Unregulated Deposit Schemes Ordinance, 2019

  Purpose of the Bill-

•  Totally ban all forms of the Unregulated Deposit Schemes.
• Totally Ban Any fraudulent default in the repayment or return of deposit on maturity or in rendering any specified service promised against such deposit.
• The focal point of the ordinance is to control and regulate Unregulated Deposit Scheme.

Ø  On whome this Ordinance applicable-

This Ordinance shall apply to only those deposits taken & accepted by non-corporate entities in small amounts from multiple investors by an invitation published in a newspaper under some scheme or arrangement.

Ø  Now the question is what does meant by The UNREGULATED DEPOSIT SCHEME.

• It is 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.

Ø  Why we need for this Law

• As the country progressed, some legislations were made to control the acceptance of deposits and making of loans & advances but they were applicable mostly to the organized entities like a company and an NBFC.
• However there was no legislation to regulate such deposits taken by many non corporate entities like, individual, Firm, Cooperative Societies, Trusts etc. 
• Banning of Unregulated Deposit Schemes Ordinance, 2019 proposes to control the flow of deposits amongst non-corporate assessees.

Ø  Any specified scheme which is regulated by any of the following regulators shall be called a REGULATED DEPOSIT SCHEME.

1.    Ministry of Corporate Affairs (MCA)

2.    Security & Exchange Board of India (SEBI)

3.    Reserve Bank of India (RBI)

4.    Insurance Regulatory & Development Authority of India (IRDA)

5.    State or U T Government

6.    National Housing Bank (NHB)

7.    Employees Provident Fund Organization

8.    Pension Fund Regulatory & Development Authority of India

9.    Central Registrar Multi-state Cooperative Societies

10.  Deposits accepted under any scheme or an arrangement registered with any regulatory body in India constituted or established under a statute; and

11.  Any other scheme as may be notified by the Central Government under this Ordinance.

Ø  Who are the DEPOSIT TAKERS

·         Individual/group of individual

·         association of persons

·         company

·         partnership firm

·         proprietorship concern

·         limited liability partnership

·         trust

·         co-operative society

Ø  What is DEPOSIT?

“Deposit” means 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)      any amount received as loan from a  banking company.

b)      any amount received as loan from Public Financial Institutions, Reserve Bank of India or Registered NBFC

c)      amounts received from Government or any other source whose repayment is guaranteed by the Government

d)     amounts received from foreign government, foreign banks, foreign development institutions foreign citizens, foreign authorities or person resident outside India as per the provisions of FEMA.

e)      amounts received by way of contributions towards the capital by partners of any partnership firm or a limited liability partnership;

f)       amounts received by an individual by way of loan from his relatives or amounts received by any firm by way of loan from the relatives of any of its partners;

g)      amounts received as credit by a buyer from a seller on the sale of any property (whether movable or immovable);

h)     amounts received by an asset re-construction company which is registered with the Reserve Bank of India under section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;

i)        any amount accepted by a registered political party under section 29B of the Representation of People Act, 1951;

j)        any periodic payment made by the members of the self-help groups operating within such ceilings as may be prescribed by the State Government or Union territory Government;

k)      any other amount collected for such purpose and within such ceilings as may be prescribed by the State Government;

l)        an amount received in the course of, or for the purpose of, business and bearing a genuine connection  to  such business

including-

i. payment, advance or part payment for the supply or hire of goods or provision of services and is repayable in the event the goods or services are not in fact sold, hired or otherwise provided;

ii. advance received in connection with consideration of an immovable property under an agreement or arrangement subject to the condition that such advance is adjusted against such immovable property as specified in terms of the agreement or arrangement;

iii. security or dealership deposit for the performance of the contract for supply of goods or provision of services; or

iv. an advance under the long-term projects for supply of capital goods

However if the above amounts become refundable and they are not refunded on the expiry of fifteen days, they shall be deemed to be deposits.

Moreover if the above amounts are taken to deal in the goods or properties or services which requires some necessary permission or approval  under  any  law, such amounts shall be deemed to be deposits if the necessary permission or approval are not obtained.