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NCLT Allahabad Holds That Company Cannot Defeat Deposit Repayment Claim Based on Non-Member Status
In a significant ruling that clarifies the scope of repayment obligations under , the has held that a company cannot defeat a claim for repayment merely because the depositor is not a member of the company. The bench, comprising Judicial Member Praveen Gupta and Technical Member Ashish Verma, ordered Dhanraj Buildwell Pvt. Ltd. to repay ₹2.28 crore with interest within 30 days, rejecting arguments that the transaction did not qualify as a " " and that the petitioner, being a , lacked standing to seek repayment.
The case arose from a of ₹2.33 crore advanced by Dhanraj Builders to Dhanraj Buildwell Pvt. Ltd. The company repaid only ₹5 lakh, leaving ₹2.28 crore outstanding. When Dhanraj Builders approached the NCLT under the for repayment, the company resisted, contending that the money received was not a " " as defined under the Companies Act and . It further argued that Dhanraj Builders, being a , could not invoke the remedy available to depositors under the law.
Deposit Definition Covers Loans
The NCLT flatly rejected these arguments, anchoring its reasoning on the statutory definition of "
" under
. The bench observed that the definition encompasses any money received by a company by way of
,
, or in any other form, subject only to the exclusions specified in
.
"In view of the express language of
, the receipt of money by a company by way of
falls within the statutory ambit of '
', subject to the exclusions prescribed under
,"
the bench noted.
The tribunal examined the exclusions under Rule 2(1)(c) and found that the ₹2.28 crore advanced as a did not fall within any of them. Crucially, the company's own balance sheets reflected the amount as a long-term borrowing, further undermining its contention that the transaction was not a . The bench considered this a significant indicator of the true nature of the funds.
Non-Member Status No Bar
A key issue in the case was whether a could invoke the for repayment of deposits. The company argued that the legal framework governing deposits treats member deposits and deposits distinctly, and that only eligible public companies can accept deposits from non-members. Since Dhanraj Buildwell was not an eligible public company, it claimed that receiving money from a was impermissible, and therefore the petitioner could not demand repayment as a depositor.
The NCLT rejected this line of reasoning. It held that the law separately regulates deposits from members and deposits from persons other than members, but that does not mean a who has given money to a company is left without a remedy. The bench observed that the petitioner's status as a could not, by itself, defeat the repayment claim. The tribunal emphasized that even if accepting the money from a contravened the statutory framework, that would not allow the company to retain the money.
Not a Shield
The bench went further to address the company's argument that its alleged non-compliance with the rules governing acceptance of deposits should absolve it of liability. The NCLT firmly rejected this position, stating that non-compliance cannot give a company a right to retain money it has received. Instead, such non-compliance may have separate under the Companies Act.
"Even if accepting the money from a
contravened the statutory framework, that would not allow the company to retain the money,"
the bench observed. The tribunal noted that the
could examine whether action under the relevant provision was warranted, and that penal provisions exist for accepting deposits in
of the law. However, these consequences do not extinguish the depositor's right to repayment.
Financial Statements Confirm Liability
A critical piece of evidence in the case was the company's own financial statements. The NCLT found that Dhanraj Buildwell's balance sheets consistently showed the ₹2.28 crore as a long-term borrowing, confirming that the company itself treated the amount as a liability. The company attempted to rely on an undertaking claiming that the had already been repaid, but the tribunal found no independent evidence to establish such repayment. The financial statements continued to reflect the amount as outstanding, and the bench concluded that the alleged repayment was not proved.
Repayment Ordered Within 30 Days
Having determined that the ₹2.28 crore constituted a " " within the meaning of the Companies Act, the NCLT directed Dhanraj Buildwell to repay the amount with interest within 30 days. The tribunal also declined requests for further action, including an investigation by the , observing that the material on record did not establish fraud. The bench left it open for the to examine whether any penal action was warranted for the company's alleged of acceptance rules.
Implications for Corporate Practice
The ruling is significant for several reasons. It clarifies that the statutory definition of " " is broad and includes loans, leaving little room for companies to recharacterize funds to avoid repayment obligations. The decision also firmly establishes that a depositor's status as a is not a valid ground for refusing repayment. Companies that accept money from non-members cannot hide behind the regulatory framework to deny legitimate claims.
Legal practitioners take note: the NCLT's reasoning reinforces the principle that a company cannot profit from its own wrongdoing. Even if a company accepts deposits in violation of the law, it must still return the money. The separate for non-compliance do not relieve the company of its to the depositor.
The order also underscores the of a company's financial statements. When a company records a as a long-term borrowing in its balance sheet, it is difficult to later argue that the amount is not a or that the debt has been repaid in the absence of independent proof.
Conclusion
The 's judgment in the matter of serves as a reminder that statutory remedies for repayment are robust and cannot be circumvented by technical objections. The tribunal has sent a clear message: companies must honour their repayment obligations, and the depositor's membership status is irrelevant when the money falls within the definition of a . With the order mandating repayment within 30 days, the tribunal has provided swift relief to the depositor, while also leaving the door open for regulatory scrutiny of the company's conduct. This decision will undoubtedly be cited in similar disputes and may influence how companies manage accounts with non-members.
