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THE BANNING OF UNREGULATED DEPOSIT SCHEMES ACT, 2019


            Dear All,

Ministry of Law and Justice has notified the Banning of Unregulated Deposit Schemes Act, 2019. It also seeks to amend three laws, i.e., the Reserve Bank of India Act, 1934, the Securities and Exchange Board of India Act, 1992 and the Multi-State Co-operative Societies Act, 2002. Main aim of the act is to ban on the unregulated deposits, illegal Ponzi schemes and Chit funds. I have given brief summary of it.

           Notified Date: - 31st July, 2019

           Scope: - It extends to the whole of India except the State of Jammu and Kashmir


           Important Definition:-
           
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,
 
        





CENTRAL DATABASE

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.  Every deposit taker which commences or carries on its business as such on or after the commencement of this Act shall intimate the authority about its business in such form and manner and within such time, as may be prescribed.


PRIORITY OF DEPOSITORS' CLAIM

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.




PRECEDENCE OF ATTACHMENT

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.

OFFENCES AND PUNISHMENTS

Any deposit taker who solicits deposits in contravention 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.

Any deposit taker who accepts deposits in contravention 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

Any deposit taker who accepts deposits in contravention 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.




Hope it will be useful for understanding the important concept of the Act. You can give us your valuable feedback on mehtavinay31@gmail.com    




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