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      Question

      A Depository Participant (DP), 'Alpha Securities,'

      received a written directive from the Securities and Exchange Board of India (SEBI) on February 1, 2025, to redress a specific group of investor grievances regarding the unauthorized transfer of shares. Alpha Securities failed to redress these grievances within the time specified by the Board. The failure continued for 20 days beyond the specified deadline. Under Section 19C of the Depositories Act, 1996, what is the statutory penalty liability for Alpha Securities?
      A A fixed penalty of ₹1 lakh only, regardless of the duration of the delay. Correct Answer Incorrect Answer
      B A penalty of not less than ₹1 lakh, but which may extend to ₹1 lakh for each day during which such failure continues, subject to a maximum of ₹1 crore. Correct Answer Incorrect Answer
      C A penalty of not less than ₹5 lakhs, but which may extend to ₹25 crores depending on the disproportionate gain made. Correct Answer Incorrect Answer
      D A mandatory imprisonment of the directors for a term not less than 1 month, along with a fine of ₹1 lakh per day. Correct Answer Incorrect Answer
      E A fixed penalty of ₹5 lakhs for every day of delay, with no upper limit on the maximum amount. Imprisonment for a term which may extend to three years or with fine, or with both. Correct Answer Incorrect Answer

      Solution

      This answer is based on Section 19C of the Depositories Act, 1996. 1. The Statutory Provision (Section 19C) Section 19C specifically deals with the "Penalty for failure to redress investors' grievances." It states: "If any depository or participant or any issuer or its agent or any person... after having been called upon by the Board in writing, to redress the grievances of the investors, fails to redress such grievances within the time specified by the Board, such depository or participant... 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." Summary Table of Penalties (Depositories Act, 1996)

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