Mumbai, Feb 25: The Securities and Exchange Board of India (SEBI) is set to strike down Castrol India's decision to disallow partial dematerialisation of an investor's holdings.According to SEBI sources, the Castrol stand is "ridiculous" and the market regulator would clarify this to both the company as well as the National Securities Depository Ltd (NSDL). The company recently refused to dematerialise the holdings of an investor who lodged only a part of his holdings for dematerialisation.
Although it is not yet clear whether any action can be taken against the company under the provisions of the Depositories Act, sources said that this would be studied over the next couple of days.
"The law is very clear in allowing investors to dematerialise part of their holdings. They (Castrol) seem to have interpreted the provisions wrongly. We will clarify on the same," said a SEBI source.
Sources said that the company had, in its talks with NSDL officials, insisted that their interpretation was correct andthat it would only go back on its decision if the market regulator came out with a clarification.
As the offices of the regulator were closed on Wednesday for a public holiday, the clarification on the matter is likely to be issued by Thursday or Friday.
"When all other 150-odd companies are dematerialising investor holdings in accordance with the law, Castrol's stand is quite surprising," said a depository source.
In fact, market sources say that given the existence of fake and forged shares of the company in the market, it should have done everything to boost demat levels in its scrip. "The move by Castrol has only proved to be an obstacle for dematerialisation as there is no way an investor can get back that part of his folio which he has already sold in the physical form," said a broker.
Castrol has rejected the demat request of some investors on the ground that the entire folio needs to be dematerialised and that part-demat of holdings is not allowed under the existing regulations.
Oncomplaints by investors affected by the company's decision and failure to persuade the company to revoke its decision, NSDL on Tuesday wrote to the market regulator, seeking its intervention.
The Castrol case is the first such case where a company and the depository have differed on issues of interpretation of the law, which was enacted in 1996, in the form of the Depositories Act.
Copyright(c)1998 Indian Express Newspapers (Bombay) Ltd.
