An Inter-Ministerial Group (IMG) has proposed stringent laws to clamp down on ponzi schemes, including up to ten years' imprisonment for wrongdoers and confiscation of assets of firms found to have accepted deposits without authorisation.
An Inter-Ministerial Group (IMG) has proposed stringent laws to clamp down on ponzi schemes, including up to ten years’ imprisonment for wrongdoers and confiscation of assets of firms found to have accepted deposits without authorisation.
Clearly differentiating regulated and unregulated deposit-taking, the group mooted a comprehensive central law — “Banning of Unregulated Deposit Schemes and Protection of Depositors’ Interests Bill, 2015” — under which specified offences will be congnizable and non-bailable. Comments on the draft Bill, put up in the public domain, can be made until April 30.
The proposed Act with six chapters and 29 sections would override a clutch of existing laws including those framed by the states. It proposes prison terms of 1-5 years and up to 10 years for repeat offenders, besides fines for wrongfully inducing people to unlawful schemes. Directors and officials of such companies would be prosecuted.
The proposed law defines ‘deposit’ as receipt of money by way of advance or loan or any other form and returned in a specified period or otherwise in cash or kind or in the form of a specified service with or without any benefit – interest, bonus, profit or any other form. The objective of the proposed Act is to protect the interest of depositors by providing a comprehensive code to ban unregulated deposit schemes.
The Bill proposes that district magistrates, to be made as competent authority under the Act by states, could order investigation of any company or individual on their assets and documents. State would also have to set up designated courts, which would have the sole jurisdiction in the cases under the new Act. It also gives overriding powers to the district magistrates to seize money or other property acquired using the depositors money. The assets could be sold off to repay the depositors.
Currently, the regulatory framework for deposit taking activity is fragmented with regulatory overlaps, which is exploited by unscrupulous people. There are various statutes in the country that allow non-bank entities to raise money form public. According to a Central Bureau of Investigation estimate Rs 68,000 crore have been collected from more than 6 crore depositors by such deposit taking entities using a large network of commission agents promising high returns. However, the CBI has said that there has been no study or authentic estimate of the real size of such deposit taking activity across the country.
Offences punishable under proposed Act would be cognizable and non-bailable
Power to local police officers to enter, search and seize without warrant
The orders of the designated court can be challenged in a high court
Deposit-taking entities have to intimate about their activities to district magistrate