Refund to claimant from IEPF

Ministry of Corporate Affairs amended the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016. The Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Amendment Rules, 2017 rules published in Official Gazette on 28^th February 2017 and came into force on even date.  In earlier post here and here(original)/here(amended), we discussed transfer of amounts of unpaid and unclaimed dividends etc to the Investor Education and Protection Fund Authority Fund and transfer of shares in respect of which dividend is remain unpaid and unclaimed for continuous seven years. In this post, we will discuss amended provisions related to refund of such amount and shares related to unpaid dividend transferred to the Investor Education and Protection Fund Authority.

Refunds which may be claimed

According to sub – section (4) of section 124 of the Companies Act, 2013 discussed earlier here; any person claiming to be entitled to any money transferred under sub-section (1) to the Unpaid Dividend Account of the company may apply to the company for payment of the money claimed.

According to clause (a) of sub – section (1) of section 125 of the companies Act, 2013 discussed earlier here, the Investor Education and Protection Fund may be utilised for refund in respect of unclaimed dividends, matured deposits, matured debentures, the application money due for refund and interest thereon.

According to proviso to sub – section (6) of section 124, any claimant of shares transferred above shall be entitled to claim the transfer of shares from Investor Education and Protection Fund in accordance with such procedure and on submission of such documents as may be prescribed.

According to sub – rule (1) rule 7 of the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, any person, whose shares, unclaimed dividend, matured deposits, matured debentures, application money due for refund, or interest thereon, sale proceeds of fractional shares, redemption proceeds of preference shares, etc. has been transferred to the Fund, may claim the shares or apply for refund of such amount.

Claim Form

According to sub – rule (1) of rule 7, such person may apply to the Authority by making an application in Form IEPF 5 online available on website http://www.iepf.gov.in along with fee, as decided by the Authority from time to time in consultation with the Central Government, under his own signature.

According to sub – rule (2) rule 7 of the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, the claimant shall after making an application online in Form IEPF – 5 under rule (1), send the same duly signed by him along with, requisite documents as enumerated in Form IEPF-5 to the concerned company at its registered office for verification of his claim.

A claimant may file application for all amounts due to him from the fund in a single application form IEPF – 5. The applicant should have Aadhar number and Aadhar linked bank account. This Aadhar requirement is clear violation of Supreme Court Ruling ……

Following documents are required to be submitted with the company –

• Print out of duly filled claim form with claimant signature.
• Copy of acknowledgement
• Indemnity Bond (original) with claimant signature (As per format given in Annexure II) to be executed :
  • On a non-judicial Stamp Paper of the value as prescribed under the Stamp Act if the amount of the claim is Rs.10, 000 or more.
  • On a plain paper if the amount claimed does not exceed Rs.10,000.
  • In case of refund of shares, on a non-judicial Stamp Paper of the value as prescribed under the Stamp Act.
  • Advance Stamped receipt (original) with signature of claimant and two witnesses.
  • In case of refund of matured deposit or debenture, original certificate thereto
  • Copy of Aadhaar Card (For Indian Nationals)
  • Proof of entitlement (certificate of share/Interest warrant Application No. etc.)
  • Cancelled Cheque leaf
  • Copy of Passport, OCI and PIO card in case of foreigners and NRI
  • Other optional document – like succession certificate

It is nowhere mentioned in the Act or Rules for appointment of a Nodal Officer by the company for this purpose. However, the Form IEPF – 5 suggests that this form should be forwarded to nodal officer (IEPF) of the company. It is reported that a mail from MCA to companies asked for such designation. In normal case, company secretary of the company or any person so authorised by company shall take this responsibility.

Verification of claim

According to sub – rule (3) rule 7 of these rules the company shall, within fifteen days of receipt of claim form, send a verification report to the Authority in the format specified by the Authority along with all documents submitted by the claimant.

According to clause (a) of sub – rule (4) of rule 7 these rules, after verification of the entitlement of the claimant to the amount claimed, the Authority and then Drawing and Disbursement Officer of the Authority shall present a bill to the Pay and Accounts Office for e- payment as per the guidelines.

According to clause (b) of sub – rule (4) of rule 7 these rules, after verification of the entitlement of the claimant to the shares claimed, the Authority shall issue a refund sanction order with the approval of the Competent Authority and shall either credit the shares which are lying with depository participant in IEPF suspense account (name of the company) to the demat account of the claimant to the extent of the claimant’s entitlement.

As amended Rule 6 of these rules made dematerialisation of share transferred to IEPF compulsory, these shall be transferred to claimant in dematerialised form only.

According to sub – rule (6) rule 7 of these rules an application received for refund of any claim under this rule duly verified by the concerned company shall be disposed of by the Authority within sixty days from the date of receipt of the verification report from the company, complete in all respects and any delay beyond sixty days shall be recorded in writing specifying the reasons for the delay and the same shall be communicated to the claimant in writing or by electronic means.

Requirement for giving reason for delay beyond specified period is welcome step though there should be a provision of payment of interest for period of delay.

Communication of deficiencies

According to sub – rule (7) of rule 7 of these rules, in cases, where the application is incomplete; a communication shall be sent to the claimant by the Authority detailing deficiencies of the application.

Claim by legal heir

According to sub – rule (8) of rule 7 of these rules, in case claimant is a legal heir or successor or administrator or nominee of the registered security holder, he has to ensure that the transmission process is completed by the company before filing any claim with the Authority.

According to “new” sub – rule (9) of Rule 7 of these rules, the company shall verify all requisite documents required for registering transfer or transmission and shall issue letter to the claimant indicating his entitlement to the said security and furnish a copy of the same to the Authority while verifying the claim of such claimant.

Here, sub – rule (8) cast duty of completing transmission process on claimant. Sub – rule (9) casts duty of verification of claims, in case of transfer and transmission, on the company.

According to sub – rule (10) of rule 7 of these rules, the claimant shall file only one consolidated claim in respect of a company in a financial year.

While filing form a claimant should ensure he has made all possible claim with all requirement documents at once.

Indemnity to the authority

In most interesting sub – rule (10) of rule 7 of these rules, all indemnity is provided to the Authority. The company shall be solely liable under all circumstances whatsoever to indemnity the IEPF Authority in case of any dispute or lawsuit that may be initiated due to any incongruity or inconsistency or disparity in the verification report or otherwise. The IEPF Authority shall not be liable to indemnity the security holder or Company for any liability arising out of any discrepancy in verification report submitted etc leading to any litigation or complaint arising thereof. This sub – rule aims to reduce legal cost to the Authority.