Section 74. Repayment of deposits, etc., accepted before commencement of this Act.
Chapter V (SEC 73-76A) of the Companies Act, 2013 deals with the provisions related to acceptance of deposits by companies. Section 74 of CA 2013 provides for repayment of deposits, etc., accepted before commencement of this Act.
Applicability of the provision
- (1) Where in respect of any deposit accepted by a company before the commencement of this Act, the amount of such deposit or part thereof or any interest due thereon remains unpaid on such commencement or becomes due at any time thereafter, the company shall
- (a) file, within a period of three months from such commencement or from the date on which such payments, are due, with the Registrar a statement of all the deposits accepted by the company and sums remaining unpaid on such amount with the interest payable thereon along with the arrangements made for such repayment, notwithstanding anything contained in any other law for the time being in force or under the terms and conditions subject to which the deposit was accepted or any scheme framed under any law; and
- (b) repay within one year from such commencement or from the date on which such payments are due, whichever is earlier.
- (2) The Tribunal may on an application made by the company, after considering the financial condition of the company, the amount of deposit or part thereof and the interest payable thereon and such other matters, allow further time as considered reasonable to the company to repay the deposit.
- (3) If a company fails to repay the deposit or part thereof or any interest thereon within the time specified in sub-section (1) or such further time as may be allowed by the Tribunal under sub-section (2), the company shall, in addition to the payment of the amount of deposit or part thereof and the interest due, be punishable with fine which shall not be less than one crore rupees but which may extend to ten crore rupees and every officer of the company who is in default shall be punishable with imprisonment which may extend to seven years or with fine which shall not be less than twenty-five lakh rupees but which may extend to two crore rupees, or with both.
Section 74 (1) (a) and (b) of the company act provided that renewal of any such deposit shall be done in accordance with this provision given under chapter 5 and the rule made under it.
Section 74 of the Companies Act,2013, provides that any deposit accepted before the commencement of the Companies Act,2013, needs to be repaid or refunded on or before 31st March,2015. The said section also states that a return has to be filed with Roc in respect of existing deposits. And in this section the penalty is minimum Rs.1crore and maximum Rs.10 crore.
Analysis of the above stated provisions:
- Section 74(1) of the Companies Act, 2013 is using the words used “any deposit accepted by a company before the commencement of this Act.” Its means that before the Companies Act,2013 if a company has accepted any deposit under the Companies Act,1956(which was in existence prior to 2013 Act), the same needs to be repaid as per the mandate of section 74(1)(b) on or before 31st March,2015.
- The Companies Act,1956 which is repealed and now in this act it did not define the word “Deposit”. But the Companies (Acceptance of Deposits) Rules,1975 which were under section 58A of the 1956 Act defined “Deposit”.
- As per the definition in the above rules the amounts received from directors, their relatives and the members of private companies were not deposits in view of the clear wording “but does not include…” Thus, all amounts which fall in the provision of (i) to (xii) of clause (b) of rule 2 of Companies (Acceptance of Deposits) Rules,1975 if accepted then were not deposit as they were specifically excluded from the definition of Deposit. A company is under an obligation to repay any deposit it accepted under the Companies Act,1956 not all the amount which were not deposit then.
- In short, the amount to be repaid on or before 31st March,2015 has to be deposit when it was accepted in view of the provision that “any deposit accepted by a company before commencement of this Act.”
- There can be a counter argument that the Deposit referred to in section 74 means the Deposit as per the new Act which includes loans from relatives of directors, their relatives and members but then that argument does not seem to be surviving as the definition of Deposit as in new Act shall take effect only after commencement of the new Act whereas the section 74 of new Act is talking of deposit accepted before the commencement of new Act. So, what was not deposit under the old Act cannot be covered by section 74 of New Act of the company law.
In view of the above statement and provision, according to me, all the money received from directors, their relatives and members of a private company including the amounts stated in (i) to(xii) of clause (b) of rule 2 of the Companies (Acceptance of Deposits) Rules,1975 on or before the commencement of companies Act,2013 are not required to be repaid as they were not deposit when accepted and because of section 74 lies in the fact that when the amount received whether the same was deposit or not. The provisions of section 74 of the Companies Act are applicable only to deposits which were accepted in accordance with the provisions of section 58A of the Companies Act,1956 read with Companies (Acceptance of Deposits) Rules,1975. Unfortunately, due to misinterpretation of section 74 many unnecessary returns have been filed with Roc and the same is being pressed to be filed again.
Accordingly, inference can be drawn that the provisions laid down u/s 74 of the Act are applicable to private companies also, which has accepted deposits from its directors. Sec. 74 of the Act speaks specifically about the deposits accepted prior to the commencement of 2013 Act. Therefore, according to me, even though there was an exception provided under Rule 2(b) of Companies (Acceptance of Deposits) Rules, 1975 insofar as the deposits received by a private company from its directors or their relatives. Accordingly, it is pertinent to note that that this particular Sec. 74 is brought into force and is introduced to overcome the said exception as was provided in the earlier 1975 Rules. It is important here to mention that the term “Deposit” was not specified in the old Act but has been given a place under the provisions of Sec. 2(31) of the new Act. Main cause of Sec. 74(1)(b) has to be analyzed since it makes a company (without making any distinction between a public and private company) liable to repay the deposits. However, this may not be possible for the major reason of non-availability of funds with the company. Further, the section is very apt and clear insofar as filing of Form DPT – 4 before the ROC and repayment of such outstanding deposits within one year from such commencement or from the date on which such payments are due whichever is earlier. That there is no obligation for a private company to comply with the provisions of Sec. 74 of the Act for repayment of deposits to the directors read with Rule 2(b) of Companies (Acceptance of Deposits) Rules, 1975. However, Rule 16 of Companies (Acceptance of Deposits Rules), 2014 specifies the “Return of Deposits to be filed with the Registrar”. According to the said Rule, – “Every company to which these rules apply, shall on or before the 30th day of June, of every year, file with the Registrar, a return in Form DPT – 3 along with the fees as provided ……… as on the 31st day of March of that year duly audited by the auditor of the company.” Now, attention is drawn to Form DPT – 3 as envisaged under Rule 16 of Companies (Acceptance of Deposits Rules), 2014 and accordingly the monies/ deposits which remains unpaid due to lack of funds or for any other reason(s), a Return of Deposits in the prescribed Form DPT – 3 may be filed before the ROC within the due date prescribed as mentioned above to overcome the default of the provisions of Sec. 74.
I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.
IF YOU ARE INTERESTED IN PARTICIPATING IN THE SAME, DO LET ME KNOW.
We do conduct several Courses, Quizs and Webinars, Click here to register
The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.
If you would also like to contribute to my website, then do share your articles or poems at firstname.lastname@example.org
Join our Whatsapp group for Legal Job Openings