Samay Publishing Limited facing acute cash crunch wants to utilise a portion of 'Deposit Repayment Reserve Account' to pay off its short-term…

CA Intermediate · Corporate and Other Laws · MTP · January 2025
Samay Publishing Limited facing acute cash crunch wants to utilise a portion of 'Deposit Repayment Reserve Account' to pay off its short-term creditors who are pressing hard for repayment of 20,00,000. Is it justified to use funds lying in ‘Deposit Repayment Reserve Account' in this manner? Give your answer as per the provisions of the Companies Act, 2013.

Suggested Answer and Working Notes:

Rule 13 of the Companies (Acceptance of Deposits) Rules, 2014, states that the amount deposited in the ‘Deposit Repayment Reserve Account' shall not be used by a company for any purpose other than repayment of deposits. In the given question, Samay Publishing Limited wants to utilise a portion of 'Deposit Repayment Reserve Account' to pay off its short-term creditors. Since there is a prohibition, Samay Publishing Limited is not permitted to utilise its 'Deposit Repayment Reserve Account' to pay off its short-term creditors.

Topics: Acceptance of Deposits by Companies

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