Jurisprudence behind the Evolution of Depositories in India

Abstract

The number of retail investors has increased tremendously over the last few years, driving the stock market volume by a significant margin. Depositories play a crucial role in the Indian securities market, providing a safe and efficient mechanism for holding and transferring securities. Depository system is a vital component of the Indian capital market. It enables electronic holding and transfer of securities. In India Depositories Act of 1996 regulates the establishment and functioning of a depository. Depositories like the National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) have played a significant role in the development of the Indian Securities Market. These depositories have transformed the Indian securities market from a paper-based system to a dematerialized system, which has made trading in securities more efficient, secure, and transparent. The paper examines the legislative history of depositories in India and analyzes the judicial precedents that have shaped framework of depositories as it appears today. The paper concludes that the jurisprudential evolution of depositories has been driven by the need to balance the interests of various stakeholders, including investors, issuers, and market intermediaries, and to promote transparency and efficiency in the securities market. It also deals with the question of how depository system functions in India.