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CA Intermediate · Corporate and Other Laws · Acceptance of Deposits by Companies

Kaveri Engineering Ltd, an eligible company, accepted deposits. A depositor holds a deposit that is due for repayment, but the company defaults on repayment. Which statement correctly states the legal consequence regarding deposit repayment and the company's obligations?

The company must repay the deposit with interest, the depositor can approach the Tribunal for relief, and both the company and its officers in default face penalties. Lack of profits is no excuse and officers are not shielded by separate personality.

  1. AThe company must repay the deposit and interest, and the depositor may approach the Tribunal, while the company and its officers in default are liable to penaltyCorrect
  2. BThe depositor loses the right to interest once the maturity date passes
  3. COnly the company is liable, never its officers, because it is a separate legal person
  4. DThe default has no consequence if the company has no profits

Explanation

On default, the company must repay the deposit with interest, and a depositor can seek relief from the Tribunal. The company and officers in default are exposed to penalties and punishment. Absence of profits is not a defence, and officers in default are also liable.

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