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Investors struggle to claim shares lying with government

SNAIL’S PACE: Investor Education and Protection Fund hasn’t been able to settle more than 15% of claims

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Investors struggle to claim shares lying with government
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Every month, thousands of people are knocking at the doors of the Investor Education and Protection Fund (IEPF) Authority's office as investors are caught in the labyrinth of a complex and long-drawn process to encash their shares.

As of now, about Rs 20,000 crore worth of unclaimed shares and unclaimed dividend, belonging over 30 lakh investors, is lying with the government.

Take, for example, the case of retired banker Amarjit Singh Kohliwho had inherited 178 shares of Reliance Communications or Bhavesh Kataria, a salesman from Mumbai who bought 100 shares of IG Petrochemicals in 1991.

Their assets ended up with the government when it decided totransfer the listed companies' shares that were lying unclaimed for a consecutive seven years to the IEPF.

Most of these are forgotten shares where either the heirs are not aware of their inheritance or share certificates have been misplaced or lost, while some are long-term investments.

"When I got to know about my inheritance, I immediately applied online on the IEPF website in June 2018. It is my seventh visit to the IEPF office in the past six months. All the documentation, including indemnity bond, PAN, Aadhaar copy, is complete from my side but the officials here say the company is yet to give some documents, so my claim can't be processed further as of now," Kohli said. Kohli has also resubmitted the online form IEPF-5 available on the Ministry of Corporate Affairs (MCA) website.

While the government rules say that the company has to send the verification report within 15 days of receiving the claim, it seldom happens. The government has to transfer the shares to the investor within 60 days.

"No one responds on the toll-free number. I must have made about 100 calls," says Kataria, who applied for the shares online in April 2018. "The value of my 100 shares has come down from Rs 80,000 to Rs 40,000 after reaching a peak of Rs 800 per share in April. I don't know what will be the value by the time I get the shares back," says Kataria, who was in Delhi to meet the IEPF officials. Kataria had made a long-term investment in shares of Goa-based IG Petrochemicals at Rs 10 some 27 years back.

Around 16,000 claims have been received by the IEPF Authority so far in the last one year. "The claims are going up day by day. We are receiving 1,500-2,000 claims every month now," said an official, adding that the IEPF hasn't been able to settle more than 15% claims.

The fund has about 49 crore shares belonging to about 29.5 folios, according to the figures provided by the MCA for the financial year 2017-2018.

The MCA order requiring all the listed firms to transfer the dormant shares, where dividend had not been paid for seven years, took effect from November 1, 2017. Since then, the companies have been transferring all such shares as well as dividends to the IEPF Authority, functioning under the MCA.

Any person whose shares, unclaimed dividend, matured deposits, matured debentures and application money due for refund or interest thereon, sale proceed of fractional shares, redemption proceeds of preference shares have been transferred to the fund can claim the shares under section 124(6) of the Act or apply for refund under section 125(3) of the Act to the IEPF Authority.

The rules require the claimant to fill an online form IEPF-5 and send a signed copy of the printout of the form to the concerned company along with the proof of ownership such as the certificate of share and seven other documents ranging from indemnity bond, advance stamped receipt to cancelled cheque leaf and a copy of Aadhaar card.

The 'online' process for claiming shares and dividends seems to be a source of harassment for the investors.

"It is not easy to understand and fulfil the requirements to claim them," says Jai Gopal Goel, a businessman from Delhi with Rs 2 lakh worth of shares of Gabriel India.

"I don't know what should be the cost of the indemnity bond as it is not specified. The objection raised by the IEPF is that the Postal Index Number (PIN) given in my Aadhaar card doesn't match with the documents submitted. I don't know whether this is relevant when the entire process is supposed to be online and shares have to be transferred to the demat account," says Delhi-based Vijay Aggarwal, who filed a claim for the forgotten shares.

As the investors struggle with the procedure, professionals and middle-men are charging thousands of rupees in commission. The commission is based on the amount involved and could range between 5% and 15% of the recovery.

"It takes time for the companies to send verification reports, particularly in the matter of transmission of shares related to inheritance or death. So far, we have got around 6,000 reports from the companies," said Navneet Chauhan, general manager, IEPF Authority.

Meanwhile, a top corporate affairs ministry official said that the refund process will be simplified soon.

As opposed to the government's claim process, New York State with currently more than $15.5 billion in unclaimed pension funds has an easy way to recover them. The claim filing process is completely online with a step-by-step claim form instructions. Not only does it require less documentation and uploading of all documents, the claimant also has a single point of contact, i.e, the government in this case. The claimant is not required to send the form or the documents to the company.

CAUGHT IN MIDDLE

  • While the government rules say that the company has to send the verification report within 15 days of receiving the claim, it seldom happens
     
  • As the investors struggle with the procedure, professionals and middle-men are charging thousands of rupees in commission
     
  • The commission is based on the amount involved and could range between 5% and 15% of the recovery
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