CS S. Dhanapal

As per Section 2(31), “Deposit” includes any receipt of money by way of deposit or loan or in any other form by a company, but does not include such categories of amount as may be prescribed in consultation with the Reserve Bank of India;

Amounts which are not considered as deposits (Rule 2 of Companies (Acceptance of Deposits) Rules, 2014)

  • any amount received from the Central Government or a State Government, or any amount received from any other source whose repayment is guaranteed by the Central Government or a State Government, or any amount received from a local authority, or any amount received from a statutory authority constituted under an Act of Parliament or a State Legislature.

  • any amount received from foreign Governments, foreign or international banks, multilateral financial institutions.
  • any amount received as a loan or facility from any banking company or from the State Bank of India or any of its subsidiary banks or from a banking institution
  • any amount received as a loan or financial assistance from Public Financial Institutions notified by the Central Government in this behalf
  • any amount received against issue of commercial paper or any other instruments issued in accordance with the guidelines or notification issued by the Reserve Bank of India
  • any amount received by a company from any other company
  • any amount received and held pursuant to an offer made in accordance with the provisions of the Act towards subscription to any securities, including share application money or advance towards allotment of securities pending allotment, so long as such amount is appropriated only against the amount due on allotment of the securities applied for
  • any amount received from a person who, at the time of the receipt of the amount, was a director of the company
  • any amount raised by the issue of bonds or debentures secured by a first charge or a charge ranking pari passu with the first charge on any assets referred to in Schedule III of the Act excluding intangible assets of the company or bonds or debentures compulsorily convertible into shares of the company within five years:
  • any amount received from an employee of the company not exceeding his annual salary under a contract of employment with the company in the nature of non-interest bearing security deposit;
  • any non-interest bearing amount received or held in trust;
  • any amount received in the course of, or for the purposes of, the business of the company as an advance for the supply of goods or provision of services accounted for in any manner whatsoever provided that such advance is appropriated against supply of goods or provision of services within a period of three hundred and sixty five days from the date of acceptance of such advance:

Provided that in case of any advance which is subject matter of any legal proceedings before any court of law, the said time limit of three hundred and sixty five days shall not apply:

  • any amount brought in by the promoters of the company by way of unsecured loan in pursuance of the stipulation of any lending financial institution or a bank subject to fulfillment of the following conditions, namely
    • the loan is brought in pursuance of the stipulation imposed by the lending institutions on the promoters to contribute such finance;
    • the loan is provided by the promoters themselves or by their relatives or by both; and
    • the exemption under this sub-clause shall be available only till the loans of financial institution or bank are repaid and not thereafter;
  • any amount accepted by a Nidhi company in accordance with the rules made under section 406 of the Act

ELIGIBLE COMPANY WHICH CAN RECEIVE DEPOSITS FROM PUBLIC

“Eligible Company” means a public company as referred to in sub-section (1) of section 76, having a net worth of not less than Rs. 100 Crores or a turnover of not less than Rs. 500 Crores and which has obtained the prior consent of the company in general meeting by means of a special resolution and also filed the said resolution with the Registrar of Companies before making any invitation to the Public for acceptance of deposits.

Provided that an eligible company, which is accepting deposits within the limits specified under clause (c) of sub-section (1) of section 180, may accept deposits by means of an ordinary resolution;

 QUANTUM OF DEPOSITS THAT CAN BE ACCEPTED

A. From members

  • No Eligible company shall accept or renew any deposit from its members, if the amount of such deposit together with the amount of deposits outstanding as on the date of acceptance or renewal of such deposits from members exceeds 10% of the aggregate of the paid-up share capital and free reserves of the company and
  • No other company shall accept or renew any deposits from its members if the amount of such deposits together with the amount of other deposits outstanding as on the date of acceptance or renewal of such deposits exceeds 25% of the aggregate of the paid-up share capital and free reserves of the company.

B. From public

  • No eligible company shall accept or renew any deposit from public, if the amount of such deposit other than the deposit received from members, together with the amount of deposits outstanding on the date of acceptance or renewal exceeds 25% of aggregate of the paid-up share capital and free reserves of the company.
  • No Government company eligible to accept deposits under section 76 shall accept or renew any deposit, if the amount of such deposits together with the amount of other deposits outstanding as on the date of acceptance or renewal exceeds 35% of the paid-up share capital and free reserves of the company.

CONDITIONS TO BE SATISFIED FOR ACCEPTING DEPOSITS

o   Resolution to be passed by company in general meeting.

o   Rules as may be framed by RBI to be complied with.

o   Circular to be issued to members showing financial position of the company, the credit rating obtained, details of outstanding deposits, if any, and other particulars as given below.

o   Deposit Repayment Reserve Account to be opened with a scheduled bank and atleast 15% of amount of deposits maturing during the current and next financial year to be deposited in the account. This account cannot be used for any other purpose.

o   Deposit insurance to be provided in the manner prescribed below:

ü  Every company referred to in sub-section (2) of section 73 and every other eligible company inviting deposits shall enter into a contract for providing deposit insurance at least thirty days before the issue of circular or advertisement or at least thirty days before the date of renewal, as the case may be

ü  The deposit insurance contract shall specifically provide that in case the company defaults in repayment of principal amount and interest thereon, the depositor shall be entitled to the repayment of principal amount of deposits and the interest thereon by the insurer up to the aggregate monetary ceiling as specified in the contract

ü  In the case of any deposit and interest not exceeding twenty thousand rupees, the deposit insurance contract shall provide for payment of the full amount of the deposit and interest and in the case of any deposit and the interest thereon in excess of twenty thousand rupees, the deposit insurance contract shall provide for payment of an amount not less than twenty thousand rupees for each depositor

ü  The amount of insurance premium paid on the insurance of such deposits shall be borne by the company itself and shall not be recovered from the depositors

ü  If any default is made by the company in complying with the terms and conditions of the deposit insurance contract which makes the insurance cover ineffective, the company shall either rectify the default immediately or enter into a fresh contract within thirty days and in case of non-compliance, the amount of deposits covered under the deposit insurance contract and interest payable thereon shall be repaid within the next fifteen days and if such a company does not repay the amount of deposits within said fifteen days it shall pay fifteen per cent interest per annum for the period of delay and shall be treated as having defaulted and shall be liable to be punished in accordance with the provisions of the Act.

o   Certificate to be provided regarding absence of any default by the company in repayment of deposit or interest thereon, either before or after the commencement of this Act.

o   Repayment of deposit and interest may also be secured by creation of charge on the assets and property of the company in compliance with rules in this regard.

o   Deposits which are unsecured or partially secured shall be so mentioned in all documents related to invitation or acceptance of deposits.

o   Credit rating should be obtained for accepting deposits from public

o   Every deposit accepted by a company under this section shall be repaid with interest in accordance with the terms and conditions of the agreement entered between the company and depositor.

o   In case of failure of company to repay deposits or interest thereon, the depositors can approach the Tribunal to obtain necessary orders for the company to make the payment or for any loss or damage incurred.

REPAYMENT OF DEPOSITS ACCEPTED BEFORE COMMENCEMENT OF NEW ACT [SECTION 74]

With regards to deposits accepted by companies before commencement of the new Act which remain outstanding in principle or interest, the following needs to be done :

  • Company to file a statement with ROC giving   details  of deposit or interest outstanding along with the details of arrangements made for repayment within 3 months of commencement of new Act or due date of repayment whichever is earlier.
  • Repayment to be made on due date of repayment .

RETURN OF DEPOSITS

Return of Deposit containing details as on 31st March of a year to be filed by every company to which the Deposit Rules apply, within 30th June of every year.

The information contained in the return should be duly audited by the auditor of the company who shall give his report as per Form DPT 3.

PENALTY

If any company referred to in sub-section (2) of section 73 or any eligible company inviting deposits or any other person contravenes any provision of rules for which no punishment is provided in the Act, the company and every officer of the company who is in default shall be punishable with fine which may extend to five thousand rupees and where the contravention is a continuing one, with a further fine which may extend to five hundred rupees for every day after the first day during which the contravention continues. [Rule 21 of (Acceptance of Deposits) Rules, 2014.]

Default in repayment of deposit or interest thereon within time

Where it is proved that deposits were accepted with intention to defraud the depositors or for any fraudulent purpose the company shall liable to pay fine between Rupees 1 Crore to Rupees 10 Crores Plus Repayment of amount of deposit/interest and Officer in Default will be personally liable with unlimited liability notwithstanding the penalty mentioned above and penalty for fraud. Aggrieved party may initiate any suit or proceedings.

Penalty for fraud:

Imprisonment for term between 6 months to 10 years and Fine ranging from amount involved in fraud to 3 times of the amount involved (Section 75)

(Written by S.Dhanapal, Senior Partner, S Dhanapal & Associates, A firm of Practising Company Secretaries, Chennai.)

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One response to “Acceptance of Public Deposits by Companies under Companies Act, 2013 – Provisions”

  1. gandharv anand says:

    please let me know the answer to this pertinent question

  2. CA Hitesh says:

    After recent Exemptions and Relaxations to Private Companies from Few Provisions of CA, 2013, can a co accept loan from director without getting declaration that he has not borrowed the fund from others and the fund is his own fund. i.e. declaration still required?

  3. sudhir goyal says:

    Dear Sir,

    If builder receive payment for property to be sold which under construction. The builder also provide assured return till possession/for certain period on amount invested. Now my query is:
    1. Whether above amount receive by builder may be considered as public deposit?

  4. Anil Khicha says:

    There is no time limit to file DPT 4 if the repayment is not due during the year as the law wants to file the same only after the due date.

  5. Dakshesh says:

    Completely agree with Rajesh….because of the fraud committed by big group thay have banned every deposit without giving a rationale thought. There is a proverb in Gujarati “Pada na vanke pakhali ne daam” – same thing these law makers have done.

    Now lets wish with this new government, they can act wisely and remove such difficult rather impracticable provisions of the act.

  6. Divesh Goyal says:

    Hello sir,

    According to me this amount will be treat as deposit from 1st April, 2014. The treatment is that you have to repay such pending application money till 31st march, 2015.

    Please correct me if am wrong.

  7. RAMANA says:

    Dear Sir,

    please clarify My below mentioned Doubt:

    One of our client Company Received Money In the form of SHARE APPLICATION MONEY FROM DIRECTORS AND SHARE HOLDERS IN THE FY 2013-14 TILL NOW shares not alloted in this case. How can be the treatment of that amount.
    can it be considered as deposits or can it be treeted as share application money pending allotment.

    please send me the treatment. how could be the company can be benefitted.

  8. Rajesh, Mumbai says:

    See the basic understanding and knowledge of ground reality of Lawmakers. They have made a Law that even a private company cannot take loans from relative of directors and shareholders. See the bankruptcy of their intelligence; they want all these company to repay loans before 31st march 2015. They indirectly wish all private companies to wind up / close the business. Can they make even a Largest Bank of India to pay all deposits in one year without taking further deposits? Leave aside the Bank, Can Government of India repay all loans (taken from various sources) in one year. See the penalty of Rs 1 crore to 10 crore if loans not paid before 31st Mar.2015 and also imprisonment up to seven years. They do not even know that In India 90% of private companies will not be having a capital of 1 crore and they are daring to impose a penalty of minimum 1 crore. They (Lawmakers) did not even consider that relatives and shareholders give loans to private company because they trust them more than Banks, more than government, get better interest, and are more comfortable with them. On the other side, private companies get such loans on reputation whenever required which help them to save on costs and grow business.
    I want to ask a question to Law makers: My brother is director of a private company. I have given loans to his company at 15% per annum and getting interest on time. I feel safer than Bank and do not want to invest in stock market. Now what should I do with my money if I am repaid my loans given to company?

    This Devil law has been enacted by earlier government. I hope new government will drop it and restore earlier situation.

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