War-time shares to be finally see dematerialisation

A shareholder whose physical share certificates arguably constitute some of the longest-held investments on Dalal Street, is finally dusting them off for conversion; more than forty years after the wars that resulted in their last transfer of ownership.

The owner of these certificates is the Office of the Custodian of Enemy Property. It is entrusted with properties including share certificates seized following the 1962 battles against the Chinese, and 1965 and 1971 Pakistan wars. Most of the holdings are said to be of people who were Pakistani nationals at the time. Bangladesh was still a part of Pakistan before the war 1971.

Two people familiar with the matter have said that the process is already underway. While they did not comment on the value of the securities, the shares are reportedly worth at least Rs 10,000 crore.

No records were available on the exact holdings however a Business Standard report from a few years ago mentions a number of holdings. These include Wipro, Tata Steel, Tata Power, Tata Chemical, Tata Coffee, Tata Engineering, Nelco Unit Trust of India schemes, Shaw Wallace, United Beveries, Birla Corporation, Grasim Industries, ACC, India Cement, Digvijay Cement, Hindustan Lever, State Bank of Bikaner and Jaipur, State Bank of Hyderabad, NEPA Mills, Poddar Mills, Kohinoor Mills, Phoenix Mills, J K Synthetics, Cipla, Ashok Leyland.

The Custodian comes under the Ministry of Home Affairs but has a physical presence in Mumbai and a branch in Calcutta and is governed by the Enemy Property Act of 1968.

One of the persons cited above said that the move is likely to be completed 'in a few months' and that it is likely an attempt to preserve physical share certificates which would probably have undergone wear and tear in the nearly fifty years that have passed since the Act was created. A second person added that he had viewed a communication in this regard.

An official with the Custodian's office confirmed that the process is ongoing. The person said that this is purely for the purpose of maintenance. The Custodian's office is not allowed to divest such securities, said the person.

"The enemy property shall continue to vest in the Custodian till it is divested by the Central Government. The enemy property could be divested only to the owner or his lawful heir," said an October 2010 government statement amending the laws governing such securities.

"The Central Government is authorized to direct the Custodian to sell or dispose of enemy properties in such manner as may be prescribed," it had added.

An email sent to the ministry of home affairs did not receive a reply.

Fresh news-reports in February this year indicated that the Home Ministry has notified rules under the Enemy Property Act to identify and take control of such assets. Additionally, it also includes procedures for divestment of the assets.

In addition to the shares and other such securities, there were 2111 immovable properties that the custodian was in charge of as of May 5, 2011, according to a Home Ministry reply to a Lok Sabha question. It received over Rs 40 crore for the financial year ending in 2012, including dividend on shares/stocks and income on investments made in government securities and treasury bills.

On the land and buildings, the district authorities are entitled to retain 1/12th of the income for management and maintenance expenses.

The original value of the holdings as per a 1971 estimate was only Rs 29.4 crore.