The Companies (Amendment) Act, 2000 has inserted sections 58AA and 58AAA to the Companies Act, 1956 whereby default in repayment of deposit/interest to small depositors is now covered. The following summarises the provisions :

1. Monthly intimation is required to be given to the Tribunal within 60 days from the date of default. This requirement is also applicable to NBFCs.

2. The monthly intimation shall include particulars about the depositors like name, address, principal and interest due/accrued.

3. The Tribunal shall pass appropriate order under section 58A(9) within 30 days of receipt of intimation after allowing opportunity of being heard to small depositors.

4. The company will not be eligible to accept any further deposits from small depositors unless all defaults to small depositors are repaid. Small depositor is defined to mean a depositor who has invested up to Rs. 25,000/- in a financial year in a company and would include his successor/nominee/legal representative.

5. A penal interest of 20% compoundable on annual basis shall become payable for overdue period in case of public deposits from small depositors matured and claimed but remaining unpaid.

6. The following will not be treated as cases of default to small depositors:

1. Where the deposit is renewed voluntarily by the small depositor.

2. Where repayment of deposit has become impracticable due to death of small depositor or competent authority having stayed the repayment.

7. All future advertisements/application forms for inviting deposits from public shall indicate total number of small depositors and amount due to them in respect of which default is made. The advertisements/application forms shall also mention the waiver of interest due to the depositor if the same has been waived by the small depositors.

8. It is provided that any fund obtained by way of working capital loan from any bank after accepting deposits from small depositors shall be first utilised for repayment of any deposit/interest to the small depositors before applying such funds for any other purposes.

9. Every application form issued to small depositors shall contain a statement about every past default by the company in repayment of any deposits/interest and in relation to waiver of interest.

10. Any person knowingly failing to comply with the provisions or order of the Tribunal shall be liable to fine of Rs. 500 per day during which non-compliance continues. For these purposes, it is provided that a Director of a company shall be deemed to be guilty of an offence committed by the company.

11. The provision of section 58A shall equally apply to deposits by small depositors.