Section 58 in The Securities And Exchange Board Of India (Depositories And Participants) Regulations, 1996
58. [ Manner of creating pledge or hypothecation.- [Substituted by S.O. 640(E), dated 5.9.1997]
(1)If a beneficial owner intends to create a pledge on a security owned by him, he shall make an application to the depository through the participant who has his account in respect of such securities.(2)The participant after satisfaction that the securities are available for pledge shall make a note in its records of the notice of pledge and forward the application to the depository.(3)[ Within fifteen days of receipt of the application, the depository shall after concurrence of the pledgee through its participant, create and record the pledge and send an intimation of the same to the participants of the pledger and the pledgee.](4)On receipt of the intimation under sub-regulation (3) the participants of both the pledgor and the pledgee shall inform the pledgor and the pledgee respectively of the entry of creation of the pledge.(5)If the depository does not create the pledge, it shall send along with the reasons an intimation to the participants of the pledgor and the pledgee.(6)The entry of pledge made under sub-regulation (3) may be cancelled by the depository if the pledgor or the pledgee makes an application to the depository through its participant:Provided that no entry of pledge shall be cancelled by the depository with the prior concurrence of the pledgee.(7)The depository on the cancellation of the entry of pledge shall inform the participant of the pledgor.(8)Subject to the provisions of the plegde document, the pledgee may invoke the pledge and on such invocation, the depository shall register the pledgee as beneficial owner of such securities and amend its records accordingly.(9)After amending its records under sub-regulation (8) the depository shall immediately inform the participants of the pledgor and pledgee of the change who in turn shall make the necessary changes in their records and inform the pledgor and pledgee respectively.(10)(a)If a beneficial owner intends to create a hypothecation on a security owned by him he may do so in accordance with the provisions of sub-regulations (1) to (9).(b)The provisions of sub-regulations (1) to (9) shall mutatis mutandis apply in such cases of hypothecation:Provided that the depository before registering the hypothecatee as a beneficial owner shall obtain the prior concurrence of the hypothecator.(11)No transfer of security in respect of which a notice or entry of pledge or hypothecation is in force shall be effected by a participant without the concurrence of the pledgee or the hypothecatee as the case may be.]
