Section 73 of Companies Act, 2013 – Prohibition on Acceptance of Deposits from Public

SECTION 73. PROHIBITION ON ACCEPTANCE OF DEPOSITS FROM PUBLIC

[Effective from 1st April, 2014]

(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 (2 of 1934) and to such other company as the Central Government may, after consultation with the Reserve Bank of India, specify in this behalf.

(2) A company may, subject to the passing of a resolution in general meeting and subject to such rules as may be prescribed in consultation with the Reserve Bank of India, accept deposits from its members on such terms and conditions, including the provision of security, if any, or for the repayment of such deposits with interest, as may be agreed upon between the company and its members, subject to the fulfilment of the following conditions, namely:—

(a) issuance of a circular to its members including therein a statement showing the financial position of the company, the credit rating obtained, the total number of depositors and the amount due towards deposits in respect of any previous deposits accepted by the company and such other particulars in such form and in such manner as may be prescribed;

(b) filing a copy of the circular along with such statement with the Registrar within thirty days before the date of issue of the circular;

[27] (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;

[28] [***]

(e) certifying that the company has not committed any default in the repayment of deposits accepted either before or after the commencement of this Act or payment of interest on [29] [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

EXEMPTIONS

[25][Clauses (a) to (e) of Section 73(2) 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:

Provided that the company referred to in clauses (A), (B) or (C) shall file the details of monies accepted to the Registrar in such manner as may be specified

The above exceptions/modifications/adaptations shall be applicable to a private company which has not committed a default in filing its financial statements under section 137 of the said Act or annual return under section 92 of the said Act with the Registrar.]

vide Notification No. G.S.R 583(E) dated 13^th June, 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 one hundred per cent. of aggregate of the paid up share capital and free reserves, and such company shall file the details of monies so accepted to the Registrar in such manner as may be specified, vide Notification No. 08(E) dated 4th January, 2017.

(f) providing security, if any for the due repayment of the amount of deposit or the interest thereon including the creation of such charge on the property or assets of the company:

Provided that in case where a company does not secure the deposits or secures such deposits partially, then, the deposits shall be termed as “unsecured deposits” and shall be so quoted in every circular, form, advertisement or in any document related to invitation or acceptance of deposits.

(3) Every deposit accepted by a company under sub-section (2) shall be repaid with interest in accordance with the terms and conditions of the agreement referred to in that sub-section.

(4) Where a company fails to repay the deposit or part thereof or any interest thereon under sub-section (3), the depositor concerned may apply to the Tribunal for an order directing the company to pay the sum due or for any loss or damage incurred by him as a result of such non-payment and for such other orders as the Tribunal may deem fit.

(5) The deposit repayment reserve account referred to in clause (c) of sub-section (2) shall not be used by the company for any purpose other than repayment of deposits.

Applicable Rules

Companies (Acceptance of Deposits) Rules, 2014

[Effective from 1st April, 2014]

Rule 1. Short title, commencement and application.—

* * *

(3) These rules shall apply to a company other than—

(i) a banking company;

(ii) a non-banking financial company as defined in the Reserve Bank of India Act, 1934 (2 of 1934) registered with the Reserve Bank of India;

(iii) a housing finance company registered with the National Housing Bank established under the National Housing Bank Act, 1987 (53 of 1987); and

(iv) a company specified by the Central Government under the proviso to sub-section (1) of section 73 of the Act.

Rule 2. Definitions.—(1) In these rules, unless the context otherwise requires,—

(a) “Act” means the Companies Act, 2013 (18 of 2013);

(b) “Annexure” means the Annexure attached to these rules;

(c) “deposit” includes any receipt of money by way of deposit or loan or in any other form, by a company, but does not include—

(i) any amount received from the Central Government or a State Government, or any amount received from any other source whose repayment is guaranteed by the Central Government or a State Government, or any amount received from a local authority, or any amount received from 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, foreign authorities or persons resident outside India subject to the provisions of Foreign Exchange Management Act, 1999 (42 of 1999) and rules and regulations made there under;

(iii) any amount received as a loan or facility from any banking company or from the State Bank of India or any of its subsidiary banks or from a banking institution notified by the Central Government under section 51 of the Banking Regulation Act, 1949 (10 of 1949), or a corresponding new bank as defined in clause (d) of section 2 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) or in clause (b) of section (2) of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or from a co-operative bank as defined in clause (bii) of section 2 of the Reserve Bank of India Act, 1934 (2 of 1934);

(iv) any amount received as a loan or financial assistance from Public Financial Institutions notified by the Central Government in this behalf in consultation Insurance Companies or Scheduled Banks as defined in the Reserve Bank of India Act, 1934 (2 of 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;

(vii) any amount received and held pursuant to an offer made in accordance with the provisions of the Act 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;

Explanation.—For the purposes of this sub-clause, it is hereby clarified that—

(a) Without prejudice to any other liability or action, if the securities for which application money or advance for such securities was received cannot be allotted within sixty 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 fifteen days from the date of completion of sixty days, such amount shall be treated as a deposit under these rules.

       [Provided that unless otherwise required under the Companies Act, 1956 (1 of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992) or rules or regulations made thereunder to allot any share, stock, bond, or debenture within a specified period, if a company receives any amount by way of subscriptions to any shares, stock, bonds or debentures before the 1st April, 2014 and disclosed in the balance sheet for the financial year ending on or before the 31st March, 2014 against which the allotment is pending on the 31st March, 2015, the company shall, by the 1st June 2015, either return such amounts to the persons from whom these were received or allot shares, stock, bonds or debentures or comply with these rules.][1]

(b) any adjustment of the amount for any other purpose shall not be treated as refund.

[2][(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:

Provided that the director or relative of the director of the private company, as the case may be, from whom money is received, furnishes 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 of the Act excluding intangible assets of the company or bonds or debentures compulsorily convertible into shares of the company within [ten years][11]:

Provided that if such bonds or debentures are secured by the charge of any assets referred to in Schedule III of the Act, 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;][12]

(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;

(xi) [any non-interest bearing amount received and held in trust];[13]

(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 a period of three hundred and sixty five days from the date of acceptance of such advance:

Provided that in case of any advance which is subject matter of any legal proceedings before any court of law, the said time limit of three hundred and sixty five days shall not apply:

(b) as advance, accounted for in any manner whatsoever, received in connection with [consideration for an immovable property][3] under an agreement or arrangement, provided that such advance is adjusted [against such property][4] in accordance with the terms of agreement or arrangement;

(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;][14]

Provided 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:

Explanation.—For the purposes of this sub-clause the amount [***][15]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 fulfillment of the following conditions, namely:—

(a) the loan is brought in pursuance 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) the exemption under this sub-clause shall be available only till the loans of financial institution or bank are repaid and not thereafter;

(xiv) any amount accepted by a Nidhi company in accordance with the rules made under section 406 of the Act.

Explanation.—For the purposes of this clause, any amount.—

(a) received by the company, whether in the form of instalments or otherwise, from a person with promise or offer to give returns, in cash or in kind, on completion of the period specified in the promise or offer, or earlier, accounted for in any manner whatsoever, or

(b) any additional contributions, over and above the amount under item (a) above, made by the company as part of such promise or offer, [shall be considered as deposits unless specifically excluded under this clause][16];

(c) “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;

(d) “eligible company” means a public company as referred to in sub-section (1) of section 76, having a net worth of not less than one hundred crore rupees or a turnover of not less than five hundred crore rupees and which has obtained the prior consent of the company in general meeting by means of a special resolution and also filed the said resolution with the Registrar of Companies before making any invitation to the Public for acceptance of deposits:

Provided that an eligible company, which is accepting deposits within the limits specified under clause (c) of sub-section (1) of section 180, may accept deposits by means of an ordinary resolution;

(f) “fees” means fees as specified in the Companies (Registration Offices and Fees) Rules, 2014;

(g) “Form” or “e-Form” means a form set forth in Annexure to these rules which shall be used for the matter to which it relates;

(h) “section” means section of the Act;

(i) “trustee” means the trustee as defined in section 3 of the Indian Trusts Act, 1882 (12 of 1882).

[(xv)   any amount received by way of subscription in respect of a chit under the Chit Fund Act,1982 (40 of 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 five years from the date of issue) in a single tranche, from a person.

Explanation.- For the purposes of this sub-clause,-

I. “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. 180(E) dated 17th February, 2016 issued by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry;

II. “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.

(xviii)   any amount received by a company from Alternate Investment Funds, Domestic Venture Capital Funds [, Infrastructure Investment Trusts, [34] [Real Estate Investment]][24] and Mutual Funds registered with the Securities and Exchange Board of India in accordance with regulations made by it.][17]

(2) Words and expressions used in these rules but not defined and defined in the Act or in the Reserve Bank of India Act, 1934 (2 of 1934) or in the Companies (Specification of definitions details) Rules, 2014, shall have the meanings respectively assigned to them in the said Acts or in the said rules.

Rule 3. Terms and conditions of acceptance of deposits by companies.—(1) On and from the commencement of these rules,—

(a) no company referred to in sub-section (2) of section 73 and no eligible company shall accept or renew any deposit, whether secured or unsecured, which is repayable on demand or upon receiving a notice within a period of less than six months or more than thirty-six months from the date of acceptance or renewal of such deposit:

Provided that a company may, for the purpose of meeting any of its short-term requirements of funds, accept or renew such deposits for repayment earlier than six months from the date of deposit or renewal, as the case may be, subject to the condition that—

(a) such deposits shall not exceed ten per cent. of the aggregate of the [5][paid up share capital, free reserves and securities premium account] of the company, and

(b) such deposits are repayable not earlier than three months from the date of such deposits or renewal thereof.

(2) Where depositors so desire, deposits may be accepted in joint names not exceeding three, with or without any of the clauses, namely, “Jointly”, “Either or Survivor”, “First named or Survivor”, “Anyone or Survivor”.

(3) No company referred to in sub-section (2) of section 73 shall accept or renew any deposit from its members, if the amount of such deposits together with the amount of other deposits outstanding as on the date of acceptance or renewal of such deposits exceeds [thirty five per cent.][18] of the aggregate of the [6][paid-up share capital free reserves and securities premium account] of the company.

[26][“Provided that a Specified IFSC Public company and 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.

Explanation.—For the purpose of this rule, 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 (28 of 2005) read with the Special Economic Zones Rules, 2006:

Provided further that the maximum limit in respect of deposits to be accepted from members shall not apply to following classes of private companies, namely:—

(i) a private company which is a start-up, for five 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:

Provided also that all the companies accepting deposits shall file the details of monies so accepted to the Registrar in Form DPT-3.”]

(4) No eligible company shall accept or renew—

(a) 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 exceeds ten per cent. of the aggregate of the [7][paid-up share capital free reserves and securities premium account] of the company;

(b) any other deposit, if the amount of such deposit together with the amount of such other deposits, other than the deposit referred to in clause (a), outstanding on the date of acceptance or renewal exceeds twenty-five per cent. of aggregate of the [8][paid-up share capital free reserves and securities premium account] of the company.

(5) No Government company eligible to accept deposits under section 76 shall accept or renew any deposit, 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 [9][paid up share capital free reserves and securities premium account] of the company.

(6) No company referred to in sub-section (2) of section 73 or any eligible company shall invite or accept or renew any deposit in any form, carrying a rate of interest or pay brokerage thereon at a rate exceeding the maximum rate of interest or brokerage prescribed by the Reserve Bank of India for acceptance of deposits by non-banking financial companies.

Explanation.—For the purposes of this sub-rule, it is hereby clarified that the person who is authorised, in writing, by a company to solicit deposits on its behalf and through whom deposits are actually procured shall only be entitled to the brokerage and payment of brokerage to any other person for procuring deposits shall be deemed to be in violation of these rules.

(7) The company shall not reserve to itself either directly or indirectly a right to alter, to the prejudice or disadvantage of the depositor, any of the terms and conditions of the deposit, deposit trust deed and deposit insurance contract after circular or circular in the form of advertisement is issued and deposits are accepted.

[(8).- (a) Every eligible company shall obtain at least once in a year, credit rating for deposits accepted by it and a copy of the rating shall be sent to the Registrar of Companies alongwith the return of deposits in Form DPT-3.

(b) The credit rating referred to in clause (a) shall not be below the minimum investment grade rating or other specified credit rating for fixed deposits, 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, issued by the Reserve Bank of India, as amended from time to time.][20]

Rule 4. Form and particulars of advertisements or circulars.—(1) Every company referred to in sub-section (2) of section 73 intending to invite deposit from its members shall issue a circular to all its members by registered post with acknowledgement due or speed post or by electronic mode in Form DPT-1:

Provided that in addition to issue of such circular to all members in the manner specified above, 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.

[30] [Provided further that 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 the commencement of the Act and 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.]

(2) [Every eligible company intending to invite deposits shall issue a circular in the form of an advertisement in form DPT-1 for the purpose in English language in an English newspaper having country wide circulation and in vernacular language in a vernacular newspaper having wide circulation in the State in which the registered office of the company is situated, and shall also place such circular on the website of the company, if any.][21]

(3) Every company inviting deposits from the public shall upload a copy of the circular on its website, if any.

(4) No company shall issue or allow any other person to issue or cause to be issued on its behalf, any circular or a circular in the form of advertisement inviting deposits, unless such circular or circular in the form of advertisement is issued on the authority and in the name of the Board of directors of the company.

(5) No circular or a circular in the form of advertisement shall be issued by or on behalf of a company unless, not less than thirty days before the date of such issue, there has been delivered to the Registrar for registration a copy thereof signed by a majority of the directors of the company as constituted at the time the Board approved the circular or circular in the form of advertisement, or their agents, duly authorised by them in writing.

(6) A circular or circular in the form of advertisement issued shall be valid until the expiry of six months from the date of closure of the financial year in which it is issued or until the date on which the financial statement is laid before the company in annual general meeting or, where the annual general meeting for any year has not been held, the latest day on which that meeting should have been held in accordance with the provisions of the Act, whichever is earlier, and a fresh circular or circular in the form of advertisement shall be issued, in each succeeding financial year, for inviting deposits during that financial year.

Explanation.—For the purpose of this rule, the date of the issue of the newspaper in which the advertisement appears shall be taken as the date of issue of the advertisement and the effective date of issue of circular shall be the date of dispatch of the circular.

[31] [***]

Rule 6. Creation of security.—(1) For the purposes of providing security, every company referred to in sub-section (2) of section 73 and every eligible company inviting secured deposits shall provide for security by way of a charge on its assets as referred to in Schedule III of the Act excluding intangible assets of the company for the due repayment of the amount of deposit and interest thereon for an amount which shall not be less than the amount remaining unsecured by the deposit insurance:

Provided that in the case of deposits which are secured by the charge on the assets referred to in Schedule III of the Act excluding intangible assets, the amount of such deposits and the interest payable thereon shall not exceed the market value of such assets as assessed by a registered valuer.

Explanation I.—For the purposes of this sub-rule it is clarified that the company shall ensure that the total value of the security either by way of deposit insurance or by way of charge or by both on company’s assets shall not be less than the amount of deposits accepted and the interest payable thereon.

Explanation II.—For the purposes of proviso to sub-clause (ix) of clause (c) of sub-rule (1) of rule 2 and this sub-rule, it is hereby clarified that pending notification of sub-section (1) of section 247 of the Act and finalisation of qualifications and experience of valuers, valuation of stocks, shares, debentures, securities etc. shall be conducted by an independent merchant banker who is registered with the Securities and Exchange Board of India or an independent chartered accountant in practice having a minimum experience of ten years.

(2) The security (not being in the nature of a pledge) for deposits as specified in sub-rule (1) shall be created in favour of a trustee for the depositors on:

(a) specific movable property of the company, or

(b) specific immovable property of the company wherever situated, or any interest therein.

Rule 7. Appointment of trustee for depositors.—(1) No company referred to in sub-section (2) of section 73 or any eligible company shall issue a circular or advertisement inviting secured deposits unless the company has appointed one or more trustees for depositors for creating security for the deposits:

Provided that a written consent shall be obtained from the trustee for depositors before their appointment and a statement shall appear in the circular or circular in the form of advertisement with reasonable prominence to the effect that the trustees for depositors have given their consent to the company to be so appointed.

(2) 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.

(3) 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.

(4) 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:

Provided that in case the company is required to have independent directors, at least one independent director shall be present in such meeting of the Board.

Rule 8. Duties of trustees.—It shall be the duty of every trustee for depositors to—

(a) ensure that the assets of the company on which charge is created together with the amount of deposit insurance are sufficient to cover the repayment of the principal amount of secured deposits outstanding and interest accrued thereon;

(b) satisfy himself that the circular or advertisement inviting deposits does not contain any information which is inconsistent with the terms of the deposit scheme or with the trust deed and is in compliance with the rules and provisions of the Act;

(c) ensure that the company does not commit any breach of covenants and provisions of the trust deed;

(d) take such reasonable steps as may be necessary to procure a remedy for any breach of covenants of the trust deed or the terms of invitation of deposits;

(e) take steps to call a meeting of the holders of depositors as and when such meeting is required to be held;

(f) supervise the implementation of the conditions regarding creation of security for deposits and the terms of deposit insurance;

(g) do such acts as are necessary in the event the security becomes enforceable;

(h) carry out such acts as are necessary for the protection of the interest of depositors and to resolve their grievances.

Rule 9. Meeting of depositors.—The trustee for depositors shall call a meeting of all the depositors on—

(a) requisition in writing signed by at least one-tenth of the depositors in value for the time being outstanding;

(b) the happening of any event, which constitutes a default or which, in the opinion of the trustee for depositors, affects the interest of the depositors.

Rule 10. Form of application for deposits.—(1) On and from the commencement of these rules, no company shall accept, or renew any deposit, whether secured or unsecured, unless an application, in such form as specified by the company, is submitted by the intending depositor for the acceptance of such deposit.

(2) The form of application referred to in sub-rule (1) shall contain a declaration 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.

Rule 11. Power to nominate.—Every depositor may, at any time, nominate any person to whom his deposits shall vest in the event of his death and the provisions of section 72 shall, as far as may be, apply to the nomination made under this rule.

Rule 12. Furnishing of deposit receipts to depositors.—(1) Every company shall, on the acceptance or renewal of a deposit, furnish to the depositor or his agent a receipt for the amount received by the company, within a period of twenty one days from the date of receipt of money or realisation of cheque or date of renewal.

(2) The receipt referred to in sub-rule (1) shall be signed by an officer of the company duly authorised by the Board in this behalf and shall state the date of deposit, the name and address of the depositor, the amount received by the company as deposit, the rate of interest payable thereon and the date on which the deposit is repayable.

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:

[32] [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]

Rule 14. Registers of deposits.—(1) Every company accepting deposits shall maintain at its registered office one or more separate registers for deposits accepted or renewed, in which there shall be entered separately in the case of each depositor the following particulars, namely:—

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

(b) particulars of 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 or 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;

[33] [***]

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

(m) any other relevant particulars;

(2) The entries specified in sub-rule (1) 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.

(3) The register referred to in sub-rule (1) 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.

Rule 15. General provisions regarding premature repayment of deposits.—Where a company makes a repayment of deposits, on the request of the depositor, after the expiry of a period of six months from the date of such deposit but before the expiry of the period for which such deposit was accepted, the rate of interest payable on such deposit shall be reduced by one per cent. from the rate which the company would have paid had the deposit been accepted for the period for which such deposit had actually run and the company shall not pay interest at any rate higher than the rate so reduced:

Provided that nothing contained in this rule shall apply to the repayment of any deposit before the expiry of the period for which such deposit was accepted by the company, if such repayment is made solely for the purpose of—

(a) complying with the provisions of rule 3; or

(b) providing war risk or other related benefits to the personnel of the naval, military or air forces or to their families, on an application made by the associations or societies formed by such personnel, during the period of emergency declared under article 352 of the Constitution:

Provided further that where a company referred to in under sub-section (2) of section 73 or any eligible company permits a depositor to renew his deposit, before the expiry of the period for which such deposit was accepted by the company, for availing of a higher rate of interest, the company shall pay interest to such depositor at the higher rate if such deposit is renewed in accordance with the other provisions of these rules and for a period longer than the unexpired period of the deposit.

Explanation.—For the purposes of this rule, where the period for which the deposit had run contains any part of a year, then, if such part is less than six months, it shall be excluded and if such part is six months or more, it shall be reckoned as one year.

Rule 16. Return of deposits to be filed with the Registrar.—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 [10][Form DPT-3] along with the fee as provided in Companies (Registration Offices and Fees) Rules, 2014 and furnish the information contained therein as on the 31st day of March of that year duly audited by the auditor of the company.

[35] [Explanation.- It is hereby clarified that Form DPT-3 shall be used for filing return of deposit or particulars of transaction not considered as deposit or both by every company other than Government company.]

[Rule 16A. Disclosures in the financial statement.- (1) Every company, other than a private company, shall disclose in its financial statement, by way of notes, about the money received from the director.

(2) Every private company shall disclose in its financial statement, by way of notes, about the money received from the directors, or relatives of directors.][23]

[36] [(3) Every company other than Government company shall file a onetime return of outstanding receipt of money or loan by a company but not considered as deposits, in terms of clause (c) of sub-rule 1 of rule 2 from the 01st April, 2014 to [37] [31st March, 2019], as specified in Form DPT-3 within [38] [ninety days from 31st March, 2019] along with fee as provided in the Companies (Registration Offices and Fees) Rules, 2014.]

Rule 17. Penal rate of interest.—Every company shall pay a penal rate of interest of eighteen per cent. per annum for the overdue period in case of deposits, whether secured or unsecured, matured and claimed but remaining unpaid.

Rule 18. Power of Central Government to decide certain questions.—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.

Rule 21. Punishment for contravention.—If any company referred to in sub-section (2) of section 73 or any eligible company inviting deposits or any other person contravenes any provision of these rules for which no punishment is provided in the Act, the company and every officer of the company who is in default shall be punishable with fine which may extend to five thousand rupees and where the contravention is a continuing one, with a further fine which may extend to five hundred rupees for every day after the first day during which the contravention continues.

Applicable Circulars

Clarification on repayment of deposits accepted by the companies before the commencement of the Companies Act, 2013 under Section 74 of the said Act

Circular No. 09/2015 dated 18-06-2015

This Ministry has received representations seeking clarification regarding processing of the deposits related complaints received from investors under section 74 of the Companies Act, 2013 (the said Act) in respect of defaults made by companies in repayment of deposits accepted by them before the commencement of the said Act i.e. before 1st April, 2014 and filing of prosecutions against defaulting companies by the Registrars of Companies/Regional Directors.

2. The matter has been examined in the Ministry and it is clarified that vide Removal of Difficulties (Second) Order [S.O. 1428(E)] dated 2nd June, 2014 are Removal of Difficulties (Fourth) Order [S.O. 146O(E)] dated 6th June, 2014, the Company Law Board has been empowered to exercise the powers of National Company law Tribunal under sub‑section (4) of section 73 and subsection (2) of section 74 of the said Act, till the latter’s constitution.

Thus, a depositor is free to file an application under section 73(4) of the said Act, with the Company Law Board if the company fails to make repayment of deposits accepted by it. Further the company may also file application under section 74(2) of the said Act with the Company Law Board seeking extension of time in making the repayment of deposits accepted by it before the commencement of the provisions of the said Act .

Clarification regarding the timelines for making applicable/available new Form DPT-3 issued vide the Companies (Acceptance of Deposits) Second Amendment Rules, 2017 

General Circular No. 11 /2017 dated 27/09/2017

This Ministry, vide notification number G.S.R. 1172(E) dated 19th September, 2017 has issued the Companies (Acceptance of Deposits) Second Amendment Rules, 2017 thereby amending the Companies (Acceptance of Deposits) Rules, 2014. The said amendment Rules inter-alia provide for substitution of existing Form DPT-3 with a new Form DPT-3. Stakeholders have sought clarifications w.r.t. timelines of the applicability/availability of the new Form DPT-3.

2. The matter has been examined and it is hereby clarified that new Form DPT-3 shall be made available for E-filing after the month of November, 2017 and till the time the new e-form is made available, the existing e-form can be used.

                                                      Extension for filing of one time return in DPT -3 Form

                                                                  General Circular No. 05/2019 dated 12.04.2019

As per Rule 16A(3) of the Companies (Acceptance of deposit) Rules, 2014 “every company other than Government company shall file a onetime return of outstanding receipt of money or loan by a company but not considered as deposits, in terms of clause (c) of sub-rule 1 of rule 2 from the 01st April, 2014 to the date of publication of the notification in the Official Gazette, as specified in Form DPT-3 within ninety days from the date of said publication of this notification along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014”. It may also be noted that data on deposits should be filed upto 31st March, 2019 (as opposed to 22nd January, 2019 which was originally indicated in the said Rule). Rule change is being issued separately.

Pending the deployment of DPT-3 Form on MCA 21 portal and in order to avoid inconvenience to stakeholders on account of various factors, it is stated that the additional fee, as provided under the Companies (Registration Offices and Fees) Rules, 2014, shall be levied after 30 days from the date of deployment of the DPT- 3 form on MCA 21 portal.

Clarification with regard to creation of deposit repayment reserve of 20% u/s. 73(2)(C) of the Companies Act 2013 and to invest or deposit 15% of amount of debentures u/r. 18 of Companies (Share capital and Debentures) Rules 2014 – COVID-19 -Extension of time-regarding

General Circular No. 24/2020 dated 19th June,2020

In continuation to General Circular No. 11/2020 dated 24th March 2020 and keeping in view the requests received from various stakeholders seeking extension of time for compliance of the subject requirements on account of covid-19, it has been decided to further extend the time in respect of matters referred to in paras V, VI of the aforesaid circular, from 30th June 2020 to 30th September 2020. All other requirements shall remain unchanged.

 

Clarification with regard to creation of deposit repayment reserve of 20% u/s. 73(2)(C) of the Companies Act 2013 and to invest or deposit 15% of amount of debentures u/r. 18 of Companies (Share Capital and Debentures) Rules 2014 – COVID-19 – Extension of time – regarding

General Circular No.34/2020, dated 29th September, 2020

In continuation to General Circulars No.11/2020 dated 24th March 2020, and 24 /2020 dated 19.06.2020 keeping in view the requests received from various stakeholders seeking extension of time for compliance of the subject requirements on account of Covid-19, it has been decided to further extend the time in respect of matters referred to in paras V, VI of the aforesaid circular dated 24.03.2020, from 30^th September 2020 to 31^st December, 2020. All other requirements shall remain unchanged.

Applicable Orders

Jurisdiction, Powers, authority and functions of Company Law Board

Companies (Removal of Difficulties) Second Order, 2014 vide S.O. 1428(E) dated 2nd June, 2014

S.O. 1428(E).— In exercise of the powers conferred by sub-section (1) of Section 470 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following Order to remove certain difficulties that have arisen in giving effect to the provisions of Section 73 of the said Act, namely:—

1. (1) This Order may be called the Companies (Removal of Difficulties) Second Order, 2014.

(2) It shall come into force at once.

2.Jurisdiction, Powers, authority and functions of Company Law Board.- Until a date is notified by the Central Government under sub-section (1) of Section 434 of the Companies Act, 2013 (18 of 2013), the Company Law Board constituted in pursuance of sub-section (1) of Section 10E of the Companies Act, 1956 (1 of 1956) shall exercise the jurisdiction, powers, authority and functions under subsection (4) of Section 73 of the Companies Act, 2013 (18 of 2013).

Applicable Notifications

As per Company Law Board (Fees on Applications and Petitions) Amendment Rules, 2014 vide G.S.R. 772(E) dated 3rd November, 2014 fee of Rs. 100 shall be applicable for application under Section 73(4) read with section 76 to Company Law Board for directing the Company to pay the sum due or for any loss or damage incurred as a result of such non-payment.

Applicable Notifications

New Delhi, the 19th September, 2017

G.S.R. 1172(E).—In exercise of the powers conferred by sections 73 and 76 read with sub-section (1) and sub-section (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Acceptance of Deposits) Rules, 2014, namely:—

1. (1) These rules may be called the Companies (Acceptance of Deposits) Second Amendment Rules, 2017.

(2) They shall come into force on the date of their publication in the Official Gazette.

[1] Inserted by the Companies (Acceptance of Deposits) Amendment Rules, 2015 vide Notification No. GSR 241(E) dated 31st March, 2015.

[2] Substituted by Companies (Acceptance of Deposit) Second Amendment Rules, 2015, vide F No. 1/8/2013 – CL-V dated 15-9-2015.

[3] Substituted for the words “consideration for property” by the Companies (Acceptance of Deposits) Amendment Rules, 2015 vide Notification No. GSR 241(E) dated 31st March, 2015.

[4] Substituted for the words “against such property” by the Companies (Acceptance of Deposits) Amendment Rules, 2015 vide Notification No. GSR 241(E) dated 31st March, 2015.

[5] Substituted by Companies (Acceptance of Deposit) Second Amendment Rules, 2015, vide File No 1/8/2013- CL-V dated 15-9-2015.

[6] Substituted by Companies (Acceptance of Deposit) Second Amendment Rules, 2015, vide File No 1/8/2013-CL-V dated 15-9-2015.

[7] Substituted by Companies (Acceptance of Deposit) Second Amendment Rules, 2015, vide File No 1/8/2013-CL-V dated 15-9-2015.

[8] Substituted by Companies (Acceptance of Deposit) Second Amendment Rules, 2015, vide File No 1/8/2013-CL-V dated 15-9-2015.

[9] Substituted by Companies (Acceptance of Deposit) Second Amendment Rules, 2015, vide File No 1/8/2013-CL-V dated 15-9-2015.

[10] Form DPT-3 substituted by the Companies (Acceptance of Deposits) Amendment Rules, 2015 vide Notification No. GSR 241(E) dated 31st March, 2015.

[11] Substituted for the words “five years” by Companies (Acceptance of Deposits) Amendment Rules, 2016 vide Notification No. 1/8/2013-CL-V dated 29th June, 2016.

[12] Inserted by the Companies (Acceptance of Deposit) Amendment Rules, 2016 vide Notification No. 1/8/2013-CL-V dated 29th June, 2016

[13] Substituted by the Companies the Companies (Acceptance of Deposit) Amendment Rules, 2016 vide Notification No. 1/8/2013-CL-V dated 29th June, 2016. Prior to the substitution it read as under:

” any non-interest bearing amount received or held in trust “.

[14] Inserted by the Companies (Acceptance of Deposit) Amendment Rules, 2016 vide Notification No. 1/8/2013-CL-V dated 29th June, 2016.

[15] Omitted words “referred to in the proviso” by the Companies (Acceptance of Deposit) Amendment Rules, 2016 vide Notification No. 1/8/2013-CL-V dated 29th June, 2016.

[16] Substituted for the words “shall be treated as deposits” by the Companies (Acceptance of Deposit) Amendment Rules, 2016 vide Notification No. 1/8/2013-CL-V dated 29th June, 2016

[17] Inserted by the Companies (Acceptance of Deposit) Amendment Rules, 2016 vide      Notification No. 1/8/2013-CL-V dated 29th June, 2016.

[18] Substituted for the words “twenty five per cent.” By the Companies (Acceptance of Deposit) Amendment Rules, 2016 vide Notification No. 1/8/2013-CL-V dated 29th June, 2016.

[19] Inserted by the Companies (Acceptance of Deposit) Amendment Rules, 2016 vide Notification No. 1/8/2013-CL-V dated 29th June, 2016.

[20] Substituted by the Companies (Acceptance of Deposit) Amendment Rules, 2016 vide Notification No.   1/8/2013-CL-V dated 29th June, 2016. Prior to the substitution it read as under:

” Every eligible company shall obtain, at least once in a year, credit rating for deposits accepted by it in the manner specified herein below and a copy of the rating shall be sent to the Registrar of Companies along with the return of deposits in Form DPT-3;]

Name of the agency	Minimum investment Grade Rating
(a) The Credit Rating Information Services of India Ltd.	FA- (FA Minus)
(b) ICRA Ltd.	MA- (MA Minus)
(c) Credit Analysis and Research Ltd.	CARE BBB(FD)
(d) Fitch Ratings India Private Ltd.	tA-(ind)(FD)
(e) Brickwork Ratings India Pvt Ltd.	12[BWR FBBB]
(f) SME Rating Agency of India Ltd.	SMERA A”

[21] Substituted by by the Companies (Acceptance of Deposit) Amendment Rules, 2016 vide Notification No.   1/8/2013-CL-V dated 29th June, 2016. Prior to the substitution it read as under:

” Every eligible company intending to invite deposits shall issue a circular in the form of an advertisement in Form DPT-1 for the purpose in English language in an English newspaper and in vernacular language in one vernacular newspaper having wide circulation in the State in which the registered office of the company is situated.”

[22] Substituted by Companies (Acceptance of Deposit) Amendment Rules, 2017,vide Notification No. G.S.R 454(E) dated 11^th May, 2017. Prior to the substitution it read as under:

“Provided that the companies may accept deposits without deposit insurance contract till the 31st March, 2017 or till the availability of a deposit insurance product, whichever is earlier.”

[23] Inserted by the Companies (Acceptance of Deposit) Amendment Rules, 2016 vide Notification No.   1/8/2013-CL-V dated 29th June, 2016.

[24] Inserted by Companies (Acceptance of Deposit) Amendment Rules, 2017 vide Notification No. G.S.R 454(E) dated 11^th May, 2017.

[25] Substituted by Notification No. G.S.R 583(E) dated 13th June, 2017, prior to substitution in Notification No, G.S.R 464(E) dated 5^th June, it read as under:-

“Clauses (a) to (e) of Section 73(2) shall not apply to a private company which accepts from its members monies not exceeding one hundred per cent of aggregate of the paid up share capital and free reserves, and such company shall file the details of monies so accepted to the Registrar in such manner as may be specified,”

 

[26] Substituted by the Companies (Acceptance of Deposits) Second Amendment Rules, 2017 vide Notification No. G.S.R. 1172(E) dated 19^th September, 2017. Prior to the substitution it read as under:

“[Provided that a private company may accept from its members monies not exceeding one hundred per cent of aggregate of the paid up share capital, free reserves and securities premium account and such company shall file the details of monies so accepted to the Registrar in such manner as may be specified.] [19]”

[27] Substituted by the Companies (Amendment) Act 2017 vide Notification No. File No. 1/1/2018-CL.I-Part  dated 5^th July, 2018 effective from 15^th August, 2018. Prior to the substitution it read as under:

“(c) depositing such sum which shall not be less than fifteen per cent. of the amount of its deposits maturing during a financial year and the financial year next following, and kept in a scheduled bank in a separate bank account to be called as deposit repayment reserve account;”

[28] Omitted by the Companies (Amendment) Act 2017 vide Notification No. File No. 1/1/2018-CL.I-Part  dated 5^th July, 2018 effective from 15^th August, 2018.Prior to omission it read as under:

“(d) providing such deposit insurance in such manner and to such extent as may be prescribed;”

[29] Substituted for the words “such deposits” by the Companies (Amendment) Act 2017 vide Notification No. File No. 1/1/2018-CL.I-Part  dated 5^th July, 2018 effective from 15^th August, 2018.

[30] Inserted by the Companies (Acceptance of Deposits) Amendment Rules, 2018 vide Notification No. File No. 1/8/2013-CL-V dated 5^th July, 2018 effective from 15^th August, 2018.

[31] Omitted by the Companies (Acceptance of Deposits) Amendment Rules, 2018 vide Notification No. File No. 1/8/2013-CL-V dated 5^th July, 2018 effective from 15^th August, 2018.Prior to omission it read as under:

“Rule 5. Manner and extent of deposit insurance.—(1) Every company referred to in sub-section (2) of section 73 and every other eligible company inviting deposits shall enter into a contract for providing deposit insurance at least thirty days before the issue of circular or advertisement or at least thirty days before the date of renewal, as the case may be.

[Provided that the companies may accept deposits without deposit insurance contract till the 31st March, 2018 or till the availability of a deposit insurance product, whichever is earlier.”][22]

Explanation.—For the purposes of this sub-rule, the amount as specified in the deposit insurance contract shall be deemed to be the amount in respect of both principal amount and interest due thereon.

(2) The deposit insurance contract shall specifically provide that in case the company defaults in repayment of principal amount and interest thereon, the depositor shall be entitled to the repayment of principal amount of deposits and the interest thereon by the insurer up to the aggregate monetary ceiling as specified in the contract:

Provided that in the case of any deposit and interest not exceeding twenty thousand rupees, the deposit insurance contract shall provide for payment of the full amount of the deposit and interest and in the case of any deposit and the interest thereon in excess of twenty thousand rupees, the deposit insurance contract shall provide for payment of an amount not less than twenty thousand rupees for each depositor.

(3) The amount of insurance premium paid on the insurance of such deposits shall be borne by the company itself and shall not be recovered from the depositors by deducting the same from the principal amount or interest payable thereon.

(4) If any default is made by the company in complying with the terms and conditions of the deposit insurance contract which makes the insurance cover ineffective, the company shall either rectify the default immediately or enter into a fresh contract within thirty days and in case of non-compliance, the amount of deposits covered under the deposit insurance contract and interest payable thereon shall be repaid within the next fifteen days and if such a company does not repay the amount of deposits within said fifteen days it shall pay fifteen per cent. interest per annum for the period of delay and shall be treated as having defaulted and shall be liable to be punished in accordance with the provisions of the Act.”

[32]Substituted by the Companies (Acceptance of Deposits) Amendment Rules, 2018 vide Notification No. 1/8/2013-CL-V dated 5^th July, 2018 effective from 15^th August, 2018. Prior to the substitution it read as under:

“Provided that the amount remaining deposited shall not at any time fall below fifteen per cent. of the amount of deposits maturing, until the end of the current financial year and the next financial year.”

[33] Omitted words “(k) details of deposit insurance including extent of deposit insurance;” by the Companies (Acceptance of Deposits) Amendment Rules, 2018 vide Notification No. File No. 1/8/2013-CL-V dated 5^th July, 2018 effective from 15^th August, 2018.

[34] Inserted by the Companies (Acceptance of Deposits) Amendment Rules, 2019 vide Notification No. File No. 1/8/2013-CL-V dated 22nd January, 2019.

[35] Inserted by the Companies (Acceptance of Deposits) Amendment Rules, 2019 vide Notification No. File No. 1/8/2013-CL-V dated 22nd January, 2019.

[36] Inserted by the Companies (Acceptance of Deposits) Amendment Rules, 2019 vide Notification No. File No. 1/8/2013-CL-V dated 22nd January, 2019.

[37]Substituted for the words “the date of publication of this notification in the Official Gazette” by the Companies (Acceptance of Deposits) Second Amendment Rules, 2019 vide Notification No.G.S.R. 341(E) dated 30th April, 2019.

[38]Substituted for the words “ninety days from the date of said publication of this notification” by the Companies (Acceptance of Deposits) Second Amendment Rules, 2019 vide Notification No.G.S.R. 341(E) dated 30th April, 2019.