The National Company Law Tribunal (NCLT), Allahabad Bench at Prayagraj, has held that a company cannot avoid repayment of money qualifying as a “deposit” under the Companies Act, 2013 merely because the person who advanced it was not a member of the company.
The bench of Praveen Gupta (Judicial Member) and Ashish Verma (Technical Member) directed the company to repay the outstanding deposit together with interest, as claimed by the petitioner, within 30 days.
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The dispute arose from financial assistance extended by Dhanraj Builders, a proprietorship concern of Rakesh Sharma, to Dhanraj Buildwell Private Limited.
According to the petitioner, the respondents approached it in December 2014 for funds to purchase land and commence business operations. The petitioner stated that it advanced ₹2,33,75,000 on orally agreed terms requiring repayment on demand and payment of interest at the rate charged by the bank.
The petitioner submitted that the company subsequently purchased two properties in Bareilly, relying on sale deeds dated January 6, 2015. It alleged that only ₹5 lakh was repaid on January 27, 2016.
In its petition, the firm sought repayment of principal of ₹2,28,75,000 and interest of ₹2,49,03,119, aggregating to ₹4,77,78,119. The interest claim was calculated at 18% per annum for the period stated in the petition.
The petitioner also relied on the company’s financial statements, including those for financial years 2015–16 and 2020–21, to establish that the borrowing continued to be recorded as an outstanding liability.
The respondents disputed the claim and relied on a stamped undertaking dated February 8, 2018, purportedly signed by Rakesh Sharma. The document stated that the money advanced by Dhanraj Builders had been received back and that nothing remained payable by the company.
The petitioner challenged the undertaking as forged and disputed the signature appearing on it. It also argued that the respondents had not disclosed when or how the alleged repayment had occurred.
The respondents separately questioned the maintainability of the proceedings. They contended that the transaction did not qualify as a deposit and that the petitioner, being a non-member of the company, could not invoke Section 73(4) of the Companies Act.
They also raised objections concerning the absence of a written agreement, limitation and the applicability of Section 74 to transactions occurring after April 1, 2014.
Examining Section 2(31) of the Companies Act, the tribunal explained that the definition of “deposit” extends beyond amounts described strictly as deposits. It includes money received by a company by way of a loan or in another form, subject to the prescribed exclusions.
The bench found that the receipt of financial assistance by the company was not disputed. The respondents’ principal defence was that the loan had subsequently been repaid.
The tribunal also noted that the company’s balance sheets recorded the borrowing under “Long Term Borrowings”. After examining the exclusions under Rule 2(1)(c) of the Companies (Acceptance of Deposits) Rules, 2014, it concluded that the amount in question did not fall within any excluded category.
Accordingly, the tribunal held that the outstanding loan qualified as a deposit under Section 2(31).
The tribunal rejected the repayment defence, finding that the undertaking was unsupported by evidence of an actual payment.
The document did not specify the date of repayment, the mode of payment, the bank account from which the money was transferred or any corresponding bank statement. No independent receipt or other supporting document establishing repayment had been produced.
The bench further noted that the company’s financial statements for 2020–21 continued to show the borrowing as outstanding. Although the respondents claimed that these statements had been incorrectly filed, they produced no documentary evidence supporting that assertion.
No revised financial statements showing discharge of the liability were submitted. The tribunal also observed that the company had not sought rectification under Section 131 of the Companies Act.
Rakesh Sharma’s earlier association with the company as a director did not, by itself, establish repayment. In the absence of corroborating evidence, and with the signature on the undertaking disputed, the tribunal held that the document could not establish discharge of the liability.
Addressing the central maintainability objection, the tribunal acknowledged that Section 73(2) regulates acceptance of deposits from members, subject to statutory conditions. However, it held that membership was not the sole determining factor for examining the repayment remedy where the amount received otherwise qualified as a deposit.
The bench reasoned that the company had accepted the money and recorded it as a loan liability in its financial statements. It could not subsequently defeat repayment by relying only on the lender’s non-member status.
Even if acceptance of the money from a non-member contravened the statutory framework, the tribunal held that such non-compliance could not, in the circumstances of the case, give the company a right to retain the funds.
The tribunal observed that contravention of Section 73 could attract punishment under Section 76A. It stated that the Registrar of Companies may examine whether penal action against the company was warranted in accordance with law.
The tribunal also rejected the argument that the absence of a formal written agreement was fatal to the repayment claim.
Referring to Sections 9 and 10 of the Indian Contract Act, 1872, it explained that promises may be express or implied and that an enforceable agreement does not invariably require a formal written document.
In this case, the advancement and receipt of funds were established from the material on record. The company’s financial statements and its repayment of ₹5 lakh further corroborated the underlying transaction.
The tribunal therefore held that the absence of a written agreement did not, by itself, negate the company’s repayment obligation.
The tribunal allowed the prayers seeking repayment of the deposit and interest within 30 days. It directed the company to pay the outstanding amount together with interest under Section 73(4), read with Rule 17 of the Companies (Acceptance of Deposits) Rules, 2014, as claimed by the petitioner.
However, it declined the separate prayers seeking action under Sections 74(3) and 75(2) and an investigation into the company’s affairs by the Serious Fraud Investigation Office.
The bench held that an unpaid deposit, without sufficient additional material, did not by itself establish fraud. It therefore partly allowed and disposed of the petition.
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