Banning of Unregulated Deposit Schemes Act, 2019

Aug 01, 2019 | by Avantis RegTech Legal Research Team


The Legislative Department on July 31, 2019, has published the Banning of Unregulated Deposit Schemes Act, 2019 for a comprehensive mechanism to ban the unregulated deposit schemes, other than deposits taken in the ordinary course of business, and to protect the interest of depositors and for matters connected therewith or incidental thereto. Further, it will extend to the whole of India except the State of Jammu and Kashmir and it shall be deemed to have come into force on February 21, 2019.

Unregulated Deposit Scheme is 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.

Ø  On and from the date of commencement of this Act:

(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

Ø  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 Act.

Ø  Punishment for the Offences is as under:

a)      Punishment for contravention of section 3 which specifies the Banning of Unregulated Deposit Schemes:

SL. No

Description

Penalty

1.

Any deposit taker who solicits deposits in contravention of section 3

       a.       Imprisonment: 1-5 Years and

       b.      Fine: 2Lac-10Lac

2.

Any deposit taker who accepts deposits in contravention of section 3                                                                                                        

       a.       Imprisonment: 2-7 Year and

       b.      Fine: 3Lac-10Lac

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

      a.       Imprisonment: 3-10 Years and

      b.      Fine: 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

b)      Punishment for contravention of section 4 which specifies the fraudulent default in Regulated Deposit Schemes: Imprisonment for a term which may extend to seven years, or with fine 5Lac-25Crore or three times the amount of profits made out of the fraudulent default, whichever is higher, or with both.

c)       Punishment for contravention of section 5 which specifies Wrongful inducement in relation to Unregulated Deposit Scheme: Imprisonment 1-5 Years and fine which may extend to ten lakh rupees.

d)      Punishment for repeat offenders: Imprisonment 5-10 Years and fine 10 Lac-50 Crore.

e)      Offences by deposit takers other than individuals: 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.

f)       Punishment for contravention of section 10 which specifies the Information of business by deposit taker: Punishable with fine which may extend to five lakh rupees.

The Banning of Unregulated Deposit Schemes Ordinance, 2019, is hereby repealed.


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