Q.Explain the provisions of Section 73 of the Companies Act, 2013 relating to acceptance of deposits from members.

Section 73 first shuts the door on deposits from the public generally, then opens a narrower one specifically for a company's own members, subject to real conditions.

Every one of these conditions must be satisfied together — meeting six of the seven is not compliance.

Section 73(1) of the Companies Act, 2013 lays down a blanket prohibition on any company inviting, accepting or renewing deposits from the public except in accordance with Chapter V (Sections 73 to 76A) and the rules made under it. This prohibition does not apply to a banking company, an RBI-registered NBFC, an NHB-registered housing finance company, or other companies the Central Government notifies, since these already operate under separate prudential deposit regulation.

Section 73(2) then carves out the exception this question is about: a company may accept deposits from its own MEMBERS, subject to an ordinary resolution passed in general meeting, and subject to satisfying every one of the following conditions together — (a) issuing a circular to members, in Form DPT-1, disclosing the company's financial position, credit rating (where applicable), and the number and amount of deposits already outstanding; (b) filing a copy of that circular with the Registrar of Companies within thirty days before it is issued; (c) maintaining a Deposit Repayment Reserve Account, depositing or investing not less than 20% of the deposits maturing in the following financial year by every 30th of April; (d) certifying that the company has not defaulted in repaying deposits or interest, or that any past default has been made good with five years having elapsed since; (e) providing deposit insurance where the rules prescribe it; (f) creating a charge on the company's assets, sufficient to cover the deposits and interest, within 30 days of accepting secured deposits; and (g) appointing one or more trustees for depositors and executing a deposit trust deed.

A deposit accepted or renewed in contravention of Section 73 obliges the company to repay it, with interest, within the prescribed timeline, and exposes the company and every officer knowingly in default to a fine and, for a wilful contravention, imprisonment.

A common error is describing Section 73(2)'s conditions as optional extras rather than a cumulative package — every condition must be met, not a majority of them. Students also sometimes confuse the ordinary resolution Section 73(2) requires with the special resolution Section 76 requires for public deposits.