The Securities Contracts (Regulation) Act, 1956

(1) This Act may be called the Securities Contracts(Regulation) Act, 1956. (2) It extends to the whole of India. (3) It shall come into force on such date1as the Central Government may, by notification in theOfficial Gazette, appoint.

In this Act, unless the context otherwise requires,-- (a) Contract means a contract for or relating to the purchase or sale of securities; 1[(aa) corporatisation means the succession of a recognised stock exchange, being a body ofindividuals or a society registered under the Societies Registration Act, 1860 (21 of 1860), by anotherstock exchange, being a company incorporated for the purpose of assisting, regulating or controllingthe business of buying, selling or dealing in securities carried on by such individuals or society; (ab) demutualisation means the segregation of ownership and management from the tradingrights of the members of a recognised stock exchange in accordance with a scheme approved by theSecurities and Exchange Board of India;] 2[3[(ac)] derivative includes-- (A) a security derived from a debt instrument, share, loan, whether secured or unsecured, riskinstrument or contract for differences or any other form of security; (B) a contact which derives its value from the prices, or index of prices, of underlyingsecurities;] 4[(C) commodity derivatives; and (D) such other instruments as may be declared by the Central Government to be derivatives;] (b) Government security means a security created and issued, whether before or after thecommencement of this Act, by the Central Government or a State Government for the purpose ofraising a public loan and having one of the forms specified in clause (2) of section 2 of the PublicDebt Act, 1944 (13 of 1944); 4[(bb) goods mean every kind of movable property other than actionable claims, money andsecurities; (bc) commodity derivative means a contract-- (i) for the delivery of such goods, as may be notified by the Central Government in theOfficial Gazette, and which is not a ready delivery contract; or (ii) for differences, which derives its value from prices or indices of prices of such underlyinggoods or activities, services, rights, interests and events, as may be notified by the CentralGovernment, in consultation with the Board, but does not include securities as referred to insub-clauses (A) and (B) of clause (ac);] (c) member means a member of a recognised stock exchange; 4[(ca) non-transferable specific delivery contract means a specific delivery contract, the rightsor liabilities under which or under any delivery order, railway receipt, bill of lading, warehousereceipt or any other documents of title relating thereto are not transferable;] (d) option in securities means a contract for the purchase or sale of a right to buy or sell, or aright to buy and sell, securities in future, and includes a teji, a mandi, a teji mandi, a galli, a put, a callor a put and call in securities; 5i9560(da) pooled investment vehicle means a fund established in India in the form of a trust or otherwise, such as mutual fund, alternative investment fund, collective investment scheme or a business trust as defined in sub-section (13A) of section 2 of the Income-tax Act, 1961 (43 of 1961) and registered with the Securities and Exchange Board of India, or such other fund, which raises or collects monies from investors and invests such funds in accordance with such regulations as may be made by the Securities and Exchange Board of India in this behalf;] (e) prescribed means prescribed by rules made under this Act; 4[(ea) ready delivery contract means a contract which provides for the delivery of goods andthe payment of a price therefor, either immediately, or within such period not exceeding eleven daysafter the date of the contract and subject to such conditions as the Central Government may, bynotification in the Official Gazette, specify in respect of any goods, the period under such contract notbeing capable of extension by the mutual consent of the parties thereto or otherwise: Provided that where any such contract is performed either wholly or in part; (I) by realisation of any sum of money being the difference between the contract rate and thesettlement rate or clearing rate or the rate of any offsetting contract; or (II) by any other means whatsoever, and as a result of which the actual tendering of the goodscovered by the contract or payment of the full price therefor is dispensed with, then such contractshall not be deemed to be a ready delivery contract;] (f) recognised stock exchange means a stock exchange which is for the time being recognisedby the Central Government under section 4; (g) rules, with reference to the rules relating in general to the constitution and management of astock exchange, includes, in the case of a stock exchange which is an incorporated association, itsmemorandum and articles of association; 6[(ga) scheme means a scheme for corporatisation or demutualisation of a recognised stockexchange which may provide for-- (i) the issue of shares for a lawful consideration and provision of trading rights in lieu ofmembership cards of members of a recognised stock exchange; (ii) the restrictions on voting rights; (iii) the transfer of property, business, assets, rights, liabilities, recognitions, contracts of therecognised stock exchange, legal proceedings by, or against, the recognised stock exchange,whether in the name of the recognised stock exchange or any trustee or otherwise and anypermission given to, or by, the recognised stock exchange; (iv) the transfer of employees of a recognised stock exchange to another recognised stockexchange; (v) any other matter required for the purpose of, or in connection with, the corporatisation ordemutulisation, as the case may be, of the recognised stock exchange;] 7[8[(gb)] Securities Appellate Tribunal means a Securities Appellate Tribunal established undersub-section (1) of section 15K of the Securities and Exchange Board of India Act, 1992 (15 of 1992);] (h) securities include-- (i) shares, scrips stocks, bonds, debentures, debenture stock or other marketable securities ofa like nature in or of any incorporated company or 9[ or a pooled investment vehicle or other body corporate]; 10[(ia) derivative; (ib) units or any other instrument issued by any collective investment scheme to the investorsin such schemes;] 11[(ic) security receipt as defined in clause (zg) of section 2 of the Securitisation andReconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002);] 12[(id) units or any other such instrument issued to the investors under any mutual fundscheme;] 13[(ida) units or any other instrument issued by any pooled investment vehicle;]br14[Explanation.--For the removal of doubts, it is hereby declared that securities shall notinclude any unit linked insurance policy or scrips or any such instrument or unit, by whatevername called, which provides a combined benefit risk on the life of the persons and investment bysuch persons and issued by an insurer referred to in clause (9) of section 2 of the Insurance Act,1938 (4 of 1938).] 15[(ie) any certificate or instrument (by whatever name called), issued to an investor by anyissuer being a special purpose distinct entity which possesses any debt or receivable, includingmortgage debt, assigned to such entity, and acknowledging beneficial interest of such investor insuch debt or receiveable including mortgage debt, as the case may be;] (ii) Government securities; and (iii) rights or interests in securities; 16[(ha) specific delivery contract means a commodity derivative which provides for theactual delivery of specific qualities or types of goods during a specified future period at aprice fixed thereby or to be fixed in the manner thereby agreed and in which the names ofboth the buyer and the seller are mentioned;] 17[(i) spot delivery contract means a contract which provides for,-- (a) actual delivery of securities and the payment of a price therefor either on the same day asthe date of the contract or on the next day, the actual period taken for the dispatch of the securitiesor the remittance of money therefor through the post being excluded from the computation of theperiod aforesaid if the parties to the contract do not reside in the same town or locality; (b) transfer of the securities by the depository from the account of a beneficial owner to theaccount of another beneficial owner when such securities are dealt with by a depository;] 18[(j) stock exchange means-- (a) any body of individuals, whether incorporated or not, constituted before corporatisationand demutualisation under sections 4A and 4B, or (b) a body corporate incorporated under the Companies Act, 1956 whether under a scheme ofcorporatisation and demutualisation or otherwise, for the purpose of assisting, regulating or controlling the business of buying, selling or dealing insecurities;] 19[(k) transferable specific delivery contract means a specific delivery contract which is not anon-transferable specific delivery contract and which is subject to such conditions relating to itstransferability as the Central Government may by notification in the Official Gazette, specify in thisbehalf.]

1[2A. Interpretation of certain words and expressions.--Words and expressions used herein andnot defined in this Act but defined in the Companies Act, 1956 (1 of 1956) or the Securities and ExchangeBoard of India Act, 1992 (15 of 1992) or the Depositories Act, 1996 (22 of 1996) shall have the samemeanings respectively assigned to them in those Acts.]

(1) Any stock exchange, which is desirous ofbeing recognised for the purposes of this Act, may make an application in the prescribed manner to theCentral Government. (2) Every application under sub-section (1) shall contain such particulars as may be prescribed, andshall be accompanied by a copy of the bye-laws of the stock exchange for the regulation and control ofcontracts and also a copy of the rules relating in general to the constitution of the stock exchange, and inparticular, to-- (a) the governing body of such stock exchange, its constitution and powers of management andthe manner in which its business is to be transacted; (b) the powers and duties of the office bearers of the stock exchange; (c) the admission into the stock exchange of various classes of members, the qualifications formembership, and the exclusion, suspension, expulsion and re-admission of members therefrom orthereinto; (d) the procedure for the registration of partnerships as members of the stock exchange in caseswhere the rules provide for such membership; and the nomination and appointment of authorisedrepresentatives and clerks.

(1) If the Central Government is satisfied, aftermaking such inquiry as may be necessary in this behalf and after obtaining such further information, ifany, as it may require,-- (a) that the rules and bye-laws of a stock exchange applying for registration are in conformitywith such conditions as may be prescribed with a view to ensure fair dealing and to protect investors; (b) that the stock exchange is willing to comply with any other conditions (including conditionsas to the number of members) which the Central Government, after consultation with the governingbody of the stock exchange and having regard to the area served by the stock exchange and itsstanding and the nature of the securities dealt with by it, may impose for the purpose of carrying outthe objects of this Act; and (c) that it would be in the interest of the trade and also in the public interest to grant recognition tothe stock exchange; it may grant recognition to the stock exchange subject to the conditions imposed upon it as aforesaid andin such form as may be prescribed. (2) The conditions which the Central Government may prescribe under clause (a) of sub-section (1)for the grant of recognition to the stock exchanges may include, among other matters, conditions relatingto,-- (i) the qualifications for membership of stock exchanges; (ii) the manner in which contracts shall be entered into and enforced as between members; (iii) the representation of the Central Government on each of the stock exchanges by such numberof persons not exceeding three as the Central Government may nominate in this behalf; and (iv) the maintenance of accounts of members and their audit by Chartered accountants whereversuch audit is required by the Central Government. (3) Every grant of recognition to a stock exchange under this section shall be published in the Gazetteof India and also in the Official Gazette of the State in which the principal office of the stock exchange issituate, and such recognition shall have effect as from the date of its publication in the Gazette of India. (4) No application for the grant of recognition shall be refused except after giving an opportunity tothe stock exchange concerned to be heard in the matter; and the reasons for such refusal shall becommunicated to the stock exchange in writing. (5) No rules of a recognised stock exchange relating to any of the matters specified in sub-section (2)of section 3 shall be amended except with the approval of the Central Government.