Rules and Regulations of India

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Section 2 – COMPANIES (ACCEPTANCE OF DEPOSITS) RULES, 1975

2. Definitions

In these Rules, unless the context otherwise requires.-

 

(a) “Act” means the Companies Act, 1956 (1 of 1956);

 

(b) “deposit” means any deposit of money with and includes any amount borrowed 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 and whose repayment is guaranteed by the Central Government or a State Government, or any amount received from a local authority or a foreign Government or any other foreign citizen, authority or person;

 

(ii) any amount received as a loan 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 from a co-operative bank as defined in clause (b-ii) of section 2 of the Reserve Bank of India Act, 1934 (2 of 1934);

 

(iii) any amount received as a loan from the Industrial Finance Corporation of India established under the Industrial Finance Corporation Act, 1948 (15 of 1948), or from a State Financial Corporation established under the State Financial Corporations Act, 1951 (63 of 1951), or from the Shipping Development Fund Committee constituted under section 15 of the Merchant Shipping Act, 1958 (44 of 1958) or from the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963), or from the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964), or from an Electricity Board constituted under the Electricity (Supply) Act, 1948 (54 of 1948) or from the Life Insurance Corporation of India constituted under section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956), or from the Rehabilitation Industries Corporation of India Limited or the State Trading Corporation of India Limited or the Minerals and Metals Trading Corporation of India Limited or the Rural Electrification Corporation Limited or the Agricultural Finance Corporation Limited or the Industrial Reconstruction Corporation of India Limited or the Industrial Credit and Investment Corporation of India Limited or the National Industrial Development Corporation of India Limited or the Tamil Nadu Industrial and Investment Corporation Limited or the State Industrial and Investment Corporation of Maharashtra Limited 4[“or from the General Insurance Corporation of India 5[and its subsidiaries, namely, the National Insurance Company Limited, the New India Assurance Company Limited, the Oriental Fire and General Insurance Company Limited and the United Fire and General Insurance Company Limited”] or from the Gujarat Industrial Investment Corporation Limited or from any financial company wholly owned by the Central Government or State Government 6[or from the Oil Industry Development Board 7[or Housing Development Finance Corporation Limited,] or from any other financial company or public financial institutions which may be notified by the Central Government in this behalf in consultation with the Reserve Bank of India;]

 

8[(iv) any amount received by a company from any other company 9[***];

 

(v) any amount received from an employee of the company by way of security deposit;

 

(vi) any amount received by way of security or as an advance from any purchasing agent, selling agent or other agents in the course of or for the purposes of the business of the company or any advance received against orders for the supply of goods or properties or for the ren
dering of any service;

 

(vii) any amount received by way of subscriptions to any shares, stock, bonds or debenture 4[Such bonds or debentures as are covered by sub-clause (x)] pending the allotment of the said shares, stock, bonds or debentures and any amount received by way of calls in advance on shares, in accordance with the Articles of Association of the Company so long as such amount is not repayable to the members under the Articles of Association of the Company;

 

(viii) any amount received in trust or any amount in transit;

 

10[(ix) any amount received from a person who at the time of’ the receipt of the amount was a Director of the company 4[or any amount received from its shareholders, by a private company, or by a private company which has become a public company under section 43A of the Act and continues to include in its Articles of Association provisions relating to the matters specified in clause (iii) of sub-section (1) of section 3 of the Act:

 

11[Provided that the Director or shareholder, as the case may be, from whom the 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 from others;

 

Explanation.- For the removal of doubts, it is hereby declared that any deposit received or renewed by a company before the commencement of the Companies (Acceptance of Deposits) Amendment Rules, 1978, shall continue to be governed by the rules applicable at the time of such deposit or renewal as the case may”;]

 

11[(x) any amount raised by the issue of bonds or debentures secured by the mortgage of any immovable property of the company or with an option to convert them into shares in the company provided that in the case of such bonds or debentures secured by the mortgage of any immovable property. the amount of such bonds or debentures shall not exceed the market value of such immovable property;]

 

12[(xi) any amount brought in by the promoters by way of unsecured loans in pursuance of stipulations of financial institutions subject to the fulfillment of the following conditions, namely:-

 

(a) the loans are brought in pursuance of the stipulation imposed by the financial institutions in fulfillment of the obligation of the promoters to contribute such finance:

 

(b) the loans are provided by the promoters themselves and/or by their relatives, and not from their friends and business associates; and

 

(c) the exemption under this sub-clause shall be available only till the loans of financial institutions are repaid and not thereafter.

 

Explanation.- For the purpose of this sub-clause, the term ‘financial institution’ shall mean-

 

(a) a public financial institution specified in or under section 4A of the Companies Act, 1956;

 

(b) a State Financial, Industrial or Investment Corporation;

 

(c) the State Bank of India or a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959);

 

(d) a nationalised bank, that is to say, a corresponding new bank as defined in section 2 of:-

 

(i) the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970); or

 

(ii) the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980);

(e) the General Insurance Corporation of India established in pursuance of. the provisions of section 9 of the General Insurance Business (Nationalization) Act, 1972 (57 of 1972);

 

(f) the Industrial Reconstruction Corporation of India;13 or

 

(g) any other Institution which the Central Government may, by notification, specify in this behalf;]

 

(c) “Depositor” includes any person who has given a loan to a company;

 

11[(cc) “Financial company” means a non-banking company which is a financial institution within the meaning of clause (c) of section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934);]

 

4[(d) “free reserves” includes the balance in the share premium account, capital and debenture redemption reserve and any other reserves shown or published in the balance sheet of the company and created by, appropriation out of the profits of the company, but does not include the balance in any reserve created;

 

(i) for repayment of any future liability or for depreciation in assets or for bad debts;

 

(ii) by the revaluation of any assets of the company.]

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