2.3 Query
Rule 3A of the Companies (Acceptance of Deposits) Rules, 1975
1.Rule 3A of the Companies (Acceptance of Deposits) Rules 1975, reads as under :
“Maintenance of liquid assets – (1) Every company shall before the 30th day of April, of each year deposit or invest, as the case may be, a sum which shall not be less than ten per cent of the amount of its deposits maturing during the year ending on the 31st day of March next following, in any one or more of the following methods, namely:
(a) in a current or other deposit account with any scheduled bank, free from charge of lien;
(b) in unencumbered securities of the Central Government or of any State Government;
(c) in unencumbered securities mentioned in clauses (a) to (d) and (ee) of Section 20 of the Indian Trusts Act, 1882 (2 of 1882).
(“Provided that with relation to the deposits maturing during the year ending on the 31st day of March, 1979, the sum required to be deposited or invested under this sub-rule shall be deposited or invested before the 30th day of September, 1978).
Explanation – For the purpose of this sub-rule, the securities referred to in clause (b) or clause (c) shall be reckoned at their market value.
(2) The amount deposited or invested, as the case may be, under sub-rule (1), shall not be utilized for any purpose other than for the repayment of deposits maturing during the year referred to in that sub-rule, provided that the amount remaining deposited or invested, as the case may be shall not at any time fall below ten per cent of the amount of deposits maturing until the 31st day of March of that year”.
2.Under Rule 10 of the aforesaid Rules, the auditor is required to certify the return to be submitted to the Registrar of Companies. Para III of Part B of the said return, the details regarding liquid assets, which inter-alia includes (a) amount of deposits maturing before 31st March next and (b) market value of securities.
3.The querists have raised the following issues arising from the provisions of the said Rule 3A for the opinion of the Expert Advisory Committee:
(i) For the purpose of investing ten per cent of amount of deposits maturing during the year ending 31st day of March next following, the investments are to be reckoned at market value. If a company desires to invest in units of Unit Trust of India Scheme 1964, whether it is issue price, re-purchase price or market price that a seller fetches in the open market that should be considered as the market value for the purpose of this Rule. The querists have informed that Unit Trust of India announces, from time to time, separate prices for the sale and repurchase of units. Normally, there is a difference of 80 to 90 paise per unit in sale and re-purchase price. The units are also being sold and purchased in the open market normally through the stock brokers. Therefore, a third price also comes into existence.The querists have pointed out that concept of market value under the wealth-tax Act, 1957 has been interpreted to mean the best price the vendor would fetch for the property if sold in the open market on a particular day. Therefore the querists are of the view that the price which a person can establish by sale instances around the date is the market value and not the re-purchase price or issue price quoted by Unit Trust of India.
(ii) In the event the deposits which are maturing in a financial year are not collected by the depositor after maturity, what would be its position in the next financial year? Whether such matured deposits have to be considered as maturing deposits and 10% in respect thereof would also have to be deposited every year till the deposit is withdrawn.
The querists have argued that the word ‘maturing’ is used in the present continuous tense and would apply only to such deposits which are maturing within a period of 12 months beginning from Ist April to31st March of the next year. Once the deposit has matured in a previous financial year, it cannot be termed as maturing in subsequent financial year. Thus, the deposits having matured and not collected by the depositor would not entitle the company to utilize 10% in respect thereof for repayment or deemed repayment. It would mean that the 10% deposited cannot be withdrawn in respect of the deposits which have not been collected by the depositor. Therefore there is no question of the amount to be deposited in the next year.
The querists have suggested an alternative interpretation that the entire amount deposited in respect of maturing deposits can be withdrawn for repayment of deposits in the next year and as such in respect of deposits already matured but not collected, 10% can be withdrawn.
(iii) Since the amount deposited/invested under this Rule can be utilized only for the purpose of repayment of deposits, does it mean that the company has to use the same amount for repayment of deposits only or whether the company can first repay the deposits and withdraw this amount afterwards for its own utilisation?
(iv) Since under the Rules, a time limit of one month is given for making this investment, is it necessary for the company to invest 10% of deposits maturing within the period of that one month and then withdraw the same or can the company invest 10% of deposits maturing from the date it invests the amount till the 31st March next following? In this context, the querists have quoted the following Circular (No. 3/13/80-CLX) issued by the Department of Company Affairs which they feel is vague and does not clarify the point.
“With reference to your letter No. Comm 3(b)3999, dated the 28th April, 1980 on the subject mentioned above, I am directed to say that Rule 3A of the Companies (Acceptance of Deposits) Rules, 1975, requires a company to deposit 10% of the deposits maturing during the year. This amount can be utilized only for repayment of deposits and the amount is to be kept at the level of 10% of the deposits maturing. Accordingly, there does not appear to be any question of company not required to keep deposit if they have to pay some deposits in April itself. However, in case of doubt details of particular case under reference with full facts may be sent to the Department for consideration”.
Opinion September 20,1984
The point-wise opinion of the Expert Advisory Committee on the issues raised by the querists is as below.
(i) The market value of units issued by the Unit Trust of India should be arrived at on the basis of their market prices prevailing in the open market at the relevant date.
(ii) In respect of the deposits matured in any preceding year but not withdrawn by the depositor, the Committee is of the opinion that such deposits should not be considered as “maturing” deposits for the computation of 10% to be maintained as liquid assets for the current year since these deposits matured in an earlier year. In other words, no further investment or deposit need be made by the company in respect of such deposits. However, the amount invested or deposited in respect of such deposits should not be withdrawn by the company, i.e., it should be carried forward till the deposits are actually withdrawn by the depositor.
(iii) The company can first repay the deposits and then withdraw the amount deposited invested by it under this Rule for its own utilization since the purpose for which such deposit/investment was made has been fulfilled subject to the other requirements of the Rule.
(iv) On a strict interpretation of Rule 3A, the company will have to deposit/invest ten per cent of the amount maturing during the month of April also, although, this deposit investment may be withdrawn by the company in the same month, subject to the other requirements of the Rule. The words “….. the amount remaining deposited or invested as the case may be, shall not at any time fall below ten per cent of the amount of deposits until the 31st day of March that year” (cl. 2), do not suggest that the deposit/investment has to be carried until the 31st day of March of that year. In other words, ten per cent of the remaining maturing deposits has to be maintained till that date. |