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TMI Blog1985 (9) TMI 282X X X X Extracts X X X X X X X X Extracts X X X X ..... taken for contravention by the company of section 370 of the Companies Act, 1956. In the said notice, it has been, inter alia , stated as follows : "Whereas the company has deposited Rs. 25.80 lakhs with various companies. Whereas section 370 provides that no company shall make loans to all bodies corporate exceeding 20% or 30%, as the case may be, and if it exceeds, then the company is required to obtain prior approval of the Central Government. Whereas the total of subscribed capital and reserves, i.e., Rs. 12,00,000 and Rs. 11,93,028, respectively, amounting to Rs. 23,93,028 and 30% of this come to Rs. 7,17,908 whereas the company has deposited in other companies amounting to Rs. 20.80 lakhs. Prima facie it has exceeded the limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. and the transaction is squarely a "loan" within the meaning of section 370 of the Companies Act. Then again, rule 2 of the Companies (Acceptance of Deposits) Rules, 1975, provides as follows : " 2. Definitions. In these rules, unless the context otherwise requires, ...... ( b )'deposit' means any deposit of money with, and includes any amount borrowed by, a company, but does not include ...... ( iv )any amount received by a company from any other company;" If this be so, then, in the present case, since there is no dispute that the moneys given by the company are to another company, the same cannot be considered as a "deposit", but would in fact be a "loan". In the circumstances, the petitioners would be entitled to no relief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n section 370 must now be construed as dealing with loans not amounting to deposits, because, otherwise, if deposit of moneys with corporate bodies were to be treated as loans, then deposits with scheduled banks would also fall within the ambit of section 370 of the Companies Act. Mr. Rele has, however, fairly conceded that deposits with scheduled banks do not fall within the ambit of section 370 of the Companies Act. Then to treat certain deposits of money and not others as being within the ambit of section 370 of the Act would be to give an inconsistent construction to the section. In the circumstances, the contention of Mr. Rele that in this case the moneys given by Birla Consultants Ltd. to the Associated Cement Companies Ltd. is a lo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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