Financial Daily
from THE HINDU group of publications

Monday, July 16, 2001



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Stuck deposits

S. Murlidharan

MY FATHER has put a lot of money in fixed deposits with a number of manufacturing companies, some of which have refused to pay back the deposits on maturity. I understand that small depositors get a preferential treatment in the matter of repayment of deposits. Advise. -- Kocchu Govindan, Thiruvananthapuram

`Small depositor', as per the Explanation given under Section 58AA of the Companies Act, 1956, is one who has deposited in a financial year a sum not exceeding Rs 20,000 in a company. Thus your father would be treated as a `small depositor' o nly if he satisfies the above norm. You may kindly note that as per this norm, he may be a small depositor in one company but may not be in another. And in the company in which he is a small depositor, it is possible that for a portion of the dep osits, he is not treated as a small depositor. This could happen had he, for example, placed Rs 15,000 in each of the preceding four financial years but in the fifth financial year preceding the current one, he had placed a fixed deposit of Rs 25,000. If this indeed is the case, he would be a small depositor for Rs 60,000, whereas he would not be one as far as the deposit of Rs 25,000 is concerned.

Your father may have less difficulties in recovering his dues to the extent what he has to receive are considered as `small deposits'. First, he himself does not have to initiate any action. The onus is on the company to inform the Company Law Board (CLB ) within 60 days of the default in repaying the matured small deposits. The CLB shall, thereafter, pass an order within 30 days normally. Second, it is possible that the CLB may pass an expeditious order in favour of the small depositors even though defa ults may be with respect to the deposits placed by non-small depositors too.

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