Rules 7 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
A company that invites secured deposits has to put a trustee between itself and the depositors, and the scheme usually needs legal advice before the circular goes out. Rules 7 to 9 say when the trustee must be appointed, who is barred, how the trust deed is executed, how the trustee may be removed, what the trustee must do and when the depositors meet. This article states the rules as amended up to G.S.R. 663(E) dated 29 August 2022 per the MCA e-book; later amendments should be checked.
No company under section 73(2) and no eligible company may issue a circular inviting secured deposits until it has appointed one or more trustees for depositors, with written consent stated in the circular. A deposit trust deed in Form DPT-2 is executed at least seven days before the circular. A director, officer, employee, depositor, debtor of the company or related person cannot be trustee. The trustee calls a meeting on a requisition by one-tenth of depositors in value or on any default.
Rule 7: appointment of the trustee
Sub-rule (1). No company referred to in section 73(2), and no eligible company, shall issue a circular or advertisement inviting secured deposits unless it has appointed one or more trustees for depositors for creating the security. A proviso requires written consent from the trustee before appointment, and a statement of that consent must appear in the circular or advertisement with reasonable prominence. For the circular itself, see our article on rules 4, 6 and 10.
Sub-rule (2). The company executes a deposit trust deed in Form DPT-2 at least seven days before issuing the circular or advertisement.
Sub-rule (3): who cannot be trustee. No person, including a company in the business of providing trusteeship services, may be appointed if the proposed trustee:
| Clause | Disqualification |
|---|---|
| (a) | Is a director, key managerial personnel or any other officer or employee of the company or of its holding, subsidiary or associate company, or a depositor in the company. |
| (b) | Is indebted to the company, its subsidiary, its holding or associate company or a subsidiary of such holding company. |
| (c) | Has any material pecuniary relationship with the company. |
| (d) | Has entered into any guarantee arrangement in respect of principal debts secured by the deposits or interest on them. |
| (e) | Is related to any person specified in clause (a). |
The rule does not define "material pecuniary relationship" and prints no figure for it. The comparable test for debenture trustees in the Share Capital Rules does print a figure; see rule 18(1) to (6). Do not carry that figure across to deposits; use the deposit rule as printed.
Sub-rule (4): removal. No trustee for depositors shall be removed after the circular or advertisement is issued and before the expiry of the trustee's term except with the consent of all the directors present at a meeting of the Board. A proviso says that where the company is required to have independent directors, at least one independent director must be present at that meeting.
Rule 8: duties of the trustee
It is the duty of every trustee for depositors to:
- ensure that the assets on which the charge is created, together with the amount of deposit insurance, are sufficient to cover repayment of the principal of secured deposits outstanding and the interest accrued;
- satisfy himself that the circular or advertisement contains nothing inconsistent with the terms of the deposit scheme or the trust deed and that it complies with the rules and the Act;
- ensure that the company does not commit any breach of the covenants and provisions of the trust deed;
- take reasonable steps to procure a remedy for any breach of the trust deed covenants or the terms of invitation of deposits;
- take steps to call a meeting of depositors when such a meeting is required;
- supervise the implementation of the conditions on creation of security and the terms of deposit insurance;
- do the acts necessary if the security becomes enforceable; and
- carry out the acts necessary to protect depositors' interests and resolve their grievances.
The reference to deposit insurance is quoted as printed; rule 5 on deposit insurance is omitted from 15 August 2018. The security itself is described in rule 6, covered in our article on rules 4, 6 and 10.
Rule 9: meeting of depositors
The trustee for depositors shall call a meeting of all the depositors on:
- (a) a written requisition signed by at least one-tenth of the depositors in value for the time being outstanding; or
- (b) the happening of any event that constitutes a default or that, in the trustee's opinion, affects the interest of the depositors.
The rule says "shall call", so a valid requisition or a default obliges the trustee. It prints no notice period or quorum for the meeting. The Act's provisions on deposits are in our post on section 73.
Example
Sagar Textiles Limited, a public company, wants to invite secured deposits. Before the circular, it appoints Kaveri Trusteeship Services as trustee, with written consent, and prints a statement of that consent prominently in the circular. It executes the DPT-2 trust deed ten days before the circular is issued. Later, depositors holding one-tenth of the deposits by value ask in writing for a meeting; the trustee must call it. If the company wanted to remove the trustee mid-term, every director present at the Board meeting would have to consent, and at least one independent director would have to be present, because the company is required to have independent directors.
Need help with a deposit trust deed?
Trustee appointment, the DPT-2 deed and the circular statement have to be settled before the circular goes out. For advice on structuring a secured deposit scheme and its documents, see our legal consultation service.
Key takeaways
- A trustee for depositors must be appointed, with written consent, before a circular inviting secured deposits.
- The DPT-2 trust deed is executed at least seven days before the circular.
- Directors, officers, employees, depositors, debtors and related persons cannot be trustee.
- Removal needs the consent of all directors present at a Board meeting, with an independent director present where independent directors are required.
- The trustee calls a depositors' meeting on a one-tenth requisition or a default.
Read next
- Rules 4, 6 and 10: DPT-1 circular, security and application form
- Rules 11–14: nomination, receipts, repayment reserve and registers
- Section 71: debentures and trustees
- Section 73: prohibition on acceptance of deposits
Disclaimer: Based on the Companies Act, 2013 rules named above as consolidated in the MCA e-book (consulted on 3 October 2026), with the later notifications the article names. Later amendments, fees, forms and the Companies Act, 2013 provisions referred to should be checked. This article is general information, not legal advice; check the official text before acting.