Creation/Invocation of pledge of securities through depository system
Summary
This circular mandates Depositories to amend their bye-laws and Pledge Request Forms to ensure compliance with Sections 176 and 177 of the Indian Contract Act, 1872 regarding pledge creation and invocation. It requires pledgees to provide reasonable notice to pledgers before selling pledged assets and obligates Depositories to maintain standardized forms and send intimation upon invocation. The provisions must be implemented by April 6, 2026, under powers conferred by the SEBI Act and Depositories Act.
Text
The Pledge Request Forms of the depositories shall, inter alia, make provision for the pledger and pledgee to undertake the following: 4.13.3.1 The pledgee undertakes to provide reasonable notice to the pledger and comply with the requirements of Sections 176 and 177 of the Indian Contract Act, 1872. 4.13.3.2 The pledger and pledgee undertake to abide with the provisions of the Indian Contract Act, 1872, the Depositories Act, SEBI Regulations, circulars, and bye-laws in force from time to time, as may be applicable.
The Depositories shall maintain a standardized format of the Pledge Request Form.
At the time of invocation of pledge, the Depositories shall send an intimation/notification to both pledger and pledgee confirming that the pledge has been invoked and the pledgee has been recorded as “beneficial owner” in terms of Regulation 79(8) of the DP Regulations.
The Depositories are advised to: 5.1. make necessary amendments to relevant bye-laws and rules, for the implementation of this circular; 5.2. carry out system changes, if any, for the implementation of this circular; and 5.3. bring the provisions of this circular to the notice of their participants and also to disseminate the same on their websites.
The provisions of this circular shall be implemented on or before April 6, 2026.
This circular is issued in exercise of the powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 read with Section 26(3) of the Depositories Act, 1996 and Regulation 97 and Regulation 79 of the Securities and Exchange Board of India (Depositories and Participants) Regulations, 2018 to protect the interest of investors in securities and to promote development of, and to regulate securities market.
Source: SecMarx — Creation/Invocation of pledge of securities through depository system. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.