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| FinMin to seek legal opinion on frozen demat accounts |
| Jyoti Mukul / New Delhi Aug 15, 2009, 00:01 IST |
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 The finance ministry will seek the law ministry’s opinion on whether legislative changes are required for the government to take control of frozen demat shares.
Demat accounts of investors who did not provide their permanent account numbers (PANs) by December 31, 2006, were frozen.
The Securities and Exchange Board of India (Sebi) and the National Securities Depository Ltd (NSDL) had advised the government to change the law to avoid complications.
However, there is a view in the finance ministry that the government can take over and auction these shares under existing rules.
“There are laws under which frozen bank accounts and unclaimed property are taken over. A similar provision can be made for these demat accounts,” said a senior finance ministry official.
Forfeiture of the amount in the accounts “has to be done through the due process of law,” Finance Minister Pranab Mukherjee had earlier said.
The new law could be in the form of an amendment to the Depositories Act. A portion of the forfeited money is proposed to be used to educate investors.
Sebi had also suggested transfer of the assets in over 600,000 frozen demat accounts to a government-appointed commissioner.
The total number of frozen accounts stood at around 4.4 million on January 1, 2007, but has since come down after some investors furnished their PANs. The value of shares in these accounts is estimated at around Rs 9,600 crore, though this keeps changing according to price changes in stock markets.
The income tax department is, in fact, conducting investigations involving 6,385 frozen demat accounts with balances in excess of Rs10 lakh as on December 2008.
These accounts had a combined value of Rs 6,709.21 crore as on December 2008 and an approximate value of Rs 16,230 crore when they were frozen, Minister of State for Finance, SS Palanimanickam, had told the Lok Sabha recently.
“The details have been forwarded to the respective investigation directorates for necessary action in accordance with the provisions of the Income Tax Act, 1961,” he said.
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