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.

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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:

  1. The Companies, which have filed DPT-4, should repay the whole amount before the end of this month as the companies have already declared that the amount was a deposit and hence, need to repay such amount as per Section 74(1)
  2. Wait for any clarification to be issued by the Ministry in this regard but caution it can be too late for those corporates, if no clarification being issued or if issued, is not in favour of corporates
  3. And the Best option is to file an application with Tribunal/ Company Law Board before March 31, 2015 under section 74(2)for getting further time for the repaying the deposit amount. As once, the application is being filed, the company may get the time till the time CLB gives any order.

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.

(CS Mohit Saluja, Mohit Saluja & Associates, 2nd Floor, Malhotra Complex, Sehdev Market, Jalandhar City, M- 9914558709, csmohitsaluja@gmail.com)

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0 responses to “Should Companies Re-Pay Deposits on or before 31.03.2015”

  1. CS MUKESH SUTHAR says:

    I agree with Mr. Saluja,

    As per my personal opinion, if we did not file Form DPT-4, then we need not to repay the loans/deposits, because the definition of ‘deposits’ come in to force on 01.04.2014. And as on date 31.03.2014 any loan/borrowings having to the company will not included in deposits.

    CS MUKESH SUTHAR
    Practicing Company Secretaries)
    Chittorgarh (Rajasthan)

  2. Akanksha says:

    can you please provide a format of application and documents to be filed to clb?

  3. Vijay Dakshini says:

    Meaning of “Deposit” as per Co Act,2013 as DPT4 is to be filled as on 1.4.14, but not 31.3.14
    1) Deposit means “deposit” as per companies act,2013

    2) Had the legislature intended the meaning of deposit as per Companies Act, 1956, legislature would have required to file statement of deposit as on 31 march, 2014. However, legislature wants us to file statement of deposit as on 1.4.2014 or a later date when deposit becomes due.

    3) Legislature do not want us to take meaning of deposit as per Co Act, 1956, otherwise legislature could have expressly stated that also.

    4) It is well settled that wherever the word “deposit” has been used in Co Act, 2013, the meaning of deposit as per Co Act, 2013 is to be used.

    5) Intention of insertion of sec 74 is clear. Company is require to repay excess deposits so that company can retain deposit as per Co Act, 2013. That is why, legislature brought sec 74.

    • Sec74(1) Where in respect of any deposit accepted by a company before the commencement of this Act(1.4.14),the amount of such “deposit” or part thereof or any interest due thereon REMAINS UNPAID ON SUCH COMMENCEMENT or becomes due at any time thereafter, the company shall—
    (a) file,……………………………………………..

  4. Rajesh,Mumbai says:

    Its pity that Such draconian provisions did not attract required protests from Professionals as well Business community.Even Media is ignoring such killing provisions in company act.Please see that in Draft Provisions of New company act, It was mentioned that deposits / Loan from Directors and Members not to be treated as deposits (Exempt) but Later in Notified act, “Members” word was deleted. UPA played prank and this government is busy in repairing damages caused by earlier UPA government.

    My father is a director of a private limited company and I have given loan of Rs.50 lacs to my father’s company. Now with this provision, If I am abstained by law to withdraw (Because company has to repay), where should I invest my Funds.
    I do not want to invest in Bank at mere 6-8% with Fixed tenure. I do not want to invest in Stock market and risk my money. What is the option left for me ? Why my father must go to Bank with beggar’s bowl and get loan with so much conditions when his family (relatives) are there ? This Law is illegal, senseless and is made without application of mind.

    I have posted so many replies against this Draconian provisions earlier on this portal but now at eleventh hour, without wasting any time and interpreting the law in twists, I request all Professionals to unite and awaken the government to put things right before it is too late.I wish Lord to save business community.

  5. Mahendra Bagrecha FCA says:

    Ministry of Corporate Affairs should realise the practical difficulties at ground levels. If they will ignore all these problems, it will be very difficult for the businessmen to start/continue doing business as a Company, specially as a Pvt Ltd.
    I hope, Ministry will come out with proper solution.

  6. M J NARASIMHESWAR says:

    Your opinion and those of many professionals stem out of over anxiety towards saving the client who did not bother to comply with the requirements of the Law all through the year. This trend is not healthy for the professionals’ health. As I was once told in a lecture meeting that in case of doubt on any legal interpretation, the professional would do well to err on the right side. If you are in doubt on whether such loans declared through form ADT 4 are to be repaid or not better advise the client to repay (if possible by borrowing from bank or any listed source). As seen from the over enthusiasm of the IT dept in fleecing FEE u/s 234E from all TDS return (so called) defaulters, the DOCA also may resort to en-mass harassment and fleecing by imposing the penalty in the first place and bringing on record that such a demand against the company exists. First impose penalty, fee, etc., let the receiver face the music. If the company ultimately wins those that harassed do not lose anything. If not they did a great favour to the Govt. I read somewhere “DO YOU WANT TO LOOT THE PUBLIC ? SORRY — THE GOVERNMENT DOES NOT LIKE COMPETITION” In the light of all this we play safe by advising the client to abide by the law as it is interpreted by us and the client in combination rather sitting by ourselves in judgement.

  7. CS. P K KRISHNAMURTHY says:

    Dear Mr. CS. MOHIT SALUJA,

    I HAVE BEEN TAKING A CONSISTENT VIEW THAT IN RESPECT OF PRIVATE LTD COMPANIES UNSECURED LOANS TAKEN FROM DIRECTORS, RELATIVES AND SHAREHOLDERS DOES NOT FALL UNDER 58A DEPOSIT AND HENCE ARE AN EXEMPTED DEPOSITS. HENCE IN IN THE SCC, WE USED TO SAY THAT THE COMPANY HAS NOT TAKEN ANY DEPOSIT FALLING UNDER SECTION 58A/58AA OF THE C.ACT, 1956.
    THIS BEING SO, IF PROFESSIONALS HAVE ADVISED THEIR CLIENTS FOR FILING DPT-4 THEN IT INCORRECT. I HAVE GIVEN ADVISE TO ALL MY CLIENTS NOT TO FILE THIS FORM AT ALL.

    NOW IF DPT-4 HAS ALREADY BEEN FILED I AM OF THE VIEW THAT SAFEST METHOD IS TO FILE PETITION UNDER SECTION 74(2) OF THE C.ACT, 2013 BEFORE THE CLB AND WAIT FOR FINAL OUTCOME. BY THAT TIME CLARIFICATION FROM MCA WOULD APPEAR.
    REGARDS,

    CS. P.K. KRISHNAMURTHY,
    PARTNER, JKM ASSOCIATES,
    COMPANY SECRETARIES, COCHIN – 682020.

  8. CA Mayank Parekh says:

    I agree with you Mr. Saluja.

    In my personal opinion, if the intention of the lawmaker was to allow Companies to keep such deposits and not to repay back then putting restrictions under new Act will be meaningless.

    In-fact intention of the lawmaker is very clear that now onwards no deposits will be allowed to be accepted and to align with the new law the lawmaker has given sufficient time to repay back deposits which are contrary to the new Act/ Rules.

    Argument on the ground that it does not constitute deposit under earlier law/ rules itself means that there was disparity and to eliminate the same the lawmaker has provided timeframe to repay back.

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