Think of Section 73 as the gatekeeper rule for company deposits. Before this law, companies would collect crores from the public, go bust, and ordinary people would lose their savings. Section 73 says: companies cannot freely collect deposits from the public — there are strict rules, and if you break them, there are serious consequences.
Who is restricted? All companies. But there are exceptions — banking companies and NBFCs (Non-Banking Financial Companies) are exempt because RBI already regulates them. The Central Government can also exempt specific companies after consulting RBI. For everyone else, the Chapter VI-A rules apply strictly.
The key permission under sub-section (2): A company can accept deposits — but only from its own members (not the general public), and only if it clears a checklist. First, it must pass a resolution in general meeting (ordinary resolution). Then it must issue a circular to members disclosing the company's financial position, credit rating, number of existing depositors, and dues. That circular must be filed with the Registrar of Companies (ROC) at least 30 days before it is issued. By 30th April every year, the company must park at least 20% of deposits maturing in the next financial year into a separate bank account called the Deposit Repayment Reserve Account (DRRA) — and this money can be used only for repaying deposits, nothing else (sub-section 5 locks this down hard). The company must also certify it has no default history, or if there was one, it was remedied and 5 years have passed since. Finally, if deposits are not fully secured by a charge on assets, they must be explicitly labelled 'unsecured deposits' in all documents.
What if the company defaults on repayment? Under sub-section (4), the depositor can approach the National Company Law Tribunal (NCLT) for an order to recover the deposit, interest, or even damages. This is exam gold — the remedy is NCLT, not a civil court. This section is asked frequently as a 4-mark or 6-mark question in CA Inter Law, especially the conditions under sub-section (2) and the 20% reserve requirement.
📊 Worked example
Example 1 — Deposit Repayment Reserve Account Calculation
Rajesh & Co. Pvt. Ltd. has accepted deposits from its members. The following deposits are maturing during FY 2025-26:
- April 2025: ₹10,00,000
- September 2025: ₹15,00,000
- February 2026: ₹25,00,000
Total deposits maturing in FY 2025-26 = ₹50,00,000
Working:
- Minimum amount to be deposited in DRRA by 30th April 2024 (the year before the maturity year) = 20% × ₹50,00,000
- = ₹10,00,000
This ₹10,00,000 must be kept in a separate scheduled bank account (DRRA) and cannot be used for any other business purpose.
Final Answer: Rajesh & Co. must deposit ₹10,00,000 into its DRRA on or before 30th April 2024.
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Example 2 — Circular Filing Deadline
Ms. Iyer is the Company Secretary of Sunrise Textiles Ltd. The Board wants to issue a deposit circular to members on 1st June 2025.
Working:
- The circular must be filed with the ROC at least 30 days before the date of issue.
- 30 days before 1st June 2025 = 2nd May 2025 (last date for filing)
Final Answer: Ms. Iyer must file the circular with the ROC on or before 2nd May 2025.
⚠️ Common exam mistakes
- Confusing 'members' with 'public': Students often say Section 73 allows companies to accept deposits from the public. Wrong — sub-section (2) permits deposits only from members (shareholders). Accepting deposits from the public by a non-exempt company is a violation of sub-section (1).
- Getting the 20% reserve timing wrong: Many students think the 20% DRRA deposit is made when deposits mature. No — it must be deposited by 30th April of the preceding year (i.e., the year before the deposits mature).
- Forgetting the 5-year cooling period: If a company had a past default and later remedied it, students miss that it must wait 5 full years after making good the default before it can accept fresh deposits.
- Wrong forum for depositor remedy: Students write 'Civil Court' when asked where a depositor can go if the company defaults. The correct answer is the NCLT (Tribunal) under sub-section (4).
- Ignoring the 'unsecured' label requirement: If deposits are not fully secured, students forget that every circular, form, and advertisement must explicitly call them 'unsecured deposits'. This is a compliance point frequently tested in practical/MCQ questions.
📖 Bare Act text — Section 73, Companies Act 2013
(click to expand)
(1) On and after the commencement of this Act, no company shall invite, accept or renew deposits under this Act from the public except in a manner provided under this Chapter: Provided that nothing in this sub-section shall apply to a banking company and non-banking financial company as defined in the Reserve Bank of India Act, 1934 and to such other company as the Central Government may, after consultation with the Reserve Bank of India, specify in this behalf. (2) A company may, subject to the passing of a resolution in general meeting and subject to such rules as may be prescribed in consultation with the Reserve Bank of India, accept deposits from its members on such terms and conditions, including the provision of security, if any, or for the repayment of such deposits with interest, as may be agreed upon between the company and its members, subject to the fulfilment of the following conditions, namely:— (a) issuance of a circular to its members including therein a statement showing the financial position of the company, the credit rating obtained, the total number of depositors and the amount due towards deposits in respect of any previous deposits accepted by the company and such other particulars in such form and in such manner as may be prescribed; (b) filing a copy of the circular along with such statement with the Registrar within thirty days before the date of issue of the circular; (c) depositing, on or before the thirtieth day of April each year, such sum which shall not be less than twenty per cent. of the amount of its deposits maturing during the following financial year and kept in a scheduled bank in a separate bank account to be called deposit repayment reserve account; (e) certifying that the company has not committed any default in the repayment of deposits accepted either before or after the commencement of this Act or payment of interest on such deposits and where a default had occurred, the company made good the default and a period of five years had lapsed since the date of making good the default; and (f) providing security, if any for the due repayment of the amount of deposit or the interest thereon including the creation of such charge on the property or assets of the company: Provided that in case where a company does not secure the deposits or secures such deposits partially, then, the deposits shall be termed as 'unsecured deposits' and shall be so quoted in every circular, form, advertisement or in any document related to invitation or acceptance of deposits. (3) Every deposit accepted by a company under sub-section (2) shall be repaid with interest in accordance with the terms and conditions of the agreement referred to in that sub-section. (4) Where a company fails to repay the deposit or part thereof or any interest thereon under sub-section (3), the depositor concerned may apply to the Tribunal for an order directing the company to pay the sum due or for any loss or damage incurred by him as a result of such non-payment and for such other orders as the Tribunal may deem fit. (5) The deposit repayment reserve account referred to in clause (c) of sub-section (2) shall not be used by the company for any purpose other than repayment of deposits.
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