument or unit, by whatever name called, issued or purported to have been issued at any time before the 9th day of April, 2010, shall be deemed and always deemed to have been validly issued and shall not be called in question in any court of law or other authority solely on the ground that it was issued without a certificate of registration under any law for the time being in force or without following any procedure under any law for the time being in force, by an insurer or any other person.

7. Repeal and savings.

(1) The Securities and Insurance Laws (Amendment and Validation) Ordinance, 2010 (3 of 2010), is hereby repealed.

(2) Notwithstanding such repeal, anything done or any action taken under the Reserve Bank of India Act, 1934 (2 of 1934) or the Insurance Act, 1938 (4 of 1938) or the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992), as amended by the said Ordinance, shall be deemed to have been done or taken under the corresponding provisions of those Acts, as amended by this Act.

Bydeb

Securities and Insurance Laws (Amendment and Validation) Ordinance, 2010

SECURITIES AND INSURANCE LAWS (AMENDMENT AND VALIDATION) ORDINANCE, 20101

[NO. 3 OF 2010]

(Promulgated by the President in the Sixty-first Year of the Republic of India)

An Ordinance further to amend the Reserve Bank of India Act, 1934, the Insurance Act, 1938, the Securities Contracts (Regulation) Act, 1956 and the Securities and Exchange Board of India Act, 1992

Whereas Parliament is not in session and the President is satisfied that circumstances exist which render it necessary for her to take immediate action;

Now, therefore, in exercise of the powers conferred by clause (1) of Article 123 of the Constitution, the President is pleased to promulgate the following Ordinance—

——————–

1. Promulgated by the President on June 18, 2010 and published in the Gazette of India, Extra., Part II, Section 1, dated 18th June, 2010, pp. 1-4, No. 26

Chapter I

PRELIMINARY

1. Short title and commencement.

(1) This Ordinance may be called the Securities and Insurance Laws (Amendment and Validation) Ordinance, 2010.

(2) It shall come into force at once.

Chapter II

AMENDMENT TO THE RESERVE BANK OF INDIA ACT, 1934

2. Insertion of new Chapter HI-E in Act 2 of 1934.

After Chapter III-D of the Reserve Bank of India Act, 1934, the following Chapter shall be inserted, namely—

Chapter III-E

JOINT MECHANISM

45-Y. Joint Mechanism.

(1) Notwithstanding anything contained in this Act or the Securities and Exchange Board of India Act, 1992 (15 of 1992) or any other law for the time being in force, if any difference of opinion arises as to whether—

(i) any instrument, being derivative referred to in clause (a) or money market instrument referred to in clause (b) or repo referred to in clause (c) or reverse repo referred to in clause (d) or securities referred to in clause (e) of Section 45-U of this Act; or

(ii) any instrument, being policy of life insurance under the Insurance Act, 1938 (4 of 1938), or the rules or regulations made thereunder, or, scrips or any other securities referred to in sub-clauses (i), (ia), (ib), (ic), (id), (ie), (ii), (iia) and (iii) of clause (h) Section 2 of the Securities Contract (Regulation) Act, 1956 (42 of 1956), is hybrid or composite instrument, having a component of money market investment or securities market instrument or a component of insurance or any other instrument referred to in clause (i) or clause (ii) and falls within the jurisdiction of the Reserve Bank of India or the Securities and Exchange Board of India established under Section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) or the Insurance Regulatory and Development Authority established under Section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999) or the Pension Fund Regulatory and Development Authority constituted by the Resolution of the Government of India, Number F. No. l(6)2007-PR, dated the 14th November, 2008 or the Central Government, such difference of opinion shall be referred to a Joint Committee consisting of the following, namely—

(a) the Union Finance Minister — ex officio Chairperson;

(b) the Governor, Reserve Bank of India — ex officio Member;

(c) the Finance Secretary in the Ministry of Finance, Government of India — ex officio Member;

(d) the Secretary (Financial Services) in the Ministry of Finance, Government of India — ex officio Member;

(e) the Chairperson, Insurance Regulatory and Development Authority — ex officio Member;

(f) the Chairman, Securities and Exchange Board of India — ex officio Member;

(g) the Chairperson, Pension Fund Regulatory and Development Authority — ex officio Member.

(2) The Secretary (Financial Services) in the Ministry of Finance, Government of India shall be the convener of the meetings of the Joint Committee referred to in sub-section (1).

(3) In case of any difference of opinion referred to in sub-section (1), any Member of the Joint Committee may make a reference to the Joint Committee.

(4) The Joint Committee shall follow such procedure as it may consider expedient and give, within a period of three months from the date of reference made under sub-section (3), its decisions thereon to the Central Government.

(5) The decision of the Joint Committee shall be binding on the Reserve Bank of India, the Securities and Exchange Board of India, the Insurance Regulatory and Development Authority and the Pension Fund Regulatory and Development Authority.”.

Chapter III

AMENDMENT TO THE INSURANCE ACT, 1938

3. Amendment of Section 2 of Act 4 of 1938.

In the Insurance Act, 1938, in Section 2, after clause (11), the following Explanation shall be inserted and shall be deemed to have been inserted with effect from the 9th day of April, 2010, namely—

‘Explanation.—For the removal of doubts, it is hereby declared that “life insurance business” shall include any unit linked insurance policy or scrips or any such instrument or unit, by whatever name called, which provides a component of investment and a component of insurance issued by an insurer referred to in clause (9) of this section.’

4. Amendment of Section 2 of Act 42 of 1956

Chapter V

AMENDMENT TO THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992

5. Amendment of Section 12 of Act 15 of 1992.

In the Securities and Exchange Board of India Act, 1992, in Section 12, in sub-section (1-B), the following Explanation shall be inserted and shall be deemed to have been inserted with effect from the 9th day of April, 2010, namely—

“Explanation.—For the removal of doubts, it is hereby declared that, for the purposes of this section, a collective investment scheme or mutual fund shall not include any unit linked insurance policy or scrips or any such instrument or unit, by whatever name called, which provides a component of investment besides the component of insurance issued by an insurer.”

Chapter VI

MISCELLANEOUS

6. Validation.

Notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authority, the provisions of Section 2 of the Insurance Act, 1938 (4 of 1938), or Section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956), or Section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), as amended by this Ordinance, shall have and shall be deemed to always have effect for all purposes as if the provisions of the said Acts, as amended by this Ordinance, had been in force at all material times and accordingly any unit linked insurance policy or scrips or any such instrument or unit, by whatever name called, issued or purported to have been issued at any time before the 9th day of April, 2010, shall be deemed and always deemed to have been validly issued and shall not be called in question in any court of law or other authority solely on the ground that it was issued without a certificate of registration under any law for the time being in force or without following any procedure under any law for the time being in force, by an insurer or any other person.