Deposit: 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. Amount from government and guaranteed by government.
b. Amount received from foreign government or foreign bank.
c. Loan from Banks and Financial Institutions
d. Loan from Public Financial Institutions notified by Govt.
e. Capital contributions by partners in P Firms/ LLP
f. Loan received by Individuals from relatives
g. Loan received by firm from relative of partners
h. Amount received as credit by buyer from seller on sale of any property
i. Amount received by ARC registered under SRFAESI Act 2002
j. Amount received in the course of normal business of selling goods or immoveable property provided the amount is adjusted against supply/ sale or is refundable in case of non supply/ sale.
k. Amount received as security or dealership deposit for the performance of the contract for supply of goods or provision of services;
l. an advance under the long-term projects for supply of capital goods
In case of (j) to (l), if the amounts received becomes 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.
Deposit Taker: It means an individual or group of individuals, proprietorship firm, partnership firm, LLP, Company, Association of Persons, Trust, Coop Society or any other arrangement but excluding Banks, Central/ State Corporations
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
Banning of Unregulated Deposit Schemes (UDS)
On and from date of commencement of this Ordinance, Unregulated Deposit Schemes will be banned. No deposit taker will directly/ indirectly promote, operate, issue any advertisement soliciting participation, inviting or accepting deposit under UDS. (Sec 3)
Fraudulent default in Regulated Deposit Schemes
No deposit taker, while accepting deposits under a Regulated Deposit Scheme (RDS),shall commit any fraudulent default in the repayment or return of deposit on maturity or in rendering any specified service promised against such deposit. (Sec 4)
Wrongful inducement in relation to Unregulated Deposit Schemes
No person 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 UDS. (Sec 5)
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 UDS.
Authorities
The Government shall, by notification, appoint officers not below the rank of Secretary as the Competent Authority (CA) for the purposes of this Ordinance.
In case of any contravention to this Ordinance, CA can issue order to attach deposits, money or any property acquired in the name of deposit taker or on his behalf.
The officers 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 3 months, without obtaining the previous approval of the CA.
Intimation by Deposit Taker
Every deposit taker need to intimate about their business to CA existing or starting on or after 13th Feb 2019 in form as prescribed (Sec 10).
Priority of depositors’ claim.
Repayment of depositor dues takes priority over all dues except as provided in SRFAESI Act 2002 and IBC Code 2016. Similarly, attachment order (for money/ property) issued by CA will have similar priority.
Application for confirmation of attachment and sale of property
CA shall within 30-60 days of 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. A notice will be issued to Depositor and person whose property is attached, to show cause with in 30 days. Similar notice may be issued to the persons having interest/ title in the property, to raise any objections.
Attachment of property of malafide transferees
In case of malafide transfer of property by depositor, designated court has power to call transferee to appear and show cause why transferred property should not be attached.
Depositor can deposit fair value of said attached property before the issue of final order. He also need to pay such costs, as applicable.
Appeal to High Court
Any person including the Competent Authority, if aggrieved by any final order of the Designated Court, may appeal to the High Court, within a period of sixty days from the date of such order.
OFFENCES AND PUNISHMENTS
Offences by deposit takers (individuals)
| Act | Imprisonment (min-max) | Penalty (min-max) |
| Solicits deposits in contravention to sec 3 | 1-5 years | Rs. 2-10 lacs |
| Accepts deposits in contravention to sec 3 | 2-7 years | Rs. 3-10 lacs |
| Accepts deposits & fraudulently defaults in refund, in contravention to sec 3 | 3-10 years | Rs. 5 lacs -2 times the amount collected |
| Deposit in contravention to Sec 4 | < 7 years | Rs 5 lacs- 25 crore/ 3 times profit w.e. is higher. |
| Deposit in contravention to Sec 5 | 1-5 years | < Rs 10 lacs |
| Repeat offenders | < 5 years | Rs 10 lacs- 50 crore |
| Failing to give intimation under Sec 10 | Rs 5 lacs |
Offences by deposit takers ( other than individuals)
Where an offence is committed by person in charge of deposit taker for conduct of the business, shall be deemed to be guilty of the offence and shall be liable to the punishment/ penalty. In case, he proves that the offence was committed without his knowledge, than he shall not be deemed guilty.
Offences to be cognizable and non-bailable.
Every offence punishable under this Ordinance, except the offence under section 22 and section 26 (ref Sec 4 & Sec 10), shall be cognizable and non-bailable.
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 UDS, 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
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