Acceptance of Deposits by Companies - E-Notes - Udesh Regular - Group 1
Acceptance of Deposits by Companies - E-Notes - Udesh Regular - Group 1
Acceptance of Deposits by Companies - E-Notes - Udesh Regular - Group 1
5 By Companies
CHAPTER
Learning Outcomes
At the end of this chapter, you will be able to:
Understand the meaning of the term ‘Deposit’.
Know the requirements for and restrictions on acceptance of deposits from members and public.
Know about the ‘eligible companies’ which can accept deposits from public in addition to their members.
Know the punishment for contravention of the provisions related to acceptance of deposits by companies.
CHAPTER OVERVIEW
Acceptance of deposits
1. INTRODUCTION
Acceptance of deposits from the members as well as public at large is an important source of finance for the corporate
sector. It is, therefore, necessary to control the companies which invite deposits in order to safeguard the general and
wider interest of all those persons who offer deposits out of their precious savings. The statutory provisions as contained
in sections 73 to 76A of the Companies Act, 2013 (hereinafter referred to as ‘the Act’) and the Companies (Acceptance of
Deposits) Rules, 2014 (hereinafter referred to as ‘the Rules’) govern the acceptance of deposits and also renewal thereof.
Types of Deposits
Secured deposits
Unsecured deposits
(secured by creating charge
(no security available)
on tangible assets)
C. Depositor
Definition:
As per Rule 2 (1) (d), the term ‘Depositor’ means:
(i) any member of the company who has made a deposit with the company in accordance with the provisions of sub-
section (2) of section 73 of the Act, or
(ii) any person who has made a deposit with a public company in accordance with the provisions of section 76 of the
Act.
In other words:
• any member of a private or public company who has deposited money with his company is a ‘depositor’.
• any person (even if not a member of the company) who has deposited money with a public company is also a ‘depositor’.
D. Eligible Company
Definition:
As per Rule 2 (1) (e) the term “eligible company” means a public company as referred to in section 76 (1), having a net
worth of not less than one hundred crore rupees or a turnover of not less than five hundred crore rupees and which has
obtained the prior consent 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:
However, an eligible company, which is accepting deposits within the limits specified under section 180 (1) (c), may accept
deposits by means of an ordinary resolution.
A public company is ‘eligible’ to accept deposits from the public at large only if it meets the above-mentioned criteria.
Accordingly,
2 The
words ‘Real Estate Investment Trusts’ have been inserted vide the Companies (Acceptance of Deposits) Amendment Rules,
2019 w.e.f. 22-01-2019.
B. Exempted Companies
Extract of Act:
According to the Section 73 (1), on and after the commencement of this Act, no company shall invite, accept or renew
deposits under this Act from the public except in a manner provided under this Chapter:
Provided that nothing in this sub-section shall apply to a banking company and non-banking financial company as defined
in the Reserve Bank of India Act, 1934 and to such other company as the Central Government may, after consultation with
the Reserve Bank of India, specify in this behalf.
This brings out the fact that ‘deposit provisions’ as contained in the Companies Act, 2013 are meant to regulate acceptance
of deposits by non-banking non-financial companies (i.e. manufacturing, trading companies, etc.) only.
in the repayment of deposits accepted either before or after the commencement of this Act or payment of interest
on such deposits.
In case a default had occurred, the company made good the default and a period of five years had lapsed since the date
of making good the default. [Section 73 (2) (e)]
(6) Provision of Security: The company may provide security, if any, for the due repayment of the amount of deposit
or the interest thereon. Further, if security is provided, the company shall take steps for the creation of charge on the
property or assets of the company.
It may be noted that in case a company does not secure the deposits or secures such deposits partially, then, the deposits
shall be termed as ‘‘unsecured deposits’’. Accordingly, it shall be so quoted in every circular, form, advertisement or in
any document related to invitation or acceptance of deposits. [Section 73 (2) (f)]
Exemption to certain private companies4:
Clauses (a) to (c) and (e) of sub-section (2) of section 73 with respect to issue of circular, filing the copy of such circular
with the Registrar, depositing of certain amount and certification as to no default committed, shall not apply to a
private company:
(A) which accepts from its members monies not exceeding one hundred per cent. of aggregate of the paid-up share
capital, free reserves and securities premium account; or
(B) which is a start-up, for five years from the date of its incorporation; or
(C) which fulfils all of the following conditions, namely:
(a) which is not an associate or a subsidiary company of any other company;
(b) if the borrowings of such a company from banks or financial institutions or any body corporate is less than
twice of its paid-up share capital or fifty crore rupees, whichever is lower; and
(c) such a company has not defaulted in the repayment of such borrowings subsisting at the time of accepting
deposits under this section.
However, such a company [as referred to in clauses (A), (B) or (C)] shall file the details of monies accepted to the
Registrar in the specified manner (i.e. in Form DPT-3).
(7) Repayment of deposit: Every deposit accepted by a company shall be repaid with interest in accordance with the
terms and conditions of the agreement. [Section 73 (3)]
3 Clause
(d) relating to ‘deposit insurance’ has been omitted vide the Companies (Amendment) Act, 2017 w.e.f. 15th August, 2018.
4 In
terms of Notification No. GSR 464 (E), dated 05-06-2015 as amended from time to time. Further, in terms of Notification
No. GSR 8(E), dated 04-01-2017, clauses (a) to (e) of section 73 (2) shall not apply to a Specified IFSC public company which
accepts from its members, monies not exceeding 100% of aggregate of the paid-up share capital and free reserves, and such
company shall file the details of monies so accepted with the Registrar in such manner as may be specified (i.e. in Form DPT-3).
India or the Securities and Exchange Board of India or the Insurance Regulatory and Development Authority of India from the
International Financial Services Centre located in an approved multi services Special Economic Zone set-up under the Special
Economic Zones Act 2005 read with the Special Economic Zones Rules, 2006.
8 As per Rule 3 (6).
28 As per Rule 4.
29 As per Rule 3 (6).
30 As per Rule 10.
SUMMARY
• D eposit 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 prescribed in consultation with RBI.
• Depositor means any member of the company or any other person (not being a member of the company) who has
made a deposit.
• ‘Eligible company’ is the one which can accept deposits both from the public and its members.
• Section 73 prohibits a company to invite, accept or renew deposits from public if they are not accepted or renewed in
the prescribed manner. This prohibition however shall not apply in case of certain exempted companies i.e.:
banking company;
non-banking financial company;
a housing finance company registered with NHB;
such other company as the Central Government may specify.
• If a company fails to repay the deposit or part thereof or any interest thereon, the depositor concerned may apply to the
Tribunal for an order directing 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.
• The deposit repayment reserve account shall not be used by the company for any purpose other than repayment of
deposits.
• In case of secured deposits, the company is required to create security of equivalent amount by way of charge on its
tangible assets.
• A company shall not issue any circular or advertisement for inviting secured deposits unless it appoints one or more
trustees.
• Every company accepting deposits shall maintain at its registered office one or more separate registers for deposits
accepted or renewed.
• A public company shall disclose in its financial statements by way of note about the money received from its directors.
• A private company shall disclose in its financial statements by way of notes, about the money received from the
directors, or relatives of directors.
• Every company shall pay a penal rate of interest of 18% p.a. for the overdue period in case of default in repayment.
• The Return of Deposits shall be filed in Form DPT-3 with the Registrar.
• In case of default in repayment, a company is punishable with fine and every officer-in-default shall be punishable with
imprisonment and also fine. In case of willful default committed with the intention to deceive various stakeholders, he
shall be liable for action under section 447.
Ans. Acceptance of deposit from public: Relevant Provisions: According to section 76 of the Companies Act, 2013, a
public company, having net worth of not less than 100 crore rupees or turnover of not less than 500 crore rupees,
can accept deposits from persons other than its members subject to compliance with the requirements provided
in sub-section (2) of section 73 and subject to such rules as the Central Government may, in consultation with the
Reserve Bank of India, prescribe.
Provided that such a company shall be required to obtain the rating (including its net-worth, liquidity and ability to
pay its deposits on due date) from a recognised credit rating agency for informing the public the rating given to the
company at the time of invitation of deposits from the public which ensures adequate safety and the rating shall be
obtained for every year during the tenure of deposits.
Provided further that 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.
Conclusion: Since, Ashish Ltd. has a net worth of `80 crores and turnover of `30 crores, which is less than the
prescribed limits, hence, it cannot accept deposit from public other than its membe`If the company wants to accept
deposits from public other than its members, it has to fulfill the eligibility criteria of net worth or Turnover or both
and then the other conditions as stated above.
Crux: Conditions to accept deposit from public (sec 76) - NW not < 100 cr or T/O not < 500 cr, obtain credit rating
before invitation, within 30 days of acceptance, create charge of amount not < deposit.
Ans. (i) Relevant Provisions: As per the provisions of Section 73(2) of the Companies Act, 2013 read with Rule 3 of
the Companies (Acceptance of Deposits) Rules, 2014, as amended by the Companies (Acceptance of Deposits)
Amendment Rules, 2016, a company shall accept any deposit from its members, together with the amount of
other deposits outstanding as on the date of acceptance of such deposits not exceeding 35% of the aggregate
of the Paid-up share capital, free Reserves and securities premium account of the company.
Provided that a private company may accept from its members monies not exceeding one hundred per cent of
aggregate of the paid up share capital, free reserves and securities premium account and such company shall
file the details of monies so accepted to the Registrar in such manner as may be specified.
Conclusion: Therefore, the given statement of eligibility of XYZ Private Ltd. to accept deposits from its members
to the extent of `60.00 lakh is True.
(ii) Relevant Provision: A Government company is not eligible to accept or renew deposits under section 76, if the
amount of such deposits together with the amount of other deposits outstanding as on the date of acceptance
or renewal exceeds thirty five per cent of the aggregate of its Paid-up share capital, free Reserves and securities
premium account of the company.
3. Vrinda Limited is a company manufacturing orange and strawberry candies for kids. Now, the company wants to
expand its business and start the manufacturing of 10 more types of candies. The company has raised `1 crore
through the issue of non-convertible debentures not constituting a charge on the assets of the company and listed on
a recognised stock exchange as per the applicable regulations made by the Securities and Exchange Board of India.
Advise, whether the above amount of `1 crore will be considered as deposit? [May-18/May-17 -Old]
Ans. Relevant Provisions: As per sub-clause (ix (a)) of Rule 2 (1) (c) of the Companies (Acceptance of Deposit) Rules,
2014, any amount raised by issue of non-convertible debentures not constituting a charge on the assets of the company
and listed on recognised stock exchange as per the applicable regulations made by the Securities and Exchange Board
of India, are not considered as deposit.
Conclusion: `1 crore raised by Vrinda Limited will not be considered as deposit in terms of sub-clause (ix(a)) of
Rule 2 (1) (c).
Crux: Non-convertible debentures not to be considered as deposit if unsecured + listed
4. Enumerate the amounts which when received by a company in the ordinary course of business are not to be considered
as deposits. [ICAI Module]
Ans. According to Rule 2 (1) (c) (xii), following amounts if received by a company in the course of, or for the purposes of,
the business of the company, shall not be considered as deposits:
(a) any amount received as an advance for the supply of goods or provision of services accounted for in any manner
whatsoever to be appropriated within a period of 365 days from date of acceptance of such advance: However,
in case any advance is subject matter of any legal proceedings before any court of law, the time limit of three
hundred and sixty-five days shall not apply.
(b) any amount received as advance in connection with consideration for an immovable property under an agreement
or arrangement.
However, such advance is required to be adjusted against such property in accordance with the terms of agreement
or arrangement;
(c) any amount received as security deposit for the performance of the contract for supply of goods or provision of
services;
(d) any amount received as advance under long term projects for supply of capital goods except those covered under
item (b) above;
(e) any amount received as an advance towards consideration for providing future services in the form of a warranty
or maintenance contract as per written agreement or arrangement, if the period for providing such services does
not exceed the period prevalent as per common business practice or five years, from the date of acceptance of
such service whichever is less;
(f) any amount received as an advance and as allowed by any sectoral regulator or in accordance with directions
of Central or State Government;
(g) any amount received as an advance for subscription towards publication, whether in print or in electronic to be
adjusted against receipt of such publications;
However, if the amount received under items (a), (b) and (d) above becomes refundable (with or without interest)
due to the reasons that the company accepting the money does not have necessary permission or approval, wherever
required, to deal in the goods or properties or services for which the money is taken, then the amount received shall
be deemed to be a deposit under these rules.
5. State the procedure to be followed by companies for acceptance of deposits from its members according to the
Companies Act, 2013. What are the exemptions available to a private limited company? [ICAI Module, Nov 2018]
Ans. Acceptance of deposits by a company from its members: As per section 73 (2) of the Companies Act, 2013, a
company may, subject to the passing of a resolution in general meeting and subject to such rules as may be prescribed
in consultation with the Reserve Bank of India, accept deposits from its members on such terms and conditions,
including the provision of security, if any, or for the repayment of such deposits with interest, as may be agreed upon
between the company and its members, subject to the fulfilment of the following conditions, namely:
(a) Issuance of a circular to its members including therein a statement showing the financial position of the company,
the credit rating obtained, the total number of depositors and the amount due towards deposits in respect of
any previous deposits accepted by the company and such other particulars in such form and in such manner as
may be prescribed;
(b) Filing a copy of the circular along with such statement with the Registrar within 30 days before the date of issue
of the circular;
(c) Depositing, on or before the 30th day of April each year, such sum which shall not be less than twenty per cent of
the amount of its deposits maturing during the following financial year and kept in a scheduled bank in a separate
bank account to be called deposit repayment reserve account;
(d) Omitted
(e) 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 and where a default had occurred,
the company made good the default and a period of five years had lapsed since the date of making good the
default; and
(f) 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.
Every deposit accepted by a company shall be repaid with interest in accordance with the terms and conditions of
the agreement. Where a company fails to repay the deposit or part thereof or any interest thereon, the depositor
concerned may apply to the Tribunal for an order directing 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.
Exemption to certain private companies: Clauses (a) to (c) and (e) of sub-section (2) of section 73 with respect
to issue of circular, filing the copy of such circular with the Registrar, depositing of certain amount and certification
as to no default committed, shall not apply to a private company:
(A) which accepts from its members monies not exceeding one hundred per cent of aggregate of the paid-up share
capital, free reserves and securities premium account; or
(B) which is a start-up, for five years from the date of its incorporation; or
(C) which fulfills all of the following conditions, namely:
(a) which is not an associate or a subsidiary company of any other company;
(b) if the borrowings of such a company from banks or financial institutions or any body corporate is less than
twice of its paid-up share capital or fifty crore rupees, whichever is lower; and
(c) such a company has not defaulted in the repayment of such borrowings subsisting at the time of accepting
deposits under this section.
However, such a company [as referred to in clauses (A), (B) or (C)] shall file the details of monies accepted to the
Registrar in the specified manner (i.e., in Form DPT-3).
6. Explain the provisions for 'Appointment of Trustee for Depositors' under the Companies Act, 2013 read with the
‘Acceptance of Deposits’ Rules, 2014. [ICAI Module, May 2018]
Ans. Appointment of Trustee for Depositors: In this respect following provisions are required to be observed as
mentioned in Rule 7 of the Companies (Acceptance of Deposits) Rules, 2014:
• One or more trustees for depositors need to be appointed by the company for creating security for deposits.
• A written consent shall be obtained from the trustees before their appointment.
7. What are the provisions relating to ‘Credit Rating’ which an ‘eligible company’ must follow if it wants to raise public
deposits? [ICAI Module]
Ans. The provisions relating to obtaining of ‘Credit Rating’ to be followed by an ‘eligible company’ are contained in Section
76 (1) of the Companies Act, 2013 and Rule 3 (8) of the Companies (Acceptance of Deposits) Rules, 2014 as amended
from time to time.
Accordingly, an ‘eligible company’ which desires to raise public deposits shall be required to obtain the rating (including
its net-worth, liquidity and ability to pay its deposits on due date) from a recognised credit rating agency. The given
rating which ensures adequate safety shall be informed to the public at the time of invitation of deposits from the
public. Further, the rating shall be obtained every year during the tenure of deposits.
As per Rule 3 (8), copy of the credit rating which is being obtained at least once in a year shall be sent to the Registrar
of Companies along with the Return of Deposits in Form DPT-3.
Further, the credit rating shall not be below the minimum investment grade rating or other specified credit rating for
fixed deposits. It shall be obtained from any one of the approved credit rating agencies as specified for Non- Banking
Financial Companies in the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank)
Directions, 1998, as amended from time to time.
8. Discuss the following situations in the light of ‘deposit provisions’ as contained in the Companies Act, 2013 and the
Companies (Acceptance of Deposits) Rules, 2014, as amended from time to time.
(i) Samit, one of the directors of Zarr Technology Private Limited, a start-up company, requested his close friend
Ritesh to lend to the company `30.00 lacs in a single tranche by way of a convertible note repayable within a
period six years from the date of its issue. Advise whether it is a deposit or not.
(ii) Polestar Traders Limited received a loan of `30.00 lacs from Rachna who is one of its directo`Advise whether
it is a deposit or not.
(iii) City Bakers Limited failed to repay deposits of `50.00 crores and interest due thereon even after the extended
time granted by the Tribunal. Is the company or Swati, its officer-in-default, liable to any penalty?
(iv) Shringaar Readymade Garments Limited wants to accept deposits of `50.00 lacs from its members for a tenure
which is less than six months. Is it a possibility?
(v) Is it in order for the Diamond Housing Finance Limited to accept and renew deposits from the public from time
to time? [ICAI Module, MTP May 20, Dec 2021]
Ans. (i) In terms of Rule 2 (1) (c) (xvii) if a start-up company receives rupees twenty-five lakh or more by way of a
convertible note (convertible into equity shares or repayable within a period not exceeding ten years from the
date of issue) in a single tranche, from a person, it shall not be treated as deposit.
In the given case, Zarr Technology Private Limited, a start-up company, received `30 lacs from Ritesh in a single
Ans. Relevant Provisions: According to section 76 (1) of the Act, an “eligible company” means a public company, having
a net worth of not less than one hundred crore rupees or a turnover of not less than five hundred crore rupees 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.
However, an ‘eligible company’, which is accepting deposits within the limits specified under section 180 (1) (c), may
accept deposits by means of an ordinary resolution.
According to Rule 4 (a), an ‘eligible company’ shall accept or renew any deposit from its members, if the amount
of such deposit together with the amount of deposits outstanding as on the date of acceptance or renewal of such
deposits from members does not exceed ten per cent. of the aggregate of the paid-up share capital, free reserves and
securities premium account of the company.
ABC Limited is having a net worth of 120 crore rupees. Hence, it falls in the category of ‘eligible company’. Thus, ABC
Limited has to ensure that acceptance of deposits from its members together with the amount of deposits outstanding
as on the date of acceptance or renewal of such deposits from the members, in no case, exceeds 10% of the aggregate
of the paid-up share capital, free reserves and securities premium account of the company.
10. Define the term 'deposit' under provisions of the Companies Act, 2013 and comment quoting relevant provisions
whether the following amounts received by a company will be considered as deposits or not:
(i) `5,00,000 raised by Rishi Confectionaries Limited through issue of non-convertible debentures not constituting
a charge on the assets of the company and listed on a recognised stock exchange as per the applicable regulations
made by the Securities and Exchange Board of India.
(ii) `2,00,000 received by Raja Yarns Limited from its employee Mr. T, who draws an annual salary of `1,50,000, as
a non-interest bearing security deposit under a contract of employment.
(iii) `3,00,000 received by a private company from one of the relatives of a Director. The said relative has furnished
a declaration that the amount was received by him from his mother as a gift. [ICAI Module, Nov 19]
Ans. Deposit: According to Section 2 (31) of the Companies Act, 2013, the term ‘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.
Rule 2 (1) (c) of the Companies (Acceptance of Deposit) Rules, 2014 states various amounts received by a company
which will not be considered as deposits. In terms of this Rule the answers to the given situations shall be as under:
(i) `5,00,000 raised by Rishi Confectionaries Limited through issue of non-convertible debentures not constituting
a charge on the assets of the company and listed on recognised stock exchange as per the applicable regulations
made by the SEBI, will not be considered as deposit in terms of sub-clause (ixa) of Rule 2 (1) (c).
(ii) `2,00,000 received by Raja Yarns Limited from its employee Mr. T, who draws an annual salary of `1,50,000, as
a non-interest bearing security deposit under a contract of employment will be considered as deposit in terms
of sub-clause (x) of Rule 2 (1) (c), for the amount received is more than his annual salary of `1,50,000.
(iii) `3,00,000 received by a private company from one of the relatives of a Director. When the relative furnishes a
declaration that the said amount was received by him from his mother as a gift, then it will not be considered
as deposit in terms of sub-clause (viii) of Rule 2 (1) (c).
In fact, the preceding sub-clause requires that any amount given by a relative of a director of a private company
shall not be considered as deposit if the relative furnishes a declaration in writing to the effect that the amount
is not being given out of funds acquired by him by borrowing or accepting loans or deposits from others.
Thus, the amount given to the private company out of gifted money by one of the relatives of a director is not
a ‘deposit’. As an additional requirement, the company shall disclose details of money so accepted in Board’s
report.
11. The Promoters of Green Limited contributed in the form of unsecured loan to the company in fulfilment of the margin
money requirements stipulated by State Industries Development Corporation Ltd. (SIDCL) for granting loan. In the
light of the provisions of the Companies Act, 2013 and Rules made thereunder whether the unsecured loan will be
regarded as Deposit or not? [MTP March 2022, July 2021]
160 Corporate and Other Laws P
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Ans. According to Rule 2 (1) (c) of the Companies (Acceptance of Deposits) Rules, 2014, the following amount is not
considered as deposit:
Any amount brought in by the promoters of the company by way of unsecured loan in pursuance of the stipulation
of any lending financial institution or a bank subject to the fulfilment of following conditions:
(a) The loan is brought because of the stipulation imposed by the lending institutions on the promoters to contribute
such finance;
(b) The loan is provided by the promoters themselves or by their relatives or by both; and
(c) such exemption shall be available only till the loans of financial institution or bank are repaid and not thereafter.
Hence, in the instant case, the unsecured loan contributed by promoters of Green Limited will not be regarded as deposit
as the unsecured loan is brought because of the stipulation imposed by the SIDCL and the loan is provided by the
promoters themselves.
12. Viki Limited engaged in the business of consumer durables. It is managed by a team of professional manage. The
Company has not made default in payment of statutory dues, and repayment of debenture/Institutional loan with
interest. The Company advertised a circular in the newspaper dated 20th September 2020 inviting the deposits from
the members and public for the first time.
The latest audited financial statement of the Company revealed the following data, as on 31.3.2020:
Paid up share capital `70 Crores
Securities Premium `20 Crores
Free Reserves `20 Crores
Long-term borrowings `50 Crores
The Company in the advertisement invited public deposit for a period of 4 Months Plan A & Plan B for 36 Months.
(i) Explain the term 'eligible company' and calculate the Maximum amount of Deposit that can be accepted from
Public (Non-Member) for Plan A and Plan B based on latest audited Financial Statement under the provisions
of the Companies Act, 2013.
(ii) Calculate the maximum amount of deposit Viki Limited can accept from the public under Plan B in case it is a
wholly owned Government Company under the provisions of the said Act. [Nov. 2020]
Ans. (i) According to Rule 2(1)(e) of the Companies (Acceptance of Deposits) Rules, 2014 "eligible company" means a
public company as referred to in sub-section (1) of section 76 of the Companies Act, 2013, having a net worth
of not less than one hundred crore rupees or a turnover of not less than five hundred crore rupees 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.
Net worth of Viki Limited as per section 2(57) of the Companies Act, 2013 can be calculated as follows:
Paid up share capital: `70 crores
Free Reserves: `20 crores
Securities premium: `20 crores
Total: `110 crores
Hence, Viki Limited is an eligible company, since its Net worth is in excess of `100 crores.
Tenure for which Deposits can be Accepted: As per Rule 3(1)(a) of the Companies (Acceptance of Deposits)
Rules, 2014, a company is not permitted to accept or renew deposits (whether secured or unsecured) which is
repayable on demand or in less than six months. Further, the maximum period of acceptance of deposit cannot
exceed thirty six months.
Exception to the rule of tenure of six months: As per the proviso to the above rule, for the purpose of meeting
any of its short-term requirements of funds, a company may accept or renew deposits for repayment earlier
than six months subject to the condition that such deposits shall not exceed ten per cent. of the aggregate of the
paid-up share capital, free reserves and securities premium account of the company. As per Rule 3(1)(b) of the
Companies (Acceptance of Deposits) Rules, 2014, such deposits are repayable not earlier than three months
from the date of such deposits or renewal thereof.
Maximum Amount of Deposits: As per Rule 3(4)(b) of the Companies (Acceptance of Deposits) Rules, 2014,
an eligible company is permitted to accept or renew deposits from persons other than its members. As per the
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law the amount of such deposit together with the amount of outstanding deposits (excluding deposits from
members) on the date of acceptance or renewal can be maximum twenty-five per cent. of the aggregate of its
paid-up share capital, free reserves and securities premium account of the company.
For Plan A: Since the maximum period of deposits is 4 months, the maximum amount of deposits shall not
exceed ten per cent. of the aggregate of the paid-up share capital, free reserves and securities premium account
of the company. Maximum amount of deposits: 10% of 110 crores (70 + 20 + 20) = 11 crores.
For Plan B: Maximum amount of deposits: 25% of 110 crores (70 + 20 + 20) = 11 crores (outstanding deposit
under plan A) = 16.5 crores.
(ii) In terms of Rule 3(5) of the Companies (Acceptance of Deposits) Rules, 2014, in case Viki Limited is a wholly
owned Government Company, so it can accept deposit together with the amount of other outstanding deposits
as on the date of acceptance or renewal maximum up to thirty-five per cent. of the aggregate of its paid-up share
capital, free reserves and securities premium account. For Plan B: Maximum amount of deposits: 35% of 110
crores (70 + 20 + 20) = 38.5 crores.
13. RS Ltd. received share application money of `50 Lakh on 01.06.2019 but failed to allot shares within the prescribed
time limit. The share application money of `5 Lakh received from Mr. Khanna, a customer of the Company, was
refunded by way of book adjustment towards the dues payable by him to the company on 30.07.2019. The Company
Secretary of RS Ltd. reported to the Board that the entire amount of `50 Lakh shall be deemed to be 'Deposits' as
on 31.07.2019 and the Company is required to comply with the provisions of the Companies Act, 2013 applicable
to acceptance of deposits in relation to this amount. You are required to examine the validity of the reporting of the
Company Secretary in the light of the relevant provisions of the Companies Act, 2013. [Jan. 2021]
Ans. According to Rule 2(1)(c) of the Companies (Acceptance of Deposits) Rules, 2014, the following category of receipt
is not considered as deposit:
Any amount received and held pursuant to an offer made in accordance with the provisions of the Companies Act,
2013 towards subscription to any securities, including share application money or advance towards allotment of
securities, pending allotment, so long as such amount is appropriated only against the amount due on allotment of
the securities applied for;
It is clarified by way of Explanation that if the securities for which application money or advance for such securities
was received cannot be allotted within 60 days from the date of receipt of the application money or advance for such
securities and such application money or advance is not refunded to the subscribers within 15 days from the date
of completion of 60 days, such amount shall be treated as a deposit under these rules.
Further, it is clarified that any adjustment of the amount for any other purpose shall not be treated as refund.
In the given question, RS Limited has received `50 Lakhs as share application money on 01.06.2019. It failed to allot
shares within the prescribed limit. Further, on 30.07.2019 the company adjusted the amount of `5 Lakhs received
from Mr. Khanna (a customer of the company), by way of book adjustment towards the dues payable by him to the
company.
In the light of the facts of the question and provisions of Law:
1. If such application money or advance is not refunded to the subscribers within 15 days from the date of completion
of 60 days, such amount shall be treated as a deposit.
In
the question, the prescribed limit of 60 days will end on 31.07.2019 and the company has 15 more days
to refund such application money to the subscribe`Otherwise, after lapse of such 15 days, the amount not so
refunded will be treated as deposit.
Hence, the Company Secretary of RS Limited is not correct in treating the entire amount of `50 Lac as ‘Deposits’
on 31.07.2019.
2. Any adjustment of the amount for any other purpose shall not be treated as refund. Thus, the amount of `5 Lakhs
adjusted against payment due to be received from Mr. Khanna, cannot be treated as refund.
qqq