CA Inter P2 · Chapter 5
Acceptance of Deposits by Companies and Registration of Charges MCQs with Answers
10 multiple-choice questions on Acceptance of Deposits by Companies and Registration of Charges for CA Inter P2 Corporate and Other Laws. Try each one before revealing the answer and explanation.
Practise this chapter interactivelyQuestion 1
Under section 82(1), a company must inform the Registrar of the payment or satisfaction in full of any registered charge within:
- A) Sixty days from the date of such payment or satisfaction
- B) Thirty days from the date of such payment or satisfaction
- C) The date of the next annual general meeting
- D) Fourteen days from the date of such payment or satisfaction
Show answer & explanation
Answer: B) Thirty days from the date of such payment or satisfaction
Section 82(1) requires the company to give intimation of the payment or satisfaction in full of a registered charge within thirty days in the prescribed form. The Registrar then issues a notice to the charge-holder to show cause why the satisfaction should not be recorded.
Question 2
Silverline Ltd, a public company, received the following sums. Which one is a 'deposit' under section 2(31) read with the Companies (Acceptance of Deposits) Rules, 2014?
- A) An amount received from the Central Government
- B) A loan from a scheduled commercial bank
- C) An inter-corporate loan from another company
- D) An unsecured loan from the wife of one of its directors
Show answer & explanation
Answer: D) An unsecured loan from the wife of one of its directors
Section 2(31) treats any receipt of money by way of deposit or loan as a deposit, except categories excluded by the rules. Amounts from the Central or State Government, banking companies and other companies are excluded. A loan from a director is excluded if the director declares in writing that it is not out of borrowed funds, and a loan from a relative of a director is excluded only for a private company. A loan from a director's relative to a public company is therefore a deposit.
Question 3
Harbour Ltd accepts deposits from its members under section 73(2). Its deposits maturing during the next financial year total ₹2.5 crore. By 30 April, what is the minimum amount it must place in a deposit repayment reserve account?
- A) ₹62.5 lakh
- B) ₹25 lakh
- C) ₹2.5 crore
- D) ₹50 lakh
Show answer & explanation
Answer: D) ₹50 lakh
Section 73(2)(c) requires a company accepting deposits from members to deposit, on or before 30 April each year, at least twenty per cent of the deposits maturing during the following financial year. The money is kept in a separate account with a scheduled bank called the deposit repayment reserve account. 20% x ₹2.5 crore = ₹50 lakh.
Question 4
Under section 73(1), the provisions of Chapter V on acceptance of deposits do NOT apply to:
- A) A private company with share capital
- B) A listed public company that is not a financial institution
- C) A banking company
- D) A company registered under section 8
Show answer & explanation
Answer: C) A banking company
Section 73(1) provides that the provisions of Chapter V do not apply to a banking company, a non-banking financial company as defined in the Reserve Bank of India Act, 1934, a housing finance company registered with the National Housing Bank, and other notified companies. Such entities are governed by their own regulators.
Question 5
A company accepted deposits with intent to defraud the depositors. Under section 75, every officer of the company responsible for accepting such deposits is:
- A) Not liable, as the deposits are the liability of the company alone
- B) Liable only if the Registrar has issued a prior show-cause notice
- C) Personally responsible, without any limitation of liability, for all or any of the losses or damages incurred by the depositors
- D) Liable only up to the amount of his own shareholding
Show answer & explanation
Answer: C) Personally responsible, without any limitation of liability, for all or any of the losses or damages incurred by the depositors
Section 75(1) provides that where a company fails to repay a deposit and it is proved that the deposit was accepted with intent to defraud, or for a fraudulent purpose, the officers responsible are liable. Every officer responsible for the acceptance is personally responsible, without limitation of liability, for the depositors' losses, in addition to liability under section 447.
Question 6
Share application money received by a company becomes a 'deposit' under the Companies (Acceptance of Deposits) Rules, 2014 if the securities are not allotted within sixty days of receipt and the money is not refunded within:
- A) Fifteen days from the date of completion of the sixty days
- B) Seven days from the date of completion of the sixty days
- C) Thirty days from the date of completion of the sixty days
- D) Ninety days from the date of receipt of the money
Show answer & explanation
Answer: A) Fifteen days from the date of completion of the sixty days
Under the rules, share application money received for allotment is not a deposit. However, if the securities are not allotted within sixty days of receipt and the money is not refunded within fifteen days after that, the money is treated as a deposit. The approach mirrors section 42(6) on private placement.
Question 7
Under section 77(1), it is the duty of every company creating a charge to register its particulars with the Registrar within:
- A) Seven days of its creation
- B) Ninety days of its creation
- C) Thirty days of its creation
- D) Sixty days of its creation
Show answer & explanation
Answer: C) Thirty days of its creation
Section 77(1) requires every company creating a charge within or outside India, on its property or assets or any of its undertakings, to register the particulars of the charge with the Registrar within thirty days of its creation. The Registrar may allow registration within extended periods under the provisos on payment of additional fees.
Question 8
Peak Ltd borrowed ₹50 lakh from a bank against a charge on its machinery but never registered the charge. Peak Ltd later went into liquidation. Which of the following is correct?
- A) The directors become personally liable to repay the entire loan to the bank
- B) The charge is not taken into account by the liquidator, but the bank can still prove for the ₹50 lakh as an unsecured creditor
- C) The charge is valid against the liquidator since the bank has the original charge document
- D) The loan itself becomes void and the bank cannot recover any amount
Show answer & explanation
Answer: B) The charge is not taken into account by the liquidator, but the bank can still prove for the ₹50 lakh as an unsecured creditor
Under section 77(3), a charge is not taken into account by the liquidator or any creditor unless it has been registered and a certificate of registration issued. Section 77(4) adds that this does not prejudice any contract or obligation for repayment of the money secured. The bank loses its security but the debt survives, so it ranks as an unsecured creditor.
Question 9
Where a company fails to register a charge within the time allowed, the charge-holder may apply to the Registrar under section 78. The Registrar may allow registration if the company does not register the charge, or show sufficient cause against registration, within:
- A) Fourteen days after the Registrar gives notice to the company
- B) Sixty days after the creation of the charge
- C) Thirty days after the Registrar gives notice to the company
- D) Seven days after the charge-holder's application
Show answer & explanation
Answer: A) Fourteen days after the Registrar gives notice to the company
Section 78 allows the person in whose favour the charge is created to apply for registration. Within fourteen days after giving notice to the company, the Registrar may allow registration unless the company itself registers the charge or shows sufficient cause why it should not be registered.
Question 10
As per section 80, a person acquiring property of a company on which a charge has been registered under section 77 is deemed to have notice of the charge:
- A) From the date the charge was created, whether registered or not
- B) Only if the company informs him in writing
- C) Only after the charge is entered in the company's own register of charges
- D) From the date of such registration
Show answer & explanation
Answer: D) From the date of such registration
Section 80 states that where a charge on any property or assets of a company or its undertakings is registered under section 77, any person acquiring that property or any part of it shall be deemed to have notice of the charge from the date of such registration. Registration therefore operates as constructive notice to the world.