Section 125: Investor Education and Protection Fund
This section is for establishing and regulating the Investor Education and Protection Fund to promote investor education and protection, and to refund unclaimed amounts to eligible claimants.
The section, clause by clause
What the section says
In plain terms
(1)The Central Government shall establish a Fund to be called the Investor Education and Protection Fund (herein referred to as the Fund).
The Central Government will establish a fund called the Investor Education and Protection Fund to be used for the purposes outlined in the law.
(2)There shall be credited to the Fund—
The fund will be credited with amounts including grants, donations, unpaid dividends, and other unclaimed money, as well as interest earned on investments, with certain amounts only being added if they have been unclaimed for 7 years.
(2)(a)the amount given by the Central Government by way of grants after due appropriation made by Parliament by law in this behalf for being utilised for the purposes of the Fund;
(2)(b)donations given to the Fund by the Central Government, State Governments, companies or any other institution for the purposes of the Fund;
(2)(c)the amount in the Unpaid Dividend Account of companies transferred to the Fund under sub-section (5) of section 124;
(2)(d)the amount in the general revenue account of the Central Government which had been transferred to that account under sub-section (5) of section 205A of the Companies Act, 1956 (1 of 1956), as it stood immediately before the commencement of the Companies (Amendment) Act, 1999 (21 of 1999), and remaining unpaid or unclaimed on the commencement of this Act;
(2)(e)the amount lying in the Investor Education and Protection Fund under section 205C of the Companies Act, 1956 (1 of 1956);
(2)(f)the interest or other income received out of investments made from the Fund;
(2)(g)the amount received under sub-section (4) of section 38;
(2)(h)the application money received by companies for allotment of any securities and due for refund;
(2)(i)matured deposits with companies other than banking companies;
(2)(j)matured debentures with companies;
(2)(k)interest accrued on the amounts referred to in clauses (h) to (j);
(2)(l)sale proceeds of fractional shares arising out of issuance of bonus shares, merger and amalgamation for seven or more years;
(2)(m)redemption amount of preference shares remaining unpaid or unclaimed for seven or more years; and
(2)(n)such other amount as may be prescribed:
provisoProvided that no such amount referred to in clauses (h) to (j) shall form part of the Fund unless such amount has remained unclaimed and unpaid for a period of seven years from the date it became due for payment.
(3)The Fund shall be utilised for—
The fund will be used to refund unclaimed amounts, promote investor education and awareness, and reimburse legal expenses, among other purposes.
(3)(a)the refund in respect of unclaimed dividends, matured deposits, matured debentures, the application money due for refund and interest thereon;
(3)(b)promotion of investors’ education, awareness and protection;
(3)(c)distribution of any disgorged amount among eligible and identifiable applicants for shares or debentures, shareholders, debenture-holders or depositors who have suffered losses due to wrong actions by any person, in accordance with the orders made by the Court which had ordered disgorgement;
(3)(d)reimbursement of legal expenses incurred in pursuing class action suits under sections 37 and 245 by members, debenture-holders or depositors as may be sanctioned by the Tribunal; and
(3)(e)any other purpose incidental thereto, in accordance with such rules as may be prescribed:
provisoProvided that the person whose amounts referred to in clauses (a) to (d) of sub-section (2) of section 205C transferred to Investor Education and Protection Fund, after the expiry of the period of seven years as per provisions of the Companies Act, 1956 (1 of 1956), shall be entitled to get refund out of the Fund in respect of such claims in accordance with rules made under this section.
explanationExplanation.—The disgorged amount refers to the amount received through disgorgement or disposal of securities.
(4)Any person claiming to be entitled to the amount referred in sub-section (2) may apply to the authority constituted under sub-section (5) for the payment of the money claimed.
Anyone claiming to be entitled to an amount in the fund can apply to the authority administering the fund for payment.
(5)The Central Government shall constitute, by notification, an authority for administration of the Fund consisting of a chairperson and such other members, not exceeding seven and a chief executive officer, as the Central Government may appoint.
The Central Government will constitute an authority to administer the fund, consisting of a chairperson, members, and a chief executive officer.
(6)The manner of administration of the Fund, appointment of chairperson, members and chief executive officer, holding of meetings of the authority shall be in accordance with such rules as may be prescribed.
The administration of the fund, including the appointment of members and the holding of meetings, will be carried out in accordance with prescribed rules.
(7)The Central Government may provide to the authority such offices, officers, employees and other resources in accordance with such rules as may be prescribed.
The Central Government may provide the authority with offices, staff, and other resources as needed.
(8)The authority shall administer the Fund and maintain separate accounts and other relevant records in relation to the Fund in such form as may be prescribed after consultation with the Comptroller and Auditor-General of India.
The authority will maintain separate accounts and records for the fund in a prescribed form.
(9)It shall be competent for the authority constituted under sub-section (5) to spend money out of the Fund for carrying out the objects specified in sub-section (3).
The authority can spend money from the fund to carry out its specified objects.
(10)The accounts of the Fund shall be audited by the Comptroller and Auditor-General of India at such intervals as may be specified by him and such audited accounts together with the audit report thereon shall be forwarded annually by the authority to the Central Government.
The fund's accounts will be audited by the Comptroller and Auditor-General of India at specified intervals.
(11)The authority shall prepare in such form and at such time for each financial year as may be prescribed its annual report giving a full account of its activities during the financial year and forward a copy thereof to the Central Government and the Central Government shall cause the annual report and the audit report given by the Comptroller and Auditor-General of India to be laid before each House of Parliament.
The authority will prepare an annual report on its activities and forward it to the Central Government, which will then be laid before each House of Parliament.
The right-hand column is written from the section text, not quoted from it, and it has no legal force. Where the two differ, the left-hand column is the law.
Amendment notes
- 1. Subs. by Act 21 of 2015, s. 11, for “unpaid or unclaimed dividend has been transferred under sub-section (5) shall also be” (w.e.f. 29-5-2015).
- 2. 2. The Explanation ins. by s. 11, ibid. (w.e.f. 29-5-2015).
- 3. Subs. by vide Notification No. S.O. 1303(E), for sub-section (7) (w.e.f. 24-3-2021).
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Reproduced from the official India Code print for reference. Check the current text on India Code before you rely on it, and read the section alongside its Rules. Nothing here is legal advice.