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Depositors Stunned by RBI’s Benevolence to Jaiprakash Associates
Fixed deposit (FD) investors of Jaiprakash Industries are shocked. On 21st April, The Economic Times reported that the Reserve Bank of India (RBI) had removed 20 companies from the list of 150 entities whose loans had to be provided for by banks against risk of default. One of these was the beleaguered Jaiprakash Associates which figures in Moneylife Foundation’s survey (1,596 complaints) among the top six companies that have the maximum complaints regarding failure to pay the principal or interest on FDs. 
 
While banks celebrate the fact that not providing for the loans will help their bottomlines, hapless depositors are in shock. Worse still, the company has selectively paid a few investors, especially those who had invested through agents who were large fund mobilisers. Media reports also indicate that the RBI breather has followed the Jaypee group’s effort to cut it massive outstanding debt of Rs75,000 crore and its intention to hire experts to restructure its business. Jaiprakash Associates alone has a debt of Rs21,731 crore, according to a Credit Suisse report. 
 
As a proportion of its outstanding, the FD component of Jaiprakash’s debt is bound to be really small and it would be a smart move, reputation-wise, if the company decided to pay them back. A little nudge from the ministry of corporate affairs (MCA) would have made a difference; but it has shown no interest. SD Israni, a well-known lawyer and company secretary and columnist, however, offers an interesting perspective. He says that although the Companies Act, 2013 had not included any provision to punish defaulting companies and their officials, the National Democratic Alliance (NDA) has, in fact, made amends. Section 76A, was inserted into the Companies Act on 29 May 2015 providing imposition of heavy fines and imprisonment for defaults. However, there is a catch. Mr Israni points out that the provision remains a paper tiger because the tribunal that can exercise the power has yet to be constituted and the CLB (company law board) cannot exercise these powers. 
 
Abhay Datar, consumer activist and former banker, points out that Section 76(1) requires companies to create a charge on fixed assets equivalent to the amount of FDs raised. Does this mean that FD-holders are secured creditors, he asks. But here, too, he points out that there is no clarity on whether this would be a first charge or a second charge on the assets. When it comes to small depositors, MCA clearly moves at snail’s pace. So what will push the MCA to give teeth to Section 76A and protect depositors? We are still looking for answers. Meanwhile Moneylife continues to advise savers to avoid investing in corporate FDs lured by a slightly higher interest rate and endangering the principal invested. 

User

COMMENTS

George Williams

2 months ago

Is there any association formed for jaypee FD investors?

REPLY

Sandeep Talwar

In Reply to George Williams 1 month ago

This is a good idea. Can we form a WhatsApp group or collect email ID's for a Google group ?

George Williams

In Reply to Sandeep Talwar 1 month ago

Contact me on [email protected]

George Williams

In Reply to Sandeep Talwar 1 month ago

Yes sandeep.Already such an initiative has been started by Helios and matheson investors and running a legal battle in Chennai high Court

Sandeep Talwar

In Reply to Sandeep Talwar 1 month ago

I am stuck with 4 FD with Jaiprakash associates and 4 with Jaypee Infratech

Pradeep Bose

2 months ago

RBI) had removed 20 companies from the list of 150 entities one of these was Jaiprakash Associates. who exceeded maximum complaints regarding their failure to pay the principal amount & interest on matured FDs for more than one year.Requested RBI,Finance Ministry,MCA etc. to take strong action against the aforesaid company & also to see that the small,retired investors',etc get back their delayed hard earned investment amount along with interests at all cost. Hoping for early action .

Sumon Mukhopadhyay

8 months ago

The investors would be getting their FDs back - may be there could be some delay.

The shares of Jaiprakash Associates Ltd which is trading near Rs.7.64, will cross Rs.12, in the short term, as the company is in the process of hiring consultants to quickly turn into black. It is also offering banks land parcels, which are non-core assets, to tide over this debt issue.

I am sure with NDA government now, speaking of converting debts to equities, the Reliance Communications and Jaiprakash Associates will be one of the biggest beneficiaries. We have already seen a rally in Gammon India, Gammon Infra, Lanco Infra and Unitech Ltd during the last few days.

Mahesh S Bhatt

10 months ago

Vijay Mallya today news is saying that UK government shall not deport.So what will few thousand rupess repayment done when thousands of crores are nit being paid back.

Audacity of Vijay Mallya is that I have given offer but banks are not accepting hence not wilful defaultor.

BJP/UPA mili juli bhagat sarkar.All businessmen buy Politicians & donot pay taxes & get quick rich.For common man there are taxes & laws.

For Businessmen /Politicians State Immunity/Political support so where is the parity & expectation of justice is false.

Its political entertainment between Politicians/Businessmen & Media every day new story very very few convictions.Ask Sucheta? She is experienced in getting Harshad Mehta culprits behind the bars after 23 years.Respect her resilence.

CJI cries/CBI cries for shortage of staff/Police does shoddy investigations of big cases Peter Mukhejea/Salman /Malageon blasts lists goes on..

God Bless Forget & Forgive & Move on is best way to live otherwise pay lawyers for timeless commitments Mahesh

Simple Indian

10 months ago

Corporate FD depositors ought to be aware of the risks involved in investing their money in such FDs which are unsecured. Most such depositors invest for the lure of higher interests offered by such FDs, despite the risks involved. However, RBI, MCA etc. should ensure that investors' interests are protected at all times. Instead, crony-capitalism has thrived in India for so long that most big companies have enough political clout to escape any action by govt agencies. With the politician-businessman nexus here to stay, retail investors would do well to assess their risks before investing in corp FDs and such.

10 months ago

I am also one of the victim of J P Associates having 3 fds already matured . CLN extended the time up to june 2016 . Yesterday only I emailed them citing that their dead line is nearing and as I am senior citizen I have requested to pay my long matured FDs immediately. Mr. Raghram Rajan our RBI governor should have seen the complaints of FD holder and then only removed this company from the list. Now at least J P Associates will honor their commitments to FD holder at an earliest.
Narayan Kamath

vnrao

10 months ago

Investors of fds in companies well aware that these are unsecured loans no gaurantee of retirn of principal/interest taken the risk and invested instead of giving some potive suggetion like insurance svheme etc negative writing does not augur well will only bring few subscribers to mag we cannot make whole india sick by naming every debt ridden compay to write off give some positive suggetions

vnrao

10 months ago

Investors of fds in companies well aware that these are unsecured loans no gaurantee of retirn of principal/interest taken the risk and invested instead of giving some potive suggetion like insurance svheme etc negative writing does not augur well will only bring few subscribers to mag we cannot make whole india sick by naming every debt ridden compay to write off give some positive suggetions

REPLY

Sucheta Dalal

In Reply to vnrao 10 months ago

Is it your suggestion that since FDs are unsecured companies have the right not to return the money? Is it a gift? All of Moneylife Foundation's financial literacy efforts inform people to beware of corporate FDs. But financial literacy in India is poor and those who have fallen for this are largely senior citizens who need some help.
Most developed countries do not allow companies to raise corporate deposits. It is corporate India that lobbies with the government to ensure that this dubious practice continues, with a pretence at having tightened rules.
So it may be in your best interest and that of the country to join our efforts in fighting this, unless there are other reasons why you have chosen to support the non-repayment.

Abhijit Joshi

10 months ago

Time & again investors fell prey to lure of FDs advertisements & false sense of security thinking FDs are safer than equity where principle is preserved.
Equities can be sold even if at loss & investors can deploy them elsewhere.
There is no such exit route to FDs.

Ashok Sachdeva

10 months ago

If we see the new law, as The Company act, 2013, section 73(4) provides opportunity to fd holders to file their claim in case of default by company. Either clb will accept application or reject. Let it reject and approch to court for true remedy. What is wrong in that?

REPLY

Sucheta Dalal

In Reply to Ashok Sachdeva 10 months ago

Approach court... what is wrong in that? Everything!!! Just the process of approaching court will cost more than the deposit in most cases and take a decade to resolve.

SuchindranathAiyerS

10 months ago

The RBI does the Nehruvian thing. "Show me the person, and I shall show you the law"

Srikanth Matrubai

10 months ago

Pathetic.
Its "Rishwat" speaking.
Really sad!!!

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