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TMI Blog1986 (2) TMI 272X X X X Extracts X X X X X X X X Extracts X X X X ..... so deposited by the company have been shown in the balance-sheets of the company for the relevant periods on the assets side under the general heading "loans and advances". Under this heading, on the assets side of the balance-sheet, the amounts of the deposits are shown under the sub-heading "deposits with joint stock companies". For the period ending October 31, 1980, the company had so deposited a sum of Rs. 50,00,000 with various independent companies. For the period ending on October 31, 1981, the company had so deposited a sum of Rs. 76,00,000 and for the period ending on October 31, 1982, the company had so deposited a sum of Rs. 35,00,000 in various joint stock companies. The particulars of these investments are set out in exhibit "C" to the petition. The deposits are with companies such as National Organic Chemical Industries Limited, Tata Oil Mills, Mahindra Mahindra Limited, The Indian Hotels Company Limited and other reputed and independent companies. The amount of deposits in the aggregate exceeds 30 per cent. of the subscribed capital of the appellant company and its free reserves. The company received a show-cause notice dated June 12, 1984, from the office o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t ( a )thirty per cent. of the aggregate of the subscribed capital of the lending company and its free reserves where all such other bodies corporate are not under the same management as the lending company;............". The relevant provisions of section 371 of the Companies Act, 1956, are as follows : "371. (1) Every person who is a party to any contravention of section 369 or section 370 excluding sub-section (1C) or (1D), or section 370A including in particular any person to whom the loan is made, or in whose interest the guarantee is given or the security is provided, shall be punishable with fine which may extend to five thousand rupees or with simple imprisonment for a term which may extend to six months". Under the second proviso to section 370 of the Companies Act, the aggregate of the loans made by a company to all bodies corporate shall not exceed, without the prior approval of the Central Government, thirty per cent of the aggregate of the subscribed capital of the lending company and its free reserves where all such other bodies corporate are not under the same management as the lending company. The only question which arises in the present case is whether th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving money and the party receiving money. But, in the case of a deposit, the delivery of money is usually at the instance of the giver and it is for the benefit of the person who deposits the money the benefit normally being earning of interest from a party who customarily accepts deposits. Deposits could also be for safe-keeping or as a security for the performance of an obligation undertaken by the depositor. In the case of a loan, however, it is the borrower at whose instance and for whose needs the money is advanced. The borrowing is primarily for the benefit of the borrower although the person who lends the money may also stand to gain thereby by earning interest on the amount lent. Ordinarily, though not always, in the case of a deposit, it is the depositor who is the prime mover while in the case of a loan, it is the borrower who is the prime mover. The other and more important distinction is in relation to the obligation to return the amount so received. In the case of a deposit which is payable on demand, the deposit would become payable when a demand is made. In the case of a loan, however, the obligation to repay the amount arises immediately on receipt of the loan. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which is perhaps the most obvious is that the deposit not for a fixed term does not seem to impose an immediate obligation on the depositee to seek out the depositor and repay him. He is to keep the money till asked for it. A demand by the depositor would, therefore, seem to be a normal condition of the obligation of the depositee to repay". Mr. Nilkanth, learned advocate for the respondents, placed some emphasis on the sentence "the two terms are not mutually exclusive". He submitted that a loan includes a deposit. This submission cannot be accepted. The Privy Council was referring to the fact that both these transactions involved bailment of money. It went on to distinguish the two for the purpose of the Limitation Act on the basis of the mode of repayment, The Privy Council's observations cannot be read to mean that a loan would include a deposit. The Privy Council observed that certain features are common to the two transactions while certain features are not. In some cases, a deposit, for example, with a bank, may amount to a loan with conditions. The Privy Council went on to say that the two transactions were distinct. The Supreme Court in the case of Ram Ratan Gupta, [ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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