The Hindu Business Line : Investor fund transfers: Ministry to condone delays

COMPANIES can now transfer unclaimed and unpaid amounts of shareholders to the Investor Education & Protection Fund (IE&PF) without any fear of being penalised for procedural delays.

Taking note of the practical difficulties faced by the corporate sector, the Ministry of Company Affairs has decided to adopt a lenient approach in tackling such defaults.

The Ministry has now said that for those companies that have complied with the norms and deposited the requisite amounts into IE&PF on or before March 31, 2003, no penal action on grounds of delay would be initiated. However, action would be initiated in cases where compliance had not been made by March 31, 2003. This would equally apply to cases where show-cause notice has been issued, the Ministry sources said.

The entire process of transfer of amounts unclaimed by the holders of company fixed deposits, unpaid dividends and other amounts that had become due for payment into IE&PF had become a ticklish issue for the corporate sector with show-cause notices being issued to companies for defaulting in transfer of such amount.

Companies had argued that the delays were not owing to deliberate intent but more due to `procedural' or `administrative' factors in making the payment to the fund as the deposits keep maturing at frequent intervals.

The problems arose due to the interpretations (September 2002) of the provision issued by the Ministry.

According to the corporate sector, the Section providing for establishment of IE&PF was brought into force from October 31, 1998, and the consistent interpretation was that it had prospective application.

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.

However, 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 fund had become operational from October 1, 2001, all amounts due for transfer during the period November 1, 1998, to September 30, 2001, should have been transferred by October 31, 2001. This had taken corporate India by surprise.

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