Sections 74 and 75 of the Companies Act, 2013: Repayment of Old Deposits and Damages for Fraud
Sections 74 and 75 form part of Chapter V of the Companies Act, 2013, dealing with acceptance and repayment of deposits by companies. Section 74 addresses deposits accepted before commencement of the 2013 Act that remained unpaid, while Section 75 imposes unlimited personal liability on responsible officers where such deposits were accepted with an intent to defraud or for a fraudulent purpose.
Section 74 - Repayment of deposits accepted before commencement of the Act
Meaning: Section 74 applies where a company had accepted a deposit before the Companies Act, 2013 came into force and the deposit, any part of it, or interest remained unpaid at commencement or became due thereafter.
Section 74(1): Statement to Registrar and repayment
Clause (a): The company must file with the Registrar a statement of deposits accepted by it, the sums remaining unpaid, interest payable and arrangements made for repayment, within the statutory period specified in Section 74(1)(a). The provision operates notwithstanding contrary terms in another law, the deposit conditions or a scheme framed under law.
Clause (b): Following the amendment effective from 15 August 2018, the company must repay the deposit within three years from commencement of the Act or on or before expiry of the period for which the deposit was accepted, whichever is earlier. Any renewal must comply with Chapter V and the Companies (Acceptance of Deposits) Rules, 2014.
For the statement contemplated by Section 74(1)(a), Rule 20 of the Companies (Acceptance of Deposits) Rules, 2014 prescribes Form DPT-4, titled "Statement regarding deposits existing on the commencement of the Act."
Section 74(2): Power of the Tribunal to allow further time
The National Company Law Tribunal may, on an application by the company, allow further time for repayment. In deciding the application, the Tribunal may consider the company's financial condition, the amount of deposit or interest payable and other relevant matters.
Section 74(3): Consequences of failure to repay
If the company fails to repay the deposit, part of the deposit or interest within the time under Section 74(1), or within further time allowed by the Tribunal under Section 74(2), the company remains liable to pay the deposit and interest and is also exposed to the statutory punishment under Section 74(3). The section provides a fine for the company ranging from Rs. 1 crore to Rs. 10 crore. An officer of the company who is in default may face imprisonment up to seven years, or a fine from Rs. 25 lakh to Rs. 2 crore, or both.
Section 75 - Damages for fraud
Meaning: Section 75 is an additional civil-liability provision for fraudulent deposit-taking connected with a failure to repay deposits covered by Section 74. Mere non-payment is not, by itself, the fraud condition stated in Section 75; it must also be proved that the deposits were accepted with intent to defraud depositors or for a fraudulent purpose.
Section 75(1): Unlimited personal liability of responsible officers
Where the conditions of Section 75(1) are established, every officer responsible for acceptance of the deposit becomes personally responsible, without limitation of liability, for losses or damages incurred by depositors. This operates without prejudice to Section 74(3) and liability under Section 447 relating to fraud.
Section 75(2): Right to take proceedings
A person, group of persons or association of persons that incurred loss because of failure to repay the deposits, part thereof or interest may institute a suit, proceeding or other action as contemplated by Section 75(2).
Section 74 and Section 75 - Key difference
| Provision | Main subject | Core consequence |
|---|---|---|
| Section 74 | Repayment of deposits accepted before commencement of the Companies Act, 2013 | Filing, repayment obligations, possible extension by Tribunal and punishment for default |
| Section 75 | Fraudulent acceptance of deposits coupled with failure to repay under Section 74 | Unlimited personal liability of responsible officers for depositor losses, in addition to other statutory liability |
Practical points
- Section 74 is specifically directed to deposits accepted before commencement of the Companies Act, 2013 and remaining unpaid or becoming due thereafter.
- Form DPT-4 is the prescribed statement under Rule 20 for Section 74(1)(a).
- A company seeking additional time for repayment may apply to the NCLT under Section 74(2).
- Section 75 requires proof of fraudulent intent or fraudulent purpose in accepting the deposits before unlimited personal liability is attracted.
- Section 75 expressly preserves liability under Section 447 in an appropriate case.
Related Companies Act provisions
For the wider statutory framework, also see Section 73 - Prohibition on acceptance of deposits from public and Section 76 - Acceptance of deposits from public by certain companies.
This article is a general statutory guide. For compliance, proceedings or limitation issues in a specific matter, the applicable Act, rules, notifications and orders should be checked as on the relevant date.