The Investor Education and Protection Fund Authority (IEPF) has finally compelled Peerless General Finance and Investment company to transfer deposits worth Rs 1,514 crore to Investors Education and Protection Fund (IAPF).
The company has taken a deposit of Rs 1.49 crore from over one crore individual investors, as per the release. As per the data provided by the company, 50.77 per cent of the total amount was taken in the form of deposit certificates of value of Rs 2,000 or less from investors across 30 states and union territories.
The money was lying unclaimed with the company for the past 15 years. As per the law, a company needs to transfer the amount to IEPF if it remains unclaimed for a period of seven years.
"In compliance with Section 125 (2) (a), matured deposits with companies remaining unclaimed for a period of 7 years from the date it became due for payment shall be credited to the IEPF account," says Pavan Kumar Vijay, Founder, Corporate Professionals Group
Till recently, the company was supposed to deposit only the unclaimed dividend to IEPF but the government came out with a regulation in October 2017, which asked companies to deposit the unclaimed dividend as well as shares with IEPF by October 31st 2017. But many companies have not complied with the deadline and the shares are still lying unclaimed with them. The IEPF authority had issued 4000 notices to such companies, it said in the release. In the release, IEPF has specifically mentioned that there are companies including NBFCs, which have neither refunded these amounts to investors nor transferred such amount to IEPF even after the expiry of seven years.
There is a large amount of unclaimed money in terms of dividend, deposits, debentures etc., which is lying with the companies. Many people don't know about this money as they never invested in these shares but have inherited from their parents and grandparents. Also, few people who had invested in physical shares may not have the record of the investments and hence are not able to claim the money. And due to reasons like change in address, the company communication has never reached to them.
Therefore, to make people aware and protect their money from being misused, the government has formed IEPF authority, which spreads awareness among investors and protects their rights.
"The purpose of the Ministry of Corporate Affairs is to transfer the shares to IEPF to avoid fraudulent transaction in physical shares by making IEPF Authority as custodian of shares. However, it is the responsibility of the company to decide the title of the shares and thus in case of any fraudulent claim, the entire liability would rest on the company and not on IEPF Authority," says Vikash Jain, co-founder of Sharesamadhan, a Delhi-based company that recovers unclaimed and lost investments.
Mr Jain believes that the process needs to be refined further to reduce the time taken. "IEPF Authority is given 3 months to settle the claim and credit the shares back in the demat account of claimant. But the irony is due to lack of infrastructure and cumbersome process of claim, IEPF authority is taking longer than 3 months to settle the claims. We feel that this time can be shortened significantly by ensuring that the company gives entitlement certificate to IEPF and IEPF will just give credit of share/dividend to the claimant. Re-verification of the KYC (which has been done by the company or RTA) again by IEPF authority does not make any sense," says Mr Jain.
The online tracking is helpful but Mr Jain also feels that there is a scope of improvement.
"I would suggest improving the online status as it does not clearly specify as to at what stage and with whom (RTA / Company/IEPF) the matter is pending," he said.
Jain also believes that it is because of the duplication of the processes, it takes a longer time for a person to claim the money. "The IEPF also checks all the papers of investors after the verification is done by the company, but regulations say in case of any wrongdoing the responsibility will lie with the company. Then why is it required for IEPF to do the entire KYC again? This elongates the process," he said.
How you can claim the money