MISCELLANEOUS PROVISION RELATED TO DEPOSITS

In our last post here, we discussed protection of deposits.

DUTIES OF TRUSTEES [Rule 8]:

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.

MEETING OF DEPOSITORS [Rule 9]:

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.

FORM OF APPLICATION FOR DEPOSITS [Rule 10]:

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. The form of application 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.

POWER TO NOMINATE [Rule 11]:

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.

FURNISHING OF DEPOSIT RECEIPTS TO DEPOSITORS [Rule 12]:

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.

The receipt 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.

MAINTENANCE OF LIQUID ASSETS AND CREATION OF DEPOSIT REPAYMENT RESERVE ACCOUNT [Rule 13]:

Every 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 (2) of section 73 with any scheduled bank and the amount so deposited shall not be utilised for any purpose other than for the repayment of deposits. The amount remaining deposited shall not at any time fall below fifteen cent of the amount of deposits maturing, until the end of the current financial year and the next financial year.

GENERAL PROVISIONS REGARDING PREMATURE REPAYMENT OF DEPOSITS [Rule 15]:

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 percent 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.

PENAL RATE OF INTEREST [Rule 17]

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.

POWER OF CENTRAL GOVERNMENT TO DECIDE CERTAIN QUESTIONS [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.

APPLICABILITY OF SECTIONS 73 AND 74 TO ELIGIBLE COMPANIES [Rule 19]:

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.

PUNISHMENT FOR CONTRAVENTION [Rule 21]:

If any company 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.

Please note: I welcome your comments and feedback. This blog post is not a professional advice. Readers may share this post on social media by using buttons given here.