The
Companies Act 2013, consolidates provisions relating to acceptance of Deposits
by Companies in 4 Sections, in particular from Sections 73 to 76 as contained
in Chapter V. When sections 73 and 76 of the Act provides or law relating to
issue of future deposits , Sections 74 and 75 deals with past deposits that
exists at the time of commencement of the Act. Further the Companies
(Acceptance of Deposits Rules) 2014 was notified and came into effect from
01.04.2014.
Definition of Deposits – Inclusions
and Exclusions:
The term Deposits include, any receipt of money by way of deposit or
loan or in any other form, by a company.[1]
However the following are excluded from
the definition of deposits:
·
Any amount received from the Central
Government /State Government/or any amount whose repayment is guaranteed by the
Central / State Government. Any amount received from a local / statutory
authority constituted under an Act of Parliament or a State Legislature ;
·
(ii) any amount received from foreign
Governments, foreign or international banks, multilateral financial
institutions, foreign Governments owned development financial institutions,
foreign export credit agencies, foreign collaborators, foreign bodies corporate
and foreign citizens, foreign authorities or persons resident outside India
subject to the provisions of Foreign Exchange Management Act, 1999 (42 of 1999)
and rules and regulations made there under;
·
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 notified by the Central Government, or a
corresponding new bank as defined in Banking Companies (Acquisition and Transfer
of Undertakings) Act, 1970 or the Banking Companies (Acquisition and Transfer
of Undertakings) Act, 1980 , or from a
co-operative bank ;
·
Any amount received as a loan or
financial assistance from Public Financial Institutions notified by the Central
Government in this behalf or any regional financial institutions or Insurance
Companies or Scheduled Banks
·
Any amount received against issue of
commercial paper or any other instruments issued in accordance with the
guidelines issued by the RBI
·
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.
Acceptance
of future deposits – Conditions Precedent
Section 73 of the Act , provides for the
manner in which Deposits are to be accepted by the companies.
A company can accept deposits only upon
satisfaction of the following conditions:
·
Issuance of a circular
to its members. Such notice shall include a statement showing
a) the
financial position of the company,
b) the
credit rating obtained,
c) the
total number of depositors
d) amount
due towards deposits in respect of any previous deposits accepted by the
company
e) such
other particulars in such form and in such manner as may be prescribed;
· Appointment
of Deposit Trustees No company shall issue aforesaid circular or
advertisement inviting secured deposits unless the company has appointed one or
more deposit trustees for creating security for the deposits. [2]
· filing a copy of the circular
along with such statement with the Registrar within thirty days before the date
of issue of the circular;
·
Depositing such sum
which shall not be less than 15% of the amount of its deposits maturing during
a financial year and the financial year next following, in a scheduled bank in
a separate bank account to be called as “Deposit repayment reserve account”. [3]Such
amount shall not be used for any other purpose other than repayment of
deposits.[4]
·
providing
such deposit insurance in such manner and to such extent as may be
prescribed;[5]
· certifying
that the company has not committed any default in the repayment of
deposits accepted either before or after the commencement of this Act or
payment of interest on such deposits;
·
Providing security,
if any for the due repayment of the amount of deposit or the interest thereon
including the creation of such charge on the property or assets of the company.[6]
Unsecured Deposits:
Where a company does not secure the
deposits or secures such deposits partially, then, the deposits shall be termed
as ‘‘unsecured deposits’’ and shall be so quoted in every circular, form,
advertisement or in any document related to invitation or acceptance of
deposits.[7]
Repayment of Deposits:
Every deposit accepted by a company
shall be repaid with interest in accordance with the terms and conditions
agreed upon. Where a company fails to repay the deposit or part thereof or any
interest thereon, the depositor concerned may apply to the Tribunal[8] seeking
the company to pay the sum due or for any loss or damage incurred by him as a
result of such non-payment and for such other orders as the Tribunal may deem
fit. [9]
Non – Applicability of Section 73:
Section 73 (1) shall not apply to
a)
a banking company
b)
nonbanking financial company as defined
in the Reserve Bank of India Act, 1934
c)
to such other company as the Central
Government may, after consultation with the Reserve Bank of India, specify in
this behalf.
Acceptance
of Deposits from Public:
Section 76 lays down conditions
precedent for accepting deposits from persons other than its members. Section
76 applies to a Public Company having turnover/net worth as may be prescribed.
The following are the ingredients of Section 76 for acceptance of deposits from
public[10]:
· Procedural Compliance : Compliance of
Section 73(2) and subject to such rules as the Central Government may, in
consultation with the RBI may prescribe.
· Credit rating: In Order to ensure safety of the deposit
holders, Section 76 mandates that the company shall obtain the rating
(including its net worth, liquidity and ability to pay its deposits on due
date) from a recognized credit rating agency. Such rating shall be done in a
periodical basis (every year during the tenure of deposits) and shall be informed to the public.
·
Charge on assets: Every company
accepting secured deposits from the public shall within thirty days of such
acceptance, create a charge on its assets of an amount not less than the amount
of deposits accepted in favour of the deposit holders in accordance with such
rules as may be prescribed.
·
Applicability of Provisions pertaining
to acceptance of deposits prescribed under Chapter V[11]
Deposits Accepted Prior to the
Commencement of this Act:
Section 74 of the Act provides for the
following statutory requirements for deposits accepted prior to the
commencement of the Act:
·
Filing of statement with ROC: The
company is required to file 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.
· Repayment of Deposits: The Company shall
repay the same within one year from such commencement or from the date on which
such payments are due, whichever is earlier.
Grant
of Further time:
The Tribunal may on an application made by the
company, may grant further time for repayment of deposits after considering factors
likethe financial condition of the company, the amount of deposit or part
thereof and the interest payable thereon and such other matters.
Penality for Non – Compliance:
If a company fails to repay the deposit
or part thereof or any interest thereon within the time specified in 74(1) or
(2) as the case may be, the company shall, in addition to the payment of the sum
due, be punishable with fine which shall not be less than one crore rupees but
which may extend to ten crore rupees.
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.
Fraud:
Section 75 in addition to the remedy
available for the aggrieved depositor under Section 74(3) provides additional remedy
in event of fraud committed by the Company/ officers in charge of the Company
in repayment of deposits.
If it is proved that the deposits had
been accepted with intent to defraud the depositors or for any fraudulent
purpose, every officer of the company
who was responsible for the acceptance of such deposit shall be personally
responsible, without any limitation of liability, for all or any of the losses
or damages that may have been incurred by the depositors.
Any suit, proceedings or other action may be
taken by any person, group of persons or any association of persons who had
incurred any loss as a result of the failure of the company to repay the
deposits or part thereof or any interest thereon.
However remedy under this Section is
available without prejudice to the provisions contained in Section 74(3) and section
447 of the Act.
Notifications & Circulars on
Acceptance of Deposits – A Snapshot:
·
Amounts received by private companies
prior to 16t April, 2Ol4 shall not be treated as 'deposits' under the Companies
Act, 2013 and Companies (Acceptance of Deposits) Rules, 2014 subject to the condition
that relevant private company shall disclose, in the notes to its financial
statement for the financial year commencing on or after 1st April,
2014 the figure of such amounts and the accounting head in which such amounts
have been shown in the financial statement.Any renewal or acceptance of fresh
deposits on or after 1st April, 2014 shall, however, be in accordance with the
provisions of Companies Act, 20 13 and rules made thereunder[12]
· A depositor is free to file an
application under section 73(4) of the said Act, with the Company Law Board if
the company fails to make repayment of deposits accepted by it. Further the company
may also file application under section 74(2) of the said Act with the Company
Law Board seeking extension of time in making the repayment of deposits
accepted by it before the commencement of the provisions of the said Act. Also there
is no bar on the Registrar of Companies for filing of prosecution against a
company if such company fails to make repayment of deposits accepted by it
under the provisions of the Companies Act, 1956 or Companies Act, 2013.[13]
SAVITHA G ARUN
SAVITHA G ARUN
[3] Rule 13 of Companies
(Acceptance of Deposits) Rules, 2014
[4] Section 73 (5)
of Companies Act 2013
[5] Rule 5 of Companies
(Acceptance of Deposits) Rules, 2014
[6] Rule 6 of Companies
(Acceptance of Deposits) Rules, 2014
[7] Proviso to
section 73
[8] NCLT is yet to
be constituted
[10]
Section 76(1)
