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Exemption under section 58a

manpreet.kaur (Student) (184 Points)

28 September 2012

A PUBLIC LIMITED COMPANY WANTS TO BORROW 50 LAKH FROM A NON-BANKING FINANCIAL CORPORATION(NBFC)...WHETHER THIS PUBLIC LIMITED COMPANY IS EXEMPTED UNDER 58A OR NOT... PLEASE EXPLAIN IN DETAIL IN BOTH CASES... PLEASE REPLY SOON.. ITS VERY VERY URGENT

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(Guest)

Dear Manpreet,

Borrowings from an NBFC is exempted under the Rule 2 (b) (iii) of the Companies (Acceptance of Deposits) Rules, 1975. Thus, the company will not be required to issue an advertisement under Section 58A of the Companies Act 1956.

As per Rule 2 (b) (iii), “deposit” does not include :

“any amount received as a loan from the Industrial Finance Corporation of India established under the Industrial Finance Corporation Act, 1948 (15 of 1948), or from a State Financial Corporation established under the State Financial Corporations Act, 1951 (63 of 1951), or from the Shipping Development Fund Committee constituted under section 15 of the Merchant Shipping Act, 1958 (44 of 1958) or from the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963), or from the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964), or from an Electricity Board constituted under the Electricity (Supply) Act, 1948 (54 of 1948) or from the Life Insurance Corporation of India constituted under section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956), or from the Rehabilitation Industries Corporation of India Limited or the State Trading Corporation of India Limited or the Minerals and Metals Trading Corporation of India Limited or the Rural Electrification Corporation Limited or the Agricultural Finance Corporation Limited or the Industrial Reconstruction Corporation of India Limited or the Industrial Credit and Investment Corporation of India Limited or the National Industrial Development Corporation of India Limited or the Tamil Nadu Industrial and Investment Corporation Limited or the State Industrial and Investment Corporation of Maharashtra Limited "or from the General Insurance Corporation of India and its subsidiaries, namely, the National Insurance Company Limited, the New India Assurance Company Limited, the Oriental Fire and General Insurance Company Limited and the United Fire and General Insurance Company Limited" or from the Gujarat Industrial Investment Corporation Limited or from any Financial company wholly owned by the Central Government or State Government or from the Oil Industry Development Board or Housing Development Finance Corporation Limited, or from any other Financial Company or Public Financial Institutions which may be notified by the Central Government in this behalf in consultation with the Reserve Bank of India.”

As per Rule 2 (cc), a “Financial company” means a non-banking company which is a financial institution within the meaning of clause (c) of section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934).

Thus, borrowings by a public limited company from an NBFC is not covered under Section 58-A.

Regards,

Veeral Gandhi

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manpreet.kaur (Student) (184 Points)
Replied 28 September 2012

Thanx a lot veeral. ur replies r always perfect

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CS Ankur Srivastava (Company Secretary & Compliance Officer) (17853 Points)
Replied 29 September 2012

Perfectly replied by Mr. Veeral Gandhi our Learned Member.... :)

Borrowing from a Financial Company or any Public Financial Institution which may be notified by the Central Government in this behalf in consultaion with the Reserve Bank of India is exempted. Therefore, Deposit rules are not applicable to them it will be considered as Loan.

Thus, borrowings by a public limited company from an NBFC is not covered under Section 58-A.

Read more at: /forum/exemption-under-section-58a-222185.asp#.UGZ-0q6aRJE

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