Important aspects of Unregulated Deposit Schemes Ordinance, 2019

The President has assented The Banning of Unregulated Deposit Schemes Bill, 2019, which was passed on the 13th day of February, 2019 in the House of the People;

The purpose of Banning of Unregulated Deposit Schemes Ordinance, 2019 is 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.

Important aspects of Banning of Unregulated Deposit Schemes Ordinance, 2019.

WHAT IS UNREGULATED DEPOSIT SCHEME ?

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 of this ordinance.

WHAT IS A DEPOSIT?

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 there under;

(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.

PERSONS ON WHICH THIS ORDINANCE IS APPLICABLE

“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;

WHO IS DEPOSIT TAKER ?

Deposit taker means—

(i) any individual or group of individuals;

(ii) a proprietorship concern;

(iii) a partnership firm (whether registered or not);

(iv) a LLP 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

OFFENCES AND PUNISHMENTS

Punishment for contravention of section 3 of Banning of Unregulated Deposit Schemes Ordinance, 2019

Reason For Punishments	Who is liable for Punishments	Quantum of punishment
Solicits deposits in contravention of section 3	Deposit taker	For a term which shall not be less than one year but which may extend to five years and fine which shall not be less than two lakh rupees but which may extend to ten lakh rupees.
Accepts deposits in contravention of section 3	Deposit taker	For a term which shall not be less than two years but which may extend to seven years and fine which shall not be less than three lakh rupees but which may extend to ten lakh rupees.
Accepts deposits in contravention of section 3 and fraudulently defaults in repayment of such deposits or in rendering any specified service,	Deposit taker	For a term which shall not be less than three years but which may extend to ten years and 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.

Punishment for contravention of section 4 of Banning of Unregulated Deposit Schemes Ordinance, 2019

Reason For Punishments	Who is liable for punishments	Quantum of punishment
Contravention of the provisions of section 4	Deposit taker	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.

 Punishment for contravention of section 5 of Banning of Unregulated Deposit Schemes Ordinance, 2019

Reason For Punishments	Who is liable for Punishments	Quantum of punishment
Contravention of the provisions of section 5	Any Person	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.

Punishment  for repeat offenders.

Reason For Punishments	Who is liable for Punishments	Quantum of punishment
Punishment  for repeat offenders	Whoever having been previously convicted of an offence punishable, except the offence under section 26	P unishable 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.

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.

Punishment for contravention of section 10 of Banning of Unregulated Deposit Schemes Ordinance, 2019.

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.