Companies Act 2013 Section 73: Prohibition on Acceptance of Deposits (2026)

Explainer · Company Law · Deposits

Updated for 2026 · Claw Editorial

Section 73 of the Companies Act, 2013 is the main rule that stops a company from raising money as deposits from the public. The idea is simple. After the schemes that hurt small savers, the law says a company cannot invite or accept deposits from anyone except in the limited ways the Act allows. A company can still take deposits from its own members, but only if it passes a resolution and follows a set of protective conditions. This explainer sets out what Section 73 says, how it works in practice, the key conditions, the penalty for breaking it, and how courts and tribunals read it. Last verified October 2026.

01What Section 73 says

Section 73(1) lays down the general bar. A company cannot invite, accept or renew deposits from the public. The only exceptions are a banking company, a non-banking financial company (NBFC) regulated by the Reserve Bank of India, and any other company the Central Government specifies after consulting the RBI.

So for an ordinary company, the door to public deposits is closed. The reason is protection. Deposits from the public were misused in the past, and the 2013 Act tightened the rules to keep public money safe.

02Deposits from members under Section 73(2)

Section 73(2) is the practical part. A company may accept deposits from its members if it passes an ordinary resolution in a general meeting and meets the conditions in the section and the rules. The main conditions are:

• issue a circular to members showing the financial position, the credit rating, the total deposits and the money the company already owes;
• file a copy of the circular with the Registrar of Companies before issuing it;
• keep a deposit repayment reserve, by depositing a part of the deposits maturing in the next financial year in a separate bank account;
• provide for deposit insurance where required, and certify that the company has not defaulted in repaying deposits;
• give security for the deposits, or state clearly that they are unsecured.

These conditions sit alongside the Companies (Acceptance of Deposits) Rules, 2014, which set the limits, the forms and the timelines. If a company fails to repay a members' deposit on time, the member can approach the National Company Law Tribunal (NCLT) for relief.

03What is not treated as a deposit

Not every receipt of money is a deposit. The definition in the Act and the 2014 Rules leaves out several common business receipts, so that normal trade and funding do not get caught. Items usually kept out include:

• money received from the Central or State Government, or guaranteed by them;
• loans from banks and financial institutions;
• money raised by issuing debentures secured against assets, or convertible into shares within the set time;
• advances received for the supply of goods or services, within the conditions in the Rules;
• money brought in by directors out of their own funds, with a declaration, and money received from a holding, subsidiary or associate company.

Because the line between a deposit and an exempt receipt can be fine, companies note these receipts carefully in their filings to show they are not deposits.

04Eligible public companies and Section 76

Section 73 mainly governs deposits from members. A separate route exists for larger public companies. Section 76 lets an eligible public company, broadly one with a certain net worth or turnover, accept deposits from the public as well, but only after meeting extra conditions such as a credit rating and more disclosure. The conditions of Section 73(2) apply to those deposits too.

For most private companies, the simple position holds: deposits may come from members on conditions, and public deposits are off the table.

05Penalty for breaking Section 73

Breaching the deposit rules is serious. Section 76A provides the penalty for a company that accepts deposits in violation of the Act or fails to repay them. The company has to repay the deposit with interest and faces a fine, and officers in default can face a fine and, in serious cases, imprisonment. The amounts are set out in Section 76A and have been revised over time.

The penalty is heavier where the breach is wilful and meant to defraud depositors. This is why boards treat deposit compliance as a board-level risk and not a routine filing.

06Case law and a practical note

Courts and the NCLT read Section 73 strictly, because its purpose is to protect depositors. Tribunals have ordered companies to repay members' deposits with interest where the conditions were not met, and have allowed the Registrar and the Serious Fraud Investigation Office to act where money was taken from the public under the guise of advances or loans. The common thread is substance over form: what matters is whether the money is really a deposit, not what the company calls it.

For a company, the practical steps are clear. Pass the resolution, file the circular, keep the repayment reserve, and repay on time. Where there is a dispute over oppression of members or mismanagement around such funds, members may also look at the wider remedy under Sections 241 and 242 for oppression and mismanagement. On the borrowing side, a related board limit sits in Section 180 on restrictions on the powers of the Board.

07Where Claw fits

Claw is an all-in-one legaltech platform for Indian advocates, law firms, and corporate legal teams, combining AI-based case search, an AI legal assistant (Legal GPT), case management, and compliance automation across all Indian courts and tribunals.

Deposit disputes and penalty orders often turn on how the NCLT and the High Courts have treated similar facts, such as advances later called deposits, or late repayment to members. Claw lets you search more than 30 crore judgments and orders on Section 73, Section 76 and Section 76A, with results in under 5 seconds, and lets you follow a live NCLT or High Court matter by company or director name across 9,102 courts, benches and forums. Reported authority runs from Supreme Court rulings of 1950 and High Court rulings of 1990 to the latest orders. Claw does not use the documents you upload to train its AI models.

Create a FREE Claw account to see how Section 73 of the Companies Act has been applied and to track a pending company-law matter, and use case search across Indian courts to find orders in similar cases.

08Sources and further reading

• India Code (Companies Act, 2013 bare text): indiacode.nic.in
• Ministry of Corporate Affairs (rules, forms and filings): mca.gov.in
• Claw: clawlaw.in

This explainer is general information, not legal advice. The deposit rules change through amendments to the Act and the 2014 Rules, so check the current text and take advice from a company secretary or counsel before you act.

09Frequently asked questions