It is silent on the term "regulations", and this has sent alarm bells ringing in SEBI, which is putting together guidelines on share buyback to ensure that the prime minister's resolve to introduce the measure can be implemented.

The ordinance, which has sought to amend the Section 77 of the Companies Act (which debars firms from buying back their shares), states under clause XI of the section that, "If a company makes a default in complying with provisions of this section, or any rules made thereunder, the company or the officer would be punishable with imprisonment up to two years, or with a fine of Rs 50,000, or withboth".

"This means that punishment can be meted out to the violators of the section and the rules. The rules are prescribed by the centre. It does not mention SEBI regulations, and one wonders whether SEBI would be able to take action on violators of its guidelines," a top market source said.

Senior SEBI officials were not available for comment as they were busy working out the guidelines. It is now unlikely that the regulator will set up a committee to work out the guidelines. Instead, it may take the draft regulations directly to its board meeting slated for November 10.

SEBI sources, however, criticised views from a section of the industry that the regulator is dithering on coming out with its guidelines. "This is a serious matter. While on the one hand, share buyback has several positives like creating liquidity, aiding corporate restructuring, etc, on the other, it can also be used to manipulate the market. If this happens, then the purpose of coming out with the measure will be defeated. We cannotafford to let this happen by rushing through with the regulations," said a SEBI source.

SEBI sources say the regulator is coming to terms with the details spelt out in the ordinance. They indicated that SEBI had already zeroed in on the broad guidelines. The Dhanuka panel had made some suggestions, and the regulator had studied certain models adopted in developed markets.

The ordinance is rather detailed, which leaves little scope for SEBI to start from scratch to address the issue. "SEBI will only need to finetune the guidelines enlisted in the ordinance as most critical issues have been addressed", said a source.