KEY HIGHLIGHTS OF THE BILL:

• One of the major features of the Bill is that it puts an absolute ban on unregulated deposit schemes and prohibits deposit takers from, directly or indirectly, promoting, operating, advertising or soliciting such unregulated deposit schemes. The Bill aims to eliminate unregulated deposit schemes by setting out a list of schemes in the schedule which will be treated as ‘regulated deposit schemes’.
• Further, Section 4 of the Bill prohibits a deposit taker from committing any fraudulent default in the repayment or return of deposit pursuant to a regulated deposit scheme.
• For the purpose of the Bill, the term ‘deposit’ has been defined widely to mean “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”.
• However, certain specific deposits have been exempted from the purview of the Bill, including inter alia amounts received (a) as credit by a buyer from a seller on the sale of any property (immovable or movable); (b) in the course of business and bearing a genuine connection to such business; (c) from inter alia foreign bodies corporate or persons resident outside India subject to the provisions of the Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder; or (d) by way of contributions towards capital by partners of any partnership firm or a limited liability partnership.
• Further, the term ‘deposit taker’ has also been defined to inter alia include a company, a limited liability partnership, as association of persons and any arrangement of whatsoever nature receiving or soliciting deposits.
• The Government intends to appoint competent authorities for the implementation of the Bill. In order to ensure strict compliance with the provisions of the Bill, the competent authority will be given the power to temporarily/ provisionally attach the deposits held by the deposit taker and the money or other property acquired either in the name of the deposit taker or any other person on behalf of the deposit taker in the event the competent authority has reasons to believe that the deposit taker has contravened Section 3 of the Bill which inter alia prohibits accepting, soliciting, promoting unregulated deposit schemes.
• Additionally, the Bill envisages the creation, operation and maintenance of an online database containing information on deposit takers operating in India for the purpose of maintaining transparency. Any deposit taker commencing or carrying on business will be required to intimate the authority about its business.
• In order to safeguard the interest of the depositors, the Bill provides that any amount due to the depositors from a deposit will, save as otherwise provided in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 or the Insolvency and Bankruptcy Code, 2016, be paid in priority over all other debts and all revenues, taxes, cesses and other rates payable to the appropriate government or local authority.
• Furthermore, the Bill provides that one or more courts will be specified as ‘designated courts’ for the purpose of the Bill. Such designated courts will inter alia have the power to make the provisional order of attachment absolute or vary or cancel such order.
• For the purpose of ensuring stringent compliance and deterring the deposit takers from circumventing the law, the Bill inter alia provides for imprisonment of up to 7 (seven) years and fine of up to Rs. 10,00,000/- (Rupees Ten Lakhs Only) in case of acceptance of unregulated deposit schemes. Further, in case of repeat offenders, the Bill provides for imprisonment of up to 10 (ten) years and fine of up to Rs. 50,00,00,000/- (Rupees Fifty Crores Only).
• However, the Bill provides that a designated court cannot take cognizance of an office unless a compliant is made by a regulator, except in case of a regulated deposit scheme for which the deposit taker is a company.