CS Mohit Saluja
As the month of March is on its end, most of the companies which have taken loan earlier under the companies act 1956 and have filed DPT-4 in this Financial year declaring that the companies has such and such amount of deposits as on 31.03.2014, are now required to repay such loan on or before March 31, 2015 under Section 74(1)(b) otherwise those companies which shall not repay the amount within the prescribed time period, shall be punishable under section 74(3) and the penalty is so much swerve that it has brought the wrinkles on heads of officers of the companies. The punishment under section 74(3) is fine which shall not be less than Rs. 1 crore but which may extend to Rs. 10 Crores and every officer who is in default shall be punishable with an imprisonment which may exceed to 7 years along with fine which shall not be less than Rs. 25 Lakh and which may extend to Rs. 2 crores or both.
Much of the problem is with Private Limited Companies which have taken the loan from their friends/ relatives of directors or shareholders which is now termed as Deposits as per Deposit Rules 2014. Hence, the amount which had been taken by the companies and which are in Lakhs and in crores in many cases, it was not possible for such companies to repay such loan in this short period of 1 year, commencing from April 1, 2014, as the money taken as loan had been invested by the companies in their business is may be in form of fixed assets or current assets which is not possible by the companies to sell off such business assets/ properties and repay the loan amount, as it will adversely affect the operations of the corporate and hence the corporate as well as economy will suffer a lot.
Hence, Professionals are now on the planning side and finding the loopholes in the act so that the money already taken should not be paid back by the companies. Many opinions and judgments coming out these days by the Professional for their clients and most of these are for Private Limited Companies specially.
One of the opinion among a lot is that the loan taken by the Private Limited Companies, before Companies Act 2013 came into existence, was not a deposit in eyes of law under Rule 2 Clause B Sub Clause IX of Deposit Rules 1975. Hence, it is being advised that the companies should neither file DPT-4 for such loan nor should repay such amount.Online GST Certification Course by TaxGuru & MSME- Click here to Join
The second opinion coming out is that the amount the companies had taken was a loan and not a Deposit. Because for obtaining the Deposits, the companies were, then need to follow the proper procedure laid down under section 58A(2)(a)and (b) of Companies 1956. For this many Professional have brought forwards the judgments of
The Madhya Pradesh High Court in the case of Sharda Talkies (Firm) v. Smt. Madhulata Vyas AIR 1966 NMP 68,
Baidyanath Plastic Industries (P) Ltd. 230 ITR 522, the Delhi High Court
The Bombay High Court in the case of Pennwalt (India) Ltd. v. Registrar of Companies (1987) 62 Comp. cases 112 (Bom.) etc.
Which clearly distinguish the loan from Deposits. And Professionals suggest that if the Deposit has not been taken by the companies, then WHAT to repay and WHY to repay. And they are right in their saying.
And many are of the opinion that Ministry will issue some clarification in this regard and the companies will need not to repay such amount. Clarification by Ministry may be possible in further days but percentage of possibility is negligible.
But the question is should the companies not repay such amount as there are a no. of judgments, there are a lot of reasoning available with the Professionals and there are interpretations which have been drawn by the Professionals. I think No. Some way out must be drawn to solve such problem.
There may be a no. of way outs in the eyes and in the minds of other Senior Professionals and I appreciate if the Professionals reading this article responds the same. But as per me following are the wayouts:
And The extension to be given by CLB depends upon the financial position of the company, the efforts taken up by the company during the year in repayment of deposits, further efforts taken by the company in repayment of balance deposits etc. as we have seen in a high profile company case that the extension has been given only for 6 months and that only in case when the company ahs repaid back the substantial part of its deposits and have applied to the Bank for obtaining loan with which the balance deposit shall be repaid.
Conclusion: The conclusion is that companies should instead of depending upon their reasoning for not repaying the deposits, should proceed further either to repay the loan or to proceed for CLB for getting extension of time.
Note: The views given above are my own. And the companies should proceed further with proper guidance and Advice of their Professionals concerned specially Company Secretaries.