Think of Section 76A as the penalty clause with teeth — it answers the question: what happens when a company breaks the deposit rules under Sections 73 or 76? This is asked frequently as a 4-mark question in CA Inter exams, so get the numbers locked in your memory.
There are two situations that trigger Section 76A: (1) a company accepts, invites, or causes others to accept deposits in a manner or under conditions that violate Section 73 or 76 (or the rules made under them), and (2) a company fails to repay the deposit — or interest on it — within the prescribed time (or within any extension granted by the Tribunal under Section 73). When either situation occurs, the law hits both the company and its defaulting officers separately.
For the company, the fine is not less than ₹1 crore or twice the deposit amount accepted — whichever is lower — but it can go up to ₹10 crore. So the minimum fine is capped at the lower of two figures, but the maximum ceiling is always ₹10 crore. For the officer in default, punishment is imprisonment up to 7 years plus a fine of not less than ₹25 lakh, which may extend to ₹2 crore. Note that both imprisonment AND fine apply to the officer — it's not an either/or. The critical twist: if the officer acted knowingly or wilfully with intent to deceive the company, shareholders, depositors, creditors, or tax authorities, he is additionally liable under Section 447 (fraud), which carries even harsher consequences including a minimum 6-month jail term.
Example 1 — Calculate the minimum fine on the company
Rajesh & Co. Pvt. Ltd. illegally accepted deposits worth ₹30 lakh in violation of Section 73. What is the minimum fine payable by the company under Section 76A?
Working:
- Option A: ₹1,00,00,000 (₹1 crore)
- Option B: 2 × ₹30,00,000 = ₹60,00,000 (₹60 lakh)
- Minimum fine = lower of the two = ₹60,00,000
Answer: The company's minimum fine is ₹60 lakh (since twice the deposit amount is lower than ₹1 crore).
---
Example 2 — Calculate the minimum fine on the company when deposit is large
Ms. Iyer is a director of Sunrise Developers Ltd., which illegally accepted deposits of ₹80 lakh. What is the minimum fine on the company?
Working:
- Option A: ₹1,00,00,000 (₹1 crore)
- Option B: 2 × ₹80,00,000 = ₹1,60,00,000 (₹1.6 crore)
- Minimum fine = lower of the two = ₹1,00,00,000
Answer: Minimum fine is ₹1 crore. (Here, ₹1 crore is lower than ₹1.6 crore, so ₹1 crore applies.)
Note: Ms. Iyer as officer in default faces imprisonment up to 7 years + fine between ₹25 lakh and ₹2 crore separately.
📖 Bare Act text — Section 76A, Companies Act 2013
(click to expand)
Where a company accepts or invites or allows or causes any other person to accept or invite on its behalf any deposit in contravention of the manner or the conditions prescribed under section 73 or section 76 or rules made thereunder or if a company fails to repay the deposit or part thereof or any interest due thereon within the time specified under section 73 or section 76 or rules made thereunder or such further time as may be allowed by the Tribunal under section 73,— (a) the company shall, in addition to the payment of the amount of deposit or part thereof and the interest due, be punishable with fine which shall not be less than one crore rupees or twice the amount of deposit accepted by the company, whichever is lower but which may extend to ten crore rupees; and (b) every officer of the company who is in default shall be punishable with imprisonment which may extend to seven years and with fine which shall not be less than twenty-five lakh rupees but which may extend to two crore rupees: Provided that if it is proved that the officer of the company who is in default, has contravened such provisions knowingly or wilfully with the intention to deceive the company or its shareholders or depositors or creditors or tax authorities, he shall be liable for action under section 447.