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Report No. 143

Chapter IV

Conclusions and Recommendations

[Conclusions which flow from the survey. (See Chapter II)]

I

Complaints regarding defaults in repayment of matured deposits were received against as may as 200 companies (very many more may be similarly guilty). While it is a matter of gratification for the Commission that about 10,000 depositors, (mostly small depositors each of whom had deposits less than Rs. 11,000 individually) were helped by the Commission in recovering nearly Rs. 3 crore 47 lakhs, nearly 34,000 such depositors are yet suffering and a large sum of nearly 18 crores of theirs is locked up.

II

A survey of 93 such companies disclosed that defaults were in respect of nearly 45,000 depositors and the aggregate amount involved was nearly 20 crore 28 lakhs.

III

The break up of 45,000 victims of default reveals that nearly 44,000 i.e. 98% sufferers were small depositors (whose individual deposits did not exceed Rs. 11,000). And that nearly a sum of Rs. 17 crores 50 lakhs representing 86% of the total amount of defaults was referable to small depositors (as defined earlier).

IV

A well-known company having a capital base of Rs. 186.66 crores alone and had defaulted in repayment to more than 1300 small depositors in respect of their matured deposits of nearly 72 lakhs. And that it had been accepting fresh deposits even though earlier matured deposits had remained unrefunded for nearly 4 years.

V

From the established fact that nearly 98% of the total number of victims of defaults in repayment were such small depositors and nearly 86% of the aggregate amount involved was referable to such small depositors it is reasonable to infer that the defaulting companies have been systematically making repayment to big depositors in preference to small depositors (how else can one explain the tele-tale circumstance that Rs. 85 out of every Rs. 100 remaining unrefunded belongs to small depositors) and an urgent and real need for special protection for them exists.

VI

The emergent fact that fresh deposits for small depositors are accepted by defaulting companies even when matured deposits of such depositors remain unrefunded and that Rs. 85 out of every Rs. 100 is due to small depositors as against only Rs. 15 due to big depositors smacks of exploitation of such depositors and underscores the need for preventing such abuse.

VII

A well-known company did not repay the dues of small depositors even after obtaining a large amount of loan from a Nationalised Bank which amount was presumably utilised in augmenting the working capital.

VIII

The small depositors whose deposits range in the neighbourhood of Rs. 3000 to Rs. 10,000 cannot afford the money-cost by way of Advocate's fees and time-cost involved in instituting a summary suit or a petition under section 58A(9) of the Companies Act to secure repayment of their matured deposits.

IX

It would appear that perhaps deposits from small depositors are utilised in making .epayment to the big depositors who have resources to resort to legal proceedings.

Hence the recommendations that follow:-



Legislative Safeguards for protecting the Small Depositors from Exploitation Back




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