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Unclaimed dividends transfer: DCA urged to be lenient

Richa Mishra

New Delhi , Feb. 18

INDIA Inc has urged the Department of Company Affairs (DCA) to adopt a `lenient' view on delays caused in transfer of amounts unclaimed by shareholders to the Investor Protection & Education Fund (IE&PF).

Companies feel that the delay is not a deliberate intent but more due to "procedural" or "administrative" factors.

Surprised by the show-cause notices issued to companies for defaulting in transferring funds to IE&PF, the Federation of Indian Chambers of Commerce and Industry (FICCI) has in a representation to the Department of Company Affairs (DCA), requested that "show-cause notices should not be issued merely for delay in the process as the same would aggravate the problems further."

Section 205C provides for establishment of IE&PF. The Section requires that the amounts of unpaid dividend and matured deposits/debentures as well as the interest accrued on them that have remained unclaimed for seven years from the date of maturity shall be credited to the Fund. It may be recalled that the said Section was brought into force from October 31, 1998 and the consistent interpretation, which was placed on the Section was that it had prospective application, a FICCI official told Business Line.

The problems arose due to the recent interpretation (September 2002) of Section 205C of the Companies Act, 1956, by the Department, an FICCI official said.

As per the interpretation, the amounts that had remained unclaimed or unpaid as on October 31, 1991 and October 31, 1998 should be transferred to IE&PF.

The interpretation further provided that since the IE&PF had become operational from October 1, 2001, all amounts due for transfer during November 1, 1998 - September 30, 2001 should have been transferred by October 31, 2001. This has taken the corporate India by surprise, he said.

"One cannot deny the fact that Section 205C is a depriving statutory provision for the claimants, as once the amounts are transferred to the said Fund, the claimants would be deprived of their claims forever, whereas, if the amounts remained with the company, their claims would be entertained as was being done earlier. The prospective application of the Section gave a seven-year time period from October 31, 1998 for the claimants to stake their claim with the company," the official said.

He said that it was on this basis that the companies were preparing, but because of the circular issued on September 23, 2002, the companies were per-forced to make transfers to IE&PF, even if they were not due for transfer to avoid controversy with the Government.

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