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Deposit for the purpose of 274(1)(g)?

Sourav Modi (Learner!) (306 Points)

01 October 2010

My question is that for the purpose of section 274(1)(g), does the term 'deposit' include borrowing from anybody. For e.g, if a public company has borrowed money from an infrastructure company, which is not a Public Financial Institution, can it be considered as a deposit for the purpose of section 274(1)(g)?

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Ajay Mishra (Company Secretary) (74337 Points)
Replied 01 October 2010

Borrowing from any body is a broad term, so in case of public company the The Acceptence of Deposits Rules give details from whome you can accept deposits.

3. Disqualifications under clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.-

(a) Whenever a company fails to file the annual accounts and annual returns, as described in sub-clause (A) of clause (g) of sub-section (1) of section 274, persons who are directors on the last due date for filing the annual accounts and the annual returns for any continuous three financial years commencing on and after the first day of April, 1999, shall be disqualified.

(b) If a company has failed to repay any deposit, irrespective of the enactment, rules or regulations under which the deposits have been accepted by the companies, or interest thereon, or redeem its debentures, or pay any dividend declared on the respective due dates, and if such failure continues for one year, as described in sub-clause (B) of clause (g) of sub-section (1) of section 274, then the directors of that company shall stand disqualified immediately on expiry of that one year from the respective due dates:

Provided that all the directors who have been directors in the relevant year, from the due date to the expiry of one year after the due date, will be disqualified:

Provided further that disqualification on account of the reasons cited under this Rule shall also apply to the reappointment as a director.

Explanation.- For the purpose of this rule, it is clarified that non-payment of dividend referred to in sub-clause (B) of clause (g) of sub-section (1) of section 274 due to the reason of dividend not being claimed or kept in separate bank account as required under section 205A of Companies Act, 1956 or paid into Investors Education & Protection Fund as required under section 205C of that Act shall not be deemed to be a failure to make payment of dividend.

Regards

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Sourav Modi (Learner!) (306 Points)
Replied 01 October 2010

But the second part of my question is still unanswered.

Yogesh Shah (Managing Corporate Finance) (1051 Points)
Replied 05 October 2010

Hi Sourav ....

Sec. 274 (1) (g) (B) covers 'DEPOSITS' - yes, all deposits. Examples are - security deposit from suppliers, deposits from employees, public deposits etc.

In question, you are talking about 'BORROWINGS'. This is a different part and borrowings are not covered in Sec. 274(1)(g)(B).

Eagerly waiting for other's opinions also.