DPT 3

Whether the loan taken from foreign body corporate will be treated as Deposit?

Deposit is defined u/s 2(31) of the Companies Act, 2013 (the 'Act') which states that "deposit" includes any receipt of money by way of deposit or loan or in any other form by a company, but does not include such categories of amount as may be prescribed in consultation with the Reserve Bank of India. Any money falling under prescribed 18 categories prescribed in rules are not considered as deposit.

The question which is discussed in this article is:

Whether the loan taken from foreign body corporate will be treated as Deposit 

Provision:

Rule 2(c) of Companies (Acceptance of Deposit) Rules, 2014 defines deposit as-

Deposit" includes any receipt of money by way of deposit or loan or in any other form, by a company, but does not include –

(ii) any amount received from foreign Governments, foreign or international banks, multilateral financial institutions (including, but not limited to, International Finance Corporation, Asian Development Bank, Commonwealth Development Corporation and International Bank for Industrial and Financial Reconstruction), foreign Governments owned development financial institutions, foreign export credit agencies, foreign collaborators, foreign bodies corporate and foreign citizens, foreign authorities or persons resident outside India subject to the provisions of Foreign Exchange Management Act, 1999 (42 of 1999) and rules and regulations made there under;

Analysis:

In this, we have to look into the following:

1.Whether the amount is received from any of party mentioned in rule 2(c)(ii) – Yes(loan is taken from Foreign body Corporate) 

2.Whether the Company has complied with the provisions of FEMA Act

If the answer to the question 2(above) is YES, the loan received by the company from the foreign body Corporate will not be treated as deposit. It is imperative to note that the any amount from foreign parties as mentioned in rule 2(c)(ii) is subject to the compliance of FEMA though the e-form DPT-3 provides for the compliance of FEMA in case of amount received from Persons residents outside India. To exclude the amount from the purview of deposit, both the conditions are required to be complied with.

Conclusion:  

Any amount received from the foreign parties if is in compliance of FEMA Act, is excluded from the purview of deposit.