Report No. 143
D.O. NO. 3/90/CH (LC)
New Delhi, the 25th May, 1990
Dear Chairman, Company Law Board,
The Law Commission is engaged in a study in regard to the problem posed by default of companies in refund of fixed deposits on maturity with particular reference to the plight of the small depositors in the context of post-audit of socio-economic legislation.
2. In the course of the investigative exercise, a communication was addressed to the Himachal Pradesh Agro Industries Corporation Ltd., Simla, in order to elicit information as regards number of depositors whose deposits had remained unrefunded for a period exceeding sixty days from the date of maturity. A photo-stat copy of the response received from the aforesaid Corporation is enclosed herewith in the context of the request being made for exercise of suo moto powers under sub-section (9) of section 58A of the Companies Act.
3. The Communication received from the aforesaid Corporation shows that 126 small depositors (deposits of less than Rs. 11,000) are suffering on account of the default on the part of the Corporation. A sum of Rs. 6 lakhs and 70 thousands of these 126 persons is locked up. These small depositors are helpless. For, each of them individually cannot afford to initiate legal proceedings. Many of them may not be aware of their rights and many of them would not know.
What to do. They would also not be in a position to incure the necessary expenditure. The response of the Corporation shows that though it is a Government undertaking it refuses to refund the deposits on account of "(1) non-availability of funds; and (2) increase in losses". It causes a great deal of distress that a Government undertaking should adopt this unedifying attitude and cause untold hardship to hundreds of poor depositors for their fault of placing trust in a Government undertaking.
4. It is the aforesaid scenario that I am constrained to make this request for involving your suo moto powers under section 58A(9) of the Act. Even though the names of all the 126 small depositors are not available, this letter of request may be treated as the basis for exercise of suo moto power collectively for the benefit of the said depositors.
5. I am also enclosing herewith a list of companies against whom complaints regarding defaults have been made by small depositors in local newspapers recently. The Commission shall be grateful to you if you can initiate some action for their benefit as well.
6. May I suggest that no notices may be issued to the small depositors concerned and they may not be required to remain present having regard to the fact that most of these small depositors would find it extremely difficult to spend for travelling expenses and for their stay in a city like Delhi and the suo moto matter would appear to be capable of being disposed of without requiring their presence.
7. The Commission will be grateful to you if you are good enough to act on this letter of request and do the needful.
Shri S.P. Upasani,
Company Law Board,
Room No. 504, 'A' Wing,