GROUP ASSIGNMENT

BUSINESS LAW

SUBMITTED TO:

Prof. M. C. Gupta

SUBMITTED BY:

S.NO. NAME ROLL NO.

1 Aishwar Shetty 191308
2 Ajinkya Yavalkar 191309
3 Megha Shah 191333
4 Nishit Garwasis 191338
5 Sonal Gupta 191355
 ACKNOWLEDGEMENT

We would like to thank the Institute of Management, Nirma University for including
Business Law in the curriculum of the MBA (Full-Time) program. We would also like to
thank Prof. M. C. Gupta, without whose constant guidance and support this assignment
would not have been possible.

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 INDEX

S.No. Topic Page no.

1 INTRODUCTION 4
2 FORMALITIES AND PROCESSES 4
3 ELIGIBLE COMPANIES UNDER SECTION 73 8
4 CONDITIONS FOR ACCEPTANCE OF DEPOSITS 9
5 VALIDITY OF CIRCULAR 9
6 TRANSITORY PROVISION 11
7 EXAMPLES OF A FEW NBNFCs LISTED ON 12
BSE/NSE

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 INTRODUCTION

A non-banking non-financial company is defined as an industrial concern or a company

whose principal activity is agricultural operations or trading in goods and services or real
estate and which is not classified as a financial or a miscellaneous or a residuary non-banking
company.

The deposit taking activity of the NBNFCs is regulated by the Department of Company
Affairs, Government of India under the Companies (Acceptance of Deposits) Rules, 1975, as
applicable to such companies, which are neither banking companies nor financial companies,
framed under Section 58A of the Companies Act, 1956. Deposits of such companies include
any deposit of money with it including any amount borrowed by it but does not include any
amount received from the Government or guaranteed by the Government, loan from any
banking company and financial institution, any amount received by way of security deposit,
subscriptions to its shares, any amount received from any other company, any amount
received from its directors, any amount raised by the issue of bonds or debentures secured by
the mortgage of any immovable property and unsecured loans brought in by the promoters.

FORMALITIES AND PROCESSES

NBNFCs are required to deposit or invest a sum, before the 30 th of April of each year, which
should not be less than 15 per cent of the amount of its deposits maturing during the year
ending on the 31st March next in any one or more of the following methods, namely, in a
current or other deposit account with any scheduled bank free from charge or lien, in
unencumbered securities of the Central or the State Government, specified trusts and Housing
Development Finance Corporation. Such amount deposited or invested should not be utilized
for any purpose other than the repayment of deposits maturing during the year. Every
NBNFC intending to invite deposits should issue an advertisement for the purpose in a
leading English newspaper and in one vernacular newspaper circulating in the State of its
registered office.

An NBNFC should not accept or renew any deposit unless an application is made by the
intending depositor for the acceptance of such deposit and such application contains a
declaration by such person that the amount is being deposited neither out of borrowed funds
nor by accepting deposits from any other person. The company should issue a receipt
acknowledging the receipt of money. Such companies should keep at its registered office
registers furnishing the particulars of the depositors and their deposits. Each company should
file a return of deposits with the registrar on or before 30 th of June every year. The company,
which acts in contravention to the Rules, is punishable with a fine of up to Rs.500 or more
depending on the continuation of the violation.

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 BEFORE INVITING DEPOSITS

As per the provisions of Companies Act, 2013, a company has to submit a copy of
advertisement before inviting deposits from the public in prescribed format (Form DPT-1)
with Registrar of Companies (ROCs). The said format is being filed by company through
Form GNL-2. A list of companies, which have filed copy of advertisement has been given
below.

You may see the details of such advertisement as filed with ROCs through View Public
Document (VPD) facility. Steps to view the Advertisement:

• 1. Login to MCA portal from here. Post login, kindly follow the below steps:
• 2. Under the TAB “Service” click on the ‘View Public Documents’ link to view
specific companies as per list to public pertaining to specific company(s).
• 3. Once the company(s) is/are selected, you will be prompted to make the payment of
prescribed fee per company.
• 4. On receipt of the payment, the system will allow you to view the documents
pertaining to the selected company from the ‘My Documents’ link after logging on to
the portal.
• 5. Form GNL-2 will be available under Other Documents Eforms category with the
Document ID.

KEY HIGHLIGHTS

283 sections of the Companies Act 2013 have been made effective now. Private Companies
have also been brought under the purview of the compliances of Companies Act 2013. Earlier
private companies were allowed to take loans from relatives and shareholders which were the
major sources of funds for most of the private companies apart from banks. The draft rules of
the new Act had specifically exempted deposits from shareholders from the definition of
deposits. However the final rules have removed the exemption and, only deposits taken from
directors are exempted from the definition of deposits provided he gives a declaration that the
amount he is giving is not out of borrowed funds. Going forward private companies shall
have to adhere to strict norms for borrowing from any person other than directors thereby
increasing the compliance costs for small private companies. Some of the key highlights are:

1) A private Company and an un-eligible public company cannot accept loans or

deposits from any person other than its Directors. For accepting any loan from person
other than Directors the company will have to comply with all the conditions
mentioned including creation of reserve account, deposit insurance, credit rating, etc.
2) Share application money received but not allotted shall be treated as deposit.

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 3) Any money received as advance in the course of ordinary business shall be treated as
deposit if goods or services are not provided within 365 days of receipt.
4) Private Companies and an un-eligible public company will have to file a return of
deposits on 30th June if they have any deposit received from person other than
director.
5) As of now if the private companies have any loan received from any person other than
director then they have to file a statement with the Registrar within 3 months of the
commencement of the Act i.e. 30th June 2014 in Form DPT-4.

The Companies Acceptance of Deposit rules are not applicable to:

1) A Banking Company,
2) A Non Banking Finance Company registered with RBI,
3) A Housing Finance Company registered with National Housing Bank,
4) Any other Company which the Central Government may specify.

DEPOSITS

Deposit includes any receipt of money by way of deposit or loan or in any other form, by a
Company.

Following amount received shall not be considered Deposits under this Chapter

1) Any amount received from Central Government /State Government/ local

authority/statutory authority constituted under an Act of Parliament or State
legislature /any other source whose repayment is guaranteed by Central Government
or State Government.
2) Any amount received from Foreign or international banks / multilateral financial
institutions/Foreign Government owned development financial institutions / foreign
export credit agencies / foreign collaborators/ foreign body corporate /foreign
citizens / foreign authorities / persons resident outside India subject to the provisions
of Foreign Exchange Management Act,1999.
3) Any amount received as a loan from a Banking Institution including co-operative
banks notified under Banking Regulation Act.
4) Any amount received as a loan from Public Financial Institution /Regional Financial
Institutions / Insurance Companies / Scheduled Banks.
5) Any amount received against commercial paper or any other instruments issued in
accordance with the guidelines of Reserve Bank of India.
6) Any amount received from any other Company.

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 7) Any amount received against subscription to any securities including share
application money provided the securities are allotted within 60 days from the date of
receipt of the application money or advance.

If the securities are not allotted within 60 days then the same should be refunded within 15
days else the same shall be treated as deposit after completion of 15 days.

8) Any amount received from a person who at the time of receipt was a director provided
the director furnishes a declaration that the amount given is not out of borrowed
funds.
9) Any amount raised by issue of bonds or debentures secured by first charge on any
assets referred to in Schedule III of the Act excluding intangible assets.
10) Any amount received from an employee of the company not exceeding his annual
salary in the nature of non interest bearing security.
11) Any amount received as a Non- interest bearing amount received or held in trust.
12) Any amount received in the course of or the purpose of the business for the
following:
a. As advance for the supply of goods or provision of services provided such
advance is appropriated against supply of goods or provision of service within
365 days from the receipt of such amount,
b. As advance received in connection with consideration for property under an
agreement or arrangement,
c. As security deposit for the performance of the contract for supply of goods or
provision of services.
d. As advance received under long term projects for supply of capital goods.

If any amount received under clause (a),(b) and (d) becomes refundable due to the reasons
that the company accepting money does not have necessary permission or approval to deal
with the goods or services then the amount received shall be deemed to be a deposit after the
expiry of 15 days from the date they become due for refund.

13) Any amount brought in by the promoters themselves or their relatives by way of
unsecured loan in pursuance of a stipulation of any lending institution on the
promoters. Such exemption shall be available only till the loans of the Financial
Institutions are not repaid and not thereafter.
14) Any amount accepted by a Nidhi Company in accordance with rules made u/s 406 of
the Act.

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 ELIGIBLE COMPANIES UNDER SECTION 73

Eligible Company means:-

1) A public Company and it has either of the following

2) Net worth of not less than one hundred crore rupees or turnover of not less than five
hundred crore rupees.
3) It has obtained the prior consent of the company in general meeting by means of a
special resolution
4) It has filed the above resolution with the Registrar of Companies before making any
invitation to the Public for accepting deposits.

Exception: An eligible company may accept deposits my means of an ordinary resolution if it

is accepting deposits within the limit specified under clause © of sub section (1) of section
180.

CONDITIONS FOR ACCEPTANCE OF DEPOSITS

1) No Company shall accept or renew deposit whether, secured or unsecured, which is

repayable on demand or upon receiving a notice within a period of less than 6 months
or more than 36 months from the date of acceptance or renewal of such deposit.

Exception : A company may for the purpose of meeting its short term requirements of funds
accept or renew deposits whose repayment is before six months provided they do not exceed
10% of the aggregate of the paid up share capital and free reserves of the company and they
are not repayable before 3 months from the date of deposits.

2) Deposits may be accepted in Joint names not exceeding 3.

3) A non Eligible company Shall accept deposit only to the extent of 25% of the
aggregate of paid up share capital and free reserves.
4) A Eligible companies 1) Deposit from members shall not exceed 10% of the
aggregate of paid up share capital and free reserves. 2) Deposit from others shall not
exceed 25% of the aggregate of paid up share capital and free reserves (excluding
deposit from members)
5) A Government companies shall not accept deposit more than 35% of the aggregate
of paid up share capital and free reserves.
6) Interest or Brokerage paid should not exceed the maximum rate of interest or
brokerages prescribed by the RBI for acceptance of deposits by Non Banking Finance
Companies.
7) The Company shall not reserve to itself whether directly or indirectly a right to alter,
to the prejudice or disadvantage of the depositor, any of the terms and conditions of
the deposit, deposit trust deed and deposit insurance contract.

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 VALIDITY OF CIRCULAR

The circular shall be valid until the expiry of six months from the date of closure of the
financial year in which it is issued or until the date on which the financial statement is laid
before the company in annual general meeting. For the purpose of this rule the date of the
issue of the newspaper in which the advertisement appears shall be taken as the date of the
issue of the newspaper and for the issue of circular effective date shall be the date of dispatch
of circular.

Guidelines for inviting deposits from members and public

Non Eligible Company Eligible Company S. 76

Resolution The Company should pass a
resolution in general meeting.
The company should pass a special
resolution in general meeting
and file the same with Registrar.
(If within limit specified u/s 180
then ordinary resolution shall
suffice).

Limit The total amount of outstanding The total amount of outstanding

deposits along with the deposits
invited should not exceed 25% of
the aggregate of paid up share
capital and free reserves.
deposits from members along with
the deposits invited from members
should not exceed 10% of the
aggregate of paid up share capital
and free reserves and for others it
should not exceed 25% of the
aggregate of paid up share capital
and free reserves.

Interest / Interest or brokerage payable shall Interest or brokerage payable shall

Brokerage not exceed the maximum rate of not exceed the maximum rate of
interest or brokerage prescribed interest or brokerage prescribed by
by RBI RBI

Tenure of The deposit should not be The deposit should not be

deposit repayable on demand or upon repayable on demand or upon
receiving a notice within a period receiving a notice within a period
of less than 6 months or more than of less than 6 months or more than
36 months. 36 months.

Circular Circular shall be issued to its Circular shall be issued in Form

members by registered post with
acknowledgement due  /speed
post/electronic mode in Form
DPT-1 / advertisement in Form
No. 1 / publish in one English
No. DPT-1 published in one
English newspaper and one
vernacular language newspaper
having circulation in the state of
registered office of the company. It

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 newspaper and one vernacular
language newspaper having
circulation in the state of
registered office of the company.
Statement Along with the circular a
statement shall be circulated
which shall contain the financial
position of the company, the
credit rating, the number of
depositors and the amount due.
Registration of The circular signed by majority of
Circular directors or their agents duly
authorized along with the
statement shall be submitted to
registrar 30 days before the date
of such issue.
Validity of 6 months from the end of the
circular financial year in which it was
issued or the date on which the
AGM is held whichever is earlier.
Insurance Deposit insurance shall be taken
30 days prior to the date of
issuance of the circular or renewal
.Ceiling is Rs. 20000 per
depositor for principal and interest
Security If secured deposits are invited
then the company shall create a
charge on its assets referred to in
Schedule III excluding intangible
assets which shall not be less than
the amount remaining unsecured
by deposit insurance.
Form Form prescribed by the company
shall be submitted by the
intending depositor.
Declaration The form shall contain a
declaration that the deposit is not
made out of borrowed funds.
Deposit receipt A receipt shall be furnished within
2 weeks from the date of receipt
of money or realization of cheque
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shall also upload the circular on its
website.
 
Along with the circular a statement
shall be circulated which shall
contain the financial position of the
company, the credit rating, the
number of depositors and the
amount due.
The circular signed by majority of
directors or their agents duly
authorized along with the statement
shall be submitted to registrar 30
days before the date of such issue.
6 months from the end of the
financial year in which it was
issued or the date on which the
AGM is held whichever is earlier.
Deposit insurance shall be taken 30
days prior to the date of issuance of
the circular or renewal .Ceiling is
Rs. 20000 per depositor for
principal and interest
If secured deposits are invited then
the company shall create a charge
on its assets referred to in Schedule
III excluding intangible assets
which shall not be less than the
amount remaining unsecured by
deposit insurance.
Form prescribed by the company
shall be submitted by the intending
depositor.
The form shall contain a
declaration that the deposit is not
made out of borrowed funds.
A receipt shall be furnished within
2 weeks from the date of receipt of
money or realization of cheque
Deposit On or before 30th April of each
repayment year  a sum not less than 15% of
reserve account the amount of deposits maturing
in the current financial year and
the next financial years shall be
deposited in a scheduled bank in a
separate account called deposit
repayment reserve account which
shall be free from charge or lien.
On or before 30th April of each
year  a sum not less than 15% of
the amount of deposits maturing in
the current financial year and the
next financial years shall be
deposited in a scheduled bank in a
separate account called deposit
repayment reserve account which
shall be free from charge or lien.

Register A register of deposits shall be A register of deposits shall be

maintained at the registered office maintained at the registered office
and entries shall be made within 7 and entries shall be made within 7
days from the date of issuance of days from the date of issuance of
deposit receipt. deposit receipt.

Return  of A return shall be filed on or A return shall be filed on or before

deposits before 30th June of every year 30th June of every year with the
with the Registrar in Form Registrar in Form No. DPT- 3
No.DPT – 3 along with fee giving along with fee giving the status as
the status as on 31st March. on 31st March.

Penal Rate of A penal Rate of 18% p.a. shall be A penal Rate of 18% p.a. shall be
Interest payable on all overdue deposits payable on all overdue deposits

TRANSITORY PROVISION

Where in respect of any deposit accepted by a company before the commencement of this
Act, the amount of such deposit or part thereof or any interest due thereon remains unpaid on
such commencement or becomes due at any time thereafter, the company shall—

1) File with the Registrar a statement in form DPT-4 a statement of all deposits accepted
by the company and sums remaining unpaid along with the interest payable thereon
along with the arrangements made for such repayments.
2) Repay within one year from such commencement or from the date on which such
payments are due whichever is earlier.

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 EXAMPLES OF A FEW NBNFCs LISTED ON BSE/NSE

Here are a few examples of NBNFCs that are listed on NSE/BSE and are accepting public
deposits:

1) INFOSYS – Infosys made an initial public offer in February 1993 and its shares
were listed on stock exchanges in India in June 1993. Trading opened at Rs. 145
per share, compared to the IPO price of Rs. 95 per share. In October 1994, Infosys
made a private placement of 5,50,000 shares at Rs. 450 each to Foreign
Institutional Investors (FIIs), Financial Institutions (FIs) and body corporates. In
March 1999, it issued 20,70,000 ADSs (equivalent to 10,35,000 equity shares of
par value of Rs. 10 each) at US$34 per ADS under the American Depositary
Shares Program and the same were listed on the NASDAQ National Market. All
the above data is unadjusted for issue of stock split and bonus shares. During July
2003, June 2005 and November 2006, it made successful secondary ADR issues
of US$294 million, US$1.07 billion and US$1.605 billion respectively.
In December 2012, Infosys transferred the listing of its American Depositary
Shares (ADS) to the NYSE from the NASDAQ. In February 2013, Infosys got
listed in Euronext London and Paris markets. In June 2018, Infosys voluntarily
delisted its shares from Euronext London and Paris due to low average daily
trading volume of Infosys’ ADS o these exchanges which was not commensurate
with the related administrative requirements.

2) HUL - Hindustan Unilever Limited (HUL) is a British-Dutch manufacturing

company headquartered in Mumbai, India. Its products include foods, beverages,
cleaning agents, personal care products, water purifiers and consumer goods. HUL
was established in 1933 as Lever Brothers and following merger of constituent
groups in 1956 was renamed as Hindustan Lever Limited. The company was
renamed in June 2007 as "Hindustan Unilever Limited". As of 2019 Hindustan
Unilever portfolio had 35 product brands in 20 categories and employs 18,000
employees with sales of Rs. 34,619 crores in 2017-18.
In December 2018, HUL announced its acquisition of Glaxo Smithkline's India
business for $3.8 billion in an all equity merger deal with 1:4.39 ratio. However
the integration of 3800 employees of GSK remained uncertain as HUL stated
there was no clause for retention of employees in the deal. In January 2019, HUL
said that it expects to complete the merger with Glaxo Smith Kline Consumer
Healthcare (GSKCH India) this year. Shares of Hindustan Unilever Limited
(HUL) rallied over 5 per cent in intraday trade, hitting 52-week high on the
Bombay Stock Exchange (BSE) after the fast-moving consumer goods (FMCG)
major reported better-than-expected earnings during December quarter.The
country's largest consumer goods company on Friday reported a jump of 11.9 per
cent in consolidated net profit at Rs 1,616 crore for the quarter ended December,
2019, compared to Rs 1,444 crore in the corresponding period last year.During
October-December quarter, sales stood at Rs 9,696 crore as compared to Rs 9,357
crore in the year ago period. On volume front, the company reported a growth of 5
per cent despite a challenging market environment.
According to market experts, HUL's volume growth was higher than FMCG
sector's volume growth of 3 per cent during December quarter.

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3) Tata Motors - Tata Motors Limited, formerly Tata Engineering and Locomotive
Company (TELCO), is an Indian multinational automotive manufacturing
company headquartered in Mumbai, Maharashtra, India. It is a part of Tata Group,
an Indian conglomerate. Its products include passenger cars, trucks, vans, coaches,
buses, sports cars, construction equipment and military vehicles.
Tata Motors has auto manufacturing and assembly plants in Jamshedpur,
Pantnagar, Lucknow, Sanand, Dharwad, and Pune in India, as well as in
Argentina, South Africa, Great Britain, and Thailand. It has research and
development centres in Pune, Jamshedpur, Lucknow, and Dharwad, India and
South Korea, Great Britain, and Spain. Tata Motors' principal subsidiaries
purchased the English premium car maker Jaguar Land Rover (the maker of
Jaguar and Land Rover cars) and the South Korean commercial vehicle
manufacturer Tata Daewoo. Tata Motors has a bus-manufacturing joint venture
with Marcopolo S.A. (Tata Marcopolo), a construction-equipment manufacturing
joint venture with Hitachi (Tata Hitachi Construction Machinery), and a joint
venture with Fiat Chrysler which manufactures automotive components and Fiat
Chrysler and Tata branded vehicles. On 29 April 2019, Tata Motors announced a
partnership with Nirma University in Ahmedabad to provide a B.Tech. degree
programme for employees of its Sanand plant.

4) Neogen Chemicals - Incorporated in 1991 in Mahape, Navi Mumbai, Neogen

Chemicals is one of India’s leading manufacturers of bromine-based, and lithium-
based, specialty chemicals. The initial public offer by Neogen Chemicals, a
leading manufacturer of bromine and lithium-based specialty chemicals, opened in
April 2019. The IPO comprised an offer for sale (OFS) of 2.9 million equity
shares, aggregating Rs 62.4 crore and fresh issue of 3.2 million equity shares
aggregating Rs 70 crore in a price band of Rs 212 - Rs 215. In just 3 days times, it
was subscribed 41 times. 

5) Polycab India - Polycab is engaged in the business of manufacturing and selling

wires and cables and fast moving electrical goods ‘FMEG’ under the
‘POLYCAB’ brand. Apart from wires and cables, they manufacture and sell
FMEG products such as electric fans, LED lighting and luminaires, switches and
switchgear, solar products and conduits & accessories. The initial public offering
of wires and cables manufacturer Polycab India has received an overwhelming
response from investors across the board. The public issue was subscribed 51.87
times last April. 

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