DA & IC act

8/3/2019 DA & IC act

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The Depositories Act, 1996:

The Depositories Act, 1996 was enacted to provide for

regulation of depositories in securities and for mattersconnected therewith or incidental thereto. It came intoforce from 20th September, 1995.

The terms used in the Act are defined as under:

(1) ´Beneficial ownerµ means a person whose name isrecorded as such with a depository.

(2) ´Depositoryµ means a company, formed and registeredunder the Companies Act, 1956 and which has beengranted a certificate of registration under sub-section (1A)of section 12 SEBI Act, 1992.

(3) ´Issuerµ means any person making an issue of securities.

(4) ´Participantµ means a person registered as such undersub-section (1A) of section 12 of SEBI Act, 1992.

(5) ´Registered ownerµ means a depository whose name isentered as such in the register of the issuer.

Agreement between depository and participant: Adepository shall enter into an agreement in the specifiedformat with one or more participants as its agent. Servicesof depository: Any person, through a participant, may enter into an agreement, in such form as may be specified

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by the bye-laws, with any depository for availing itsservices.

Surrender of certificate of security:

Any person who has entered into an agreement with adepository shall surrender the certificate of security, forwhich he seeks to avail the services of a depository, to theissuer in such manner as may be specified by theregulations. The issuer, on receipt of certificate of security,shall cancel the certificate of security and substitute in itsrecords the name of the depository as a registered ownerin respect of that security and inform the depository accordingly. A depository shall, on receipt of informationenter the name of the person in its records, as thebeneficial owner.

Registration of transfer of securities with depository:

Every depository shall, on receipt of intimation from aparticipant, register the transfer of security in the name of the transferee. If a beneficial owner or a transferee of any security seeks to have custody of such security, thedepository shall inform the issuer accordingly.

Options to receive security certificate or hold securitieswith depository:

Every person subscribing to securities offered by an issuershall have the option either to receive the security certificates or hold securities with a depository. Where a

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person opts to hold a security with a depository, the issuershall intimate such depository the details of allotment of the security, and on receipt of such information the

depository shall enter in its records the name of theallottee as the beneficial owner of that security. Securitiesin depositories to be in fungible form: All securities held by a depository shall be dematerialised and shall be in afungible form.

Rights of depositories and beneficial owner:

A depository shall be deemed to be the registered ownerfor the purposes of effecting transfer of ownership of security on behalf of a beneficial owner. The depository asa registered owner shall not have any voting rights or any other rights in respect of securities held by it. Thebeneficial owner shall be entitled to all the rights and

benefits and be subjected to all the liabilities in respect of his securities held by a depository.

Pledge or hypothecation of securities held in a depository:

A beneficial owner may with the previous approval of thedepository create a pledge or hypothecation in respect of a security owned by him through a depository. Every beneficial owner shall give intimation of such pledge orhypothecation to the depository and such depository shallthereupon make entries in its records accordingly. Any

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entry in the records of a depository shall be evidence of apledge or hypothecation.

Furnishing of information and records by depository andissuer:

Every depository shall furnish to the issuer informationabout the transfer of securities in the name of beneficialowners at such intervals and in such manner as may bespecified by the bye-laws. Every issuer shall make availableto the depository copies of the relevant records in respectof securities held by such depository. Option to opt out inrespect of any security: If a beneficial owner seeks to optout of a depository in respect of any security he shallinform the depository accordingly. The depository 229shall on receipt of intimation make appropriate entries inits records and shall inform the issuer. Every issuer shall,

within thirty days of the receipt of intimation from thedepository and on fulfillment of such conditions and onpayment of such fees as may be specified by theregulations, issue the certificate of securities to thebeneficial owner or the transferee, as the case may be.

Depository to indemnify loss in certain cases:

Any loss caused to the beneficial owner due to thenegligence of the depository or the participant, thedepository shall indemnify such beneficial owner. Wherethe loss due to the negligence of the participant is

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indemnified by the depository, the depository shall havethe right to recover the same from such participant.

Securities not liable to stamp duty As per Section 8-A of Indian Stamp Act, 1899:

(a) an issuer, by the issue of securities to one or moredepositories shall, in respect of such issue, be chargeablewith duty on the total amount of security issued by it andsuch securities need not be stamped;

(b) where an issuer issues certificate of security under sub-section (3) of Section 14 of the Depositories Act, 1996, onsuch certificate duty shall be payable as is payable on theissue of duplicate certificate under the Indian Stamp Act,1899;

(c) transfer of registered ownership of securities from a

person to a depository or from a depository to a beneficialowner shall not be liable to any stamp duty;

(d) the transfer of beneficial ownership of shares, suchsecurities dealt with by depository shall not be liable toduty under Article 62 of Schedule I of the Indian Stamp

Act, 1899;

(e) transfer of beneficial ownership of units, such unitsbeing units of mutual fund including units of the Unit Trustof India, dealt with by a depository shall not be liable toduty under Article 62 of Schedule I of the Indian Stamp

Act, 1899;

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Indian Contract Act, 1872 :

Contract According to section 2(h) of the Indian Contract Act, 1872,

a contract is an agreement enforcebly law.Therefore, there has to be an agreement to create a contractand secondly, it has to satisfy certain requirementsmentioned in section 10 of the Act, i.e., the agreement hasto between parties competent to contract, with their freeconsent, for a lawful object and with lawful consideration,and it should not have been expressly declared as voidagreement.

Standard Form Contracts With an enormous increase in commercial transactions,the concept of Standard Form Contracts has come into

existence. Various business organizations like insurancecompanies,231airways, securities market regulator, otherbusinessman etc. generally get the terms of the contractprinted on a standard form and the other side is simply required to agree to the same, or sometimes to sign intoken of his having agreed to the terms of the contract sodrafted. A standard form contract is a pre-establishedrecord of legal terms regularly used by a business entity or firm in transactions with customers. The record specifiesthe legal terms governing the relationship between the firmand another party. The firm requires the other party to acceptthe record without amendment and without expecting

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the other party to know or understand its terms. AStandard Form Contract is effective upon acceptance.

Agency contract An agent is a person employed to do any act for anotheror to represent another in dealings with third persons, asper section 182 of the Indian Contract Act, 1872. Theperson for whom such act is done, or who is sorepresented, is called the Principal. Principal is bound by the acts done by an agent or the contracts entered into by

him on behalf of the principal in the same manner, as if theacts had been done or the contracts had been entered into by the principal himself, in person. An agent has a dual capacity:one, he serves as a connecting link between his principaland the third person, and second, he can have acontractual relationship with his principal. An agent,having an authority to do an act, has authority to do every lawful thing which is necessary in order to do such act. Anagent having authority to carry on a business, hasauthority to do every lawful thing necessary for thepurpose, or usually done in the course, of conducting suchbusiness.

Sub-agent A sub-agent is a person employed by, and acting under the

control of, the original agent in the business of the agency.Though the general rule is against delegation of authority by an agent or the appointment of a sub-agent, therecould be such an appointment in exceptional situationsrecognised by law. Thus, when any act does not needpersonal performance by the agent himself, or the

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principal agrees to the appointment of a sub-agent, orthe ordinary custom of trade permits the same, or thenature of the business of agency so warrants, nature of

the agency so warrants, a sub-agent may be validly appointed by an agent. When a sub-agent hasbeen properly appointed the position of various parties isasunder:(a) The principal is, so far as regards third persons, represented by the sub-agent, and isbound by andresponsible for his acts, as if he were an agent originally appointed bytheprincipal.(b) The agent is responsible to the principal for the acts of the sub-agent.(c) The sub-agent is responsible for his acts to the agent, but not to the principal exceptin case of fraud or willful wrong.

8/3/2019 DA & IC act


8/3/2019 DA & IC act


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