CA Kamal Garg
In terms of section 2(31) of the Companies Act, 2013, “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. Therefore, all types of deposit of money or the amount borrowed by a company do not fall within the definition of deposit.
The Central Government has notified the Companies (Acceptance of Deposit) Rules, 2014 under the Companies Act, 2013. Rule 2(1)(c)(xii) of the Companies (Acceptance of Deposits) Rules, 2014 provides that any amount received in the course of or for the purposes of the business of the company:
“(a) 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 365 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”
Issue: From above a question may arise as to whether the sundry creditors outstanding (in respect of advances received from them for supply of goods or provision of services) as on 1st April, 2014 (i.e. the date on which provisions of Chapter V of the Companies Act, 2013 regarding Acceptance of Deposits by the Companies came into force) would be considered as “Deposits accepted by the Company before the commencement of Companies Act, 2013” in terms of Section 74 reproduced below:
Section 74 of the Companies Act, 2013 reads as follows:
|Where in respect of any deposit accepted by a company before the commencement of this Act, 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—
|file within a period of three months from such commencement or from the date on which such payments are due with the Registrar a statement of all the deposits accepted by the company and sums remaining unpaid on such amount with the interest payable thereon along with the arrangements made for such repayment, notwithstanding anything contained in any other law for the time being in force or under the terms and conditions subject to which the deposit was accepted or any scheme framed under any law; and
|repay within one year from such commencement or from the date on which such payments are due, whichever is earlier.
|The Tribunal may, on an application made by the company, after considering the financial condition of the company, the amount of deposit or part thereof and the interest payable thereon and such other matters, allow further time as considered reasonable to the company to repay the deposit.
|If a company fails to repay the deposit or part thereof or any interest thereon within the time specified in sub-section (1) or such further time as may be allowed by the Tribunal under sub-section (2), the company shall, in addition to the payment of the amount of deposit or part thereof and the interest due, be punishable with fine which shall not be less than one crore rupees but which may extend to ten crore rupees and every officer of the company who is in default shall be punishable with imprisonment which may extend to seven years or with fine which shall not be less than twenty-five lakh rupees but which may extend to two crore rupees, or with both.”
The issue under the subject matter of this Article can be analysed with the help of following discussion:
The Supreme Court of India, in Nani Gopal Mitra vs. State of Bihar AIR 1970 SC 1636, enunciated as follows:
“It is, therefore, clear that as a general rule the amended law relating to procedure operates retrospectively. But there is another equally important principle, viz. that a statute should not be so construed as to create new disabilities or obligations or impose new duties in respect of transactions which were complete at the time the amending Act came into force.”
Further, section 6(b) and (e) of the General Clauses Act states as under:
“6. Effect of repeal.— Where this Act or any Central Act or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not—
(b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or
(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid;
and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed.”
Therefore, in view of the above legal position, the Companies (Acceptance of Deposits) Rules, 2014 would not apply retrospectively in respect of the aforesaid outstanding sundry creditors from whom advances were received prior to the commencement of the Companies (Acceptance of Deposits) Rules, 2014.
The above article is contributed by CA Kamal Garg having professional and academic interests in IFRS, Accounts, Auditing and Corporate Laws arenas. He can be approached at email@example.com