Provisions on repayment of deposits, etc., accepted before commencement of Companies Act, 2013 is reproduced below:

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 thereafter, 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 the 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 one year from such commencement or from the date on which such payments are due, whichever is earlier.
(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 fine which shall not be less than twenty-five lakh rupees but which may extend to two crore rupees, or with both.

[highlight]Section 74 (1) is brought to force from April 01, 2014. Sub-sections (2) and (3) of Section 74 is not yet brought to force.[/highlight]

This provision is covered by Chapter V ACCEPTANCE OF DEPOSITS BY COMPANIES [Sections 73 to 76].

For this chapter, the Companies (Acceptance of Deposit) Rules, 2014 (‘the Rules’) are notified with effect from April 01, 2014.

Corresponding provisions of the Companies Act, 1956:
No such provision.

Corresponding provisions of the English Companies Act, 2006:
No such provision.

Applicability:
[highlight] Section 74 is applicable to all companies. [/highlight]

What is the difference from the Companies Act, 1956:
Only private companies were prohibited under the Companies Act, 1956 from accepting public deposits. Private companies were permitted to accept deposits from shareholders / members, directors and their relatives. All public companies were permitted to accept deposits from public, subject to the Companies (Acceptance of Deposits) Rules, 1975.
Under the Companies Act, 2013, entire landscape of ‘deposits’ is changed. Accordingly it mandates all companies to repay deposits within 1 year. All companies can accept deposits from its members / shareholders, subject to compliance of stricter norms under section 73. Only public companies can invite or accept deposits from public, subject to strict procedure under the Rules and section 76. All companies can accept money, which does not fall within the definition of ‘deposit’ under the Rules.

The term “deposit” includes any receipt of money by way of deposit or loan or in any other form by a company, but does not include such categories of amount as may be prescribed in consultation with the Reserve Bank of India ((Section 2(31), not yet brought to force)).

However, for the purpose of sub-section (1) of section 74, term ‘deposit’ has to be read as ‘deposit’ within the meaning of the Companies Act, 1956. This is so because (a) definition of ‘deposit’ under the Companies Act, 2013 is subject to context in which it is used; and (b) sub-section (1) refers to ‘deposit accepted by a company before the commencement of this Act’.
Where any deposit is accepted by a company, before the commencement of the Act, and any amount thereof or interest due thereon has remained unpaid (though due) then such companies shall, after the commencement of the Act:

(a) 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, [highlight]file with the Registrar of Companies,

(i) within three months of commencement of the Act (in respect of deposit and interest thereon which became due but remained unpaid) ((date extended by MCA till 31st August 2014)) or

(ii) within three months of due date for repayment of deposits and interest thereon (where they are not due fore repayment at the time of commencement of the Act),

a statement ((in Form DPT-4)) [/highlight] of all the deposits accepted by the company and sums remaining unpaid with interest payable thereon. Such statement shall also give details of arrangements made by the Company for its repayment.

AND

Where any deposit is accepted by a company, before the commencement of the Act, and any amount thereof or interest due thereon has remained unpaid (though due) then such companies shall, after the commencement of the Act,

(b)

(i) repay the amount of deposit and interest thereon which became due but remained unpaid, within one year of commencement of the Act, or

(ii) the amount of deposit and interest thereon which has not yet became due for repayment, repay the same on their due date(s),

whichever is earlier.

Where a company comprehends its inability to repay as per (b) above, it may approach National Company Law Tribunal (‘NCLT’) ((power delegated by MCA to Company Law Board)), for seeking more time to repay deposit.

NCLT may allow reasonable more time to repay the deposits with interest after considering, inter alia, its financial position, amount of deposits and interest thereon. ((Section 74(2) )). [highlight]This provision is brought to force from 06 June 2014. [/highlight]

It is clarified by way of an explanation under the Rules ((Explanation to Rule 19 of the Rules)), that in case of a company which had accepted or invited public deposits under the relevant provisions of the Companies Act, 1956 and rules made under that Act (hereinafter known as “Earlier Deposits”) and has been repaying such deposits and interest thereon in accordance with such provisions, and if the following conditions are fulfilled by the company then it need not repay deposits within a year:
(i) the Company complies with requirements under the Act and the rules and
(ii) the Company continues to repay such deposits and interest due thereon on due dates for the remaining period of such deposit in accordance with the terms and conditions and period of such Earlier Deposits and in compliance with the requirements under the Act and the rules.

Both above conditions requires compliance with the requirements under the Act and the rules. It means if a company is a public company and is also a ‘eligible company’ within the meaning of the Rules and complies with other requirements of acceptance of deposits from public, then only it need not comply with section 74(1)(b).

Penalty:
The provision relating to penalty under section 74(3) is brought to force from 06 June 2014. It provides as under:

Where a company fails to repay deposits and interest thereon or part thereof within aforesaid time, or within extension of time given by NCLT:
(a) the company is liable to minimum fine of Rs.1,00,00,000/- (Rupees one crore) and which may extend upto Rs.10,00,00,000/- (Rupees ten crore). Despite payment of fine, the company continues to be liable to repay deposits with interest.

(b) Besides the company, every officer of the company who is in default is liable to minimum fine of Rs.25,00,000/- (Rupees twenty five lakh) and which may extend upto Rs.2,00,00,000/- (Rupees two crore) or with imprisonment upto seven years or with both (fine and imprisonment). ((Section 74(3) )).

(c) 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 failure of the company to repay deposits and interest thereon or part thereof. ((Section 75(2) ))

(d) Where it is proved that the [highlight]deposits have been accepted with intent to defraud the depositors or for any fraudulent purpose[/[highlight] every officer of the company [highlight]who was responsible for the acceptance of such deposit shall be personally responsible, without limitation of liability, for all or any of the losses or damages that may have been incurred by the depositors. In addition, action under section 447 may be taken (which provides punishment for fraud by way of minimum imprisonment of 6 months and upto 10 years as also minimum fine equivalent to amount involved in the fraud and upto three times thereof. ((Section 75(1) ))

[pullquote-right]Damages are generally an award of money, to be paid as compensation for loss or injury.[/pullquote-right]
The term ‘compensation’ as stated in the Oxford Dictionary, signifies that which is given in recompense, an equivalent rendered. ‘Damages’ on the other hand constitute the sum of money claimed or adjudged to be paid in compensation for loss or injury sustained, the value estimated in money, of something lost or withheld. ((The Divisional Controller, KSRTC vs Mahadeva Shetty And Anr. AIR 2003 SC 4172: (2003) 7 SCC 197))

Nature of offence:
Since officers of company may be punished with imprisonment, it is necessary to decide nature of offence.

Since offence is punishable with imprisonment for a term exceeding two years, it is treated as warrant case under section 2(x) of the Code of Criminal Procedure Code, 1973.