After the commencement of present Act of 2013, or more correctly, on issue of Notification by Government of India making Section 73 effective; no company shall invite, accept or renew deposits from the public except in a manner provided under Chapter V of the Act. The chapter V has total four Sections i.e. Section 73 to 76 (both inclusive).
This prohibition does not apply to a banking company, a non – banking financial company as well as any other class of company as specified by the Central government. The Central government may specify any company after consultation with the Reserve Bank of India.
DEPOSIT FROM MEMBERS (SECTION 73):
A company may after passing a resolution in general meeting accept deposit from its members subject to agreed terms and conditions and on following conditions, namely: —
(a) Issue of a circular to its members, which includes statement of financial position, credit rating, total number of depositors, amount due and other prescribed particulars;
(b) Filing a copy of the circular along with statement with the Registrar within thirty days before the issue of the circular;
(c) Depositing and kept a sum not less than fifteen percent of the amount of its deposits maturing during the current and next following financial year in a schedule bank in a separate bank account to be called as deposit repayment reserve account;
(d) Providing a deposit insurance as prescribed;
(e) Certifying that the company has not committed any default in repayment of deposits accepted before or after the commencement of this Act or payment of interest on such deposit; and
(f) Providing security including the creation of charge on the property or assets of the company. However security is not required where deposit is termed as “unsecured deposits” in every circular, form, advertisement and other documents.
Every deposit accepted by the company shall be repaid with interest in accordance with the terms and conditions of the agreement.
Where a company fails to repay the deposit or part thereof or any interest thereon, the depositor concerned may apply to the Tribunal for an order directing the company to pay the sum due or any loss or damage incurred by him as a result of such non – payment and such other order as the tribunal may deem fit.
The deposit repayment reserve account (DRRA) shall be utilised by the company for repayment of deposits.
DEPOSIT FROM PUBLIC (SECTION 76):
A public company, with a specified net worth or turnover, may accept deposits from persons other than its members. The company shall make compliance of requirements of Section 73, this chapter and any rule made by the government for this purpose.
Every company accepting secured deposits from the public shall within thirty days of such acceptance, create a charge on its assets of an amount not less than the amount of deposits accepted in favour of the deposit holders in accordance with such rules as may be prescribed.
REPAYMENT OF DEPOSITS ACCEPTED UNDER OLD ACT (SECTION 74):
In case company has accepted any deposit and any such deposit or its part or any interest thereon is due at the time when this Section come into force, the company shall –
(a) File a statement of all deposits and sum remaining unpaid with interest payable thereon, arrangement for repayment with the Registrar within three months from the date of commencement of this provision or from the date on which such deposit become due; and
(b) Repay within one year all such sums from commencement of this provision or form the date on which such payment become due.
However, the Tribunal (NCLT) may, on application made by the company, allow further time as considered reasonable to the company to repay the deposit. The tribunal shall consider financial position of the company, amount of deposit and the interest thereon.
Any failure on part of company within specified time or such further time shall 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.
DAMAGES FOR FRAUD (SECTION 75)
Any person, group of person or any association of persons (that means anyone) who has incurred any loss as a result of the failure of the company to repay the deposit or part thereof or any interest thereon may initiate a suit, proceedings or any other suitable action against the company and every officer of the company.
This recourse is available to against the company in addition to recourse available under Section 74.
If, it is proved that the deposits had been accepted with intent to defraud the depositors or for any fraudulent purpose, every officer of the company who was responsible for the acceptance of such deposit shall be personally responsible, without any limitation of liability, for all or any of the losses or damages that may have been incurred by the depositors.
This is also clear from this Section, the company and every officer of the company shall also be liable for punishment for fraud under Section 447 of the Act.
This is very stringent punishment in case of fraudulent failure to repay the deposit or interest. There is provision for imprisonment for up to seven year under Section 74 and up to ten year under Section 447. Financial penalty goes as high as two crore rupees under Section 74, unlimited amount of loss or damages under Section 75 and any amount up to three times of amount involved in fraud. Most important thing is any person suffering from loss may file complaint.
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