New Delhi: Gone are the days where, companies  got protection against claims of recoveries once they were declared sick. A recent judgment by the Karnataka High Court is all set to change the scenario for company fixed deposit holders.

The court has ruled that company fixed deposits do not have the nature of money lent, instead they are money held in trust; as a result, the company could not use the legal protection for claims for recovery of this money. Hence, a claim made for the return of a deposit cannot be termed as a suit for recovery of money, and so, the protection under SICA would not be available to the company. In a recent case the National Consumer Commission was made aware by one litigant about this order by the honorable high court and the commission quickly adopted the precedent.

Earlier, it was very difficult to get back the money invested in a company fixed deposit if the company had declared bankruptcy and filed for sickness with the Board of Industrial & Financial Reconstruction (BIFR). The company then gained immunity against any claims by the investors. To get back the money through any legal remedy required a permission from the BIFR.