The
Banning of Unregulated Deposit Schemes Ordinance, 2019 has been
promulgated to have a central legislation to tackle the menace of
illicit deposits taking activities in the country. Presently,
non-banking entities are allowed to raise deposits from the public under
the provisions of various statutes enacted by the Central Government
and State Governments. However, the regulatory frame
work for deposit
taking activity in the country is not seamless. Despite such diverse
regulatory frame work, schemes and arrangements leading to unauthorised
collection of money and deposits fraudulently by inducing public to
invest in uncertain schemes promising high returns or other benefits are
still operating in the society.
This Ordinance, therefore, ensures a comprehensive ban on unregulated
deposit taking activity and for its effective enforcement. It aims to
prevent such unregulated deposit schemes or arrangements at their
inception and at the same time makes soliciting, inviting or accepting
deposits pursuant to an unregulated deposited scheme as a punishable
offence. The said Ordinance also seeks to put in place a mechanism by
which the depositors can be repaid without delay by attaching the assets
of the defaulting establishments.
MINISTRY OF LAW AND JUSTICE
(Legislative Department)
New Delhi, the 21st February, 2019
THE BANNING OF UNREGULATED DEPOSIT SCHEMES ORDINANCE, 2019
No. 7 or 2019
Promulgated by the President in the Seventieth Year of the Republic of India.
An Ordinance to provide for a comprehensive mechanism to ban the
unregulated deposit schemes and to protect the interest of depositors
and for matters connected therewith or incidental thereto.
WHEREAS the
Banning of Unregulated Deposit Schemes Bill, 2019 was passed on the 13th day of February, 2019 in the House of the People;
AND WHEREAS the said Bill could not be taken up for consideration and passing in the Council of States;
AND WHEREAS Parliament is not in session and the President is
satisfied that circumstances exist which render it necessary for him to
take immediate action;
Now, THEREFORE, in exercise of the powers conferred by clause (1) of
article 123 of the Constitution, the President is pleased to promulgate
the following Ordinance:—
CHAPTER I
PRELIMINARY
Short title, extent and commencement.
1. (1) This Ordinance may be called the
Banning of Unregulated Deposit Schemes Ordinance, 2019.
(2) It extends to the whole of India except the State of Jammu and Kashmir.
(3) It shall come into force at once.
2. Definition.
In this Ordinance, unless the context otherwise requires,—
(1) “appropriate Government” means in respect of matters relating to,—
(i) the Union territory without legislature, the Central Government;
(ii) the Union territory of Puducherry, the Government of that Union territory;
(iii) the Union territory of Delhi, the Government of that Union territory; and
(iv) the State, the State Government;
(2) “company” shall have the same meaning as assigned to it in clause (20) of section 2 of the Companies Act, 2013;
(3) “Competent Authority” means an Authority appointed by the appropriate Government under section 7;
(4) “deposit” means an amount of money received by way of an
advance or loan or in any other form, by any deposit taker with a
promise to return whether after a specified period or otherwise, either
in cash or in kind or in the form of a specified service, with or
without any benefit in the form of interest, bonus, profit or in any
other form, but does not include—
(a) amounts received as loan from a scheduled bank or a
co-operative bank or any other banking company as defined in section 5
of the Banking Regulation Act, 1949;
(b) amounts received as loan or financial assistance from the Public
Financial Institutions notified by the Central Government in
consultation with the Reserve Bank of India or any non-banking financial
company as defined in clause (f) of section 45-I of the Reserve Bank of
India Act, 1934 and is registered with the Reserve Bank of India or any
Regional Financial Institutions or insurance companies;
(c) amounts received from the appropriate Government, or any amount
received from any other source whose repayment is guaranteed by the
appropriate Government, or any amount received from a statutory
authority constituted under an Act of Parliament or a State Legislature;
(d) amounts received from foreign Governments, foreign or
international banks, multilateral financial institutions, foreign
Government owned development financial institutions, foreign export
credit collaborators, foreign bodies corporate, foreign citizens,
foreign authorities or person resident outside India subject to the
provisions of the Foreign Exchange Management Act, 1999 and the rules
and regulations made thereunder;
(e) amounts received by way of contributions towards the capital by
partners of any partnership firm or a limited liability partnership;
(f) amounts received by an individual by way of loan from his
relatives or amounts received by any firm by way of loan from the
relatives of any of its partners;
(g) amounts received as credit by a buyer from a seller on the sale of any property (whether movable or immovable);
(h) amounts received by an asset re-construction company which is
registered with the Reserve Bank of India under section 3 of the
Securitisation and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002;
(i) any deposit made under section 34 or an amount accepted by a
political party under section 29B of the Representation of People Act,
1951;
(j) any periodic payment made by the members of the self-help groups
operating within such ceilings as may be prescribed by the State
Government or Union territory Government;
(k) any other amount collected for such purpose and within such ceilings as may be prescribed by the State Government;
(l) an amount received in the course of, or for the purpose
of, business and bearing a genuine connection to such business
including—
(i) payment, advance or part payment for the supply or hire of goods
or provision of services and is repayable in the event the goods or
services are not in fact sold, hired or otherwise provided;
(ii) advance received in connection with consideration of an
immovable property under an agreement or arrangement subject to the
condition that such advance is adjusted against such immovable property
as specified in terms of the agreement or arrangement;
(iii) security or dealership deposited for the performance of the contract for supply of goods or provision of services; or
(iv) an advance under the long-term projects for supply of capital goods except those specified in item (ii):
Provided that if the amounts received under items (i) to (iv) become
refundable, such amounts shall be deemed to be deposits on the expiry of
fifteen days from the date on which they become due for refund:
Provided further that where the said amounts become refundable, due
to the deposit taker not obtaining necessary permission or approval
under the law for the time being in force, wherever required, to deal in
the goods or properties or services for which money is taken, such
amounts shall be deemed to be deposits.
Explanation.— For the purposes of this clause,—
(i) in respect of a company, the expression “deposit” shall have the
same meaning as assigned to it under the Companies Act, 2013;
(ii) in respect of a non-banking financial company registered under
the Reserve Bank of India Act, 1934, the expression “deposit” shall have
the same meaning as assigned to it in clause (bb) of the section 45-I
of the said Act;
(iii) the expressions “partner” and “firm” shall have the same
meanings as respectively assigned to them under the Indian Partnership
Act, 1932;
(iv) the expression “partner” in respect of a limited liability
partnership shall have the same meaning as assigned to it in clause (q)
of section 2 of the Limited Liability Partnership Act, 2008;
(v) the expression “relative” shall have the same meaning as assigned to it in the Companies Act, 2013;
(5) “depositor” means any person who makes a deposit under this Ordinance;
(6) “deposit taker” means—
(i) any individual or group of individuals;
(ii) a proprietorship concern;
(iii) a partnership firm (whether registered or not);
(iv) a limited liability partnership registered under the Limited Liability Partnership Act, 2008;
(v) a company;
(vi) an association of persons;
(vii) a trust (being a private trust governed under the provisions of the Indian Trusts Act, 1882 or a
public trust, whether registered or not);
(viii) a co-operative society or a multi-State cooperative society; or
(ix) any other arrangement of whatsoever nature,
receiving or soliciting deposits, but does not include—
(i) a Corporation incorporated under an Act of Parliament or a State Legislature;
(ii) a banking company, a corresponding new bank, the State Bank of
India, a subsidiary bank, a regional rural bank, a co-operative bank or a
multi-State co-operative bank as defined in the Banking Regulation
Act,1949;
(7) “Designated Court” means a Designated Court constituted by the appropriate Government under section 8;
(8) “insurer” shall have the same meaning as assigned to it in clause (9) of section 2 of the Insurance Act, 1938;
(9) “notification” means a notification published in the Official
Gazette and the expression “notify” shall be construed accordingly;
(10) “person” includes—
(i) an individual;
(ii) a Hindu Undivided Family;
(iii) a company;
(iv) a trust;
(v) a partnership firm;
(vi) a limited liability partnership;
(vii) an association of persons;
(vii) a co-operative society registered under any law for the time being in force relating to cooperative societies; or
(ix) every artificial juridical person, not falling within any of the preceding sub-clauses;
(11) “prescribed” means prescribed by the rules made by the Central
Government or, as the case may be, the State Government under this
Ordinance;
(12) “property” means any property or assets of every description,
whether corporeal or incorporeal, movable or immovable, tangible or
intangible, and includes deeds and instruments evidencing title to, or
interest in, such property or assets, wherever located;
(13) “public financial institution” shall have the same meaning as
assigned to it in clause (72) of section 2 of the Companies Act, 2013;
(14) “Regulated Deposit Scheme” means the Schemes specified under column (3) of the First Schedule;
(15) “Regulator” means the Regulator specified in column (2) of the First Schedule;
(16) “Schedule” means the Schedules appended to this Ordinance;
(17) “Unregulated Deposit Scheme” means a Scheme or an arrangement
under which deposits are accepted or solicited by any deposit taker by
way of business and which is not a Regulated Deposit Scheme, as
specified under column (3) of the First Schedule.
CHAPTER II
BANNING OF UNREGULATED DEPOSIT SCHEMES
3. Banning of Unregulated Deposit Schemes.
On and from the date of commencement of this Ordinance,—
(a) the Unregulated Deposit Schemes shall be banned; and
(b) no deposit taker shall, directly or indirectly, promote, operate,
issue any advertisement soliciting participation or enrolment in or
accept deposits in pursuance of an Unregulated Deposit Scheme.
4. Fraudulent default in Regulated Deposit Schemes.
No deposit taker, while accepting deposits pursuant to a Regulated
Deposit Scheme, shall commit any fraudulent default in the repayment or
return of deposit on maturity or in rendering any specified service
promised against such deposit.
5. Wrongful inducement in relation to Unregulated Deposit Schemes.
No person by whatever name called shall knowingly make any statement,
promise or forecast which is false, deceptive or misleading in material
facts or deliberately conceal any material facts, to induce another
person to invest in, or become a member or participant of any
Unregulated Deposit Scheme.
6. Certain scheme to be Unregulated Deposit Scheme.
A prize chit or a money circulation scheme banned under the
provisions of the Prize Chits and Money Circulation Scheme (Banning)
Act, 1978 shall be deemed to be an Unregulated Deposit Scheme under this
Ordinance.
CHAPTER III
AUTHORITIES
7. Competent Authority.
(1) The appropriate Government shall, by notification,
appoint one or more officers not below the rank of Secretary to that
Government, as the Competent Authority for the purposes of this
Ordinance.
(2) The appropriate Government may, by notification, appoint
such other officer or officers as it thinks fit, to assist the
Competent Authority in discharging its functions under this Ordinance.
(3) Where the Competent Authority or officers appointed under
sub-section (2), for the purposes of this section, has reason to believe
(the reason for such belief to be recorded in writing), on the basis of
such information and particulars as may be prescribed that any deposit
taker is soliciting deposits in contravention of section 3, he may, by
order in writing, provisionally attach the deposits held by the deposit
taker and the money or other property acquired either in the name of the
deposit taker or in the name of any other person on behalf of the
deposit taker from the date of the order, in such manner as may be
prescribed.
(4) The Competent Authority shall, for the purposes of sub-section
(3), have the same powers as vested in a civil court under the Code of
Civil Procedure, 1908 while conducting investigation or inquiry in
respect of the following matters, namely:—
(a) discovery and inspection;
(b) enforcing the attendance of any person, including any officer of a reporting entity and examining him on oath;
(c) compelling the production of records;
(d) receiving evidence on affidavits;
(e) issuing commissions for examination of witnesses and documents; and
(f) any other matter which may be prescribed.
(5) The Competent Authority shall have power to summon any person
whose attendance he considers necessary whether to give evidence or to
produce any records during the course of any investigation or proceeding
under this section.
(6) All the persons so summoned shall be bound to attend in person or
through authorised agents, as such officer may direct, and shall be
bound to state the truth upon any subject respecting which they are
examined or make statements, and produce such documents as may be
required.
(7) Every proceeding under sub-sections (4) and (5) shall be deemed
to be a judicial proceeding within the meaning of section 193 and
section 228 of the Indian Penal Code.
(8) Subject to any rules made in this behalf by the Central
Government, any officer referred to in sub-section (2) may impound and
retain in his custody for such period, as he thinks fit, any records
produced before him in any proceedings under this Ordinance:
Provided that the officers referred to in sub-section (2) shall not—
(a) impound any records without recording his reasons for so doing; or
(b) retain in his custody any such records for a period exceeding
three months, without obtaining the previous approval of the Competent
Authority.
8. Designated Court.
(1) The appropriate Government shall, with the concurrence
of the Chief Justice of the concerned High Court, by notification,
constitute one or more Courts known as the Designated Courts for such
area or areas or such case or cases as may be specified in such
notification, which shall be presided over by a Judge not below the rank
of a District and Sessions Judge or Additional District and Sessions
Judge.
(2)’ No Court other than the Designated Court shall have
jurisdiction in respect of any matter to which the provisions of this
Ordinance apply.
(3) When trying an offence under this Ordinance, the Designated Court
may also try an offence, other than an offence under this Ordinance,
with which the accused may, under the Code of Criminal Procedure, 1973,
be charged at the same trial.
CHAPTER IV
INFORMATION ON DEPOSIT TAKERS
9. Central database.
(1) The Central Government may designate an authority,
whether existing or to be constituted, which shall create, maintain and
operate an online database for information on deposit takers operating
in India.
(2) The authority designated under sub-section (1) may
require any Regulator or the Competent Authority to share such
information on deposit takers, as may be prescribed.
10. Intimation of business by deposit taker.
(1) Every deposit taker which commences or carries on its
business as such on or after the commencement of this Ordinance shall
intimate the authority referred to in subsection (1) of section 9 about
its business in such form and manner and within such time, as may be
prescribed.
(2) The Competent Authority may, if it has reason to believe
that the deposits are being solicited or accepted pursuant to an
Unregulated Deposit Scheme, direct any deposit taker to furnish such
statements, information or particulars, as it considers necessary,
relating to or connected with the deposits received by such deposit
taker.
Explanation.— For the removal of doubts, it is hereby clarified that—
(a) the requirement of intimation under sub-section (1) is applicable
to deposit takers accepting or soliciting deposits ‘as defined in
clause (4) of section 2; and
(b) the requirement of intimation under sub-section (1) applies to a
company, if the company accepts the deposits under Chapter V of the
Companies Act, 2013.
11. Information to be shared.
(1) The Competent Authority shall share all information
received under section 29 with the Central Bureau of Investigation and
with the authority which may be designated by the Central Government
under section 9.
(2) The appropriate Government, any Regulator, income-tax authorities
or any other investigation agency, having any information or documents
in respect of the offence investigated under this Ordinance by the
police or the Central Bureau of Investigation, shall share all such
information or documents with the police or the Central Bureau of
Investigation.
(3) Where the principal officer of any banking company, a
corresponding new bank, the State Bank of India, a subsidiary bank, a
regional rural bank, a cooperative bank or a multi-State co-operative
bank has reason to believe that any client is a deposit taker and is
acting in contravention to the provisions of this Ordinance, he shall
forthwith inform the same to the Competent Authority.
CHAPTER V
RESTITUTION TO DEPOSITORS
12. Priority of depositors’ claim.
Save as otherwise provided in the Securitisation and Reconstruction
of Financial Assets and Enforcement of Security Interest Act, 2002 or
the Insolvency and Bankruptcy Code, 2016, any amount due to depositors
from a deposit taker shall be paid in priority over all other debts and
all revenues, taxes, cesses and other rates payable to the appropriate
Government or the local authority.
13. Precedence of attachment.
(1) Save as otherwise provided in the Securitization and
Reconstruction of Financial Assets and Enforcement of Bankruptcy Code,
2016, an order of provisional attachment passed by the Competent
Authority, shall have precedence and priority, to the extent of the
claims of the depositors, over any other attachment by any authority
competent to attach property for repayment of any debts, revenues,
taxes, cesses and other rates payable to the appropriate Government or
the local authority.
(2) Where an order of provisional attachment has been passed by the Competent Authority—
(a) such attachment shall continue until an order is passed
under sub-section (3) or sub-section (5) of section 15 by the Designated
Court;
(b) all the attached money or property of the deposit taker
and the persons mentioned therein shall vest in the Competent Authority
and shall remain so vested till further order of the Designated Court.
(3) The Competent Authority shall open an account in a scheduled bank
for the purpose of crediting and dealing with the money realised under
this Ordinance, which shall not be utilised except under the
instructions of the Designated Court.
(4) The Competent Authority shall not dispose of or alienate the
property or money attached except in accordance with the order of the
Designated Court under sub-section (3) or sub-section (5) of section 15.
(5) Notwithstanding anything contained in subsection (4), the
Competent Authority may, if it thinks it expedient, order the immediate
sale of perishable items or assets, and the proceeds of the sale shall
be utilised in the same manner as provided for other property.
14. Application for confirmation of attachment and sale of property
(1) The Competent Authority shall, within a period of thirty
days, which may extend up to sixty days, for reasons to be recorded in
writing, from the date of the order of provisional attachment, file an
application with such particulars as may be prescribed, before the
Designated Court for making the provisional attachment absolute, and for
permission to sell the property so attached by public auction or, if
necessary, by private sale.
(2) In case where the money or property has been attached on
the permission granted by a Designated Court in another State or Union
territory, the application for confirmation of such attachment shall be
filed in that Court.
15. Confirmation of attachment by Designated Court.
(1) Upon receipt of an application under section 14, the Designated Court shall issue notice to—
(a) the deposit taker; and
(b) any person whose property is attached under section 14,
to show cause, within a period of thirty days from the date of issue
of notice, as to why the order of attachment should not be made absolute
and the properties so attached be sold.
(2) The Designated Court shall also issue notice to all
other persons represented to it as having or being likely to claim any
interest or title in the property, to appear on the same date as persons
referred to in sub-section (1) to raise objections, if they so desire,
to the attachment of the property.
(3) The Designated Court shall, after adopting such procedure as may be prescribed, pass an order—
(a) making the provisional order of attachment absolute; or
(b) varying it by releasing a portion of the property from attachment; or
(c) cancelling the provisional order of attachment,
and in case of an order under clause (a) or clause (b), direct the
Competent Authority to sell the property so attached by public auction
or, if necessary, by private sale and realise the sale proceeds:
(4) The Designated Court shall not, in varying or cancelling
the provisional order of attachment, release any property from
attachment, unless it is satisfied that—
(a) the deposit taker or the person referred to in subsection (1) has interest in such property; and
(b) there shall remain an amount or property sufficient for repayment to the depositors of such deposit taker.
(5) The Designated Court shall pass such order or issue such
dfrection as may be necessary for the equitable distribution among the
depositors of the money attached or realised out of the sale.
(6) The Designated Court shall endeavor to complete the
proceedings under this section within a period of one hundred and eighty
days from the date of receipt of the application referred to in
sub-section (1).
16. Attachment of property of malafide transferees.
(1) Where the Designated Court is satisfied that there is a
reasonable cause for believing that the deposit taker has transferred
any property otherwise than in good faith and not for commensurate
consideration, it may, by notice, require any transferee of such
property, whether or not he received the property directly from the said
deposit taker, to appear on a date to be specified in the notice and
show cause why so much of the transferee’s property as is equivalent to
the proper value of the property transferred should not be attached.
(2) Where the said transferee does not appear and show cause
on the specified date or where the Designated Court is satisfied that
the transfer of the property to the said transferee was not a bonafide
transfer and not for commensurate consideration, it shall order the
attachment of so much of the said transferee’s property as in its
opinion is equivalent to the proper value of the property transferred.
17. Payment in lieu of attachment.
(1) Any deposit taker or a person referred to in subsection
(1) of section 15, or transferee referred to in section 16 whose
property is about to be attached or has been provisionally attached
under this Ordinance, may, at any time before the confirmation of
attachment, apply to the Designated Court for permission to deposit the
fair value of the property in lieu of attachment.
(2) While allowing the deposit taker or person or transferee
referred to in sub-section (1) to make the deposit under sub-section
(1), the Designated Court may order such deposit taker or person or
transferee to pay any sum towards costs as may be applicable.
18. Powers of Designated Court.
(1) The Designated Court shall exercise the following powers, namely:—
(a) power to approve the statement of dues of the deposit taker due from various debtors;
(b) power to assess the value of the assets of the deposit taker and
finalise the list of the depositors and their respective dues;
(c) power to direct the Competent Authority to take possession of any
assets belonging to or in the control of the deposit taker and to sell,
transfer or realise the attached assets, either by public auction or by
private sale as it-deems fit depending upon the nature of assets and
credit the sale proceeds thereof to its bank account;
(d) power to approve the necessary expenditure to be incurred by the
Competent Authority for taking possession and realisation of the assets
of the deposit taker;
(e) power to pass an order for full payment to the depositors by the
Competent Authority or an order for proportionate payment to the
depositors in the event the money so realised is not sufficient to meet
the entire deposit liability;
(f) power to direct any person, who has made profit or averted loss
by indulging in any transaction or activity in contravention of the
provisions of this Ordinance, to disgorge an amount equivalent to the
wrongful gain made or loss averted by such contravention; and
(g) power to pass any other order which the Designated Court deems
fit for realisation of assets of the deposit taker and for repayment of
the same to the depositors of such deposit taker or on any other matter
or issue incidental thereto.
(2) On the application of any person interested in any
property attached and vested in the Competent Authority under this
Ordinance and after giving such Competent Authority an opportunity of
being heard, make such order as the Designated Court considers just and
reasonable for—
(a) providing from such of the property attached and vested in the
Competent Authority as the applicant claims an interest in, such sums as
may be reasonably necessary for the maintenance of the applicant and of
his family, and for expenses connected with the defence of the
applicant where criminal proceedings have been initiated against him in
the Designated Court under this Ordinance; or
(b) safeguarding, so far as may be practicable, the interest of any business affected by the attachment.
Explanation.—For the purposes of this section, the
expression “deposit taker” includes the directors, promoters, managers
or members of said establishment or any other person whose property or
assets have been attached under this Ordinance.
19. Appeal to High Court.
Any person including the Competent Authority, if aggrieved by any
final order of the Designated Court under this Chapter, may appeal to
the High Court, within a period of sixty days from the date of such
order:
Provided that the High Court may entertain the appeal after the
expiry of the said period of sixty days, if it is satisfied that the
appellant was prevented by sufficient cause from preferring the appeal
in time.
Explanation.— The expression “High Court” means the High Court of a State or Union territory where the Designated Court is situated.
20. Power of Supreme Court to transfer cases.
(1) Whenever it is made to appear to the Supreme Court that
there is a default in any deposit scheme or deposit schemes of the
nature referred to in section 30, the Supreme Court may, by an order,
direct that any particular case be transferred from one Designated Court
to another Designated Court.
(2) The Supreme Court may act under this section only on an
application filed by the Competent Authority or any interested party,
and every such application shall be supported by an affidavit.
(3) Where an application for the exercise of the powers conferred by
this section is dismissed, the Supreme Court may, if it is of opinion
that the application was frivolous or vexatious, order the applicant to
pay by way of compensation to any person who has opposed the application
such sum not exceeding fifty thousand rupees as it may consider
appropriate in the circumstances of the case.
CHAPTER VI
OFFENCES AND PUNISHMENTS
21. (1) Any deposit taker who solicits deposits in
contravention of section 3 shall be punishable with imprisonment for a
term which shall not be less than one year but which may extend to five
years and with fine which shall not be less than two lakh rupees but
which may extend to ten lakh rupees.
(2) Any deposit taker who accepts deposits in contravention of
section 3 shall be punishable with imprisonment for a term which shall
not be less than two years but which may extend to seven years and with
fine which shall not be less than three lakh rupees but which may extend
to ten lakh rupees.
(3) Any deposit taker who accepts deposits in contravention of
section 3 and fraudulently defaults in repayment of such deposits or in
rendering any specified service, shall be punishable with imprisonment
for a term which shall not be less than three years but which may extend
to ten years and with fine which shall not be less than five lakh
rupees but which may extend to twice the amount of aggregate funds
collected from the subscribers, members or participants in the
Unregulated Deposit Scheme.
Explanation.— For the purposes of this Ordinance,—
(i) the expression “fraudulently” shall have the same meaning as assigned to it in section 25 of the Indian Penal Code;
(ii) where the terms of the Deposit Scheme are entirely impracticable
or unviable, the terms shall be relevant facts showing an intention to
defraud.
22. Punishment for contravention of section 4.
Any deposit taker who contravenes the provisions of section 4 shall
be punishable with imprisonment for a term which may extend to seven
years, or with fine which shall not be less than five lakh rupees but
which may extend to twenty-five crore rupees or three times the amount
of profits made out of the fraudulent default referred to in said
section, whichever is higher, or with both.
23. Punishment for contravention of section 5.
Any person who contravenes the provisions of section 5 shall be
punishable with imprisonment for a term which shall not be less than one
year but which may extend to five years and with fine which may extend
to ten lakh rupees.
24. Punishment for repeat offenders.
Whoever having been previously convicted of an offence punishable
under this Chapter, except the offence under section 26, is subsequently
convicted of an offence shall be punishable with imprisonment for a
term which shall not be less than five years but which may extend to ten
years and with fine which shall not be less than ten lakh rupees but
which may extend to fifty crore rupees.
25. Offences by deposit takers other than individuals.
(1) Where an offence under this Ordinance has been committed
by a deposit taker other than an individual, every person who, at the
time the offence was committed, was in charge of, and was responsible
to, the deposit taker for the conduct of its business, as well as the
deposit taker, shall be deemed to be guilty of the offence and shall be
liable to be proceeded against and punished accordingly.
(2) Nothing contained in sub-section (1) shall render any
such person liable to any punishment provided in this Ordinance, if he
proves that the offence was committed without his knowledge or that he
exercised all due diligence to prevent the commission of such offence.
(3) Notwithstanding anything contained in subsection (1), where an
offence under this Ordinance has been committed by a deposit taker other
than an individual, and it is proved that the offence—
(a) has been committed with the consent or connivance; or
(b) is attributable to any neglect on the part of any director,
manager, secretary, promoter, partner, employee or other officer of the
deposit taker,
such person shall also be deemed to be guilty of that offence and
shall be liable to be proceeded against and punished accordingly.
26. Punishment for contravention of section 10.
Whoever fails to give the intimation required under sub-section (1)
of section 10 or fails to furnish any such statements, information or
particulars as required under subsection (2) of that section, shall be
punishable with fine which may extend to five lakh rupees.
27. Cognizance of offences.
Notwithstanding anything contained in section 4, no Designated Court
shall take cognizance of an offence punishable under that section except
upon a complaint made by the Regulator:
Provided that the provisions of section 4 and this section shall not apply in relation to a deposit taker which is a company.
CHAPTER VII
INVESTIGATION, SEARCH AND SEIZURE
28. Offences to be cognizable and non-bailable.
Notwithstanding anything contained in the Code of Criminal Procedure,
1973 every offence punishable under this Ordinance, except the offence
under section 22 and section 26, shall be cognizable and non-bailable.
29. Competent Authority to be informed of offences.
The police officer shall, on recording information about the
commission of an offence under this Ordinance, inform the same to the
Competent Authority.
30. Investigation of offences by Central Bureau of Investigation.
(1) On receipt of information under section 29 or otherwise,
if the Competent Authority has reason to believe that the offence
relates to a deposit scheme or deposit schemes in which-
(a) the depositors, deposit takers or properties involved are located
in more than one State or Union territory in India or outside India;
and
(b) the total value of the amount involved is of such magnitude as to significantly affect the public interest,
the Competent Authority shall refer the matter to the Central
Government for investigation by the Central Bureau of Investigation.
(2) The reference made by the Competent Authority under sub-section
(1) shall be deemed to be with the consent of the State Government under
section 6 of the Delhi Special Police Establishment Act, 1946.
(3) On the receipt of the reference under subsection (1), the
Central Government may transfer the investigation of the offence to the
Central Bureau of Investigation under section 5 of the Delhi Special
Police Establishment Act, 1946.
31. Power to enter, search and seize without warrant.
(1) Whenever any police officer, not below the rank of an
officer-in-charge of a police station, has reason to believe that
anything necessary for the purpose of an investigation into any offence
under this Ordinance may be found in any place within the limits of the
police station of which he is in-charge, or to which he is attached,
such officer may, with the written authorisation of an officer not below
the rank of Superintendent of Police, and after recording in writing so
far as possible, the thing for which the search is to be made and
subject to the rules made in this behalf, authorise any officer
sub-ordinate to him,—
(a) to enter and search any building, conveyance or place, between
sunrise and sunset, which he has reason to suspect is being used for
purposes connected with the promotion or conduct of any deposit taking
scheme or arrangement in contravention of the provisions of this
Ordinance;
(b) in case of resistance, to break open any door and remove any
obstacle to such entry, if necessary by force, with such assistance as
he considers necessary, for exercising the powers conferred by clause
(a);
(c) to seize any record or property found as a result of the search
in the said building, conveyance or place, which are intended to be
used, or reasonably suspected to have been used, in connection with any
such deposit-taking scheme or arrangement in contravention of the
provisions of this Ordinance; and
(d) to detain and search, and if he thinks proper, take into custody
and produce before any Designated Court any such person whom he has
reason to believe to have committed any offence punishable under this
Ordinance:
Provided that if such officer has reason to believe that the said
written authorisation cannot be obtained without affording opportunity
for the concealment of evidence or facility for the escape of an
offender, he may, without the said written authorisation, enter and
search such building, conveyance or place, at any time between sunset
and sunrise after recording the grounds in writing.
(2) Where it is not practicable to seize the record or property, the
officer authorised under sub-section (1), may make an order in writing
to freeze such property, account, deposits or valuable securities
maintained by any deposit taker about which a complaint has been made or
credible information has been received or a reasonable suspicion exists
of their having been connected with the promotion or conduct of any
deposit taking scheme or arrangement in contravention of the provisions
of this Ordinance and it shall be binding on the concerned bank or
financial or market establishment to comply with the said order:
Provided that no bank or financial or market establishment shall
freeze such account, deposit or valuable securities, for a period beyond
thirty days unless the same is authorised by the order of the
Designated Court:
Provided further that, if at any time, it becomes practicable to
seize the frozen property, the officer authorised under sub-section (1)
may seize such property.
Explanation.—For the purpose of this section, the expressions,—
(i) “freezing of account” shall mean that no transaction, whether
deposit or withdrawal shall be allowed in the said account; and
(ii) “freezing of property” shall mean that no transfer, conversion, disposition or movement of property shall be allowed.
(3) Where an officer takes down any information in writing or records
grounds for his belief or makes an order in writing under sub-section
(1) or sub-section (2), he shall, within a time of seventy-two hours
send a copy thereof to the Designated Court in a sealed envelope and the
owner or occupier of the building, conveyance or place shall, on
application, be furnished, free of cost, with a copy of the same by
–the Designated Court.
(4) All searches, seizures and arrests under this section shall be
made in accordance with the provisions of the Code of Criminal
Procedure, 1973.
32. Application of Code of Criminal Procedure, 1973 to proceedings before Designated Court.
(1) The Designated Court may take cognizance of offences under this Ordinance without the accused being committed to it for trial.
(2) Save as otherwise provided in section 31, the provisions of the Code of Criminal Procedure, 1973 shall apply—
(a) to all arrests, searches and seizures made under this Ordinance;
(b) to the proceedings under this Ordinance and for the purposes of
the said provisions, the Designated Court shall be deemed to be a Court
of Session and the persons conducting the prosecution before the
Designated Court, shall be deemed to be Public Prosecutors.
CHAPTER VIII
MISCELLANEOUS
33. Publication of advertisement of Unregulated Deposit Scheme.
Where any newspaper or other publication of any nature, contains any
statement, information or advertisement promoting, soliciting deposits
for, or inducing any person to become a member of any Unregulated
Deposit Scheme, the appropriate Government may direct such newspaper or
publication to publish a full and fair retraction, free of cost, in the
same manner and in the same position in such newspaper or publication as
may be prescribed.
34. Ordinance to have overriding effect.
Save as otherwise expressly provided in this Ordinance, the
provisions of this Ordinance shall have effect notwithstanding anything
contained in any other law for the time being in force, including any
law made by any State or Union territory.
35. Application of other laws not barred.
The provisions of this Ordinance shall be in addition to, and not in
derogation of, the provisions of any other law for the time being in
force.
36. Protection of action taken in good faith.
No suit, prosecution or other legal proceedings shall lie against the
appropriate Government or the Competent Authority or any officer of the
appropriate Government for anything
,which is in good faith done or intended to be done under this Ordinance or the rules made thereunder.
37. Power of Central Government to make rules.
(1) The Central Government may, by notification, make rules for carrying out the provisions of this Ordinance.
(2) In particular and without prejudice to the generality of
the foregoing power, such rules may provide for all or any of the
following matters, namely:—
(a) the information and other particulars to be taken into
consideration before issuing an order, and the manner of attachment,
under sub-section (3) of section 7;
(b) information to be shared under sub-section (2) of section 9;
(c) the form and manner in which and the time within which the intimation shall be given under subsection (1) of section 10;
(d) the particulars contained in the application to be filed by the
Competent Authority before the Designated Court under sub-section (1) of
section 14;
(e) the procedure to be adopted by the Designated Court before issuing an order under sub-section (3) of section 15;
(f) rules under sub-section (1) of section 31;
(g) the manner of publication of advertisement under section 33; and
(h) any other matter which is required to be, or may be, prescribed.
38. Power of State Government, etc. to make rules.
(1) The State Government or Union territory Government, as
the case may be, in consultation with the Central Government, by
notification, make rules for carrying out the provisions of this
Ordinance.
(2) In particular and without prejudice to the generality of
the foregoing power, such rules may provide for all or any of the
following matters, namely:—
(a) ceiling for self-help groups under clause (j) of sub-section (4) of section 2;
(b) purpose and ceiling under clause (k) of subsection (4) of section 2;
(c) the manner of provisional attachment of property by the Competent Authority under sub-section (3) of section 7;
(d) other matters under clause (f) of sub-section (4) of section 7;
(e) the rules relating to impounding and custody of records under sub-section (8) of section 7;
(f) any other matter which is required to be, or may be, prescribed.
39. Laying of rules.
(1) Every rule made by the Central Government under this
Ordinance shall be laid, as soon as may be after it is made, before each
House of Parliament, while it is in session, for a total period of
thirty days which may be comprised in one session, or in two or more
successive sessions, and if, before the expiry of the session
immediately following the session or the successive sessions aforesaid,
both Houses agree in making any modification in the rule, or both Houses
agree that the rule should not be made, the rule shall thereafter have
effect only in such modified form or be of no effect, as the case may
be; so, however, that any such modification or annulment shall be
without prejudice to the validity of anything previously done under that
rule.
(2) Every rule made by a State Government or the Union
territory Government, as the case may be shall be laid, as soon as may
be after it is made, before each House of the State Legislature or the
Union territory Legislature, as the case may be, where it consists of
two Houses, or where such Legislature consists of one House, before that
House.
40.Power to remove difficulties.
(1) If any difficulty arises in giving effect to the
provisions of this Ordinance, the Central Government may, by order
published in the Official Gazette, make such provisions, not
inconsistent with the provisions of this Ordinance, as may appear to be
necessary for removing the difficulty:
Provided that no such order shall be made under this section after
the expiry of three years from the commencement of this Ordinance.
(2) Every order made under this section shall be laid, as soon as may be after it is made, before each House of Parliament.
41. Power to amend First Schedule.
(1) The Central Government may, having regard to the objects
of this Ordinance, and if it considers necessary or expedient so to do,
by notification, add to, or as the case may be, omit from the First
Schedule, any scheme or arrangement, and on such addition, or omission,
such scheme or arrangement shall become, or cease to be, a Regulated
Deposit Scheme, as the case may be.
(2) A copy of every notification issued under this section
shall, as soon as may be after it has been issued, be laid before each
House of Parliament.
42. Amendment to certain enactments.
The enactments specified in the Second Schedule shall be amended in the manner specified therein.
FIRST SCHEDULE
[(See section 2 (15)]
REGULATED DEPOSIT SCHEMES
(1) The Regulator and Regulated Deposit Scheme refers to the
regulators-and schemes and arrangements listed in the following Table,
namely:—
TABLE
| SI No. |
Regular |
Regulated Deposit Scheme |
| (1) |
(2) |
(3) |
| 1 |
Securities and Exchange Board of India |
(i) Any scheme or an arrangement [as defined under section 11AA of
the Securities and Exchange Board of India Act, 1992 (15 of 1992)]
launched, sponsored or carried out by a
Collective Investment Management Company registered with the Securities
and Exchange Board of India under the Securities and Exchange Board of
India (Collective Investment Scheme) Regulations, 1999.(ii) Any scheme
or an arrangement registered with the Securities and Exchange Board of
India under the Securities and Exchange Board of India (Alternative
Investment Funds) Regulations, 2012.(iii) Any scheme or an arrangement,
pursuant to which funds are managed by a portfolio manager, registered
under the Securities and Exchange Board of India (Portfolio Managers)
Regulations, 1993.(iv) Any scheme or an arrangement regulated under the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014
or providing for employee benefits as permitted under the Companies
Act, 2013 (18 of 2013).(v) Any other scheme or an arrangement registered
under the Securities and Exchange Board of India Act, 1992 (15 of
1992), or the regulations made thereunder.(vi) Any amount received as
contributions in the nature of subscriptions to a mutual fund registered
with Securities and Exchange Board of India under the Securities and
Exchange Board of India (Mutual Funds) Regulations, 1996. |
| 2. |
Reserve Bank of India |
(i) Any scheme under which deposits are accepted by Non-Banking
Financial Companies as defined in clause (f) of section 45-1 of the
Reserve Bank of India Act, 1934 (2 of 1934) and registered with the
Reserve Bank of India; or any other scheme or an arrangement registered
under the Reserve Bank of India Act, 1934.
(ii) Any scheme or an arrangement under which funds are accepted by
individuals or entities engaged as Business Correspondents and
Facilitators by banks subject to the Guidelines and Circulars issued by
the Reserve Bank of India from time to time.
(iii) Any scheme or an arrangement under which funds are received by a
system provider operating as an authorised payment system under the Payment and Settlement Systems Act, 2007 (51 of 2007).
(iv) Any other scheme or an arrangement regulated under the Reserve
Bank of India Act, 1934 (2 of 1934), or the guidelines or circulars of
the Reserve Bank of India. |
| 3. |
The Insurance Regulatory and Development Authority of India |
A contract of insurance pursuant to a certificate of registration
obtained in accordance with the Insurance Act, 1938 (4 of 1938). |
| 4. |
State Government or Union territory Government |
(i) Any scheme or an arrangement made or offered by a cooperative
society registered under the Co-operative Societies Act, 1912 (2 of
1912) or a society being a society registered or deemed to be registered
under any law relating to co-operative societies for the time being in
force in any State or Union territory.
(ii) Any scheme or an arrangement commenced or conducted as a chit
business with the previous sanction of the State Government in
accordance with the provisions of the Chit Funds Act, 1982 (40 of 1982).
(iii) Any scheme or an arrangement regulated by any enactment
relating to money lending which is for the time being in force in any
State or Union territory.
(iv) Any scheme or an arrangement by a prize chit or money circulation scheme under section 11 of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (43 of 1978). |
| 5. |
National Housing Bank |
Any scheme or an arrangement for acceptance of deposits registered under the National Housing Bank Act, 1987 (53 of 1987). |
| 6. |
Pension Fund Regulatory and Development Authority |
Any scheme or an arrangement under the Pension Fund Regulatory and Development Authority Act, 2013 (23 of 2013). |
| 7. |
Employees Provident Fund Organisation |
Any scheme, Pension Scheme or Insurance Scheme framed under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 (19 of 1952). |
| 8. |
Central Registrar, Multi-State Co-operative Societies |
Any scheme or an arrangement for acceptance of deposits from voting
members by a Multi-State Co-operative Society registered under the
Multi-State Co-operative Societies Act, 2002 (39 of 2002). |
| 9. |
Ministry of Corporate Affairs, Government of India |
(i) Deposits accepted or permitted under the provisions of Chapter V of the Companies Act, 2013 (18 of 2013).
(ii) Any scheme or an arrangement under which deposits are accepted
by a company declared as a Nidhi or a Mutual Benefit Society under
section 406 of the Companies Act, 2013 (18 of 2013). |
(2) The following shall also be treated as Regulated Deposit Schemes under this Ordinance, namely:—
(a) deposits accepted under any scheme or an arrangement registered
with any regulatory body in India constituted or established under a
statute; and
(b) any other scheme as may be notified by the Central Government under this Ordinance.
AMENDMENT TO CERTAIN ENACTMENTS
PART I
AMENDMENT TO THE RESERVE BANK OF INDIA ACT, 1934
Amendment of section 45-1 of Act 2 of 1934.
In the Reserve Bank of India Act, 1934, in section 45-I, in clause (bb), after
Explanation II, the following
Explanation shall be inserted, namely:—
“Explanation III.—The amounts accepted by a cooperative
society from the members or shareholders, by whatever name called, but
excluding the amounts received as share capital, shall be deemed to be
deposits for the purposes of this clause, if such members or
shareholders are nominal or associate members, by whatever name called,
who do not have full voting rights in the meetings of such co-operative
society.”.
PART II
AMENDMENTS TO THE SECURITIES AND
EXCHANGE BOARD OF INDIA ACT, 1992
Amendment of section 11 of Act 15 of 1992.
In the Securities and Exchange Board of India Act, 1992,—
(i) in section 11, in sub-section (4), for clause (e), the following clause shall be substituted, namely:—
“(e) attach, for a period not exceeding ninety days, bank accounts or
other property of any intermediary or any person associated with the
securities market in any manner involved in violation of any of the
provisions of this Act, or the rules or the regulations made thereunder:
Provided that the Board shall, within ninety days of the said
attachment, obtain confirmation of the said attachment from the Special
Court, established under section 26A, having jurisdiction and on such
confirmation, such attachment shall continue during the pendency of the
aforesaid proceedings and on conclusion of the said proceedings, the
provisions of section 28A shall apply:
Provided further that only property, bank account or accounts or any
transaction entered therein, so far as it relates to the proceeds
actually involved in violation of any of the provisions of this Act, or
the rules or the
SECOND SCHEDULE
[(See section 42)]
AMENDMENT TO CERTAIN ENACTMENTS
PART I
AMENDMENT TO THE RESERVE BANK OF INDIA A
CT, 1934
Amendment of section 45-1 of Act 2 of 1934.
In the Reserve Bank of India Act, 1934, in section 45-I, in clause (bb), after
Explanation II, the following
Explanation shall be inserted, namely:—
“Explanation III.—The amounts accepted by a cooperative
society from the members or shareholders, by whatever name called, but
excluding the amounts received as share capital, shall be deemed to be
deposits for the purposes of this clause, if such members or
shareholders are nominal or associate members, by whatever name called,
who do not have full voting rights in the meetings of such co-operative
society.”.
PART II
AMENDMENTS TO THE SECURITIES AND
EXCHANGE BOARD OF INDIA ACT, 1992
Amendment of section 11 of Act 15 of 1992.
In the Securities and Exchange Board of India Act, 1992,—
(i) in section 11, in sub-section (4), for clause (e), the following clause shall be substituted, namely:—
“(e) attach, for a period not exceeding ninety days, bank accounts or
other property of any intermediary or any person associated with the
securities market in any manner involved in violation of any of the
provisions of this Act, or the rules or the regulations made thereunder:
Provided that the Board shall, within ninety days of the said
attachment, obtain confirmation of the said attachment from the Special
Court, established under section 26A, having jurisdiction and on such
confirmation, such attachment shall continue during the pendency of the
aforesaid proceedings and on conclusion of the said proceedings, the
provisions of section 28A shall apply:
Provided further that only property, bank account or accounts or any
transaction entered therein, so far as it relates to the proceeds
actually involved in violation of any of the provisions of this Act, or
the rules or the regulations made thereunder shall be allowed to be
attached.”;
(ii) in section 28A, after
Explanation 3, the following
Explanation shall be inserted, namely:—
“Explanation 4.—The interest referred to in section 220 of
the Income-tax Act, 1961 shall commence from the date the amount became
payable by the person.”.
PART III
AMENDMENT TO THE MULTI-STATE CO-OPERATIVE
SOCIETIES ACT, 2002
Amendment of section 67 of Act 39 of 2002.
In the Multi-State Co-operative Societies Act, 2002, in section 67, in sub-section (1),—
(a) after the words “receive deposits”, the words “from its voting members” shall be inserted;
(b) the following
Explanation shall be inserted, namely:—
“Explanation.—For the removal of doubts, it is hereby
clarified that a multi-State co-operative society shall not be entitled
to receive deposits from persons other than voting members.”.
RAM NATH KOVIND,
President.
DR. G. NARAYANA RAJU,
Secretary to the Govt. of India.