Securities Contracts (Regulation) Act, 1956
[42 of 1956]
An Act to prevent undesirable transactions in
securities by regulating the business of dealing therein, [***]
by providing for certain other matters connected therewith.
BE it enacted by Parliament
in the Seventh Year of the
1. Short
title, extent and commencement.
(1) This Act may be called the Securities
Contracts (Regulation) Act, 1956.
(2) It extends to the whole of
(3) It shall come into force on such date as
the Central Government may, by notification in the Official Gazette, appoint.
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;
[(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;]
[[(ac)] “derivative” includes—
(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 prices, or index of prices, 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 (18 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;
[(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;]
[[(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 (15 of 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;
[(ia) derivative;
(ib) units or any other instrument issued by any collective
investment scheme to the investors in such schemes;]
[(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;]
[(id) units or any
other such instrument issued to the investors under any mutual fund scheme;]
(ii) Government securities;
(iia) such other instruments as may be declared by the Central
Government to be securities; and
(iii) rights or
interest in securities;
[(i) “spot
delivery contract” means a contract which provides for,—
(a) actual delivery of securities and the
payment of a price therefore 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 therefore 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;]
(a) any body of
individuals, whether incorporated or not, constituted before corporatisation and demutualisation
under sections 4A and 4B, 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.]
2A. Interpretation
of certain words and expressions.
Words and expressions used herein and not defined in this Act but
defined in the Companies Act, 1956 (1 of 1956) or the Securities and Exchange
Board of India Act, 1992 (15 of 1992) or the Depositories Act, 1996 (22 of 1996)
shall have the same meanings respectively assigned to them in those Acts.]
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 its 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 membership, and the
exclusion, suspension, expulsion and re-admission of members therefrom 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.
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 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 it,
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 to the 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 exchange 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 whenever 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 as 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.
4A. 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 4B:
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.
4B. Procedure
for corporatisation and demutualisation.
(1) All recognised
stock exchanges referred to in section 4A shall, within such time asmay 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
(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 the 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 not 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 stock brokers of the recognised stock exchange;
(b) the right
of shareholders or a stock broker 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 stock brokers 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)] 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.
[(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 4B
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 4B, 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
sub-section (5) of section 4B.]
6. Power of Central Government to call for periodical returns or
direct inquiries to be made.
(1) Every recognised
stock exchange shall furnish to the Securities and Exchange Board of India 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 Securities and Exchange Board of India.
(3) Without prejudice to the provisions contained in sub-sections (1) and (2), the 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, by 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 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 of
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 dealings 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.
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.
7A. 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;
(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 that 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).
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 therefore, 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
[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, either in the form proposed in the order or with such
modifications thereof as may be agreed to between the stock exchange and the
Central Government.
(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 (1 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) 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 there under;
(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, 11 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.]
9. Power of recognized stock exchanges to make
bye-laws.
(1) Any recognized stock exchange may,
subject to the previous approval of the Securities and Exchange Board of India,
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 Securities and
Exchange Board of India by the clearing house as soon as may be after each
periodical settlement of all or any of the following particulars as the
Securities and Exchange Board of India 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 Securities and Exchange Board of
India under clause (c) subject to the directions, if any, issued by the
Securities and Exchange Board of India 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, recession 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 charges;
(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 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 Securities and Exchange Board of India, 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 Securities and Exchange Board of
India 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 therefore, dispense with the condition of
previous publication.
10. Power of Securities and Exchange Board of
(1) The
Securities and Exchange Board of India 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 bye-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 Securities and Exchange Board of India on its own motion, it may, within
[two] months of the publication thereof in the Gazette of India under
sub-section (2), apply to the Securities and Exchange Board of India for
revision thereof, and the Securities and Exchange Board of India 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, anywhere 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 Securities and Exchange Board of
India 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 therefore, dispense with the
condition of previous publication.
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, in 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 recognised
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.
If in the opinion of the Central Government an emergency has arisen 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
stock exchange has been given an opportunity of being heard in the matter.
12A. 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.]
Contracts and options in securities
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 [State or States or area]
that it is necessary so to do, it may, by notification in the Official
Gazette, declared this section to apply to such [State or States or area], and thereupon every contract in such [State or States or area] which is
members of a recognised stock exchange [or recognised stock exchanges] in such [State or States or area] or
through or with such member shall be illegal:
[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.]
13A. 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 such trading floor under the regulatory framework of that
stock exchange.]
14. Contracts in notified areas to be void in
certain circumstances.
(1) Any
contract entered into in 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 recognised 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.
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 person or 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 out that he is acting as a principal.
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 notification
issued thereunder shall be illegal.
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 or on behalf of any other person, the business of dealing in 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 Securities and Exchange Board of
India 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 dealings in securities shall not apply to the doing of
anything by or on behalf of a member of any recognised
stock exchange.
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 Government1 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 dealing in
spot delivery contracts also in any State or area (whether section 13 has been
declared to apply to that 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.
18A. 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.]
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 the 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.
20. Prohibition of options in
securities.
[Omitted by the Securities Laws (Amendment) Act, 1995, w.e.f. 25-1-1995.]
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.]
(1) A
recognised stock exchange may delist
the securities, after recording the reasons therefore, 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 the 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 22B to 22E 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.]
22. Right of appeal against refusal of stock exchanges to list
securities of public companies.
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 [or collective investment
scheme], the company [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:
[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 (Second
Amendment) Act, 1999.]
22A. 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 (1A) 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.
22B. 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).
22C. 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 that Act;
(d) “legal practitioner”
means an advocate, vakil or an attorney of any High
Court, and includes a pleader in practice.
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.
22E. 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.
22F. [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) 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 section 17, or
section 19; or
[(d) enters into any
contract in derivative in contravention of section 18A or the rules made under
section 30;]
(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 persons 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;
[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 [or who fails to
comply with the provisions of section 21 [or section 21A] or with
the orders of] or section 22 [or with the orders of the Securities Appellate
Tribunal] [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.]
23A. Penalty for failure to furnish information, return,
etc.
Any
person, who is required under this Act or any rules made there under,—
(a) to furnish any information, document,
books, returns or report to a recognised stock
exchange, fails to furnish the same within the time specified therefore 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.
23B. 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 there under, 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.
23C. Penalty for failure to redress investors’ grievances.
If any stock broker 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.
23D. 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 1992) as a stock broker 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.
23E. Penalty for failure to comply with provision of
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.
23F. 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.
23G. 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.
23H. 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) For
the purpose of adjudging under sections 23A, 23B, 23C, 23D, 23E, 23F, 23G and
23H, 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.
23J. 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.
23K. Crediting sums realised by way of penalties to Consolidated Fund of
All
sums realised by way of penalties under this Act
shall be credited to the Consolidated Fund of India.
23L. 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 4B, may prefer an appeal before the
Securities Appellate Tribunal and the provisions of sections 22B, 22C, 22D and
22E 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) 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, 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.
23N. 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 there under, 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 there under 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.]
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 it 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
[(b) “director”, in relation to—
(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.
25. Certain offences to be cognizable.
Notwithstanding anything contained in the Code of Criminal Procedure,
1898 (5 of 1898), any offence punishable under [***] section 23
shall be deemed to be a cognizable offence within the meaning of that Code.
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.]
(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.
27A. 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 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 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
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.]
27B. 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
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.]
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 Government1 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.
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 there under.
29A. Power to delegate.
The Central Government may, by order published in the Official Gazette,
direct that the powers (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 (2 of
1934).]
(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;]
[(ha) the grounds on which the securities of a
company may be delisted from any recognised
stock exchange under sub-section (1) of section 21A;
(hb) the form in
which an appeal may be filed before the Securities Appellate Tribunal under
sub-section (2) of section 21A 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 22A 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 23L and the fees payable
in respect of such appeal;]
(i) any other
matter which is to be or may be prescribed.
[(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.]
31. Power of Securities and Exchange Board of
(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 there under 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 4B 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.]