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THE DEPOSITORIES ACT, 1996

Title : THE DEPOSITORIES ACT, 1996

Year : 1996



The enactments specified in the Schedule to this Act shall be amended in the manner provided therein.

30A - 1*Validation of certain acts

Any act or thing done or purporting to have been done under the principal Act, in respect of settlement of administrative and civil proceedings, shall, for all purposes, be deemed to be valid and effective as if the amendments made to the principal Act had been in force at all material times.".

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1. Inserted by the Securities Laws (Amendment) Act, 2014.

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(1) The Depositories (Third) Ordinance, 1996 (Ord. 28 of 1996) is hereby repealed.

(2) Notwithstanding such repeal, anything done or any action taken under the said Ordinance shall be deemed to have been done or taken under the corresponding provisions of this Act.

Schedule 1

THE SCHEDULE

(See section 30)

AMENDMENTS TO CERTAIN ENACTMENTS

PART I

AMENDMENT TO THE INDIAN STAMP ACT, 1899 (2 OF 1899)
Amendment

After section 8, the following section shall be inserted, namely:--
8A. Securities not liable to stamp duty.--Notwithstanding anything contained in this Act,-

(a) An issuer, by the issue of securities to one or more depositories shall, in respect to such issue, be chargeable with duty on the total amount of security issued by it and such securities need not be stamped;

(b) Where an issuer issues certificate of security under sub-section (3) of section 14 of the Depositories Act, 1996, on such certificate duty shall be payable as is payable on the issue of duplicate certificate under this Act;

(c) Transfer of registered ownership of shares from a person to a depository or from a depository to a beneficial owner shall not be liable to any stamp duty;

(d) The transfer of beneficial ownership of shares, such shares being shares of a company dealt with by a depository shall not be liable to duty under article 62 of Schedule I of this Act.

Explanation.-For the purposes of this section, the expressions "beneficial owner", "depository", and "issuer" shall have the meanings respectively assigned to them in clauses (a), (e) and (f) of sub-section (1) of section 2 of the Depositories Act, 1996.'.

PART II

AMENDMENTS TO THE COMPANIES ACT, 1956 (l OF 1956)
Amendments

1. In section 2, after clause (45A), the following clause shall be inserted, namely:-

'(45B) "Securities and Exchange Board of India" means the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992).'.

2. Interpretation of certain words and expressions.-

After section 2, the following section shall be inserted, namely:-

"2A. Words and expressions used and not defined in this Act but defined in the Depositories Act, 1996, shall have the same meanings respectively assigned to them in that Act.".

3. In section 41, after sub-section (2), the following sub-section shall be inserted, namely:-

"(3) Every person holding equity share capital of company and whose name is entered as beneficial owner in the records of the depository shall be deemed to be a member of the concerned company.".

4. In section 49, in sub-section (5), after clause (b), the following clause shall be inserted, namely:-

"(c) From holding investments in the name of a depository when such investments are in the form of securities held by the company as a beneficial owner.".

5. In section 51, the following proviso shall be inserted, namely:-

"Provided that where the securities are held in a depository, the records of the beneficial ownership may be served by such depository on the company by means of electronic mode or by delivery of floppies or discs.".

6. Section 83 shall be omitted.

7. In section 108, after sub-section (2), the following sub-section shall be inserted, namely:-

"(3) Nothing contained in this section shall apply to transfer of security effected by the transferor and the transferee both of whom are entered as beneficial owners in the records of a depository.".

8. In section 111, after sub-section (13), the following sub-section shall be inserted, namely:-

'(14) In this section, "company" means a private company and indudes a private company which had become a public company by virtue of section 43A of this Act.'.

9. After section 111, the following section shall be inserted, namely:-

"111A. Rectification of Register on Transfer.-

(1) In this section, unless the context otherwise requires, "company" means a company other than a company referred to in sub-section (14) of section 111 of this Act.

(2) Subject to the provisions of this section, the shares or debentures and any interest therein of a company shall be freely transferable.

(3) The Company Law Board may, on an application made by a depository, company, participant or investor or the Securities and Exchange Board of India within two months from the date of transfer of any shares or debentures held by a depository or from the date on which the instrument of transfer or the intimation of transmission was delivered to the company, as the case may be, after such inquiry as it thinks fit, direct any company or depository to rectify register or records if the transfer of the shares or debentures is in contravention of any of the provisions of the Securities and Exchange Board of India Act, 1992 (15 of 1992), or regulations made thereunder or the Sick Industrial Companies (Special Provisions) Act, 1985 (l of 1986).

(4) The Company Law Board, while acting under sub-section (3), may at its discretion make such interim order as to suspend the voting rights before making or completing such enquiry.

(5) The provisions of this section shall not restrict the right of a holder of shares or debentures, or transfer such shares or debentures and any person acquiring such shares or debentures shall be entitled to voting rights unless the voting rights have been suspended by an order of the Company Law Board.

(6) Notwithstanding anything contained in this section, any further transfer, during the pendency of the application with the Company Law Board, of shares or debentures shall entitle the transferee to voting rights unless the voting rights in respect of such transferee have also been suspended.

(7) The provisions of sub-sections (5), (7), (9), (10) and (12) of section 111 shall, so far as may be, apply to the proceedings before the Company Law Board under this section as they apply to the proceedings under that section.'.

10. In section 113, after sub-section (3), the following sub-section shall be inserted namely:-

"(4) Notwithstanding anything contained in sub-section (1), where the securities are dealt in a depository, the company shall intimate the details of allotment of securities to depository immediately on allotment of such securities.".

11. In section 150, in sub-section (1), in clause (b), the words "distinguishing each share by its number" shall be omitted.

12. In section 152, in sub-section (1), in clause (b), the words "distinguishing each debenture by its number" shall be omitted.

13. After section 152, the following section shall be inserted, namely:-

"252A. Register and index of beneficial owners to be of debenture holder.-

The register and index of beneficial owners maintained by a depository under section 11 of the Depositories Act, 1996, shall be deemed to be an index of members and register and index of debenture holders, as the case may be, for the purposes of this Act.".

14. In Schedule II, in Part II, in clause C, after sub-clause 9, the following sub-clause shall be inserted, namely:-

"9A. The details of opinion to subscribe for securities to be dealt with in a depository.".

PART III

AMENDMENTS TO THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956)

Amendments

1. In section 2, for clause (i), the following clause shall be substituted, namely:-

"(i) "Spot delivery" contract means a contract which provides for,-

(a) Actual delivery of securities and the payment of a price therefor either on the same day as the date of the contract or on the next day, the actual periods taken for the despatch of the securities or the remittance of money therefor through the post being excluded from the computation of the period aforesaid if the parties to the contract do not reside in the same town or locality;

(b) Transfer of the securities by the depository from the account of a beneficial owner to the account of another beneficial owner when such securities are dealt with by a depository.".
2. Section 22A shall be omitted.

PART IV

AMENDMENT TO THE INCOME-TAX ACT, 1961 (43 OF 1961)
Amendment

In section 45, after sub-section (2), the following sub-section shall be inserted, namely:-

"(2A) Where any person has had at any time during the previous year any beneficial interest in any securities, then, any profits or gains arising from transfer made by the depository or participant of such beneficial interest in respect of securities shall be chargeable to income-tax as the income of the beneficial owner of the previous year in which such transfer took place and shall not be regarded as income of the depository who is deemed to be the registered owner of securities by virtue of sub-section (1) of section 10 of the Depositories Act, 1996, and for the purposes of-

(i) Section 48; and

(ii) Proviso to clause (42A) of section 2,the cost of acquisition and the period of holding of any securities shall be determined on the basis of the first-in-first-out method.

Explanation.-For the purposes of this sub-section, the expressions "beneficial owner", "depository" and "security" shall have the meanings respectively assigned to them in clauses (a), (e) and (1) of sub-section (1) of section 2 of the Depositories Act, 1996.".

PART V

AMENDMENT TO THE BENAMI TRANSACTIONS (PROHIBITION) ACT, 1988 (45 OF 1988)

Amendment

In section 3, for sub-section (2), the following sub-section shall be substituted, namely:-

"(2) Nothing in sub-section (1) shall apply to-

(a) The purchase of property by any person in the name of his wife or unmarried daughter and it shall be presumed, unless the contrary is proved, that the said property had been purchased for the benefit of the wife or the unmarried daughter;

(b) The securities held by a-

(i) Depository as a registered owner under sub-section (1) of section 10 of the Depositories Act, 1996;

(ii) Participant as an agent of a depository.

Explanation.- The expressions "depository" and "participant" shall have the meanings respectively assigned to them in clauses (e) and (g) of sub-section (1) of section 2 of the Depositories Act, 1996.".

PART VI

AMENDMENTS TO THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 (15 OF 1992)

Amendments

1. In section 2, in sub-section (2), for the words, brackets and figures "the Securities Contracts (Regulation) Act, 1956 (42 of 1956)", the words, brackets and figures "the Securities Contracts (Regulation) Act, 1956 (42 of 1956), or the Depositories Act, 1996", shall be substituted.

2. In section 11, in sub section (2), in clause (ba), for the words "depositories, custodians", the words "depositories, participants, custodians" shall be substituted.

3. In section 12, in sub-section (1A), for the words "depository, custodian", at both the places where they occur, the words "depository, participant, custodian" shall be substituted.

4. In section 16, in sub-section (1), for the words "this Act", the words and figures "this Act or the Depositories Act, 1996" shall be substituted.

Last updated on July, 2016

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