benami property and SEBI guidelines




Benami transaction means;

  • where the property is transferred to or held by a person, and consideration for such property has been provided or paid by another person.
  • the property is held, by a person, for the immediate or future benefit, direct or indirect, of the person who has provided or paid consideration.
  • property is held, carried out or made in a fictitious name.
  • where the owner of the property is not aware of, or, denies knowledge of such ownership.
  • Where person providing consideration for the property is not traceable or is fictitious.

According to the SEBI,  all the holders holding securities holders holding securities in physical mode shall submit a copy of PAN and bank details (a copy of the PAN card and original cancelled cheque leaf /attested bank passbook showing name of account holder) within 21 days from the date of receiving notice from Issuer Companies through their RTAs.

After the submission of required documents by the security holder, RTAs is under obligation to send letter under registered/Speed post seeking PAN and bank details within 90 days from the date of this circular (which is dated 20th April 2018) and two reminders thereof after the gap of 30 days. The period of 21 days is required to provide the required details.

PAN card can be substituted with valid Identity proof issued by Government, in case holder is the residence of Sikkim.

The objectives of the SEBI behind this  to keep a check on the wrong payment or return of dividend, interest, warrants etc and ensure smooth functioning and administration . The above action can put the restrictions on  benami transaction also.

Securities holders who are unable to respond to RTA call/notice and not able to provide PAN and bank details within 180 days of the circular or have informed that the securities available in their name as per the records of RTA does not belong to them, shall be subject to enhanced due diligence by Issuer Company. Let’s see how RTA / company would respond to those cases.

The holder can continue to hold the shares in physical form but whose ledger folios do not have/ having incomplete details with respect to PAN and Bank particulars are mandatorily required to furnish these details to the Issuer Company/RTA for registration in the folio.

This amendment can eliminate fraud and manipulations can be taken place in payments of dividends,warrants,interest etc. to those who holds the securities in physical form. The transactions such as benami transactions can be reduced to an large extent.

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