NSDL -BYELAWS -2000 CH-6 6. PARTICIPANTS 6.1. ADMISSION OF PARTICIPANTS 6.1.1. Any person desiring to become a Participant shall file an application with the Securities and Exchange Board of India through the Depository, in the format specified by the Securities and Exchange Board of India together with the fees specified by the Securities and Exchange Board of India. 6.1.2. The application shall be submitted in the specified form and manner and shall be accompanied by the fees, security deposits and/or such other sums of money as specified by the Depository under the Business Rules. 6.1.3. Every application shall be dealt with by the Depository within thirty days of receipt of such application and if the Depository is satisfied, it shall forward the same to the Securities and Exchange Board of India with the Depository's recommendations. 6.1.4. An application which is not complete in all respects and does not conform to the instructions specified shall be rejected. The Depository may, before rejecting any application, give to the applicant in writing, an opportunity to remove within such time as specified by the Executive Committee, the objection indicated by the Depository. 6.1.5. The Depository may require the applicant to furnish such further information or clarification as required within such time as it may specify. On failure to provide any information within the time provided or such further time as may be granted the application will be deemed to have been rejected. 6.1.6. The Managing Director of the Depository may approve or reject any application as he may deem fit in his absolute discretion. The applicant may appeal to the Executive Committee against the decision of the Managing Director and the decision of the Executive Committee in this regard shall be final. 6.1.7. The Executive Committee shall have the right to call upon the applicant to make additional contributions towards funds, and to pay such fees, deposits, such additional security deposit in cash or kind, to furnish any additional guarantee or to require the deposit of any monies in respect of contribution to funds including building fund, computerization fund, indemnity fund, insurance fund or such other funds as the Depository may specify from time to time. 6.2. ADMISSION CRITERIA 6.2.1. The applicant (s) shall be eligible to become Participant (s) in the Depository, provided they meet the minimum criteria laid down under the Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996, and the eligibility criteria specified below :- i. the applicant shall be required to furnish information and details of its business history, which shall be for a minimum period of three years; provided that the Depository may, if it is satisfied that it would be in the interest of the investors and that the applicant is otherwise eligible to become a Participant, waive this requirement of three years. ii. the applicant should not have been convicted in any of the five years immediately preceding the filing of the application in any matter involving misappropriation of funds and securities, theft, embezzlement of funds, fraudulent conversion or forgery; iii. the applicant should not have been expelled, barred or suspended by the securities and exchange board of India, self regulatory organisation, or any recognised stock exchange; Provided however that, if a period of three years or more has elapsed since such punishment was imposed, the Depository may, in its discretion consider such application. iv. the applicant has a minimum net worth of rupees one crore Explanation : for the purpose of determining whether the applicant has adequate net worth, the applicant shall submit a net worth certificate (including the computation thereof) based on the audited books of account (in the format which may be specified by the Depository in the business rules) duly certified by a chartered accountant and submitted to the Depository; v. the applicant shall be required to furnish details of its board of directors/authorised officials, who shall be responsible for acting on behalf of the Participant; vi. the Depository may conduct entrance examinations and / or interviews, to examine the knowledge of the Participant (and its staff) related to the operational, functional and technical aspects of the Depository. the Depository may also make it mandatory for the Participant to appoint a compliance officer, who shall interact with the Depository on behalf of the Participant for compliance with the bye laws and business rules, resolving, redressal of investors'/ clients' grievances; vii. the applicant should have adequate office space exclusively for Depository operations. the applicant should also furnish details of his main office, address, fax, and phone number (s). the Depository shall have the sole discretion to decide whether in its opinion, the applicant has adequate infrastructure facilities at the time of granting admission; viii. the applicant has made adequate arrangements for conducting effective and safe Depository operations including security measures, software and hardware requirements, risk containment and insurance requirements, as specified by the Depository; ix. for the purpose of satisfying itself regarding the eligibility of the applicant to become a Participant, the Depository may carry out an inspection of the office and facilities of the applicants; x. the applicant shall be eligible to become a Participant with effect from the date on which it is registered with the Securities and Exchange Board of India under the Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996. 6.3. RIGHTS AND OBLIGATIONS OF PARTICIPANTS 6.3.1. No Participant shall conduct any business as a Participant unless it enters into an agreement with Depository as per Annexure A of these Bye Laws. 6.3.2. A Participant while conducting any business as a Participant with a Client shall act as an agent of the Depository (Principal), and shall be liable to the Client for all the acts and deeds performed by the Participant. Subject to the provisions of Sec. 16 of the Act , the Depository shall not be liable to any person other than a Participant or a Client who may have any claim or claims in relation to any matters concerning the Depository operations. 6.3.3. The Participant shall not give a debit or credit to the account of a Client without a due authorisation from Client. 6.3.4. Participant shall not commingle its own securities with the securities of its Client and shall maintain each Client's account separately. 6.3.5. The Depository shall obtain, on a daily basis, the Client details from all Participants. The details shall be obtained in respect of the changes in the accounts of the Clients from the processing undertaken at the end of the previous working day. The Client details shall include the Client name, address and also the security wise details of the balance of the Client. 6.3.6. The Participants shall submit the following returns to the Depository :- i. net worth certificate computed in a manner laid down in the Business Rules duly certified by a Chartered Accountant on the annual audited accounts of the Participant; ii. in case the Participant is a clearing member of the clearing corporation of any exchange, the details regarding any suspension/termination or defaults or any disputes in relation to its dealings with such clearing corporation within two working days of such an event; iii. number of complaints received from Clients, their nature, status and manner of redressal once every month; iv. number of transfers effected for off-market settlement of trades once every month. 6.3.7. It shall be the responsibility of each Participant to promptly check and reconcile with its own records the details of such advices, statements and reports and to promptly notify the Depository of any error or omission contained in such advices, statements and reports within the time specified by the Depository. 6.3.8. Any advice, statement or report provided by the Depository shall in the absence of manifest error, be conclusive as to its subject matter. Except as otherwise agreed by the Depository, the failure of a Participant to inform the Depository of any error or omission in any advice, statement or report within the time frame stipulated by the Depository shall constitute a waiver in favour of the Depository by such Participant of any right to require rectification. 6.3.9. The Depository may if it is satisfied that it is in the interest of the Clients entertain a late request by a Participant to rectify an error or omission as aforesaid. 6.3.10. Every Participant shall reconcile his records with those of the Depository on a daily basis. 6.3.11. The Executive Committee may at any time require a Participant to provide on demand, collateral or additional collateral in such form, extent and manner as is determined by the Executive Committee to be appropriate with reference  to, inter alia, the level of unreconciled balance in case of transfer of its account to other Depository or excess credit balance of securities due to any fraud, error or omission on the part of its officers, agents and employees. The collateral shall be in addition to and independent of any security which the Depository may at any time hold for the obligations and liabilities of such Participant. 6.3.12. Without prejudice to the above, the Depository may, for the purposes of deciding whether or not to require a Participant to provide collateral, specify exposure limits on a Participant. 6.3.13. A Participant shall not create or permit the creation of any mortgage, charge or other encumbrance over all or any of the assets provided as collateral, security or such similar purpose to the Depository. 6.3.14. The Depository may apply all or any of the collateral (including all rights and entitlements thereto, if any) at any time without prior notice to a Participant in or towards satisfaction of the obligations and liabilities of such Participant to the Depository or such Participant 's obligations and liabilities to a Client. 6.3.15. In respect of any sums received by the Depository from a Participant as collateral, the obligation of the Depository to such Participant shall be to the extent of the amount remaining after satisfaction of all obligations and liabilities (actual or contingent) of such Participant to the Depository and such Participant's obligations and liabilities to a Client. 6.3.16. Each Participant shall indemnify the Depository and its officers and employees and hold each of them harmless against all costs, fees, expenses, liabilities, taxes, actual losses and damages of any nature whatsoever suffered or incurred by any of them directly or indirectly as a result of or in connection with the following matters :- i. the participation in the Depository system by the Participant and/or its activities in the Depository including the provision of services by the Participant to the client and the provision of services by the Depository to the Participant and all matters relating thereto as contemplated in the bye laws; ii. the failure by the Participant to comply with the provision of the bye laws and the Participant agreement (including without limitation, the representations and warranties contained therein) or to comply with any directions or procedures of the Depository; iii. the acts by the Depository or its officers and employees done by placing reliance upon instructions or communications believed in good faith by any of them to have been given by or on behalf of the Participant (including, but not limited to, the giving of effect to such instructions or communications by any of them) or the failure of the Participant to give instructions to the Depository as contemplated in the bye laws; iv. the acceptance by the Depository of eligible securities deposited by the Participant and giving effect to transactions relating thereto by the Depository in accordance with the bye laws and there under the withdrawal of eligible securities by the Participant; v. the failure by the Participant to deliver eligible securities, or to perform such other duties or obligations contemplated in the bye laws. Nothing contained above shall apply to the extent the Depository or its employees are guilty of negligence, willful misconduct or fraud on their part and are responsible for the losses. 6.3.17. For the purpose of determining whether a Participant is liable for any acts or omissions under these Bye Laws, the acts or omissions, whether done intentionally or not, by its officers, employees, agents and representatives, shall be deemed to be acts or omissions of the Participant. 6.3.18. Notwithstanding anything to the contrary in the Bye Laws, the Depository shall not be bound to effect any transaction or take any other action upon the instructions of a Participant if it would violate any applicable law, decree, court order, regulation or order of any government or other competent authority or if the Depository determines that it will not be in the interests of the Depository, Participants or the general investors. 6.3.19. Notwithstanding anything to the contrary in the Bye Laws, the Depository shall have the right to initiate a transaction or to take any other action in order to give effect to the order or judgment of a court of law or the Central or State Government or any other competent statutory authority. 6.3.20. The Depository reserves the right to rectify any erroneous transaction made to the accounts of Participants and shall thereafter inform the concerned Participants of such rectification. 6.3.21. Without prejudice to any other right the Depository may have, if as a result of rectification by the Depository of any erroneous credit entries to the accounts of a Participant pursuant to these Bye Laws, a negative balance arises, the Depository may : i. require the Participant to replace the relevant eligible securities in this connection; ii. require the Participant to pay to it forthwith a cash sum of such amount as the Depository considers appropriate as collateral and the only obligation of the Depository in respect of such sum so paid by the Participant shall be to pay such Participant an amount equal to the balance remaining after satisfaction of all obligations & liabilities (actual or contingent) of such Participant to the Depository. The Depository may itself at any time purchase as replacement, eligible securities on behalf of the Participant, at such price as may be determined by the Executive Committee to be the best prevailing market price and terms, if any, or in other cases at its discretion on the terms available. The cost and other expenses in connection with purchase shall be borne by the Participant. 6.3.22. Each Participant shall be responsible to indemnify the Depository against all costs, fees, expenses, liabilities, actual losses and damages of any nature whatsoever incurred by the Depository as a result of or in connection with the purchase of replacement eligible securities by the Depository on behalf of the Participant. 6.3.23. No Participant shall assign its business as a Participant to any other person except with the prior approval of the Executive Committee which may notify from time to time the terms and conditions subject to which it may assign its business as a Participant to any other person. 6.4. RIGHTS AND OBLIGATIONS OF PARTICIPANTS AND CLIENTS 6.4.1. No Participant shall conduct business as a Participant with its Clients unless it has entered into an agreement with its Clients. 6.4.2. *Every Participant shall enter into an agreement referred to above with each of its clients as per Annexure B of these Bye Laws.) Every Participant shall enter into an agreement referred to above with each of its Clients as per Annexure B of these Bye Laws Provided that in case of : *(Amended w.e.f. March 6, 1997. Prior to this amendment, Bye Law 6.4.2 read as follows : i. foreign institutional investors registered with the Securities and Exchange Board of India and who have entered into an agreement with the Participant either directly or through their power of attorney holders in accordance with the provisions of sub-regulation (1) of regulation 16 of the SEBI (Foreign Institutional Investors) Regulations, 1995; and ii. such agreement gives the Participant an authority to act on behalf of the foreign institutional investors for availing the services of the Depository ; and iii. such agreement has been filed with the Securities and Exchange Board of India ; then such Participant need not enter into an agreement as per Annexure B of these Bye Laws. 6.4.3. The Participant shall thereafter open separate accounts of each of its Clients for holding security balances on behalf of its Clients. 6.4.4. Every Participant shall provide a transaction statement including statement of accounts, if any, to the Clients in such form as specified under the Business Rules. Such a statement shall be furnished to the Clients at fortnightly intervals unless the Participant and its Clients have agreed otherwise. However, if there is no transaction in the account, then the Participant shall provide such statement to the Client at least once a quarter. Provided that in case of a Participant who has not entered into an agreement as per Annexure B of this Bye Laws with its Client in terms of the proviso to Bye Law 6.4.2, then the Participant shall provide the transaction statement including statement of accounts, if any, to the Client as agreed between the Participant and the Client 6.4.5. The Participant shall act on the instructions of the Client provided in the manner laid down under the Business Rules. 6.4.6. The Participant shall maintain a separate account for each Client and ensure that the securities of the Client are not mixed with its own securities. 6.4.7. In the event of multiple instructions received from the Client relating to transfer of securities which exceed the balance of the Client kept with the Participant, the sequence of execution of instructions by the Participant will be as follows :- i. in the event of the Client specifying the sequence of execution of instructions, in the same manner as specified by the Client to the extent it can be executed with the balance available with the Participant; ii. in the absence of specific instructions from the Client in the chronological order in which such instructions are received from the Client to the extent it can be executed with the balance available with the Participant. 6.5. TERMINATION 6.5.1. TERMINATION BY NOTICE BY THE DEPOSITORY The Executive Committee may at any time and on such conditions as it thinks fit, by giving not less than thirty working days notice in writing, terminate the participation of a Participant under the following circumstances :- i) the Participant no longer meets the eligibility criteria to be a Participant; ii) in the event of the death, incapacity of a Participant being an individual or the dissolution of a Participant being a partnership; iii) in the event of a Participant being a body corporate when it is wound up or an official liquidator or provisional liquidator is appointed under the Companies Act, 1956; iv) in the event of a Participant ceasing to do business which relates to the Depository operations; v) the Depository has reasonable grounds to believe that the Participant is approaching financial difficulty or will be unable to meet its obligations to the Depository; vi) in the event of any distress, execution or other process being levied or enforced or served upon or against any property of a Participant; vii) in the event of bankruptcy, liquidation or winding up of a Participant or the initiation of any proceedings in relation thereto (including but not limited to the bankruptcy or an analogous act by a Participant) or if the Executive Committee considers in its absolute discretion that the occurrence of such events are imminent or likely; viii) in the event of the appointment of a receiver or administrator over the assets of a Participant or if a Participant suffers a composition with its creditors or if a scheme of arrangement is approved by the court (other than for the purposes of reconstruction or amalgamation) or if the Executive Committee considers in its absolute discretion that the occurrence of such events are imminent or likely; ix) in the event of failure to pay fees or any other charges as required under the Bye Laws or the Participant agreement; x) in the event of failure of a Participant to fulfill the obligations arising out of the indemnification of the Depository by the Participant; xi) the Depository has reasonable grounds to believe that the Participant has been responsible for negligence, fraudulent or dishonest conduct or has made a material misstatement or omitted to state a material fact in any statement to the Depository; xii) the Participant has violated any Business Rule, procedure or breach of agreement with the Depository; xiii) the Participant's registration granted by Securities and Exchange Board of India or by any other governmental agency has been suspended or cancelled; xiv) if the Participant is a member of a stock exchange, the Participant has been expelled, or its trading privileges have been suspended by the Stock Exchange; xv) the Depository has reasonable grounds to believe that termination of relationship with the Participant is necessary for the protection of investors or other Participants or to facilitate the orderly performance of the Depository services. 6.5.2. SUSPENSION WITHOUT NOTICE Without prejudice to any other rights, the Depository may have and notwithstanding anything to the contrary in the Bye laws, the Depository may suspend with immediate effect, the participation in the Depository of a Participant on the grounds enumerated in Bye Laws 6.5.1 (ix) to 6.5.1 (xv) above pending the proceedings under Bye Law 6.5.1. 6.5.3. TERMINATION OF PARTICIPANT SHIP BY A PARTICIPANT The Depository may cease to provide any service or act for a Participant, on receiving a notice of not less than thirty days from the Participant, that the Participant no longer wishes to act as such. The Depository shall notify the Participant, other Participants, Clients of Participants and Securities and Exchange Board of India within seven days of the Participant ceasing to act as such. 6.5.4. CONSEQUENCES OF TERMINATION i) On termination of participation, the Executive Committee shall, unless as otherwise provided in the Bye Laws, cause to be returned to or make available for collection by the Participant, all collateral held by the Depository from the Participant. Provided that the Depository shall have the right (without affecting any other rights it may have) to set off amounts due or which may become due to the Depository, other Participants and Clients from the Participant, if applicable. ii) The termination of participation in the Depository of a Participant will not affect any rights and liabilities of the Participant arising out of matters which have taken place prior thereto and for the purpose of settlement of any such rights or liabilities of the Participant, the Depository may continue to treat the Participant as a Participant. iii) Without prejudice to the provisions of (i) and (ii) above, the Depository shall be entitled to set off any earlier claims or rights of the Participant against any amount due to the Depository or any other person entitled for any claim through the Depository irrespective of the fact that such counter claim has arisen after the date of termination of the Participant. iv) In the event of the termination of participation by the Participant or the receipt of notification to terminate, the Executive Committee shall, as soon as practicable, notify the other Participants and initiate suitable steps for protection of the interests of Client account holders with such Participant. v) The Depository shall notify the Participant and other Participants and the Securities and Exchange Board of India within seven days of the termination of the Participant under Bye Laws 6.5.1, 6.5.2 and 6.5.3 above. The Participant shall inform all its Clients of such termination within a period of seven days from the date on which it receives notice of such termination. vi) The Participant shall be required to meet all its outstanding obligations to the Depository while the Participant was acting as such and the Client shall have the option of either getting the securities held with the Participant transferred to another Participant, or get the securities rematerialized 6.6. *CLEARING CORPORATION OR A CLEARING HOUSE OF A STOCK EXCHANGE *(Amended w.e.f. November 5, 1998. Prior to this amendment, Bye Law 6.4.4 read as follows : 6.4.4 Every Participant shall submit periodical statement of accounts to the Clients in such form as specified under the Business Rules. Such a statement shall be furnished to the Clients at least once in fifteen days unless the Participant and its Clients have agreed otherwise. Amended w.e.f. September 12, 1997. Prior to this amendment, Bye Law 6.6 read as follows : 6.6 CLEARING CORPORATION 6.6.1 ADMISSION CRITERIA A clearing corporation shall be admitted as a user on the Depository only if :- i) the clearing corporation has adequate hardware and software systems to interact with the Depository as specified in the Business rules; ii) the Depository is satisfied that the clearing corporation operates in such a manner that it ensures payment against delivery or guarantees settlement; iii) the clearing corporation undertakes to co-operate at all times to redress the grievances of Clients and the Participant in respect of its operations in relation to the Depository; iv) in the opinion of the Depository, the clearing corporation has the operational capability to provide the services relating to clearing and settlement of transactions relating to the securities admitted to the Depository to be held in dematerialized form.) 6.6.1. ADMISSION CRITERIA A clearing corporation or a clearing house of stock exchange shall be admitted as a User on the Depository only if :- i) the clearing corporation or a clearing house of a stock exchange has adequate hardware and software systems to interact with the Depository as specified in the Business Rules; ii) the Depository is satisfied that the clearing corporation or a clearing house of a stock exchange operates in such a manner that it ensures payment against delivery or guarantees settlement; iii) the clearing corporation or a clearing house of a stock exchange undertakes to co-operate at all times to redress the grievances of Clients and the Participant in respect of its operation in relation to the Depository; iv) in the opinion of the Depository, the clearing corporation or a clearing house of a stock exchange has the operational capability to provide the services relating to clearing and settlement of transactions relating to the securities admitted to the Depository to the held in dematerialized form.