Repayment, Damages for Fraud, and Punishment

In one line

Deposits taken before the 2013 Act had to be cleared out, a company that fails to repay faces very large fines, and where the deposits were taken to defraud, the officers responsible pay personally without any limit.

In exam wording: section 74 required deposits accepted before the commencement of this Act to be declared to the Registrar and repaid within three years or by the end of their term, whichever is earlier; section 75 makes every officer responsible for accepting a deposit personally responsible without any limitation of liability where the deposits were accepted with intent to defraud; and section 76A punishes any contravention of section 73 or section 76.

Why the law has this at all

Three different problems, one after the other.

Section 74 is a transition. When the 2013 Act closed the public deposit route, companies were already holding public money taken under the 1956 Act. Simply banning new deposits would have left the old ones outstanding indefinitely. So section 74 forced companies to declare what they were holding and get it repaid on a deadline, and gave the Tribunal power to extend where repayment at once would destroy the company and everybody's money with it.

Section 75 is about the officer, not the company. A company that cannot repay is often a company with nothing left. Suing it is pointless. Where the money was taken dishonestly, the depositors need a defendant with assets, and section 75 gives them the officers who were responsible, without any cap.

Section 76A is the general penalty, and its numbers are among the highest in the Act. That is deliberate: deposit-taking frauds are the kind that ruin thousands of small savers at once.

Some words this chapter uses

Commencement of this Act means the date the 2013 Act came into force for the provision in question. Renewal is extending an existing deposit rather than taking a new one. Personally responsible means liable out of one's own property. Without any limitation of liability means no cap, not even the amount involved. Wilfully means deliberately. Officer in default is defined in section 2(60).

Old deposits: section 74

Section 74(1): declare and repay. Where, in respect of any deposit accepted by a company before the commencement of this Act, the amount or part of it, or any interest due, remains unpaid on such commencement or becomes due at any time thereafter, the company shall:

• (a) file with the Registrar, within three months from such commencement or from the date on which the payments are due, a statement of all the deposits accepted by the company and the sums remaining unpaid with the interest payable, along with the arrangements made for such repayment, notwithstanding anything in any other law, in the terms on which the deposit was accepted, or in any scheme framed under any law; and
• (b) repay within three years from such commencement, or on or before the expiry of the period for which the deposits were accepted, whichever is earlier.