UNIT I

Sec2 [(j) “stock exchange” means— (a) any body of individuals, whether incorporated or not,
constituted before corporatisation and demutualisation under sections 4A and 4B, or (b) a body
corporate incorporated under the Companies Act, 1956 (1 of 1956) whether under a scheme of
corporatisation and demutualisation or otherwise, for the purpose of assisting, regulating or
controlling the business of buying, selling or dealing in securities.]

Meaning of Stock Exchange

A stock exchange is an important factor in the capital market. It is a secure place where trading is
done in a systematic way. Here, the securities are bought and sold as per well-structured rules
and regulations. Securities mentioned here includes debenture and share issued by a public
company that is correctly listed at the stock exchange, debenture and bonds issued by the
government bodies, municipal and public bodies.
Typically bonds are traded Over-the-Counter (OTC), but a few corporate bonds are sold in a stock
exchange. It can enforce rules and regulation on the brokers and firms that are enrolled with them.
In other words, a stock exchange is a forum where securities like bonds and stocks are purchased
and traded. This can be both an online trading platform and offline (physical location).

Recognition of stock exchange

Section 3 of the Securities Contract (Regulation) Act lays down that for recognition, every stock
exchange for the purpose of being recognised has to make an application in a prescribed manner
to the Central Government. If the central government is satisfied, then it may grant recognition
subject to further inquiry and condition imposed as laid down in the Act.
Every grant of recognition shall be published in the Official Gazette. The opportunity has to be
given to the applicant to present their matter in case their application is refused. Any amendment
shall not be made without the involvement of central government.
Contracts
The SCRA defines ‘contracts’ as a means to an agreement pertaining to the sale or purchase of
securities. Contracts are of three types, and they are as follows:
i) Spot contract: These are the contracts that provide for the real delivery of assets or securities
in exchange for payments on the same day of the contract being executed or on a future date.
ii) Ready delivery contract: These are the contracts that are to be executed immediately or
within a specified timeframe.
iii) Forward contracts: These are the contracts under which the parties involved would agree to
execute the contract on a specified date in future.
Listing of Securities
A company, desirous of listing its securities on the Exchange, shall be required to
file an application, in the prescribed form, with the Exchange before issue of
Prospectus by the company, where the securities are issued by way of a
prospectus or before issue of 'Offer for Sale', where the securities are issued by
way of an offer for sale. The company shall be responsible to follow all the
requirements specified in the Companies Act, the listing norms issued by SEBI
from time to time and such other conditions, requirements and norms that may
be in force from time to time and included hereafter in these Bye-laws and
Regulations to make the security eligible to be listed and for continuous listing on
the Exchange.
 Securities Appellate Tribunal (SAT)
Securities Appellate Tribunal is a statutory body developed under the provisions of Section 15K of
the Securities and Exchange Board of India Act. Securities Appellate Tribunal was mainly
established to hear an appeal against the order passed by the SEBI (Securities and Exchange
Board of India) or by an adjudicating officer under the SEBI Act. In this article, we look at the
Securities Appellate Tribunal (SAT) in detail.
Composition of Securities Appellate Tribunal (SAT)
Securities Appellate Tribunal (SAT) would consist of the following:

 One presiding Officer

 Other members
Presiding Officer
The Central Government will appoint the presiding Officer of Securities Appellate Tribunal in
discussion with the chief justice of India or nominee. The person so appointed as the presiding
OfficerOfficer should meet with the following requirements:

 The retired or sitting judge of the supreme court

 The retired or sitting judge of the high court
 The retired or sitting judge of the high court, who has completed at least seven years of
service as a judge in a high court.
Members
The Central Government will appoint the two members of the Securities Appellate Tribunal. The
member so appointed should possess the following qualities:

 The member should be capable of dealing with problems related to the securities market.
 The member should possess qualification and experience related to corporate law,
securities laws, economics, finance or accountancy.
Tenure
Presiding Officer: The tenure for Presiding Officer will be five years from the date of appointment
or re-appointment.
Members: The tenure for the member will be five years from the date of appointment or re-
appointment.
Power of Securities Appellate Tribunal (SAT)
The Securities Appellate Tribunal (SAT) will have the same powers as vested in a civil court under
the code of civil procedure while trying a suit, with respect of the following matters namely:

 Enforce and summon the attendance of any person

 Require the discovery and production of documents
 Receive evidence on affidavits
 Issue commissions for the examination of the documents or witnesses
 Dismiss an application for default or deciding it ex-parte
 Set aside any order or dismissal of any application for default or any other order passed by
it ex-parte
 Any other matter as and when prescribed.
Who can make an appeal?
Every person aggrieved by order of the Securities and Exchange Board of India or adjudicating
officer is liable to make an appeal to the Securities Appellate Tribunal (SAT).
Note: No appeal can be made to the Securities Appellate Tribunal (SAT) against any order made
with the consent of the parties.
Time Limit

Every appeal to the Securities Appellate Tribunal should be filed within 45 days from the
day on which a copy of the order passed by the Securities and Exchange Board of India or
adjudicating office is received.
 The Securities Appellate Tribunal may allow an appeal after the expiry of the specified
period of 45 days if the reason for not filing the appeal with the said period is satisfied.
 The appeal should be made in three copies along with the additional copies for each
additional appeal, and that should be signed by the authorised person.
 On receipt of the appeal, the Securities Appellate Tribunal may confirm, modify or set aside
the order appealed against and such appeal should be disposed of within 6 months from
the date of receipt of such appeal.
Appear before SAT
As per the SEBI Act, any authorised person is a Company Secretary, Chartered Accountant
(CA), Cost Accountant or Legal Practitioner can appear before Securities Appellate Tribunal
(SAT).
Appeal against the orders of SAT

Every person aggrieved by any order or decision of Securities Appellate Tribunal can file an
appeal to the supreme court. Also, the appeal only can be made on any question of law.
 The appeal should be made within 60 days from the date of receiving a copy of the order or
decision of Securities Appellate Tribunal. However, the supreme court may further allow a
period of 60 days for making an appeal, if it satisfied that the applicant was prevented from
filing the appeal within the first 60 days due to sufficient cause.
Procedure for Appeal
An appeal should be presented in the prescribed form by any aggrieved person in the registry of
the appellate tribunal within whose jurisdiction falls or can be sent by registered post addressed to
the Registrar. The appeal sent by post should be presented in the registry on the same date on
which it was received in the registry.
Scheduled Fee
Every appeal should be made along with an application fee remitted in the form of Demand Draft
drawn on any nationalised bank and such fee is payable at the place where the registry is located.
The amount of fee payable for appeal against adjudication orders made are as follows:
S.No Amount of Penalty Imposed Amount of Fees Payable

1. Less than Rs.10,000 Rs.500

2. Rs.10,000 or more Rs.1,200

3. Rs.1 lakh or more Rs.1,200 inclusive of Rs.500 for every one lakh of
penalty.
Note: The fee payable for any other appeal against an order of the Board under the Securities and
Exchange Board of India Act should be of Rs.5000.
Title to dividends.Previous    Next
(1) It shall be lawful for the holder of any security whose name appears on the books of the
company issuing the said security to receive and retain any dividend declared by the company in
respect thereof for any year, notwithstanding that the said security has already been transferred by
him for consideration, unless the transferee who claims the dividend from the transferor has
lodged the security and all other documents relating to the transfer which may be required by the
company with the company for being registered in his name within fifteen days of the date on
which the dividend became due.

Explanation.--The period specified in this section shall be extended--

(i) in case of death of the transferee, by the actual period taken by his legal representative to
establish his claim to the dividend;

(ii) in case of loss of the transfer deed by theft or any other cause beyond the control of the
transferee, by the actual period taken for the replacement thereof; and

(iii) in case of delay in the lodging of any security and other documents relating to the transfer due
to causes connected with the post, by the actual period of the delay.

(2) Nothing contained in sub-section (1) shall affect--

(a) the right of a company to pay any dividend which has become 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; or

(b) the right of the transferee of any security to enforce against the transferor or any other person
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.

Securities and Exchange Board of India

From Wikipedia, the free encyclopedia
The Securities and Exchange Board of India (SEBI) is the regulatory
body for securities and commodity market in India under the ownership of Ministry of
Finance within the Government of India. It was established on 12 April 1988 as an executive body
and was given statutory powers on 30 January 1992 through the SEBI Act, 1992.[1][3]

History[edit]
Securities and Exchange Board of India (SEBI) was first established in 1988 as a non-statutory
body for regulating the securities market. It became an autonomous body on 30 January 1992 and
was accorded statutory powers with the passing of the SEBI Act 1992 by the Indian Parliament.
SEBI has its headquarters at the business district of Bandra Kurla Complex in Mumbai and has
Northern, Eastern, Southern and Western Regional Offices in New Delhi, Kolkata, Chennai,
and Ahmedabad respectively. It has opened local offices at Jaipur and Bangalore and has also
opened offices at Guwahati, Bhubaneshwar, Patna, Kochi and Chandigarh in Financial Year
2013–2014.
Controller of Capital Issues was the regulatory authority before SEBI came into existence; it
derived authority from the Capital Issues (Control) Act, 1947.
The SEBI is managed by its members, which consists of the following:

 The chairman is nominated by the Union Government of India.

 Two members, i.e., Officers from the Union Finance Ministry.
 One member from the Reserve Bank of India.
 The remaining five members are nominated by the Union Government of India, out of them at
least three shall be whole-time members.
After the amendment of 1999, collective investment schemes were brought under SEBI
except nidhis, chit funds and cooperatives.

Organisation structure[edit]

SEBI headquarters, Mumbai

Madhabi Puri Buch took charge of chairman on 1 March 2022, replacing Ajay Tyagi, whose term
ended on 28 February 2022. Madhabi Puri Buch is the first woman chairperson of SEBI. [citation needed]
Current Board members[edit]
The board comprises:[4][5]

Name Designation

Madhabi Puri
Chairman
Buch

S.K Mohanty Whole time member

Raje Prem Kumar - Ashwini Bhatia Whole time member

Ajay Seth Part-time member

Rajesh Verma Part-time member

M. Rajeshwar Rao Part-time member

V Ravi Anshuman Part-time member

List of Chairpersons[edit]
List of Chairmen:[6]

Name From To

Madhabi Puri
1 March 2022 Present
Buch

Ajay Tyagi 10 February 2017 28 February 2022

 U K Sinha 18 February 2011 10 February 2017

C. B. Bhave 18 February 2008 18 February 2011

M. Damodaran 18 February 2005 18 February 2008

G. N. Bajpai 20 February 2002 18 February 2005

D. R. Mehta 21 February 1995 20 February 2002

S. S. Nadkarni 17 January 1994 31 January 1995

G. V.
24 August 1990 17 January 1994
Ramakrishna

Dr. S. A. Dave 12 April 1988 23 August 1990

National Apex Bodies[edit]

 National Institute of Securities Markets of India

Functions and responsibilities[edit]

The Preamble of the Securities and Exchange Board of India describes the basic functions of the
Securities and Exchange Board of India as "...to protect the interests of investors in securities and
to promote the development of, and to regulate the securities market and for matters connected
there with or incidental there to".
SEBI has to be responsive to the needs of three groups, which constitute the market:

 issuers of securities
 investors
 market intermediaries
SEBI has three powers rolled into one body: quasi-legislative, quasi-judicial and quasi-executive. It
drafts regulations in its legislative capacity, it conducts investigation and enforcement action in its
executive function and it passes rulings and orders in its judicial capacity. Though this makes it
very powerful, there is an appeal process to create accountability. There is a Securities Appellate
Tribunal which is a three-member tribunal and is currently headed by Justice Tarun Agarwala,
former Chief Justice of the Meghalaya High Court.[7] A second appeal lies directly to the Supreme
Court. SEBI has taken a very proactive role in
streamlining disclosure requirements to international
standards. [8]

Securities and Exchange Board of India (SEBI)

Powers[edit]
For the discharge of its functions efficiently, SEBI has been vested with the following powers:

 to approve by−laws of Securities exchanges.

 to require the Securities exchange to amend their by−laws.
 inspect the books of accounts and call for periodical returns from recognised Securities
exchanges.
 inspect the books of accounts of financial intermediaries.
 compel certain companies to list their shares in one or more Securities exchanges.
 registration of Brokers and sub-brokers.

Securities and Exchange Board of India Act, 1992

12.Registration of stock-brokers, sub-brokers, share transfer agents, etc.-

(1) No stock-broker, sub-broker, share transfer agent, banker to an issue, trustee of trust deed,
registrar to an issue, merchant banker, underwriter, portfolio manager, investment adviser and
such other intermediary who may be associated with securities market shall buy, sell or deal in
securities except under, and in accordance with, the conditions of a certificate of registration
obtained from the Board in accordance with the rules made under this Act:

Provided that a person buying or selling securities or otherwise dealing with the securities market
as a stock-broker, sub-broker, share transfer agent, banker to an issue, trustee of trust deed,
registrar to an issue, merchant banker, underwriter, portfolio manager, investment adviser and
such other intermediary who may be associated with securities market immediately before the
establishment of the Board for which no registration certificate was necessary prior to such
establishment, may continue to do so for a period of three months from such establishment or, if
he has made an application for such registration within the said period of three months, till the
disposal of such application.

(2) Every application for registration shall be in such manner and on payment of such fees as may
be determined by regulations.

(3) The Board may, by order, suspend or cancel a certificate of registration in such manner as may
be determined by regulations:

Provided that no order under this sub-section shall be made unless the person concerned has
been given a reasonable opportunity of being heard.

Section 12A.   Prohibition of manipulative and deceptive devices,

insider trading and substantial acquisition of securities or
control.Previous    Next
1
[12A. Prohibition of manipulative and deceptive devices, insider
trading and substantial acquisition of securities or control.-- No
person shall directly or indirectly--
(a) use or employ, in connection with the issue, purchase or sale of any
securities listed or proposed to be listed on a recognised stock exchange,
any manipulative or deceptive device or contrivance in contravention of
the provisions of this Act or the rules or the regulations made thereunder;

(b) employ any device, scheme or artifice to defraud in connection with

issue or dealing in securities which are listed or proposed to be listed on a
recognised stock exchange;

(c) engage in any act, practice, course of business which operates or

would operate as fraud or deceit upon any person, in connection with the
issue, dealing in securities which are listed or proposed to be listed on a
recognised stock exchange, in contravention of the provisions of this Act
or the rules or the regulations made thereunder;

(d) engage in insider trading;

(e) deal in securities while in possession of material or non-public

information or communicate such material or non-public information to
any other person, in a manner which is in contravention of the provisions
of this Act or the rules or the regulations made thereunder;

(f) acquire control of any company or securities more than the percentage
of equity share capital of a company whose securities are listed or
proposed to be listed on a recognised stock exchange in contravention of
the regulations made under this Act.]

Power to adjudicate.
15-I.
(1) For the purpose of adjudging under sections 15A, 15B, 15C, 15D, 15E, 105[15EA, 15EB,]
15F, 15G 106[,15H, 15HA and 15HB], the Board 107[may] appoint any officer not below the rank
of
a Division Chief to be an adjudicating officer for holding an inquiry in the prescribed manner
after giving any person concerned a reasonable opportunity of being heard for the purpose of
imposing any penalty.
(2) While holding an inquiry the adjudicating officer shall have power to summon and enforce
the attendance of any person acquainted with the facts and circumstances of the case to give
evidence or to produce any document which in the opinion of the adjudicating officer, may be
useful for or relevant to the subject-matter of the inquiry and if, on such inquiry, he is satisfied
that the person has failed to comply with the provisions of any of the sections specified in sub-
section (1), he may impose such penalty as he thinks fit in accordance with the provisions of any
of those sections.
108
[(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 15T, whichever is earlier.]
109
[Factors to be taken into account while adjudging quantum of penalty.]
27
15J.
While adjudging quantum of penalty under
110
[15-I or section 11 or section 11B, the Board
or the adjudicating officer] shall have due regard to the following factors, namely :—
(a) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as
a result of the default;
(b) the amount of loss caused to an investor or group of investors as a result of the default;
(c) the repetitive nature of the default.
111
[Explanation.—For the removal of doubts, it is clarified that the power
112
[...] to
adjudge the quantum of penalty under sections 15A to 15E, clauses (b) and (c) of section
15F, 15G, 15H and 15HA shall be and shall always be deemed to have been exercised
under the provisions of this section.]

Appeal to the Securities Appellate Tribunal.

15T. 104[(1) Save as provided in sub-section (2), any person aggrieved,—
(a) by an order of the Board made, on and after the commencement of the Securities Laws
(Second Amendment) Act, 1999, under this Act, or the rules or regulations made
thereunder; or
(b) by an order made by an adjudicating officer under this Act,
may prefer an appeal to a Securities Appellate Tribunal having jurisdiction in the matter.
105[(2) ********]
(3) Every appeal under sub-section (1) shall be filed within a period of forty-five days from the
date on which a copy of the order made by the 106[Board or the Adjudicating Officer, as the case
may be,] is received by him and it shall be in such form and be accompanied by such fee as may
be prescribed :
Provided that the Securities Appellate Tribunal may entertain an appeal after the expiry of the
said period of forty-five days if it is satisfied that there was sufficient cause for not filing it
within that period.
(4) On receipt of an appeal under sub-section (1), the Securities Appellate Tribunal may, after
giving the parties to the appeal, an opportunity of being heard, pass such orders thereon as it
thinks fit, confirming, modifying or setting aside the order appealed against.
(5) The Securities Appellate Tribunal shall send a copy of every order made by it to the
107[Board, the] parties to the appeal and to the concerned Adjudicating Officer.
(6) The appeal filed before the Securities Appellate Tribunal under sub-section (1) shall be dealt
with by it as expeditiously as possible and endeavour shall be made by it to dispose of the
appeal finally within six months from the date of receipt of the appeal.
10[Appeal to Supreme Court.
15Z. Any person aggrieved by any decision or order of the Securities Appellate Tribunal may
file an appeal to the Supreme Court within sixty days from the date of communication of the
decision or order of the Securities Appellate Tribunal to him on any question of law arising out
of such order :
Provided that the Supreme Court may, if it is satisfied that the applicant was prevented by
sufficient cause from filing the appeal within the said period, allow it to be filed within a further
period not exceeding sixty days.]
Appeal and revision.
26C. 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.

Regulation of capital market

Regulations are very important for the growth of capital markets all through the world. The
development of a market economy is dependent on the growth of the capital market. The
regulation of a capital market encompasses the regulation of securities. These rules enable the
capital market to function more competently and fairly.
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A well regulated market has the prospective to boost additional investors to participate, and
contribute in, promoting the development of the economy.

Capital Market Regulatory Authorities Worldwide: The chief capital market regulatory authorities
worldwide are as follows:
 U.S. Securities and Exchange Commission
 Canadian Securities Administrators, Canada
 Australian Securities and Investments Commission
 Securities and Exchange Commission, Pakistan
 Securities and Exchange Board of India
 Securities and Exchange Commission, Bangladesh
 Securities and Exchange Surveillance Commission
 Securities and Futures Commission, Hong Kong
 Financial Supervision Authority, Finland
 Financial Supervision Commission, Bulgaria
 Financial Services Authority, UK
 Comision Nacional del Mercado de Valores, Spain
 Authority of Financial Markets

It has been well established that there is a growing network of financial intermediaries that operate
in a highly competitive environment while being directed by strict norms. India has one of the most
refined new equity issuance markets. Disclosure requirements and the accounting policies
 followed by listed companies to offer financial information are comparable to the best systems in
the world. In Indian scenario, the securities market is regulated by various agencies such as
department of economic affairs, department of company affairs, and the reserve bank of India. The
capital markets and protection of investor's interest is now primarily the responsibility of the
Securities and Exchange Board of India (SEBI), which is located in Bombay. The activities of
these agencies are coordinated by high level committee on capital and financial market. The high
level coordinated committee for financial market discusses various policy level issues which
require inter regularity coordination between the regulators in financial market such as RBI, SEBI,
insurance, regulatory and development authority (IRDA) and pension regulatory and development
authority. The committee is chaired by Governor, RBI, secretary minister of finance, chairman
SEBI, chairman IRDA, and chairman, PRDA are members of committee (Bharati V. Pathak, 2008).

The capital market is market of equity and debt securities is regulated by Securities and Exchange
Board of India (SEBI). Securities and Exchange Board of India (SEBI) has full autonomy and
authority to regulate and develop capital market. The government has framed rules under
securities controls act, the SEBI act and depositories act.
Regulatory structure of financial institutions and market (Source: Bharati V. Pathak, 2008)

SEBI's functions include:

1. Regulating the business in stock exchange and any other securities markets.
2. Registering and regulating the working of collective investment schemes, including mutual
funds.
3. Barring fraudulent and unfair trade practices relating to securities markets.
4. Promoting investor's education and training of intermediaries of securities markets.
5. Prohibiting insider trading in securities, with the imposition of monetary penalties, on erring
market intermediaries.
6. Regulating substantial acquisition of shares and takeover of companies.
7. Calling for information from, carrying out inspection, conducting inquiries and audits of the stock
exchanges and intermediaries and self-regulatory organisations in the securities market.

To summarize, Capital market is controlled by financial supervisors and their own governance
organization. Major grounds of regulation is to keep investors away from scam and deception.
Financial regulatory organisations are also charged with decreasing the losing rate of financial,
providing licenses to financial service providers, and executing applicable regulations.

UNIT II
beneficial owner
2. (1) In this Act, unless the context otherwise requires,— (a) “beneficial owner” means a person
whose name is recorded as such with a depository;
(b) “Board” means the Securities and Exchange Board of India established under section 3 of the
Securities and Exchange Board of India Act, 1992 (15 of 1992);
(e) “depository” means a company formed and registered under 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);

CHAPTER II
CERTIFICATE OF COMMENCEMENT OF BUSINESS
Certificate of commencement of business by depositories.
sec3. (1) No depository shall act as a depository unless it obtains a certificate of
commencement of business from the Board.

(2) A certificate granted under sub-section (1) shall be in such form as may be specified by
the regulations.
(3) The Board shall not grant a certificate under sub-section (1) unless it is satisfied that the
depository has adequate systems and safeguards to prevent manipulation of records and
transactions :
Provided that no certificate shall be refused under this section unless the depository
concerned has been given a reasonable opportunity of being heard.

CHAPTER III
RIGHTS AND OBLIGATIONS OF DEPOSITORIES, PARTICIPANTS, ISSUERS AND
BENEFICIAL OWNERS
Agreement between depository and participant.
4. (1) A depository shall enter into an agreement with one or more participants as its agent.
(2) Every agreement under sub-section (1) shall be in such form as may be specified by the
bye-laws.
Services of depository.
5. Any person, through a participant, may enter into an agreement, in such form as may be
specified by the bye-laws, with any depository for availing its services.

Surrender of certificate of security.

6. (1) Any person who has entered into an agreement under section 5 shall surrender the
certificate of security, for which he seeks to avail the services of a depository, to the issuer in
such manner as may be specified by the regulations.
(2) The issuer, on receipt of certificate of security under sub-section (1), shall cancel the
certificate of security and substitute in its records the name of the depository as a registered
owner in respect of that security and inform the depository accordingly.
(3) A depository shall, on receipt of information under sub-section (2), enter the name of the
person referred to in sub-section (1) in its records, as the beneficial owner.

Registration of transfer of securities with depository.

7. (1) Every depository shall, on receipt of intimation from a participant, register the
transfer of security in the name of the transferee.
(2) If a beneficial owner or a transferee of any security seeks to have custody of such
security the depository shall inform the issuer accordingly.
Options to receive security certificate or hold securities with depository.
8. (1) Every person subscribing to securities offered by an issuer shall have the option either
to receive the security certificates or hold securities with a depository.
(2) Where a person opts to hold a security with a depository, the issuer shall intimate such
depository the details of allotment of the security, and on receipt of such information the
depository shall enter in its records the name of the allottee as the beneficial owner of that
security.

Securities in depositories to be in fungible form.

9. (1) All securities held by a depository shall be dematerialised and shall be in a fungible
form.
2[(2) Nothing contained in sections 153, 153A, 153B, 187B, 187C and 372 of the Companies
Act, 1956 (1 of 1956), shall apply to a depository in respect of securities held by it on behalf
of the beneficial owners.]
Rights of depositories and beneficial owner.
10. (1) Notwithstanding anything contained in any other law for the time being in force, a
depository shall be deemed to be the registered owner for the purposes of effecting transfer
of ownership of security on behalf of a beneficial owner.
(2) Save as otherwise provided in sub-section (1), the depository as a registered owner shall
not have any voting rights or any other rights in respect of securities held by it.
(3) The beneficial owner shall be entitled to all the rights and benefits and be subjected to all
the liabilities in respect of his securities held by a depository.

Register of beneficial owner.

11. Every depository shall maintain a register and an index of beneficial owners in the
manner provided in sections 150, 151 and 152 of the Companies Act, 1956 (1 of 1956).
Pledge or hypothecation of securities held in a depository.
12. (1) Subject to such regulations and bye-laws, as may be made in this behalf, a beneficial
owner may with the previous approval of the depository create a pledge or hypothecation
in respect of a security owned by him through a depository.
(2) Every beneficial owner shall give intimation of such pledge or hypothecation to the
depository and such depository shall thereupon make entries in its records accordingly.
(3) Any entry in the records of a depository under sub-section (2) shall be evidence of a
pledge or hypothecation.

2 Substituted by the Depositories Related Laws (Amendment) Act, 1997, Sec 22, w.e.f. 15-01-
1997. Prior
to its substitution sub-section (2) read as under :
“(2) Nothing contained in sections 153, 153A, 153B, 187B, 187C and 372 of the Companies Act,
1956
(1 of 1956) shall apply to the securities held by a depository on behalf of the beneficial owners.”
Furnishing of information and records by depository and issuer.
13. (1) Every depository shall furnish to the issuer information about the transfer of
securities in the name of beneficial owners at such intervals and in such manner as may be
specified by the bye-laws.
(2) Every issuer shall make available to the depository copies of the relevant records in
respect of securities held by such depository.
Option to opt out in respect of any security.
14. (1) If a beneficial owner seeks to opt out of a depository in respect of any security he
shall inform the depository accordingly.
(2) The depository shall on receipt of intimation under sub-section (1) make appropriate
entries in its records and shall inform the issuer.
(3) Every issuer shall, within thirty days of the receipt of intimation from the depository
and on fulfillment of such conditions and on payment of such fees as may be specified by
the regulations, issue the certificate of securities to the beneficial owner or the transferee, as
the case may be.
Act 18 of 1891 to apply to depositories.
15. The Bankers’ Books Evidence Act, 1891 shall apply in relation to a depository as if it
were a bank as defined in section 2 of that Act.
Depositories to indemnify loss in certain cases.
16. (1) Without prejudice to the provisions of any other law for the time being in force, any
loss caused to the beneficial owner due to the negligence of the depository or the
participant, the depository shall indemnify such beneficial owner.
(2) Where the loss due to the negligence of the participant under sub-section (1) is
indemnified by the depository, the depository shall have the right to recover the same from
such participant.
Rights and obligations of depositories, etc.
17. (1) Subject to the provisions of this Act, the rights and obligations of the depositories,
participants and the issuers whose securities are dealt with by a depository shall be
specified by the regulations.
(2) The eligibility criteria for admission of securities into the depository shall be specified by
the regulations.

Competition Act, 2002

Section 2.   Definitions.Previous    Next
In this Act, unless the context otherwise requires,--
(a) "acquisition" means, directly or indirectly, acquiring or agreeing to
acquire--
(i) shares, voting rights or assets of any enterprise; or
(ii) control over management or control over assets of any enterprise;
(b) "agreement" includes any arrangement or understanding or action in
concert,--
(i) whether or not, such arrangement, understanding or action is formal or
in writing; or
(ii) whether or not such arrangement, understanding or action is intended
to be enforceable by legal proceedings;
1 2
[ [(ba) "Appellate Tribunal" means the Competition Appellate Tribunal
established under subsection (1) of Section 53A;]]
(c) cartel" includes an association of producers, sellers, distributors,
traders or service providers who, by agreement amongst themselves,
limit, control or attempt to control the production, distribution, sale or price
of, or, trade in goods or provision of services;
(d) "Chairperson" means the Chairperson of the Commission appointed
under sub-section (1) of section 8;
(e) "Commission" means the Competition Commission of India
established under sub-section (1) of section 7;
(f) "consumer" means any person who--
(i) buys any goods for a consideration which has been paid or promised
or partly paid and partly promised, or under any system of deferred
payment and includes any user of such goods other than the person who
buys such goods for consideration paid or promised or partly paid or
partly promised, or under any system of deferred payment when such use
is made with the approval of such person, whether such purchase of
goods is for resale or for any commercial purpose or for personal use;

(ii) hires or avails of any services for a consideration which has been paid
or promised or partly paid and partly promised, or under any system of
deferred payment and includes any beneficiary of such services other
than the person who hires or avails of the services for consideration paid
or promised, or partly paid and partly promised, or under any system of
deferred payment, when such services are availed of with the approval of
the first-mentioned person whether such hiring or availing of services is
for any commercial purpose or for personal use;

(g) "Director General" means the Director General appointed under sub-
section (1) of section 16 and includes any Additional, Joint, Deputy or
Assistant Directors General appointed under that section;

(h) "enterprise" means a person or a department of the Government, who

or which is, or has been, engaged in any activity, relating to the
production, storage, supply, distribution, acquisition or control of articles
or goods, or the provision of services, of any kind, or in investment, or in
the business of acquiring, holding, underwriting or dealing with shares,
debentures or other securities of any other body corporate, either directly
or through one or more of its units or divisions or subsidiaries, whether
such unit or division or subsidiary is located at the same place where the
enterprise is located or at a different place or at different places, but does
not include any activity of the Government relatable to the sovereign
functions of the Government including all activities carried on by the
departments of the Central Government dealing with atomic energy,
currency, defence and space.

Explanation.--For the purposes of this clause,--

(a) "activity" includes profession or occupation;

(b) "article" includes a new article and service includes a new service;

(c) unit" or "division", in relation to an enterprise, includes--

(i) a plant or factory established for the production, storage, supply,

distribution, acquisition or control of any article or goods;

(ii) any branch or office established for the provision of any service;
(i) "goods" means goods as defined in the Sale of Goods Act, 1930 (8 of
1930) and includes--

(A) products manufactured, processed or mined;

(B) debentures, stocks and shares after allotment;

(C) in relation to goods supplied, distributed or controlled in India, goods

imported into India;

(j) "Member" means a Member of the Commission appointed under sub-

section (1) of section 8 and includes the Chairperson;

(k) "notification" means a notification published in the Official Gazette;

(l) "person" includes--

(i) an individual;

(ii) a Hindu undivided family;

(iii) a company;

(iv) a firm;

(v) an association of persons or a body of individuals, whether

incorporated or not, in India or outside India; or

(vi) any corporation established by or under any Central, State or

Provincial Act or a Government company as defined in section 617 of the
Companies Act, 1956 (1 of 1956);

(vii) any body corporate incorporated by or under the laws of a country

outside India;

(viii) a co-operative society registered under any law relating to co-

operative societies;
(ix) a local authority;

(x) every artificial juridical person, not falling within any of the preceding
sub-clauses;

(m) "practice" includes any practice relating to the carrying on of any trade
by a person or an enterprise;

(n) "prescribed" means prescribed by rules made under this Act;

(o) "price", in relation to the sale of any goods or to the performance of

any services, includes every valuable consideration, whether direct or
indirect, or deferred, and includes any consideration which in effect
relates to the sale of any goods or to the performance of any services
although ostensibly relating to any other matter or thing;

(p) "public financial institution" means a public financial institution

specified under section 4A of the Companies Act, 1956 (1 of 1956) and
includes a State Financial, Industrial or Investment Corporation;

(q) "regulations" means the regulations made by the Commission under

section 64;

(r) "relevant market" means the market which may be determined by the
Commission with reference to the relevant product market or the relevant
geographic market or with reference to both the markets;

(s) "relevant geographic market" means a market comprising the area in

which the conditions of competition for supply of goods or provision of
services or demand of goods or services are distinctly homogenous and
can be distinguished from the conditions prevailing in the neighbouring
areas;

(t) "relevant product market" means a market comprising all those

products or services which are regarded as interchangeable or
substitutable by the consumer, by reason of characteristics of the
products or services, their prices and intended use;

(u) 'service" means service of any description which is made available to

potential users and includes the provision of services in connection with
business of any industrial or commercial matters such as banking,
communication, education, financing, insurance, chit funds, real estate,
transport, storage, material treatment, processing, supply of electrical or
other energy, boarding, lodging, entertainment, amusement, construction,
repair, conveying of news or information and advertising;

(v) "shares" means shares in the share capital of a company carrying

voting rights and includes--

(i) any security which entitles the holder to receive shares with voting
rights;

(ii) stock except where a distinction between stock and share is

expressed or implied;

(w) "statutory authority" means any authority, board, corporation, council,

institute, university or any other body corporate, established by or under
any Central, State or Provincial Act for the purposes of regulating
production or supply of goods or provision of any services or markets
therefor or any matter connected therewith or incidental thereto;

(x) "trade" means any trade, business, industry, profession or occupation

relating to the production, supply, distribution, storage or control of goods
and includes the provision of any services;

(y) "turnover" includes value of sale of goods or services;

(z) words and expressions used but not defined in this Act and defined in
the Companies Act, 1956 (1 of 1956) shall have the same meanings
respectively assigned to them in that Act.

Prohibition of certain agreements

Section 3.   Anti-competitive agreements.Previous    Next

(1) No enterprise or association of enterprises or person or association of persons shall enter into
any agreement in respect of production, supply, distribution, storage, acquisition or control of
goods or provision of services, which causes or is likely to cause an appreciable adverse effect on
competition within India.
(2) Any agreement entered into in contravention of the provisions contained in sub-section (1)
shall be void.
(3) Any agreement entered into between enterprises or associations of enterprises or persons or
associations of persons or between any person and enterprise or practice carried on, or decision
taken by, any association of enterprises or association of persons, including cartels, engaged in
identical or similar trade of goods or provision of services, which--
(a) directly or indirectly determines purchase or sale prices;
(b) limits or controls production, supply, markets, technical development, investment or provision
of services;
(c) shares the market or source of production or provision of services by way of allocation of
geographical area of market, or type of goods or services, or number of customers in the market
or any other similar way;
(d) directly or indirectly results in bid rigging or collusive bidding,
shall be presumed to have an appreciable adverse effect on competition:
Provided that nothing contained in this sub-section shall apply to any agreement entered into by
way of joint ventures if such agreement increases efficiency in production, supply, distribution,
storage, acquisition or control of goods or provision of services.
Explanation.-- For the purposes of this sub-section, "bid rigging" means any agreement, between
enterprises or persons referred to in sub-section (3) engaged in identical or similar production or
trading of goods or provision of services, which has the effect of eliminating or reducing
competition for bids or adversely affecting or manipulating the process for bidding.

(4) Any agreement amongst enterprises or persons at different stages or levels of the production
chain in different markets, in respect of production, supply, distribution, storage, sale or price of, or
trade in goods or provision of services, including--
(a) tie-in arrangement;
(b) exclusive supply agreement;
(c) exclusive distribution agreement;
(d) refusal to deal;
(e) resale price maintenance,
shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely to
cause an appreciable adverse effect on competition in India.
Explanation.-- For the purposes of this sub-section,--

(a) "tie-in arrangement" includes any agreement requiring a purchaser of goods, as a condition of
such purchase, to purchase some other goods;
(b) "exclusive supply agreement" includes any agreement restricting in any manner the purchaser
in the course of his trade from acquiring or otherwise dealing in any goods other than those of the
seller or any other person;
(c) "exclusive distribution agreement" includes any agreement to limit, restrict or withhold the
output or supply of any goods or allocate any area or market for the disposal or sale of the goods;
d) "refusal to deal" includes any agreement which restricts, or is likely to restrict, by any method
the persons or classes of persons to whom goods are sold or from whom goods are bought;
e) "resale price maintenance" includes any agreement to sell goods on condition that the prices to
be charged on the resale by the purchaser shall be the prices stipulated by the seller unless it is
clearly stated that prices lower than those prices may be charged
(5) Nothing contained in this section shall restrict--(i) the right of any person to restrain any
infringement of, or to impose reasonable conditions, as may be necessary for protecting any of his
rights which have been or may be conferred upon him under--
(a) the Copyright Act, 1957 (14 of 1957);
(b) the Patents Act, 1970 (39 of 1970);
(c) the Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade Marks Act, 1999 (47 of
1999);
(d) the Geographical Indications of Goods (Registration and Protection) Act, 1999 (48 of 1999);
(e) the Designs Act, 2000 (16 of 2000);
(f) the Semi-conductor Integrated Circuits Layout-Design Act, 2000 (37 of 2000);
(ii) the right of any person to export goods from India to the extent to which the agreement relates
exclusively to the production, supply, distribution or control of goods or provision of services for
such export.

abuse of Dominant position and Regulation of combinations

Section 4.   Abuse of dominant position.Previous    Next
1
[(1) No enterprise or group shall abuse its dominant position.]
(2) There shall be an abuse of dominant position 2[under sub-section (1),
if an enterprise or a group],--
(a) directly or indirectly, imposes unfair or discriminatory--
(i) condition in purchase or sale of goods or service; or(ii) price in
purchase or sale (including predatory price) of goods or service.
Explanation.--For the purposes of this clause, the unfair or discriminatory
condition in purchase or sale of goods or service referred to in sub-
clause (i) and unfair or discriminatory price in purchase or sale of goods
(including predatory price) or service referred to in sub-clause (ii) shall not
include such discriminatory condition or price which may be adopted to
meet the competition; or
(b) limits or restricts--
(i) production of goods or provision of services or market therefor; or
(ii) technical or scientific development relating to goods or services to the
prejudice of consumers; or
(c) indulges in practice or practices resulting in denial of market
access 3 [in any manner]; or
(d) makes conclusion of contracts subject to acceptance by other parties
of supplementary obligations which, by their nature or according to
commercial usage, have no connection with the subject of such contracts;
or
(e) uses its dominant position in one relevant market to enter into, or
protect, other relevant market.
Explanation.--For the purposes of this section, the expression--
(a) "dominant position" means a position of strength, enjoyed by an
enterprise, in the relevant market, in India, which enables it to--
(i) operate independently of competitive forces prevailing in the relevant
market; or
(ii) affect its competitors or consumers or the relevant market in its favour;
(b) "predatory price" means the sale of goods or provision of services, at
a price which is below the cost, as may be determined by regulations, of
production of the goods or provision of services, with a view to reduce
competition or eliminate the competitors;
4
[(c) "group" shall have the same meaning as assigned to it in
clause (b) of the Explanation to section 5.]
Section 6.   Regulation of combinations
(1) No person or enterprise shall enter into a combination which causes or is likely to cause an
appreciable adverse effect on competition within the relevant market in India and such a
combination shall be void.(2) Subject to the provisions contained in sub-section (1), any person or
enterprise, who or which proposes to enter into a combination, 1[shall] give notice to the
Commission, in the form as may be specified, and the fee which may be determined, by
regulations, disclosing the details of the proposed combination, within 2[thirty days] of--

(a) approval of the proposal relating to merger or amalgamation, referred to in clause (c) of section
5, by the board of directors of the enterprises concerned with such merger or amalgamation, as
the case may be;
(b) execution of any agreement or other document for acquisition referred to in clause (a) of
section 5 or acquiring of control referred to in clause (b) of that section.
3
[(2A) No combination shall come into effect until two hundred and ten days have passed from the
day on which the notice has been given to the Commission under sub-section (2) or the
Commission has passed orders under section 31, whichever is earlier.]

(3) The Commission shall, after receipt of notice under sub-section (2), deal with such notice in
accordance with the provisions contained in sections 29, 30 and 31.
(4) The provisions of this section shall not apply to share subscription or financing facility or any
acquisition, by a public financial institution, foreign institutional investor, bank or venture capital
fund, pursuant to any covenant of a loan agreement or investment agreement.
(5) The public financial institution, foreign institutional investor, bank or venture capital fund,
referred to in sub-section (4), shall, within seven days from the date of the acquisition, file, in the
form as may be specified by regulations, with the Commission the details of the acquisition
including the details of control, the circumstances for exercise of such control and the
consequences of default arising out of such loan agreement or investment agreement, as the case
may be.
Explanation.--For the purposes of this section, the expression--
(a) foreign institutional investor has the same meaning as assigned to it in clause (a) of
the Explanation to section 115AD of the Income-tax Act, 1961(43 of 1961);
(b) venture capital fund has the same meaning as assigned to it in clause (b) of the Explanation to
clause (23 FB) of section 10 of the Income-tax Act, 1961(43 of 1961).
Competition Commission of India – Objectives
The CCI acts as the competition regulator in India. The Commission was established in 2003,
although it became fully functional only by 2009. It aims at establishing a competitive environment
in the Indian economy through proactive engagement with all the stakeholders, the government,
and international jurisdiction. The objectives of the Commission are:

1. To prevent practices that harm the competition.

2. To promote and sustain competition in markets.
3. To protect the interests of consumers.
4. To ensure freedom of trade.

How was the Competition Commission of India formed?

The CCI was established by the Vajpayee government, under the provisions of the Competition
Act 2002. 

1. The Competition (Amendment) Act, 2007 was enacted to amend the Competition Act,

2002.
2. This led to the establishment of the CCI and the Competition Appellate Tribunal.

 The Competition Appellate Tribunal has been established by the Central

Government to hear and dispose of appeals against any direction issued or decision
made or order passed by the CCI.
 The government replaced the Competition Appellate Tribunal (COMPAT) with
the National Company Law Appellate Tribunal (NCLAT) in 2017.

What is the Competition Act, 2002?

The Competition Act, 2002 was enacted by the Parliament of India and governs the Indian
competition law. The Act received the presidential assent in 2003.

1. The Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) was repealed
and replaced by the Competition Act, 2002.

This was done based on the recommendations of the Raghavan Committee.

2. The Act:
 Prohibits anti-competitive agreements
 Prohibits abuse of dominant position by enterprises and
 Regulates combinations (acquisition, acquiring of control, and M&A), which can
cause or is likely to cause an appreciable adverse effect on the competition within
India.
3. The Act follows the philosophy of modern competition laws.

Why do we need Competition Laws?

Competition laws perform three main functions in society.


1. To uphold free-enterprise: the competition laws have been called the Magna Carta
of free enterprise.
2. Security against market distortions: there is a constant risk of various people
resorting to market distortions and abusing their dominant positions to resort to anti-
competitive activities, thus competition laws are required to ensure that the market is
safe from the various distortions.
 3. They also aid in the promotion of domestic industries: Competition laws are
required to ensure that the domestic industries do not get suppressed with an
increase in globalization. They play a quintessential role in determining the viability
of the domestic industries. However, to keep the Indian competition laws updated
with the businesses of the digital world which include not many assets, the Indian
government has established a Competition Law Review Committee.

Competition Commission of India – Members Composition

The members of the CCI are appointed by the Central Government. The Competition Commission
of India is currently functional with a Chairperson and two members.

1. The Commission used to consist of one chairperson and a minimum of two members and a
maximum of six members.
2. This has further been reduced to three members and one chairperson by the Cabinet. This
move was taken to produce a faster turnaround in hearings and speedier approval, thereby
stimulating the business processes of corporates and resulting in greater employment
opportunities in the country.
3. The chairperson and the members are usually full-time members.
4. The eligibility for the Commission: The Chairperson and every other Member shall be a
person of ability, integrity, and who, has been, or is qualified to be a judge of a High Court,
or, has special knowledge of, and professional experience of not less than fifteen years in
international trade, economics, business, commerce, law, finance, accountancy,
management, industry, public affairs, administration or in any other matter which, in the
opinion of the Central Government, may be useful to the Commission.

Competition Commission of India – Functions

The preamble of the Competition Act focuses on the development of the economy and the country
by avoiding unfair competition practices and promoting constructive competition. The functions of
the CCI are:

1. Ensuring that the benefit and welfare of the customers are maintained in the Indian Market.
2. An accelerated and inclusive economic growth through ensuring fair and healthy
competition in the economic activities of the nation.
3. Ensuring the efficient utilization of the nation’s resources through the execution of
competition policies.
4. The Commission also undertakes competition advocacy.
5. It is also the antitrust ombudsman for small organizations.
6. The CCI will also scrutinize any foreign company that enters the Indian market through a
merger or acquisition to ensure that it abides by India’s competition laws – the Competition
Act, 2002.
7. CCI also ensures interaction and cooperation with the other regulating authorities in the
economy. This will ensure that the sectoral regulatory laws are agreeable with the
competition laws.
8. It also acts as a business facilitator, by ensuring that a few firms do not establish
dominance in the market and that there is a peaceful co-existence between the small and
the large enterprises.

Competition Commission of India – Challenges

The CCI faces multiple challenges while implementing the Competition Laws. The challenges can
be both internal and external.

1. The constant and continuous change in the way businesses are undertaken and the
evolving antitrust issue is proving to be a significant challenge for the CCI. 
 2. The emerging business models are based on a digital economy and e-commerce. This
proves to be a problem for the CCI as the current competition laws talk only of assets and
turnovers.
3. The number of benches of the CCI has to be increased to pronounce judgments more
speedily on the competition cases.
4. The inclusion of parameters in the competition and antitrust laws such as data accessibility,
network effects, etc. is important to ensure that the Competition laws are relevant in a
digital economy.

Competition Commission of India – Recent News

1. On November 5 & 6, 2020, the Competition Commission of India organised a virtual

Workshop of BRICS Competition Agencies on Competition Issues in the Automotive
Sector. Earlier, BRICS Competition Agencies had signed a Memorandum of Understanding
(MoU) on co-operation in the field of competition law and policy in May 2016 (In 2020
extended for an open-end period) to enhance co-operation and interaction.
2. A group of 15 startup founders held a virtual meeting with the Competition Commission of
India (CCI) recently to appraise the regulator about Google’s anti-competitive policies in
India. The discussion involved Google’s recent imposition of its Play Store billing system on
Indian developers, as well as the 30% commission the company charges for selling digital
goods and services through the system.
3. Considering restrictions placed on physical movement, CCI immediately allowed flexibility
within its procedures—including electronic filing of antitrust cases as well as combination
notices including Green Channel notifications and deferment of non-urgent cases. CCI also
made the Pre-Filing Consultation (PFC) facility for combinations available through video
conference. A dedicated helpline was set up to attend to the queries of stakeholders during
the pandemic. Relevant public notices were regularly put on the website of CCI for
information of the relevant stakeholders. CCI has also put in place a mechanism to conduct
proceedings through video conferencing to avoid physical contact and presence.

Section 56.   Power of Central Government to supersede Commission.Previous    Next

(1) If at any time the Central Government is of the opinion--
(a) that on account of circumstances beyond the control of the Commission, it is unable to
discharge the functions or perform the duties imposed on it by or under the provisions of this
Act; or
(b) that the Commission has persistently made default in complying with any direction given by
the Central Government under this Act or in the discharge of the functions or performance of
the duties imposed on it by or under the provisions of this Act and as a result of such default
the financial position of the Commission or the administration of the Commission has suffered;
or
(c) that circumstances exist which render it necessary in the public interest so to do,
the Central Government may, by notification and for reasons to be specified therein, supersede
the Commission for such period, not exceeding six months, as may be specified in the
notification:
 Provided that before issuing any such notification, the Central Government shall give a
reasonable opportunity to the Commission to make representations against the proposed
supersession and shall consider representations, if any, of the Commission.
(2) Upon the publication of a notification under sub-section (1) superseding the Commission,--
(a) the Chairperson and other Members shall as from the date of supersession, vacate their
offices as such;
(b) all the powers, functions and duties which may, by or under the provisions of this Act, be
exercised or discharged by or on behalf of the Commission shall, until the Commission is
reconstituted under sub-section (3), be exercised and discharged by the Central Government
or such authority as the Central Government may specify in this behalf;
(c) all properties owned or controlled by the Commission shall, until the Commission is
reconstituted under sub-section (3), vest in the Central Government.
(3) On or before the expiration of the period of supersession specified in the notification issued
under sub-section (1), the Central Government shall reconstitute the Commission by a fresh
appointment of its Chairperson and other Members and in such case any person who had
vacated his office under clause (a) of sub-section (2) shall not be deemed to be disqualified for
re-appointment.
(4) The Central Government shall cause a notification issued under sub-section (1) and a full
report of any action taken under this section and the circumstances leading to such action to
be laid before each House of Parliament at the earliest.

UNIT III
Foreign Exchange Management Act, 1999 –

Section 2.   Definitions.Previous    Next

In this Act, unless the context otherwise requires,--
(a) Adjudicating Authority means an officer authorised under sub-
section (1) of section 16;
1
 [(b) Appellate Tribunal means the Appellate Tribunal referred to in
section 18;]
c) authorised person means an authorised dealer, money changer, off-
shore banking unit or any other person for the time being authorised
under sub-section (1) of section 10 to deal in foreign exchange or foreign
securities;
2
 [(cc) Authorised Officer means an officer of the Directorate of
Enforcement authorised by the Central Government under section 37A;]
(d) Bench means a Bench of the Appellate Tribunal;
(e) capital account transaction means a transaction which alters the
assets or liabilities, including contingent liabilities, outside India of persons
resident in India or assets or liabilities in India of persons resident outside
India, and includes transactions referred to in sub-section (3) of section 6;
f) Chairperson means the Chairperson of the Appellate Tribunal;
(g) chartered accountant shall have the meaning assigned to it in
clause (b) of sub-section (1) of section 2 of the Chartered Accountants
Act, 1949 (38 of 1949);
2
 [(gg) Competent Authority means the Authority appointed by the Central
Government under sub-section (2) of section 37A;]
(h) currency includes all currency notes, postal notes, postal orders,
money orders, cheques, drafts, travellers cheques, letters of credit, bills of
exchange and promissory notes, credit cards or such other similar
instruments, as may be notified by the Reserve Bank;
(i) currency notes means and includes cash in the form of coins and bank
notes;
(j) current account transaction means a transaction other than a capital
account transaction and without prejudice to the generality of the
foregoing such transaction includes,--
(i) payments due in connection with foreign trade, other current business,
services, and short-term banking and credit facilities in the ordinary
course of business,
(ii) payments due as interest on loans and as net income from
investments,
(iii) remittances for living expenses of parents, spouse and children
residing abroad, and
iv) expenses in connection with foreign travel, education and medical care
of parents, spouse and children;
(k) Director of Enforcement means the Director of Enforcement appointed
under sub-section (1) of section 36;
(l) export, with its grammatical variations and cognate expressions,
means--
(i) the taking out of India to a place outside India any goods,
(ii) provision of services from India to any person outside India;
(m) foreign currency means any currency other than Indian currency;
(n) foreign exchange means foreign currency and includes,--
(i) deposits, credits and balances payable in any foreign currency,
(ii) drafts, travellers cheques, letters of credit or bills of exchange,
expressed or drawn in Indian currency but payable in any foreign
currency,
(iii) drafts, travellers cheques, letters of credit or bills of exchange drawn
by banks, institutions or persons outside India, but payable in Indian
currency;
(o) foreign security means any security, in the form of shares, stocks,
bonds, debentures or any other instrument denominated or expressed in
foreign currency and includes securities expressed in foreign currency,
but where redemption or any form of return such as interest or dividends
is payable in Indian currency;
(p) import, with its grammatical variations and cognate expressions,
means bringing into India any goods or services;
(q) Indian currency means currency which is expressed or drawn in Indian
rupees but does not include special bank notes and special one rupee
notes issued under section 28A of the Reserve Bank of India Act, 1934 (2
of 1934);
(r) legal practitioner shall have the meaning assigned to it in clause (i) of
sub-section (1) of section 2 of the Advocates Act, 1961 (25 of 1961);
s) Member means a Member of the Appellate Tribunal and includes the
Chairperson thereof;

(t) notify means to notify in the Official Gazette and the expression
notification shall be construed accordingly;
(u) person includes--
(i) an individual,
(ii) a Hindu undivided family,
(iii) a company,
(iv) a firm,
(v) an association of persons or a body of individuals, whether
incorporated or not,
(vi) every artificial juridical person, not falling within any of the preceding
sub-clauses, and
(vii) any agency, office or branch owned or controlled by such person;
(v) person resident in India means--
(i) a person residing in India for more than one hundred and eighty-two
days during the course of the preceding financial year but does not
include--
(A) a person who has gone out of India or who stays outside India, in
either case--
(a) for or on taking up employment outside India, or
(b) for carrying on outside India a business or vocation outside India, or
(c) for any other purpose, in such circumstances as would indicate his
intention to stay outside India for an uncertain period;
(B) a person who has come to or stays in India, in either case, otherwise
than--
(a) for or on taking up employment in India, or
(b) for carrying on in India a business or vocation in India, or
(c) for any other purpose, in such circumstances as would indicate his
intention to stay in India for an uncertain period;
(ii) any person or body corporate registered or incorporated in India,
(iii) an office, branch or agency in India owned or controlled by a person
resident outside India,
(iv) an office, branch or agency outside India owned or controlled by a
person resident in India;
(w) person resident outside India means a person who is not resident in
India;
(x) prescribed means prescribed by rules made under this Act;
(y) repatriate to India means bringing into India the realised foreign
exchange and--
(i) the selling of such foreign exchange to an authorised person in India in
exchange for rupees, or
(ii) the holding of realised amount in an account with an authorised person
in India to the extent notified by the Reserve Bank,
and includes use of the realised amount for discharge of a debt or liability
denominated in foreign exchange and the expression repatriation shall be
construed accordingly;
(z) Reserve Bank means the Reserve Bank of India constituted under
sub-section (1) of section 3 of the Reserve Bank of India Act, 1934 (2 of
1934);
(za) security means shares, stocks, bonds and debentures, Government
securities as defined in the Public Debt Act, 1944 (18 of 1944), savings
certificates to which the Government Savings Certificates Act, 1959 (46 of
1959) applies, deposit receipts in respect of deposits of securities and
units of the Unit Trust of India established under sub-section (1) of section
3 of the Unit Trust of India Act, 1963 (52 of 1963)* or of any mutual fund
and includes certificates of title to securities, but does not include bills of
exchange or promissory notes other than Government promissory notes
or any other instruments which may be notified by the Reserve Bank as
security for the purposes of this Act;

(zb) service means service of any description which is made available to

potential users and includes the provision of facilities in connection with
banking, financing, insurance, medical assistance, legal assistance, chit
fund, real estate, transport, processing, supply of electrical or other
energy, boarding or lodging or both, entertainment, amusement or the
purveying of news or other information, but does not include the rendering
of any service free of charge or under a contract of personal service ;

(zc) Special Director (Appeals) means an officer appointed

under 3 [section 17];

(zd) specify means to specify by regulations made under this Act and the
expression specified shall be construed accordingly;
(ze) transfer includes sale, purchase, exchange, mortgage, pledge, gift,
loan or any other form of transfer of right, title, possession or lien.

Foreign Exchange Management Act (FEMA) & Foreign Exchange Regulation Act (FERA)
Foreign Exchange Management Act, 1999 (FEMA) came into force by an act of Parliament. It was
enacted on 29 December 1999. This new Act is in consonance with the frameworks of the World
Trade Organisation (WTO). It also paved the way for the Prevention of Money Laundering Act,
2002 which came into effect from July 1, 2005. This topic would be of importance in the IAS
Exam for both Prelims and Mains.

Quick Facts about FERA & FEMA for UPSC

What is FEMA?
It is a set of regulations that empowers the Reserve Bank of India to pass regulations and enables
the Government of India to pass rules relating to foreign exchange in tune with the foreign trade
policy of India.
Which Act did FEMA replace?
FEMA replaced an act called Foreign Exchange Regulation Act (FERA).
What is FERA and when was it passed?
FERA (Foreign Exchange Regulation Act) legislation was passed in 1973. It came into effect on
January 1, 1974. FERA was passed to regulate the financial transactions concerning foreign
exchange and securities. FERA was introduced when the Forex reserves of the country were very
low.
Why was FERA replaced?
FERA did not comply with the post-liberalization policies of the Government.
What is the main change brought in FEMA compared to FERA?
It made all the criminal offences as civil offences.
For comprehensive information on the Difference between FERA and FEMA, visit the given link.

Main Features of Foreign Exchange Management Act, 1999

1. It gives powers to the Central Government to regulate the flow of payments to and from a
person situated outside the country.
2. All financial transactions concerning foreign securities or exchange cannot be carried out
without the approval of FEMA. All transactions must be carried out through “Authorised
Persons.”
3. In the general interest of the public, the Government of India can restrict an authorized
individual from carrying out foreign exchange deals within the current account.
4. Empowers RBI to place restrictions on transactions from capital Account even if it is carried
out via an authorized individual.
5. As per this act, Indians residing in India, have the permission to conduct a foreign
exchange, foreign security transactions or the right to hold or own immovable property in a
 foreign country in case security, property, or currency was acquired, or owned when the
individual was based outside of the country, or when they inherit the property from
individual staying outside the country.

Categories of Authorised Persons under FEMA

Category Authorized Dealer Authorized Dealer Authorized Full Fledged

– Category I Category – II Dealer Money Changers

Category – III

Entities 1.Commercial 1. Upgraded FFMC 1. Select 1. Department of

Banks Financial and Post
2. Co-operative
other
2.State Co- Banks 2.Urban Co-
Institutions
operative Banks operative Banks
3. Regional Rural
3.Urban Co- Banks (RRB’s), 3. Other FFMC
operative Banks others

Activities As per RBI All activities Foreign Purchase of

Permitted guidelines, all permitted to FFMC exchange, foreign exchange
current and capital and specified non- and sale for
transactions
account trade related current private and
related
transactions account business visits
transactions abroad

Structure of FEMA.

1. The Head Office of FEMA, also known as Enforcement Directorate, headed by the Director
is located in New Delhi.
2. There are 5 zonal offices in Delhi, Mumbai, Kolkata, Chennai, and Jalandhar, each office is
headed by Deputy Director.
3. Every 5 zones are further divided into 7 sub-zonal offices headed by Assistant Directors
and 5 field units headed by Chief Enforcement Officers.

The above details would be of help to candidates preparing for the UPSC 2022 exams from the
perspective of the mains examination.
Section 10.   Authorised person.Previous    Next
(1) The Reserve Bank may, on an application made to it in this behalf,
authorise any person to be known as authorised person to deal in foreign
exchange or in foreign securities, as an authorised dealer, money
changer or off-shore banking unit or in any other manner as it deems fit.
(2) An authorisation under this section shall be in writing and shall be
subject to the conditions laid down therein.
(3) An authorisation granted under sub-section (1) may be revoked by the
Reserve Bank at any time if the Reserve Bank is satisfied that--
(a) it is in public interest so to do; or
(b) the authorised person has failed to comply with the condition subject
to which the authorisation was granted or has contravened any of the
provisions of the Act or any rule, regulation, notification, direction or order
made thereunder:
Provided that no such authorisation shall be revoked on any ground
referred to in clause (b) unless the authorised person has been given a
reasonable opportunity of making a representation in the matter.
(4) An authorised person shall, in all his dealings in foreign exchange or
foreign security, comply with such general or special directions or orders
as the Reserve Bank may, from time to time, think fit to give, and, except
with the previous permission of the Reserve Bank, an authorised person
shall not engage in any transaction involving any foreign exchange or
foreign security which is not in conformity with the terms of his
authorisation under this section.
(5) An authorised person shall, before undertaking any transaction in
foreign exchange on behalf of any person, require that person to make
such declaration and to give such information as will reasonably satisfy
him that the transaction will not involve, and is not designed for the
purpose of any contravention or evasion of the provisions of this Act or of
any rule, regulation, notification, direction or order made thereunder, and
where the said person refuses to comply with any such requirement or
make only unsatisfactory compliance therewith, the authorised person
shall refuse in writing to undertake the transaction and shall, if he has
reason to believe that any such contravention or evasion as aforesaid is
contemplated by the person, report the matter to the Reserve Bank.
(6) Any person, other than an authorised person, who has acquired or
purchased foreign exchange for any purpose mentioned in the declaration
made by him to authorised person under sub-section (5) does not use it
for such purpose or does not surrender it to authorised person within the
specified period or uses the foreign exchange so acquired or purchased
for any other purpose for which purchase or acquisition or foreign
exchange is not permissible under the provisions of the Act or the rules or
regulations or direction or order made thereunder shall be deemed to
have committed contravention of the provisions of the Act for the purpose
of this section.

Section 15. Power to compound contravention.

Show Related Subordinates

(1) Any contravention under section 13 may, on an application made by the person committing
such contravention, be compounded within one hundred and eighty days from the date of receipt
of application by the Director of Enforcement or such other officers of the Directorate of
Enforcement and officers of the Reserve Bank as may be authorised in this behalf by the Central
Government in such manner as may be prescribed.
(2) Where a contravention has been compounded under sub-section (1), no proceeding or further
proceeding, as the case may be, shall be initiated or continued, as the case may be, against the
committing such contravention under that section, in respect of the contravention so compounded.

Section 13.   Penalties.

(1) If any person contravenes any provision of this Act, or contravenes
any rule, regulation, notification, direction or order issued in exercise of
the powers under this Act, or contravenes any condition subject to which
an authorisation is issued by the Reserve Bank, he shall, upon
adjudication, be liable to a penalty up to thrice the sum involved in such
contravention where such amount is quantifiable, or up to two lakh rupees
where the amount is not quantifiable, and where such contravention is a
continuing one, further penalty which may extend to five thousand rupees
for every day after the first day during which the contravention continues.

1
[(1A) If any person is found to have acquired any foreign exchange,
foreign security or immovable property, situated outside India, of the
aggregate value exceeding the threshold prescribed under the proviso to
sub-section (1) of section 37A, he shall be liable to a penalty up to three
times the sum involved in such contravention and confiscation of the
value equivalent, situated in India, the Foreign exchange, foreign security
or immovable property.

(1B) If the Adjudicating Authority, in a proceeding under sub-section (1A)

deems fits, he may, after recording the reasons in writing, recommend for
the initiation of prosecution and if the Director of Enforcement is satisfied,
he may, after recording the reasons in writing, may direct prosecution by
filing a Criminal Complaint against the guilty person by an officer not
below the rank of Assistant Director.

(1C) If any person is found to have acquired any foreign exchange,

foreign security or immovable property, situated outside India, of the
aggregate value exceeding the threshold prescribed under the proviso to
sub-section (1) of section 37A, he shall be, in addition to the penalty
imposed under sub-section (1A), punishable with imprisonment for a term
which may extend to five years and with fine.

(1D) No court shall take cognizance of an offence under sub-section (1C)

of section 13 except as on complaint in writing by an officer not below the
rank of Assistant Director referred to in sub-section (1B).]

(2) Any Adjudicating Authority adjudging any contravention under sub-

section (1), may, if he thinks fit in addition to any penalty which he may
impose for such contravention direct that any currency, security or any
other money or property in respect of which the contravention has taken
place shall be confiscated to the Central Government and further direct
that the foreign exchange holdings, if any, of the persons committing the
contraventions or any part thereof, shall be brought back into India or
shall be retained outside India in accordance with the directions made in
this behalf.

Explanation.--For the purposes of this sub-section, “property” in respect of

which contravention has taken place, shall include--

(a) deposits in a bank, where the said property is converted into such
deposits;

(b) Indian currency, where the said property is converted into that
currency; and

(c) any other property which has resulted out of the conversion of that
property.

Section 16. Appointment of Adjudicating Authority.

(1) For the purpose of adjudication under section 13, the Central Government may, by an order
published in the Official Gazette, appoint as many officers of the Central Government as it may
think fit, as the Adjudicating Authorities for holding an inquiry in the manner prescribed after giving
the person alleged to have committed contravention under section 13, against whom a complaint
has been made under sub-section (3) (hereinafter in this section referred to as the said person) a
reasonable opportunity of being heard for the purpose of imposing any penalty:
Provided that where the Adjudicating Authority is of opinion that the said person is likely to
abscond or is likely to evade in any manner, the payment of penalty, if levied, it may direct the said
person to furnish a bond or guarantee for such amount and subject to such conditions as it may
deem fit.
(2) The Central Government shall, while appointing the Adjudicating Authorities under sub-section
(1), also specify in the order published in the Official Gazette, their respective jurisdictions.
(3) No Adjudicating Authority shall hold an enquiry under sub-section (1) except upon a complaint
in writing made by any officer authorised by a general or special order by the Central Government.
(4) The said person may appear either in person or take the assistance of a legal practitioner or a
chartered accountant of his choice for presenting his case before the Adjudicating Authority.
(5) Every Adjudicating Authority shall have the same powers of a civil court which are conferred on
the Appellate Tribunal under sub-section (2) of section 28 and--
(a) all proceedings before it shall be deemed to be judicial proceedings within the meaning of
sections 193 and 228 of the Indian Penal Code (45 of 1860);
(b) shall be deemed to be a civil court for the purposes of sections 345 and 346 of the Code of
Criminal Procedure, 1973 (2 of 1974).
(6) Every Adjudicating Authority shall deal with the complaint under sub-section (2) as
expeditiously as possible and endeavour shall be made to dispose of the complaint finally within
one year from the date of receipt of the complaint:
Provided that where the complaint cannot be disposed of within the said period, the Adjudicating
Authority shall record periodically the reasons in writing for not disposing of the complaint within
the said period.

Section 17.   Appeal to Special Director (Appeals).Previous    Next

(1) The Central Government shall, by notification, appoint one or more
Special Directors (Appeals) to hear appeals against the orders of the
Adjudicating Authorities under this section and shall also specify in the
said notification the matter and places in relation to which the Special
Director (Appeals) may exercise jurisdiction.
(2) Any person aggrieved by an order made by the Adjudicating Authority,
being an Assistant Director of Enforcement or a Deputy Director of
Enforcement, may prefer an appeal to the Special Director (Appeals).
(3) Every appeal under sub-section (1) shall be filed within forty-five days
from the date on which the copy of the order made by the Adjudicating
Authority is received by the aggrieved person and it shall be in such form,
verified in such manner and be accompanied by such fee as may be
prescribed:
Provided that the Special Director (Appeals) may entertain an appeal after
the expiry of the said period of forty-five days, if he is satisfied that there
was sufficient cause for not filing it within that period.
(4) On receipt of an appeal under sub-section (1), the Special Director
(Appeals) may after giving the parties to the appeal an opportunity of
being heard, pass such order thereon as he thinks fit, confirming,
modifying or setting aside the order appealed against.
(5) The Special Director (Appeals) shall send a copy of every order made
by him to the parties to appeal and to the concerned Adjudicating
Authority.
(6) The Special Director (Appeals) shall have the same powers of a civil
court which are conferred on the Appellate Tribunal under sub-
section (2) of section 28 and
(a) all proceedings before him shall be deemed to be judicial proceedings
within the meaning of sections 193 and 228 of the Indian Penal Code (45
of 1860);
(b) shall be deemed to be a civil court for the purposes of sections 345
and 346 of the Code of Criminal Procedure, 1973 (2 of 1974).

Section 18. Appellate Tribunal.

1 [18. Appellate Tribunal.--The Appellate Tribunal constituted under sub-section (1) of section 12
of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (13 of
1976), shall, on and from the commencement of Part XIV of Chapter VI of the Finance Act, 2017
(7 of 2017), be the Appellate Tribunal for the purposes of this Act and the said Appellate Tribunal
shall exercise the jurisdiction, powers and authority conferred on it by or under this Act.]

Section 19.   Appeal to Appellate Tribunal.Previous    Next

(1) Save as provided in sub-section (2), the Central Government or any
person aggrieved by an order made by an Adjudicating Authority, other
than those referred to in sub-section (1) of section 17, or the Special
Director (Appeals), may prefer an appeal to the Appellate Tribunal:

Provided that any person appealing against the order of the Adjudicating
Authority or the Special Director (Appeals) levying any penalty, shall while
filing the appeal, deposit the amount of such penalty with such authority as
may be notified by the Central Government:

Provided further that where in any particular case, the Appellate Tribunal is
of the opinion that the deposit of such penalty would cause undue hardship
to such person, the Appellate Tribunal may dispense with such deposit
subject to such conditions as it may deem fit to impose so as to safeguard
the realisation of penalty.

(2) Every appeal under sub-section (1) shall be filed within a period of forty-

five days from the date on which a copy of the order made by the
Adjudicating Authority or the Special Director (Appeals) is received by the
aggrieved person or by the Central Government and it shall be in such
form, verified in such manner and be accompanied by such fee as may be
prescribed:

Provided that the Appellate Tribunal may entertain an appeal after the
expiry of the said period of forty-five days if it is satisfied that there was
sufficient cause for not filing it within that period.

(3) On receipt of an appeal under sub-section (1), the Appellate Tribunal

may, after giving the parties to the appeal an opportunity of being heard,
pass such orders thereon as it thinks fit, confirming, modifying or setting
aside the order appealed against.

(4) The Appellate Tribunal shall send a copy of every order made by it to
the parties to the appeal and to the concerned Adjudicating Authority or the
Special Director (Appeals), as the case may be.
(5) The appeal filed before the Appellate Tribunal under sub-
section (1) shall be dealt with by it as expeditiously as possible and
endeavour shall be made by it to dispose of the appeal finally within one
hundred and eighty days from the date of receipt of the appeal:
Provided that where any appeal could not be disposed of within the said
period of one hundred and eighty days, the Appellate Tribunal shall record
its reasons in writing for not disposing off the appeal within the said period.
(6) The Appellate Tribunal may, for the purpose of examining the legality,
propriety or correctness of any order made by the Adjudicating Authority
under section 16 in relation to any proceeding, on its own motion or
otherwise, call for the records of such proceedings and make such order in
the case as it thinks fit.
Section 36.   Directorate of Enforcement.Previous    Next
(1) The Central Government shall establish a Directorate of Enforcement
with a Director and such other officers or class of officers as it thinks fit, who
shall be called officers of Enforcement, for the purposes of this Act.
(2) Without prejudice to the provisions of sub-section (1), the Central
Government may authorise the Director of Enforcement or an Additional
Director of Enforcement or a Special Director of Enforcement or a Deputy
Director of Enforcement to appoint officers of Enforcement below the rank of
an Assistant Director of Enforcement.
(3) Subject to such conditions and limitations as the Central Government
may impose, an officer of Enforcement may exercise the powers and
discharge the duties conferred or imposed on him under this Act.

Section 37. Power of search, seizure, etc.Previous Next

(1) The Director of Enforcement and other officers of Enforcement, not below the rank of an
Assistant Director, shall take up for investigation the contravention referred to in section 13.
(2) Without prejudice to the provisions of sub-section (1), the Central Government may also, by
notification, authorise any officer or class of officers in the Central Government, State Government
or the Reserve Bank, not below the rank of an Under Secretary to the Government of India to
investigate any contravention referred to in section 13.
(3) The officers referred to in sub-section (1) shall exercise the like powers which are conferred on
income-tax authorities under the Income-tax Act, 1961 (43 of 1961) and shall exercise such
powers, subject to such limitations laid down under that Act.

UNIT IV

A Non-Banking Financial Company (NBFC) is a financial institution.  It carries on businesses

under the Companies Act 2013  like:-
 receiving personal loans and advances,
 Acquisition of stocks or shares,
 Leasing,
 Hire-purchase,
 Insurance business, and
 chit fund business.
In India, the authority to control the NBFC registration is with the Reserve Bank Of
India(RBI). Non-Banking Financial Company helps people with its variety of banking and non-
banking services. They need to follow the rules and regulations made by RBI. According to the
provisions mentioned in Chapter III B of the RBI Act 1934, it’s function is regulated and
supervised.  NBFC Registration must be done as per the rules & regulations referred to in Section
45-IA of the RBI Act 1934 and as per companies Act 2013. There is a necessity of minimum net
owned fund of Rs. 2 Crore in NBFC.
The main activity of their business is to raise funds from public depositors and investors and then
lend to borrowers according to rules and regulations made by the Reserve Bank of India. They are
an alternative to the banking and financial sector.
India’s Regulatory Requirements of NBFC

After obtaining “Certificate of Registration” from the RBI only then NBFCs can start its operations.
 The company should be registered as a public limited company or private limited
company in India
 The company should have mininmum net owned fund Rs.2 Crore.
 
(Note that, the net owned fund will be calculated as per the last audited balance sheet of
the company.)
 NBFCs can accept or renew public deposits for a minimum period of 12 months and a
maximum period of 60 months.
 Also, they can’t accept deposits repayable on demand.
 NBFCs can offer interest rates not more than the ceiling rates referred by RBI from time
to time.
 Offering gifts/incentives or any other additional benefit to the depositors is not allowed.
 There is a necessity of minimum investment-grade credit rating.
 There is no assurance by RBI for repayment of deposits by NBFCs.
 NBFC has to submit hard copies of the documents through the regional office of RBI.
Must Read: Prerequisites of NBFC Registration
Types of NBFCs

NBFC Regulation | Types |Legal Raasta

NBFCs can be categorized on the basis of their liabilities or activities. Below we give in detail
about them.
Based on Liabilities:

 Deposit Accepting NBFCs (NBFCs-D) [Deposit Taking]

 Non-Deposit NBFCs (NBFCs-ND) [Non-Deposit Taking]
 Systematically Important NBFCs-ND (NBFCs-ND-SI)
 Others NBFCs-ND
Based on Activities:

Asset Finance Company (AFC)

These type of companies involve financing physical assets such as:-
 Automobiles,
 Material handling equipment, and
 Industrial machines supporting economic activity.
Equipment Leasing Company
Equipment Leasing Company is a type of financial institution which carries its own principal
business activity of leasing of equipment.
Hire Purchase Finance Company
It is a type of financial institution that carries its own principal business activity of hire purchase
transactions.
Investment Company (IC)
It is a type of financial institution whose main business is related to the acquisition of securities.
Loan Companies (LC)
It is a type of institution which provides finance in the form of loans or advances. And they obtain
funds by collecting deposits from the public, as well as give loans to small-scale traders.
Infrastructure Finance Company (IFC)
Net own funds of Infrastructure Finance Company is Rs.300 Crore, Credit rating ‘A’ or equivalent
credit rating, CRAR of 15% and 75% in infrastructure loans.
Systemically Important Core Investment Company (CIC-ND-SI)
This company has deployed at least 90% of its assets(assets of Rs. 100 crores and above) in the
form of investment in shares, debt instruments or loans in group companies. These companies
also accept public funds.
Must read: Regulations governing NBFCs in India
Infrastructure Debt Fund (IDF-NBFC)
 These types of companies can be set up either as a trust or as a company and they are
meant to infuse funds into the infrastructure sector.
 But if Infrastructure Debt Funds can set up as a trust, then it is a mutual fund. And it will
be known as IDF-MF which is regulated by SEBI. The mutual fund would issue rupee-
denominated units with 5 years of maturity to collect funds for the infrastructure projects.
 And in case Infrastructure Debt Funds can set up as a company, it will be an NBFC
which will work under the guideline of RBI. Such companies are known as IDF-
NBFC. IDF-NBFC is a type of non-deposit taking NBFC that has Net Owned Fund of Rs
300 crores or more and which invests only in Public-Private Partnerships (PPP). The
post-commencement operations date (COD) infrastructure projects which have
completed at least 1 year of satisfactory commercial operation and become a party to a
Tripartite Agreement.
Non-Banking Financial Company-Micro Finance Institution (NBFC-MFI)
It is a non-deposit NBFC having it’s 85% of assets in the form of microfinance.
Microfinance needs to be in the form of loans given to those who all are having an annual income
of Rs. 60,000 in rural areas and Rs. 120,000 in urban areas. Also, loans should not exceed Rs.
50,000. The duration of the loan should not be less than 24 months.
Non-Banking Financial Company 
These companies should have a minimum Net Owned Fund of Rs. 5 Crore and its financial assets
in the factoring business should constitute a minimum of 75 percent of its total assets. And its
income derived through factoring business should be a minimum 75 percent of its gross income.
Housing Finance Company
It is a type of company whose main business is of financing of addition or construction of houses.
And also includes the development of plots of lands for the construction of new houses.
Chit Fund Company
Chit Fund Company collects deposits from members on a periodic basis and distributes those
funds between them as prizes. Members who enter into an agreement with chit Company
subscribe for a particular period. The Chit Fund Act, 1982 governs the functions of the Chit Fund
Company administered by the State Governments. And the deposit-taking activities works under
the guideline of  Reserve Bank of India(RBI)
Mutual Benefit Finance Company
These Companies also called “Nidhis”, are the non-banking finance companies that allow its
members to pool their money into predetermined investment objective. The main sources of
funds:-
 share capital,
 member deposits,
 public deposit
Must read about Increase in Authorised Share Capital
 Residuary Non-Banking Company
This company is a type of NBFC having the main business of the receiving of deposits, under any
scheme, arrangement or in any other way and not being an investment, asset financing, and loan
company. These types of companies have to maintain investments as per regulations of RBI, in
addition to liquid assets.

Consumer Protection Act, 1986

The consumer protection act 1986 notes give detailed information on the Consumer Protection
Act, 1986, which was approved to provide quicker and simpler access to redressal consumer
grievances.

TABLE OF CONTENT
 What is the Consumer?
 Concept of Consumer Protection
 Features of Consumer Protection Act 1986
Consumer Protection Act 1986 was enacted for superior protection of the interest of consumers.
The provision of the Act came into force from 15-04-1987. Consumer Protection Act forced strict
liability on a manufacturer in case of the supply of faulty goods by him and strict liability on a
service provider in case of shortage in rendering his services. 

To safeguard the interests and rights of consumers, quasi-judicial machinery is sought to be set up
at the district, state and central levels. This Act applies to the whole of India except the state of
Jammu and Kashmir. This Act was replaced by the ‘Consumer Protection Act 2019’ which came
into force on 24th July 2020.

What is the Consumer?

Consumer refers to persons or households that use goods and services generated within the
economy. The consumer is defined as someone who obtains goods or services for direct use or
possession rather than for exchange, resale or use in production and manufacturing.

For example:

When your mother buys apples for you and consumes them, your mother and yourself are treated
as consumers.

Check the complete UPSC Syllabus

Concept of Consumer Protection

Consumer protection means protecting the rights and interests of consumers. In other words, it
refers to the measures taken to protect consumers from unprincipled and unethical misconduct by
the business and provide them quick redressal of their grievances.

Features of Consumer Protection Act, 1986

 It applies to all goods, services and inequitable trade practices unless specified and exempted by
the Central Government
 It covers all sectors, private, public or co-operative
 It provides the establishment or setting up of consumer protection councils at the district, state and
central levels to encourage and protect the rights of consumers and three-tier quasi-judicial
machinery to deal with consumer grievances and disputes

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Objectives of Consumer Protection

 To protect the consumer from abuse

 To provide a venue for grievances/compensation
 To ensure a superior quality of living by upgrading consumer products and services
 Protecting the consumer against immoral and unfair activities of the traders

Need for Consumer Protection Act

The necessity of acquiring measures to protect the interest of consumers come to light mainly due
to the vulnerable position of the consumers.

Social Responsibility: It is the moral responsibility of the business to serve the interest of
consumers. In line with this principle, producers and traders have to provide the right quality and
quantity of goods at fair prices.
Increasing Awareness: Consumers are becoming more mature and conscious of their rights
against the malpractices of the business. Many consumer organisations and associations are
making efforts to build consumer awareness.
Consumer Satisfaction: The Father of the Nation, Mahatma Gandhi, had once called
manufacturers and traders to” treat your consumers as god”. Consumer satisfaction is the only key
to the success of the business. Hence, people in business should take every step to serve the
interests of consumers by providing them quality goods and services at a reasonable price.
Survival and Growth of Business: Businesses have to be in the service of consumer interests
for their survival and growth. On account of globalisation and the rise in competition, any business
organisation which indulges in malpractices or fails to provide improved services to its ultimate
consumer shall find it difficult to continue.
Principle of Trusteeship: Resources/Assets were contributed by society. They are merely the
trustees of the wealth and, therefore, they should use such resources effectively for the sake of
the community, which includes the consumer. 
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Rights of the Consumer

 Right to Safety – To be secured against the marketing of goods on delivering dangerous services
to health and life
 Right to Information – To be protected against dishonest or misleading advertising or labelling
and the right to be given the facts and figures needed to make an informed choice
 Right to Choice –To choose products at competitive prices with an assurance of satisfactory
quality
 Right to Representation – To express consumer interests in the making and execution of
government policies
 Right to Seek Redress – To be compensated for misrepresentation, shoddy goods or
unsatisfactory services
 Right to Consumer Education –To Acquire the Knowledge and skills necessary to be an
informed customer
 Right to Basic Needs – This Guarantees adequate food, shelter, health care, clothing, education
and sanitation

Filing a Complaint

There are three tier Consumer Grievances machinery under the Consumer Protection Act, 1986
and their jurisdiction.

 District Forum – The value of goods or compensation claim does not exceed Rs. 20 lakh.
 State Forum – The value of goods or compensation is more than Rs. 20 lakh but does not exceed
one crore.
 National Forum – It takes up all the cases exceeding the value of Rs. 1 crore.

Conclusion

The Consumer Protection Act refers to the measures taken to protect consumers from
unprincipled and unethical misconduct by the business and provide them quick redressal of their
grievances. This Act is for the protection of the interest and rights of the consumer, and this spirit
has been reflected in its provisions. 

The inclusion of e-commerce has broadened the Act’s scope, making it easier for the consumer to
hold food aggregators responsible for violating their rights.

2. Definitions
(b) "complainant" means- (i) a consumer; or (ii) any voluntary consumer association registered
under the Companies Act, 1956 (1 of 1956), or under any other law for the time being in force; or
(iii) the Central Government or any State Government, 2[(iv) one or more consumers, where there
are numerous consumers having the same interest;] who or which makes a complaint;

(d) "consumer" means any person who- (i) buys any goods for a consideration which has been
paid or promised or partly paid and partly promised, or under any system of deferred payment and
includes any user of such goods other than the person who buys such goods for consideration
paid or promised or partly paid or partly promised, or under any system of deferred payment when
such use is made with the approval of such person, but does not include a person who obtains
such goods for resale or for any commercial purpose; or
(ii) 1[hires or avails of] any services for a consideration which has been paid or promised or partly
paid and partly promised, or under any system of deferred payment and includes any beneficiary
of such services other than the person who 1[hires or avails of] the services for consideration paid
or promised, or partly paid and partly promised, or under any system of deferred payments, when
such services are availed of with the approval of the first-mentioned person; 2[Explanation : For
the purposes of sub-clause (i), "commercial purpose" does not include use by a consumer of
goods bought and used by him exclusively for the purpose of earning his livelihood, by means of
self-employment;]

(i) "goods" means goods as defined in the Sale of Goods Act, 1930 (3 of 1930)

(e) "consumer dispute" means a dispute where the person against whom a complaint has been
made, denies or disputes the allegations contained in the complaint;

2[(r) "unfair trade practice" means a trade practice which, for the purpose of promoting the sale,
use or supply of any goods or for the provision of any service, adopts any unfair method or unfair
or deceptive practice including any of the following practices, namely,-
(1) the practice of making any statement, whether orally or in writing or by visible representation
which,-
(i) falsely represents that the goods are of a particular standard, quality, quantity, grade,
composition, style or model;
(ii) falsely represents that the services are of a particular standard, quality or grade;
(iii) falsely represents any re-built, second-hand, renovated, reconditioned or old goods as new
goods;
(iv) represents that the goods or services have sponsorship, approval, performance,
characteristics, accessories, uses or benefits which such goods or services do not have;
(v) represents that the seller or the supplier has a sponsorship or approval or affiliation which
such seller or supplier does not have;
(vi) makes a false or misleading representation concerning the need for, or the usefulness of, any
goods or services;
(vii) gives to the public any warranty or guarantee of the performance, efficacy or length of life of
a product or of any goods that is not based on an adequate or proper test thereof:
PROVIDED that where a defence is raised to the effect that such warranty or guarantee is based
on adequate or proper test, the burden of proof of such defence shall lie on the person raising
such defence;
(viii) makes to the public a representation in a form that purports to be-
(i) a warranty or guarantee of a product or of any goods or services; or
(ii) a promise to replace, maintain or repair an article or any part thereof or to repeat or continue a
service until it has achieved a specified result,
if such purported warranty or guarantee or promise is materially misleading or if there is no
reasonable prospect that such warranty, guarantee or promise will be carried out;
(ix) materially misleads the public concerning the price at which a product or like products or
goods or services, have been or are, ordinarily sold or provided, and, for this purpose, a
representation as to price shall be deemed to refer to the price at which the product or goods or
services has or have been sold by sellers or provided by suppliers generally in the relevant
market unless it is clearly the price at which the product has been sold or services have been
provided by the person by whom or on whose behalf the representation is made;
(x) gives false or misleading facts disparaging the goods, services or trade of another person.
Explanation : For the purposes of clause (1), a statement that is-
(a) expressed on an article offered or displayed for sale, or on its wrapper or container; or
(b) expressed on anything attached to, inserted in, or accompanying, an article offered or
displayed for sale, or on anything on which the article is mounted for display or sale; or
(c) contained in or on anything that is sold, sent, delivered, transmitted or in any other manner
whatsoever made available to a member of the public,
shall be deemed to be a statement made to the public by, and only by, the person who had
caused the statement to be so expressed, made or contained;
(2) permits the publication of any advertisement whether in any newspaper or otherwise, for the
sale of supply at a bargain price, of goods or services that are not intended to be offered for sale
or supply at the bargain price, or for a period that is, and in quantities that are, reasonable, having
regard to the nature of the market in which the business is carried on, the nature and size of
business, and the nature of the advertisement;.

The Goods and Services Tax (Compensation to States) Act, 2017 Salient Features 1. Levy of Tax:
The State GST (SGST) and Central GST (CGST) shall be levied on all the transactions of goods
and services, concurrently.
2. Utilization of Levy: Levies from State GST (SGST) & Central GST (CGST) shall form part of
State and the Centre respectively and no cross-utilization shall be allowed. 3. Availability of Tax
Credit: In respect of taxes paid on any supply of goods or services or both used or intended to be
used in the course business.
4. Destination based Tax: The GST is a destination based tax on consumption of Goods and
Services. Hence the credit of SGST shall be transferred to the Destination State in the form of
Integrated GST (IGST). IGST will be imposed on all Inter-State Transactions.
5. Assessment : Registered person will be allowed himself to assess the taxes payable under the
GST Laws and furnish a return for each Tax Period.
6. Threshold Limit: There shall be a taxable limit (presently, `. 10 Lakhs in North Eastern States &
`. 20 Lakhs in rest of the county)
7. Composition Scheme The GST Laws will provide a composition scheme for small dealers
(presently, turnover of `. 75 Lakhs).
8. GSTIN or GST Identification Number Every registrants or dealers ( including Exporters and
Importers) shall be given a PAN based TIN number which shall be a common to the both the State
GST and Central GST.
9. Compensation to States The GST Laws provides for payment of compensation to the States for
loss of revenue, if any, arising out of implementing of the Goods and Services Tax for a period of 5
years.
10. The GST Council The Council is a quasi – judicial body of States and the Centre, represented
by the State Finance Ministers or Taxation Ministers and the Finance Minister of India. The key
role of this Council is to make recommendations on various provisions of GST Laws to the State
and the Centre.
11. Anti-Profiteering Measures – It is expected the GST Laws will bring down the prices of goods
and services once implemented. To ensure the pass of such benefits to end users or the
customers, the government has put anti-profiteering measures. 12. Transition Elaborate
‘Transitions Provisions” for smooth transition of existing tax payers to new Indirect Tax Regime
provided. It is expected that the GST Laws or new indirect tax regime, brings benefits to all the
stakeholders viz. industry, government and the citizens. Further, lower the cost of goods and
services, boost the economy and make our products and services globally competitive.

What Is Corporate Governance?

Corporate governance is the system of rules, practices, and processes  by which a firm is directed
and controlled. Corporate governance essentially involves balancing the interests of a company's
many stakeholders, such as shareholders, senior management executives, customers, suppliers,
financiers, the government, and the community.

Since corporate governance provides the framework for attaining a company's objectives, it
encompasses practically every sphere of management, from action plans and internal controls to
performance measurement and corporate disclosure.

KEY TAKEAWAYS

 Corporate governance is the structure of rules, practices, and processes used to direct and
manage a company.
 A company's board of directors is the primary force influencing corporate governance.
 Bad corporate governance can cast doubt on a company's operations and its ultimate
profitability.
 Corporate governance covers the areas of environmental awareness, ethical behavior,
corporate strategy, compensation, and risk management.
 The basic principles of corporate governance are accountability, transparency, fairness,
responsibility, and risk management.

Understanding Corporate Governance

Governance refers specifically to the set of rules, controls, policies, and resolutions put in place to
direct corporate behavior. A board of directors is pivotal in governance. Proxy advisors
and shareholders are important stakeholders who can affect governance.

Communicating a firm's corporate governance is a key component of community and investor

relations. For instance, Apple Inc.'s investor relations site outlines its corporate leadership (its
executive team and board of directors). It provides corporate governance information including its
committee charters and governance documents, such as bylaws, stock ownership guidelines,
and articles of incorporation .1

Most companies strive to have exceptional corporate governance. For many shareholders, it is
not enough for a company merely to be profitable. It also must demonstrate good corporate
citizenship through environmental awareness, ethical behavior, and sound corporate governance
practices.

Benefits of Corporate Governance

 Good corporate governance creates transparent rules and controls, provides guidance to
leadership, and aligns the interests of shareholders, directors, management, and
employees.
 It helps build trust with investors, the community, and public officials.
 Corporate governance can provide investors and stakeholders with a clear idea of a
company's direction and business integrity.
 It promotes long-term financial viability, opportunity, and returns.
  It can facilitate the raising of capital.
 Good corporate governance can translate to rising share prices.
 It can lessen the potential for financial loss, waste, risks, and corruption.
 It is a game plan for resilience and long-term success.

PAPER- VII CORPORATE AND SECURITIE LAWS

Unit-I:
Securities Contracts (Regulation) Act, 1956 – Interpretation Clause - Meaning and Definition of
Stock Exchange -Recognition of Stock Exchange - Contracts in Securities -Listing of securities -
Securities Appellate Tribunal (SAT)- Constitution, Powers and Functions - Appeals from orders of
SAT – Title to Dividends-Securities and Exchange Board of India Act, 1992 -Interpretation
ClauseEstablishment of the Securities and Exchange Board of India - Constitution, Powers and
Functions
- Registration of Stock Brokers , Sub-brokers ,& Share Transfer Agents - Prohibition of
Manipulative
and Deceptive practices-Inside Trading and Substantial Acquisition of Securities or
ControlAdjudication of disputes- Appeals to Securities Appellate Tribunal, HCs & SC- Capital
Markets
regulations.
Unit-II:
Depositories Act, 1996 - Definition of Depository Board and Beneficial Owner - Certificate of
Commencement of Business - Rights and obligations of Depositories, participants, issuers and
beneficial Owners Competition Act, 2002- Applicability of the Act - Definitions –Prohibition of
certain agreements - abuse of Dominant position and Regulation of combinations - Competition
Commission of India –Powers-- Functions - Power of Central Government to supersede
Commission -Penalties - Appeals - Competition Advocacy NCALT: Powers and Jurisdiction,
Position
under the Finance Act.
Unit-III:
Foreign Exchange Management Act, 1999 - Definitions - Regulation and Management of Foreign
Exchange - Authorised Person – Contravention - penalties - adjudication and Appeal – FEMA
Appellate Tribunal: Powers and Jurisdiction, Directorate of Enforcement : Powers and Functions.
Unit-IV:
Non-banking finance Companies - Formation and regulation ofNBFC's-Consumer Protection Act,
1986 - Salient Features - Definitions of complainant, Consumer, Manufacturer, Consumer Dispute,
Service, Goods, Unfair Trade Practices - Liability of Companies to consumers- Basic Features of
the
GST Act,2017 Corporate Governance -International dimensions of Company. Law.