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Analysis on Acceptance of deposits under Companies Act, 2013

CA RAVI CHHATWANI 
Updated on 08 April 2021

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Chapter V

Acceptance of Deposits by Companies

Prohibition on acceptance of deposits from public.

Sec 73(1)

After commencement of this Act, Company has to invite, accept or renew deposits in manner as provided in this chapter.

Provided above shall not apply to Banking company and Non Banking company as defined in RBI Act, 1934 and to such other company as C.g. specify after consultation with RBI

Sec 73(2)

A company may:

a. after passing resolution in General Meeting

b. and subject to rules prescribed in consultation with RBI,

c. Accept deposits from members on such terms and conditions, including provision for security, if any or for repayment of deposit with interest as agreed between company and members,

d. Subject to fulfillment of following conditions namely :-

Issuance of circular to members including statement showing

a. Financial position of company

b. The credit rating obtained

c. Total number of depositors

d. Amount due towards deposits in respect of any previous deposits accepted by company and

e. Such other particulars in manner and form as prescribed.

Filing a copy of circular along with such statement with ROC within 30 days before the date of issue of circular;

Depositing such sum not less than 15% of amount of deposits maturing during financial year and financial year next following, and kept in a scheduled bank in a separate bank account to be called as deposit repayment reserve account; 

Providing such deposit insurance in such manner and to such extent as may be prescribed.

Certifying that company has not committed any default in repayment of deposits accepted before or after commencement of this act or payment of interest on such deposits; and

Providing security, if any for due repayment of amount of deposit or interest thereon including the creation of such charge on property or assets of company: 

Provided company does not secure or partially secure, the deposit shall be termed as ‘‘unsecured deposit’’ and shall be quoted in every circular, form, advertisement or any document related to invitation or acceptance of deposits.

Sec 73(3)

Every deposit accepted by a company u/s 72(2) shall be repaid with interest with T & C of agreement referred to in that sub-section.

Sec 73(4)

Where a company fails to repay deposits or part thereof or interest thereon u/s 73(3), depositor concerned may apply to Tribunal for an order directing the company to pay sum or for any loss or damage incurred by him as a result of non- payment and for such other orders as tribunal may deem fit.

Sec 73(5)

The deposit repayment reserve account referred in section 73(2)(c) shall  not be used by company for purpose other than repayment of deposits.

Repayment of Deposits, Etc. accepted before commencement of this ACT

Sec 74(1)

Where in respect of any deposit accepted by company before commencement of act, any amount remains unpaid (by reason of not due or due but not paid) on such commencement or is due at any time after commencement, the company shall

File, within 3 months of commencement or from date on which such payments are due (when before commencement already due), with ROC,

a. a statement of all deposits accepted by company

b. and sums remaining unpaid on such amount with interest payable thereon

c. along with arrangement made for such repayment,

d. Notwithstanding anything contained in any other law or T & C s.t. which deposit accepted or any scheme framed under law.   

Repay within 1 year from such commencement or from date on which such payments are due, whichever is earlier.

Sec 74(2)

The Tribunal may on application made by company, after considering

- the financial position,

- the amount of deposit or part thereof or interest payable thereon, and

- such other matters,

Allow further time as considered reasonable to company to repay deposit.

Sec 74(3)

If company fails to repay deposit or part thereof or interest thereon within time specified u/s 74(1) or further time u/s 74(2), the company shall, in addition to payment of amount due, be punishable

With fine Rs.  min. 1 crore to max. 10 crore

And every officer= Imprisonment – max. 7 years

Fine- 25 lakh to 2 crore,

Or with both.

Damages for Fraud

Sec 75(1)

Where deposit, etc not repaid within time u/s 74(1) / (2) and it is proved that the deposits had been accepted with the intent to defraud the depositors or fraudulent purpose,

Every officer of company who was responsible for acceptance of such deposits shall, without prejudice to provision to section 74(3) and liability u/s 447 (i.e. that section also applies), be personally responsible, without any limitation of liability, for all or any of losses or damages that may have incurred by the depositors.

Sec 75(2)

Any suit, proceeding or other action may be taken by any person, group of person or AOP who had incurred any loss as a result of failure of company to repay the deposits or part thereof or any interest thereon.

Acceptance of Deposits from public by certain Companies.

Sec 76(1)

Notwithstanding anything u/s 73, a public company having such net worth or turnover as may be prescribed, may accept deposits from persons other than its members subject to compliance with requirements provided u/s 73(2), and subject to such rules as C.G. may, in consultation with RBI, Prescribe:

Provided such company shall be required to obtain the rating (including its net worth, liquidity and ability to pay its deposits on due date) from recognized credit rating agency for informing public the rating given to company at the time of invitation of deposits from public which ensures adequate safety and rating shall be obtained every year during the tenure of deposits.

Provided further that every company accepting secured deposits from public shall within 30 days of such acceptance , create a charge on its assets of an amount not less than deposit accepted in favor of deposit holders in accordance with rules.

Sec 76(2)

Provision of this chapter shall, mutatis mutandis, apply to acceptance of  deposits from public under this section

BY CA RAVI CHHATWANI,

PRACTICING CHARTERED ACCOUNTANT

EMAIL: RAVICHHATWANI15@GMAIL.COM


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