In PTC India Financial Services Ltd. v. Venkateswarlu Kari and Another^[1], the SC held that Section 12 of the Depositories Act, 1996 (‘Depositories Act’) or SEBI (Depositories and Participants) Regulation 1996 (‘Depositories Regulation’) does not change the law of pledge requiring issue of reasonable notice; or as allowing sale to self, or abolishing the right of the pawnor to redeem the pledged goods till ‘actual sale’. Mere exercise of the right by the pawnee to record himself as the ‘beneficial owner’, which is a necessary precondition before the pawnee can exercise his right to sell, is not ‘actual sale’ and would not affect the rights of the pawnor of redemption under Section 177 of the Indian Contract Act, 1872 (‘ICA’). The exercise of right on the part of the pawnee and consequent action on the part of the ‘depository’ recording the pawnee as the ‘beneficial owner’ is not ‘actual sale’. The pawnor’s right to redemption under Section 177 of the ICA continues and can be exercised even after the pawnee has been registered and has acquired the status of ‘beneficial owner’. The right of redemption would cease on the ‘actual sale’, that is, when the ‘beneficial owner’ sells the dematerialised securities to a third person. Thus, there is no disharmony between Sections 10 and 12 of the Depositories Act and Regulation 58 of the Depositories Regulation and Sections 176 and 177 of the ICA.

[1] PTC India Financial Services Ltd. v. Venkateswarlu Kari & Anr., 2022 SCC OnLine SC 408.