THE BANNING OF UNREGULATED DEPOSIT SCHEMES ACT, 2019

Background of the Act.

Before The Banning of Unregulated Deposit Schemes Act, 2019 became the Act,it came into being as an Ordinance passed by the President of India on February 21, 2019, as the Banning of Unregulated Deposit Scheme Ordinance, which was later replaced by the Banning of Unregulated Deposit Schemes Act, 2019 on July 31, 2019.

The LokSabha passed the Act on July 24, 2019, and by RajyaSabha on July 29, 2019, and received the President's permission on July 31, 2019, and was added to the Gazette of India.

The Banning of Unregulated Deposit Schemes Act, 2019 (further referred to as BUDS Act, 2019) aims to protect investors' interest from fraudulent investments schemes and programme.

The objective of the Act.

The BUDS Act, 2019 provide for a comprehensive mechanism to ban the unregulated deposit schemes, other than deposits taken in the ordinary course of business, and to protect depositors' interest and for matters connected in addition to that or incidental to it.

The Act aims to bring down fraudulent activities concerning unregulated deposit schemes. It lays down the principles, rules and process which have to be followed throughout the transactions and it also provides the consequences one might suffer in case of failure to meet with all the requirements prescribed in the Act.

BUDS Act, 2019 tries to bring structural changes and bring uniformity in the dealings of unregulated deposit schemes. All the provisions and particulars of the Act aim to protect the interest of the depositors and secure their deposits in any form.

Provisions and content of the Act.

Clause 04 of Section 02 of the Act defines ‘deposits as, 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 state.

Act also mentions various advances which are not to be included in the definition of the deposit. It consists of the loan from various financial institutions such as a scheduled bank, co-operative bank, money taken as a loan from any friend or relative, amount received by the local or foreign government, or any other such advancement.

The ‘depositor’ is a person who makes any deposit under this Act.

The ‘deposit taker is a person or group of persons or a company or a trust or a partnership fir or any other association of people individual or otherwise of any nature receiving or soliciting deposit.

This Act, from the date of its commencement, banned all the Unregulated Deposit Schemes. A deposit scheme is defined as unregulated if it is taken for a business purpose and is not registered with the regulators listed in the Act. The Central and the State Government has to work together in their respective powers to regulate and keep the deposit schemes genuine and trustworthy.

This Act provides for Central Government to appoint one or more officers as the Competent Authority for the purpose of this Act. The designated authority should not be below the rank of Secretary to that Government.

The Central Government has to designate an authority to maintain the online database for information on deposit takers operating in India. All deposit takers will be required to inform the database authority about their business.

The Depositor’sDepositor’s claim has been prioritized through this Act. Unless mentioned otherwise in any statue concerning deposit schemes, the amount due to the DepositorDepositor has to be paid in priority over all other debts and revenues to be paid to the appropriate Government or local authority.

The Act also prescribes punishments in the form of imprisonment and fines for not following the due procedure and laid down in the Act and for violation of the provisions of the Act.

Newspapers or publications (print or electronic) which have published advertisements or statements promoting or inducing deposits as part of an Unregulated Deposit Scheme may be directed by the appropriate Government to issue a full, fair, and unequivocal retraction, free of cost, within two days from the date of the proper Government’s direction. The retraction is required to be as prominent as the original advertisement, statement or information and in such a format and font that immediately catches the attention of any reader.

Conclusion.

The Banning of Unregulated Deposit Schemes Act, 2019 was introduced with a view to regulate the activities related to deposit schemes and provide a structural uniformity. It gives out all the rules and procedures that are to be followed while dealing with deposit schemes in India.

A lot of people in the past have suffered due to fraudulent deposit schemes running in the market. It has helped in safeguarding the interests of the people by banning all the unregulated deposit schemes and making it more safe and effective.