But a large number of investors do not know what to do when companies, FIs and non-banking finance companies (NBFCs) neither pay back their deposit money and interest on maturity, nor respond to written and oral communications?

So what are the remedies available to the depositors? Complaining to the Investors Protection Cell (IPC) in the Department of Company Affairs (DCA) is one way out. The cell is located in Shastri Bhavan, New Delhi. While the cell deals with shares and debentures, another section of DCA deals with the non-payment of fixed deposits by non-banking, non-finance companies.

Aggrieved depositors can file complaints with the Company Law Board (CLB) on the prescribed form either in Delhi or the CLB's regional offices at Calcutta, Mumbai and Chennai, depending on the location of the registered office of the defaulting company.

While the DCA deals with complaints against non-banking, non-finance companies, complaints relating to NBFCs, which constitute nearly 75 per cent of the complaints of depositors/investors fall within the purview of the Reserve Bank of India. Such complaints have to be lodged with the RBI or the concerned bench of the CLB under Section 45QA of the RBI Act. After hearing the parties, the CLB issues orders. If these are not complied with, prosecution is initiated against such companies by the Registrar of Companies or RBI-designated officers, as the case may be.

The existing law is however totally inadequate to provide protection to small depositors and investors. At present, a company is not required to intimate the CLB about a default. Neither is there a specified time-frame within which the CLB must pass appropriate orders. The defaulting company is not debarred from accepting fresh deposits even if previous depositors have not been paid. If the company sources a loan for working capital from a nationalised bank, it is not obligatory for it to first repay the small depositors.

Worst of all, deposit-related violations at present do not constitute a cognisable offence under CrPC. A director in a defaulting company is not disqualified from holding a similar position in another public company. The Companies Act does not provide for induction of a nominee of small depositors in the boards of companies. There is no remedy if the defaulting company has no liquid money. The concept of `deposit insurance' does not exist and the proceedings in the CLB are long-drawn-out and expensive.

The non-passage of the Companies (Second) Amendment Bill, 1999, incorporating some provisions in the interest of small depositors, during the monsoon session of the Lok Sabha has come as a blow to the retail investor's cause.

The other option is to file cases in consumer courts though ambiguity persisted until some time ago regarding whether depositors could be termed `consumers' within the meaning of Section 2(1) (d) of the Act and if the depositing company was providing a `service' within the meaning of Section 2(1)(o) of the Act. Whether a depositor is bound by the CLB's order setting out a schedule of repayment of deposits and whether the failure to repay the deposit amounted to `deficiency' in service within the meaning of Section 2(1)(g) of the Act were also grey areas.

In the Neela Vasant Raje vs Amogh Industries case, the National Consumer Commission held that a depositor who has made deposits with a company or a firm in response to an offer from the firm, inviting deposits from the general public with the promise of attractive interest rates, is a `consumer' and the company or firm inviting deposits by promising good returns and prompt repayment on maturity, is a `provider of service' for a consideration, within the meaning of the Consumer Protection Act.

In yet another case, Gyan Singh & Others vs Carry On Savings & Investments Company, the West Bengal State Consumer Commission rejected the contention of the company that the matter be adjudicated first with the CLB. It held that there was no bar on admitting such complaints in view of Section 3 of the Act by way of additional remedy, if the same were not derogatory to the provisions of any other law.

In view of the above rulings, the consumer-depositor should take advantage of Consumer Disputes Redressal Fora for recovering his deposit money.