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National Securities And Depositories Limited – ByeLaws,1996

  1. The National Securities And Depositories Limited – ByeLaws, 1996
    1. 1. Short title and commencement
    2. 2. Definitions
    3. 3. Board of directors.
    4. 4. Executive Committee.
    5. 5. Business Rules.
    6. 6. Participants.
    7. 7. Safe Guards
    8. 8. Securities.
    9. 9. Accounts.
    10. 10. Reconciliation.
    11. 11. Disciplinary Action.
    12. 12. Appeals.
    13. 13. Conciliation.
    14. 14. Arbitration.
    15. Annexure
      1. 15. AGREEMENT BETWEEN THE DEPOSITORY PARTICIPANT AND THE NATIONAL SECURITIES DEPOSITORY LIMITED
      2. 16. AGREEMENT BETWEEN THE DEPOSITORY PARTICIPANT AND THE PERSON SEEKING TO OPEN AN ACCOUNT WITH THE DEPOSITORY PARTICIPANT.
      3. 17. AGREEMENT BETWEEN THE DEPOSITORY PARTICIPANT AND THE PERSON SEEKING TO OPEN AN ACCOUNT WITH THE DEPOSITORY PARTICIPANT.
      4. 18. TRIPARTITE AGREEMENT BETWEEN THE ISSUER, REGISTRAR & NATIONAL SECURITIES DEPOSITORY LIMITED.

 

The National Securities And Depositories Limited – ByeLaws, 1996

 

§ 1. Short title and commencement

 

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SHORT TITLE AND COMMENCEMENT

1.1. In exercise of the powers conferred under Sec. 26 of The Depositories Act 1996,National Securities Depository Limited hereby makes the following Bye Laws which have beenapproved by the Securities and Exchange Board of India pursuant to order No.IIMARP/2676/1996 dated October 15, 1996 of Securities and Exchange Board of India.

1.2. These Bye Laws may be called the Bye Laws of National Securities Depository Limited.

1.3.These Bye Laws shall come into effect from October 15, 1996.

 

§ 2. Definitions

 

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2. DEFINITIONS

2.1. Unless the context otherwise requires :-

2.1.1. Act : means The Depositories Act, 1996;

2.1.2. Board of Directors : means the Board of Directors of National Securities DepositoryLimited;

2.1.3. Business Rules : includes such manuals, notices, circulars containing thepractices, procedures and administrative requirements relating to the operations andfunctions of the Depository system as may be notified by the Board of Directors from timeto time;

2.1.4. Clearing Corporation : means any body corporate engaged in the activity of clearingand settlement of trades done on a recognised stock exchange;

2.1.5. *Client : in relation to a Participant means a Beneficial Owner who has opened anaccount with that Participant and has entered into the agreement in accordance with theprovisions of Chapter 6 of these Bye Laws; *(Amended w.e.f. March 6, 1997. Prior to thisamendment, Bye Law 2.1.5 read as follows :

2.1.5 Client : in relation to a Participant means a Beneficial Owner who has opened anaccount with that Participant and has entered into the agreement as perAnnexure B in accordance with the provisions of Chapter 6 of these Bye Laws;)

2.1.6. Depository : means National Securities Depository Limited;

2.1.7. Eligible Securities : means securities which are admitted on the Depository inaccordance with Chapter 8 of these Bye Laws;

2.1.8. User : means and includes all market intermediaries interacting with theDepository; and includes Participants, Issuers, Registrars and Transfer Agent and ClearingCorporation;

2.1.9. 2 “Other eligible entity” (Inserted w.e.f. October 16, 1998. The existingclause 2.1.9 has been renumbered as 2.1.10) shall mean any entity which is eligible tooperate an Subsidiary General Ledger (SGL) with the permission of the Reserve Bank ofIndia (RBI).

2.1.10. Words and expressions used but not defined in the Bye Laws but defined under TheDepositories Act 1996, The Companies Act 1956, The Securities Contracts (Regulation) Act,1956, The Securities and Exchange Board of India Act, 1992 and the Securities and ExchangeBoard of India (Depositories and Participants) Regulations, 1996 shall have the samemeaning respectively assigned to them under the aforesaid Acts and Regulations.

 

§ 3. Board of directors.

 

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3. BOARD OF DIRECTORS

3.1.1. The Board of Directors of National Securities Depository Limited, constituted in accordance with the provisions of the Articles of Association of the Company, may organise, maintain, control, manage, regulate and facilitate the operations of the Depository and of securities transactions by the Participants of the Depository, subject to the provisions of The Depositories Act 1996, The Securities and Exchange Board of India Act, 1992, The Securities and Exchange Board of India(Depositories and Participants) Regulations, 1996 and any directives issued there under.

3.1.2. The Board of Directors may delegate, from time to time, to an Executive Committee or Committees or to the Managing Director or to any person or persons, such of the powers vested in it and upon such terms and conditions as it may think fit, and cancel, withdraw,alter or vary all or any of such powers so delegated.

3.1.3. The Board of Directors shall have the authority to issue directives from time to time to the Executive Committee or such other Committees or Managing Director or any other person or persons to whom any powers have been delegated by the Board of Directors, and such directives shall be binding on the Executive Committee, Committees, Managing Director, such other person/ persons.

3.1.4. Subject to the prior approval of the Securities and Exchange Board of India, the Board of Directors may amend, add or repeal any of the provisions of the Bye Laws framed by it.

 

§ 4. Executive Committee.

 

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4. EXECUTIVE COMMITTEE

4.1. CONSTITUTION

4.1.1. An Executive Committee shall be appointed by the Board of Directors for the purpose of managing the day to day affairs of the Depository.

4.1.2. The Executive Committee shall consist of not more than fifteen members.

4.1.3. The Executive Committee appointed by the Board of Directors shall consist of :-

i. the Managing Director of the Depository;

ii. not more than five persons nominated in that behalf by the Board of Directors from the Users to be known as User Representatives;

iii. not more than five individual persons of eminence in the field of finance,accounting, law or any other discipline or amongst the investors as may be nominated by the Board of Directors;

iv. four persons nominated in that behalf by the Board of Directors as “Other Nominees”.

4.2. POWERS OF THE EXECUTIVE COMMITTEE

4.2.1. The Executive Committee may exercise such of the powers that may be delegated by the Board of Directors in accordance with the provisions of Bye Law 3.1.2

4.2.2. Subject to the provisions of The Depositories Act, 1996, The Securities and Exchange Board of India Act, 1992 and any directives thereunder, The Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996 and such other directives or regulations as may be specified by the Securities and Exchange Board of India from time to time, the Executive Committee may modify, amend, add or repeal any of the provisions of the Business Rules framed by it.

4.2.3. The Executive Committee may from time to time, constitute sub- committees consisting of two or more of its members which shall report to it on such matters as it may deem fit. The constitution, quorum, and responsibilities of such sub-committees will be determined by the Executive Committee.

4.3. USER REPRESENTATIVES

4.3.1. Subject to the provisions of Bye Laws 4.4.1 & 4.7.1, the Board of Directors shall nominate on the Executive Committee from time to time, not more than five persons from amongst the User Representatives. The persons from amongst the User Representatives so nominated by the Board of Directors shall hold office for a period of two years and shall be eligible for re-nomination subject to Bye Law 4.4.2.

4.3.2. Any vacancy caused by the resignation, removal, death, insolvency or otherwise of such a nominated person shall be filled in by the Board of Directors by a suitable nomination.

4.4. ELIGIBILITY OF USER REPRESENTATIVES TO BECOME EXECUTIVE COMMITTEE MEMBERS

4.4.1. No User Representative shall be eligible to be nominated as a member of the Executive Committee :-

i. unless the Participant satisfies the requirement, if any, specified in that behalf by The Securities Contracts (Regulation) Act, 1956 or the rules framed thereunder, The Securities and Exchange Board of India Act, 1992 and any directives thereunder, The Depositories Act, 1996, The Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996 and such other directives or Regulations as may be specified by the Securities and Exchange Board of India from time to time;

ii. unless he is a User Representative and has adequate experience as a market intermediary;

iii. if he is a partner of a User Representative, who is already a member of the Executive Committee;

iv. if he has at any point of time been declared as defaulter or failed to meet his liabilities in the ordinary course of business or compounded with his creditors;

v. if he has been expelled or suspended by the Disciplinary Action Committee of the Depository.

4.4.2. A User Representative nominated for two consecutive terms as a member on the Executive Committee shall not be eligible to be re- nominated to the Executive Committee unless a period of two years has elapsed since his last nomination.

4.5. NOMINATION OF PERSONS OF EMINENCE

4.5.1. Subject to the provisions of Bye Law 4.4.1, the Board of Directors shall nominate on the Executive Committee from time to time such individual persons of eminence in the field of finance, accounting, law or any other discipline, or amongst investors, as decided by the Board of Directors. The persons from amongst them so nominated by the Board of Directors shall hold office for a period of two years and shall be eligible for re-nomination.

4.5.2. Any vacancy caused from amongst the nominated User Representatives shall be filled in by the Board of Directors by a suitable nomination.

4.6. OTHER NOMINEES

4.6.1. The Board of Directors shall nominate on the Executive Committee from time to time not more than four persons to be known as “Other Nominees”, who shall hold office for a period of two years and shall be eligible for re-nomination. Such other nominees may include two senior officers of the Depository.

4.6.2. Any vacancy caused from amongst them shall be filled in by the Board of Directors by a suitable nomination.

4.7. VACATION OF OFFICE OF NOMINEES OF THE BOARD OF DIRECTORS

4.7.1. The office of any nominee of the Board of Directors, including that of the User Representatives, persons of eminence and other nominees on the Executive Committee, shall ipso facto be vacated, if :-

i) he, by notice in writing addressed to the Chairman of the Executive Committee, resigns his office;

ii) he is adjudicated insolvent;

iii) he applies to be adjudicated insolvent;

iv) he is convicted by any court in India, of any offence, and sentenced in respect thereof to imprisonment for not less than thirty days;

v) he absents himself from three consecutive meetings of the Executive Committee or from all meetings of the Executive Committee for a continuous period of three months, which ever is longer, without obtaining leave of absence from the Executive Committee;

vi) in the case of a Participant, if it ceases to be a Participant of the Depository, or if it is suspended, or expelled, or if its Participant ship is terminated by the Depository in accordance with these Bye Laws;

vii) in the case of a User, if the User”s registration has been suspended or cancelled by the Securities and Exchange Board of India;

viii) in the case of an employee of the Depository, if he ceases to be an employee of the Depository.

Provided further that, if at any time the Board of Directors, in its absolute discretion is satisfied that circumstances exist which render it necessary in the interest of the investor to do so, the Board of Directors may cancel the nomination of any person nominated to the Executive Committee.

4.8. OFFICE BEARERS OF EXECUTIVE COMMITTEE

4.8.1. The Executive Committee shall, from time to time, have the following office bearers namely, a Chairman and a Vice Chairman.

4.8.2. The Managing Director of the Depository shall be the Chairman of the Executive Committee.

4.8.3. The Executive Committee may elect one among themselves as the Vice Chairman.

4.8.4. The Vice Chairman so elected shall hold office for a period of one year and shall be eligible for re-election.

4.8.5. In the event of any casual vacancy arising in the office of the Chairman, the Vice Chairman shall act as the Chairman to fill the casual vacancy, and the Executive Committee shall nominate, from amongst the members, an acting Vice Chairman to fill in the casual vacancy so caused in the post of the Vice Chairman.

4.8.6. In the event of any casual vacancy arising in the office of the Vice Chairman, the Executive Committee may nominate any person to act as the acting Vice Chairman during the period of such casual vacancy. Such acting Vice Chairman shall hold office for the same period as the office bearer in whose place he holds office.

4.9. MEETINGS OF THE EXECUTIVE COMMITTEE

4.9.1. *The Chairman of the Executive Committee may, at any time, convene a meeting of the Executive Committee.

4.9.2. *(Amended w.e.f. September 12, 1997. Prior to this amendment, Bye Law 4.9.2 read asf ollows :

4.9.2 The Executive Committee may meet at least once in every calendar month for the dispatch of business, adjourn and otherwise regulate its meetings and proceedings, as it thinks fit.)

The Executive Committee shall meet at least once in every two months for the dispatch of business, adjourn and otherwise regulate its meetings and proceedings, as it

thinks fit.

4.9.3. The quorum for a meeting of the Executive Committee shall be five.

4.9.4. Provided that where at any time, the number of interested members exceeds two-thirds of the total strength, then the number of remaining members, i.e., the number of members not interested shall be the quorum for the meeting. An interested member means any member who is directly or indirectly concerned or interested in the issue or matter to be dealt with at the meeting of the Executive Committee and whose presence shall not count for the purpose of forming the quorum of such meeting.

4.9.5. Questions arising at any meeting of the Executive Committee shall be decided by a majority of the votes cast by members present and voting. In the case of equality of votes, the Chairman of the Executive Committee shall have a second or casting vote.

4.9.6. At all meetings of the Executive Committee, the Chairman shall ordinarily preside and in his absence, the Vice-Chairman shall preside. If the Vice-Chairman is also not present at the meeting, the members of the Executive Committee present shall choose one from among themselves to be the Chairman of such meeting.

4.10. POWERS OF THE CHAIRMAN

4.10.1. The Chairman shall be entitled to exercise any or all of the powers, exercisable by the Executive Committee whenever he is of the opinion that immediate action is necessary, subject to such action being ratified by the Executive Committee within the time stipulated by the Executive Committee.

 

§ 5. Business Rules.

 

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5. BUSINESS RULES

5.1. The Board of Directors or Executive Committee shall formulate Business Rules for the functioning and operations of the Depository and to regulate the functioning and operations of the Participants of the Depository with powers to amend and/or alter suchB usiness Rules.

Provided however that, no Business Rules shall come into operation unless, one working day prior thereto, a copy of the same has been submitted to the Securities and Exchange Board of India.

5.2. Without prejudice to the generality of Bye Law 5.1 above, the Board of Directors or Executive Committee may formulate Business Rules inter alia, with respect to :-

i. determination from time to time, as to the fees, system usage charges, deposits,margins and other monies payable to the Depository by the Participants and by the Issuers of eligible securities or its Registrar & Transfer Agent whose securities have been admitted to dealings on the Depository;

ii. norms and procedures for approval of Issuers and/or its Registrar & Transfer Agent to act as such;

iii. norms which shall be required to be followed by the Users while acting as such;

iv. supervision of the market and formulation of Code of ethics as it may deem fit;

v. maintenance of records and books of accounts by Participants;

vi. administration, maintenance and investment of the corpus of the Fund (s) set up by the Depository, including the Participant Fund and Investor Protection Fund;

vii. dissemination of information, announcements to be placed on the Depository system;

viii. manner in which the accounts of the Participant shall be reconciled with the records of the Depository on a daily basis;

ix. requirements for submission of periodic returns to the Depository on its activities in relation to the Depository;

x. manner and form in which the Participant shall maintain continuous electronic means of communication to the Depository;

xi. manner and format in which every Participant shall submit periodic returns to the Depository;

xii. any other matter as may be decided by the Board of Directors.

5.3. The Executive Committee may, from time to time, specify additional requirements in the Business Rules in the interest of the investors.

 

§ 6. Participants.

 

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6. PARTICIPANTS

6.1. ADMISSION OF PARTICIPANTS

6.1.1. Any person desiring to become a Participant shall file an application with the Securities and Exchange Board of India through the Depository, in the format specified by the Securities and Exchange Board of India together with the fees specified by the Securities and Exchange Board of India.

6.1.2. The application shall be submitted in the specified form and manner and shall be accompanied by the fees, security deposits and/or such other sums of money as specified by the Depository under the Business Rules.

6.1.3. Every application shall be dealt with by the Depository within thirty days of receipt of such application and if the Depository is satisfied, it shall forward the same to the Securities and Exchange Board of India with the Depository”s recommendations.

6.1.4. An application which is not complete in all respects and does not conform to the instructions specified shall be rejected. The Depository may, before rejecting any application, give to the applicant in writing, an opportunity to remove within such time as specified by the Executive Committee, the objection indicated by the Depository.

6.1.5. The Depository may require the applicant to furnish such further information or clarification as required within such time as it may specify. On failure to provide any information within the time provided or such further time as may be granted the application will be deemed to have been rejected.

6.1.6. The Managing Director of the Depository may approve or reject any application as he may deem fit in his absolute discretion. The applicant may appeal to the Executive Committee against the decision of the Managing Director and the decision of the Executive Committee in this regard shall be final.

6.1.7. The Executive Committee shall have the right to call upon the applicant to make additional contributions towards funds, and to pay such fees, deposits, such additional security deposit in cash or kind, to furnish any additional guarantee or to require the deposit of any monies in respect of contribution to funds including building fund, computerization fund, indemnity fund, insurance fund or such other funds as the Depository may specify from time to time.

6.2. ADMISSION CRITERIA

6.2.1. The applicant (s) shall be eligible to become Participant (s) in the Depository,provided they meet the minimum criteria laid down under the Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996, and the eligibility criteria specified below :-

i. the applicant shall be required to furnish information and details of its business history, which shall be for a minimum period of three years;

provided that the Depository may, if it is satisfied that it would be in the interest oft he investors and that the applicant is otherwise eligible to become a Participant,waive this requirement of three years.

ii. the applicant should not have been convicted in any of the five years immediately preceding the filing of the application in any matter involving misappropriation of funds and securities, theft, embezzlement of funds, fraudulent conversion or forgery;

iii. the applicant should not have been expelled, barred or suspended by the securities and exchange board of India, self regulatory organisation, or any recognised stock exchange;

Provided however that, if a period of three years or more has elapsed since such punishment was imposed, the Depository may, in its discretion consider such application.

iv. the applicant has a minimum net worth of rupees one crore

Explanation : for the purpose of determining whether the applicant has adequate net worth,the applicant shall submit a net worth certificate (including the computation thereof)based on the audited books of account (in the format which may be specified by the Depository in the business rules) duly certified by a chartered accountant and submitted to the Depository;

v. the applicant shall be required to furnish details of its board of directors/authorised officials, who shall be responsible for acting on behalf of the Participant;

vi. the Depository may conduct entrance examinations and / or interviews, to examine the knowledge of the Participant (and its staff) related to the operational, functional and technical aspects of the Depository. the Depository may also make it mandatory for the Participant to appoint a compliance officer, who shall interact with the Depository on behalf of the Participant for compliance with the bye laws and business rules, resolving, redressal of investors”/ clients” grievances;

vii. the applicant should have adequate office space exclusively for Depository operations. the applicant should also furnish details of his main office, address, fax,and phone number (s). the Depository shall have the sole discretion to decide whether in it sopinion, the applicant has adequate infrastructure facilities at the time of granting admission;

viii. the applicant has made adequate arrangements for conducting effective and safe Depository operations including security measures, software and hardware requirements, risk containment and insurance requirements, as specified by the Depository;

ix. for the purpose of satisfying itself regarding the eligibility of the applicant to become a Participant, the Depository may carry out an inspection of the office and facilities of the applicants;

x. the applicant shall be eligible to become a Participant with effect from the date on which it is registered with the Securities and Exchange Board of India under the Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996.

6.3. RIGHTS AND OBLIGATIONS OF PARTICIPANTS

6.3.1. No Participant shall conduct any business as a Participant unless it enters into an agreement with Depository as per Annexure A of these Bye Laws.

6.3.2. A Participant while conducting any business as a Participant with a Client shall act as an agent of the Depository (Principal), and shall be liable to the Clientf or all the acts and deeds performed by the Participant. Subject to the provisions of Sec.16 of the Act , the Depository shall not be liable to any person other than a

Participant or a Client who may have any claim or claims in relation to any matters concerning the Depository operations.

6.3.3. The Participant shall not give a debit or credit to the account of a Client without a due authorisation from Client.

6.3.4. Participant shall not commingle its own securities with the securities of its Client and shall maintain each Client”s account separately.

6.3.5. The Depository shall obtain, on a daily basis, the Client details from all Participants. The details shall be obtained in respect of the changes in the accounts of the Clients from the processing undertaken at the end of the previous working day. The Client details shall include the Client name, address and also the security wise details of the balance of the Client.

6.3.6. The Participants shall submit the following returns to the Depository :-

i. net worth certificate computed in a manner laid down in the Business Rules duly certified by a Chartered Accountant on the annual audited accounts of the Participant;

ii. in case the Participant is a clearing member of the clearing corporation of any exchange, the details regarding any suspension/termination or defaults or any disputes in relation to its dealings with such clearing corporation within two working days of such an  event;

iii. number of complaints received from Clients, their nature, status and manner of redressal once every month;

iv. number of transfers effected for off-market settlement of trades once every month.

6.3.7. It shall be the responsibility of each Participant to promptly check and reconcile with its own records the details of such advices, statements and reports and to promptly notify the Depository of any error or omission contained in such advices,statements and reports within the time specified by the Depository.

6.3.8. Any advice, statement or report provided by the Depository shall in the absence of manifest error, be conclusive as to its subject matter. Except as otherwise agreed by the Depository, the failure of a Participant to inform the Depository of any error or omission in any advice, statement or report within the time frame stipulated by the Depository shall constitute a waiver in favour of the Depository by such Participant of any right to require rectification.

6.3.9. The Depository may if it is satisfied that it is in the interest of the Clients entertain a late request by a Participant to rectify an error or omission as aforesaid.

6.3.10. Every Participant shall reconcile his records with those of the Depository on a daily basis.

6.3.11. The Executive Committee may at any time require a Participant to provide on demand, collateral or additional collateral in such form, extent and manner as is determined by the Executive Committee to be appropriate with reference  to, inter alia, the level of unreconciled balance in case of transfer of its account to other Depository or excess credit balance of securities due to any fraud, error or omission on the part of its officers, agents and employees. The collateral shall be in addition to and independent of any security which the Depository may at any time hold for the obligations and liabilities of such Participant.

6.3.12. Without prejudice to the above, the Depository may, for the purposes of deciding whether or not to require a Participant to provide collateral, specify exposure limits on  a Participant.

6.3.13. A Participant shall not create or permit the creation of any mortgage, charge or other encumbrance over all or any of the assets provided as collateral, security or such similar purpose to the Depository.

6.3.14. The Depository may apply all or any of the collateral (including all rights and entitlements thereto, if any) at any time without prior notice to a Participant in or towards satisfaction of the obligations and liabilities of such Participant to the Depository or such Participant “s obligations and liabilities to a Client.

6.3.15. In respect of any sums received by the Depository from a Participant as collateral, the obligation of the Depository to such Participant shall be to the extent of the amount remaining after satisfaction of all obligations and liabilities (actual or contingent) of such Participant to the Depository and such Participant”s obligations and liabilities to a Client.

6.3.16. Each Participant shall indemnify the Depository and its officers and employees and hold each of them harmless against all costs, fees, expenses, liabilities, taxes, actual losses and damages of any nature whatsoever suffered or incurred by any of them directly or indirectly as a result of or in connection with the following matters :-

i. the participation in the Depository system by the Participant and/or its activities in the Depository including the provision of services by the Participant to the client and the provision of services by the Depository to the Participant and all matters relating thereto as contemplated in the bye laws;

ii. the failure by the Participant to comply with the provision of the bye laws and the Participant agreement (including without limitation, the representations and warranties contained therein) or to comply with any directions or procedures of the Depository;

iii. the acts by the Depository or its officers and employees done by placing reliance upon instructions or communications believed in good faith by any of them to have been given by or on behalf of the Participant (including, but not limited to, the giving of effect to such instructions or communications by any of them) or the

failure of the Participant to give instructions to the Depository as contemplated in the bye laws;

iv. the acceptance by the Depository of eligible securities deposited by the Participant and giving effect to transactions relating thereto by the Depository in accordance with the bye laws and there under the withdrawal of eligible securities by the Participant;

v. the failure by the Participant to deliver eligible securities, or to perform such other duties or obligations contemplated in the bye laws.

Nothing contained above shall apply to the extent the Depository or its employees are guilty of negligence, willful misconduct or fraud on their part and are responsible for the losses.

6.3.17. For the purpose of determining whether a Participant is liable for any acts or omissions under these Bye Laws, the acts or omissions, whether done intentionally or not,by its officers, employees, agents and representatives, shall be deemed to be acts or omissions of the Participant.

6.3.18. Notwithstanding anything to the contrary in the Bye Laws, the Depository shall not be bound to effect any transaction or take any other action upon the instructions of a Participant if it would violate any applicable law, decree, court order, regulation or order of any government or other competent authority or if the Depository determines that it will not be in the interests of the Depository, Participants or the general investors.

6.3.19. Notwithstanding anything to the contrary in the Bye Laws, the Depository shall have the right to initiate a transaction or to take any other action in order to give effect to the order or judgment of a court of law or the Central or State Government or any other competent statutory authority.

6.3.20. The Depository reserves the right to rectify any erroneous transaction made to the accounts of Participants and shall thereafter inform the concerned Participants of such rectification.

6.3.21. Without prejudice to any other right the Depository may have, if as a result of rectification by the Depository of any erroneous credit entries to the accounts of a Participant pursuant to these Bye Laws, a negative balance arises, the Depository may :

i. require the Participant to replace the relevant eligible securities in this connection;

ii. require the Participant to pay to it forthwith a cash sum of such amount as the Depository considers appropriate as collateral and the only obligation of the Depository in respect of such sum so paid by the Participant shall be to pay such Participant an amount equal to the balance remaining after satisfaction of all obligations &liabilities (actual or contingent) of such Participant to the Depository. The Depository may itself at any time purchase as replacement, eligible securities on behalf of the Participant, at such price as may be determined by the Executive Committee to be the best prevailing market price and terms, if any, or in other cases at its discretion on the terms available. The cost and other expenses in connection with purchase shall be borne by the Participant.

6.3.22. Each Participant shall be responsible to indemnify the Depository against all costs, fees, expenses, liabilities, actual losses and damages of any nature what so ever incurred by the Depository as a result of or in connection with the purchase of replacement eligible securities by the Depository on behalf of the Participant.

6.3.23. No Participant shall assign its business as a Participant to any other person except with the prior approval of the Executive Committee which may notify from time to time the terms and conditions subject to which it may assign its business as a Participant to any other person.

6.4. RIGHTS AND OBLIGATIONS OF PARTICIPANTS AND CLIENTS

6.4.1. No Participant shall conduct business as a Participant with its Clients unless it has entered into an agreement with its Clients.

6.4.2. *Every Participant shall enter into an agreement referred to above with each of its clients as per Annexure B of these Bye Laws.)

Every Participant shall enter into an agreement referred to above with each of its Clients as per Annexure B of these Bye Laws

Provided that in case of :

*(Amended w.e.f. March 6, 1997. Prior to this amendment, Bye Law 6.4.2 read as follows :

i. foreign institutional investors registered with the Securities and Exchange Board of India and who have entered into an agreement with the Participant either directly or through their power of attorney holders in accordance with the provisions of sub-regulation (1) of regulation 16 of the SEBI (Foreign Institutional Investors)Regulations, 1995; and

ii. such agreement gives the Participant an authority to act on behalf of the foreign institutional investors for availing the services of the Depository ; and

iii. such agreement has been filed with the Securities and Exchange Board of India ; thens uch Participant need not enter into an agreement as per Annexure B of these Bye Laws.

6.4.3. The Participant shall thereafter open separate accounts of each of its Clients for holding security balances on behalf of its Clients.

6.4.4. Every Participant shall provide a transaction statement including statement of accounts, if any, to the Clients in such form as specified under the Business Rules.Such a statement shall be furnished to the Clients at fortnightly intervals unless the Participant and its Clients have agreed otherwise. However, if there is no transaction in the account, then the Participant shall provide such statement to the Client at least once a quarter.

Provided that in case of a Participant who has not entered into an agreement as per Annexure B of this Bye Laws with its Client in terms of the proviso to Bye Law 6.4.2, then the Participant shall provide the transaction statement including statement of accounts,if any, to the Client as agreed between the Participant and the Client

6.4.5. The Participant shall act on the instructions of the Client provided in the manner laid down under the Business Rules.

6.4.6. The Participant shall maintain a separate account for each Client and ensure that the securities of the Client are not mixed with its own securities.

6.4.7. In the event of multiple instructions received from the Client relating to transfer of securities which exceed the balance of the Client kept with the Participant, the sequence of execution of instructions by the Participant will be as follows :-

i. in the event of the Client specifying the sequence of execution of instructions, in the same manner as specified by the Client to the extent it can be executed with the balance available with the Participant;

ii. in the absence of specific instructions from the Client in the chronological order in which such instructions are received from the Client to the extent it can be executed with the balance available with the Participant.

6.5. TERMINATION

6.5.1. TERMINATION BY NOTICE BY THE DEPOSITORY

The Executive Committee may at any time and on such conditions as it thinks fit, by giving not less than thirty working days notice in writing, terminate the participation of a Participant under the following circumstances :-

i) the Participant no longer meets the eligibility criteria to be a Participant;

ii) in the event of the death, incapacity of a Participant being an individual or the dissolution of a Participant being a partnership;

iii) in the event of a Participant being a body corporate when it is wound up or an official liquidator or provisional liquidator is appointed under the Companies Act, 1956;

iv) in the event of a Participant ceasing to do business which relates to the Depository operations;

v) the Depository has reasonable grounds to believe that the Participant is approaching financial difficulty or will be unable to meet its obligations to the Depository;

vi) in the event of any distress, execution or other process being levied or enforced or served upon or against any property of a Participant;

vii) in the event of bankruptcy, liquidation or winding up of a Participant or the initiation of any proceedings in relation thereto (including but not limited to the bankruptcy or an analogous act by a Participant) or if the Executive Committee considers in its absolute discretion that the occurrence of such events are imminent or likely;

viii) in the event of the appointment of a receiver or administrator over the assets of a Participant or if a Participant suffers a composition with its creditors or if a scheme of arrangement is approved by the court (other than for the purposes of reconstruction or amalgamation) or if the Executive Committee considers in its absolute discretion that the occurrence of such events are imminent or likely;

ix) in the event of failure to pay fees or any other charges as required under the Bye Laws or the Participant agreement;

x) in the event of failure of a Participant to fulfill the obligations arising out of the indemnification of the Depository by the Participant;

xi) the Depository has reasonable grounds to believe that the Participant has been responsible for negligence, fraudulent or dishonest conduct or has made a material misstatement or omitted to state a material fact in any statement to the Depository;

xii) the Participant has violated any Business Rule, procedure or breach of agreement with the Depository;

xiii) the Participant”s registration granted by Securities and Exchange Board of India or by any other governmental agency has been suspended or cancelled;

xiv) if the Participant is a member of a stock exchange, the Participant has been expelled, or its trading privileges have been suspended by the Stock Exchange;

xv) the Depository has reasonable grounds to believe that termination of relationship with the Participant is necessary for the protection of investors or other Participants or to facilitate the orderly performance of the Depository services.

6.5.2. SUSPENSION WITHOUT NOTICE

Without prejudice to any other rights, the Depository may have and notwithstandinganything to the contrary in the Bye laws, the Depository may suspend with immediateeffect, the participation in the Depository of a Participant on the grounds enumerated inBye Laws

6.5.1 (ix) to 6.5.1 (xv) above pending the proceedings under Bye Law 6.5.1.

6.5.3. TERMINATION OF PARTICIPANT SHIP BY A PARTICIPANT

The Depository may cease to provide any service or act for a Participant, on receiving a notice of not less than thirty days from the Participant, that the Participant no longer wishes to act as such. The Depository shall notify the Participant, other Participants,Clients of Participants and Securities and Exchange Board of India within seven days of the Participant ceasing to act as such.

6.5.4. CONSEQUENCES OF TERMINATION

i) On termination of participation, the Executive Committee shall, unless as otherwise provided in the Bye Laws, cause to be returned to or make available for collection by the Participant, all collateral held by the Depository from the Participant.

Provided that the Depository shall have the right (without affecting any other rights it may have) to set off amounts due or which may become due to the Depository, other Participants and Clients from the Participant, if applicable.

ii) The termination of participation in the Depository of a Participant will not affect any rights and liabilities of the Participant arising out of matters which have taken place prior thereto and for the purpose of settlement of any such rights or liabilities of the Participant, the Depository may continue to treat the Participant as a Participant.

iii) Without prejudice to the provisions of (i) and (ii) above, the Depository shall beentitled to set off any earlier claims or rights of the Participant against any amount dueto the Depository or any other person entitled for any claim through the Depositoryirrespective of the fact that such counter claim has arisen after the date of termination of the Participant.

iv) In the event of the termination of participation by the Participant or the receipt of notification to terminate, the Executive Committee shall, as soon as practicable, notify the other Participants and initiate suitable steps for protection of the interests of Client account holders with such Participant.

v) The Depository shall notify the Participant and other Participants and the Securitie sand Exchange Board of India within seven days of the termination of the Participant under Bye Laws 6.5.1, 6.5.2 and 6.5.3 above. The Participant shall inform all its Clients of such termination within a period of seven days from the date on which it receives notice of such termination.

vi) The Participant shall be required to meet all its outstanding obligations to the Depository while the Participant was acting as such and the Client shall have the option of either getting the securities held with the Participant transferred to another Participant, or get the securities rematerialized

6.6. *CLEARING CORPORATION OR A CLEARING HOUSE OF A STOCK EXCHANGE *(Amended w.e.f.November 5, 1998. Prior to this amendment, Bye Law 6.4.4 read as follows :

6.4.4 Every Participant shall submit periodical statement of accounts to the Clients in such form as specified under the Business Rules. Such a statement shall be furnished tot he Clients at least once in fifteen days unless the Participant and its Clients have agreed otherwise.

Amended w.e.f. September 12, 1997. Prior to this amendment, Bye Law 6.6 read as follows :

6.6 CLEARING CORPORATION

6.6.1 ADMISSION CRITERIA

A clearing corporation shall be admitted as a user on the Depository only if :-

i) the clearing corporation has adequate hardware and software systems to interact with the Depository as specified in the Business rules;

ii) the Depository is satisfied that the clearing corporation operates in such a manner that it ensures payment against delivery or guarantees settlement;

iii) the clearing corporation undertakes to co-operate at all times to redress the grievances of Clients and the Participant in respect of its operations in relation to the Depository;

iv) in the opinion of the Depository, the clearing corporation has the operational capability to provide the services relating to clearing and settlement of transactions relating to the securities admitted to the Depository to be held in dematerialized form.)

6.6.1. ADMISSION CRITERIA

A clearing corporation or a clearing house of stock exchange shall be admitted as a User on the Depository only if :-

i) the clearing corporation or a clearing house of a stock exchange has adequate hardware and software systems to interact with the Depository as specified in the Business Rules;

ii) the Depository is satisfied that the clearing corporation or a clearing house of as tock exchange operates in such a manner that it ensures payment against delivery or guarantees settlement;

iii) the clearing corporation or a clearing house of a stock exchange undertakes to  co-operate at all times to redress the grievances of Clients and the Participant in respect of its operation in relation to the Depository;

iv) in the opinion of the Depository, the clearing corporation or a clearing house of as tock exchange has the operational capability to provide the services relating to clearing and settlement of transactions relating to the securities admitted to the Depository to the held in dematerialized form.

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