CHAPTER 5

ACCEPTANCE OF
DEPOSITS BY
COMPANIES

LEARNING OUTCOMES
At the end of this chapter, you will be able to:

♦ Explain the meaning of the term ‘Deposit’.

♦ Comprehend the requirements for and restrictions on
acceptance of deposits from members and public.
♦ Grasp the concept of ‘eligible companies’ which can accept
deposits from public in addition to their members.
♦ Identify the punishment for contravention of the provisions
relating to acceptance of deposits by companies.

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 5.2 CORPORATE AND OTHER LAWS

♦
CHAPTER OVERVIEW

Acceptance of Deposits

Acceptance of
Prohibition on Repayment of Punishment for
deposits from
acceptance deposits contravention
public
[Sec. 73] [Sec. 74] [Sec. 76A]
[Sec. 76]

1. INTRODUCTION
Chapter V Consists of sections 73 to 76A as well as the Companies
(Acceptance of Deposits) Rules, 2014.

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.

2. CERTAIN IMPORTANT TERMS EXPLAINED

A. DEPOSIT

Definition: According to section 2 (31) of the Act, 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.

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 ACCEPTANCE OF DEPOSITS BY COMPANIES 5.3
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Features:

(i) The above definition of ‘deposit’ is inclusive one.

(ii) It includes any money received by way of:

a) deposit; or
b) loan; or
c) in any other form.

(iii) Repayment of ‘deposit’ is time-bound.

(iv) It can be secured or unsecured.

(v) It does not include prescribed categories of

amounts (as stated in the ‘Acceptance of Deposits’
Rules).

(vi) It may be accepted in joint names not exceeding

three persons.

(vii) A depositor may nominate any person at any

time.

(viii) Every deposit accepted by the company shall be

repaid with interest.

(ix) Premature repayment of a deposit can be made by

the company.

(x) A private company can accept deposits from its

members only.

(xi) A public company can accept deposits from its

members and also from the public if it fulfills certain
parameters.

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 5.4 CORPORATE AND OTHER LAWS

Types of Deposits

Unsecured
Secured deposits
deposits
(fully secured by
(partial or no
creating charge on
security made
tangible assets)
available)

B. AMOUNTS NOT CONSIDERED AS DEPOSIT

Following categories of amounts are not considered as deposit [Rule 2 (1) (c)]:
(i) Any amount received from:
• the Central Government; or
• a state Government; or
• any other source whose repayment is guaranteed by the Central
Government or a State Government; or
• local authority; or
• a 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 (including, but not limited to,
International Finance Corporation, Asian Development Bank,
Commonwealth Development Corporation, and International Bank for
Industrial and Financial Reconstruction),
• foreign Governments owned development financial institutions,
• foreign export credit agencies,
• foreign collaborators,
• foreign bodies corporate and foreign citizens,

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 ACCEPTANCE OF DEPOSITS BY COMPANIES 5.5
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• foreign authorities or persons resident outside India;

The receipt of funds shall be subject to the provisions of Foreign Exchange
Management Act, 1999 and rules and regulations made thereunder;
(iii) Any amount received as a loan or facility from:
• any banking company, or
• State Bank of India or its subsidiary banks, or
• a notified banking institution, or
• a corresponding new bank (as defined in the Banking Companies
(Acquisition and Transfer of Undertakings) Acts of 1970 and 1980), or
• any co-operative bank;
(iv) Any amount received as a loan or financial assistance from:
• 1
Public Financial Institutions, or
• any regional financial institutions, or
• Insurance companies, or
• Scheduled banks (as defined in Reserve bank of India Act, 1934;
(v) Any amount received against issue of commercial paper or any other
instruments issued in accordance with the guidelines or notification issued by
the Reserve Bank of India;
(vi) Any amount received by a company from any other company [Mainly known as
Inter Company Deposit (ICD)];
(vii) Any amount received and held 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;

Notes:
(a) It is clarified by way of Explanation that if the securities for which
application money or advance for such securities was received cannot be

1
Such PFI’s as notified by the Central Government in this behalf in consultation with the Reserve
Bank of India.

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 5.6 CORPORATE AND OTHER LAWS

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.
(b) Further, it is clarified that any adjustment of the amount for any other
purpose shall not be treated as refund.

(viii) Any amount received from a person who, at the time of the receipt of the
amount, was a director of the company or a relative of the director of the
private company;
However, the director of the company or relative of the director of the private
company, as the case may be, from whom money is received, is required to furnish
to the company at the time of giving the money, 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 and the company shall
disclose the details of money so accepted in the Board's report;
(ix) Any amount raised by the issue of:
• bonds or debentures secured by a first charge or a charge ranking pari
passu with the first charge on any assets referred to in Schedule III 2 of the
Companies Act, 2013 excluding intangible assets of the company, or
• bonds or debentures compulsorily convertible into shares of the company
within 10 years;
However, if such bonds or debentures are secured by the charge of any assets
referred to in Schedule III of the Companies Act, 2013, excluding intangible
assets, the amount of such bonds or debentures shall not exceed the market
value of such assets as assessed by a registered valuer.
(ixa) Any amount raised by issue of non-convertible debenture not constituting a
charge on the assets of the company and listed on a recognised stock exchange
as per applicable regulations made by Securities and Exchange Board of India;
Example 1: Soorya Ltd. has raised ` 20,00,000 through issue of non-convertible
debentures (20,000 NCDs of ` 100 each) not constituting a charge on the assets

2
Schedule III contains format of Balance Sheet.

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 ACCEPTANCE OF DEPOSITS BY COMPANIES 5.7
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of the company. The NCDs are listed on a recognised stock exchange as per
applicable regulations made by Securities and Exchange Board of India. The
said amount will not be considered as deposit in terms of the rule stated above
[Sub-clause (ixa)]
(x) any amount received from an employee of the company not exceeding his
annual salary under a contract of employment with the company in the nature
of non-interest bearing security deposit;
Example 2: Ratnakar was appointed as Supervisor by Siddhi Transporters and
Logistics Limited on an annual salary of ` 6,00,000. He was required to deposit
a sum of ` 6,50,000 under the contract of employment with the company as
security deposit on which no interest was payable to him.
In the above case, the amount so received by Siddhi Transporters and Logistics
Limited from Ratnakar under the contract of employment with the company
being non-interest bearing security deposit, will be considered as deposit in
terms of sub-clause (x), since the amount is more than his annual salary. Had
the amount of non-interest bearing security deposit received by the company
under the contract of employment been limited to ` 6,00,000 or less, it would
not have been considered as deposit.
(xi) Any non-interest bearing amount received and held in trust;
(xii) 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 three hundred
and sixty-five days from the date of acceptance of such advance:
However, 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.
(b) as advance, accounted for in any manner whatsoever, received in
connection with consideration for an immovable property under an
agreement or arrangement, provided that such advance is
adjusted against such property in accordance with the terms of
agreement or arrangement;

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 5.8 CORPORATE AND OTHER LAWS

(c) as security deposit for the performance of the contract for supply of
goods or provision of services;
(d) as advance received under long term projects for supply of capital goods
except those covered under item (b) above;
(e) 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) as an advance received and as allowed by any sectoral regulator or in
accordance with directions of Central or State Government;
(g) as an advance for subscription towards publication, whether in print or in
electronic to be adjusted against receipt of such publications;
However, it is clarified that 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.
Further, by way of Explanation it is clarified that for the purposes of this sub-
clause the amount shall be deemed to be deposits on the expiry of fifteen
days from the date they become due for refund.
(xiii) 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 fulfillment 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.

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(xiv) any amount accepted by a Nidhi company in accordance with the rules made
under section 406 of the Act;
(xv) any amount received by way of subscription in respect of a chit under the Chit
Fund Act, 1982;
(xvi) any amount received by the company under any collective investment scheme
in compliance with regulations framed by the Securities and Exchange Board of
India;
(xvii) an amount of twenty-five lakh rupees or more received by a start-up
company, 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;
By way of Explanation it is clarified that:

1. ‘‘Start-up company” means a private company incorporated under the

Companies Act, 2013 or Companies Act, 1956 and recognised as such in
accordance with Notification Number G.S.R. 127 (E), dated 19-02-2019
issued by the Department for Promotion of Industry and Internal Trade ;
2. ‘‘Convertible note” means an instrument evidencing receipt of money
initially as a debt, which is repayable at the option of the holder, or which
is convertible into such number of equity shares of the start-up company
upon occurrence of specified events and as per the other terms and
conditions agreed to and indicated in the instrument.
Example 3: Greedwood limited (‘the company) which is register as start-up
company register under Companies Act, 2013 has received an amount of
` 20 lakh and ` 10 lakh on different date by way of a convertible note. Though
the company has received an amount of twenty-five lakh rupees or more, the
said amount will be considered as deposit since the aggregate amount has not
received in single tranche in terms of the rule stated above Sub-clause (xvii)].

(xviii) any amount received by a company from Alternate Investment Funds, Domestic
Venture Capital Funds, Infrastructure Investment Trusts, Real Estate Investment

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 5.10 CORPORATE AND OTHER LAWS

Trusts 3 and Mutual Funds registered with the Securities and Exchange Board of
India in accordance with regulations made by it.

Note: Clarification regarding amounts received by private companies from their

members, directors or their relatives before 1st April, 2014 – whether to be
considered as deposits or not under the Companies Act, 2013 (General Circular No.
5/2015, dated 30-03-2015)

It is clarified that such amounts received by private companies prior to 1st April, 2014
shall not be treated as ‘deposits’ subject to the condition that relevant private
company shall disclose in the notes to its financial statement the figure of such
amounts and the accounting head in which such amounts have been shown.

However, any renewal or acceptance of fresh deposits on or after 1st April, 2014 shall
be in accordance with the Companies Act, 2013 and the rules made thereunder.

C. DEPOSITOR
Definition:
As per Rule 2 (1) (d) of the Companies (Acceptance of Deposits) Rules, 2014, 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’.

3
The words ‘Real Estate Investment Trusts’ have been inserted vide the Companies (Acceptance
of Deposits) Amendment Rules, 2019 w.e.f. 22-01-2019.

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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,

(a) It should a public company.

(b) It should have net worth of minimum ` 100 Crore or a turnover of

minimum ` 500 Crore.

(c) It has obtained the prior consent by means of a special resolution

passed in the general meeting.

(d) The special resolution has been filed with the Registrar of Companies .

(e) An ordinary resolution is sufficient if an eligible company is accepting deposits

within the limits specified under section 180(1)(c).

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3. PROHIBITIVE PROVISIONS AND EXEMPTED

COMPANIES
A. Prohibitive Provisions
According to section 73 (1) of the Act, no company can accept or renew deposits
from public unless it follows the manner provided under Chapter V of the Act for
acceptance or renewal of deposits from public. Manner of acceptance of deposits
from public is explained later in the Chapter.
B. Exempted Companies
According to 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.
Besides above exempted companies, Rule 1 (3) also states that ‘Deposit Rules’ shall
not apply to any Housing Finance Company registered with National Housing Bank
established under the National Housing Bank Act, 1987.
In nutshell, following are the exempted companies to which ‘deposit provisions’ are
not applicable:
(i) any banking company;
(ii) any Non-banking Financial Company (NBFC);
(iii) any Housing Finance Company (HFC); and
(iv) such other company as may be notified by the Central Government.
This brings out the fact that ‘deposit provisions’ as contained in the Companies Act,
2013 and ‘Deposit Rules’ have been enacted to regulate acceptance of deposits by
non-banking non-financial companies (i.e. manufacturing companies, trading
companies, etc.) only.

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4. PROVISIONS REGARDING ACCEPTANCE OF

DEPOSITS FROM MEMBERS
Any company may accept or renew deposits from its members by following the
provisions as set out below:
(1) Passing of a Resolution: A company is required to pass a resolution in general
meeting for acceptance of deposits from its members [Section 73 (2)].
(2) Issuance of a Circular containing Statement: The company is required to
issue 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 the prescribed
form and manner. [Section 73 (2) (a)]
According to Rule 4, the company shall issue such circular to all its members by
registered post with acknowledgement due or speed post or by electronic
mode in Form DPT-1.
Further, the circular may be published in English language in an English newspaper
and in vernacular language in a vernacular newspaper having wide circulation in
the State in which the registered office of the company is situated.
In addition, a certificate of the statutory auditor of the company shall be
attached in Form DPT-1, stating that the company has not committed default
in the repayment of deposits or in the payment of interest on such deposits
accepted either before or after payment of interest on such deposits accepted
either before or after the commencement of the Act.
In case a company had committed a default in the repayment of deposits
accepted either before or after the commencement of the Act or in the
payment of interest on such deposits, a certificate of the statutory auditor of
the company shall be attached in Form DPT-1, stating that the company had
made good the default and a period of five years has lapsed since the date of
making good the default as the case may be.

Such Circular shall be issued on the authority and in the name of Board of
Directors of the company.
The Circular shall remain valid till the earliest of the following dates:

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(a) up to six months from the closure of the financial year in which it is
issued; or
(b) the date on which the financial statements are laid before the company at
the Annual General Meeting (AGM), or in case no AGM has been held, the
latest day on which the AGM should have been held as per the relevant
statutory provisions.

A fresh circular shall be issued, in each succeeding financial year, for inviting
deposits during that financial year.
Example 4: Ray Pharmaceuticals Limited issued a Circular inviting ‘deposits’
from its members on 14-02-2023. Its Annual General Meeting (AGM) was held
on 07-09-2023. Since, six months from the closure of FY 2022-23 end on 30-09-
2023, the Circular remains valid till 07-09-2023 only. After this date, a fresh
Circular shall be issued if the company wants to invite further deposits from its
members.
(3) Filing of Circular: The company is required to file a copy of the circular
containing the statement with the Registrar within 30 days before the date of
issue of the circular. [Section 73 (2) (b)]
(4) Requirement of Deposit Repayment Reserve Account: The company is
required to deposit, on or before 30th of April each year, at least 20% 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. [Section 73 (2) (c)]
According to Rule 13 (Maintenance of Liquid Assets and Creation of Deposit
Repayment Reserve Account), every company referred to in sub-section (2)
of section 73 and every eligible company shall on or before the 30th day of April
of each year deposit the sum as specified in clause (c) of the said sub-section
with any scheduled bank and the amount so deposited shall not be utilised for
any purpose other than for the repayment of deposits:
Provided that the amount remaining deposited shall not at any time fall below
twenty per cent of the amount of deposits maturing during the financial year.

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4
(5) Certification as to No default in Repayment: The company needs to certify
that it 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.
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)]

Exemption to certain Private Companies 5:

Clauses (a) to (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).

4
Clause (d) relating to ‘deposit insurance’ was omitted vide the Companies (Amendment) Act,
2017 w.e.f. 15th August, 2018.
5
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).

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(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)]
(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)]
(8) Application to National Company Law Tribunal (NCLT) if the Company fails
to repay: In case a company fails to repay the deposit or part thereof or any
interest thereon, the depositor concerned may apply to the NCLT 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 NCLT
may deem fit. [Section 73 (4)]
(9) Utilising the Amount of Deposit Repayment Reserve Account: The Deposit
Repayment Reserve Account shall not be used by the company for any purpose
other than repayment of deposits. [Section 73 (5)]
Rule 13 also states that the amount so deposited in the Account shall not be
used by the company for any purpose other than repayment of deposits.
(10) Tenure for which Deposits can be Accepted 6: 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.
Example 5: Arpit, a member of Swapnil Traders Private Limited deposited
₹1,00,000 with his company on 1st April, 2024. The earliest repayment date in
this case shall be 30th September, 2024 and the latest repayment date shall be
31st March, 2027. Thus, the tenure will range between six months and thirty-six
months, as per the policy of Swapnil Traders Private Limited.

6
As per Rule 3 (1).

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Exception to the rule of tenure of six months: 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:
(i) 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; and
(ii) such deposits are repayable only on or after three months from the date
of such deposits or renewal.
Example 6: Continuing the example of Swapnil Traders Private Limited, it is
assumed that aggregate of its paid-up share capital, free reserves and
securities premium account is ` 2,00,00,000. In order to meet its short-term
requirement of funds, it can raise deposits maximum up to ` 20,00,000 (being
10% of ` 2,00,00,000) whose repayment tenure can be less than six months; but
such tenure cannot be less than three months.
Therefore, Swapnil Traders Private Limited must ensure that the short-term
deposits so accepted are repaid only on or after three months from the date of
such deposits.
(11) Maximum Amount of Deposits from Members 7: A company is permitted to
accept or renew any deposit from its members including other such deposits
outstanding as on the date of acceptance or renewal maximum up to 35% of
the aggregate of its paid-up share capital, free reserves and securities premium
account.
However, as an exception, a Specified IFSC Public company 8 and a private
company may accept from its members monies not exceeding 100% of
aggregate of the paid-up share capital, free reserves and securities premium
account. Further, such company shall file the details of monies so accepted with
the Registrar in Form DPT-3.

7
As per Rule 3 (3).
8
A Specified IFSC Public company means an unlisted public company which is licensed to operate
by the Reserve Bank of 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.

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 5.18 CORPORATE AND OTHER LAWS

In addition, the maximum limit in respect of deposits to be accepted from

members shall not apply to the following classes of private companies:
(i) a private company which is a start-up, for ten years from the date of its
incorporation;
(ii) a private company which fulfils all of the following conditions, namely:
(a) which is not an associate or a subsidiary company of any other
company;
(b) 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 less; and
(c) such a company has not defaulted in the repayment of such borrowings
subsisting at the time of accepting deposits under
section 73:

Note: It may be noted that all the companies accepting deposits shall file
the details of monies so accepted with the Registrar in Form DPT-3.

(12) Appointment of Trustee for Depositors: As regards appointment of trustee,

refer provisions given under ‘Acceptance of Deposits from Public’ because same
provisions are applicable.
(13) Trustee to call Meeting of Depositors 9: The trustee for depositors shall call a
meeting of all the depositors in the following cases:
(a) on receipt of a requisition in writing signed by at least one-tenth of the
depositors in value for the time being outstanding;
(b) on the happening of any event, which constitutes a default or which, in the
opinion of the trustee for depositors, affects the interest of depositors.
(14) Ceiling on Rate of Interest and Brokerage Payable on Deposits 10 : A
company is permitted to invite or accept or renew any deposit at any rate of
interest or pay any amount of brokerage but in no case, it shall exceed the
maximum rate of interest or brokerage prescribed by the Reserve Bank of India
in case of non-banking financial companies (NBFCs) for acceptance of deposits.

9
As per Rule 9.
10
As per Rule 3 (6).

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 ACCEPTANCE OF DEPOSITS BY COMPANIES 5.19
5.19

Further, no brokerage shall be paid to any person except the person who is
authorised in writing by the company to solicit deposits on its behalf and
through whom deposits are actually procured. Payment of brokerage to any
other person for procuring deposits shall be deemed to be in violation of
‘deposit rules’.
(15) Filling of Application Form for making Deposits 11: A company shall accept or
renew any deposit, whether secured or unsecured, only when an application, as
specified by the company, is submitted by the intending depositor for the
acceptance of deposit.
The application shall contain a declaration made by the intending depositor to
the effect that the deposit is not being made out of any money borrowed by
him from any other person.
(16) Deposits in Joint Names 12: In case the depositors so desire, deposits may be
accepted by the company in joint names not exceeding three. A joint deposit
may be accepted with or without any of the clauses, namely, “Jointly”, “Either or
Survivor”, “First named or Survivor”, “Anyone or Survivor”.
These clauses operate on maturity of deposits.
Example 7: A, B and C have jointly deposited ` 3,00,000 in a company.
• In case of ‘Jointly’ clause:
the repayment of deposit on maturity shall be made to all the three
together i.e. A, B and C or the survivors.
• In case of ‘Either or Survivor’ clause:
the repayment of deposit on maturity shall be made to either of the three
i.e. either A or B or C or the survivor.
• In case of ‘First named or Survivor’ clause:
the repayment of deposit on maturity shall be made to the first named
person i.e. A if he is the first named person or the survivor.
• In case of ‘Anyone or Survivor’ clause:
the repayment of deposit on maturity shall be as in the case of ‘Either or
Survivor’.

11
As per Rule 10.
12
As per Rule 3 (2).

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 5.20 CORPORATE AND OTHER LAWS

(17) Nomination 13: Every depositor may nominate any person at any time. The
nominee shall be the person to whom his deposits shall vest in the event of his
death.
(18) Deposit Receipt 14: Within a period of twenty-one days from the date of receipt
of money or realization of cheque or date of renewal, the company is required
to furnish a deposit receipt to the depositor or his agent. The receipt shall be
signed by an officer duly authorised by the Board and state the date of deposit,
the name and address of the depositor, the amount of deposit, the rate of
interest and the maturity date.
(19) Register of Deposits 15: As regards Register of Deposits, refer provisions given
under ‘Acceptance of Deposits from Public’ because same provisions are
applicable.
(20) Premature Repayment of Deposits 16: As regards premature repayment of
deposits, refer provisions given under ‘Acceptance of Deposits from Public’
because same provisions are applicable.

(21) Filing of Return of Deposits with the Registrar 17: A duly audited Return of
Deposits in DPT-3 (containing particulars as on 31st March of every year) shall
be filed with the Registrar of Companies along with requisite fee on or before
30th June of that year and declaration to that effect shall be submitted by the
auditor in Form DPT-3.* It is clarified by way of Explanation that DPT-3 shall be
used to include particulars of deposits or particulars of transactions not
considered as deposits or both by every company (other than a Government
company).
(22) No Right to Alter any Terms and Conditions of Deposit 18: The company has
no right to alter, either directly or indirectly, any of the terms and conditions of
the deposit, deposit trust deed and deposit insurance contract which may prove
disadvantageous to the interest of the depositors after circular or circular in the
form of advertisement is issued and deposits are accepted.

13
As per Rule 11.
14
As per Rule 12.
15
As per Rule 14.
16
As per Rule 15.
17
As per Rule 16.
* Inserted by Companies (Acceptance of Deposits) Amendment Rules, 2022
18
As per Rule 3 (7).

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 ACCEPTANCE OF DEPOSITS BY COMPANIES 5.21
5.21

(23) Disclosures in Financial Statements 19: A public company shall disclose in its
financial statements by way of note about the money received from its
directors.

In case of a private company it shall disclose in its financial statements by way

of note about the money received from the directors or the relatives of
directors.

(24) Penal Rate of Interest 20: In case the company fails to repay deposits (both
secured and unsecured) on maturity, after they are claimed, it shall pay penal
rate of interest of eighteen per cent per annum for the overdue period.

(25) Punishment for Contravention 21: If any company inviting deposits or any
other person contravenes any of the ‘deposit rules’ for which no punishment is
provided in the Act, the company and every officer-in-default shall be
punishable as under:

• with fine extendable to five thousand rupees; and

• in case the contravention is a continuing one, with a further fine which

may extended to five hundred rupees for every day after the first day
during which the contravention continues.

5. PROVISIONS REGARDING ACCEPTANCE OF

DEPOSITS FROM PUBLIC BY ELIGIBLE
COMPANIES [SECTION 76]
Only ‘eligible companies’ are permitted to accept deposits from the public, in
addition to their members.
It means not all the companies can access the public at large for raising deposits
though they can accept deposits from their members.

19
As per Rule 16A. — Vide Rule 16A (3), as a onetime measure, every company (other than a
Government company) was required to file a onetime return of outstanding receipt of money or
loan by a company not considered as deposits from 1st April 2014 till 31st March, 2019 in Form DPT-
3 with the Registrar of Companies within ninety days from 31st March, 2019 along with requisite fee.
20
As per Rule 17.
21
As per Rule 21.

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 5.22 CORPORATE AND OTHER LAWS

Section 76 of the Act and the Companies (Acceptance of Deposits) Rules, 2014 deal
with acceptance of deposits from public by eligible companies.
The acceptance of deposits from public shall be subject to compliance with section
73 (2) and the prescribed rules.
These provisions are stated as under:
(1) Net Worth/Turnover Criterion 22: A public company, having net worth of not
less than one hundred crore rupees or turnover of not less than five hundred
crore rupees, may accept deposits from persons other than its members. Such type
of public company is known as ‘eligible company’.

(2) Passing of Special Resolution 23: The ‘eligible company’ is required to obtain
the prior consent by means of a special resolution in general meeting and also file
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.
(3) Obtaining of Credit Rating 24: The ‘eligible 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. The given rating ensuring
‘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), a 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.

22
As per Rule 2 (1) (e).
23
As per Rule 2 (1) (e).
24
As per first Proviso to section 76 (1).

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 ACCEPTANCE OF DEPOSITS BY COMPANIES 5.23
5.23

(4) Charge Creation on Assets Necessary if the Deposits are Secured 25: Every
company which accepts secured deposits from the public shall within thirty days of
such acceptance, create a charge on its assets. The amount of charge shall not be less
than the amount of deposits accepted. The charge shall be created in favour of the
deposit holders in accordance with the prescribed rules.
In respect of creation of security, Rule 6 states that the company accepting secured
deposits shall create security by way of charge on its tangible assets only.
The other notable points are:
• The company cannot create charge on intangible assets (i.e. goodwill, trade-
marks, etc.).
• Total value of security should not be less than the amount of deposits accepted
and interest payable thereon.
• The market value of assets subject to charge shall be assessed by a registered
valuer.
• The security shall be created in favour of a trustee for the depositors on specific
movable and immovable property of the company.
(5) Tenure for which Deposits can be Accepted 26: 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: 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—
(i) 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;
and
(ii) such deposits are repayable only on or after three months from the date of
such deposits or renewal.

25
As per second Proviso to section 76 (1).
26
As per Rule 3 (1).

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 5.24 CORPORATE AND OTHER LAWS

(6) Appointment of Trustee for Depositors 27: Following provisions are required
to be observed in this respect:
• One or more trustees for depositors need to be appointed by the company for
creating security for the deposits.
• A written consent shall be obtained from the trustees before their appointment.
• A statement shall appear in the advertisement with reasonable prominence to
the effect that the trustees for depositors have given their consent to the
company for such appointment.
• The company shall execute a Deposit Trust Deed in Form DPT-2 at least seven
days before issuing the circular or circular in the form of advertisement.
• No person including a company that is in the business of providing trusteeship
services shall be appointed as a trustee for the depositors, if the proposed
trustee:
(a) is a director, key managerial personnel or any other officer or an
employee of the company or of its holding, subsidiary or associate
company or a depositor in the company;
(b) is indebted to the company, or its subsidiary or its holding or associate
company or a subsidiary of such holding company;
(c) has any material pecuniary relationship with the company;
(d) has entered into any guarantee arrangement in respect of principal debts
secured by the deposits or interest thereon;

(e) is related to any person specified in clause (a) above.

No trustee for depositors shall be removed from office after the issue of circular
or advertisement and before the expiry of his term except with the consent of
all the directors present at a meeting of the board. In case the company is
required to have independent directors, at least one independent director shall
be present in such meeting of the Board.

(7) Meeting of Depositors to be called by Trustee 28: The trustee for depositors
shall call a meeting of all the depositors in the following cases:

27
As per Rule 7.
28
As per Rule 9.

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 ACCEPTANCE OF DEPOSITS BY COMPANIES 5.25
5.25

(a) on receipt of a requisition in writing signed by at least one-tenth of the

depositors in value for the time being outstanding;
(b) on the happening of any event, which constitutes a default or which, in the
opinion of the trustee for depositors, affects the interest of depositors.
(8) Maximum Amount of Deposits 29: An eligible company is permitted to accept
or renew deposits as under:
• From its Members: The amount of such deposit together with outstanding
deposits from the members as on the date of acceptance or renewal can be
maximum ten per cent. of the aggregate of its paid-up share capital, free
reserves and securities premium account;
• From Persons other than its Members: The amount of such deposits 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.
(9) Maximum Amount of Acceptable Deposit in case of an Eligible
Government Company 30: Such a company is permitted to accept or renew any
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.
(10) Issuance of Circular in the Form of Advertisement 31: An ‘eligible company’
intending to invite deposits is required to issue a circular in the form of an
advertisement in DPT-1.
Such advertisement shall be published in English in an English newspaper and in
vernacular language in a vernacular newspaper. Both newspapers should have wide
circulation in the State in which the registered office of the company is situated.
If the company has its website, the circular shall also be placed on the website.

Such advertisement shall be issued on the authority and in the name of Board of
Directors of the company.

29
As per Rule 3 (4).
30
As per Rule 3 (5).
31
As per Rule 4.

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 5.26 CORPORATE AND OTHER LAWS

• Filing with the Registrar: At least thirty days before the issue of the
advertisement, its copy duly signed by a majority of the directors who approved
the advertisement or otherwise signed by their duly authorised agents is
required to be delivered to the Registrar of Companies for registration.
• Validity of the Advertisement: The advertisement shall remain valid till the
earliest of the following dates:

(a) up to six months from the closure of the financial year in which it is
issued; or
(b) the date on which the financial statements are laid before the company at
the Annual General Meeting (AGM), or in case no AGM has been held, the
latest day on which the AGM should have been held as per the relevant
statutory provisions.
• Fresh Advertisement: A fresh advertisement shall be issued, in each
succeeding financial year, for inviting deposits during that financial year.
• Issue and Effective dates: The date on which the advertisement appeared in
the newspaper shall be taken as the date of the issue of advertisement. Further,
the effective date of issue of circular shall be the date on which the circular was
dispatched.

(11) Maintenance and Using the Amount of Deposit Repayment Reserve

Account: The company is required to deposit, on or before 30th April of each year, at
least 20% 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. [Section 73 (2) (c)]
Rule 13 states that the amount so deposited in the account shall not be used by the
company for any purpose other than repayment of deposits. Further, it states that
such amount shall not at any time fall below twenty percent of the amount of
deposits maturing during the financial year.
(12) Ceiling on Rate of Interest and Brokerage Payable on Deposits 32: An eligible
company is permitted to invite or accept or renew any deposit at any rate of interest
or pay any amount of brokerage but in no case, it shall exceed the maximum rate of

32
As per Rule 3 (6).

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 ACCEPTANCE OF DEPOSITS BY COMPANIES 5.27
5.27

interest or brokerage prescribed by the Reserve Bank of India in case of non-banking

financial companies (NBFCs) for acceptance of deposits.
Further, no brokerage shall be paid to any person except the person who is
authorised in writing by the company to solicit deposits on its behalf and through
whom deposits are actually procured.
(13) Filling of Application Form for making Deposits 33: A company shall accept or
renew any deposit, whether secured or unsecured, only when an application, as
specified by the company, is submitted by the intending depositor for the acceptance
of deposit.

The application shall contain a declaration made by the intending depositor to the
effect that the deposit is not being made out of any money borrowed by him from
any other person.

(14) Deposits in Joint Names 34: In case the depositors so desire, deposits may be
accepted in joint names not exceeding three. A joint deposit may be accepted with or
without any of the clauses, namely, “Jointly”, “Either or Survivor”, “First named or
Survivor”, “Anyone or Survivor”. These clauses operate on maturity of deposit.
(15) Nomination 35 : Every depositor may nominate any person at any time. The
nominee shall be the person to whom his deposits shall vest in the event of his
death.
(16) Deposit Receipt 36: Within a period of twenty-one days from the date of
receipt of money or realization of cheque or date of renewal, the company is required
to furnish a deposit receipt to the depositor or his agent. The receipt shall be signed
by the duly authorised officer and state the date of deposit, the name and address of
the depositor, the amount of deposit, the rate of interest and the maturity date.

(17) Register of Deposits 37:

• Every company accepting deposits shall maintain one or more separate

registers for deposits accepted or renewed at its registered office.

Following particulars shall be entered separately in the case of each depositor:

33
As per Rule 10.
34
As per Rule 3 (2).
35
As per Rule 11.
36
As per Rule 12.
37
As per Rule 14.

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 5.28 CORPORATE AND OTHER LAWS

(a) name, address and PAN of the depositor/s;

(b) particulars of the guardian, in case of a minor;

(c) particulars of the nominee;

(d) deposit receipt number;

(e) date and the amount of each deposit;

(f) duration of the deposit and the date on which each deposit is repayable;

(g) rate of interest on such deposits to be payable to the depositor;

(h) due date for payment of interest;

(i) mandate and instructions for payment of interest and for non-deduction
of tax at source, if any;

(j) date or dates on which the payment of interest shall be made;

38
(l) particulars of security or charge created for repayment of deposits;

(m) any other relevant particulars.

• The entries shall be made within seven days from the date of issuance of the
receipt duly authenticated by a director or secretary of the company or by any
other officer authorised by the Board for this purpose.
• The said register shall be preserved in good order for a period of not less than eight
years from the financial year in which the latest entry is made in the register.
(18) Premature Repayment of Deposits 39 : After the expiry of six months but
before the actual date of maturity, if a depositor requests for premature repayment,
the rate of interest payable shall be one percent less than the rate which would be
payable for the period for which the deposit has actually run.
In this respect it is to be noted that the period for which the deposit has run, if it
contains any part of the year which is less than six months then it shall be excluded;
otherwise if that part is six months or more it shall be taken as one year.

38
Clause (k) relating to details of deposit insurance was omitted by the Companies (Acceptance of
Deposits) Amendment Rules, 2018, w.e.f. 15-08-2018. [Notification No. G.S.R. 612 (E), dated 5th
July, 2018 w.e.f. 15-08-2018]
39
As per Rule 15.

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 ACCEPTANCE OF DEPOSITS BY COMPANIES 5.29
5.29

Reduction of rate of interest is not applicable in the following cases:

• Where the deposit is prematurely repaid to comply with Rule 3 i.e. premature
repayment made in order to reduce the total amount of deposits to bring it
within the permissible limits; or
• Where the deposit is prematurely repaid to provide for war risk or other related
benefits to the personnel of naval, military or air forces or to their families
during the period of emergency declared under Article 352 of the Constitution.
(19) Premature Closure of Deposit to Earn Higher Rate of Interest 40: In case a
depositor desires to avail higher rate of interest by renewing the deposit before its
actual maturity date, the company shall pay him the higher rate of interest only if the
deposit is renewed for a period longer than the unexpired period of deposit.
(20) Filing of Return of Deposits with the Registrar 41: A duly audited Return of
Deposits in DPT-3 (containing particulars as on 31st March of every year) shall be filed
with the Registrar of Companies along with requisite fee on or before 30th June of
that year.
It is clarified by way of Explanation that DPT-3 shall be used to include particulars of
deposits or particulars of transactions not considered as deposits or both by every
company (other than a Government company).
(21) Disclosures in Financial Statements 42: A public company shall disclose in its
financial statement by way of note about the money received from its directors.
(22) Penal Rate of Interest 43: In case the company fails to repay deposits (both
secured and unsecured) on maturity, after they are claimed, it shall pay penal rate of
interest of eighteen per cent per annum for the overdue period.
(23) No Right to Alter any Terms and Conditions of Deposit 44: The company has
no right to alter any of the terms and conditions of the deposit, deposit trust deed
and deposit insurance contract which may prove detrimental to the interest of the

40
As per Rule 15 (Second Proviso).
41
As per Rule 16.
42
As per Rule 16A. — Vide Rule 16A (3), as a onetime measure, every company (other than a
Government company) was required to file a onetime return of outstanding receipt of money or
loan by a company not considered as deposits from 1st April 2014 till 31st March, 2019 in Form
DPT-3 with the Registrar of Companies within ninety days from 31st March, 2019 along with
requisite fee.
43
As per Rule 17.
44
As per Rule 3 (7).

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 5.30 CORPORATE AND OTHER LAWS

depositors after circular or circular in the form of advertisement is issued and

deposits are accepted.
(24) Punishment for Contravention 45: If any eligible company inviting deposits or
any other person contravenes any of the ‘deposit rules’ for which no punishment is
provided in the Act, the company and every officer-in-default shall be punishable as
under:
• with fine extendable to five thousand rupees; and
• in case the contravention is a continuing one, with a further fine up to five
hundred rupees for every day after the first day during which the contravention
continues.
(25) Applicability of Section 73 and 74 to Eligible Companies: Rule 19 states that
pursuant to provisions of sub-section (2) of section 76 of the Act, the provisions of
sections 73 and 74 shall, mutatis mutandis, apply to acceptance of deposits from
public by eligible companies.
Note: Besides Rule 19, section 76 (2) of the Act states that the provisions of Chapter
V shall, mutatis mutandis, apply to the acceptance of deposits from public under
section 76.

6. PUNISHMENT FOR CONTRAVENTION OF

SECTION 73 OR SECTION 76 [SECTION 76A]
According to section 76A of the Act, in case a company accepts or invites or allows
any other person to accept or invite on its behalf any deposit in contravention of the
manner or the conditions prescribed under section 73 or section 76 or rules made
thereunder or if a company fails to repay the deposit or part thereof or any interest
within the time specified under section 73 or section 76 or rules made thereunder or
such further time as may be allowed by the Tribunal under section 73, then the
following consequences will follow:

(a) Punishment for the company: 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 or twice the amount of

45
As per Rule 21.

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 ACCEPTANCE OF DEPOSITS BY COMPANIES 5.31
5.31

deposit accepted by the company, whichever is lower but which may extend to
ten crore rupees; and
(b) Punishment for officer-in-default: Every officer of the company who is in
default shall be punishable with imprisonment which may extend to seven years
and with fine which shall not be less than twenty-five lakh rupees but which
may extend to two crore rupees.

Further, if it is proved that the officer of the company who is in default, has
contravened such provisions knowingly or wilfully with the intention to deceive
the company or its shareholders or depositors or creditors or tax authorities, he
shall be liable for action under section 447 (Punishment for fraud).

7. REPAYMENT OF DEPOSITS ACCEPTED BEFORE

COMMENCEMENT OF THE COMPANIES ACT,
2013 [SECTION 74]
The provisions regarding repayment of deposits accepted before commencement of
the Companies Act, 2013, have been dealt with in section 74. These provisions are
explained as under:
(i) Filing of Statement of Deposits with the Registrar of Companies and
Repayment thereafter: As per section 74 (1), in case any deposit was accepted
by a company before the commencement of this Act (i.e. before 1-4-2014), and
the amount of such deposit or any interest remains unpaid as on 1-4-2014 or
becomes due at any time thereafter, the company shall take the following steps:
(a) file, within a period of 3 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. This is to be
done 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

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 5.32 CORPORATE AND OTHER LAWS

(b) repay within three years from such commencement or on or before expiry
of the period for which the deposits were accepted, whichever is earlier.
Note 1: As per Explanation to Rule 19 if the company has been repaying such
deposits and interest thereon without any default on due dates for the
remaining period of such deposit in accordance with the terms and conditions,
point (b) above shall be deemed to have been complied with.

Note 2: It is to be noted that renewal of any such deposits shall be done in

accordance with the provisions of Chapter V and the rules made thereunder.
(ii) Extension of Time for Repayment of Deposits by the Tribunal: As per
section 74 (2), the Tribunal may, on an application made by the company, after
considering the financial condition of the company, the amount of deposit and
the interest payable thereon and such other matters, allow further time as
considered reasonable to the company to repay the deposit.
(iii) Punishment for Non-Repayment of Deposits: As per section 74 (3), if a
company fails to repay the deposit or part thereof or any interest thereon
within the time specified in section 74 (1) or such further extended time allowed
by the Tribunal under section 74 (2), the company shall, in addition to the
payment of the amount of deposit or part thereof and the interest due, be
punishable as under:
• company: with fine minimum of one crore rupees and maximum of ten
crore rupees; and
• every officer-in-default: with imprisonment extendable to seven years or
with fine minimum of twenty-five lakh rupees and maximum of two crore
rupees, or with both.

8. POWER OF CENTRAL GOVERNMENT TO DECIDE

CERTAIN QUESTIONS
As per Rule 18, If any question arises as to the applicability of these rules to a
particular company, such question shall be decided by the Central Government in
consultation with the Reserve Bank of India.

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 ACCEPTANCE OF DEPOSITS BY COMPANIES 5.33
5.33

SUMMARY
♦ Deposit includes any receipt of money by way of (i) deposit or (ii) loan or (iii) in
any other form by a company.

But it does not include such categories of amount which are prescribed in the
‘Acceptance of Deposits’ Rules.

♦ Depositor means any member of the company who has made a deposit with
the company.
Depositor also means any other person (not being a member of the company)
who has made a deposit with a public company categorised as ‘eligible
company’.

♦ A public company, having net worth of not less than one hundred crore rupees
or turnover of not less than five hundred crore rupees, is known as ‘eligible
company’. It 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.

♦ A company may accept deposits from its members on mutually agreed terms
and conditions subject to the passing of a resolution in general meeting.

♦ Every company referred to in section 73 (2) intending to invite deposits from its
members shall issue a circular to all its members in Form DPT-1. Exemption is
available to certain private companies.

♦ An ‘eligible company’ shall obtain the prior consent of the company in general
meeting by means of a special resolution and also file the same with the
Registrar of Companies before making any invitation to the public for
acceptance of deposits.

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 5.34 CORPORATE AND OTHER LAWS

♦ An ‘eligible company’ accepting deposits within the limits specified under

section 180 (1) (c) may accept deposits by means of an ordinary resolution.

♦ Every ‘eligible company’ intending to invite deposits shall issue a circular in the
form of advertisement in Form DPT-1.

♦ Deposits shall be accepted by the companies within the specified limits.

♦ Deposits may be accepted by a company in joint names not exceeding three.

♦ 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.

♦ A ‘Deposit Receipt’ shall be issued by the company to the depositor or his

agent within twenty-one days from the date of receipt of money or realisation
of cheque or date of renewal.

♦ Nomination facility shall be available to every depositor.

♦ Premature repayment of deposits is permissible.

♦ 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.

♦ If a company fails to repay the deposit or part thereof or any interest thereon,
the depositor concerned may apply to the National Company Law Tribunal
(NCLT) for an order directing the company to pay the sum due or for any loss

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or damage incurred by him as a result of such non-payment and for such other
orders as the NCLT may deem fit.

♦ 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.

TEST YOUR KNOWLEDGE

Multiple Choice Questions
1. Varsha Limited decides to raise deposits of ` 20 lakh from its members. However,
it proposes to secure such deposits partially by offering a security worth ` 15
lakh. Which of the following options best describe such deposits:
(a) Fully secured deposits (except a small portion)
(b) Unsecured deposits
(c) Partially secured deposits
(d) These cannot be classified as deposits
2. What is the maximum tenure for which a company can accept or renew deposits
from its members as well as public?
(a) 12 months
(b) 24 months
(c) 36 months
(d) 48 months

3. Fin Limited is accepting deposits of various tenures from its members from time
to time. The current Register of Deposits, maintained at its registered office is
complete. State the minimum period for which it should mandatorily be preserved
in good order.
(a) Four years from the financial year in which the latest entry is made in the
Register.

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 5.36 CORPORATE AND OTHER LAWS

(b) Six years from the financial year in which the latest entry is made in the
Register.
(c) Eight years from the financial year in which the latest entry is made in the
Register.
(d) Ten years from the latest date of entry.
4. Every company shall pay a penal rate of interest of ----------------- per annum
for the overdue period in case of deposits, whether secured or unsecured, matured
and claimed but remaining unpaid:
(a) 9%

(b) 14%
(c) 18%
(d) 24%

5. As per the provisions of the Companies Act, 2013 and relevant rules thereunder,
an eligible company is not permitted to accept from public or renew the same
deposits (whether secured or unsecured) which is repayable on demand or in less
than ______________ months. Further, the maximum period of acceptance of
deposit cannot exceed ________________ months. But, for the purpose of meeting
any of its short- term requirements of funds, a company may accept or renew
deposits for repayment earlier than ______________ months subject to certain
conditions.
(a) six, thirty six, six

(b) three, twenty four, three

(c) six, sixty, six
(d) three, sixty, six

Descriptive Questions
1. Enumerate the amounts which when received by a company in the ordinary
course of business are not to be considered as deposits.
2. 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?

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3. Explain the provisions for 'Appointment of Trustee for Depositors' under the
Companies Act, 2013 read with the ‘Acceptance of Deposits’ Rules, 2014.
4. What are the provisions relating to ‘Credit Rating’ which an ‘eligible company’
must follow if it wants to raise public deposits?
5. 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 lakh 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 lakh from Rachna who is
one of its directors. Advise whether it is a deposit or not.
(iii) City Bakers Limited failed to repay deposits of ` 50 crore 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 lakh 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?
6. ABC Limited having a net worth of ` 120 crore wants to accept deposit from its
members. The directors of the company have approached you to advise them as
to what special care has to be taken while accepting such deposit from the
members in case their company falls within the category of an ‘eligible company’.
7. Define the term 'deposit' under the 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

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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. Tarun,
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.
8. State, with reasons, whether the following statements are ‘True or False’?
(i) ABC Private Limited may accept deposits from its members to the extent of
` 50 lakh, if the aggregate of its paid-up capital, free reserves and security
premium account is ` 50 lakh.
(ii) A Government Company, which is eligible to accept deposits under Section
76 of the Companies Act, 2013, cannot accept deposits from public
exceeding 25% of the aggregate of its paid-up capital, free reserves and
security premium account.
9. Answer the following citing relevant provisions:
(a) Prayas Electricals Limited having paid-up capital of ` 1 crore availed a term
loan of ` 10,00,000 from Beta Bank Limited to purchase electrical items. Mr.
Sambhav, one of the directors of the company, is of the opinion that it shall
be considered as ‘deposit’. Is his contention correct?
(b) Eklavya Publishing Company Limited facing acute cash crunch wants to
utilise a portion of ‘Deposit Repayment Reserve Account’ to pay off its
short-term creditors who are pressing hard for repayment of
` 20,00,000. Is it justified to use funds lying in ‘Deposit Repayment Reserve
Account’ in this manner?
(c) Sanjiv is a shareholder in Utsah Textiles Private Limited holding 10,000
shares of ` 10 each. His wife Sneha and his three sons Aayush, Pranav and
Himanshu are also shareholders in the company holding 1,000 shares each.
In response to the invitation from the company inviting deposits from its
members, Sanjiv wants to deposit ` 1,00,000 for 36 months jointly with his
wife and three sons. Whether Utsah Textiles Private Limited can accede to

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the request of Sanjiv and accept deposit jointly in five names since all the
depositors are shareholders of the company.
10. Shubhra Chemicals Private Limited (not a start-up company) is desirous of
accepting ‘deposits’ from its members amounting to two hundred percent of
aggregate of its paid-up share capital, free reserves and securities premium
account. What are the conditions it must fulfill before such acceptance?

ANSWERS
Answer to MCQ based Questions
1. (b) Unsecured deposits
2. (c) 36 months
3. (c) Eight years from the financial year in which the latest entry is
made in the Register.
4. (c) 18%
5. (a) six, thirty six, six

Answer to Descriptive Questions

1. According to Rule 2 (1) (c) (xii) of the Companies (Acceptance of Deposits)
Rules, 2014, 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 three hundred and sixty-five days from the 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

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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.
Further, for the purposes of this sub-clause the amount shall be deemed to be
deposits on the expiry of fifteen days from the date it became due for refund.
2. 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—

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(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 thirtieth 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) 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
(e) 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 National Company Law Tribunal (NCLT) 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 NCLT may deem fit.
Exemption to certain private companies:
In terms of Notification No. GSR 464 (E), dated 05-06-2015 as amended from
time to time, 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:

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 5.42 CORPORATE AND OTHER LAWS

(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).
3. 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 the deposits.
• A written consent shall be obtained from the trustees before their
appointment.
• A statement shall appear in the circular or advertisement with reasonable
prominence to the effect that the trustees for depositors have given their
consent to the company for such appointment.
• The company shall execute a deposit trust deed in Form DPT-2 at least
seven days before issuing the circular or circular in the form of
advertisement.

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• No person including a company that is in the business of providing trusteeship

services shall be appointed as a trustee for the depositors, if the proposed
trustee:
(a) is a director, key managerial personnel or any other officer or an
employee of the company or of its holding, subsidiary or associate
company or a depositor in the company;

(b) is indebted to the company, or its subsidiary or its holding or

associate company or a subsidiary of such holding company;
(c) has any material pecuniary relationship with the company;
(d) has entered into any guarantee arrangement in respect of principal
debts secured by the deposits or interest thereon;
(e) is related to any person specified in clause (a) above.
• No trustee for depositors shall be removed from office after the issue of
circular or advertisement and before the expiry of his term except with the
consent of all the directors present at a meeting of the board. In case the
company is required to have independent directors, at least one
independent director shall be present in such meeting of the Board.
4. 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

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Acceptance of Public Deposits (Reserve Bank) Directions, 1998, as amended

from time to time.

5. (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 lakh from Ritesh in a single tranche by way of a convertible
note which is repayable within a period of six years from the date of its
issue. In view of Rule 2 (1) (c) (xvii) which requires a convertible note to be
repayable within a period of ten years from the date of its issue, the
amount of ` 30 lakh shall not be considered as deposit.

(ii) In terms of Rule 2 (1) (c) (viii), any amount received from a person who is
director of the company at the time of giving loan to the company shall
not be treated as deposit if such director furnishes to the company at the
time of giving money, a written declaration 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 and further, the company shall
disclose the details of money so accepted in the Board's report.

In the given case, it is assumed that Rachna was one of the directors of
Polestar Traders Limited when the company received a loan of ` 30 lakh
from her. Further, it is assumed that she had furnished to the company at
time of giving money, a written declaration to the effect that the amount
was not being given out of funds acquired by her by borrowing or
accepting loans or deposits from others and in addition, the company had
disclosed the details of money so accepted in the appropriate Board's
report.

If these conditions are satisfied ` 30 lakh shall not be treated as deposit.

(iii) By not repaying the deposit of ` 50 crore and the interest due thereon
even after the extended time granted by the Tribunal, City Bakers Limited

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has contravened the conditions prescribed under Section 73 of the Act.

Accordingly, following penalty is leviable:

• Punishment for the company: City Bakers Limited shall, in addition to

the payment of the amount of deposit and the interest due thereon,
be punishable with fine which shall not be less than rupees one
crore or twice the amount of deposit accepted by the company,
whichever is lower but which may extend to rupees ten crore.

• Punishment for officer-in-default: Swati, being the officer-in-default,

shall be punishable with imprisonment which may extend to seven
years and with fine which shall not be less than rupees twenty-five
lakh but which may extend to rupees two crore.

Further, if it is proved that Swati had contravened such provisions

knowingly or wilfully with the intention to deceive the company or its
shareholders or depositors or creditors or tax authorities, she will be liable
for action under section 447 (Punishment for fraud).

(iv) According to Rule 3 (1), 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.

However, as an exception to this rule, for the purpose of meeting any of its
short-term requirements of funds, a company is permitted to accept or
renew deposits for repayment earlier than six months subject to the
conditions that:

(i) 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; and

(ii) such deposits are repayable only on or after three months from the
date of such deposits or renewal.

In the given case of Shringaar Readymade Garments Limited, it wants to

accept deposits of ` 50 lakh from its members for a tenure which is less
than six months. It can do so if it justifies that the deposits are required

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for the purpose of meeting any of its short-term requirements of funds

but in no case such deposits shall exceed 10% ten per cent of the
aggregate of its paid-up share capital, free reserves and securities
premium account and further, such deposits shall be repayable only on or
after three months from the date of such deposits.

(v) According to section 73 (1) of the Act, no company can accept or renew
deposits from public unless it follows the manner provided under Chapter
V of the Act (contains provisions regarding acceptance of deposits by
companies) for acceptance or renewal of deposits from public. However,
Proviso to Section 73 (1) states 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. Further, Rule 1 (3) (iii) states that the
Companies (Acceptance of Deposits) Rules, 2014 shall not apply to a
housing finance company registered with the National Housing Bank
established under the National Housing Bank Act, 1987.

In the given case, it is assumed that Diamond Housing Finance Limited is

registered with the National Housing Bank and therefore, the ‘Acceptance
of Deposits’ Rules shall not apply to it.

Hence, Diamond Housing Finance Limited being an exempted company,

can accept and renew deposits from the public from time to time without
following the prescribed manner.

6. 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.

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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.

7. 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. Tarun,
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

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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 the details of money

so accepted in the Board’s report. Further, according to Rule 16 (A) (2), it shall
also disclose in its financial statement, by way of notes, about the money
received from the directors, or relatives of directors.

8. (i) As per the provisions of Section 73 (2) of the Companies Act, 2013 read
with Rule 3 (3) of the Companies (Acceptance of Deposits) Rules, 2014, as
amended from time to time, 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 thirty five per
cent of the aggregate of the paid-up share capital, free reserves and
securities premium account of the company. It is 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 Form DPT-3.

Therefore, the given statement where ABC Private Limited is accepting

deposits from its members to the extent of ` 50 lakh is ‘true’.

(ii) As per Rule 3 (5) of the Companies (Acceptance of Deposits) Rules 2014, 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.

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Therefore, the given statement where the limit of 25% has been stated for
acceptance of deposits is ‘false’.

9. (a) In terms of Rule 2 (1) (c) (iii) of the Companies (Acceptance of Deposits)
Rules, 2014, any amount received as a loan or facility from any banking
company shall not be considered as ‘deposit’.

In view of the above, the contention of Mr. Sambhav that the term loan of
` 10,00,000 availed by the company from Beta Bank Limited shall be
considered as ‘deposit’ is not correct.

(b) Rule 13 of the Companies (Acceptance of Deposits) Rules, 2014, states

that the amount deposited in the ‘Deposit Repayment Reserve Account’
shall not be used by a company for any purpose other than repayment of
deposits.

Since there is a prohibition, Eklavya Publishing Company Limited is not

permitted to utilise its ‘Deposit Repayment Reserve Account’ to pay off its
short-term creditors.

(c) Rule 3 (2) of the Companies (Acceptance of Deposits) Rules, 2014,

provides that where depositors so desire, deposits may be accepted in
joint names not exceeding three.

In view of this provision, Sanjiv can deposit ` 1,00,000 with Utsah Textiles
Private Limited jointly with two other persons only irrespective of the fact
that all the five persons are members of the company.

10. According to first proviso to Rule 3 (3), a private company may accept from its
members monies not exceeding 100% of aggregate of the paid-up share
capital, free reserves and securities premium account.

According to second proviso to Rule 3(3), the maximum limit in respect of

deposits to be accepted from members shall not apply to the classes of private
company which fulfils all of the following conditions, namely:

(a) which is not an associate or a subsidiary company of any other company;

© The Institute of Chartered Accountants of India

 5.50 CORPORATE AND OTHER LAWS

(b) 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 less; and

(c) such a company has not defaulted in the repayment of such borrowings
subsisting at the time of accepting deposits under section 73:

According to third proviso all the companies accepting deposits shall file the
details of monies so accepted with the Registrar in Form DPT-3.

In case Shubhra Chemicals Private Limited is not an associate or a subsidiary

company of any other company and its borrowings from banks, etc. is less than
twice of its paid-up share capital or fifty crore rupees, whichever is less and also
it has not defaulted in the repayment of such borrowings subsisting at the time
of accepting deposits, then it can accept ‘deposits’ from its members
amounting to two hundred percent of aggregate of its paid-up share capital,
free reserves and securities premium account.

Further, it shall file the details of monies so accepted with the Registrar in Form
DPT-3.

© The Institute of Chartered Accountants of India