THE COMPANIES ACT 2013: SECTION 74 & SECTION 75
Updated: Apr 1
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Preface: In this article we are going to build understanding about Section 74 i.e. Repayment of Deposits and Section 75 i.e. Damages for Fraud.
While section 74 of the Companies Act 2013 deals with the repayment of deposits accepted by a company before the commencement of this act. On the other hand, section 75 provides provisions for damages in case of fraud or situations when a company fails to repay the deposits within a specified period of time which is one year from the commencement of the act.
Section 74: Repayment of deposits
*74. (1) Where in respect of any deposit accepted by a company before the commencement of this Act, the amount of such deposit or part thereof or any interest due thereon remains unpaid on such commencement or becomes due at any time after that, the company shall—
(a) file, within a period of three months from such commencement or from the date on which such payments are due, with the Registrar a statement of all the deposits accepted by the company and sums remaining unpaid on such amount with interest payable thereon along with the arrangements made for such repayment, notwithstanding anything contained in any other law for the time being in force or under the terms and conditions subject to which the deposit was accepted or any scheme framed under any law; and
([b) repay within three years from such commencement or on or before the expiry of the period for which the deposits were accepted, whichever is earlier:
Provided that renewal of any such deposits shall be done in accordance with the provisions of Chapter V and the rules made thereunder.]
(2) The Tribunal may, on an application made by the company, after considering the financial condition of the company, the amount of deposit or part thereof, and the interest payable thereon and such other matters, allow further time as considered reasonable to the company to repay the deposit.
(3) If a company fails to repay the deposit or part thereof or any interest thereon within the time specified in sub-section (1) or such further time as may be allowed by the Tribunal under sub-section (2), the company shall, in addition to the payment of the amount of deposit or part thereof and the interest due, 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 a fine which shall not be less than twenty-five lac rupees but which may extend to two crore rupees, or with both.
For instance, if a company fails to repay the deposits or a part thereof or any thereon within the specified period of time, the company shall, in addition to the payment of the amount of deposit or a portion thereof and the interest due, be punishable with a minimum fine of ₹ one crore and a maximum fine of ₹ ten crores and every other officer of the company who is in default shall be punishable with imprisonment which may extend to seven-year or with minimum fine ₹ 25 lacs and a maximum fine of ₹ one crore or with both.
Section 75: Damages for fraud.
*75. (1) Where a company fails to repay the deposit or part thereof or any interest thereon referred to in section 74 within the time specified in sub-section (1) of that section or such further time as may be allowed by the Tribunal under sub-section (2) of that section, and 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, without prejudice to the provisions contained in subsection (3) of that section and liability under section 447, 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.
(2) Any suit, proceedings, or other action may be taken by any person, group of persons, or any association of persons who had incurred any loss as a result of the failure of the company to repay the deposits or part thereof or any interest thereon.