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Securities Law (Amendment) Bill, 2014 passed by Lok Sabha – Detailed comparison of key changes made in SCRA, 1956 & Depositories Act, 1996
Preamble
The Securities Exchange Board of India (herein after referred as SEBI) is the securities market regulator in India. SEBI was established under Securities and Exchange Board of India Act, 1992[1] (hereinafter referred as the Act) and derives power, rights and authority from the Act. As the capital market dynamics are changing, it is also important to enhance the power of SEBI with changing capital market. In recent past Legislature were constantly endeavoring to push though the amendments to the SEBI Act, 1992 however due to some or the other reasons such amendments were not able to get through the Parliament. The Central Government tried to circumvent its inability to pass through the Parliament by promulgating the ordinance to amend the Act. The Central Government through President had issued ordinance to amend the SEBI Act in the year 2013 and 2014 and the new government was able to ensure that the Securities Law (Amendment) Bill, 2014[2] (herein after referred as Amendment Bill 2014),which includes the amendment to SEBI Act, Depositories Act, 1996 and Securities Contract (Regulation) Act, 1956, was passed on 6th August 2014 in Lok Sabha.
Detailed Comparative
A detailed comparative table on the amendment to securities law with respect to the Act, the provision of the law prior to the ordinance, amendment by the ordinance and actual amendment to the Act, and impact thereon is as follows:-
Section /Clause |
SECURITIES CONTRACT (REGULATION) ACT, 1956[3] |
Ordinance 2014[4] |
Securities Laws (Amendment) Bill,2014[5] |
Impact |
Will come into effect from |
Section 12A- Explanation |
Insertion of |
12A- Explanation– For the removal of doubts, it is hereby declared that power to issue directions under this section shall include and always be deemed to have been included the power to direct any person, who made profit or averted loss by indulging in any transaction or activity in contravention of the provisions of this Act or regulations made there under, to disgorge an amount equivalent to the wrongful gain made or loss averted by such contravention. |
12A- Explanation.— For the removal of doubts, it is hereby declared that power to issue directions under this section shall include and always be deemed to have beenincluded the power to direct any person, who made profit or averted loss by indulging in any transaction or activity in contravention of the provisions of this Act or regulations made there under, to disgorge an amount equivalent to the wrongful gain made or loss averted by such contravention |
Explanation empowers SEBI to order disgorge any wrongful gain or any loss averted by any activity which is in contravention to provision of the Act or rules made thereunder. |
18th July,2013 |
Section 23A |
Failure for furnishing record ,information etc shall be punishable with one lakh rupees each day for continuing default or one crore rupees whichever is less. |
Not included in Ordinance,2014 |
Failure for furnishing record ,information etc shall be punishable with not less than one lakh rupees but which may extend to one lakh rupees for continuing default subject to maximum of one crore rupees |
Penalty for non furnishing of information, records as per the listing agreement or conditions or bye laws of the recognized stock exchange rationalized by specifying a minimum penalty of Rs. 1 Lakh subject to maximum of Rs. 1 Crore |
As the Central Government may appoint, by notification in the Official Gazette. |
Section 23B |
Failure made by any person in entering into an agreement with client shall be punishable with one lakh rupees each day for continuing default or one crore rupees whichever is lower. |
Not included in Ordinance,2014 |
Failure made by any person in entering into an agreement with client shall be punishable with not less than one lakh rupees but which may extend to one lakh rupees for continuing default subject to maximum of one crore rupees. |
Penalty for not entering into an agreement by any person with client as per the Act or bye laws of the recognized stock exchange rationalized by specifying a minimum penalty of Rs. 1 Lakh subject to maximum of Rs. 1 Crore |
As the Central Government may appoint, bynotification in the Official Gazette. |
23C |
Failure to redress the investor grievances by stock broker or sub broker or company within the stipulated time frame from SEBI or recognized stock exchange shall be punishable with penalty of one lakh rupees each day for continuing failure or one crore rupees whichever is lower. |
Not included in Ordinance,2014 |
Failure to redress the investor grievances by stock broker or sub broker or company within the stipulated time frame from SEBI or recognized stock exchange shall be punishable with penalty which shall not be less than one lakh rupees but which may extend to one lakh rupees for continuing default subject to maximum of one crore rupees |
Penalty for non redressal of investor grievances by any stock broker or sub broker or company with in time stipulated by SEBI or recognised stock rationalized by specifying a minimum penalty of Rs. 1 lakh subject to a maximum of Rs. 1 crore |
As the Central Government may appoint, bynotification in the Official Gazette. |
23D |
Stock broker or sub broker fails to segregate monies or securities of client or uses the securities or money of client(s) for self or anyother client shall be punishable with penalty not exceeding one crore rupees. |
Not included in Ordinance 2014 |
Stock broker or sub broker fails to segregate monies or securities of client or uses the securities or money of client(s) for self or anyother client shall be punishable with penalty which shall not be less than one lakh rupess but may extend to one crore rupees. |
Penalty for non segregation of monies or securities of client or using such client(s) monies or securities for self or for anyother client by stock broker or sub broker rationalized by specifying a minimum penalty of Rs. 1 lakh subject to a maximum of Rs. 1 crore |
As the Central Government may appoint, bynotification in the Official Gazette. |
23E |
Failure in complying with the listing conditions or delisting conditions or breach thereof by company or any person managing mutual funds or collective investment scheme shall be punishable with penalty not exceeding twenty five crore rupees |
Not included in Ordinance 2014 |
Failure in complying with the listing conditions or delisting conditions or breach thereof by company or person managing mutual funds or collective investment scheme shall be punishable with penalty not less than five lakh rupees but may extend to twenty-five crore rupees. |
Penalty for non complying the provisions of listing conditions or delisting conditions or breach thereof by company or person managing mutual funds or collective investment scheme rationalized by specifying a minimum penalty of Rs. 5 lakh subject to a maximum of Rs. 25 crores |
As the Central Government may appoint, bynotification in the Official Gazette. |
23F |
Excess dematerialization of securities or delivery of unlisted securities by any issuer shall be punishable with penalty not exceeding twenty five crore rupees. |
Not included in Ordinance 2014 |
Excess dematerialization of securities or delivery of unlisted securities by any issuer shall be punishable with penalty not less than five lakhs but but may extend to twenty-five crore rupees. |
Penalty for excess dematerialization or delivery of unlisted securities rationalized by specifying a minimum penalty of Rs. 5 lakhs subject to a maximum of Rs. 25 crores. |
As the Central Government may appoint, bynotification in the Official Gazette. |
23G |
Incase of failure of recognized stock exchange to furnish periodical returns or amend rules as per the directions issued by SEBI shall be punishable with penalty not exceeding twenty five crore rupees |
Not included in Ordinance,2014 |
Incase of failure of recognized stock exchange to furnish periodical returns or amend rules as per the directions issued by SEBI shall be punishable with penalty not less than five lakhs but but may extend to twenty-five crore rupees |
Penalty for failure in furnishing periodicals returns by recognized stock exchange as per the rules or bye-laws as directed by SEBI rationalized by specifying a minimum penalty of Rs. 5 lakhs subject to a maximum of Rs. 25 crores. |
As the Central Government may appoint, bynotification in the Official Gazette. |
23H |
Failure is made in complying with provisions, directions pr rules of recognised stock exchange or SEBI and for which no penalty has been prescribed separately shall be liable to a penalty which may extend to one crore rupees. |
Not included in Ordinance,2014 |
Failure is made in complying with provisions, directions as per the rules of recognised stock exchange or SEBI and for which no penalty has been prescribed separately shall be liable to a penalty which shall not be less than one lakh rupees but may extend to one crore rupees. |
Penalty for non complying with provisions, directions as per the rules of recognised stock exchange rationalized by specifying a minimum penalty of Rs. 1 lakh subject to a maximum of Rs. 1 crore. |
As the Central Government may appoint, bynotification in the Official Gazette. |
23I(3) |
New Insertion of sub section (3) |
(3) The Board may call for and examine the record of any proceedings under this section and if it considers that the order passed by the adjudicating officer is erroneous to the extent it is not in the interests of the securities market, it may, after making or causing to be made such inquiry as it deems necessary, pass anorder enhancing the quantum of penalty, if the circumstances of the case so justify:Provided that no such order shall be passed unless the person concerned has been given an opportunity of being heard in the matter:Provided further that nothing contained in this sub-section shall be applicable after an expiry of a period of three months from the date of the order passed by the adjudicating officer or disposal of the appeal under section 23L, whichever is earlier. |
(3) The Board may call for and examine the record of any proceedings under this section and if it considers that the order passed by the adjudicating officer is erroneous to the extent it is not in the interests of the securities market, it may, after making or causing to be made such inquiry as it deems necessary, pass anorder enhancing the quantum of penalty, if the circumstances of the case so justify:Provided that no such order shall be passed unless the person concerned has been given an opportunity of being heard in the matter:Provided further that nothing contained in this sub-section shall be applicable after an expiry of a period of three months from the date of the order passed by the adjudicating officer or disposal of the appeal under section 23L, whichever is earlier. |
Pursuant to this clause the Board will be empowered to examine any record of any proceeding conducted by adjudicating officer and if such proceeding was found to be erroneous to the interest of the securities market, than the board will be empowered to enhance the quantum of penalty. Board to also reconsider the such proceeding not exceeding three month from the date of the order by adjudicating officer if order passed by the adjudicating officer in wrongful means. |
28th March,2014 |
Section 23 JA |
New Insertion |
Settlement of administrative and civil proceedings.23JA. (1) Notwithstanding anything contained in any other law for the time being in force, any person, against whom any proceedings have been initiated or may beinitiated under section 12A or section 23-I, may file an application in writing to the Board proposing for settlement of the proceedings initiated or to be initiated for the alleged defaults.(2) The Board may, after taking into consideration the nature, gravity and impact of defaults, agree to the proposal for settlement, on payment of such sum by the defaulter or on such other terms as may be determined by the Board in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992.(3) For the purpose of settlement under this section, the procedure as specified by the Board under the Securities and Exchange Board of India Act, 1992 shall apply.(4) No appeal shall lie under section 23L against any order passed by the Board or adjudicating officer, as the case may be, under this section. |
Settlement of administrative and civil proceedings.23JA. (1) Notwithstanding anything contained in any other law for the time being in force, any person, against whom any proceedings have been initiated or may beinitiated under section 12A or section 23-I, may file an application in writing to the Board proposing for settlement of the proceedings initiated or to be initiated for the alleged defaults.(2) The Board may, after taking into consideration the nature, gravity and impact of defaults, agree to the proposal for settlement, on payment of such sum by the defaulter or on such other terms as may be determined by the Board in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992.(3) For the purpose of settlement under this section, the procedure as specified by the Board under the Securities and Exchange Board of India Act, 1992 shall apply.(4) No appeal shall lie under section 23L against any order passed by the Board or adjudicating officer, as the case may be, under this section. |
This clause provides for settlement of administrative and civil proceeding. |
20th April,2007. |
Section 23JB |
New Insertion |
Recovery of amounts:(1) If a person fails to pay the penalty imposed by the adjudicating officer or fails to comply with any direction of the Board for refund of monies or fails to comply with a direction of disgorgement order issued under Section 12A or fails to pay any fees due to the Board, the Recovery Officer may draw up under his signature a statement in the specified form specifying the amount due from the person (such statement being hereafter in this Chapter referred to as certificate) and shall proceed to recover from such person the amount specified in the certificate by one or more of the following modes, namely:-(a) attachment and sale of the person’s movable property;(b) attachment of the person’s bank accounts;(c) attachment and sale of the person’s immovable property;(d) arrest of the person and his detention in prison;(e) appointing a receiver for the management of the person’s movable and immovable properties, and for this purpose, the provisions of section 221 to 227, 228A, 229, 232, theSecond and Third Schedules to the Income-tax Act, 1961 and the Income-tax (Certificate Proceedings) Rules, 1962, as in force from time to time, in so far as may be, apply with necessary modifications as if the said provisions and the rules thereunder were the provisions of this Act and referred to the amount due under this Ordinance instead of to income-tax under the Income-tax Act, 1961.Explanation 1- For the purpose of this sub-section, the person’s movable or immovable property or monies held in bank accounts shall include any property or monies held in bank accounts which has been transferred directly or indirectly on or after the date when the amount specified in certificate had become due, bythe person to his spouse or minor child or son’s wife or son’s minor child, otherwise than for adequate consideration, and which is held by, or stands in the name of, any of the persons aforesaid; and so far as the movable or immovable property or monies held in bank accounts so transferred to his minor child or hisson’s minor child is concerned, it shall, even after the date of attainment of majority by such minor child or son’s minor child, as the case may be, continue to be included in the person’s movable or immovable property or monies held in bank accounts for recovering any amount due from the person under this Ordinance. |
Recovery of amounts:(1) If a person fails to pay the penalty imposed by the adjudicating officer or fails to comply with any direction of the Board for refund of monies or fails to comply with a direction of disgorgement order issued under Section 12A or fails to pay any fees due to the Board, the Recovery Officer may draw up under his signature a statement in the specified form specifying the amount due from the person (such statement being hereafter in this Chapter referred to as certificate) and shall proceed to recover from such person the amount specified in the certificate by one or more of the following modes, namely:-(a) attachment and sale of the person’s movable property;(b) attachment of the person’s bank accounts;(c) attachment and sale of the person’s immovable property;(d) arrest of the person and his detention in prison;(e) appointing a receiver for the management of the person’s movable and immovable properties, and for this purpose, the provisions of section 221 to 227, 228A, 229, 232, theSecond and Third Schedules to the Income-tax Act, 1961 and the Income-tax (Certificate Proceedings) Rules, 1962, as in force from time to time, in so far asmay be, apply with necessary modifications as if the said provisions and the rules thereunder were the provisions of this Act and referred to the amount due under this Ordinance instead of to income-tax under the Income-tax Act, 1961.Explanation 1- For the purpose of this sub-section, the person’s movable or immovable property or monies held in bank accounts shall include any propertyor monies held in bank accounts which has been transferred directly or indirectly on or after the date when the amount specified in certificate had become due, bythe person to his spouse or minor child or son’s wife or son’s minor child, otherwise than for adequate consideration, and which is held by, or stands in the name of, any of the persons aforesaid; and so far as the movable or immovable property or monies held in bank accounts so transferred to his minor child or hisson’s minor child is concerned, it shall, even after the date of attainment of majority by such minor child or son’s minor child, as the case may be, continue tobe included in the person’s movable or immovable property or monies held in bank accounts for recovering any amount due from the person under this Ordinance. |
This clause empowers the Recovery officer to enforce the recovery of amount of penalty or fails to comply with any direction of SEBI for refund of monies or fails to comply with the direction of disgorgement order imposed by the adjudicating officer or fails to pay any fees due to the board by way of:-(a) attachment and sale of the person’s movable property;(b) attachment of the person’s bank accounts;(c) attachment and sale of the person’s immovable property;(d) arrest of the person and his detention in prison;(e) appointing a receiver for the management of the person’s movable and immovable properties, and for this purpose, the provisions of sections 220 to 227, 228A, 229, 232, the Second and Third Schedules to the Income-tax Act, 1961 and the Income-tax (Certificate Proceedings) Rules, 1962, as in force from time to time, in so far as may be, apply with necessary modifications as if the said provisions and the rules made thereunder were the provisions of this Act and referred to the amount due under this Act instead of to income-tax under the Income-tax Act, 1961.Hence this will give more teeth to the SEBI as regulator in order to ensure strict compliance of the order of SEBI or such order of the SEBI can be enforced by them in the manner as specified under the Act. |
18th July, 2013. |
23L(1) |
(1) Any person aggrieved, by the order or decision of the recognized stockexchange or the adjudicating officer or any order made by the Securities andExchange Board of India under section 4B 111 may prefer an appeal before the Securities Appellate Tribunal and the provisions ofsections 22B, 22C, 22D and 22E of this Act, shall apply, as far as may be, to such |
(1) Any person aggrieved, by the order or decision of the recognized stock exchange or the adjudicating officer or any order made by the Securities and Exchange Board of India under section 4B [or sub-section (3) of section 23-I], may prefer an appeal before the Securities Appellate Tribunal |
(1) Any person aggrieved, by the order or decision of the recognized stock exchange or the adjudicating officer or any order made by the Securities and Exchange Board of India under section 4B [or sub-section (3) of section 23-I], may prefer an appeal before the Securities Appellate Tribunal |
Appeal before the Securities Appellate Tribunal in case of any party aggrieved by order passed by adjudicating officer or SEBI under 4B ([Procedure for corporatisation and demutualization) or Section 23I(3) |
28th March, 2014. |
Section 26(2) |
No court inferior to that of a Court of Session shall try any offence punishable under this Act |
Section 26(2) omitted |
Section 26(2) omitted |
Prior to the ordinance and amendment to the act, Session Court had jurisdiction to try any offence punishable under this Act, which has been omitted with amendment. |
18th July, 2013. |
Section26A, |
New Insertion |
Establishment of Special Courts.(1) The Central Government may, for the purpose of providing speedytrial of offences under this Act, by notification, establish or designate as many Special Courts as may be necessary.(2) A Special Court shall consist of a single judge who shall be appointed by the Central Government with the concurrence of the Chief Justice of the High Court within whose jurisdiction the judge to be appointed is working.(3) A person shall not be qualified for appointment as a judge of a Special Court unless he is, immediately before such appointment, holding the office of a Sessions Judge or an Additional Sessions Judge, as the case may be. |
Establishment of Special Courts.(1) The Central Government may, for the purpose of providing speedytrial of offences under this Act, by notification, establish or designate as many Special Courts as may be necessary.(2) A Special Court shall consist of a single judge who shall be appointed by the Central Government with the concurrence of the Chief Justice of the High Court within whose jurisdiction the judge to be appointed is working.(3) A person shall not be qualified for appointment as a judge of a Special Court unless he is, immediately before such appointment, holding the office of a Sessions Judge or an Additional Sessions Judge, as the case may be. |
The amendment provides for establishment of Special Court for speedy trial of offence under the Act and framework of such special court. |
18th July, 2013. |
Section26B |
New Insertion |
Offences triable by Special Courts.Notwithstanding anything contained in the Code of Criminal Procedure,1973, all offences under this Act committed prior to the date of commencement of the Securities Laws (Amendment) Act, 2014 or on or after the date of such commencement,shall be taken cognizance of and tried by the Special Court established for the area in which the offence is committed or where there are more Special Courts than one for such area, by such one of them as may be specified in this behalf by the High Court |
Offences triable by Special Courts.Notwithstanding anything contained in the Code of Criminal Procedure,1973, all offences under this Act committed prior to the date of commencement of the Securities Laws (Amendment) Act, 2014 or on or after the date of such commencement, shall be taken cognizance of and tried by the Special Court established for the area in which the offence is committed or where there are more Special Courts than one for such area, by such one of them as may be specified in this behalf by the High Court concerned. |
All offences under the SEBI Act shall be tried by the Special Courts established for the area concerned. |
18th July, 2013. |
Section23C |
New Insertion |
Appeal and Revision.The High Court may exercise, so far as may be applicable, all the powersconferred by Chapters XXIX and XXX of the Code of Criminal Procedure, 1973 on a High Court, as if a Special Court within the local limits of the jurisdiction of the High Court were a Court of Session trying cases within the local limits of the jurisdiction of the High Court. |
Appeal and Revision.The High Court may exercise, so far as may be applicable, all the powersconferred by Chapters XXIX and XXX of the Code of Criminal Procedure, 1973 on a High Court, as if a Special Court within the local limits of the jurisdiction of the High Court were a Court of Session trying cases within the local limits of the jurisdiction of the High Court. |
High Court are authorised for appeal and revision |
18th July, 2013. |
Section23D |
New Insertion |
Application of Code to proceedingsbefore Special Court.(1) Save as otherwise provided in this Act, the provisions of the Code ofCriminal Procedure, 1973 shall apply to the proceedings before a Special Court and for the purposes of the said provisions, the Special Court shall be deemed to be a Court of Session and the person conducting prosecution before a Special Court shall be deemed to be a Public Prosecutor within the meaning of clause (u) of section 2 of the Code ofCriminal Procedure, 1973.(2) The person conducting prosecution referred to in sub-section (1) shouldhave been in practice as an Advocate for not less than seven years or should have held a post, for a period of not less than seven years, under the Union or a State,requiring special knowledge of law. |
Application of Code to proceedingsbefore Special Court.(1) Save as otherwise provided in this Act, the provisions of the Code of Criminal Procedure, 1973 shall apply to the proceedings before a Special Court and for the purposes of the said provisions, the Special Court shall be deemed to be a Court of Session and the person conducting prosecution before a Special Court shall be deemed to be a Public Prosecutor within the meaning of clause (u) of section 2 of the Code of Criminal Procedure, 1973.(2) The person conducting prosecution referred to in sub-section (1) should have been in practice as an Advocate for not less than seven years or should have held a post, for a period of not less than seven years, under the Union or a State,requiring special knowledge of law. |
Special Courts shall be governed by the Code of criminal proceedings for proceedings before it. |
18th July, 2013. |
Section23E |
New Insertion |
Transitional provisions.Any offence committed under this Act, which is triable by a Special Courtshall, until a Special Court is established, be taken cognizance of and tried by a Court of Session exercising jurisdiction over the area, notwithstanding anything containedin the Code of Criminal Procedure, 1973:Provided that nothing contained in this section shall affect the powers of the High Court under section 407 of the Code to transfer any case or class of cases taken cognizance by a Court of Session under this section. |
Transitional provisions.Any offence committed under this Act, which is triable by a Special Court shall, until a Special Court is established, be taken cognizance of and tried by a Court of Session exercising jurisdiction over the area, notwithstanding anything contained in the Code of Criminal Procedure, 1973:Provided that nothing contained in this section shall affect the powers of the High Court under section 407 of the Code to transfer any case or class of cases taken cognizance by a Court of Session under this section. |
Transitional provisions authorise Court of Sessions to conduct trail for matters till Special Courts are established. |
18th July, 2013. |
Section 31(2)(c) (d) |
New Insertion of clauses (c ) and (d) |
Not included in Ordinance,2014 |
Power of Securities and Exchange Board of India to make regulations.(c) the terms determined by the Board for settlement of proceedings under subsection (2) of section 23JA;(d) any other matter which is required to be, or may be, specified by regulations or in respect of which provision is to be made by regulations. |
SEBI shall be empowered to make regulation for settlement proceedings under the Act. |
18th July, 2013. |
Section 32 |
New Insertion |
Validation of certain acts.Any act or thing done or purporting to have been done under the principalAct, in respect of settlement of administrative and civil proceedings, shall, for all purposes, be deemed to be valid and effective as if the amendments made to the principal Act had been in force at all material times. |
Validation of certain acts.Any act or thing done or purporting to have been done under the principal Act, in respect of settlement of administrative and civil proceedings, shall, for all purposes, be deemed to be valid and effective as if the amendments made to the principal Act had been in force at all material times. |
This Section validates settlement |
18th July, 2013. |
–
Section /Clause |
THE DEPOSITORIES ACT, 1996[6] |
Ordinance 2014[7] |
Securities Laws (Amendment) Bill,2014[8] |
Impact |
Will come into effect from |
Section 19-Explanation |
Insertion of |
Explanation- For the removal of doubts, it is hereby declared that the power to issue directions under this section shall include and always be deemed to have been included the power to direct any person, who made profit or averted loss by indulging in any transaction or activity in contravention of the provisions of this Act or regulations made thereunder, to disgorge an amount equivalent to the wrongful gain made or loss averted by such contravention |
Explanation.— For the removal of doubts, it is hereby declared that power to issue directions under this section shall include and always be deemed to have been included the power to direct any person, who made profit or averted loss by indulging in any transaction or activity in contravention of the provisions of this Act or regulationsmade thereunder, to disgorge an amount equivalent to the wrongful gain made or loss averted by such contravention. |
Explanation empowers SEBI to order disgorge any wrongful gain or any loss averted by any activity which is in contravention to provision of the Act or rules made thereunder. |
As the Central Government may appoint, bynotification in the Official Gazette. |
Section 19A |
In case of failure by any person to furnish any information, record, maintain any record or file any return shall be liable to penalty of one lakh rupees each day for continuing failure or one crore rupees whichever is less. |
Not included in the Ordinance,2014 |
Incase of failure by any person to furnish any information, record, maintain any record or file any return shall be liable to penalty which shall not be less than one lakh rupees but may extend to one lakh rupees for continuing default subject to maximum of one crore rupees. |
Penalty for non furnishing of information, return as per this Act or any rules or regulations or bye laws made thereunder is rationalized by specifying a minimum penalty of Rs. 1 lakhs subject to a maximum of Rs. 1 crores. |
As the Central Government may appoint, bynotification in the Official Gazette. |
Section 19B |
Failure on the part of depository participant, agent or any person registered with SEBI to enter into an agreement shall be liable to penalty of one lakh rupees each day for continuing failure or one crore rupees whichever is less. |
Not included in the Ordinance,2014 |
Failure on the part of depository participant, agent or any person registered with SEBI to enter into an agreement shall be liable to penalty which shall not be less than one lakh rupees but may extend to one lakh rupees each day for continuing default subject to maximum of one crore rupees. |
Penalty for not entering into an agreement by depository or participant or any issuer or agent as per this Act or any rules or regulations or bye laws made thereunder is rationalized by specifying a minimum penalty of Rs. 1 lakhs subject to a maximum of Rs. 1 crores. |
As the Central Government may appoint, bynotification in the Official Gazette. |
Section 19C |
Default in resolving investor grievances with time specified by SEBI shall be liable to penalty of one lakh rupees for continuing failure or one crore rupees whichever is less |
Not included in the Ordinance,2014 |
Default in resolving investor grievances with time specified by SEBI shall be liable to penalty which shall not be less than one lakh rupees but may extend to one lakh rupees for continuing default subject to maximum of one crore rupees |
Penalty for non redressal of investor grievances by any depository or issuer or agent within the time allotted by SEBI is rationalized by specifying a minimum penalty of Rs. 1 lakhs subject to a maximum of Rs. 1 crores. |
As the Central Government may appoint, bynotification in the Official Gazette. |
Section 19D |
Delay is made in issuing securities or fails to dematerialize the securities by any issuer or agent registered as intermediary with SEBI shall be liable to penalty of one lakh rupees for continuing failure or one crore rupees whichever is less |
Not included in the Ordinance,2014 |
Delay is made in issuing securities or fails to dematerialize the securities by any issuer or agent registered as intermediary shall be liable to penalty which shall not be less than one lakh rupees but may extend to one lakh rupees for continuing default subject to maximum of one crore rupees. |
Penalty for delay in issuance of securities certificate or dematerialization rationalized by specifying a minimum penalty of Rs. 1 lakhs subject to a maximum of Rs. 1 crore. |
As the Central Government may appoint, bynotification in the Official Gazette. |
Section 19E |
Failure to reconcile the records of demateralised securities by any issuer or agent registered as intermediary with SEBI shall be liable to penalty of one lakh rupees for continuing failure or one crore rupees whichever is less. |
Not included in the Ordnance,2014 |
Failure to reconcile the records of demateralised securities by any issuer or agent registered as intermediary with SEBI shall be liable to penalty which shall not be less than one lakh rupees but may extend to one lakh rupees for continuing default subject to maximum of one crore rupees. |
Penalty for failure to reconcile records by any depository or participant or any issuer or agent is rationalized by a minimum penalty of Rs. 1 lakhs subject to a maximum of Rs. 1 crore. |
As the Central Government may appoint, bynotification in the Official Gazette. |
Section 19F |
Failure by any person in complying with the directions issued by the Board shall liable to penalty of one lakh each day rupees for continuing failure or one crore rupees whichever is less |
Not included in the Ordnance,2014 |
Failure by any person in complying with the directions issued by the Board shall liable to penalty which shall not be less than one lakh rupees but may extend to one lakh rupees for continuing default subject to maximum of one crore rupees |
Penalty for not complying with the provisions of the Board rationalized by a minimum penalty of Rs. 1 lakhs subject to a maximum of Rs. 1 crore. |
As the Central Government may appoint, bynotification in the Official Gazette. |
Section 19G |
Failure to comply with Act, rules, directions issued by the Board where no penalty has been prescribed shall be liable to penalty which may extend to one crore rupees. |
Not included in the Ordnance,2014 |
Failure to comply with Act, rules, directions issued by the Board where no penalty has been prescribed shall be liable to penalty which shall not be less than one lakh rupees but may extend to one crore rupees. |
Penalty for failure in complying with the Act, rules, directions issued by the Board is rationalized by a minimum penalty of Rs. 1 lakhs subject to a maximum of Rs. 1 crore. |
28thMarch,2014 |
Section 19 H(3) |
New Insertion of sub section(3) |
(3) The Board may call for and examine the record of any proceedings under this section and if it considers that the order passed by the adjudicating officer is erroneous to the extent it is not in the interests of the securities market, it may, after making or causing to be made such inquiry as it deems necessary, pass an order enhancing the quantum of penalty, if the circumstances of the case so justify:Provided that no such order shall be passed unless the person concerned has been given an opportunity of being heard in the matter:Provided further that nothing contained in this sub-section shall be applicable after an expiry of a period of three months from the date of the order passed by the adjudicating officer or disposal of the appeal under section 23A , whichever is earlier. |
The Board may call for and examine the record of any proceedings under this section and if it considers that the order passed by the adjudicating officer is erroneous to the extent it is not in the interests of the securities market, it may, after making or causing to be made such inquiry as it deems necessary, pass an order enhancing the quantum of penalty, if the circumstances of the case so justify:Provided that no such order shall be passed unless the person concerned has been given an opportunity of being heard in the matter:Provided further that nothing contained in this sub-section shall be applicable after an expiry of a period of three months from the date of the order passed by the adjudicating officer or disposal of the appeal under section 23A, whichever is earlier. |
Pursuant to this clause the Board will be empowered to examine any record of any proceeding conducted by adjudicating officer and if such proceeding was found to be erroneous to the interest of the securities market, than the board will be empowered to enhance the quantum of penalty. Board to also reconsider the such proceeding not exceeding three month from the date of the order by adjudicating officer if order passed by the adjudicating officer in wrongful means. |
18th July, 2013 |
Section 19IA |
New Insertion |
Settlement of Administrative and Civil Proceedings.(1) Notwithstanding anything contained in any other law for the time being in force, any person, against whom any proceedings have been initiated or may be initiated under section 19 or section 19H, as the case may be, may file an application in writing to the Board proposing for settlement of the proceedings initiated or to be initiated for the alleged defaults.(2) The Board may, after taking into consideration the nature, gravity and impact of defaults, agree to the proposal for settlement, on payment of such sum by the defaulter or on such other terms as may be determined by the Board in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992.(3) For the purpose of settlement under this section, the procedure as specified by the Board under the Securities and Exchange Board of India Act, 1992 shall apply.(4) No appeal shall lie under section 23A against any order passed by the Board or the adjudicating officer under this section.’’. |
Settlement of Administrative and Civil Proceedings.(1) Notwithstanding anything contained in any other law for the time being in force, any person, against whom any proceedings have been initiated or may be initiated under section 19 or section 19H, as the case may be, may file an application in writing to the Board proposing for settlement of the proceedings initiated or to be initiated for the alleged defaults.(2) The Board may, after taking into consideration the nature, gravity and impact of defaults, agree to the proposal for settlement, on payment of such sum by the defaulter or on such other terms as may be determined by the Board in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992.(3) For the purpose of settlement under this section, the procedure as specified by the Board under the Securities and Exchange Board of India Act, 1992 shall apply.(4) No appeal shall lie under section 23A against any order passed by the Board or the adjudicating officer under this section. |
Pursuant to this clause filing of writing application for settlement by person against whom action is initiated under section 19(Power of board to give directions in certain cases) and Section 19H(Power to adjudicate). |
18th July, 2013 |
Section 19-IB |
New Insertion |
Recovery of amounts.(1) If a person fails to pay the penalty imposed by the adjudicating officer or fails to comply with a direction of disgorgement order issued under section 19 or fails to pay any fees due to the Board, the Recovery Officer may draw up under his signature a statement in the specified form specifying the amount due from the person (such statement being hereafter in this Chapter referred to as certificate) and shall proceed to recover from such person the amount specified in the certificate by one or more of the following modes, namely:-(a) attachment and sale of the person’s movable property;(b) attachment of the person’s bank accounts;(c) attachment and sale of the person’s immovable property;(d) arrest of the person and his detention in prison;(e) appointing a receiver for the management of the person’s movable andimmovable properties,and for this purpose, the provisions of sections 221 to 227, 228A, 229, 232, the Second and Third Schedules to the Income-tax Act, 1961 and the Income-tax (Certificate Proceedings) Rules, 1962, as in force from time to time, in so far as may be, apply with necessary modifications as if the said provisions and the rules thereunder were the provisions of this Act and referred to the amount due under this Act instead of to income-tax under the Income-tax Act, 1961.Explanation 1.— For the purposes of this sub-section, the person’smovable or immovable property or monies held in bank accounts shall include any property or monies held in bank accounts which has been transferred, directly or indirectly on or after the date when the amount specified in certificate had become due, by the person to his spouse or minor child or son’s wife or son’s minor child, otherwise than for adequate consideration, and which is held by, or stands in the name of, any of the persons aforesaid; and so far as the movable or immovable property or monies held in bank accounts so transferred to his minor child or his son’s minor child is concerned, it shall, even after the date of attainment of majority by such minor child or son’s minor child, as the case may be, continue to be included in the person’s movable or immovable property or monies held in bank accounts for recovering any amount due from the person under this Act.Explanation 2. — Any reference under the provisions of the Second and Third Schedules to the Income-tax Act, 1961 and the Income-tax (Certificate Proceedings) Rules, 1962 to the assessee shall be construed as a reference to the person specified in the certificate.Explanation 3. — Any reference to appeal in Chapter XVIID and theSecond Schedule to the Income-tax Act, 1961, shall be construed as a reference to appeal before the Securities Appellate Tribunal under section 23A of this Act.(2) The Recovery Officer shall be empowered to seek the assistance of the local district administration while exercising the powers under sub-section (1).(3) Notwithstanding anything contained in any other law for the time being in force, the recovery of amounts by a Recovery Officer under sub-section (1), pursuant to non-compliance with any direction issued by the Board under section 19, shall have precedence over any other claim against such person.(4) For the purposes of sub-sections (1), (2) and (3), the expression ‘‘Recovery Officer’’ means any officer of the Board who may be authorised, by general or special order in writing, to exercise the powers of a Recovery Officer. |
Recovery of amounts.1) If a person fails to pay the penalty imposed by the adjudicating officer or fails to comply with a direction of disgorgement order issued under section 19 or fails to pay any fees due to the Board, the Recovery Officer may draw up under his signature a statement in the specified form specifying the amount due from the person (such statement being hereafter in this Chapter referred to as certificate) and shall proceed to recover from such person the amount specified in the certificate by one ormore of the following modes, namely: —(a) attachment and sale of the person’s movable property;(b) attachment of the person’s bank accounts;(c) attachment and sale of the person’s immovable property;(d) arrest of the person and his detention in prison;(e) appointing a receiver for the management of the person’s movable andimmovable properties,and for this purpose, the provisions of sections 221 to 227, 228A, 229, 232, the Second and Third Schedules to the Income-tax Act, 1961 and the Income-tax (Certificate Proceedings) Rules, 1962, as in force from time to time, in so far as may be, apply with necessary modifications as if the said provisions and the rules thereunder were the provisions of this Act and referred to the amount due under this Act instead of to income-tax under the Income-tax Act, 1961.Explanation 1.— For the purposes of this sub-section, the person’smovable or immovable property or monies held in bank accounts shall include any property or monies held in bank accounts which has been transferred, directly or indirectly on or after the date when the amount specified in certificate had become due, by the person to his spouse or minor child or son’s wife or son’s minor child, otherwise than for adequate consideration, and which is held by, or stands in the name of, any of the persons aforesaid; and so far as the movable or immovable property or monies held in bank accounts so transferred to his minor child or his son’s minor child is concerned, it shall, even after the date of attainment of majority by such minor child or son’s minor child, as the case may be, continue to be included in the person’s movable or immovable property or monies held in bank accounts for recovering any amount due from the person under this Act.Explanation 2. — Any reference under the provisions of the Second and Third Schedules to the Income-tax Act, 1961 and the Income-tax (Certificate Proceedings) Rules, 1962 to the assessee shall be construed as a reference to the person specified in the certificate.Explanation 3. — Any reference to appeal in Chapter XVIID and theSecond Schedule to the Income-tax Act, 1961, shall be construed as a reference to appeal before the Securities Appellate Tribunal under section 23A of this Act.(2) The Recovery Officer shall be empowered to seek the assistance of the local district administration while exercising the powers under sub-section (1).(3) Notwithstanding anything contained in any other law for the time being in force, the recovery of amounts by a Recovery Officer under sub-section (1), pursuant to non-compliance with any direction issued by the Board under section 19, shall have precedence over any other claim against such person.(4) For the purposes of sub-sections (1), (2) and (3), the expression ‘‘Recovery Officer’’ means any officer of the Board who may be authorised, by general or special order in writing, to exercise the powers of a Recovery Officer. |
Section empowers the Recovery officer (any officer of the Board who may be authorised, by general or special order in writing, to exercise the powers of a Recovery Officer) to recover of penalty or amount disgorged by attaching person’s bank accounts, movable and immoveable property ,appointing receiver for management of such property and even cause imprisonment. |
18th July, 2013 |
Section 22(2) |
No court inferior to that of a Court of Session shall try any offence punishable under this Act |
Section 22(2) omitted |
Section 22(2) omitted |
Prior to the ordinance and amendment to the act, Session Court had jurisdiction to try any offence punishable under this Act, which has been omitted with amendment. |
18th July, 2013 |
Section 22C |
New Insertion |
Establishment of Special Courts.(1) The Central Government may, for the purpose of providing speedy trialof offences under this Act, by notification, establish or designate as many Special Courts as may be necessary.(2) A Special Court shall consist of a single judge who shall be appointed by the Central Government with the concurrence of the Chief Justice of the High Court within whose jurisdiction the judge to be appointed is working.(3) A person shall not be qualified for appointment as a judge of a Special Court unless he is, immediately before such appointment, holding the office of a Sessions Judge or an Additional Sessions Judge, as the case may be. |
Establishment of Special Courts.(1) The Central Government may, for the purpose of providing speedy trial of offences under this Act, by notification, establish or designate as many Special Courts as may be necessary.(2) A Special Court shall consist of a single judge who shall be appointed by the Central Government with the concurrence of the Chief Justice of the High Court within whose jurisdiction the judge to be appointed is working.(3) A person shall not be qualified for appointment as a judge of a Special Court unless he is, immediately before such appointment, holding the office of a Sessions Judge or an Additional Sessions Judge, as the case may be. |
The amendment provides for establishment of Special Court for speedy trial of offence under the Act and framework of such special court. |
18th July, 2013 |
Section 22D |
New insertion |
Offences triable by Special Courts.Notwithstanding anything contained in the Code of Criminal Procedure, 1973, all offences under this Act committed prior to the date of commencement of the Securities Laws (Amendment) Act, 2014 or on or after the date of such commencement, shall be taken cognizance of and tried by the Special Court established for the area in which the offence is committed or where there are more Special Courts than one for such area, by such one of them as may be specified in this behalf by the High Court concerned. |
Offences triable by Special Courts.Notwithstanding anything contained in the Code of Criminal Procedure, 1973, all offences under this Act committed prior to the date of commencement of the Securities Laws (Amendment) Act, 2014 or on or after the date of such commencement, shall be taken cognizance of and tried by the Special Court established for the area in which the offence is committed or where there are more Special Courts than one for such area, by such one of them as may be specified in this behalf by the High Court concerned. |
All offences under the SEBI Act shall be tried by the Special Courts established for the area concerned. |
18th July, 2013 |
Section 22E |
New insertion |
Appeals and Revision:The High Court may exercise, so far as may be applicable, all the powers conferred by Chapters XXIX and XXX of the Code of Criminal Procedure, 1973 on a High Court, as if a Special Court within the local limits of the jurisdiction of the High Court were a Court of Session trying cases within the local limits of the jurisdiction of the High Court. |
Appeals and Revision:The High Court may exercise, so far as may be applicable, all the powers conferred by Chapters XXIX and XXX of the Code of Criminal Procedure, 1973 on a High Court, as if a Special Court within the local limits of the jurisdiction of the High Court were a Court of Session trying cases within the local limits of the jurisdiction of the High Court. |
High Court are authorised for appeal and revision. |
18th July, 2013 |
Section 22F |
New insertion |
Application of Code to proceedingsbefore Special Court.(1) Save as otherwise provided in this Act, the provisions of the Code ofCriminal Procedure, 1973 shall apply to the proceedings before a Special Court and for the purposes of the said provisions, the Special Court shall be deemed to be a Court of Session and the person conducting prosecution before a Special Court shall be deemedto be a Public Prosecutor within the meaning of clause (u) of section 2 of the Code of Criminal Procedure, 1973.(2) The person conducting prosecution referred to in sub-section (1) shouldhave been in practice as an Advocate for not less than seven years or should haveheld a post, for a period of not less than seven years, under the Union or a State,requiring special knowledge of law. |
Application of Code to proceedingsbefore Special Court.(1) Save as otherwise provided in this Act, the provisions of the Code ofCriminal Procedure, 1973 shall apply to the proceedings before a Special Court and for the purposes of the said provisions, the Special Court shall be deemed to be a Court of Session and the person conducting prosecution before a Special Court shall be deemed to be a Public Prosecutor within the meaning of clause (u) of section 2 of the Code of Criminal Procedure, 1973.(2) The person conducting prosecution referred to in sub-section (1) should have been in practice as an Advocate for not less than seven years or should have held a post, for a period of not less than seven years, under the Union or a State,requiring special knowledge of law. |
Special Courts shall be governed by the Code of criminal proceedings for proceedings before it. |
18th July, 2013 |
Section 22G |
New insertion |
Transitional provisions.Any offence committed under this Act, which is triable by a Special Courtshall, until a Special Court is established, be taken cognizance of and tried by a Court of Session exercising jurisdiction over the area, notwithstanding anything containedin the Code of Criminal Procedure, 1973:Provided that nothing contained in this section shall affect the powers of theHigh Court under section 407 of the Code to transfer any case or class of cases taken cognizance by a Court of Session under this section |
Transitional provisions.Any offence committed under this Act, which is triable by a Special Court shall, until a Special Court is established, be taken cognizance of and tried by a Court of Session exercising jurisdiction over the area, notwithstanding anything containedin the Code of Criminal Procedure, 1973:Provided that nothing contained in this section shall affect the powers of the High Court under section 407 of the Code to transfer any case or class of cases taken cognizance by a Court of Session under this section |
Transitional provisions authorise Court of Sessions to conduct trail for matters till Special Courts are established. |
18th July, 2013 |
Section 23A(2) |
Appeal to Securities Appellate Tribunal(2) No appeal shall lie to the Securities Appellate Tribunal from an order made by the Board with the consent of the parties. |
Section 23(2) omitted |
Section 23(2) omitted |
Prior to the ordinance and amendment Section 23 (2) restrained the power to appeal where the order was made with the consent of the parties. which has been omitted with amendment. |
18th July, 2013 |
Section 25(2)(h) and (i) |
New insertion of clause (h) and (i) |
Power of Board to make regulations.(h) the terms determined by the Board for settlement of proceedings under subsection (2) of section 19-IA;i) any other matter which is required to be, or may be, specified by regulations or in respect of which provision to be made by regulations. |
Power of Board to make regulations.(h) the terms determined by the Board for settlement of proceedings under subsection (2) of section 19-IA;i) any other matter which is required to be, or may be, specified by regulations or in respect of which provision to be made by regulations. |
This amendment empowers the board to make regulation with regards to settlement proceedings under Section 19(2)(IA) and make any regulation under regulation already formulated under the Act, which has been empowered under the formulated regulation. |
18th July, 2013 |
Section 30A |
New Insertion |
Validation of certain acts.Any act or thing done or purporting to have been done under the principalAct, in respect of settlement of administrative and civil proceedings, shall, for all purposes, be deemed to be valid and effective as if the amendments made to the principal Act had been in force at all material times |
Validation of certain acts.Any act or thing done or purporting to have been done under the principal Act, in respect of settlement of administrative and civil proceedings, shall, for all purposes, be deemed to be valid and effective as if the amendments made to the principal Act had been in force at all material times |
Section 34A validates any acts or things done under the SEBI Act in view of the amendments. |
18th July, 2013 |
[1] http://www.sebi.gov.in/cms/sebi_data/attachdocs/1379572440984.pdf
[2]http://www.prsindia.org/uploads/media/Securities%20(A)/Securities%20law%20(A)%20bill,%202014.pdf
[3] Link to SCRA Act 1956 :- http://www.sebi.gov.in/cms/sebi_data/attachdocs/1379572229231.pdf
[4] Link to SEBI Ordinance dated 28th March 2014:- http://www.sebi.gov.in/cms/sebi_data/attachdocs/1396330987444.pdf
[5] Link to Securities Laws (Amendment) Bill, 2014:
http://www.prsindia.org/uploads/media/Securities%20(A)/Securities%20law%20(A)%20bill,%202014.pdf
[6] Link to the DP Act,1996:- http://www.sebi.gov.in/acts/act03a.pdf
[7] Link to SEBI Ordinance dated 28th March 2014:- http://www.sebi.gov.in/cms/sebi_data/attachdocs/1396330987444.pdf
[8] Link to Securities Laws (Amendment) Bill, 2014:- http://www.prsindia.org/uploads/media/Securities%20(A)/Securities%20law%20(A)%20bill,%202014.pdf
[The above post is contributed by CS Vinita Nair and Ruchira Shinde at Vinod Kothari & Co. They can be contacted at vinita@vinodkothari.com and ruchira@vinodkothari.com respectively]
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On a quick glance through, but if so done mindfully, one is left with some points of grave doubt. For a sample, consider Sec 23 D, changed to read ,-
“Stock broker or sub broker fails to segregate… or uses the securities or money of client(s) FOR SELF OR ANY OTHER CLIENT shall be punishable…” Doubt is, does that, by any chance, mean, or intended to mean, if misused for a non-client – a third party / say, relative or friend , is not punishable.
Over to experts and others directly concerned; who will do well to diligently look for, identify, and draw SEBI’s attention ,for remedial action,even at the outset, should there any inept drafting leading to any such confusion, and the likely chaos in its administering the rules and regulations.