Transfer of Security Deposit Received as Liability

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This query is : Resolved

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A PVC pipe manufacturer received refundable security deposits from small dealers. They now want to transfer these deposits to a newly appointed master dealer who will supply the small dealers. While transferring the amount is possible, the original deposit receiver remains responsible for its refund. It's crucial to obtain a tripartite agreement or the explicit consent of the small dealers before shifting this responsibility to the master dealer.

Tanuj Kumar Gupta

Tanuj Kumar Gupta (Querist)
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05 July 2022 Dear Expert,

let suppose I am Manufacturer of PVC Pipe. I appointed small dealers for sale of my product for that i kept Rs 20000 as refundable security deposit when they start work with me. Now i had opened a Master dealer in their area & i will bill to him & he will distribute the stock to small dealers.
Can i transfer the security deposit of Rs 20000 to Master dealer which is standing as liability in my books?
Please guide solution & process if yes..

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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06 July 2022 Yes, you can transfer the amount no problem.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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08 July 2022 Here, it is the responsibility of the deposit receiver to refund the amount when the contract between them gets over. So, unless there is any tri-party agreement or the consent obtained from the small dealer, you should not hand over the responsibility to your master dealer.

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