The President on 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 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.
