CA Final Paper 4 Corporate & Allied Laws Chapter 17 V. Babu Sankara Subramaniam., FCS

1

To prevent undesirable transactions in securities

To regulate the business of dealings therein

To provide certain other matters connected therewith

2

To the whole of India

Applies with effect from 20.02.1957

3

Section 2(a) Contract • means a Contract for or • Relating to • Purchase or Sale of Securities

Section 2(aa) Corporatization means • Succession of Recognized Stock Exchange

• RSE being a Body of Individual or • RSE being a Society under SRA 1860

• By another Stock exchange • being a company incorporated under Indian Companies Act

• For the purpose of assisting ,regulating and controlling • The business of buying ,selling dealing in securities • Carried on by such BOI or Society

4

Section 2(ab) DEMUTUALISATION means • Segregation of ownership and Management • From trading rights of members • Of a RSE in accordance with a scheme approved by SEBI

Section 2(ac) DERIVATIVE includes

5

• a security derive its value from • a debt instrument or share or a loan instrument • whether secured or unsecured • a risk instrument or • a contract for difference or • any other form of security or

• a Contract derives its value from • form prices or • index of prices of underlying securities

Section 2(b) Government Security means • Security created and issued by • a State or central Government • either before or after commencement of Act • for raising a public loan • having one of the forms of • Section 2(2) Public Debt Act 1944

Section 2 (c) member means member of a RSE

Section 2 (d) Option in Securities • a Contract for purchase or sale of • a right to buy or sell • a right to buy and sell • securities in future includes • Teji ,mandi ,teji mandi • A Gali • Put or a call • A put and call in securities

6

Section 2 (e) – Precsribed means prescribed by the rules made under this Act

Section 2(f) - Recognized Stock Exchange

• Means a Stock exchange which is • For the time being recognized by the C Gov. • Under section 4

Section 2(g) Rules means

• Relating in general the constitution ad Management of the Exchange • Includes

• If the Stock exchange is incorporated association • Its MOA and AOA

7

Section 2(ga) Scheme

8

• of Corporatisation or Demutualisation of a RSE • To provide for

• Issue of shares • For a lawful consideration • Provide for trading rights • In lieu of membership cards of members of a RSE

• Restriction of voting rights • Transfer of property

• Business assets • Rights and liabilities • Recognitions • Contracts of RSE whether in the name its name or trustee or

• Otherwise Transfer of employees • Any other matter • Required for the purpose of • In connection with Corp/Dmutln of RSE

Section 2(h) Securities include

9

• Shares, scrips, stocks • Bonds, debenture, debenture stock • Other marketable securities of a like nature in • or of any incorporated company or • other body corporate

• Derivatives • Units or other instrument issued

• By any Collective investment Scheme • To the investors in such schemes

• Security receipts under Section 2(zg) of SARFAESI 2002 • Units or other instrument issued

• By any Mutual fund Scheme To the investors in such schemes • any certificate or instrument

• issued to an investor By an issuer being a Special purpose entity • Which posses any debt or receivable including mortgage debt • Assigned to such entity Acknowledging beneficial interest of such investor • In such debt or receivable including mortgage debt

• As the case may be Government Securities • Such other instruments as may be • Declared by the CGovt to be securities • rights or interest in securities

Section 2 (i) Spot delivery Contract • I

• Actual delivery of securities and • Payment of price thereof • On the same day as the day of the contract or • Next day

• II • Transfer of Securities by Depository • From one beneficial owner to another BO • When the securities are dealt in Depository

If the parties do not reside in the same place

Actual time taken for

• dispatch of securities • remittance of money through post • Being excluded from computation of the period

10

Section 2(j) Stock Exchange means • I

• Any BOI incorporated or not • Constituted before Corporatisation and demutualization • Under Section 4 A and 4 B

• II • A Body corporate under Companies Act 1956 • Formed under a Scheme of Corptn and Demtn or otherwise

For the Purpose of • Assisting, regulating and controlling • Business of buying, selling or dealing in securities

11

Section 2A Interpretation of certain words and expressions

• Words and expressions used but not defined under this Act

• But defined under • The Companies act 1956 • SEBI Act 1992 • Depositories Act 1996 • Shall have the same meaning assigned to them in

those Acts

12

Desirous Stock exchange make an application to CGOVT

13

• Submit prescribed particulars and enclose • copy of bye law – Contract, control and regulation • Rules – General constitution of SE • Particulars to have

• Governing Body – Constitution, Management and Powers • GB manner of business transacted • Powers and duties of Office bearers • Members – Admission, Qualification • Members – Exclusion, Suspension expulsion and readmission • Partnership – Procedure for admission • Partnership – Authorized Representative and Authorized Clerk

nomination and appointment

Central Government satisfy and require the Stock exchange

14

• Ensure Bye law and rules conform conditions • Fair dealings • Protect investors

• Willing to comply imposed conditions • Consult GB • Consider area served • Nature of securities • Number of members

• Grant recognition in • Public interest • Trade interest • May impose condition • May prescribe forms

Publication of Grant of recognition • Gazette of India • Official State of State – Principal Office of RSE • Effective from the date of publication

Refusal to Grant • Give prior opportunity to be heard to SE • Communicate reasons for refusal to SE • In writing

Amendment of Conditions - Section 3(2) • No amendment to rules • Except with prior approval of CGovt

15

Those RSE not done to apply for C + D • Follow section 4B and C+D • Within the appointed date • SEBI if satisfied that the SE • Was prevented • Sufficient cause shown • Specify another appointed date • Till such date SE can continue as such

Appointed date • SEBI to Notify • Different date for different Sexch • Notify in the Official Gazette

16

RSE • RSE to submit a scheme to SEBI • Not applies to those who already done

SEBI • enquire / if Satisfied –approve • With or without modification • In public or trade interest

No Scheme to be approved if • Issue of shares • Provision of trading rights • In lieu of membership card • Propose to pay dividend • Out of reserves / assets of RSE

17

Publication of Scheme of Approval

18

• immediately • SEBI in Official Gazette • RSE in 2 daily English /Vernacular of SEBI choice • Upon publication the Scheme is effective • Notwithstanding any thing contained contrary

• In this Act • Any other law • Agreement • Award / Judgment /decree • Instrument • Binding on all

• All persons • Authorities • Members • Creditors • Depositors • Employees • Contractual obligations • Rights /powers /liability /obligations • with/against/ over/ in connection with • RSE / its members

SEBI -Reject to approve the Scheme • If satisfied in Trade /Public interest • Order in writing • Publish in Official Gazette • Give reasonable opportunity of being heard • To RSE and all persons concerned • Before passing the order of Rejection

SEBI –Restrict voting right • By order in writing • VR of Stock broker cum Shareholder of RSE • Right to appoint reps in GB by Shareholders of RSE • Maximum reps of S Broker in GB

• Not to exceed ¼ of total strength

19

SEBI – Publication of order of restriction • In the official gazette • Order to have effect • Notwithstanding anything contained in • Companies Act /any other law for the time being in force

On approval of the Scheme RSE shall • issue fresh equity capital to public • Any manner specified by SEBI • Ensure at least 51% of equity held with in 12 months from DOP • Held by public other than shareholders holding trading rights • On sufficient reasons + public interest SEBI to extend by another

12 months

20

CGOVT is of opinion • In the public /Trade interest granted recognition to be withdrawn • Shall serve a notice on the GB • State the reasons for withdrawal • Give an opportunity of being heard • Upon withdrawal Notify in the Official Gazette

Other reasons for withdrawal • RSE not Croptised or Demutualised • Fails to submit a Scheme within time • Recognition given is withdrawn • Publish such withdrawal • Withdrawal shall affect the contract outstanding • Before the date of withdrawal

21

Effect of withdrawal

• Shall not affect he validity of • Contract made before notification • Provide for in the notification • For due performance of any Outstanding Contracts on

that date

22

RSE • to furnish to SEBI periodical returns relating to its affairs • Maintain books of accounts and • preserve books and documents for 5 years • Subject to inspection by SEBI at all reasonable times

SEBI • By Order in writing • Call upon RSE / members • Furnish information/ explanation in writing • Relating to affairs of SExch and its members

SEBI • To make an inquiry • Appoint one or more persons • Affairs of the GB or its members • Submit a report to the SEBI within the time

23

Obligation on inquiry

24

• Every Director/Manager/ Secretary / other officer of RSE • Every member of the RSE

• If Firm Partner/ Manager/Secretary /Other officer • Every other person/Body of persons

• Had dealings in the ordinary course of business • Directly or indirectly

• Shall be bound to • Produce books and documents • In his custody /poer • Furnish within such time • Statement /information

RSE may make or amend rules and provide for • Restricting voting rights of • Matters placed before the meeting • Each member entitled for one vote

• irrespective of paid up equity held in RSE • to appoint another as his proxy to attend and vote at meeting • Such other incidental and consequential of above matters

CGOVT approval and Publication • Made /amended rule to be effective upon approval of Govt • Approval with such modification to be published in OGzte • Deemed to have been valid notwithstanding anything in

Companies Act

25

CGOVT may direct the RSE • Consult with GB of S.Exchges • Generally or specially with one particular S.Exch • In its opinion necessary or expedient to do so • May direct generally or specially • To make rules or amend any rules already made • Relating to Section 3(2) all matters or any connected maters • Within 2 months from the date of order

RSE Neglects or fails to comply with order

• within the specified time • CGovt may make or amend rules • Proposed form /with such modification • As agreed between SExchge and the CGovt

26

Publication in OGz and GZt of State

• Where the Principal office issituated • Amended rules will be effective from DO Publication • Notwithstanding anything contrary in Companies Act • Anyother law for time being in force • As if made or made by the St.Exch

27

RSE • To obtain prior approval of SEBI • Transfer duties and functions to Clg Corporation • Form a company under the Companies Act

Purpose • Periodical settlement of Contracts and difference thereof • Delivery of and payment for securities • Any other incidental matter connected therewith

Clearing Corporation • Shall make bye laws • SEBI to approve in the public/ Trade interest • Publish the bye law in Official Gzte

28

Relating Market

• Hours of Trade – Opening, Closing and regulation • High/ low rates – Declare and determine market

Clearing house

29

• Periodical settlement of contracts • Delivery and payment for securities • Pass delivery of order • Maintain clearing houses • Submit report to SEBI • Carry over from one settlement to another • Contracts square up during each settlement • Security actually delivered at each clearing • Publication any particulars submitted to SEBI

Securities

• Regulate /Prohibit blank transfers • Contracts settled or difference paid • Carry over facilities • Fix/ alter / postpone days of settlement • Margins / Conditions / forms of Contract • Regulation of making/enforcing/termination of contract between

• members / Clients • Listing/inclusion/ suspension /withdrawal / prohibition of trading Secs

Others

• Method/ Procedure of claims / disputes by arbitration • Levy of fees and recovery • Fixing of scale of brokerage • Make and compare and close bargains • Dealing of members of own account • Member obligation to produce information /explanations

30

Member liable • Fine • Expulsion • Suspension • Other penalty not involving money

Bye law requires previous publication • Upon approval publish in Official Gzte • SEBI may dispense with publication of Bye law • Public interest /Trade interest

31

SEBI to approve • On its own motion • On request received from GB • SEBI on being satisfied after consultation with GB • Necessary and expedient to do • Record the reasons • Make bye law on all or any matter in Section 9 • Amend bye laws made by the Stock Exchange

Publication • Made or amended bye laws • Publish in Gazet of India • Official Gzte of State of PO • On publication • Amended byelaws will be made as if by SExch

32

Objection by GB • Notwithstanding • SEBI on its own • Within 2 months of publication • Revise thereof • Give an opportunity of being heard • Revise the Byelaw made or amended • Revised bye law to be published and effective from the DOP

Conditions • Subject to previous publication

SEBI to dispense Publications • In the interest of the Trade / Public • SEBI if satisfied • For reasons to be recorded in writing • Dispense with publication • Of Bylaw made / amended /revised • With conditions of previous publication

33

Without prejudice to other powers

CGovt is of Opinion

GB of RSE to be superceded

CGovt • To serve a written notice on GB • Considering suspension of GB • Specify the reasons in the Notice • Give an opportunity of being heard

Notification • In the Official Gazette • Declare GB to be suspended

Appointment of Chairman • To excersice and perform • All powers and duties of GB • One Chairman and a vice Chairman • Central Govt appoints them

34

Publication and Consequence • GB members cease to hold office • Appointed persons to exercise powers and perform • Property to vests with the appointed person • Property required for performance mentioned in writing

Notwithstanding in any law /rules /bye law • GB ceases • Appointed person to hold office • For the notified period

Reconstitution of GB • Before determination of period • Call upon RSE to reconstitute GB • Vest property with GB • Or with appointed person to re-vest them • Till reconstituted appointed person will continue • Exercise and perform powers and duties

35

An emergency in the opinion of CGovt arisen

To meet the emergency and expedient

To direct the Sec. Exch

To suspend the such of its business

For a period of not exceeding 7 days

Subject to such conditions specified

Notify in the official gazette with reasons

36

SEBI - Inquire and Satisfy • In the interest of investors /orderly development of Sec Market • To prevent conduct in detrimental to

• Affairs of RSE • Clearing corporation • Providing Clearing trading settlement

• To secure proper management of RSE /Clearing Corporation / Agency /person

SEBI to issue Directions • To RSE /Clearing Corporation / Associated persons of Sec Market • To Companies either listed /Proposed to be listed • In the interest of investors /Securities and Securities Market • Issue appropriate directions

37

CGovt if satisfied • Nature of volume of transactions in securities • in any State /s areas • it is necessary so to do • By notification declare that • Section 13 apply to the State/area

Contracts • Entered there upon in such area • After the date of notification • Shall be illegal

• Other wise than between • members of RSE in such State • or through or with such member

38

Provided that • Any contract entered between 2 or more members of RSE • in that area shall be subject to such terms and conditions

• as stipulated by the respective RSE • with prior approval of SEBI

• Require prior permission of the respective RSE if so stipulated • with prior approval of SEBI

39

A stock Exchange may establish

Additional trading floor

With prior approval of SEBI

As per the terms and conditions of SEBI

Trading Floor means • A trading ring • A trading facility • Offered by a RSE • Outside its area of operation

To enable the investors to buy and sell

Through such additional floor

Under the regulatory frame work of the St.Exch

40

Any contract entered contravention of Bye law Sec 9(3)(a)

Shall be void

41

• as respect to rights of any member of RSE • Who has entered into such contract • In contravention of such bye law

• also as respect of rights of • Any other person who knowingly participated • In the transaction entailing such contravention

• Notwithstanding (i) any person other than the member • can enforce the contract and • recover any sum • if he had no knowledge of the transaction contravened Section 9(3)(a) • Notified area in the State specified under Section 13

None of the member of RSE in respect of any contract

Enter as principal with any other person

Other than a member of RSE

Unless he has • Secured the consent or any authority of such person and • Disclose in the note /Memorandum / agreement/of • Sale or purchase of securities that • He is acting as a principal

Provided • No confirmation is required • For closing out any outstanding contract • Entered in to by such person as per byelaw • If the member discloses in the note/ memorandum/ agreement of • Sale /purchase in respect of such closing out • That he is acting as a Principal

42

Provided • Member secured consent or authority • otherwise in writing • Written confirmation by such person • shall be secured within 3 days from the date of the contract

43

CGOVT is the Opinion • It is necessary to prevent undesirable speculative transactions • In specified securities in any State or area • Notify in the Official Gazette • Declaring that no person shall • Enter into any contract • Save without the permission of Central govt • For sale or purchase of any security • Except specified therein

Contracts entered in contravention • after the date of notification • Shall be illegal

44

Subject to the provisions of the Act and the terms and conditions

No person shall carry or purport to carry on

• His own or any other person behalf • Deal in securities in State or area • Not declared under section 13 to apply

Notify in the Official Gazete

Restrictions do not apply

45

• This section apply • Except under the authority of • A license granted by SEBI • Keep regard the matters • Manner in which securities are dealt with • Desirable or expedient • In the interest of trade or public interest • Such dealing to be regulated • By a system of licensing

• Doing anything by or on behalf of a member of a RSE

Offer to the Public and listing thereof • Without prejudice to the provision in this Act or • Any other law for the time being in force • No securities - Sec 2(h)(ie) - shall be offered • To the public or listed in any RSE • Unless

• The Issuer fulfils the eligibility criteria • Comply with other SEBI regulation requirement

Application • the issuer shall make application to one or more RSE • for permission for such instruments to be listed on the • stock exchange/s

46

No permission granted

• No permission granted for listing • Refused by the RSe /any of RSE • The issuer to repay all moneys received • From the application • If not repaid within 8 days • The issuer and every director or trustee • Who is in default • Shall on and from expiry of the 8 days • Pay interest @ 15% pa • Jointly and severally liable to pay money with interest

8th day • In reckoning the eighth day • Any intervening day is a public holiday • Under NI Act 1881 • It shall be disregarded • If 8th day itself is public holiday • the first day thereafter which is not a holiday • shall be the due day

47

Applicability of other provisions

• All the provisions of this Act • For listing of securities of a public company

On a RSE shall apply to the listing of the Securities under Section 2(h)(ie) being a special purpose entity

48

CGovt is of opinion that • In the interest of trade or Public • To regulate and control the business • Of spot delivery contract • In any state or area

Notify in Official Gzte • Declare provision of section 17 will also apply • In state or area to Spot delivery contract • Generally buy or sale of securities specified in the

notification • Specify manner and extent provision to apply

49

Notwithstanding any thing contained • any other law for the time being in force • Contract of derivative shall be legal and valid • If such a contract are

• traded on a RSE and • settled on clearing house of RSE

• In accordance with rules and bye laws of such RSE

50

Comes into effect by notification in the Official gzte

Date appointed by C Govt

Stock Exchange • No person shall organize except with permission of CGOVT • Assist in organizing • Or be a member of any Sexchange other than a RSE • For the purpose of Assisting ,entering into or performing • Any contracts in securities

51

For listing the any person desirous of listing to make an application to the Se. Exch

The person shall comply with conditions of

Listing agreement with StExchge

52

A RSE may de-list • Record the reasons • On any grounds under this Act • Company to be given an opportunity of being heard

Appeal by a listed company or aggrieved person • May file an appeal before SAT • Against the decision of RSE • For de- listing the shares • Within 15 days from decision • Section 22 B to 22 E shall apply

Provided that • SAT is satisfied that the Company • Is prevented from filing appeal • For sufficient cause • Allow the appeal to be filed • Within not exceeding one month

53

RSE • In exercise of its power given in Bye laws

• Refuse to list the securities of Public Company or Collective investment Scheme

• Company is entitled to receive reasons for refusal • Appeal within 15 days to SAT • That the St. Excge omitted or failed to dispose off the

application • Within time given under Section 73(1) of the Act • To deal the securities • Within one month as given by CGovt if not filed within 15

days

54

SAT

55

• Appeal in the prescribed form • Accompanied with fee • Give an opportunity of being heard • Vary /set-aside/ the decision of St. Echge • If the STechge has omitted/failed to dispose off • Or refuse to grant permission • On setting aside the StEchge to act upon the order of SAT • SAT to send copy of the order to SEBI and parties concerned • SAT deal it expeditiously to dispose off within 6 months • From the date of receipt of appeal

To discharge its functions SEBI is vested with same powers

• Of a civil court under CPC 1908 • Every proceeding is a Judicial proceeding within the meaning • Of Section 193/228 and 196 of IPC 1860 • Deemed as Civil court Chapter 26 of CrPc 1973 applies

Not bound by CPC 1908

• Guided by Natural Principles of Justice • Other provisions of the Act and any rules • Have self regulated and sittings

56

Matters • Summon any person enforce attendance and examine him

on oath • Require documents by discovery and its production • Receive evidence on affidavits • Issue commission for examination of person and documents • Review its own decisions • Dismiss any application for default or decide ex-party • Set aside an order on dismissal on any application for

default • Any other matter which may be prescribed by the

Government

57

Who can appear before SAT to represent

Appellant in person

Authorize one or more

• CA s Practice Section 2(1) CA 1949 • CSs Practice Section 2(1)© CS 1980 • CWA Practice Section 2(1) (b) CWA 1959 • Legal Practice Advocate Vakil Attorney of HC Pleader

58

Limitation Act 1963 apply

To an appeal made to SAT

59

Entertain Suit • No Civil court to entertain any suit or proceedings • In respect of any matter which • SAT is empowered by this Act to determines

Grant Injunction • To grant any injunction any court or authority • In respect of any action taken or to be taken • Pursuant to power conferred by this Act or under this

Act

60

Any aggrieved person • By any decision or order of SAT • May file an appeal to SC • Within 60 days from the day of communication of • Decision / order of SAT • On any Question of law arising out of such order

Provided that • SC if satisfied that the appellant • Was prevented by sufficient cause • From filing an appeal • Allow the appeal be filed within a further • Period of not exceeding 60 days

61

Any person without reasonable cause • Fails to comply with any requisition under Section 6(4) or • Enters into any contract against the provision of Section

13 or 16 or • Contravenes the provision of Section 17,17A,19 or • Enters into any contract in derivative contravention of

Section 18A or –rules - Section 30 • Owns or keeps a place other than a RSE

• Which is used for the purpose of entering into or • Performing any contracts in contravention of any

provision of the Act

62

Manages a place other than a RSE • Manages ,controls or assists such a place • Which is used for the purposes of the entering into or • Performing any contracts in contravention of the provisions of the Act • At which contracts are recorded or adjusted or rights or liabilities • Arising out of contracts are adjusted ,regulated or enforced • In any manner whatsoever

Not being a member of RSE or his agent • Not authorized as such under the rules /bye laws of such RSE • Not being a dealer in securities licensed under Section 17 • Willfully represents to or • induces any person to believe that contracts • can be entered into or performed under this Act • Through him

63

Not being a member of RSE or his agent • Not authorized as such under the rules /bye laws of such RSE • Not being a dealer in securities licensed under Section 17 • canvases, advertises or touts in any manner • either for himself or on behalf of other persons • for the business connected with contracts • in contravention of any provisions of this Act

At any place other than the place • Of business specified in the byelaws of a RSE • Any person or persons • Joins, gathers or assists at such places • For making bids or offers or • For entering into or performance of any of the • Provisions of this Act

64

Shall be punishable • without prejudice to any award by the Adjudicating Authority • Under this Act on conviction • With an imprisonment for a term which • may extend to 10 years or • with a fine extend up to Rs 25 crores or • with both

Any person who enters in to any contract • In contravention of the provision of Section 15 • Who fails to comply with Section 21 or 21A • With orders of SAT

65

Shall be punishable

• without prejudice to any award by the Adjudicating Authority

• Under this Act on conviction • With an imprisonment for a term which • may extend to 10 years or • with a fine extend up to Rs. 25crores or • with both

66

Any person who is required • Under this Act or any rules made there under

Furnish any information, documents or books, returns • Or report to a RSE • Fails to furnish the same within the specified time • In the listing agreement or conditions or bye laws of RSE • Shall be punishable to a penalty of • Rs One lakh for eah day during which the failure continues • Or One crore rupees which ever is less • For each of such failure

Maintain books of account or records • As per the listing agreement • Or conditions or bye laws • Fails to maintain them • Shall be punishable to a penalty of • Rs One lakh for eah day during which the failure continues • Or One crore rupees which ever is less

67

Any person who is required • Under this Act or any bye laws of a RSE • To enter into an agreement with his client

• Fails to enter into such an agreement • Shall be punishable to a penalty of • Rs. 1 lakh for each day during which the failure

continues • Or One crore rupees which ever is less • For each of such failure

68

Any stock /sub broker or a listed /proposed to be listed company • After having been called upon by SEBI or RSE • in writing • To redress the grievances of he investors • Fails to redress such grievances

• within the stipulated time by SEBI /RSE • Shall be punishable to a penalty of • Rs 1 lakh for each day during which the failure continues • Or 1 crore rupees which ever is less

69

Any Sub/ Stock broker –registered –Section 12 SEBI 1992 • Fails to segregate money or security of Clients • Or uses for self or other client

He shall be punishable with • A fine of not exceeding Rs. 1 Crore

70

A company or any person managing Collective Investment Scheme Or Mutual fund • Fail to comply with the listing conditions • Or de-listing conditions • Or grounds or • Commits breach thereof

Shall be punishable with a fine not exceeding Rs 25 crores

71

Any issuer of securities

• Excess Dematerialize • Or delivers excess securities • For which no trading permission given

Shall be punishable with a fine not exceeding Rs 25 crores

72

Any RSE

• Fails or neglects to furnish • Periodical returns • Or make or amend rules /bye laws • Comply with conditions • Shall be punishable with a fine not exceeding Rs.25 crores

73

Whosoever fails to comply • With Act • Or rules • Or Articles /Bye laws • Regulations of the St.Exchge • Directions of the SEBI

No separate penalty is provided • Shall be punishable with a penalty • To an extent of Rs One crore

74

To adjudicate the matters – Section 23 A to 23H • SEBI to appoint an officer • Not below the rank of Division Chief • As Adjudication Authority • In the prescribed manner

Adjudication Authority • Hold an enquiry • Before imposing a penalty • Give an opportunity of being heard

Powers of AA • Summon and enforce attendance • Of any person acquainted with facts • To give evidence • To produce useful documents • Relating to enquiry

If satisfied of default he shall impose penalty as he thinks fit

75

AA to have due regard • Disproportionate gain /unfair advantage

• If quantifiable on account of default • Loss amount caused to an investor as a result of default • Repetitive nature of default

Section 23 L Credit to the Consolidated Fund Account

• Realized penalties shall be credited to CF

76

Any person • Contravenes or attempts to contravene • Abets to contravene • Provisions of the Act/Rules/Regulations/Bye Laws

For which no punishment is provided in the Act

Shall be punishable with • Imprisonment extending up-to 10 years • Fine extending up to Rs 25 Crores or Both

Fail to pay the penalty order of AA • Non compliance with direction /orders • Punishable for a term • Not less than a month • Not to exceed 10years • Fine extending upto Rs 25 Crores or Both

77

Notwithstanding anything contained in CrPc 1973 • Offences punishable under this Act • Not being punishable with imprisonment only • Or with imprisonment and fine

Either before or after institution of any proceeding • Be compounded by SAT or Court • Before which such proceeding is pending

78

CGovt is satisfied Any person alleged to have violated • Any provision of the Act/ rules /regulations • On full disclosure made into alleged violations • On the recommendation of SEBI ( Need not bind the Govt) • Subject to condition as Govt deems fit • Grant immunity from • Prosecutions for any such offences • Also impose of any penalty of alleged violation

Withdrawal of immunity by CGovt • At any time CG can withdraw • If conditions are not complied with • On which the immunity was granted • Or Given false evidence • Any other offence he is guilty of contravention

Shall be liable for a fine as if the immunity had not been granted

No Immunity by CGovt • Where the proceedings of persecution • initiated before receipt of application • for any grant of immunity

79

Offence committed by Company • Every person in charge (and the company) • and responsible for conduct of business • shall be deemed guilty • and liable to prosecution and punishment

If he proves that • Offence committed without his knowledge • Or he exercised due diligence • To prevent such offence • He shall not be punished

Notwithstanding above -Offence committed by Company • If proved committed with his consent • Or connivance or attributable to gross negligence • On the part of any Director /Manage/Secretary /other officer of the company

(DMOS) • Then DMSO shall be deemed guilty and punished accordingly and the company

80

Notwithstanding anything contained-CrPC 1898

• Any offence punishable under Section 23 • Shall be deemed to be a cognizable offence • Within the meaning of that code

Section 26 Cognizance of offences by Courts

No court shall take cognizance of any offence

• Punishable under this Act or rules or regulations or bye law • Unless a complaint made • By the C/S Government / SEBI /RSE /any person

Court inferior to that of Court of Sessions shall try an offence

81

• Punishable under this Act

Holder of any security • Notwithstanding the security transferred by him for a consideration • Whose name appears in the books of company issuing security • Lawful to receive and retain any dividend declared by the company • For any year in respect of the securities

Unless • The transferee has lodged the security and all related documents • In respect of transfer • That may be required by the company for registering in his name • Within 15 days of the date on which the dividend became due

82

Extension of the period • Death of the transferee

• By actual time taken by his LR to establish his claim to dividend

• Loss of transfer deed by theft or cause beyond the control of transferee • By actual period taken for replacement thereof

• Delay in lodging due to causes connected with post • By the actual period of delay

83

Notwithstanding anything said above

84

• Right of the company • To pay the dividend ,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

• Right of the transferee • Of any security to enforce against • The transferor or any other person of 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

Holder of any security (units or instruments by CIS)

85

• Notwithstanding the security transferred by him for a consideration • Whose name appears in the books of CIS issuing security • Lawful to receive and retain any income declared by the CIS • For any year in respect of the securities

• Unless • The transferee has lodged the security and all related

documents • In respect of transfer • That may be required by the CIS for registering in his name • Within 15 days of the date on which the income became due

Extension of the period

• Death of the transferee • By actual time taken by his LR to establish his claim to

dividend • Loss of transfer deed by theft or cause beyond the

control of transferee • By actual period taken for replacement thereof

• Delay in lodging due to causes connected with post • By the actual period of delay

86

Notwithstanding anything said above • To pay the income, due, • to any person whose name is for the time being • registered in the books of the CIS • as the holder of the security • in respect of which the income has become due

Right of the transferee • Of any security to enforce against • The transferor or any other person of his rights • If any

• In relation to the transfer in any case • Where the CIS has refused to register the transfer of the security • In the name of the transferee

87

Holder of any security (units or instruments by MF)

• Notwithstanding the security transferred by him for a consideration • Whose name appears in the books of MF issuing security • Lawful to receive and retain any income declared by the MF • For any year in respect of the securities

Unless

• The transferee has lodged the security and all related documents • In respect of transfer • That may be required by the MF for registering in his name • Within 15 days of the date on which the income became due

88

Extension of the period

• Death of the transferee • By actual time taken by his LR to establish his claim to dividend

• Loss of transfer deed by theft or cause beyond the control of transferee • By actual period taken for replacement thereof

• Delay in lodging due to causes connected with post • By the actual period of delay

89

Notwithstanding anything said above

90

• Right of the MF • To pay the income, due • to any person whose name is for the time being • registered in the books of the MF • as the holder of the security • in respect of which the income has become due

• Right of the transferee • Of any security to enforce against • The transferor or any other person of his rights

• If any • In relation to the transfer in any case

• Where the MF has refused to register the transfer of the security • In the name of the transferee

Provisions of this Act shall not apply to • The Government • The RBI • Any local authority • Any corporation set up by special law • Any person effected transaction with or through above referred authority

Exchange for Securities - Price there of

91

• Any convertible bond • Share warrant • Any option • Right in relation thereto • As it entitles the person to whom issued • To obtain at his option form the company • Or other body corporate issuing the same • From any of the shareholders or duly appointed agents • Shares of the company or other body corporate • Whether by conversion of he bond /warrant / otherwise • On the basis of the price agreed up on when the same was issued

Central Government if Satisfied

92

• In the interest of trade and commerce • Or economic development of he country • It is necessary or expedient to do so may • By Notification in the official Gzte • Specify any class of contracts • As contracts to which this Act or • Any provision of the Act shall not apply • Also conditions /restriction/limitation if any • Subject to which it shall not apply

No suit ,prosecution or other legal proceeding

93

• Shall lie in any court against • The GB or any member • Office bearer • Servant of any RSE • Any person appointed under Section 11(1) of the Act • For any thing done

• In good faith or intended to be done • Pursuant to this Act or of any rules • Or bye laws made there-under

CGOVT by order • Publish in the Official Gzete • May direct that the powers of the Cgovt • In relation to matters specified in order • Subject to such conditions • Except those under Section 30

• Be exercisable by SEBI or • By RBI (Section 3 RBI 1934)

94

CGOVT may

95

• By notification in Official Gzte • Make rules For carrying into effect the objects of this Act • Particulars for periodical returns and annual return to Govt • Maintain and period of preserve documents - Section 6 • Requirement of public company for listing in any RSE • Requirement for listing of CIS in any stock exchange • Grounds of de – listing Section 21A • Manner of

• application and levy of fee thereof • enquiry for recognition and the condition for grant of RSE - member admission ,area and form of

recognition • enquiry by GB of RSE – Section 6 • making or amending the byelaw and publication for criticism • application ,condition and fee ,period of license by dealer for license Section 17 and maintain

documents and revocation of license for breach of condition • enquiry under Section 23I (i)

• Form of appeal for filing before • SAT and fee thereof Section 21A • SAT and fee there of Section 22A • SAT and fee under Section 23 L

• Any other matter which may be or is to prescribed

Every rule made under this Act

96

• Shall be laid before each of the house of Parliament • While in session for a total period of 30days • One or two session or more successive sessions • Both houses agree in making any modification • That rules shall not be made • Rules in the modified form shall have effect modified form • No effect as the case may be • Such modification or annulment shall without prejudice • The validity of anything previously done under that rule

Without prejudice to the provision of Section 30

SEBI may by notification in the official Gzte • Make regulation consistent with provisions of the Act • And the rules made to carry out the purposes of the Act

Further the CGovt may provide for following matters • Public to hold at least 51% of Share capital • Manner of holding of equity capital of a RSE at least 51 % • Is held by public within 12 months from the date of publication • of the order Section 4B (7) • Held by other than the shareholding having • Trading rights under Section 4 B (8)

Eligibility criteria and other requirements Section 17A

97

Every regulation made under this Act

98

• Shall be laid before each of the house of Parliament • While in session for a total period of 30days • One or two session or more successive sessions • Both houses agree in making any modification • That regulation shall not be made • Regulations in the modified form shall have effect modified form • No effect as the case may be • Such modification or annulment shall without prejudice • The validity of anything previously done under that regulations

99

What are the Objects of the SCRA 1956?

What are the undertakings exempted from the provisions of SCRA ?

Definitions

100

• Contract • Securities • Government Securities • Spot Delivery Contracts • Option in Securities • Derivative • Stock Exchange • Recognized Stock Exchange

• Corporatisation • Demutualization • Scheme

Explain the

101

• procedure for Corporatization and demutualization • consequences where a stock exchange fails to corporatize or demutualise • process of grant of recognition of Stock Exchange • provision relating to power of Central Government to call for periodical

return and directing of inquiry to be made in the affairs of a Stock exchange

• concept of Licensing of dealers in SCRA 1956 • provision relating to delisting of Securities ? • special provision relating to public issue and listing of certain securities • concept of Clearing Corporation • term Offences by Companies • procedure to adjudicate under SCRA • process of Compounding under SCRA

State the power of

102

• SEBI • to issue directions to the stock exchange • to make / amend of the bye law of the a recognized Stock Exchange

• Central Government • to supersede the Governing Body of the stock exchange • to suspend the business of recognized of the stock exchange • to prohibit certain contracts for the purpose of preventing undesirable

speculation in trading of securities ? • to declare the contract in notified areas to be illegal in certain

circumstances • to declare the contract in notified areas to be void in certain

circumstances • to make / amend the rules of the a recognized Stock Exchange • to rules under SCRA

What are the new provision relating to penalty ? • failure to furnish information • failure to maintain books of accounts • Failure to redress the grievances of Investor • Failure to segregate security and money of clients • Failure to comply with conditions of listing/delisting • Excess dematerialization of deliver unlisted securities • Failure to furnish periodical returns • No separate penalty prescibed

103

When can the recognition to a stock exchange be withdrawn ?

Can a stock exchange provide in its rules for restriction of voting rights to its members / matters relating thereto

Can a stock exchange refuse listing of securities ? What a re the remedies ?

What are the rights of a transferor of a security to receive dividends ?

What are the rights of a transferor of a security to receive income from collective investment scheme / mutual funds?

What are the penalties provided for non compliances under SCRA

Can the Central Government grant immunity to a person who has violated the provision of SCRA

104

Rural Elecrtrical Corporation has issued 6 years bonds to public directly and not through any stock exchange . Is it in order under SCRA ?

Unethical practices were complained against the Governig Body members of a stock exchange . Who can take action against them under SCRA ?

Can some of the duties of a recognized stock exchange be transferred to a clearing Corporation ? If so how ?

Whether a transferee of securities can claim income where he lodges the instrument of transfer within 1 month or 14 days

105

106