Page 34 - Banking Finance MAY 2017

ARTICLE

der the Companies Act, 1956 (1 of 1956), and which has been
granted a certificate of registration under sub-section (1A)
of section 12 of the Securities and Exchange Board of India
Act, 1992 (15 of 1992). A depository enter into an agree-
ment with one or more participants as its agent." partici-
pant" means a person registered as such under sub-section
(1A) of section 12 of the Securities and Exchange Board of
India Act, 1992 (15 of 1992).Every depository shall, on re-
ceipt of intimation from a participant, register the transfer
of security in the name of the transferee.All securities held
by a depository shall be dematerialized .A depository shall
be deemed to be the registered owner for the purposes of
effecting transfer of ownership of security on behalf of a
This bill has brought amendments in 4 important
beneficial owner.
Acts
o SARFAESI ACT,2002 There are two sorts of depositories in India. One is the Na-

o RDDBFI ACT,1993 tional Securities Depository Limited (NSDL) and the other is
the Central Depository Service (India) Limited (CDSL).
o DEPOSITORY ACT, 1996
o INDIAN STAMP ACT, 1899 Every Depository Participant (DP) needs to be registered
under this Depository before it begins its operation or trade
SARFAESI Act,2002 Amendments: in the market.The beneficial owner shall be entitled to all
the rights and benefits and be subjected to all the liabilities
X SARFAESI Act allows secured creditors to take posses- in respect of his securities held by a depository.
sion over a collateral, against which a loan had been
provided, upon a default in repayment. This process is Amendments to the Depository Act 1996
undertaken with the assistance of the District Magis-
trate, and does not require the intervention of courts X This will integrate records of property registered under
or tribunals. various registration systems with central registry.
X This includes integration of registrations made under
X The Bill provides that this process will have to be com-
pleted within 30 days by the District Magistrate. Companies Act, 2013, Registration Act, 1908 and Mo-
tor Vehicles Act, 1988.
X The Bill empowers the District Magistrate to assist banks
in taking over the management of a company, in case X The Bill provides that secured creditors will not be able
the company is unable to repay loans. This will be done to take possession over the collateral unless it is regis-
in case the banks convert their outstanding debt into tered with the central registry.
equity shares, and consequently hold a stake of 51% or X The Bill seeks to set up a central database of security
more in the company. interest on property rights, to enable present and fu-
ture creditors to have a clear picture of ownership or
Empowerment to RBI under the act: encumbrances against security offered.
The Act empowered the Reserve Bank of India (RBI) to ex- X After registration of security interest, secured creditors
amine the statements and any information of Asset Recon- will have priority over others in repayment of dues.
struction Companies related to their business. The Bill fur-
ther empowers the RBI to carry out audit and inspection of RDDBFI Act, 1993
these companies. The RBI may penalise a company if the The RECOVERY OF DEBTs DUE TO BANK AND FINANCIAL
company fails to comply with any directions issued by it. INSTITUTION ACT 1993 created Debt Recovery Tribunals
(DRTS) to adjudicate debt recovery cases. This was done to
Depository Act 1996: move cases out of civil courts for reducing time taken for

"Depository" means a company formed and registered un- debt recovery, and for providing technical expertise. This

34 | 2017 | MAY | BANKING FINANCE

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