Section 16 of The Depositories Act, 1996 — Depositories to indemnify loss in certain cases
Bare section text
Official Legislative Text
- (1)Without prejudice to the provisions of any other law for the time being in force, any loss caused to the beneficial owner due to the negligence of the depository or the participant, the depository shall indemnify such beneficial owner.
- (2)Where the loss due to the negligence of the participant under sub-section (1) is indemnified by the depository, the depository shall have the right to recover the same from such participant.
Educational Study Layer
Summary
- The depository must compensate the owner for any loss caused by its own negligence.
- This rule also covers losses caused by the negligence of a participant who acts on the depository's behalf.
- Compensation means making the owner whole again for the financial damage caused by mistakes.
- If the depository pays for a participant's mistake, it has the legal right to demand that money back from the participant.
- This protection exists alongside any other laws that might apply to the situation.
Practical examples
FAQ
1. Who pays if a participant makes a mistake under Section 16 of the Depositories Act 1996?
Under Section 16 of the Depositories Act 1996, the depository is responsible for paying the beneficial owner first for any loss caused by negligence.
2. Does the Depositories Act 1996 Section 16 allow depositories to recover money from participants?
Yes, if a depository pays an owner for a participant's negligence, it has the right to recover that sum from the participant under Section 16 of the Depositories Act 1996.
3. What kind of fault is covered by Section 16 of the Depositories Act 1996?
Section 16 of the Depositories Act 1996 specifically covers losses caused by negligence.
4. Does Section 16 of the Depositories Act 1996 replace other laws about negligence?
No, Section 16 of the Depositories Act 1996 works without affecting any other laws that are already in force.
Practice Quiz
Q1.Under Section 16 of the Depositories Act, 1996, who is primarily responsible for compensating a beneficial owner for losses due to a participant's negligence?
Q2.Under Section 16 of the Depositories Act, 1996, what can a depository do if it pays for a participant's negligence?
Q3.Does Section 16 of the Depositories Act, 1996 apply even if other laws are in force?
Q4.Under Section 16 of the Depositories Act, 1996, what must be proven to trigger a depository's duty to pay?