Miscellaneous
Section 27. Title to dividends.
27(1).
When a person holds a security and his name is recorded in the company’s books then:
The company declares a dividend for that security.
Even if the person has already sold/transferred the security for consideration:
He is still legally allowed to receive and keep the dividend.
However, there is an exception in favour of the buyer (transferee).
The buyer can claim the dividend if:
He submits (lodges) the security and transfer documents to the company.
He also has to get them lodged within 15 days from the date the dividend became due.
If the buyer does this in time , the dividend will go to the buyer.
If the buyer does not do this in time , the original holder (transferor) keeps the dividend.
Explanation:
The 15 day time period given under this section shall be extended in the following circumstances:
(i).
If the transferee (buyer) dies before claiming the dividend then:
His legal representative steps in to claim the dividend.
So , in this case, the time limit is extended.
The extension equals the actual time taken by the legal representative to establish the claim.
So, the delay caused due to death is taken into account.
(ii).
If the transferee (buyer) loses the transfer deed
The loss happens due to theft, or any reason beyond his control
Because of this, he cannot complete the transfer process on time
In such a case, the time limit is extended
The extension equals the actual time taken to get a replacement of the transfer deed
(iii).
If the transferee (buyer) has to lodge the security and transfer documents with the company but:
Sometimes, there is a delay due to postal issues.
This delay is not the fault of the transferee.
In such a case, the time limit is extended.
The extension equals the actual number of days delayed because of the post.
So, genuine postal delays are taken into account
27(2).
The provisions contained in 27(1) shall not affect the following:
(a).
When a company declares a dividend on a security:
It looks at its official records to see who the holder is.
The name that appears in the company’s books at that time is treated as the current holder.
Even if the security has been transferred, but not yet updated in records:
The company does not consider the new owner.
The company proceeds to pay the dividend to the registered holder.
The company is legally protected in doing so.
So , the company relies on its records, and pays the person whose name is officially recorded at that time.
(b).
When a person buys a security (transferee):
He submits the transfer to the company for registration.
Under circumstances , The company refuses to register the transfer in his name then:
Because of this, he does not become the registered holder.
However, his rights do not end here:
The transferee can still take action against the transferor (seller) or any other relevant person.
He can enforce his rights arising out of the transfer (like ownership rights, claims, etc.).
This is independent of the company’s refusal.
So , even if the company refuses registration, the buyer can still enforce his rights against the seller or others involved.
Section 27 A. Right to receive income from collective investment scheme
The person whose name is recorded in the books of the collective investment scheme is treated as the legal holder of the units/securities.
That person has the right to receive income (like dividends or distributions) declared on those units.
This right continues even if the holder has already transferred (sold) the units to someone else for consideration.
The scheme will still pay income to the registered holder because it relies on its records, not actual ownership.
The registered holder is legally allowed to receive and retain that income.
The transferee (buyer) can claim the income only if certain conditions are fulfilled.
The transferee must submit (lodge) the transferred units along with all required transfer documents to the scheme.
This submission must be done within 15 days from the date on which the income became due.
If the transferee complies within this 15-day period, the scheme may recognize the transferee’s claim to the income.
If the transferee fails to comply within 15 days, the right to income remains with the original registered holder.
In such a case, the transferee cannot claim the income from the scheme.
The transferee’s only possible remedy would then be against the transferor, not the scheme.
The rule ensures administrative convenience and certainty by relying on the register of holders.
The critical factor is timing — the 15-day window from when the income becomes due.
If that window is missed, the transferee loses the right to claim income from the scheme.
Explanation:
The 15 day time period given under this section shall be extended in the following circumstances:
(i).
If the transferee (buyer) dies before claiming the dividend then:
His legal representative steps in to claim the dividend.
So , in this case, the time limit is extended.
The extension equals the actual time taken by the legal representative to establish the claim.
So, the delay caused due to death is taken into account.
(ii).
If the transferee (buyer) loses the transfer deed
The loss happens due to theft, or any reason beyond his control
Because of this, he cannot complete the transfer process on time
In such a case, the time limit is extended
The extension equals the actual time taken to get a replacement of the transfer deed
(iii).
If the transferee (buyer) has to lodge the security and transfer documents with the company but:
Sometimes, there is a delay due to postal issues.
This delay is not the fault of the transferee.
In such a case, the time limit is extended.
The extension equals the actual number of days delayed because of the post.
So, genuine postal delays are taken into account.
27A(2).
The provisions in Section 27A(1) shall not affect:
(a).
A collective investment scheme declares income on its units or other instruments.
It checks its records to identify who the holder is.
The person whose name is currently registered in the collective investment scheme books is treated as the holder.
Even if the units have been transferred but not yet updated:
The collective investment scheme does not consider the new owner.
The collective investment scheme proceeds to pay the income to the registered holder.
It has the legal right to do so.
So , collective investment scheme relies on its records and pays the person whose name is officially registered at that time.
(b).
A person buys units or instruments of a collective investment scheme (transferee),
He applies to get the transfer registered in his name.
Under circumstances , the collective investment scheme refuses to register the transfer then:
Because of this, he does not become the registered holder.
But his rights do not end here:
The transferee can still take action against the transferor (seller) or any other concerned person.
He can enforce his rights arising out of the transfer (like ownership claims, recovery, etc.).
This right exists even though the collective investment scheme has refused registration.
So , refusal by the mutual fund does not destroy the buyer’s rights against the seller or others involved.
Section 27 B. Right to receive income from mutual fund.
The person whose name is recorded in the books of the mutual fund is treated as the legal holder of the units or instruments
That person has the right to receive income (like dividends or distributions) declared by the mutual fund on those units.
This right exists even if the holder has already transferred (sold) the units to someone else for consideration.
The mutual fund will rely only on its records, so it will treat the registered holder as entitled to income.
The registered holder is legally allowed to both receive and keep that income.
The transferee (buyer) can claim the income only in a specific situation.
The transferee must lodge the transferred units with the mutual fund.
The transferee must also submit all required transfer documents to the mutual fund.
This must be done for the purpose of getting the units registered in the transferee’s name.
The transferee must complete this process within 15 days from the date the income became due.
If the transferee fulfills these conditions within 15 days, the mutual fund may recognize his claim to the income.
If the transferee does not complete this process within 15 days, the right to income remains with the original registered holder.
In that case, the transferee cannot claim the income from the mutual fund.
The transferee’s remedy, if any, would be against the transferor and not against the mutual fund.
The rule ensures certainty and smooth functioning by relying on the name entered in the register rather than actual ownership.
The key deciding factor is whether the transferee acted within the 15-day time limit from when the income became due.
Explanation:
The 15 day time period given under this section shall be extended in the following circumstances:
(i).
If the transferee (buyer) dies before claiming the dividend then:
His legal representative steps in to claim the dividend.
So , in this case, the time limit is extended.
The extension equals the actual time taken by the legal representative to establish the claim.
So, the delay caused due to death is taken into account.
(ii).
If the transferee (buyer) loses the transfer deed
The loss happens due to theft, or any reason beyond his control
Because of this, he cannot complete the transfer process on time
In such a case, the time limit is extended
The extension equals the actual time taken to get a replacement of the transfer deed
(iii).
If the transferee (buyer) has to lodge the security and transfer documents with the company but:
Sometimes, there is a delay due to postal issues.
This delay is not the fault of the transferee.
In such a case, the time limit is extended.
The extension equals the actual number of days delayed because of the post.
So, genuine postal delays are taken into account.
27B(2).
The provisions in Section 27A(1) shall not affect:
(a).
A mutual fund declares income on its units or other instruments.
It checks its records to identify who the holder is.
The person whose name is currently registered in the mutual fund books is treated as the holder.
Even if the units have been transferred but not yet updated:
The mutual fund does not consider the new owner.
The mutual fund proceeds to pay the income to the registered holder.
It has the legal right to do so.
So , mutual fund relies on its records and pays the person whose name is officially registered at that time.
(b).
A person buys units or instruments of a mutual fund (transferee),
He applies to get the transfer registered in his name.
Under circumstances , the mutual fund refuses to register the transfer then:
Because of this, he does not become the registered holder.
But his rights do not end here:
The transferee can still take action against the transferor (seller) or any other concerned person.
He can enforce his rights arising out of the transfer (like ownership claims, recovery, etc.).
This right exists even though the mutual fund has refused registration.
So , refusal by the mutual fund does not destroy the buyer’s rights against the seller or others involved.
Section 28. Act not to apply in certain cases.
28(1).
The provisions of the SEBI Contract Regulation Act , 1956 shall not apply to certain entities.
(a).
These include:
The Government.
The Reserve Bank of India.
Any local authority.
Any corporation created under a special law.
It also covers persons who:
Carry out transactions with these authorities, or
Act through their agency,
So, if a transaction is routed through or done with such bodies then the provisions of the Act will not apply.
Transactions involving these specified authorities are kept outside the scope of the Act
(b).
A company issues instruments like:
Convertible bonds.
Share warrants.
Options or rights related to them.
These instruments give a person a future choice (option).
The person can decide to obtain shares from:
The issuing company or body corporate, or
Its shareholders, or
Its duly appointed agents
The shares can be obtained by converting the bond or warrant, or through any other agreed method.
The key condition the price of the shares is already fixed at the time of issue.
In such cases this Act will not apply to these instruments (to that extent).
28A(2).
This provision operates without affecting 28A(1), and operates in addition to it.
When the Central Government ia satisfied that granting an exemption is necessary or expedient then:
Such satisfaction must be based on reasons such as:
Promoting trade and commerce, or
Supporting the economic development of the country.
If satisfied, the Central Government may issue a notification in the Official Gazette.
Through this notification, it may specify a class of contracts.
Such specified contracts may be declared as not subject to this Act or certain provisions of the Act.
The exemption may be granted fully or partially, depending on what is specified.
The Government may also impose conditions, limitations, or restrictions on such exemption.
The exemption will apply only subject to those specified conditions, limitations, or restrictions.
Section 29. Protection of action taken in good faith
There are certain authorities involved in stock exchange functioning.
These include:
The governing body of a recognised stock exchange.
Its members, office bearers, and employees.
Persons appointed under section 11.
These people perform actions under the Act , rules or bye-laws made under it.
Sometimes, such actions may affect others:
But if these actions are done in good faith then:
No lawsuit, prosecution, or legal proceeding can be filed against them.
This protection applies even if the act was actually done, or it was intended to be done under the law.
Section 29 A. Power to delegate
The Central Government of India has various powers under this Act.
It can issue an order published in the Official Gazette.
Through this order, it can delegate its powers:
These powers (except the power under section 30) can be given to:
The Securities and Exchange Board of India, or
The Reserve Bank of India.
The delegation is not absolute.
It will be limited to specific matters, and subject to conditions mentioned in the order.
So, SEBI or RBI can exercise those powers as if they were the Central Government, within those limits
So , the Central Government can share its powers with SEBI or RBI, but with restrictions and conditions.
Section 29 B. Powers of Board not to apply to International Financial Services Centre
This provision applies despite anything contained in any other law.
It deals with the powers of the Securities and Exchange Board of India (SEBI)
(a).
SEBI’s powers do not apply to an International Financial Services Centre (IFSC).
Such IFSC is set up under the Special Economic Zones Act, 2005.
(b).
In such IFSCs, the powers are exercised instead by the International Financial Services Centres Authority (IFSCA).
This authority is established under the International Financial Services Centres Authority Act, 2019.
This applies only in relation to the following that are permitted in IFSCs:
Financial products.
Financial services.
Financial institutions.
SEBI has no jurisdiction in IFSCs for these matters and IFSCA is the regulator there instead.
Section 30. Power to make rules.
30(1).
The Central Government of India has the power to make rules under this Act.
It must do so by issuing a notification in the Official Gazette.
These rules are made to implement and carry out the objectives of the Act.
30(2).
The Central Government of India has general power to make rules
This clause clarifies that, without limiting that general power, it can make rules on specific matters
(a)
rules can prescribe how applications should be made
what details/particulars must be included in those applications
and the fees to be paid for such applications
(b).
rules can prescribe how an inquiry is conducted for recognising a stock exchange
rules can specify the conditions for granting recognition
these conditions may include:
rules about admission of members, especially if it is the only recognised stock exchange in that area
rules can also prescribe the form in which recognition will be granted
(c).
rules can specify what details must be included in:
periodical returns
annual reports
these are to be submitted to the Central Government
(d).
rules can prescribe:
which documents must be maintained under section 6
how long they must be preserved
(e).
rules can define how inquiries should be conducted
specifically, inquiries by the governing body of a stock exchange under section 6
(f).
rules can prescribe how bye-laws should be published before being made or amended
this is to allow public criticism/comments before finalisation
(g).
The Central Government of India can make rules regarding licensing of dealers in securities
These rules can cover the entire lifecycle of a licence
They may prescribe:
how applications should be made for licences under section 17
the fees payable for such licences
the validity period of the licences
the conditions for granting licences
These conditions may include:
the forms to be used for making contracts
the documents to be maintained by licensed dealers
the requirement to submit periodic information to a specified authority
Rules can also provide for:
revocation (cancellation) of licences if conditions are breached
(h).
The Central Government of India can make rules regarding listing requirements on stock exchanges
These rules specify what conditions must be fulfilled before listing
(A)
rules can prescribe the requirements for public companies
these must be satisfied to get their securities listed on a stock exchange
(B)
rules can prescribe the requirements for collective investment schemes
these must be satisfied to get their units listed on a stock exchange
The Central Government of India can make rules on additional specific matters
(ha)
rules can specify the grounds for delisting of securities
i.e., when a company’s securities can be removed from a recognised stock exchange (under section 21A)
(hb)
rules can prescribe:
the form of appeal to the Securities Appellate Tribunal under section 21A
the fees payable for such appeal
(hc)
rules can prescribe:
the form of appeal to the Securities Appellate Tribunal under section 22A
the fees payable
(hd)
rules can define the manner in which inquiries are conducted under section 23-I
(he)
rules can prescribe:
the form of appeal to the Securities Appellate Tribunal under section 23L
the fees payable
(i)
rules can cover any other matter that needs to be prescribed under the Act30(3).
A rule is made under the Act
After it is made, it must be placed before both Houses of Parliament
This must be done:
as soon as possible
while Parliament is in session
The rule must remain before Parliament for a total of 30 days
in one session, or
across multiple sessions
During this time, Parliament can review the rule
If both Houses agree:
to modify the rule → it will apply in modified form
to reject (annul) the rule → it will stop having effect
However:
anything already done under the rule remains valid
Section 30A. Special Provisions related to commodity derivatives.
30A(1).
The Act does not apply to non-transferable specific delivery contracts.
These are contracts where delivery is specific, and the contract cannot be transferred to others.
However, there is an important restriction.
In areas where section 13 applies:
No person can organise or help organise any association (other than a recognised stock exchange).
Such associations must not provide facilities where parties can settle these contracts without actual delivery.
So , you cannot create a system that allows paper settlement instead of real delivery for such contracts.
So , while these contracts are outside the Act, creating unofficial platforms to avoid actual delivery is not allowed.
30A(2).
If , in a particular area, section 13 is made applicable to commodity derivatives for certain goods then:
This means trading in such goods is regulated under the Act in that area.
The Central Government of India gets a special power.
It can issue a notification for that area (or part of it)
Through this notification, it can declare that some or all provisions of the Act will not apply
This exemption is for transferable specific delivery contracts related to those goods
The exemption can be:
General (for all such contracts), or
Specific (only for certain classes of contracts)
So , even in regulated areas, the Central Government can selectively relax the Act’s application for certain delivery-based contracts of goods.
30A(3).
Normally, non-transferable specific delivery contracts are outside the Act.
But this provision gives an override power,
If the Central Government of India believes that:
It is necessary in the interest of trade, or
It is required in the public interest
Then the Government can step in.
It can issue a notification in the Official Gazette.
Through this notification, it can declare that some or all provisions of the Act will apply to such contracts
This can be done:
For a specific area.
For specific goods or classes of goods.
For specific types (classes) of such contracts.
The Government can also specify how the provisions will apply, and to what extent they will apply
So , even if such contracts are normally exempt, the Government can bring them under regulation whenever needed in public or trade interest.
Section 30B. Special provisions related to pooled investment vehicle.
30B(1).
Normally, other laws may restrict borrowing or issuing debt.
These include:
The Indian Trusts Act, 1882.
Any other existing law.
Court or tribunal orders.
This provision overrides all such restrictions.
A pooled investment vehicle whether it is structured as a trust or in any other form is allowed to:
Borrow money and issue debt securities.
The condition is that it must be registered with the Securities and Exchange Board of India.
But this is not unrestricted.
It must follow the manner specified, and the limits set under SEBI regulations.
30B(2).
When a pooled investment vehicle covered under 30B(1)) takes a loan from lenders:
The terms of this borrowing are recorded in facility documents.
Such a vehicle is allowed to create security interest (i.e., give assets as collateral) to the lenders.
However, this is not absolute.
It must follow the provisions of its trust deed.
So, if the trust deed allows it , the vehicle can pledge or charge its assets as security.
Example:
30B(3).
A pooled investment vehicle takes a loan from a lender
It is required to:
repay the principal, and
pay interest or other dues
If the vehicle defaults (fails to pay):
the lender gets the right to take action
The lender can:
recover the unpaid amount, and
enforce any security interest (collateral)
This enforcement is done against the trust assets
The lender proceeds by taking action against:
the trustee, who acts on behalf of the pooled investment vehicle
All actions must follow:
the terms and conditions in the facility documents.
A pooled investment vehicle defaults, and recovery proceedings are started
These proceedings are against the trust assets
The trustee is only acting on behalf of the vehicle
The law protects the trustee personally
This means:
the trustee is not personally liable for the debt
Also:
the trustee’s own personal assets cannot be used for recovery
Recovery is limited strictly to:
the trust assets only
30B(4).
A pooled investment vehicle defaults on its loan
The lender recovers the due amount by enforcing security over the trust assets
After recovery, some trust assets may still remain
These remaining assets do not go to the lender
Instead, they are distributed among the unit holders (investors)
The distribution is done on a proportionate basis
each unit holder gets a share based on their holding
Section 31. Power of Securities and Exchange Board of India to make regulations.
31(1).
There is already a general power under section 30 of the Securities and Exchange Board of India Act, 1992
This provision does not affect or limit that existing power
In addition, the Securities and Exchange Board of India is given power to make regulations
These regulations must be:
issued by notification in the Official Gazette
consistent with this Act
consistent with the rules made under the Act
31(2).
Securities and Exchange Board of India has general power to make regulations
This clause says:
without limiting that general power, SEBI can make rules on specific matters
(a).
One such specific matter is about shareholding of a recognised stock exchange
SEBI can prescribe how at least 51% of equity share capital must be held
This must happen:
within 12 months from the date of the relevant order under section 4B
The 51% must be held by:
the public, and
not by shareholders who have trading rights
So, trading members should not control majority ownership
(b).
the eligibility criteria and other requirements under section 17A
(c).
the terms determined by the Board for settlement of proceedings under subsection (2) of section 23JA.
(d).
any other matter which is required to be, or may be, specified by regulations or in respect of which provision is to be made by regulations
31(3).
Securities and Exchange Board of India makes a regulation under the Act
After making it, the regulation must be placed before both Houses of Parliament
This must be done:
as soon as possible
while Parliament is in session
The regulation must remain before Parliament for a total of 30 days
this can be in one session, or
spread across multiple sessions
During this period, Parliament has the power to review it
If both Houses agree:
to modify the regulation → it will apply in modified form
to reject (annul) the regulation → it will stop having effect
However, there is an important protection:
anything already done under the regulation remains valid
Section 32. Validation of certain acts.
Certain actions were taken under the principal Act
These actions relate to settlement of administrative and civil proceedings
At that time, the law may not have expressly contained the amended provisions
Later, amendments were made to the Act
This provision gives retrospective validity to earlier actions
It treats those past actions as if:
the amended law was already in force when they were done
So, even if there was a technical gap earlier:
those actions remain valid and effective
