Court orders transfer of escrowed funds and interest to IEPF under Companies Acts. RBI directions not binding.

The court held that the petitioner company was liable to transfer both the principal and interest earned on escrowed funds to the Investor Education Protection Fund (IEPF) under the Companies Acts. It determined that Chapter IIIB of the RBI Act did not override these provisions and that RBI's directions on interest were not binding. The court rejected estoppel and waiver arguments against statutory requirements, ordering the transfer of the escrowed amount and accrued interest to the IEPF by a specified date, dismissing the writ petitions without costs.

---

---

Issues Involved:
1. Liability to deposit interest earned on escrowed funds to the Investor Education Protection Fund (IEPF).
2. Applicability and overriding effect of Chapter IIIB of the Reserve Bank of India (RBI) Act over the Companies Acts of 1956 and 2013.
3. Validity and binding nature of RBI's directions regarding interest on escrow accounts.
4. Estoppel and waiver against statutory provisions.

Summary:

1. Liability to Deposit Interest to IEPF:
The primary issue was whether the petitioner company was liable to transfer the interest earned on the aggregate escrowed amount to the IEPF. The court held that under Section 125 of the Companies Act, 2013, and Section 205C of the Companies Act, 1956, the petitioner was bound to transfer both the principal and the interest accrued on unclaimed deposits to the IEPF. The court emphasized that the interest earned on the amount lying with the petitioner-Company is public money and must be deposited with the IEPF.

2. Applicability and Overriding Effect of Chapter IIIB of the RBI Act:
The petitioners argued that Chapter IIIB of the RBI Act, specifically Section 45Q, confers overriding effect over any other law, including the Companies Acts. However, the court found no direct conflict between Chapter IIIB of the RBI Act and Sections 205C of the 1956 Act or 125 of the 2013 Act. The court concluded that while Chapter IIIB governs the functioning of NBFCs, it does not cover interest on escrow accounts as in the present case. Thus, the provisions of the Companies Acts were applicable.

3. Validity and Binding Nature of RBI's Directions:
The petitioners contended that the RBI's letters allowed them to use the interest earned on the escrowed amounts. However, the court determined that these communications did not constitute binding directions under Chapter IIIB of the RBI Act. The court stated that the RBI's advice on the interest was not a policy decision and did not override the statutory requirements of the Companies Acts.

4. Estoppel and Waiver Against Statutory Provisions:
The court rejected the argument of estoppel against the statute, stating that there cannot be any estoppel against statutory provisions. The court also noted that the RBI did not have the right to relinquish the interest due to the IEPF, and thus, no plea of waiver was available against the RBI.

Conclusion:
The court ordered that the amount invested in the Escrow Account, along with the entire interest accrued thereon, be disbursed in favor of the IEPF by August 31, 2023. The writ petitions were dismissed, and there was no order as to costs.

---