In a related development, the Sebi executive director (legal), Dharmishta Raval told The Financial Express that an option has been given to an investor and not the company to provide for demat facility. "If an investor seeks such an option it is binding on a company to provide the option", said Raval.

Seven companies including Colgate and Bhel have failed to sign up with the depository on time and hence the deadline for trading in demat shares of these companies had to be pushed back by Sebi. In fact, Bhel is yet to sign up with thedepository.

Sebi sources said that the Depositories Act provides the regulator with enough powers to take action against errant companies. However, it is not clear whether Sebi is contemplating any action on these companies. "The Act gives the investors the right to seek an option to dematerialise shares. If the right of the investor to ask the corporate to provide him the depository option is not to be one on paper only, it is imperative for the government to first exercise the option as a shareholder by directing the PSUs to sign up with the depository", Bhave told The Financial Express. "How will the government tell corporates to provide the demat option to its shareholders when the government itself is not willing to exercise its option as a shareholder to push PSUs to the depository", said Bhave. Speaking out on the entire issue of seven companies failing to sign up with the depository on time, Bhave said that it was rather unfortunate that companies did not realise the gravity of signing up in advancedespite several missives and even personal visits by the NSDL staff.

"It is even more unfortunate that six of these companies were PSUs where the government is the majority shareholder. If PSUs refrain from signing up then a wrong message is sent out to the market," said Bhave. "The government and Sebi must put their foot down and tell these PSUs to sign up. A strict deadline should be set up for all the PSUs by when all of them should be asked to sign up with the depository. We have requested Sebi to take up the matter with the government", said Bhave. "In this case, investors like UTI had asked for the option but were not given the same on time. The whole idea of pushing companies to sign up has only arisen now as this is for the first time that we have found companies not signing up despite being included in the mandatory list. This is very unfortunate and steps should be taken to ensure that such a situation does not take place again", said Bhave.

Earlier, UTI had sought the demat option for tradingin demat shares of both Bhel and Colgate after realising that both these companies had not signed up with the depository in time for the October 15 deadline.