Circular: Deposits under earlier Act

“Ease of doing business” certainly is a joke invoked once again by the Government on eve of closing of financial year 2014 – 15. Even a fast track professional cannot study implication and advice companies about. This became bigger prank when it is meant to give relief to private companies with lesser resources. As one senior company secretary comments, “This clarification is being given on 30th March, 2015 when many companies have either repaid or have filed petitions with the CLB for extension of time to repay the deposits”. Another professional summarise it as “too little, too late”.

Before reading this well intended circulars, circumstance show this now may help intentional defaulters as law abiding corporate already following some process with almost no scope of reversibility.

Now we may read the general circular 05/2015 issued on 30^th March 2015 (afternoon, almost before 36 hours of calendar deadline and just before 12 hours of working deadline).

The amount received by private companies from their members, directors or their relatives was not considered as “deposit” under Section 58A of the Companies Act, 1956. This situation was changed by Section 74 of the Companies Act 2013 with effect from 1st April, 2014.

As discussed earlier here, 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.

Rule 20 of the Companies (Acceptance of Deposits) Rules, 2014 discussed earlier here simply inform that for the purposes of clause (a) of sub-section (1) of section 74, the statement shall be in Form DPT – 4.

Interestingly, for the purpose of the Companies Act 2013, term deposit is not defined in the Act but in the Rule 2(1) of the Companies (Acceptance of Deposits) Rules, 2014 as discussed earlier here in detail. The definition defines deposit negatively by excluding many instances.

Now, this circular tries to amend definition of deposit as given in these rule by reading down:

The amount received by private companies from their members, directors or their relatives was not considered as “deposit” under Section 58A of the Companies Act, 1956. Such amounts received by private companies prior to 1^st April, 2014 shall not be treated as ‘deposits’ under the Companies Act, 2013 and Companies (Acceptance of Deposits) Rules, 2014 subject to the condition that relevant private company shall disclose, in the notes to its financial statement for the financial year commencing on or after 1^st April, 2014 the figure of such amounts and the accounting head in which such amounts have been shown in the financial statement.

Now, private companies are not required to file Form DTP – 4 for these deposits. If, such form have already filed, such form may be treated as ineffective positively, but position is not cleared. Where company has moved to the Tribunal in term of sub – section (2) of Section 74 may withdraw the application.

The circular further clarify:

Any renewal or acceptance of fresh deposits on or after 1st April, 2014 shall, however, be in accordance with the provisions of Companies Act, 2013 and rules made there under