GOVERNMENT OF INDIA
MINISTRY OF LAW, JUSTICE AND COMPANY
AFFAIRS
DEPARTMENT OF COMPANY AFFAIRS
NOTIFICATION
New Delhi, 26th July, 2001
G.S.R.
555(E).- In exercise of the powers
conferred by sub-section (1) of section 637 A of the Companies Act, 1956 (1 of 1956),
and in supersession of earlier Notification Nos.GSR 737(E) dated 1.11.1999,
GSR 780(E) dated
19.11.1999 and GSR
347(E) dated 25.4.2000 except as respects things done or omitted to be done
before said supersession the
Central Government hereby directs
that -
1(a)
no company declared as a Nidhi or Mutual Benefit Society under section
620A of the said Act, before or after the date of this notification (hereinafter
referred to as such Nidhi or Mutual Benefit Society)
shall, after the publication of
this notification, -
(i)
carry on the
business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of
shares or debentures issued by any body corporate except the shares of another Nidhi, if
specifically permitted by Central Government[1];
(ii)
open any new
current account with its members;
(iii)
admit as member,
any body corporate or trust;
(iv)
issue any equity
share of nominal value less than Rs. 10/- :
Provided
that in the case of existing Nidhis having face value of shares of less than
Rs. 10/- such companies shall increase the face value of the shares to Rs. 10/-
within a period of one year from the date of this Notification.
Provided
further that no service charges shall be levied for issue of
shares;
Provided
also that the Central Government may, if satisfied, grant exemption on
merits in individual cases;
(v)
make any
preferential allotment of shares to any persons or group of persons but shall
make only rights issue of shares and the unsubscribed portion can be apportioned
by the Board of Directors in terms of Section 81 of the Companies Act,
1956.
(vi)
acquire another
company by purchase of shares or control of composition of Board of Directors
otherwise than through amalgamation or merger under the Companies Act and
subject to the regulations applicable to Nidhi companies in
force;
(vii)
carry on any
business other than the business of borrowing or lending in its own name and
allow use of its name by any other body corporate whose main object is to earn
profit by borrowing and lending;
(viii)
enter into any
financial dealing with any person other than its members;
(ix)
pledge any type of
security lodged with it by its members;
(x)
take further deposits from or lend further
money to any body corporate ;
(xi)
enter into any
partnership arrangement in its borrowing or lending
activities;
(xii)
shall issue or
cause to be issued any advertisement in any form for soliciting deposit ;
Explanation: Private circulation of the
details of fixed deposit schemes among the members shall not be considered to be
"advertisement" inviting deposits;
(xiii)
pay any brokerage
or incentive for mobilizing deposits from members or for deployment of funds or
for granting loans;
(xiv)
issue prepaid
interest warrant;
(xv)
enter into any
arrangement for the change of its management without a special resolution passed
in its general meeting and approval of the Central
Government;
(b) every such Nidhi or Mutual Benefit Society shall,
after the publication of this
notification -
(i)
ensure that its
membership is not reduced to less than five hundred members
at any time;
(ii)
obtain certificate
every year from the statutory auditors certifying that it has complied with the directions specified
in this notification and has maintained its books of account according to
recognised principles of accounting;
(iii)
ensure that its Net Owned Fund (excluding the
proceeds of preference share capital) is not less than ten lakh rupees or such amount as the Central
Government may specify from time to time;
provided that the existing nidhis or Mutual
Benefit Societies shall reach before 31st day of December 2002, the
said minimum amount of ten lakh
rupees;
provided further that the Central Government may
for reasons to be recorded in writing extend the period of 31st day
of December, 2002 in respect of any class or category of Nidhi or Mutual Benefit
Society.
C (i) a company declared as a Nidhi
or Mutual Benefit Society under section 620A of the Companies Act, 1956 may after the
publication of this notification, open branches only if it has earned profit for
last three continuous years;
(ii)
a Nidhi or Mutual
Benefit Society may open up to three branches, subject to the above condition,
within the Revenue District; and
beyond three branches
outside the District, with the prior permission of the Regulatory
Authority;
(iii)
no such company shall open branches or
collection centres or offices or deposit centres, by whatever name called,
outside the State of its Registered Office;
(d) (i)
a Nidhi or Mutual Benefit Society
may accept deposits not exceeding
twenty times of its Net Owned Funds (NOF) as per last audited balance
sheet:
Provided that in
the case of existing Nidhis having deposits in excess of the aforesaid limits,
the same shall be brought to the prescribed limit by increasing the Net Owned
Fund position or alternatively by reducing the deposit within two years from the
date of this notification;
Provided further
that the ratio will apply to incremental deposits immediately.
Explanation :
"Net Owned Funds"
means the aggregate of the paid up equity capital and free reserves as reduced
by accumulated losses and intangible assets appearing in the last audited
balance sheet prior to issue of this notification. A reserve shall be considered as a 'free
reserve' if it is available for distribution as dividend. Further, the amount
representing the proceeds of issue of preference shares shall not be included
for calculating net owned funds.
(ii)
within the aforesaid limit a Nidhi or Mutual Benefit Society can open the following kinds of deposit
accounts, subject to the conditions stipulated
therein:
(A)
FIXED DEPOSIT
ACCOUNT : Fixed deposit account can
be opened for a minimum period of 12 months and a maximum period of 60
months;
(B)
RECURRING DEPOSIT
ACCOUNT : Recurring deposit account
can be opened for a minimum period of 12 months and maximum period of 60
months;
(C)
SAVING DEPOSIT
ACCOUNT : The maximum balance at
any given time qualifying for interest shall not exceed Rs. 20,000/- and the
rate of interest shall not be more than 2% above
the rate of interest payable on savings bank account by nationalised
banks;
(e) (A) every
application for deposit should contain the particulars as stipulated
below:
(i)
name of the Nidhi
or Mutual Benefit Society.
(ii)
date of
incorporation of the Nidhi or Mutual Benefit Society.
(iii)
the business
carried out by the Nidhi with details of branches, if any.
(iv)
brief particulars
of the management of the Nidhi (name, addresses and occupation of the
directors).
(v)
profits of the
Nidhi before and after making provision for tax for the last three financial
years.
(vi)
dividend declared
by the Nidhi as per latest three balance sheets.
(vii)
mode of repayment of
deposit.
(viii)
maturity period of
deposit.
(ix)
interest payable on
deposit.
(x)
the rate of
interest which shall be payable to the depositor in case depositor withdraws the
deposit prematurely.
(xi)
the terms and
conditions subject to which a deposit shall be accepted /
renewed.
(xii)
any other special
features relating to terms and conditions subject to which the deposit is
accepted / renewed.
(B) the application form shall also contain the following
:
(i)
in case of non
payment of the deposit or part thereof as per the terms and conditions of such
deposit, the depositor may approach the Bench of Company Law Board having
jurisdiction over the
company.
(ii)
in case of any
deficiency of the Nidhi or Mutual Benefit Society in servicing its deposit, the
depositor may approach the National Consumers Disputes Redressal Forum, the
State Level Consumers Disputes Redressal Forum or District Level Consumers
Disputes Redressal Forum for relief;
(iii)
a statement that
the financial position of the Nidhi or Mutual Benefit Society as disclosed and
the representations made in the application form are true and correct and that
the Nidhi and the Board of Directors are responsible for the correctness and
veracity thereof;
(iv)
the financial
activities of the Nidhi or Mutual Benefit Society are regulated by the
Department of Company Affairs. It must, however, be distinctly understood that
the Department of Company Affairs does not undertake any responsibility for the
financial soundness of the Nidhi or for the correctness of any of the statement
or the representations made or opinions expressed by the Nidhi and for repayment
of deposit / discharge of liabilities by the Nidhi;
(v)
at the end of
application form but before the signature of the depositor, the following
verification clause by the depositor shall be appended namely
:
"I have gone through the financial and other statements /
particulars / representations furnished / made by the Nidhi and after careful
consideration I am making the deposit with the Nidhi at my own risk and
volition";
(C) every Nidhi
or Mutual Benefit Society shall obtain proper introduction of the new depositors
before opening their accounts and accepting the deposits and keep on its record
the evidence on which it has relied upon for the purpose of such
introduction;
(f) (i) every Nidhi or Mutual Benefit Society
shall, -
(A)
allot to every
deposit holder at least a minimum of ten equity shares or shares equivalent to
Rs. 100/- whichever is higher;
(B)
offer interest on
fixed and recurring deposits as determined by the Regulatory Authority, subject
to other conditions;
(C)
permit Fixed
Deposit Account to be foreclosed by the depositor subject to the following
conditions:
(ii)
a Nidhi or Mutual
Benefit Society shall not repay any deposit within a period of three months from
the date of its acceptance;
(iii)
where a Nidhi or
Mutual Benefit Society at the request of the depositor repays any deposit after
a period of three months, the depositor shall not be entitled to any interest up
to six months from the date of deposit;
(iv)
where a Nidhi or
Mutual Benefit Society at the request of the depositor makes repayment of a
deposit before the expiry of the
period for which such deposit was accepted by the Nidhi or Mutual Benefit
Society, the rate of interest payable by the Nidhi or Mutual Benefit Society on
such deposit shall be reduced by two percent from the rate which the Nidhi or
Mutual Benefit Society would have ordinarily paid, had the deposit been accepted
for the period for which such deposit had run;
Provided
that in the event of death of a depositor, the deposit may be repaid
prematurely to the surviving depositor/s in the case of joint holding with
survivor clause, or to the nominee or to legal heir/s with interest at the rate
which the company would have ordinarily paid, had such deposit been accepted for
the period for which such deposit had run,
up to the date of repayment;
(g) every Nidhi or
Mutual Benefit Society shall invest and continue to invest, with effect from the
1st September, 2001, in unencumbered term deposits with a scheduled
commercial bank, other than a co-operative bank or a regional rural bank, an
amount which shall not be less than ten per cent of the deposits outstanding at
the close of business on the last working day of the second preceding month;
(h) every Nidhi or Mutual Benefit Society
shall, -
(i) give loan to its
shareholders or members against the following securities:-
(A) gold, silver and jewellery;
Provided
that the period of such loan shall not exceed one year
(B) immovable property;
Provided
that the loan against immovable property shall not exceed fifty percent of
the overall loan outstanding on the date of approval by the board and the
individual loan shall not exceed fifty percent of the value of property offered
as security. The period of such loan shall not exceed five
years.
Explanation: Existing Nidhi companies
shall bring down the ratio of loan against immovable property to fifty percent
of the overall loan outstanding within two years from the date of this
notification;
(C)
fixed deposit,
Kisan Vikas Patra/National Savings Certificate Scheme/insurance policies and
other Government Securities;
Provided
that such securities shall be
pledged with the company duly discharged and the lock-in period of such securities shall
not fall beyond the loan period or
one year whichever is earlier.
(ii)
The rate of
interest charged on loan given by every such company shall not exceed five percent above the highest rate of interest
offered on deposits by the Nidhi and shall be based on reducing
balance method;
(iii)
give loan to any
member/shareholder subject to the following ceiling on each loan:
(A) two lakh rupees, where the total amount of
deposits of such Nidhi or Mutual Benefit Society from its members are two crore
rupees or less;
(B) one percent of the total deposits or seven lakh
fifty thousand rupees, whichever is
less, where deposits of such Nidhi or Mutual Benefit Society from its members
are more than two crore rupees but are twenty crore rupees or less;
(C)
twelve lakh rupees,
where the deposits of such Nidhi or Mutual Benefit Society from its members are
more than twenty crore rupees but are fifty crore rupees or
less;
(D)
fifteen lakh
rupees, where the deposits of such Nidhi or Mutual Benefit Society from its
members are more than fifty crore rupees:
Provided
that no such Nidhi or Mutual Benefit Society shall give to any
member/shareholder loans and advances exceeding seven lakh fifty thousand rupees
if such Nidhi or Mutual Benefit Society had not made profits in the three
preceding years;
(h)
(i) no company declared as Nidhi or Mutual Benefit Society, after the
publication of this notification, shall, -
(A) have any person as director for a continuous
period of more than ten years except with the approval of the Regulatory
Authority;
Explanation: any break in continuous
service as director of less than six months would be construed as holding office
continuously.
(B) have a person as director who is convicted by a
court of law for a criminal offence;
(ii)
every Nidhi or
Mutual Benefit Society having membership of ten thousand and above or rupees two
crore deposits as at the end of each financial year shall publish the audited
accounts in two dailies (one in English and one in vernacular language) within
six months from the close of the financial year)
(iii)
every such Nidhi or
Mutual Benefit Society shall not declare dividend exceeding twenty five percent
and further subject to the condition that an equal amount is transferred in
General Reserve
Provided
that no dividend can be declared if there is default in repayment of
deposits or interest thereon.
(iv)
dividend declared
by a Nidhi or Mutual Benefit Society shall be disbursed to the members in terms
of section 205/207 of the Companies Act, 1956;
(v)
any dividend
remaining unclaimed for a period beyond seven years shall be transferred to the
Central Government account in terms of section 205C of the Companies Act,
1956;
(vi)
in respect of every such Nidhi or Mutual
Benefit Society which has violated the notifications or regulations framed by
the Regulatory Authority with the approval of Central Government or failed to
function in terms of the Memorandum and Articles of Association, the Regulatory
Authority shall be entitled to appoint a Special Officer to take over the
management of the Nidhi and such
Special officer shall function as per the guidelines stipulated by the
Regulatory Authority ;
Explanation: Regulatory
Authority denotes the concerned Regional Directors of Department of Company
Affairs where the Registered Office of the Nidhi is
located.
2.
The directions specified herein above shall, as far as may be, apply to
every company declared as a Nidhi or Mutual Benefit Society under section 620A
of the said Act before or after the
publication of this notification and to potential Nidhi companies desiring to
get Nidhi status under the said
Act.
3.
The Central Government, if satisfied that the circumstances have arisen
and if found in public interest, after recording the reasons in writing, may
relax any of the directions mentioned above either generally or for any
specified period, subject to such terms and conditions, as the Central
Government may specify, for avoiding any hardship to any Nidhi or a class of
Nidhis for proper working of nidhis.
[F.No. 5/7/2000-CL.V]
A.RAMASWAMY,
Joint Secretary