Section 8 – CERTIFYING AUTHORITIES RULES

8. Licensing of Certifying Authorities

(1) The following persons may apply for grant of a license to issue Digital Signature Certificates, namely :-

a. an individual, being a citizen of India and having a capital of five crores of rupees or more in his business or profession

b.a company having –

(i)paid up capital of not less than five crores of rupees; and

(ii) net worth of not less than fifty crores of rupees:

Provided that no company in which the equity share capital held in aggregate by the Non-resident Indians, Foreign Institutional Investors, or foreign companies, exceeds forty-nine per cent of its capital, shall be eligible for grant of license:

Provided further that in a case where the company has been registered under the Companies Act, 1956 (1 of 1956) during the preceding financial year or in the financial year during which it applies for grant of license under the Act and whose main object is to act as Certifying Authority, the net worth referred to in sub-clause (ii) of this clause shall be the aggregate net worth of its majority shareholders holding at least 51% of paid equity capital, being the Hindu Undivided Family, firm or company:

Provided also that the majority shareholders referred to in the second proviso shall not include Non-resident Indian, foreign national, Foreign Institutional Investor and foreign company:

Provided also that the majority shareholders of a company referred to in the second proviso whose net worth has been determined on the basis of such majority shareholders, shall not sell or transfer its equity shares held in such company-

(i) unless such a company acquires or has its own net worth of not less than fifty crores of rupees;

(ii) without prior approval of the Controller;

c.a firm having – 

i.capital subscribed by all partners of not less than five crores of rupees; and 

ii.net worth of not less than fifty crores of rupees: 

Provided that no firm, in which the capital held in aggregate by any Non-resident Indian, and foreign national, exceeds forty-nine per cent of its capital, shall be eligible for grant of license:

Provided further that in a case where the firm has been registered under the Indian Partnership Act, 1932 (9 of 1932) during the preceding financial year or in the financial year during which it applies for grant of license under the Act and whose main object is to act as Certifying Authority, the net worth referred to in sub-clause (ii) of this clause shall be the aggregate net worth of all of its partners:

Provided also that the partners referred to in the second proviso shall not include Non-resident Indian and foreign national:

Provided also that the partners of a firm referred to in the second proviso whose net worth has been determined on the basis of such partners, shall not sell or transfer its capital held in such firm-

(i) unless such firm has acquired or has its own net worth of not less than fifty crores of rupees;

(ii) without prior approval of the Controller;

(d) Central Government or a State Government or any of the Ministries or Departments, Agencies or Authorities of such Governments.

Explanation.- For the purpose of this rule,-

i. “company” shall have the meaning assigned to it in clause 17 of section 2 of the Income-tax Act,1961 (43 of 1961); 

ii. “firm”, “partner” and “partnership” shall have the meanings respectively assigned to them in the Indian Partnership Act, 1932 (9 of 1932); but the expression “partner” shall also include any person who, being a minor has been admitted to the benefits of partnership; 

iii. “foreign comp
any” shall have the meaning assigned to it in clause (23A) of section 2 of the Income-tax Act,1961 (43 of 1961)

iv. “net worth” shall have the meaning assigned to it in clause (ga) of sub-section (1) of section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986)

v. “Non-resident” shall have the meaning assigned to it as in clause 26 of section 2 of the Income-tax Act,1961 (43 of 1961)

(2) The applicant being an individual, or a company, or a firm under sub-rule (1), shall submit a performance bond or furnish a banker’s guarantee from a scheduled bank in favor of the Controller in such form and in such manner as may be approved by the Controller for an amount of not less than five crores of rupees and the performance bond or banker’s guarantee shall remain valid for a period of six years from the date of its submission:

Provided that the company and firm referred to in the second proviso to clause (b) and the second proviso to clause (c) of sub-rule (1) shall submit a performance bond or furnish a banker’s guarantee for ten crores of rupees:

Provided further that nothing in the first proviso shall apply to the company or firm  after it has acquired or has its net worth of fifty crores of rupees.

(3) Without prejudice to any penalty which may be imposed or prosecution may be initiated for any offence under the Act or any other law for the time being in force, the performance bond or banker’s guarantee may be invoked –

f. when the Controller has suspended the license under sub-section (2)
of section 25 of the Act; or 

g. for payment of an offer of compensation made by the Controller; or  

h. for payment of liabilities and rectification costs attributed to the negligence of the Certifying Authority, its officers or employees; or

i. for payment of the costs incurred in the discontinuation or transfer of operations of the licensed Certifying Authority, if the Certifying Authority’s license or operations is discontinued; or 

j. any other default made by the Certifying Authority in complying with the provisions of the Act or rules made thereunder.

Explanation.- “transfer of operation” shall have the meaning assigned to it in clause (47) of section 2 of the Income-tax Act, 1961 (43 of 1961). 

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