26.1.3 Nidhi Rules, 2014

3. Definitions.—(1) In these rules, unless the context otherwise requires,—

(a) “Act” means the Companies Act, 2013 (18 of 2013);

‘Branch’ means a place other than the registered office of Nidhi.

(b) “Doubtful Asset” means a borrowal account which has remained a Non-performing asset for more than two years but less than three years;

(c) “Loss Asset” means a borrowal account which has remained a Non-performing asset for more than three years or where in the opinion of the Board, a shortfall in the recovery of the loan account is expected because the documents executed may become invalid if subjected to legal process or for any other reason;

(d) “Net Owned Funds” means the aggregate of paid up equity share capital and free reserves as reduced by accumulated losses and intangible assets appearing in the last audited balance sheet:

Provided that the amount representing the proceeds of issue of preference shares shall not be included for calculating Net Owned Funds.

 “Nidhi” means a company which has been incorporated as a Nidhi with the object of cultivating the habit of thrift  and savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit, and which complies with the rules made by the Central Government for regulation of such class of companies.

(e) “Non-Performing Asset” means a borrowal account in respect of which interest income or instalment of loan towards re payment of principal amount has remained unrealised for twelve months;

(f) “Standard Asset” means the asset in respect of which no default in re-payment of principal or payment of interest has occurred or is perceived and which has neither shown signs of any problem relating to re-payment of principal sum or interest nor does it carry more than normal risk attached to the business;

(g) “Sub-Standard Asset” means a borrowal account which is a Non-performing asset:

Provided that reschedulement or renegotiation or rephasement of the loan instalment or interest payment shall not change the classification of an asset unless the borrowal account has satisfactorily performed for at least twelve months after such reschedulement or renegotiation or rephasement.

( 2) used herein, but not defined in these rules and defined in the Act or in the Companies (Specification of definitions details) Rules, 2014 shall have the same meaning as assigned to them in the Act or in the said Rules.

– The Central Government, on receipt of application (in Form NDH-4 along with fee thereon) of a public company for declaring it as Nidhi and on being satisfied that the company meets the requirements under these rules, shall notify the company as a Nidhi in the official Gazette:

Provided that a Nidhi incorporated under the Act on or after the commencement of the Nidhi (Amendment)Rules, 2019 shall file within sixty days from the date of expiry of:-

(a) one year from the date of its incorporation or
(b) the period up to which extension of time has been granted by the Regional Director under sub-ruIe (3) of rule 5:

Provided further that nothing in the first proviso shall prevent a Nidhi from filing Form NDH-4 before the period referred therein:

Provided also that that in case a company does not comply with the requirements of this rule, it shall not be allowed to file Form No. SH-7 (Notice to Registrar of any alteration of share capital) and Form PAS-3 (Return of Allotment).

 no company, which has not complied with the requirements of the this rule, or fail to comply with such requirement on or after the commencement of the Nidhi (Amendment) Rules, 2022, or in case the application submitted by the company in Form NDH-4 is or has been rejected by the Central Government, shall raise any deposits from its members or provide any loan to its members under the provisions of these rules from the date of such non-compliance, or from the date of the commencement of the above said rules, or the date of rejection of the application in Form NDH-4 whichever is later.

provided also that if any deposit raised by the company after the date of non-compliance, or the date of commencement of the above said rules, or the date of rejection of the application in Form NDH-4 whichever is later as referred to in the fourth provision shall be deemed to have been raised have been raised in pursuance of Chapter V of the Act, and shall be subject to all the requirements under that Chapter, or under any other provisions of the Act or the rules made thereunder, as the case may be.

Provided also that nothing in this rule shall apply to companies incorporated as Nidhi on or after the commencement of the above said rules.

(1) On and after commencement of Nidhi (Amendment) Rule, 2022, public company desirous to be declared as a Nidhi shall apply, in , within a period of one hundred twenty days of its incorporation for declaration as Nidhi, if it fulfils the following conditions, namely:-

(I) it has not less than two hundred members: and

(II) it has Net Owned Funds or twenty lakh rupees or more.

(2) The company shall also attach, alongwith Form NDH-4, the declaration with regard to fulfilment of fit and proper person criteria, as per this sub-rule, by all the Promoters and directors of the company.

(3) For the purpose of determing as to whether any promoter or director is a ‘fit and proper person’, the following shaIl be taken into account, namely:-

(a) integrity. honesty, ethical behaviour, reputation, fairness and character of the person; and

(b) the person not incurring any of the fallowing disqualifications, namely:-

(i) criminal complaint or information under section 154 of the Code of Criminal Procedure, 1973 (2 of 1974) has been filed by a person authorised by the Central Government against such person and which is pending;

(ii) charge sheet has been filed against such person by any enforcement agency in matters concerning economic offences which is pending;

(iii) an order of restraint, prohibition or debarment has been passed against such person by any regulatory authority or enforcement agency in any matter concerning company law, securities laws or financial markets which is in force;

(iv) an order of conviction has been passed against such person by a court for any offence involving moral turpitude;

(v) such person has been declared insolvent and not been discharged; (vi) such person has been found to be of unsound mind by a court of competent jurisdiction and the finding is in force;

(vii) such person has been categorised as a willful defaulter;

(viii) such person has been declared a fugitive economic offender;

(ix) such person is a director in five or more companies incorporated or declared as Nidhi, or is a promoter of three or more companies incorporated or declared as Nidhi.

(4) The Central Government, shall examine the application filed in Form NDH-4 and convey its decision within a period of forty five days to the company:

Provided that in case a decision on an application filed in form NDH-4 is not taken by the Central Government within the aforesaid period of receipt of such application, the same shall be deemed as approved.

(5) On being satisfied that the company meets the requirements under sub- rules (2) and (3), the Central Government, shall notify in the Official Gazette, declaring it as a Nidhi or Mutual Benefit Society, as the case may be:

Provided that the decision of the Central Government approving the application, shall be filed by the company with the Registrar alongwith Form 20A required under section 10A of the Act:

Provided further that such company shall commence its business only once the decision of the Central Government approving its application is obtained from the Central Government pursuant to the declaration given under rule 12 of the Companies (Incorporation) Rules, 2014.

(6) In case a company does not comply with the requirements of sub- rule (1) of this rule, it shall not be allowed to file Form No. SH-7 (Notice to Registrar of any alteration of share capital) and Form PAS-3 (Return of allotment).

(7) The provisions of this rule shall not be applicable to a public company incorporated under the Act before the date of commencement of the Nidhi (Amendment) Rules, 2022.