Companies (acceptance of deposits) rule 2014

Guest (Querist) 26 August 2016 This query is : Resolved
1. XYZ Properties Pvt Ltd (the Vendor) constructed a complex of 50 Flats in Noida named Eden Towers. In the printed brochure, it was mentioned that a sum of Rupees 25/- per sqft. has to be deposited by the purchasers as “Eden Appartment Owners Association Welfare Fund” which will be handed over to the Association after its formation. Accordingly, all the purchasers have deposited the money at the time of Registration of the Flats during the period 2013 to 2014.
2. In the Agreement for Sale it has been mentioned that:-
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Article X- Sinking Fund
It has been agreed between the Vendor and the purchaser that decency of the building is to be maintained and taking into account the kind of construction and for the aforesaid purpose it has been agreed to have a Sinking Fund to be created for the purpose of meeting the Capital Expenses and other incidental thereto which may be necessary from time to time in respect of the said building.
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The Eden Apartment Owners Association has been formed in the month of June 2016. The Vendor is now going to handover the charge of maintenance to the newly formed Association wef 01.09.2016. During the discussions regarding charge handover / takeover, the Association claimed for transfer of Sinking Fund (Association Fund) with interest keeping in view the provisions of Section 73 to 76 of the Companies Act 2013 read with Rule 17 of Companies (Acceptance of Deposits) Rule 2014. Vendor agreed to transfer the above Sinking Fund (Association Fund) but not agreed to pay the interest.

Advice is sought as to whether their claim for interest on Sinking Fund Deposits (Association Fund) is valid as per the Act on the plea that the Vendor is a Private Company and kept the deposits for more than 365 days?

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P. Venu (Expert) 27 August 2016
The matter requires professional consultation.

M V Gupta (Expert) 27 August 2016
Facts as set out in the query are as under-1. The amount at the rate of Rs. 25/- per Sq ft is collected by the builder which is a Pvt Ltd company as Sinking Fund to meet the prospective maintenance/capital expenses for the buildings after the building is handed over to the flat purchasers;(the name "sinking fund" seems to be misnomer)
2. The amount will be handed over to the Association of the flat purchasers upon its formation.
3. The agreement is silent on payment of interest.
Under the provisions of the Act a non interest bearing amount received or held in trust is not treated as deposit. The amount in question is received by the builder as sinking fund contribution to be handed over to the Association of the flat purchasers.Therefore legally Until the amount is passed on to the Association of the flat purchasers, the builder will be holding the amount in trust for the Association. The agreement is silent on payment of interest to the ASSOCIATION OF FLAT PURCHASERS.As such I am of the opinion that it is not governed by Sections 73 to 76 of the Companies Act, 2013 or the Rules.
As regards the question whether the Association of the flat purchasers will be entitled to claim interest on the amount, as the agreement has not provided for interest they may not be entitled to claim the same, But the builder will be
liable to pass on to the Association any interest earned by keeping the amount in FD with a bank or by keeping it in a savings account with a bank as the same will be regarded as accretion to the amount. As the amount does not belong to him, any accretion to it also does not bnelong to him.

In this connection pl see the article at website- "taxguru.in/company-law/companies-acceptance-deposits-section 73to76-companies act 2013.html"

Rajendra K Goyal (Expert) 02 September 2016
can be benefited from the advice from expert M V Gupta.

Raj Kumar Makkad (Expert) 02 September 2016
I do endorse the wise advice of ld. Gupta ji.

Companies (acceptance of deposits) rule 2014

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