TaxTMI 
TaxTMI 
1983 (2) TMI 327
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..../87 which was reduced to ₹ 6,40,000/- as on 31-3-1979. The money advanced by the partnership firm to the Company was the money deposited with the partnership firm by the members of the public. While so, the Reserve Bank Directions, 1973 placed certain restrictions on on-banking institutions including Chit Fund Companies receiving deposits from the public. The deposits accepted by non-banking institutions from its shareholders will be exempted only if a declaration was given by him by borrowing or accepting deposit from another person. The said directions also specified a limit beyond which the non-banking institutions could not accept deposits from the public. Since the company received deposits from the partnership firm which had acquired the money deposited from the public and since the amount of deposit also exceeded the limit specified in the Reserve Bank Directions, 1973, the Second Respondent filed C. C. No.2320 of 1979 on the file of the learned 16th Metropolitan Magistrate, Madras against the petitioners on the ground that they had violated the provisions of the Reserve Bank Directions, 1973. It is in these circumstances these writ petitions have been filed. 2. Mr. K....
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.... defined a chit fund company. Clause 2 (1) (f) defined the word 'deposit' thus: "Deposit means any deposit of money with, and includes any amount borrowed by, a company, but does not include:- (1) omitted, (2) any loans raised on terms involving the issue of debentures or the creation of a mortgage, pawn, pledge or hypothecation, charge including floating charge, or lien on the assets of the company or any part there, (3) to (6) omitted. (7) any loan received from a member of the company or nay money received from a member by way of subscription to any shares, stock, bonds and debentures (including calls or deposits received in advance). (8) in the case of a chit fund company, or any other company carrying on chit or kuri business, any subscription received from the members of a chit or kuri series in terms of the contract, or other arrangement treating thereto and in the case of a stock exchange or stock-broking company, any money received in connection with the purchase or sale of securities. (9) to (13) omitted." 3. In view of the definition of the deposit under the 1966 Directions the deposit cannot be taken of any amount borrowed by the company on the issue....
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....ital and free reserves of the company : provided that for the purpose of Clause (b), 'deposit' shall not include any loan secured by the creation of a mortgage or pledge of the assets of the company or any part thereof-rest omitted." 6. Clause 5 deals with existing deposits of miscellaneous non-banking companies. Cl. 5 contains an explanation to the effect that in arriving at the aggregate of the paid-up capital and free reserves for the purposes of this paragraph and paragraph 4, there shall be deducted from the aggregate of the paid-up capital and free-reserves, as appearing in the balance-sheet of the company, the amount of accumulated balance of loss, if any, disclosed in the balance-sheet. 7. The substance of the definition of the word 'deposit' under the Reserve Bank Directions, 1973 is that the money received from a person, who, at the time of the receipt of the loan, was or is a director of the company will not fall within the meaning of the term 'deposit'. Similarl, any money receipt by a private company from its shareholders will also not fall within the definition of 'deposit'. The proviso however provides that any such money receiv....
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....the date of acceptance or renewal of such deposit, exceeds, fifteen per cent of its net owned funds; (ii) any other deposit, if the amount of such deposit, together with the amount of such other deposits, not being deposits of the kinds referred to in sub-clause (1) of this clause, already received and outstanding in the books of the company as on the date of acceptance or renewal of such deposit, exceeds twenty-five per cent of its net owned funds. Explanation : For the purpose of this paragraph 'net owned funds' shall mean the aggregate of the paid-up capital and free reserves as appearing in the latest audited balance sheet of the company as reduced by the amount of accumulated balance of loss, deferred revenue expenditure and other intangible assets, if any, as disclosed in the said balance sheet." Section 45-I(bb) of the Act defines deposit thus: "Deposit shall include, and shall be deemed always to have included, any money received by a non-banking institution, by way of deposit, or loan or any other form, but shall not include amounts raised, by way of share capital or contributed as capital by partners of a firm." 9. The contention of Mr. Radhakr....
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....ates of interest and that consequently the impugned directions were valid. Exception was taken before the Bench regarding the particulars to be furnished in advertisements soliciting deposits which was not accepted. I am unable to appreciate the contention of Mr. Radhakrishnan how the amendment of the word deposit in the 1977 Directions would in any way alter the situation. 11. There is no substance in the contention that the fundamental rights of the petitioners under Article 19(1)(g) of the Constitution is in any manner affected. So far as the Chit Fund Company is concerned the Directions do not in any manner affect the business of the company as it only restricts the power of the company to borrow from certain quarters and in a particular manner. I am unable to understand how the petitioners' fundamental right can be affected when the Directions only place restrictions on the power of the chit fund company to borrow. I therefore reject the argument based on Article 19 of the Constitution of India. 12. I am therefore of the view that the decision in Mayavaram Financial Corporation Ltd. v. Reserve Bank of India, (1972-2 Mad LJ 72) clearly applies and the 1973 directions are ....