Depository sources pointed out that hectic efforts are on to convince these companies to sign up with the depository ahead of the October 15 deadline. Sebi sources said the regulator is contemplating necessary action. Sebi chairman D R Mehta has said that theregulator may consider extending the deadline for these scrips.

NSDL managing director C B Bhave confirmed that he had written to Sebi as this was a matter on which only the regulator could take a stand. He said he was hopeful that these companies would sign up before the deadline. As it takes a minimum of 15 days to dematerialise a share which is registered in the name of the owner, there could be great confusion on October 15. From that date, institutions - FIIs, FIs, mutual funds, banks and OCBs - will not be able to sell Colgate and Bhel shares in the physical form. (They can, however, buy in the physical segment).

Institutions have been mandated to sell only demat shares. For lack of liquidity in the demat segment, institutions have been allowed to buy in physical form but they would need to dematerialise the shares if they intend to sell them. Both, Colgate and Bhel are part of the Sensex and the S&P CNX Nifty indices and are currently the only two index scrips which have not signed up with NSDL toprovide the facility to investors.

Sebi had announced on July 17 that these two scrips would form part of the fourth list of 60 securities where institutions would trade only in demat shares. The deadline was set for October 15. There were about 7 companies in this list which had not signed up with NSDL as on that date. The idea of including these stocks in the demat list was to push the companies to sign up fast as the intention was to get all Sensex and S&P CNX Nifty stocks in the depository mode.

Sebi's idea in pushing for compulsory demat trading was partly aimed at pushing more and more companies to embrace paperless trading as the norm. Once trading is mandated to take place only in the demat mode, companies have little option but to sign up with the depository. Under the Depositories Act, the right to hold a share in physical or demat form is with the shareholder.

The ministry of finance is also of the opinion that even if a shareholder seeks to dematerialise his shares a company would have toprovide him with the option .