Banning of Unregulated Deposit Ordinance,2019, exempts Individual, Firm, Companies & LLP etc. for taking any loan and deposit for their course of business as per section 2(4) e,f ,l and other provisions.
For the purpose of Banning of Unregulated Deposit Schemes Ordinance, 2019 “deposit” means an amount of money received by way of an advance or loan or in any other form, by any deposit taker with a promise to return whether after a specified period or otherwise, either in cash or in kind or in the form of a specified service, with or without any benefit in the form of interest, bonus, profit or in any other form, but it does not include the following deposits which are exempt from the provisions of Banning of Unregulated Deposit Schemes Ordinance, 2019.
Deposits Exempt under Banning of Unregulated Deposit Schemes Ordinance, 2019
(a) amounts received as loan from a scheduled bank or a co-operative bank or any other banking company as defined in section 5 of the Banking Regulation Act, 1949;
(b) amounts received as loan or financial assistance from the Public Financial Institutions notified by the Central Government in consultation with the Reserve Bank of India or any non-banking financial company as defined in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 and is registered with the Reserve Bank of India or any Regional Financial Institutions or insurance companies;
(c) amounts received from the appropriate Government, or any amount received from any other source whose repayment is guaranteed by the appropriate Government, or any amount received from a statutory authority constituted under an Act of Parliament or a State Legislature;
(d) amounts received from foreign Governments, foreign or international banks, multilateral financial institutions, foreign Government owned development financial institutions, foreign export credit collaborators, foreign bodies corporate, foreign citizens, foreign authorities or person resident outside India subject to the provisions of the Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder;
(e) amounts received by way of contributions towards the capital by partners of any partnership firm or a limited liability partnership;
(f) amounts received by an individual by way of loan from his relatives or amounts received by any firm by way of loan from the relatives of any of its partners;
(g) amounts received as credit by a buyer from a seller on the sale of any property (whether movable or immovable);
(h) amounts received by an asset re-construction company which is registered with the Reserve Bank of India under section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;
(i) any deposit made under section 34 or an amount accepted by a political party under section 29B of the Representation of People Act, 1951;
(j) any periodic payment made by the members of the self-help groups operating within such ceilings as may be prescribed by the State Government or Union territory Government;
(k) any other amount collected for such purpose and within such ceilings as may be prescribed by the State Government;
(l) an amount received in the course of, or for the purpose of, business and bearing a genuine connection to such business including—
(i) payment, advance or part payment for the supply or hire of goods or provision of services and is repayable in the event the goods or services are not in fact sold, hired or otherwise provided;
(ii) advance received in connection with consideration of an immovable property under an agreement or arrangement subject to the condition that such advance is adjusted against such immovable property as specified in terms of the agreement or arrangement;
(iii) security or dealership deposited for the performance of the contract for supply of goods or provision of services; or
(iv) an advance under the long-term projects for supply of capital goods except those specified in item (ii):
Provided that if the amounts received under items (i) to (iv) become refundable, such amounts shall be deemed to be deposits on the expiry of fifteen days from the date on which they become due for refund:
Provided further that where the said amounts become refundable, due to the deposit taker not obtaining necessary permission or approval under the law for the time being in force, wherever required, to deal in the goods or properties or services for which money is taken, such amounts shall be deemed to be deposits.
Explanation.— For the purposes of this clause,—
(i) in respect of a company, the expression “deposit” shall have the same meaning as assigned to it under the Companies Act, 2013;
(ii) in respect of a non-banking financial company registered under the Reserve Bank of India Act, 1934, the expression “deposit” shall have the same meaning as assigned to it in clause (bb) of the section 45-I of the said Act;
(iii) the expressions “partner” and “firm” shall have the same meanings as respectively assigned to them under the Indian Partnership Act, 1932;
(iv) the expression “partner” in respect of a limited liability partnership shall have the same meaning as assigned to it in clause (q) of section 2 of the Limited Liability Partnership Act, 2008;
(v) the expression “relative” shall have the same meaning as assigned to it in the Companies Act, 2013;
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Meaning of Deposit under Companies Act 2013
Deposit Under Companies Act, 2013 and Companies (Acceptance of Deposits) Rules, 2014
Deposit is defined under Section 2(31) of Companies Act, 2013,”deposit” includes any receipt of money by way of depositor 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.
Rule 2(1) (c) of Companies (Acceptance of Deposits) Rules, 2014, “deposit” includes any receipt of money by way of deposit or loan or in any other form, 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 whose repayment is guaranteed by the Central Government or a State Government, or any amount received from a local authority, or any amount received from a statutory authority constituted under an Act of Parliament or a State Legislature ;
(ii) any amount received from foreign Governments, foreign or international banks, multilateral financial institutions (including, but not limited to, International Finance Corporation, Asian Development Bank, Commonwealth Development Corporation and International Bank for Industrial and Financial Reconstruction), foreign Governments owned development financial institutions, foreign export credit agencies, foreign collaborators, foreign bodies corporate and foreign citizens, foreign authorities or persons resident outside India subject to the provisions of Foreign Exchange Management Act, 1999 (42 of 1999) and rules and regulations made there under;
(iii) any amount received as a loan or facility 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 in clause (b) of section (2) of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980) , 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) ;
(iv) any amount received as a loan or financial assistance from Public Financial Institutions notified by the Central Government in this behalf in consultation with the Reserve Bank of India or any regional financial institutions or Insurance Companies or Scheduled Banks as defined in the Reserve Bank of India Act, 1934 (2 of 1934);
(v) any amount received against issue of commercial paper or any other instruments issued in accordance with the guidelines or notification issued by the Reserve Bank of India;
(vi) any amount received by a company from any other company;
(vii) any amount received and held pursuant to an offer made in accordance with the provisions of the Act towards subscription to any securities, including share application money or advance towards allotment of securities pending allotment, so long as such amount is appropriated only against the amount due on allotment of the securities applied for;
Explanation.- For the purposes of this sub-clause, it is hereby clarified that –
(a) Without prejudice to any other liability or action, if the securities for which application money or advance for such securities was received cannot be allotted within sixty days from the date of receipt of the application money or advance for such securities and such application money or advance is not refunded to the subscribers within fifteen days from the date of completion of sixty days, such amount shall be treated as a deposit under these rules.
[Provided that unless otherwise required under the Companies Act, 1956 (l of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992) or rules or regulations made thereunder to allot any share, stock, bond, or debenture within a specified period, if a company receives any amount by way of subscriptions to any shares, stock, bonds or debentures before the lst April,2014 and disclosed in the balance sheet for the financial year ending on or before the 3lst March,2014 against which the allotment is pending on the 3lst March,2015, the company shall, by the lst June 2015, either return such amounts to the persons from whom these were received or allot shares, stock, bonds or debentures or comply with these rules]
(b) any adjustment of the amount for any other purpose shall not be treated as refund.
[(viii) any amount received from a person who, at the time of the receipt of the amount, was a director of the company or a relative of the director of the Private company:
Provided that the director of the company or relative of the director of the private company, as the case may be, from whom 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 loans or deposits from others and the company shall disclose the details of money so accepted in the Board’s report;
(ix) any amount raised by the issue of bonds or debentures secured by a first charge or a charge ranking pari passu with the first charge on any assets referred to in Schedule III of the Act excluding intangible assets of the company or bonds or debentures compulsorily convertible into shares of the company within Ten years:
Provided that if such bonds or debentures are secured by the charge of any assets referred to in Schedule III of the Act, excluding intangible assets, the amount of such bonds or debentures shall not exceed the market value of such assets as assessed by a registered valuer;
(ixa) any amount raised by issue of non-convertible debenture not constituting a charge on the assets of the company and listed on a recognised stock exchange as per applicable regulations made by Securities and Exchange Board of India.
(x) any amount received from an employee of the company not exceeding his annual salary under a contract of employment with the company in the nature of non-interest bearing security deposit;
[(xi) any non-interest bearing amount received and held in trust;]
(xii) any amount received in the course of, or for the purposes of, the business of the company,-
(a) as an advance for the supply of goods or provision of services accounted for in any manner whatsoever provided that such advance is appropriated against supply of goods or provision of services within a period of three hundred and sixty five days from the date of acceptance of such advance:
Provided that in case of any advance which is subject matter of any legal proceedings before any court of law, the said time limit of three hundred and sixty five days shall not apply:
(b) as advance, accounted for in any manner whatsoever, received in connection with consideration for an immovable property] under an agreement or arrangement , provided that such advance is adjusted against such property in accordance with the terms of agreement or arrangement;
(c) as security deposit for the performance of the contract for supply of goods or provision of services;
(d) as advance received under long term projects for supply of capital goods except those covered under item (b) above:
(e) as an advance towards consideration for providing future services in the form of a warranty or maintenance contract as per written agreement or arrangement, if the period for providing such services does not exceed the period prevalent as per common business practice or five years, from the date of acceptance of such service whichever is less;
(f) as an advance received and as allowed by any sectoral regulator or in accordance with directions of Central or State Government;
(g) as an advance for subscription towards publication, whether in print or in electronic to be adjusted against receipt of such publications;“]
Provided that if the amount received under items (a), (b) and (d) above becomes refundable (with or without interest) due to the reasons that the company accepting the money does not have necessary permission or approval, wherever required, to deal in the goods or properties or services for which the money is taken, then the amount received shall be deemed to be a deposit under these rules:
Explanation.- For the purposes of this sub-clause the amount shall be deemed to be deposits on the expiry of fifteen days from the date they become due for refund.
(xiii) any amount brought in by the promoters of the company by way of unsecured loan in pursuance of the stipulation of any lending financial institution or a bank subject to fulfillment of the following conditions, namely:-
(a) the loan is brought in pursuance of the stipulation imposed by the lending institutions on the promoters to contribute such finance;
(b) the loan is provided by the promoters themselves or by their relatives or by both; and
(c) the exemption under this sub-clause shall be available only till the loans of financial institution or bank are repaid and not thereafter;
(xiv) any amount accepted by a Nidhi company in accordance with the rules made under section 406 of the Act.
Explanation.- For the purposes of this clause, any amount.-
(a) received by the company, whether in the form of instalments or otherwise, from a person with promise or offer to give returns, in cash or in kind, on completion of the period specified in the promise or offer, or earlier, accounted for in any manner whatsoever, or
(b) any additional contributions, over and above the amount under item (a) above, made by the company as part of such promise or offer,
shall be considered as deposits unless specifically excluded under this clause
Meaning of Relative under Banning of Unregulated Deposit Schemes Ordinance, 2019
The expression “relative” shall have the same meaning as assigned to it in the Companies Act, 2013; [As per Explanation (v) of Section 2(4) of Banning of Unregulated Deposits Ordinance 2019 ]
As per Section 2(77) of Companies Act 2013
relative‘‘, with reference to any person, means any one who is related to another, if—
(i) they are members of a Hindu Undivided Family;
(ii) they are husband and wife; or
(iii) one person is related to the other in such manner as may be prescribed;
Rule 4 of the Companies (Specification of definitions details) Rules, 2014 reads as follows
List of relatives in terms of clause (77) of section 2.-
A person shall be deemed to be the relative of another, if he or she is related to another in the following manner, namely:-
1. Father:
Provided that the term “Father” includes step-father.
2. Mother:
Provided that the term “Mother” includes step-mother.
3. Son:
Provided that the term “Son” includes step-son.
4. Son’s Wife.
5. Daughter.
6. Daughter’s husband.
7. Brother:
Provided that the term “Brother” includes step-brother.
8. Sister:
Provided that the term “Sister” includes step-sister.
However, following needs to be understood. Father, mother, son, brother and sister include the step-counterparts but there is no specific mention about step-daughter. Thus plain interpretation of the section indicates that step daughter is not a relative.