Chapter V - Acceptance of Deposits by Companies
Section 75
Section 75: personal liability of officers for fraudulent deposits
Section 75 lifts the limited-liability shield for deposits taken with intent to defraud. Where a company fails to repay deposits or interest in time and fraud is proved, every officer responsible for accepting the deposits is personally liable for the depositors’ losses.
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This article is for general information. Refer to the Companies Act, 2013 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) Where a company fails to repay the deposit or part thereof or any interest thereon referred to in section 74 within the time specified in sub-section (1) of that section or such further time as may be allowed by the Tribunal under sub-section (2) of that section, and it is proved that the deposits had been accepted with intent to defraud the depositors or for any fraudulent purpose, every officer of the company who was responsible for the acceptance of such deposit shall, without prejudice to the provisions contained in sub-section (3) of that section and liability under section 447, be personally responsible, without any limitation of liability, for all or any of the losses or damages that may have been incurred by the depositors. (2) Any suit, proceedings or other action may be taken by any person, group of persons or any association of persons who had incurred any loss as a result of the failure of the company to repay the deposits or part thereof or any interest thereon.
Introduction
The section works alongside section 74 (repayment of deposits accepted before the commencement of the Act) and section 447 (punishment for fraud). Depositors who suffered loss may sue individually, in groups or through associations.
Section 75 commenced on 1 June 2016 under S.O. 1934(E). The India Code consolidated text shows no amendment, and the text is identical to the Act as published in 2013.
Key takeaways
Trigger
The company fails to repay a deposit, or interest on it, referred to in section 74 within the time allowed, and it is proved that the deposits were accepted with intent to defraud or for a fraudulent purpose.
Unlimited personal liability
Every officer responsible for accepting the deposit is personally responsible, without any limitation of liability, for depositors’ losses or damages.
In addition to other action
This is without prejudice to section 74(3) and liability under section 447.
Who can sue
Any person, group of persons or association of persons who suffered loss from the failure to repay.
When personal liability arises
Section 75(1) applies where a company fails to repay a deposit or part of it, or any interest on it, referred to in section 74, within the time specified in section 74(1) or any further time allowed by the Tribunal under section 74(2). If it is proved that the deposits were accepted with intent to defraud the depositors or for any fraudulent purpose, every officer of the company who was responsible for accepting the deposit is personally responsible, without any limitation of liability, for all or any of the losses or damages incurred by the depositors.
This liability is without prejudice to section 74(3) and to liability under section 447. In other words, it is an additional civil remedy, not a replacement for penalties or criminal action.
Action by depositors
Under section 75(2), any suit, proceedings or other action may be taken by any person, group of persons or association of persons who incurred loss because the company failed to repay the deposits or interest.
Practical preparation
For companies: accept deposits only where the Act and the deposit rules allow; document who approved each acceptance; repay on time or seek more time from the Tribunal under section 74(2). For officers: do not approve acceptance of deposits you do not believe can be repaid. For depositors: keep deposit receipts and correspondence, and consider joining other depositors in a group or association action.
Practical checklist
Do
- Keep clear records of who approved the acceptance of each deposit.
- Seek more time from the Tribunal under section 74(2) before the repayment deadline if needed.
Avoid
- Do not accept deposits to fund a business you know cannot repay them.
- Do not assume the company’s limited liability protects officers when fraud is proved.
Illustrative example
Hypothetical: deposits taken to cover losses
A company’s managing director arranged deposits from local savers while knowing the business could not repay. The company defaulted.
Default
The company fails to repay within the time under section 74, and the Tribunal has not extended it.
Proof of fraud
The depositors’ association shows the deposits were accepted with intent to defraud.
Liability
The managing director, who was responsible for accepting the deposits, is personally liable for the depositors’ losses without limit.
Outcome
- Separate action under section 447 and section 74(3) remains possible.
Glossary
- Deposit
- Money received by a company by way of deposit or loan, as defined in section 2(31), subject to the exclusions prescribed.
- Officer responsible
- The officer of the company who was responsible for accepting the deposit.
- Without any limitation of liability
- The officer’s personal liability is not capped at any amount or by the company’s limited liability.
Frequently asked questions
Is every default in repaying deposits a section 75 case?
No. Section 75(1) needs proof that the deposits were accepted with intent to defraud the depositors or for a fraudulent purpose.
Can depositors sue together?
Yes. Section 75(2) allows action by any person, group of persons or association of persons who suffered loss.
Does section 75 replace punishment for fraud?
No. It is without prejudice to section 74(3) and liability under section 447.
Need help applying this provision to your situation?
Contact BizeneedLast updated 11 October 2026