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CS Professional · Drafting, Pleadings and Appearances · Adjudications and Appeals under SEBI Laws

A depository's bye-laws under section 26 of the Depositories Act do not contain a procedure for proceeding against a participant that breaches the regulations. SEBI by written order directs the depository to make the needed bye-laws within 60 days. The depository neglects to comply. What may SEBI do?

SEBI may make the bye-laws itself. Under section 26(4) of the Depositories Act, if the depository fails to comply with the Board's written order within the specified period, the Board may make, amend or revoke the bye-laws in the form specified or with modifications it thinks fit.

  1. AOnly report the matter to the Central Government for action
  2. BMake the bye-laws itself, in the form specified in the order or with such modifications as it thinks fitCorrect
  3. CWait for the depository to apply for an extension, with no power to act itself
  4. DApproach the civil court for a direction to the depository

Explanation

Section 26(2)(o) requires bye-laws to cover proceeding against a participant in breach, with suspension and expulsion. Under section 26(3) the Board may direct bye-laws by written order, and under 26(4), on failure to comply, it may itself make, amend or revoke them in the specified form or with modifications. A civil court is not the route, and the Central Government has no role here.

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