DEPOSITS

DEPOSITS

Companies preferred to raise finance by accepting deposits form the public rather than taking loans from financial institution.

Section 58A - The Central Government may, in consultation with the Reserve Bank of India, prescribe the limits up to which, the manner in which and the conditions subject to which deposits may be invited or accepted by a company either from the public or from its members.

No company shall invite any deposit unless such deposit are in accordance with the rules made thereunder and an advertisement including therein a statement showing the financial position of the company, has been issued by the company in such form and in such manner as may be prescribed

The company should not in default in the repayment of any deposit or part thereof and any interest thereupon in accordance with the terms and conditions of such deposit.

Exemption

Nothing contained on Section 58A shall apply:-

1. Banking Company
2. Such other companies as the Central Government may, after consulting the Reserve Bank Of India, specify in this behalf
3.  Such class of financial companies as the Central Government may, after consulting the Reserve Bank of India, specify in this behalf except the provisions relating to advertisement.

Nomination by Depositors - Section 58A(11)

A depositor may, at any time, make a nomination and the provisions of Sections 109A and 109B shall, as far as may be, apply to the nomination made.

Deposit on the name of Minor

If the Deposit is in the name of the minor, the name of guardian should be stated in the application and the guardian signs the form for and on behalf of the minor.

Deposit in Joint Name - All correspondence should be made in the name of the person whose name appears first in the order of the joint names.

Deposit Receipt is not transferred by assignment, endorsement, and transfer or otherwise.

Addition of one or more names(s), as joint holders, on a fixed Deposits Receipt during the period of fixed Deposit is not permissible.

Defaults in Repayment of Deposits to small Deposit holders – Section 58AA

Every company, which accepts deposits from small depositors, shall intimate within sixty days from the date of default to the Tribunal any default made by it in repayment of any such deposits or part thereof or any interest thereupon.

Section 58A(9) Where a company accepts or invites any deposit in excess of the limits prescribed or in contravention of the manner of condition    

(a) the company shall be punishable,

     (i) where such contravention relates to the acceptance of any deposit, with fine which shall not be less than an amount equal to the amount of the deposit so accepted;

     (ii) where such contravention relates to the invitation of any deposit, with fine which may extend to ten lakh rupees]but shall not be less than fifty thousand rupees

     (b) every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to five years and shall also be liable to fine