2012 (5) TMI 495 - HC - Companies Law

Maturity proceeds/redemption amounts under section 205C of the Companies Act - Investment in bonds with an option of premature redemption petitioner applied for redemption of their bonds - respondent No. 1 refused to make the payment and informed the petitioner that they had exercised the call option for early redemption in 2001 - As the petitioner did not submit the bond certificates respondent No. 1 transferred the maturity proceeds/redemption amounts under section 205C of the Companies Act, 1956 to the Ministry of Corporate Affairs Held that - petitioner is aggrieved because she did not stake her claim for refund within seven years. She did not inform change of address and, therefore, could not be communicated and informed about the premature redemption. The petitioner also did not bother to read the terms and conditions of allotment including the early redemption clause. These are serious lapses on the part of the petitioner Applicability of act Held that - Act deal with the deposits or promissory notes. There is no such limitation or prohibition in the Act. The Act itself is a principal enactment and not a delegated legislation Retrospective effect Held that - contention of the petitioner that section 205C has been given retrospective effect has no merit. The aforesaid section was introduced by Companies (Amendment) Act, 1999 with effect from 31st October, 1998. The call option was exercised by the respondent in January, 2001 and the bonds became due and payable in July 2001. The contention of the petitioner that they were not aware of this provision also does not merit acceptance. writ petition dismissed

Summary

Issues Involved:
1. Early Redemption of Bonds
2. Notice for Early Redemption
3. Transfer of Unclaimed Amounts to Investor Education and Protection Fund (IEPF)
4. Constitutional Validity of Sections 205A and 205C of the Companies Act, 1956
5. Retrospective Application of Section 205C

Detailed Analysis:

1. Early Redemption of Bonds:
The petitioner invested in ICICI Bonds, 1996, which had an option for premature redemption. The clause for early redemption specified dates and deemed face values for redemption. The petitioner sought redemption in 2009, but the respondent had already exercised the call option for early redemption in 2001. The court noted that the petitioner failed to submit the bonds for payment despite multiple reminders.

2. Notice for Early Redemption:
The respondent published notices in newspapers as required and sent reminder letters to bond-holders, including the petitioner, who had not surrendered their bonds. The court found no evidence that the petitioner informed the respondent of her change of address, and thus, the respondent's actions were deemed appropriate and compliant with the bond terms.

3. Transfer of Unclaimed Amounts to Investor Education and Protection Fund (IEPF):
The respondent transferred the unclaimed maturity proceeds to the Ministry of Corporate Affairs under section 205C of the Companies Act, 1956. The petitioner challenged this transfer, arguing it adversely affected her rights. The court upheld the transfer, noting that the amount had remained unclaimed for over seven years, thus justifying its transfer to the IEPF.

4. Constitutional Validity of Sections 205A and 205C of the Companies Act, 1956:
The petitioner contended that sections 205A and 205C were arbitrary and violated Article 14 of the Constitution. The court emphasized that challenges to the constitutional validity of a statute require specific pleadings, which were missing in this case. The court referenced previous judgments to underline the need for detailed and specific grounds when assailing the constitutional validity of a statute.

5. Retrospective Application of Section 205C:
The petitioner argued that section 205C should not apply retrospectively to bonds issued before its enactment. The court dismissed this argument, clarifying that the section was introduced with effect from 31st October 1998, and the call option was exercised in 2001, making the section applicable.

Conclusion:
The court dismissed the writ petition, holding that the petitioner's failure to claim within the stipulated period and inform the respondent of her address change were significant lapses. The provisions of section 205C were upheld as constitutional, reasonable, and enacted in public interest. The court emphasized that laws of limitation are preventive, ensuring claims are made within a reasonable period, and do not violate fundamental rights.