INDIA AWAKE FOR TRANSPARENCY Vs. UNION OF INDIA REP. BY SECRETARY, MINISTRY OF CORPORATE AFFAIRS AND ANR.

JUDGEMENT

(1.) The petitioner claims that it has approached this Court, under Article 226 of the Constitution in public interest. It describes itself as a non-profit company, "primarily focused on working in areas of governance and efficient resource management, whether in the public or private sphere." It seeks directions for strict enforcement of the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 ["the 2016 Rules"] by every company transferring shares to the second respondent (the Investor Education and Protection Fund, hereafter described as "the Fund") and ensure that officials transferring the shares are made responsible for due certification of compliance with the Rules.

(2.) Referring to Section 205A of the (repealed) Companies Act , 1956, it is submitted that previously, where companies were dealing with eventualities whereby unpaid dividends accrued with them, that provision compelled them (the companies) to designate a specific account as "Unpaid Dividend Account" (UDA) and transfer such monies into it. The UDA marked such amounts as separate and not belonging to or available with, such companies.

(3.) It is submitted that the Companies Act , 2013 (hereafter "the 2013 Act") not only retains the feature with respect to transfer of amounts from the UDA of all companies to the Fund, but goes further, in that shares that yield dividends, which remain unpaid for over seven (7) years, would be transferred to the Fund, by virtue of operation of Section 124 (6). It is urged that this radical change would mean that if for some reason shareholders are unable to en-cash their dividends for seven years, they would face asset deprivation. Terming shares as valuable property, the petitioner states that such radical change has to be carefully introduced and not in a tardy manner. It is submitted that the share transfer mandated by Section 124 (6) is not limited to those holding physical scrips, but to all dematerialized ("demat" for short) shares. In the case of the latter, the demat accounts would be automatically debited or altered and the shareholding would be automatically depleted.