President Ram Nath Kovind Thursday promulgated the Banning of Unregulated Deposit Scheme Ordinance which seek to curb the menace of ponzi schemes and make such unregulated deposit scheme punishable.
The Ordinance will help put a check on illicit deposit taking activities like Saradha scam and Rose Valley chit fund scam in the country that dupe poor and the financially illiterate of their hard earned savings.
The Lok Sabha passed the Bill to this effect on the last day of the budget session by a voice-vote, but the legislation could not get the approval of the Rajya Sabha.
Earlier this week, the Cabinet has requested the President of India for promulgation of the Unregulated Deposit Schemes Ordinance, 2019.
The legislation contains a substantive banning clause which bans deposit takers from promoting, operating, issuing advertisements or accepting deposits in any unregulated deposit scheme.
"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," the Ordinance said.
The law also proposes to create three different types of offences -- running of unregulated deposit schemes, fraudulent default in regulated deposit schemes, and wrongful inducement in relation to unregulated deposit schemes.
The Ordinance also provides for severe punishment ranging from 1 year to 10 years and pecuniary fines ranging from Rs 2 lakh to Rs 50 crore to act as deterrent. It too has adequate provisions for disgorgement or repayment of deposits in cases where such schemes nonetheless manage to raise deposits illegally.
The law provides for attachment of properties or assets and subsequent realisation of assets for repayment to depositors. Clear-cut timelines have been provided for attachment of property and restitution to depositors.
It also enables creation of an online central database for collection and sharing of information on deposit-taking activities in the country.
Being a comprehensive union law, it adopts best practices from state laws, while entrusting the primary responsibility of implementing the provisions of the legislation to the state governments.
Last month, Law Minister Ravi Shankar Prasad had said that the CBI has lodged about 166 cases in the last four years related to chit funds and multi-crore scams, with the maximum in West Bengal and Odisha.
As per information provided by RBI, during the period between July 2014 and May 2018, 978 cases of unauthorised schemes were discussed in State Level Coordination Committee (SLCC) meetings in various states/UTs and were forwarded to the respective regulators/law enforcement agencies in the states.
A large number of such instances have been reported from the eastern part of the country.
Subsequently, the Finance Minister in the Budget 2017-18 had announced that the draft bill to curtail the menace of illicit deposit schemes had been placed in the public domain and would be introduced shortly after its finalisation.
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