Advance for sale of immovable property excluded from deposit rules; prosecution for alleged Companies Act breach was quashed.

Amounts received by a company as advance towards sale of immovable property are excluded from the definition of "deposit" under the Companies (Acceptance of Deposits) Rules, 2014 when they are taken under an agreement or arrangement and adjusted against the property in accordance with that arrangement. The proviso deeming such advances to be deposits applies only where the amount becomes refundable because the company lacks the necessary approval or permission to deal with the property or service. On the facts, the company had acquired land, obtained conversion and development permissions, and entered written sale agreements; the advances were part of genuine property transactions and could not support penal action under Sections 73 and 76-A. Continuation of the prosecution was held to be an abuse of process and was quashed.

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Issues: Whether amounts received by a company as advance towards sale of immovable property, under agreements or arrangements and adjusted in terms thereof, fall within the definition of deposits under the Companies (Acceptance of Deposits) Rules, 2014, and whether prosecution for alleged contravention of Sections 73 and 76-A of the Companies Act, 2013 could be quashed.

Analysis: Rule 2(1)(c)(xii)(b) of the Companies (Acceptance of Deposits) Rules, 2014 excludes from the definition of deposit any amount received as advance in connection with consideration for property under an agreement or arrangement, provided the advance is adjusted against the property in accordance with the terms of that agreement or arrangement. The proviso deeming such amount a deposit applies only where the amount becomes refundable because the company lacks the necessary permission or approval to deal in the relevant property or service. On the material before it, the company had purchased land, obtained conversion and development permissions, and entered into written agreements for sale of plots. The advances were received in the course of such property transactions, and the record did not justify treating them as deposits for the purpose of penal action.

Conclusion: The advances were not deposits within the meaning of the Rules, and continuation of the criminal proceedings amounted to abuse of process. The prosecution was liable to be quashed.

Ratio Decidendi: Advance money received for sale of immovable property under an agreement or arrangement is excluded from the concept of deposit if it is to be adjusted against the property in accordance with the agreement, and criminal prosecution for deposit-related contravention cannot stand where that statutory exclusion applies.

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