Understanding Section 75 of the Companies Act, 2013 – Why Officers Can’t Hide Anymore
Most people assume that when a company fails, the company alone is responsible.
That assumption is dangerous. And often wrong.
Section 75 of the Companies Act, 2013 exists precisely to break this mindset. It makes one thing very clear — if deposits are accepted with fraudulent intent and not repaid, the individuals behind the decision cannot simply walk away.
This section doesn’t target honest business failure.
It targets deception.
And it does so very aggressively.
What Section 75 Is Really About
At its heart, Section 75 deals with damages for fraud.
If a company accepts deposits and later fails to repay them, and it is proved that the acceptance involved fraud, then liability does not stop at the company level. It moves directly to the people responsible.
Directors.
Officers.
Decision-makers.
They can be held personally and unlimitedly liable.
That single word — unlimited — changes everything.
Why This Section Exists
Deposits are built on trust.
People put their money into companies believing promises made in prospectuses, advertisements, or direct representations. Without strict consequences, that trust would be easy to abuse.
Section 75 exists to ensure that:
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deposits are not used as a cheap funding tool
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companies don’t raise money knowing they won’t repay
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officers think twice before making unrealistic promises
It’s not about paperwork. It’s about accountability.
Who Can Be Personally Liable Under Section 75?
This is where things get serious.
Any officer of the company who was involved in:
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accepting deposits, or
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managing deposits, or
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making representations related to deposits
can be held personally liable if fraud is established.
And yes, this means personal assets can be touched to compensate depositors.
Corporate veil? Lifted.
Limited liability? Gone.
What Does “Liability” Actually Cover?
Not just the deposit amount.
Section 75 covers:
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principal deposit
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interest payable
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and all losses or damages suffered due to fraud
The law is intentionally harsh. It’s meant to hurt where it matters, so that fraud never becomes a calculated risk.
How Section 75 Connects With Section 74
These two sections work together.
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Section 74 talks about repayment of deposits
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Section 75 kicks in when repayment fails because of fraud
If a company defaults under Section 74 and fraud is involved, depositors don’t have to wait helplessly. They can directly seek compensation from officers responsible.
This is why Section 75 is often described as the teeth behind deposit regulations.
Interaction With Other Fraud Provisions
Section 75 doesn’t operate alone.
In serious cases, it can work alongside Section 447, which deals with punishment for fraud. That means personal liability for damages can exist along with criminal consequences.
So yes, financial exposure and criminal exposure can coexist.
Why This Section Is a Big Deal for Depositors
Without Section 75, depositors would be left chasing insolvent companies with empty balance sheets.
This provision ensures that:
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fraud doesn’t get buried under corporate failure
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responsibility follows the people who caused the damage
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depositors have a real remedy
It restores balance in a system where companies usually have more power than individual investors.
A Simple Real-World Example
Imagine a company accepting deposits by promising high returns.
Behind the scenes, the funds are used to cover losses, not for the stated purpose. No repayment plan. No real intent to return money.
When the company defaults, Section 75 allows depositors to go after the officers who knowingly misled them.
Even if the company collapses, personal liability survives.
That’s the point.
What Companies Often Get Wrong
Some officers assume that if a default happens, it will be treated as a business failure.
That’s only true if there was no fraud.
Once intent and misrepresentation enter the picture, Section 75 changes the game entirely. Ignorance, delegation, or “it was the company’s decision” doesn’t help.
Why Section 75 Strengthens Corporate Governance
This section forces discipline.
It ensures that:
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deposit schemes are evaluated seriously
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representations are realistic
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risk is disclosed honestly
When personal consequences exist, decision-making improves.
That’s not coincidence. That’s design.
Key Things to Remember
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Section 75 applies when deposits are accepted with fraudulent intent
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Officers involved can be personally and unlimitedly liable
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Liability covers principal, interest, and all damages
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It works closely with Section 74 and fraud provisions like Section 447
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Corporate structure does not protect fraudulent conduct
Final Thoughts
Section 75 of the Companies Act, 2013 is not a technical provision. It’s a warning.
It tells companies and their officers that public money is not a playground. Fraud has consequences. Real ones.
For depositors, it provides protection.
For officers, it demands responsibility.
If you are dealing with deposit compliance, defaults, or potential exposure under Section 75, professional guidance is not optional. It’s essential.
To understand your risks, responsibilities, or remedies under the Companies Act, connect with experts at Callmyca.com and make informed, legally sound decisions.
