Loan from Director Is Not a ‘Deposit’ Under S. 73 of Companies Act, 2013; Subsequent Change in Director's Status Doesn't Alter Loan's Character: NCLT New Delhi - 2025-07-10

Loan From Director Is Not A 'Deposit'; Subsequent Exit Doesn't Alter Character: NCLT Dismisses Ex-Director's Plea

New Delhi: The National Company Law Tribunal (NCLT), New Delhi Bench, has delivered a significant ruling clarifying the distinction between a director's loan and a "deposit" under the Companies Act, 2013. The tribunal, presided over by Hon’ble Member (Judicial) Shri Manni Sankariah Shanmuga Sundaram, held that a non-interest-bearing amount received from a director before the commencement of the 2013 Act does not constitute a "deposit."

The NCLT dismissed a petition filed by Mr. Ramesh N. Keswani, a former 50% shareholder and director of Krishant Exim Pvt. Ltd., who sought the repayment of ₹1.75 crore, claiming it was a deposit that the company failed to return. The tribunal found the petition non-maintainable under Section 73(4) of the Act, which deals with the repayment of deposits.

Background of the Dispute

Mr. Ramesh N. Keswani approached the NCLT seeking repayment of a principal sum of ₹1,75,75,000 along with interest, totaling over ₹3.66 crore. He also sought penal action, including fines and imprisonment, against the company and its current directors under Sections 76A (Punishment for contravention of Section 73) and 447 (Punishment for fraud) of the Companies Act, 2013.

The central conflict stems from a larger dispute over the ownership of Krishant Exim Pvt. Ltd. Mr. Keswani alleged that his 50% shareholding was fraudulently transferred on February 10, 2020. He contended that from this date, his relationship with the company turned adversarial, and he became a member of the "public." Consequently, the amount he had previously provided as a loan should be treated as a "deposit" from the public, which the company was statutorily obligated to repay immediately to avoid violating Section 73 of the Act.

Arguments from Both Sides

Petitioner's Stance (Mr. Ramesh N. Keswani): - The amount of ₹1.75 crore advanced to the company should be treated as a "deposit." - Following his alleged fraudulent removal as a shareholder and director on February 10, 2020, his status changed to that of a member of the public. - As the Companies Act, 2013 prohibits companies from accepting deposits from the public without following a prescribed procedure, the company was bound to repay the amount immediately. - The company's continued classification of the sum as a "Loan from Director" in financial statements after this date was a fraudulent misrepresentation.

Respondents' Stance (Krishant Exim Pvt. Ltd. & Others): - The amount in question was never a "deposit." It was a non-interest-bearing loan received from a director, which is explicitly excluded from the definition of a deposit under the Companies (Acceptance of Deposits) Rules, 2014. - The funds were received in 2013, before the Companies Act, 2013, came into effect on April 1, 2014. - MCA General Circular No. 05/2015 clarifies that such pre-2014 amounts are not to be treated as deposits under the new Act, provided they are disclosed in financial statements, a condition the company complied with. - Mr. Keswani himself signed multiple financial statements classifying the amount as a director's loan, and he is therefore barred by the principle of estoppel from claiming otherwise. - The petition was misdirected under Section 73, which applies to deposits accepted after the 2013 Act's commencement. Any claim related to pre-2014 funds would fall under the transitional provisions of Section 74.

Tribunal's Analysis and Decision

The NCLT meticulously examined the arguments and evidence, arriving at a clear conclusion. The tribunal underscored that the nature of a financial transaction is determined at the time it occurs and does not retrospectively change based on subsequent events.

The judgment noted, "The Petitioner cannot now seek to alter the nature and character of the transaction, having himself consistently classified the amount as a loan from director and signed off on such classification in the statutory documents. The principle of estoppel applies squarely in such a situation."

Key findings of the tribunal include:

1. Nature of the Transaction: The amount was advanced before the Companies Act, 2013, and was consistently recorded as a "loan from director" in the company's financial statements, many of which were signed by the petitioner himself.

2. Statutory Exclusion: The Companies (Acceptance of Deposits) Rules, 2014, explicitly exclude amounts received from a company's director from the definition of a "deposit."

3. No Retrospective Reclassification: The tribunal found no legal basis for reclassifying the loan as a deposit due to the petitioner's subsequent change in status. It observed, "The statutory provisions do not contemplate any retrospective reclassification of a director’s loan into a deposit on account of a subsequent change in status."

4. Inapplicable Legal Provisions: Since the amount was not a "deposit" under the 2013 Act, the petition under Section 73(4) was not maintainable. The tribunal stated that even if it were a deposit, the correct provision would be Section 74, which deals with deposits accepted under the previous Companies Act, 1956.

The NCLT also noted that the core allegations of fraud regarding the share transfer were already sub-judice before the Delhi High Court and that the NCLT was not the appropriate forum to adjudicate those disputes in a petition for the repayment of a deposit.

Consequently, the tribunal dismissed Mr. Keswani's petition (C.P. No. 188 of 2024) and the associated application for an ad-interim stay on the sale of company property, concluding that no case was made out for invoking the penal provisions of the Companies Act.