Delhi High Court rejects PNB plea to move ex-shareholder refund money to IEPF

The Delhi High Court on 8 October 2026 dismissed a review petition filed by Punjab National Bank in a dispute over money held for refunds to former shareholders of Meena Steels Limited. The bank had argued that the money must be moved to the Investor Education and Protection Fund (IEPF), a fund set up by the Central Government under the Companies Act, 2013. The court held that the provision the bank relied on does not apply to these refunds.

What Happened

According to the order, Meena Steels Limited reduced its share capital under a resolution dated 6 December 2014, which the court confirmed on 29 March 2016. An escrow account, a separate account held for a set purpose, was opened with the bank on 28 June 2016 for refunds to ex-shareholders.

In an order of 30 August 2022, the court directed the company to re-submit a list of beneficiaries and the bank to issue fresh refund warrants. Any balance was to go into a separate account in the company's name, to be used only to pay ex-shareholders. On 2 February 2026, the court modified this so that the amount matching the refund warrants would also be kept in that account, again only for ex-shareholders.

The bank sought a review, arguing that seven years had passed and that Section 125(2)(h) of the Companies Act, 2013 required the money to be transferred to the IEPF. The court held that Section 125(2)(h) deals with application money received by companies for allotment of securities and due for refund, whereas these refunds arose from a court-approved reduction of capital. It found no error apparent on the face of the record and dismissed the review petition.

What It Means

For the former shareholders of Meena Steels Limited, the court's earlier directions stand. The money set aside for them must be kept in a separate account and used only to discharge the company's liability towards them under the scheme, and for no other purpose. The company's managing director was required to give an undertaking on affidavit to this effect.

The ruling also draws a line on the IEPF provision the bank cited. Per the court, the seven-year transfer rule in Section 125(2)(h) relates to application money for securities, and the bank could not show how refunds arising from a reduction of share capital fall within it.

Source: High Court judgment