Introduction: An important notice has been issued concerning the transfer of shares and dividends to the Investors Education and Protection Fund (IEPF) for notified parties as directed by the Custodian. This notice, dated September 15, 2023, delves into the legal background and implications of this directive.
Legal Authority and Background: The notice begins by highlighting the Custodian’s role as a statutory authority appointed under Section 3(1) of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992. This appointment empowers the Custodian to handle matters related to parties involved in the Securities Scam 1992.
Notification of Parties: Persons/entities involved in the Securities Scam have been notified by the Custodian under Section 3(2) of the said Act. Such notifications are significant as they mark the attachment of their movable and immovable properties as of the date of notification.
Overriding Legal Effect: The notice emphasizes the overriding effect of Section 13 of the Special Court (TORTS) Act, 1992, over other laws. This means that the provisions of the Act take precedence over any other law or instrument, including court decrees or orders.
Concerns of Non-Compliance: Despite directives issued by the Bombay Stock Exchange (BSE) to listed companies, some companies have been transferring shares and dividends to the IEPF. This non-compliance raises concerns, as it leads to unaccounted assets that rightfully belong to notified parties under the Custodian’s jurisdiction.
Impact on Asset Picture: The transfer of shares and dividends to the IEPF instead of the Custodian results in a misleading portrayal of the total assets of the notified parties. This distortion can have far-reaching implications and complicate asset recovery processes.
Procedure and Challenges: The notice also mentions the challenges associated with the procedure for claiming shares and dividends from the IEPF. It characterizes the process as tedious and time-consuming, underscoring the importance of adhering to Custodian directives.
Request for Compliance: In conclusion, the notice reiterates the request for all listed companies to refrain from transferring shares and dividends to the IEPF for notified parties attached by the Custodian. It also asks for BSE’s continued cooperation in enforcing this directive.
Conclusion: The Custodian’s directive regarding the transfer of shares and dividends to the IEPF for notified parties is not only a legal requirement but also critical for maintaining the accuracy of asset records and ensuring transparency in financial matters. It is essential for listed companies to comply with this directive to avoid legal repercussions and to uphold the integrity of the financial system.
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Office of the Custodian
The Special Court (TORTS) Act, 1992
Department of Financial Services,
Ministry of Finance, Government of India,
101h Floor, Nariman Bhawan, 227,Vinay K. Shah Marg,
Nariman Point, Mumbai 400 021.
Phones:22022251, 22856780, 22833007 Fax: 022-22810357
E-mail: custodian.mumbaiWahoo.com
BY SPEED POST
No. 945/CUS/BOM/SHCIL/DEMAT/SC/CORR-NP/2997-I
September 15, 2023
To
The Executive Director,
Bombay Stock Exchange,
Phiroza Jeejeebhy Towers,
Dalal Street,
Mumbai – 400001.
Sub.:- Transfer of shares and Dividends belonging to notified parties by the Companies to IEPF.
Sir/ Madam,
Please refer to this office letter No. 2052/CUS/BOM/MA 220/93(248-315) dated Th June, 2003 and your letter dated 8lt, July, 2003 addressed to ail listed companies (copies enclosed).
The Custodian is a statutory Authority appointed under section 3(1) of Special Court (Trial of Offences Relating to Transactions in Securities) Act.1992. To deal with the parties involved in the Securities Scam 1992. Persons/entities involved in the Scam, were Notified by the Custodian, from time to time, under Section 3 (2) of the said Act.
In accordance with Section 3(3) of the said Act, any property; movable, immovable or both, belonging to the Notified persons/entities stand simultaneously attached as on the date of their notification. The assets attached by the Custodian are dealt as per the orders of the Hon’ble Special Court (of Bombay). Further, under Section 13, the provision of the Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law, other than this Act, or in any decree or order of any Court, tribunal or other authority. Thus the Special Court (TORTS) Act, 1992 has an overriding effect over other laws.
In spite of the directions issued by your office to the Companies, many companies are remitting and transferring the shares and dividends to the Investor Education Protection Fund OEM. Such action by the Companies puts this office in dire constraint as the shares and dividends which should rightfully be deposited with the Custodian belonging to various notified parties remain unaccounted, which in turn results in depicting a wrong picture of the total assets of the notified parties. Further the procedure for claiming the shares and dividends from the IEPF is tedious and time consuming.
Your office is once again requested to direct all the listed companies to refrain from transferring the shares and dividends to IEPF belonging to the notified parties attached by the Custodian.
A copy of the directions issued may please be marked to this office. This office would be grateful for an early and prompt action in this regard.
Yours faithfully,
(Divya Srinivas)
Encl.: As above.
