Public Deposits u/s 58A and 58AA

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 January 2010 A real estate co. takes advance from public for sale of land, on the condition that it shall either provide them with a plot of land or shall repay the amount with 10% interest.
Whether the amount so received shall be classified as deposit from public;
and whether Companies (Acceptance of Deposits) Rule, 1975 shall be applicable.

CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
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23 January 2010 While drafting the agreement between the company and its customers; the care should be taken that the company will provide a plot of land but in case the committment is not fulfilled; then the company shall pay a "PENALTY" of 10% to the customers.

Then this will not attract Section 58A.

Otherwise also it would not attract section 58A.

But the wordings put by you is like -

"EITHER" provide them with a plot of land "OR" shall repay the amount with 10% interest.

Which may create litigation.

Ankur Garg

Ankur Garg (Expert)
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26 January 2010 If you fail to fulfill the conditions of the agreements then this amount would be cnsidered as a public deposit.

Later on ROC may object to this practice particularily at the time of scrutiny of your balance sheet.

Regards

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