Jaya Krishna Kapoor

Q.1 To whom the ordinance is applicable?

A1 .The Ordinance is applicable to all persons receiving or soliciting deposits, working in any legal capacity, namely:

(i) Individual or group of individuals

(ii) A proprietorship concern

(iii) A partnership firm (Registered or not )

(iv) A Limited Liability Partnership Firm

(v) A Company

(vi) A trust (Public or Private Trust, whether Registered or not)

(vii) A cooperative society or multi state cooperative society

(viii) Any other arrangement of whatsoever nature

Q.2 Which entities are not covered by the Ordinance?

A 2. The following deposit takers are not covered by the Ordinance:

(i) A cooperation incorporated under the Act of Parliament or State Legislature

(ii) A 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 cooperative bank as defined in the Banking Regulation Act

Q.3 What does deposit means for the purpose of this Act?

A 3. 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 benefit, in the form of interest, bonus profit or in any other form.

Q.4 What is excluded from the definition of Deposit for the purpose of this Act?

A 4. For the purpose of this Act, the term deposit does not include the following amounts:

(i) Amounts received as loan from scheduled bank or a cooperative bank or any other banking company , as defined in Banking Regulations Act

(ii) Amount received as loan or financial assistance from Public Financial Institutions or Non-Banking Financial Companies or Regional Financial Institutions or Insurance Companies.

(iii) Amount received from Government or any other amount whose repayment is guaranteed by the Government or any other amount received from a statutory authority constituted under the Act of Parliament or State Legislature

(iv) Amount received from Foreign Government, Foreign or International Banks, Multilateral financial Institutions, Foreign Government owned Development Financial Institutions, Foreign Export Credit Collaborators, Foreign Bodies Corporate, Foreign Citizens, Foreign Citizens, Person Resident Outside India subject to the provisions of Foreign Exchange Management Act,1999 and the rules and regulations thereunder.

(v) Amount received towards capital by partners of any partnership firm or a limited liability partnership

(vi) Amount received by an individual as loan from his relatives or partners.

(vii) Amount received as credit by a buyer from a seller on sale of any movable or immovable property.

(viii) Amount received by an asset reconstruction company registered with RBI under the SARFAESI Act,2002

(ix) Any deposit accepted by a political party under the Representation of People’s Act,1951

(x) Any periodic payment made by the members of self help groups as per the State Government or Union Territory Government

(xi) Any other amount collected for such purpose and within such limit as prescribed by State Government

Q.5 Are there any exemptions in relation to Loans and Advances raised during the course of business?

A 5. An amount received in the course of business and has a genuine connection to such business, may not be considered as deposits for the purpose of this Act, including:

(a) 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.

(b) Advance received in connection with consideration of an Immovable Property under an agreement or arrangement subject to the condition that the advance is adjusted against the Immovable property as per the arrangement or agreement.

(c) Security or dealership deposited for the performance of the contract for supply of goods or services.

(d) An advance under the Long term projects for supply of capital goods except those defined in (b) above.

Q.6 When can the payments, discussed in Point 5., be considered as deposits, to fall within the ambit of this Act?

A 6. If the above amounts, as discussed in point (a) to (d), 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.

Further, if the amount mentioned above becomes refundable due to the deposit taker not obtaining necessary permission or approval under the law, wherever required, to deal in the goods or properties or services for which the money is taken shall be deemed to be deposits.

Q.7 Whether Prize Chit considered as Unregulated Deposit Scheme?

A7.A Prize Chit or Money Circulation Scheme banned under the provisions of the prize Chit and Money Circulation Scheme Act shall be deemed to be Unregulated Deposit Scheme, under this Ordinance.

Q.8 What are the activities which are banned as per the Ordinance?

A 8. As per section 3 and 4 of the Ordinance, the following acts are banned:

  • Directly or indirectly promote, operate or issue any advertisement soliciting participation or enrolment in or accept deposits in pursuance of Unregulated Deposit Schemes.
  • Commit any Fraudulent Default in the repayment or return of deposit on maturity or in rendering any service promised against such deposit.

Q.9 What is the punishment on case of contravention of the provisions of the Ordinance?

A 9. Any deposit taker who solicits deposits in contravention to this Ordinance or solicits, directly or indirectly any Unregulated Deposits Schemes shall be punishable with imprisonment of not less than two years but which may extend upto seven years and fine of not less than two lakh rupees which may extend to ten lakh rupees.

Any deposit taker who accepts deposits in contravention to the provisions of this Ordinance shall be punishable with imprisonment of not less than two years but which may extend upto seven years and fine of not less than three lakh rupees but which may extend to ten lakh rupees.

Any deposit taker who accepts deposit in contravention to this Ordinance and fraudulently defaults in the repayment of the same shall be punishable with imprisonment of not less than three years but which may extend upto ten years and fine not less than five lakhs but which may extend to twice the amount of fund collected as deposit.

Any person who commits any fraudulent default in repayment or return of deposit on maturity or in rendering any service promised against such deposit shall be punishable with imprisonment of a term which may extend upto 7 years or fine of not less than five lakh rupees but which may extend upto twenty five crore rupees or three times the amount of profits made out of the fraudulent default, whichever is higher or both.

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Qualification: CA in Job / Business
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Location: New Delhi, IN
Member Since: 13 Jun 2019 | Total Posts: 4

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