Answer the following citing relevant provisions of the Companies Act, 2013: (i) Mantra Books & Media Ltd with a paid-up share capital of 10…

CA Intermediate · Corporate and Other Laws · MTP · September 2025
Answer the following citing relevant provisions of the Companies Act, 2013: (i) Mantra Books & Media Ltd with a paid-up share capital of 10 crore, has obtained a term loan of 10 lakh from ABC Industrial Bank for purchasing high quality papers. Mr. Devansh, a director of the company, contends that the loan should be treated as a "deposit" under the Companies Act, 2013. Is his contention correct? (ii) Aarav Systems Ltd. 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 10 lakh. Is it justified to use funds lying in 'Deposit Repayment Reserve Account' in this manner?

Suggested Answer and Working Notes:

(i) In terms of Rule 2 (1) (c) (iii) of the Companies (Acceptance of Deposits) Rules, 2014, any amount received as a loan or facility from any banking company shall not be considered as 'deposit'. In view of the above, the contention of Mr. Devansh that the term loan of 10lakh availed by the company from ABC Industrial Bank shall be considered as 'deposit', is not correct. (ii) 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. Since there is a prohibition, Aarav Systems Ltd. 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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