When a share certificate is dematerialised, the company that issued it loses sight of who actually owns its securities — the name on the register is the depository, not the human investor. Section 13 of the Depositories Act, 1996 rebuilds that line of sight. It compels the depository to feed the issuer a continuous stream of information about transfers in the names of beneficial owners, and obliges the issuer to hand back the records the depository needs to function. Sitting alongside it are SEBI's muscular powers under Sections 18 and 19 to call for information, inspect and direct, and a graded penalty regime under Section 19A. Together these provisions answer the central anxiety of a paperless market: in a system where ownership is a database entry, who has the right to see the data, and who must surrender it on demand? This chapter unpacks the bare text, the architecture behind it, and the enforcement case law that gives it teeth.
Where Section 13 Sits in the Scheme of the Act
The Depositories Act, 1996 was enacted to provide for the regulation of depositories in securities and to enable the holding and transfer of securities in electronic, dematerialised form. Its working machinery lives in Chapter IV (“Rights and Obligations of Depositories, Participants, Issuers and Beneficial Owners”), running from Section 4 to Section 17. Section 13, captioned “Furnishing of information and records by depository and issuer”, is one obligation in a tightly interlocked chain. It cannot be read in isolation from its neighbours.
Section 9 declares that securities in a depository are held in fungible form — stripped of distinctive numbers, so that the investor owns a quantity rather than identifiable certificates. Section 10 then performs the conceptual sleight of hand on which the whole system rests: the depository is deemed the registered owner for the purpose of effecting transfers, but enjoys no voting or beneficial rights, while the investor remains the beneficial owner entitled to all rights, benefits and liabilities. Section 11 requires every depository to maintain a register and index of beneficial owners. Section 12 governs intimation of pledge or hypothecation. Section 13 is the provision that keeps the issuer informed of what is happening inside this electronic register that bears the depository's name, not the issuer's shareholders'.
For the broader design rationale, see our chapter on the introduction, object and scheme of the Act, and for the foundational vocabulary — depository, participant and beneficial owner — see definitions. The whole subject is mapped on our Depositories Act hub.
The Bare Text of Section 13
Section 13 is mercifully short and contains two reciprocal obligations:
Section 13(1) — “Every depository shall furnish to the issuer information about the transfer of securities in the name of beneficial owners at such intervals and in such manner as may be specified by the bye-laws.”
Section 13(2) — “Every issuer shall make available to the depository copies of the relevant records in respect of securities held by such depository.”
Two features deserve immediate attention. First, the obligation runs in both directions: the depository informs the issuer, and the issuer supplies records to the depository. Second, the intervals and manner of the depository's reporting are not fixed by the statute but are left to be “specified by the bye-laws” — a deliberate piece of delegated detail that lets the system evolve without legislative amendment. The substance of the obligation is statutory; the cadence is regulatory.
Why the Issuer Needs the Data: The Beneficial-Owner Problem
To understand Section 13(1) you must first grasp the problem it solves. Because of Section 10, when securities are dematerialised the issuer's own register of members no longer shows the real investors. The depository — in practice the National Securities Depository Limited (NSDL) or Central Depository Services (India) Limited (CDSL) — is recorded as the registered holder. Yet the issuer still has statutory and commercial duties owed to its actual shareholders: dispatching dividends, sending notices of general meetings, conducting rights issues, and identifying who may vote.
Section 13(1) bridges that gap. By compelling the depository to report transfers in the names of beneficial owners at bye-law-specified intervals, the provision ensures the issuer can reconstruct, at any record date, the true picture of beneficial ownership underlying the consolidated holding shown in its register against the depository's name. This is what makes corporate actions possible in a dematerialised environment. The beneficial owner, as Section 10(3) confirms, is entitled to all the rights and benefits in respect of the securities held by a depository on his behalf — but those rights are only deliverable if the issuer knows who and where the beneficial owners are.
The flip side, Section 13(2), recognises that the depository cannot maintain accurate records in a vacuum. It needs the issuer's underlying records — the master data about the security, allotments, corporate actions, and reconciliation inputs — to keep its own register of beneficial owners under Section 11 in step with reality. This reciprocal duty also underpins the periodic reconciliation between issuer records and depository holdings that later became a freestanding regulatory obligation, breach of which now attracts a dedicated penalty under Section 19E.
It is worth stressing the constitutional character of the beneficial owner's position that Section 13 is designed to protect. Section 10(3) provides in terms that the beneficial owner shall be entitled to all the rights and benefits and be subjected to all the liabilities in respect of his securities held by a depository. The depository, by contrast, is by Section 10(2) expressly denied any voting rights or any other rights in respect of the securities it holds as registered owner. The information furnished under Section 13(1) is therefore not a courtesy — it is the operational means by which a statutory entitlement is rendered effective. If the issuer did not receive beneficial-owner transfer data, the rights guaranteed by Section 10(3) would exist on paper but could not be delivered in fact. Section 13 is, in this sense, the delivery mechanism for the Act's central promise.
The Role of Bye-Laws, Agreements and Participants
Section 13(1) expressly delegates the “intervals” and “manner” of reporting to the depository's bye-laws. Under Section 26 a depository frames bye-laws (with the previous approval of SEBI) on, among other things, the manner and procedure for the maintenance and transmission of records, and the furnishing of information. The statutory skeleton of Section 13 is thus fleshed out operationally by an instrument that is itself subject to regulatory approval — a recurring pattern in the Act whereby Parliament fixes the duty and delegates the mechanics.
The information chain does not run depository-to-issuer in a straight line; it passes through participants and rests on contractual foundations. A beneficial owner does not deal with the depository directly but through a participant — typically a broker, bank or financial institution — who acts as the depository's agent. The terms of that relationship are governed by the agreement between depository and participant, while the suite of dematerialisation, transfer and pledge functions the depository performs is detailed in our chapter on the services of a depository. Section 13 sits atop this structure: the data the depository furnishes to the issuer is aggregated from records maintained through its network of participants.
Section 18: SEBI's Power to Call for Information and Enquiry
Section 13 is a routine, system-internal flow of information. Section 18 is the regulator's override. Where Section 13 channels information from depository to issuer as a matter of course, Section 18 lets SEBI reach in and extract information from any participant in the system when the public interest demands it.
Section 18(1) provides that the Board, on being satisfied that it is necessary in the public interest or in the interest of investors, may, by order in writing, either (a) call upon any issuer, depository, participant or beneficial owner to furnish in writing such information relating to the securities held in a depository as it may require; or (b) authorise any person to make an enquiry or inspection in relation to the affairs of the issuer, beneficial owner, depository or participant, who shall submit a report within a specified time.
Section 18(2) reinforces this with a production duty: every director, manager, partner, secretary, officer or employee of the depository, issuer, participant or beneficial owner shall, on demand, produce before the person making the enquiry or inspection all information, records and documents in his custody having a bearing on the subject matter of the enquiry. Note the breadth: the duty to furnish information under Section 18 binds even the individual beneficial owner, not merely institutional intermediaries. This is the statutory hook that allowed SEBI, during the IPO allotment scam, to demand demat-account data and trace fictitious beneficial owners.
Section 19: From Information to Directions
Information-gathering would be toothless without the power to act on it. Section 19 closes the loop. It empowers the Board, after making or causing an enquiry or inspection, to issue such directions as it deems fit if satisfied that it is necessary (i) in the interest of investors or orderly development of the securities market, or (ii) to prevent the affairs of any depository or participant being conducted in a manner detrimental to the interests of investors or the securities market. An Explanation clarifies that this power to issue directions includes the power to direct any person to disgorge wrongful gains made.
The logical sequence — furnish information (Sections 13, 18), inspect (Section 18), then direct (Section 19) — is the spine of depository enforcement. Whether a particular SEBI action under this chapter is a quasi-judicial “order” (and therefore appealable to the Securities Appellate Tribunal) or a mere administrative measure became the central question in the leading case discussed below.
NSDL v SEBI: Which SEBI Acts Can Be Challenged?
The most authoritative judicial gloss on SEBI's powers over depositories is National Securities Depository Ltd. v. Securities and Exchange Board of India, decided by the Supreme Court on 7 March 2017 (reported as 2017 SCC OnLine SC 256), per R.F. Nariman and Pinaki Chandra Ghose, JJ. SEBI had issued a circular dated 9 November 2005 directing depositories to abolish dematerialisation charges on account-transfer transactions. NSDL appealed to the Securities Appellate Tribunal, which (by order dated 29 September 2006) rejected SEBI's preliminary objection on maintainability but ultimately dismissed the appeal on merits.
The question that reached the Supreme Court was the scope of “order” under Section 23A of the Depositories Act (and the cognate Section 15T of the SEBI Act): is every act of SEBI appealable to SAT, or only quasi-judicial orders? The Court held that SAT's appellate jurisdiction is confined to quasi-judicial orders; administrative and legislative measures fall outside it. As Nariman J. put it, “administrative orders such as circulars issued” under SEBI's general power are “obviously outside the appellate jurisdiction of the Tribunal.” Such measures must instead be challenged by judicial review under Article 226.
The significance for the present chapter is structural. A SEBI direction under Section 19, or an order calling for information under Section 18, made after applying mind to the rights of a specific party, is quasi-judicial and appealable. A general circular fixing how all depositories must report or charge — even one specifying the “manner” contemplated by provisions like Section 13 — is administrative and is not appealable to SAT. NSDL v SEBI thus draws the jurisdictional boundary around the entire information-and-direction apparatus.
The IPO Allotment Scam: Information Powers in Action
The clearest demonstration of why these information provisions matter is the IPO allotment scam of 2003–2005. In In re Roopalben Nareshbhai Panchal and related proceedings, SEBI uncovered that thousands of fictitious or benami demat accounts had been opened to corner the retail quota in successive public issues. Roopalben Panchal alone was found to operate thousands of benami beneficial-owner accounts; another entity, Sugandh, operated more than a thousand. Photographs and identity details harvested from an Ahmedabad photo studio had been used to fabricate the underlying beneficial owners.
It was precisely SEBI's power to call for information about “securities held in a depository” from depositories, participants and beneficial owners — the Section 18 power — that allowed the regulator to map the clustered accounts, trace the common addresses, and establish the manipulation. By order dated 15 December 2005 SEBI directed NSDL and CDSL to ensure the identified accounts were not used to manipulate future allotments, and proceeded against the depository participant, Karvy Stockbroking Ltd., for opening accounts without adequately verifying the genuineness of the entities. The episode forced a tightening of the data-furnishing, reconciliation and KYC obligations that flow from Sections 11, 13 and the bye-laws, and is the practical backdrop to the reconciliation penalty now in Section 19E.
Section 19A: Penalty for Failure to Furnish Information
The duty to furnish information is backed by a money penalty. Section 19A — “Penalty for failure to furnish information, return, etc.” — provides that if any person who is required under the Act, or any rules, regulations or bye-laws made thereunder, to furnish any information, document, books, returns or report to the Board fails to furnish the same within the specified time, or furnishes or files false, incorrect or incomplete information, return, report, books or documents, he shall be liable to a penalty which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which such failure continues, subject to a maximum of one crore rupees.
The daily-accruing structure (a floor of one lakh, accruing at up to one lakh per day, capped at one crore per failure) is deliberately calibrated to bite on continuing non-compliance rather than to punish a one-off lapse disproportionately. Crucially, Section 19A penalises not only a failure to furnish but also the furnishing of false, incorrect or incomplete information — squarely relevant to the fabricated beneficial-owner data exposed in the IPO scam. The same graded template (not less than one lakh, up to one lakh per day, maximum one crore) recurs across the sibling penalty sections: Section 19B (failure to enter into an agreement), Section 19E (failure to reconcile records), and Section 19F (failure to comply with directions).
Adjudication, Mitigating Factors and Settlement
A penalty under Section 19A is not imposed arbitrarily. Section 19H empowers the Board to appoint an adjudicating officer, not below the rank of a Division Chief, to hold an inquiry in the prescribed manner after giving the person a reasonable opportunity of being heard, and then to impose the penalty. Section 19-I directs the adjudicating officer, while adjudging the quantum, to have due regard to (a) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default; (b) the amount of loss caused to an investor or group of investors as a result of the default; and (c) the repetitive nature of the default.
Section 19-IA further permits a person against whom proceedings have been initiated to apply to settle them, on payment of such sum or on such terms as the Board may determine — the statutory basis of SEBI's consent/settlement mechanism. Sums realised as penalties are, under Section 19J, credited to the Consolidated Fund of India. This adjudication-and-settlement layer ensures that the information-furnishing duties of Section 13, and the regulator's demands under Section 18, are enforced through a structured, reasoned and appealable process rather than by executive fiat — consistent with the quasi-judicial/administrative distinction drawn in NSDL v SEBI.
Confidentiality, Access and the Limits of Furnishing
The duty to furnish information is not a licence for open access. The depository holds sensitive beneficial-owner data, and the Act and its subordinate framework restrict who may see it. Section 13(1) confines the depository's routine reporting to the issuer and to information about transfers in the names of beneficial owners — not to the world at large. Section 18 permits disclosure to SEBI (or its authorised inspector) only on the Board recording satisfaction that it is necessary in the public interest or in the interest of investors. Beyond these gateways, the beneficial owner's holding details are confidential, accessible chiefly to the beneficial owner himself and his participant.
This is the architecture's quiet balance: enough mandatory furnishing to make corporate actions, reconciliation and enforcement possible, but not so much as to convert the depository register into a public ledger. The same logic explains why the depository, though the registered owner under Section 10, is denied voting and beneficial rights — it is a custodian of information and title, not a principal with an interest of its own. The reciprocal records flow of Section 13(2) likewise runs to the depository for operational use, not for onward publication.
Section 13 Distinguished from Section 11 and Section 12
Aspirants frequently conflate Sections 11, 12 and 13 because all three concern records. The distinction is worth fixing. Section 11 is about maintenance: every depository shall maintain a register and an index of beneficial owners. It is a standing, internal record-keeping obligation. Section 12 is about intimation of encumbrances: a beneficial owner who creates a pledge or hypothecation must give intimation to the depository, which then records it, and any such entry is evidence of the pledge. Section 13, by contrast, is about flow: it moves information outward (depository to issuer) and records inward (issuer to depository).
Put differently, Section 11 builds the register, Section 12 annotates it with encumbrances, and Section 13 synchronises it with the outside world — the issuer who must honour corporate actions and the depository who must keep its register accurate. A related but separate exit-side obligation arises when a beneficial owner opts to leave the depository system: see our chapter on the surrender of certificate of security, where rematerialisation again requires coordinated record-keeping between issuer and depository.
Examination Pointers and Common Traps
For judiciary and CLAT-PG candidates, a few crisp anchors. One: Section 13 has exactly two limbs — depository-to-issuer information (13(1)) and issuer-to-depository records (13(2)) — and the intervals/manner of the former are fixed by bye-laws, not by the statute. Two: the wide power to “call upon any issuer, depository, participant or beneficial owner to furnish… information” is Section 18, exercisable on satisfaction of public interest or investor interest, and it binds even individual beneficial owners. Three: the penalty for failing to furnish information or furnishing false information is Section 19A — floor of one lakh, accruing at up to one lakh per day, capped at one crore per failure.
The most examinable trap is the appealability point from National Securities Depository Ltd. v. SEBI (2017 SCC OnLine SC 256): only quasi-judicial orders are appealable to SAT; administrative circulars are not, and must be challenged under Article 226. A second trap is confusing Section 13 (the topic) with Section 11 (register) or Section 12 (pledge). A third is forgetting that the depository, though the registered owner under Section 10, holds no voting or beneficial rights — the beneficial owner alone enjoys those, which is precisely why the Section 13 information flow exists.
Two further refinements separate a competent answer from a strong one. First, candidates should be able to place Section 13 within the appeal architecture: an order made under the Act is appealable to the Securities Appellate Tribunal under Section 23A, and from SAT a further appeal lies to the Supreme Court on a question of law under Section 23F — but, after NSDL v SEBI, only if the impugned act is genuinely quasi-judicial. A bye-law or circular specifying the “manner” of furnishing under Section 13(1) is administrative and falls outside that appeal route. Second, candidates should remember that the furnishing duties are reinforced, not exhausted, by Section 13: the depository's standing maintenance duty (Section 11), the issuer's reconciliation obligations, and SEBI's call-for-information power (Section 18) together form a layered regime, and an examiner's fact pattern about missing or falsified beneficial-owner data may engage any combination of them, with Section 19A supplying the penalty and Section 19 the corrective direction.
Frequently asked questions
What is the subject matter of Section 13 of the Depositories Act, 1996?
Section 13 deals with the furnishing of information and records between a depository and an issuer. Under Section 13(1) every depository must furnish to the issuer information about transfers of securities in the names of beneficial owners, at intervals and in the manner specified by the bye-laws. Under Section 13(2) every issuer must make available to the depository copies of the relevant records of securities held by that depository.
Why does an issuer need information from the depository at all?
Because of Section 10, once securities are dematerialised the depository (NSDL or CDSL) is the registered owner on the issuer's register, while the investor is only the beneficial owner. The issuer therefore cannot see its real shareholders. Section 13(1) restores that visibility so the issuer can pay dividends, send meeting notices, conduct rights issues and identify who may vote — corporate actions that depend on knowing the beneficial owners.
How is Section 13 different from SEBI's power to call for information?
Section 13 is a routine, system-internal flow between depository and issuer governed by bye-laws. SEBI's override power is Section 18, under which the Board, on being satisfied that it is necessary in the public interest or in investors' interest, may call upon any issuer, depository, participant or beneficial owner to furnish information, or authorise an enquiry or inspection. Section 18 binds even individual beneficial owners and was the statutory basis for tracing benami demat accounts in the IPO allotment scam.
What is the penalty for failing to furnish information under the Act?
Section 19A imposes a penalty for failure to furnish, or for furnishing false, incorrect or incomplete information, returns or records to the Board. The penalty shall not be less than one lakh rupees, may extend to one lakh rupees for each day during which the failure continues, and is subject to a maximum of one crore rupees for each failure. An adjudicating officer imposes it under Section 19H after an inquiry, having regard to the factors in Section 19-I.
What did National Securities Depository Ltd. v. SEBI decide?
In National Securities Depository Ltd. v. SEBI (2017 SCC OnLine SC 256, decided 7 March 2017, per Nariman and Pinaki Chandra Ghose, JJ.), the Supreme Court held that the Securities Appellate Tribunal's appellate jurisdiction is confined to quasi-judicial orders. Administrative circulars issued by SEBI are not appealable to SAT and must instead be challenged by judicial review under Article 226. This draws the jurisdictional boundary around SEBI's information and direction powers.
Does Section 13 make beneficial-owner data publicly available?
No. Section 13(1) confines the depository's routine reporting to the issuer and to transfer information in the names of beneficial owners. Section 18 permits disclosure to SEBI only on a recorded satisfaction of public or investor interest. Beyond these gateways the data is confidential, accessible chiefly to the beneficial owner and the participant. The architecture furnishes enough information for corporate actions and enforcement without turning the register into a public ledger.