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

Mehta Foods Pvt Ltd, a private company, receives Rs 5 lakh from its director Mr Mehta out of his own funds. He gives a written declaration that the amount is not borrowed from others, and the company discloses it in its financial statement. How is this amount treated under the Companies (Acceptance of Deposits) Rules, 2014?

The Rs 5 lakh is not a deposit. Money received from a director is excluded from deposits when the director gives a written declaration that it is not borrowed from others and the company discloses the details in its financial statement, so the amount's size or repayment time does not change the treatment.

  1. AIt is not a deposit, as money received from a director with a written declaration that it is not borrowed is excluded from depositsCorrect
  2. BIt is a deposit because every receipt from a director is a deposit
  3. CIt is a deposit because the amount exceeds Rs 1 lakh
  4. DIt is a deposit unless the amount is repaid within 30 days

Explanation

The Rules exclude from deposits any amount received from a director (or relative of a director of a private company) if the lender gives a written declaration that it is not borrowed funds, and the company discloses the details in its financial statement. Hence the amount is not a deposit. The Rs 1 lakh figure and the 30-day period are not the test for this exclusion.

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