REFUND OR RECLAIM 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) Second Amendment Rules, 2019 rules published in Official Gazette on 14^th August 2019. 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. Amendment relevant to this post comes into effect with effect from 20^th September 2019 except fraudulent claim and deceitful impersonation related provisions under Rule 7(11) which came into effect on 20^th August 2019.

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

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. [Sub – rule (1) of rule 7]

The Form IEPF – 5 upon submission by the claimant shall be transmitted to the Nodal Officer of the company. [Sub – rule (2) of rule 7] The Nodal officer for the purpose of IEPF shall be appointed by the company under sub – rule (2A) of Rule 7.

The claimant shall after making an application online in Form IEPF – 5, send the same duly signed by him along with requisite documents to the Nodal Officer of the concerned company at its registered office for verification of his claim. These requisite documents are:

1. original physical share certificate, original bond, deposit certificate, debenture certificate, as the case may be,
2. Indemnity Bond,
3. Advance Receipts, and
4. any other document as enumerated in the Form depending upon the subject matter of the claim. [Sub – rule (2) of rule 7]

VERIFICATION OF CLAIM

The company shall, within thirty days of receipt of claim form, send an online verification report to the Authority in the format specified by the Authority along with all documents submitted by the claimant. The company shall attach the scanned copy of all the original documents submitted by the claimant in physical form duly certified by its Nodal Officer along with the e-verification report along with a scanned copy of both sides of original physical share certificate or original bond or deposit or debenture certificate/s duly cancelled and certified. [Sub – rule (3) rule 7]

If the online verification report is not sent by the company within thirty days of filing of claim, the company may do so by paying additional fee of fifty rupees for every day subject to maximum of two thousand and five hundred rupee.  [First Proviso to Sub – rule (3) rule 7] So the meter will start from 30^th day and will continue till 80^th day.

The company shall be liable to maintain the original documents submitted to it by the claimant and shall produce such documents whenever required. [Second Proviso to Sub – rule (3) rule 7]

This seems to be permanent record however it may render useless after expiry of limitation period for anyone disputing the claim of the claimant.

In case of non-receipt of verification report along with documents by the Authority after the expiry of sixty days from the date of filing of Form IEPF-5, the Authority may reject Form IEPF-5, after sending a communication to the claimant and the concerned company, on the e-mail address of the claimant and the company, to furnish response within a period of fifteen days. [Third Proviso to Sub – rule (3) rule 7]

It seems third proviso require amendment in light of first proviso to increase the period at least to 90^th day from the date of filing of Form IEPF-5.

For failure to submit verification report of the claim in accordance with these rules, the company and its Nodal Officer shall be punishable as per the provisions of the Act. [Fourth Proviso to Sub – rule (3) rule 7]

IMPORTANT POINT FOR VERIFICATION

Rule 7(3) also explain additional procedure for certain cases:

Loss of Physical Certificate:

In case of loss of original physical share certificate or original bond or deposit or debenture certificate or proof of entitlement, the company and the claimant shall follow the procedure as laid down in:

1. the Companies (Share Capital and Debenture) Rules, 2014;
2. the Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements) Regulation, guidelines, procedures and circulars issued from time to time; and
3. Schedule III of these IEPF rules and attach certified copies of all documents as may be required under the said rules or guidelines with the e-verification report.

Treatment of Duplicate Certificate created at the time of IEPF Transfer:

In addition, the company shall attach a scanned copy of both sides of share certificate generated under clause (d) of sub-rule (3) of rule 6 of these rules along with the e-verification report.

Collection and record of Original Certificates:

The Company shall be solely responsible for collecting original physical share certificate or original bond or deposit or debenture certificate or proof of entitlement from the claimant and shall be liable for any misuse thereof.

POST VERIFICATION PROCESS

In case of claim of an amount, after verification of the entitlement of the claimant, the Authority and then Drawing and Disbursement Officer of the Authority shall present a bill to the Pay and Accounts Office for e- payment. [Clause (a) of sub – rule (4) of rule 7]

In case of claim of shares, after verification of the entitlement of the claimant, the Authority shall issue a refund sanction order with the approval of the Competent Authority and shall credit the shares to the DEMAT account of the claimant to the extent of the claimant’s entitlement. [Clause (b) of sub – rule (4) of rule 7]

TIME PERIOD TO DISPOSE OFF APPLICATION

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. 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. [sub – rule (6) rule 7 of these rules]

COMMUNICATION OF DEFICIENCIES

If it necessary to call for further information or finds such application or e-form or document to be defective or incomplete in any respect, the Authority shall give intimation of such information called for or defects or incompleteness, by e-mail on the email address of the claimant and the company, directing him or it:

1. to furnish such information, or
2. to rectify such defects or incompleteness, or
3. to re-submit such application or e-Form or document within fifteen days from the date of receipt of such communication.

On failure of providing such information or rectify the defect or resubmit the form, the Authority may reject the claim. [sub – rule (7) of Rule 7]

If such information or incompleteness is called from the claimant, he shall file the e-form and shall send such documents as called for within fifteen days, duly signed by him, to the Nodal Officer of the concerned company for verification of the claim. The company shall send a revised verification report to IEPFA. [First Proviso to sub-rule (7) of Rule 7]

If any such information or incompleteness is called from the company, the company shall file the revised verification report and shall send such documents as called for within thirty days.  The provisions of sub-rule (3) of rule 7 shall apply mutatis mutandis to this sub-Rule. [Second and third Proviso to sub-rule (7) of Rule 7]

CLAIM BY LEGAL HEIR

Earlier there was a requirement that 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. Now this has been changed.

In case, claimant is a legal heir or successor or administrator or nominee of the registered share holder, the claimant shall ensure to submission of self-attested scanned copy of all documents detailed in Schedule II of these rules online along with the Form IEPF – 5. In case of loss of securities held in physical form, he has to ensure to submission of self-attested scanned copy of additional documents detailed in Schedule III of these rules online along with the Form IEPF-5. The claimant shall submit in original all these documents duly signed by him, to the Nodal Officer of the concerned company at its registered office for verification of the claim. [sub – rule (8) of rule 7]

Where, claimant is a legal heir or successor or administrator or nominee of any other registered security, 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 through its e-verification report. [sub – rule (9) of rule 7]

The authority shall dispose such request of transfer or transmission based on the e-verification report of the company subject to verification of such request. [sub – rule (9) of rule 7]

COMPANY TO INDEMNIFY THE AUTHORITY

The verification process and its consequences shall be sole liability of the company.

The company shall be liable under all circumstances whatsoever to indemnify the 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 Authority shall not be liable to indemnify 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.[Clause (a) of sub – rule (11) of Rule 7]

FRAUD AND OTHER CRIME

Any fraudulent claim by the claimant shall be deemed to be fraud within the meaning of section 447 of the Act and the claimant shall be liable accordingly. If any person deceitfully personates an owner of any security or of any share warrant or coupon issued in pursuance of this Act and thereby files any claim to obtain or attempts to obtain any such security or interest or any such warrant or coupon due to the lawful owner, he shall be punishable under sections 57, 447 and 448 of the Act. [sub – rule (11) of Rule 7]

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