- The petitioner (Nivedita Sharma) was allotted 5(five) ICICI bonds on 15.7.1996 at a price of Rs.5200/- each bearing the face value of Rs. 2,00,000/- each, consisting of an option for premature redemption and with surrender date of 15.7.2021.
- The petitioner on 2nd March, 2009 wrote to the ICICI for redemption of her bonds. But ICICI refused to make the payment and informed the petitioner that they had already exercised the call option for early redemption in 2001. ICICI had sent notice to all bondholders and also published a notice exercising their early redemption option in newspapers.
- Since petitioner had changed her address and had not informed ICICI about her new address, she could not receive the notice. Even five reminders sent by ICICI could not reach her.
- As the petitioner did not submit the bond certificates even after seven years of redemption, the respondent transferred the maturity proceeds/redemption amounts under Section 205C of the Companies Act, 1956 (‘the Act) to the Ministry of Corporate Affairs.
- The petitioner challenged the constitutional vires of Section 205C and Section 205A of the Act. Her contentions and decision given by Delhi High Court are as follows:
- Contention: The amendment was made in sub Section 5 of Sections 205A and 205C of the Act with effect from 31st October, 1998 which is after the said bonds were issued in 1996 and, therefore, cannot be given retrospective effect.
- Decision: The call option was exercised by the respondent in January, 2001 and the bonds became due and payable in July 2001, i.e. after amendment to the Act. Court found no merit in contention of retrospective effect.
- Contention: A premature or early encashment/redemption should not be covered by Section 205C of the Act.
- Decision: Premature or early encashment/redemption, Court turned down the contention opining that the language of the said provision is lucid and clear. The maturity date cannot be counted from the date when the bond was to mature without taking into account the early redemption date. The investors or public when they deposit the amount must stake their claim within seven years, from the date when the amount became payable. In case they fail to make any claim within seven years they lose their right. Once a right is lost, it is lost forever in view of the proviso to Section 205C(2) of the Act.
The word ‘unclaimed’ used in the proviso to Section 205C(2) clarifies that in case a claim is made within a period of seven years from the date amount became due and payable ; the money shall not be transferred to the said fund.
- Contention: Section 205C of the Act does not apply to promissory notes, which are not covered by the said Section.
- Decision: It is also not possible to accept the contention of the petitioner that the Act cannot 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.
- Contention: The provisions of Sections 205A and 205C are arbitrary and violate article 14 of the Constitution.
- Decision: Since no specific pleadings made in petition on constitutional validity of Sections 205C and 205A, the same was set aside. It was also observed that to strike down Section 205C will amount to negating and striking down a worthy and meritorious legislation which is on the whole beneficial and advantageous and in public interest.
- Contention: A huge corpus is accumulated in the Investors Education and Protection Fund, but no steps are being taken to utilize the said corpus.
- Decision: No merit in contention on use of funds found.
The law of limitation affords a guarantee and ensures that cause of action is not raised after a lapse of particular period. Limitation is preventive and not curative and seeks to give quietus to claims which have not been enforced. It ensures that litigants are diligent in seeking remedies in court and prohibits stale claims. It ensures promptitude and assist vigilant persons who do not sleep over their rights.
As the high court did not find any merit, the writ petition was accordingly dismissed.