Investor Education and Protection Fund (IEPF)
February 28, 2014 by Samrish Bhanja and Sonam Malkotia
Important Note: The provisions for transfer of dividend to Investor Education and Protection Fund have been amended w.e.f. 7th September 2016. For latest provisions, see Various Timelines Under the Companies Act, 2013 for IEPF Compliances.
Provisions Under the Companies Act, 1956
Every now and then, MCA is issuing notices to all the Corporates, be it Private, Public or Listed entities, who have not uploaded information in form 5INV containing information of unclaimed and unpaid amounts as specified in Section 205C(2) of the Companies Act, 1956. MCA has notified that Investor Education and Protection Fund (Uploading of information regarding unpaid and unclaimed amounts lying with companies) Rules, 2012, has mandated every company to file e-Form 5INV containing the information of unclaimed and unpaid amounts
Section 205 C is a salutary and virtuous provision. It has been enacted to ensure that a company does not unjustifiably and unduly enrich themselves, as the depositors have failed to stake claim and have not been paid for a period of seven years from the date the amount became due. Thus, if a person makes a claim within a period of seven years, Section 205 C will not apply.
What all amounts are covered under Section 205C(2)?
Section 205C (2) enumerates the amounts that remains unpaid and unclaimed for a period of seven years from the date they became due for payment is credited to the fund. They include unpaid dividend, share application money received for allotment and due for refund, matured deposits, interest accrued on these amounts, etc.
The word “unclaimed” used in the proviso to Section 205 C (2) clarifies that in case a claim is made within a period of seven years from the date amount became due and payable; the money shall not be transferred to the said fund.
Annual Disclosure in form 5 INV to be filed w.r.t unclaimed amount as on AGM within 90 days thereof
- Every company shall file eform 5INV containing the information of unclaimed and unpaid amounts as on the date of AGM or the date on which it should have been held as per the provisions of section 166 of the Act. The form is to be filed within a period of 90 days of AGM as stated above.
- An excel sheet has to be uploaded within 14 days of uploading of Form 5INV containing the Investor information. Excel files are to be uploaded year wise in respect of a particular Form 5-INV. The excel file shall contain information, namely, the names and addresses of the persons entitled to receive the sum; the nature of amount, the due date for transfer into the Investor Education and Protection Fund, etc.
The aforesaid information shall be duly verified and certified by a chartered accountant or a company secretary or a cost accountant practicing in India or by the statutory auditors of the company.
For detailed procedure, please visit www.iepf.gov.in
Default in filing of information
If a company fails to furnish and upload information or furnishes and uploads false information on the website, the company, and every officer of the company who is in default, shall be liable with a fine as per Section 629A of the Companies Act, 1956 (Rs. 5000/- and if the contravention continues shall be liable to Rs. 500/- per day).
If no Unpaid/Unclaimed moneys, whether Form 5INV to be filed?
The Company having unpaid/unclaimed moneys as referred to in Section 205C(2) are only required to disclose the unpaid and unclaimed amount and Form 5INV is required to be filed. In case there is no unpaid and unclaimed amount, then there is no need to file Form 5INV.
The amount remaining unclaimed for 7 years to be credited to IEPF
Any amount remaining unclaimed for 7 years is required to be credited by the companies to the Fund, within a period of thirty days of such amounts becoming due to be credited to the Fund.
Form 1 to be filed with MCA w.r.t the amount credited to IEPF
Every Company shall, when effecting a credit to the account of the Fund, will separately furnish to the concerned Registrar of Companies a statement in Form 1 duly certified by a Chartered Accountant or a Company Secretary or a Cost Accountant practicing in India or by the Statutory Auditors of the company wherein the details of the Challans is to be filled.
Records to be maintained for 3 years w.r.t amount transferred to IEPF
It is mandatory that each Company keep a record relating to folio number, Certificate Number etc. in respect of persons to whom the amount of unpaid or unclaimed dividend, application money, matured deposit or debentures, interest accrued or was payable, for a period of three years and the Committee or Sub-Committee shall have powers to inspect such records of that period.
No claim shall lie after transfer of unpaid dividend to the IEPF
In Nivedita Sharma vs. MCA and others, Delhi HC stated that period of seven years is substantially long. The investors or public when they deposit the amount must make a claim within seven years otherwise they will lose their right to make the claim. Rules of limitation are founded on consideration of public policy. It ensures that litigants are diligent in seeking remedies in court and prohibits stale claims. It ensures promptitude and assist vigilant persons who do not sleep over their rights. Laws prescribing reasonable period of limitation have been upheld, though whenever the period prescribed expires, a claimant suffers, but this invariably happens as the said litigant has been grossly negligent and has failed to take steps.