Case Law on Companies Act – Section 205(C) regarding Unclaimed Deposits

Case Law on Companies Act – Section 205(C) regarding Unclaimed Deposits – plaintiff wants refund – bank refuses to do so and suggests the amount to be claimed by the depositors – whether correct – held, no

The Peerless General Finance & Investment Co. Ltd. v. UCO Bank [Cal] Decided on: 15/06/2011

The plaintiff,  a non-banking financial company obtains manager’s cheque (MC) from the defendant bank for issuing the same to the plaintiff’s depositors. On non-encashment of the deposited amount of Rs.8,41,500, the defendant wrote to the plaintiff asking it to furnish an  indemnity bond of Rs.100 or to present the MC, failing which the amount would be transferred to its head office account. Consequently, though the plaintiff was willing to furnish the indemnity  bond in manner suggested by the defendant, the defendant did not suggest any form for indemnity bond and subsequently, refused to honour its original commitment suggesting the plaintiff to return the manager’s cheques issued by the defendant also, for the bank to refund the amount.

The plaintiff contended that such demand amounted to the bank attempting to appropriate the proceeds and that if the original instruments were returned to the bank, there would be no question of any  indemnity bond being issued to cover any future claim in respect of the instruments to which the defendant contended saying that the suit is misconceived as the money does not belong to the plaintiff and so it would be open to the depositors to claim the amount.

Decision: Application disposed off with direction.

Reasons:

• The parties fight over the amount belongs to neither.
• The provisions of  Section 205C of the Companies Act relates to deposits under Section 58A of that Act and section 58A does not cover deposits pertaining to non-banking financial companies.

Direction:

The plaintiff will be entitled to obtain refund on executing an indemnity bond in the form (to be given within four weeks) within a period of seven days from the bank making over the form. However, in the event of the plaintiff executing the indemnity bond or the defendant failing to furnish the format of the indemnity bond within the said time, the plaintiff will be entitled to receive the sum subject to the condition that a fixed deposit of such amount be opened by the plaintiff with any branch of the defendant. In the event of default in terms of this order, there will be a decree in favour of the plaintiff for the sum of the deposit together with interest at the rate of eight per cent per annum.