Report No. 143
Your Reply Dated 26 February to Commission's Communication Dated 14 February Unsatisfactory Because of Non-Compliance with Direction to furnish Particulars, Details and Data (Stop) Please send Names addresses of Depositors Mentioning Deposit amount and Date of Maturity Quickly.
Not to be Telegraphed:
7th Floor, Shastri Bhavan,
New Delhi-110 001
Law Commission of India
Ministry of Law and Justice
(Department of Legal Affairs)
March 19, 1991
Copy by post in confirmation to:
M/s. Ambalal Sarabhai Enterprises Ltd.,
(Dr. Satish Chandra)
Additional Law Officer,
7th Floor, Shastri Bhavan,
New Delhi-110 001
Government Of India,
New Delhi-110 001
April 19, 1991
Justice M.P. Thakkar
Sub: Request for the exercise of suo motu powers under sub-section (9) of section 58A of the Companies Act.
Dear Chairman of 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 or post-audit of socio-economic legislation.
2. In the course of the investigative exercise, a communication was addressed to M/s Ambalal Sarabhai Enterprises Ltd., Wadi Vadodara, Baroda, in order to elicit information as regards number of depositors whose deposits had remained unrefunded for a period exceeding 60 days commencing from the date of maturity.
In view of the failure of the company to furnish information, a communication was addressed to the said company on 14-2-91, a copy whereof is annexed hereto (Annexure 'A'). In response thereto of the company has informed the Commission by its communication dated 26th Feb., 1991, to the effect that Rs. 71.96 lakhs have remained unrefunded to 1,312 depositor for the period exceeding 60 days as on 31-1-1991_ A copy of the said communication is annexed hereto and marked Annexure 'B'
3. It will be noticed that the sum of Rs. 71.96 lakhs spread over 1,312 accounts work out at Rs. 5,485 per account. It means all the depositors were suffering on account of failure on the part of the company to refund the small depositors who cannot individually initiate appropriate legal proceedings in order to seek redress.
They cannot do so individually because each of them would have to incur expenditure which would possibly exceed the amount due to them in the context of their individual deposits. Under the circumstances, the Commission addressed a communication to the company mentioning that the company would be well advised to make payment of the principal amount due to all of the 1312 depositors along with interest accrued thereon within the time frame mentioned hereunder:
"25% of the depositors concerned, that is to say, 328 depositors should be refunded the amount within 15 days of the receipt of this communication. Payment to further 328 depositors would be required to be made within further 15 days thereafter. And the remaining 656 depositors would be required to be refunded the amount within one month thereafter. In making refunds, the priority should be arranged in accordance with the date of maturity that is to say, one who has been suffering the longest should be the one to be refunded his dues earliest."
A copy of the said communication is annexed hereto (Annexure 'C').
4. The company has neither furnished information nor acceded to the recommendation made in the aforesaid communication, through the time limit indicated in the letter has expired since long. It appears that the company is not inclined to furnish the information or to accede to the recommendation made in the said letter. It may be stated that while no written response has been received from the company, the Resident Director and the Resident Chief Executive Officer of the company at Delhi sought a meeting with the Consultant/Joint Secretary and Law Officer for 9-4-91.
The two officers did not give any specific information about the small depositors with the company nor did they indicate as to when the amounts would be refunded. They said that they would be writing to the head office to furnish the same to us. However, the company has act written to the Commission so far. The relevant paragraphs from the minutes of the meeting recorded by the Consultant/JS & LO are extracted and annexed as Annexure D. It, therefore, appears that the company is not interested in redressing the grievances of the small depositors.
The number of small depositors would appear to be very large having regard to the fact that 1,312 depositors whose deposits range around Rs. 5,485 per account are put to suffering on account of the default of the company. These small depositors are helpers. 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 incur the necessary expenditure.
The response of the company shows that though minutes of the meeting of 9-4-91 show that though the company has recently secured a loan, 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 company which has assets worth 186.66 crores and has net profit of 61.54 lakhs in 1989-90 (see balance sheet, pages 8 and 9, at Annexure B1) should adopt this unedifying attitude and cause untold hardship to hundreds of poor depositors for their fault of placing trust in company.
5. It is in the aforesaid scenario that lam constrained to make this request for invoking your suo-motu powers under section 58A(9) of the Act. Even though the names of all the 1,312 small depositors are not available, this letter of request may be treated as the basis for exercise of suo motu powers collectively for the benefit of the said depositors.
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 Bombay and the suo motu matters 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.
8. The Commission will be grateful to you if you are good enough to treat this communication as one apprising the Company Law Board about the need for exercise of suo motu powers under sub-section (9) of section 58A on the basis of the information furnished by this communication and the annexure accompanying the same.
The Commission hopes that the needful will be done at an early date and the Commission is apprised of the action taken in respect of the 1,312 depositors who are small depositors and are facing hardship in the circumstances narrated hereinbefore. The particulars regarding the names and the amounts due to the concerned depositors can be obtained by the Company Law Board in exercise of the powers under the Companies Act in as much as the Commission has not been able to procure this information.
With warm regards,
Shri S.P. Upasani, Chairman,
Company Law Board, Western Region Bench, Bombay,
C/o. Government of India, Department of Company Affairs
(Ministry of Industry),
Room No. 504, 'A' Wing, Shastri Bhawan,
Encls: As above