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)
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:
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
B. From public
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 :
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.
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.)