Permission under section 58A

No.

This is not a Deposit case u/s 58A.

Mr. Ankur is right, it is not a deposit.

Further, provisions of deposits does not apply to a Private Company as per Acceptance of Deposit Rules, 1975.

Thank you sir, But still Im not clear that under which provisions / section the private companies are exempted or allowed to take secured loan from Individual.  Can anyone explain the provisions please?

Originally posted by : satyavenk
	Thank you sir, But still Im not clear that under which provisions / section the private companies are exempted or allowed to take secured loan from Individual.  Can anyone explain the provisions please?

Exemption is provided in the The Companies (Acceptance of Deposits) Rules, 1975.

Originally posted by : satyavenk
	Thank you sir, But still Im not clear that under which provisions / section the private companies are exempted or allowed to take secured loan from Individual.  Can anyone explain the provisions please?

Find below extract from the deposit rule and check rule 2(b)(ix) as highlighted.

The Companies (Acceptance of Deposits) Rules, 1975

In exercise of the powers conferred by section 58A, read with section 642 of the Companies Act, 1956 (1 of 1956), the Central Government, in consultation with the Reserve Bank of India, hereby makes the following Rules, namely:—

1. Short title, commencement and application.—(1) These Rules may be called the Companies (Acceptance of Deposits) Rules, 1975.

(2) They shall come into force on the date of their publication in the Official Gazette.

(3) They shall apply to such companies as are not banking companies and are not also financial companies.

2. Definitions.—In these Rules, unless the context otherwise requires.—

(a) "Act" means the Companies Act, 1956 (1 of 1956);

(b) "deposit" means any deposit of money with and includes any amount borrowed by, a company, but does not include—

(i) any amount received from the Central Government or a State Government, or any amount received from any other source and whose repayment is guaranteed by the Central Government or a State Government, or any amount received from a local authority or a foreign Government or any other foreign citizen, authority or person;

(ii) any amount received as a loan from any banking company or from the State Bank of India or any of its subsidiary banks or from a banking institution notified by the Central Government under section 51 of the Banking Regulation Act, 1949 (10 of 1949), or a corresponding new bank as defined in clause (d) of section 2 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or from a co-operative bank as defined in clause (bii) of section 2 of the Reserve Bank of India Act, 1934 (2 of 1934);

(iii) any amount received as a loan from the Industrial Finance Corporation of India established under the Industrial Finance Corporation Act, 1948 (15 of 1948), or from a State Financial Corporation established under the State Financial Corporations Act, 1951 (63 of 1951), or from the Shipping Development Fund Committee constituted under section 15 of the Merchant Shipping Act, 1958 (44 of 1958) or from the Unit Trust of India established under

1  Circular No. DNBS (PD) CC. No./02.01/2002-03, dated 3-3-2003 issued by Department of Non-banking Supervision, RBI.

2 Notification No. GSR 43(E) dated 3-2-1975.

the Unit Trust of India Act, 1963 (52 of 1963), or from the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964), or from an Electricity Board constituted under the Electricity (Supply) Act, 1948 (54 of 1948) or from the Life Insurance Corporation of India constituted under section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956), or from the Rehabilitation Industries Corporation of India Limited or the State Trading Corporation of India Limited or the Minerals and Metals Trading Corporation of India Limited or the Rural Electrification Corporation Limited or the Agricultural Finance Corporation Limited or the Industrial Reconstruction Corporation of India Limited or the Industrial Credit and Investment Corporation of India Limited or the National Industrial Development Corporation of India Limited or the Tamil Nadu Industrial and Investment Corporation Limited or the State Industrial and Investment Corporation of Maharashtra Limited or from the General Insurance Corporation of India and its subsidiaries, namely, the National Insurance Company Limited, the New India Assurance Company Limited, the Oriental Fire and General Insurance Company Limited and the United Fire and General Insurance Company Limited or from the Gujarat Industrial Investment Corporation Limited or from any financial company wholly owned by the Central Government or State Government or from the Oil Industry Development Board or Housing Development Finance Corporation Limited, or from any other financial company or public financial institution which may be notified by the Central Government in this behalf in consultation with the Reserve Bank of India;

(iv) any amount received by a company from any other company;

(v) any amount received from an employee of the company by way of security deposit;

(vi) any amount received by way of security or as an advance from any purchasing agent, selling agent or other agents in the course of or for the purposes of the business of the company or any advance received against orders for the supply of goods or properties or for the rendering of any service;

(vii) any amount received by way of subscripttions to any shares, stock, bonds or debentures such bonds or debentures as are covered by sub-clause (x) pending the allotment of the said shares, stock, bonds or debentures and any amount received by way of calls in advance on shares, in accordance with the Articles of Association of the Company so long as such amount is not repayable to the members under the Articles of Association of the Company;

(viii) any amount received in trust or any amount in transit;

(ix) any amount received from a person who, at the time of the receipt of the amount, was a director of the company or any amount received from a relative of a director or its member by a private company:

Provided that the director, relative of a Director or member, as the case may be, from whom money is received, furnishes to the company at the time of giving the money, a declaration in writing to the effect that the amount is not being given out of funds acquired by him by borrowing or accepting from others;

(x) any amount raised by the issue of bonds or debentures secured by the mortgage of any immovable property of the company or with an option to convert them into shares in the company provided that in the case of such bonds or debentures secured by the mortgage of any immovable property, the amount of such bonds or debentures shall not exceed the market value of such immovable property;

(xi) any amount brought in by the promoters by way of unsecured loans in pursuance of stipulations of financial institutions subject to the fulfilment of the following conditions, namely:—

(a) the loans are brought in pursuance of the stipulation imposed by the financial institutions in fulfilment of the obligation of the promoters to contribute such finance;

Originally posted by : M.J.Mani Vannan
	Dear All, If such individual (Lender) neither a director nor relative of director or a member, your transaction must be treated as a deposit under section 58A of the Companies Act, 1956.

 Ya I also agree with Mr. MJ Mani Vannan

A private limited company cannot accept deposit, loan or share application money from a person other than its director, existing shareholder or relative of director.

Originally posted by : M.J.Mani Vannan
	Dear All, If such individual (Lender) neither a director nor relative of director or a member, your transaction must be treated as a deposit under section 58A of the Companies Act, 1956.

 A private company can only accept deposit from its directors, members or their relatives. However, under deposit rules any amount accepted by a private company from its directors, members or relatives are exempted deposit. The provisions of deposit does not apply to them. Thus a private company cannot accept deposit.

Dear all

What are the penalties if Privat co. takes an unsecured loan from a person other than its director or member or their relative.

What are the penalties if Privat co. takes an unsecured loan from a person other than its director or member or their relative.

What are the penalties & consequences if a Private limited company is violated section 3(1)(iii)(d) by accepting unsecured loans fron individuals other than dirctors,members,shareholdrs & ther relatives?

My company is a Public Ltd company can anyone tell me that unsecured deposits accepted by employees fall U/s 58A or not.

Similarly we are taking security deposits from our dealers, transporters, contractors. Whether they became fall under Section 58A.