The Banning of Unregulated Deposit Schemes Act, 2019

Banning of Unregulated Deposit Schemes Act, 2019

UNION OF INDIA
India

Banning of Unregulated Deposit Schemes Act, 2019

Act 21 of 2019

Published on 31 July 2019• 
Commenced on 31 July 2019• 
[This is the version of this document from 31 July 2019.]• 
[Note: The original publication document is not available and this content could not be
verified.]

• 

Banning of Unregulated Deposit Schemes Act, 2019(Act No. 21 of 2019)Last Updated 1st August,
2019[Dated 31.7.2019.]Ministry of Law and Justice(Legislative Department)The following Act of
Parliament received the assent of the President on the 31st July, 2019, and is hereby published for
general information: -An Act to provide for a comprehensive mechanism to ban the unregulated
deposit schemes, other than deposits taken in the ordinary course of business, and to protect the
interest of depositors and for matters connected therewith or incidental thereto.Be it enacted by
Parliament in the Seventieth Year of the Republic of India as follows: -

Chapter I
Preliminary

1. Short title, extent and commencement.

(1)This Act may be called the Banning of Unregulated Deposit Schemes Act, 2019.(2)It extends to
the whole of India except the State of Jammu and Kashmir.(3)It shall be deemed to have come into
force on the 21st day of February, 2019.

2. Definitions.

- In this Act, unless the context otherwise requires, -(1)"appropriate Government" means in respect
of matters relating to, -(i)the Union territory without legislature, the Central Government;(ii)the
Union territory of Puducherry, the Government of that Union territory;(iii)the Union territory of
Delhi, the Government of that Union territory; and(iv)the State, the State
Government;(2)"company" shall have the same meaning as assigned to it in clause (20) of section 2
of the Companies Act, 2013;(3)"Competent Authority" means an Authority appointed by the
appropriate Government under section 7;(4)"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

Banning of Unregulated Deposit Schemes Act, 2019

Indian Kanoon - http://indiankanoon.org/doc/17657769/ 1



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)amounts received as loan from a scheduled bank or a co-operative bank or any other
banking company as defined in section 5 of the Banking Regulation Act, 1949;(b)amounts received
as loan or financial assistance from the Public Financial Institutions notified by the Central
Government in consultation with the Reserve Bank of India or any non-banking financial company
as defined in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 and is registered with
the Reserve Bank of India or any Regional Financial Institutions or insurance
companies;(c)amounts received from the appropriate Government, or any amount received from
any other source whose repayment is guaranteed by the appropriate Government, or any amount
received from a statutory authority constituted under an Act of Parliament or a State
Legislature;(d)amounts received from foreign Governments, foreign or international banks,
multilateral financial institutions, foreign Government owned development financial institutions,
foreign export credit collaborators, foreign bodies corporate, foreign citizens, foreign authorities or
person resident outside India subject to the provisions of the Foreign Exchange Management Act,
1999 and the rules and regulations made thereunder;(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 deposit made under section 34 or an amount accepted by a political party under section
29B of the Representation of the 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 deposited 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 except those specified in item (ii):Provided that if the amounts
received under items (i) to (iv) become refundable, such amounts shall be deemed to be deposits on
the expiry of fifteen days from the date on which they become due for refund:Provided further that
where the said amounts become refundable, due to the deposit taker not obtaining necessary
permission or approval under the law for the time being in force, wherever required, to deal in the
goods or properties or services for which money is taken, such amounts shall be deemed to be
deposits.Explanation. - For the purposes of this clause, -(i)in respect of a company, the expression
"deposit" shall have the same meaning as assigned to it under the Companies Act, 2013;(ii)in respect
of a non-banking financial company registered under the Reserve Bank of India Act, 1934, the
expression "deposit" shall have the same meaning as assigned to it in clause (bb) of section 45-I of

Banning of Unregulated Deposit Schemes Act, 2019

Indian Kanoon - http://indiankanoon.org/doc/17657769/ 2



the said Act;(iii)the expressions "partner" and "firm" shall have the meanings respectively assigned
to them under the Indian Partnership Act, 1932;(iv)the expression "partner" in respect of a limited
liability partnership shall have the same meaning as assigned to it in clause (q) of sub-section (1) of
section 2 of the Limited Liability Partnership Act, 2008;(v)the expression "relative" shall have the
same meaning as assigned to it in the Companies Act, 2013;(5)"depositor" means any person who
makes a deposit under this Act;(6)"deposit taker" means -(i)any individual or group of
individuals;(ii)a proprietorship concern;(iii)a partnership firm (whether registered or not);(iv)a
limited liability partnership registered under the Limited Liability Partnership Act, 2008;(v)a
company;(vi)an association of persons;(vii)a trust (being a private trust governed under the
provisions of the Indian Trusts Act, 1882 or a public trust, whether registered or not);(viii)a
co-operative society or a multi-State co-operative society; or(ix)any other arrangement of
whatsoever nature, receiving or soliciting deposits, but does not include -(i)a Corporation
incorporated under an Act of Parliament or a State Legislature;(ii)a banking company, a
corresponding new bank, the State Bank of India, a subsidiary bank, a regional rural bank, a
co-operative bank or a multi-State co-operative bank as defined in the Banking Regulation
Act,1949;(7)"Designated Court" means a Designated Court constituted by the appropriate
Government under section 8;(8)"insurer" shall have the same meaning as assigned to it in clause (9)
of section 2 of the Insurance Act, 1938;(9)"notification" means a notification published in the
Official Gazette and the expression "notify" shall be construed accordingly;(10)"person" includes
-(i)an individual;(ii)a Hindu Undivided Family;(iii)a company;(iv)a trust;(v)a partnership firm;(vi)a
limited liability partnership;(vii)an association of persons;(viii)a co-operative society registered
under any law for the time being in force relating to co-operative societies; or(ix)every artificial
juridical person, not falling within any of the preceding sub-clauses;(11)"prescribed" means
prescribed by the rules made by the Central Government or, as the case may be, the State
Government under this Act;(12)"property" means any property or assets of every description,
whether corporeal or incorporeal, movable or immovable, tangible or intangible, and includes deeds
and instruments evidencing title to, or interest in, such property or assets, wherever
located;(13)"public financial institution" shall have the same meaning as assigned to it in clause (72)
of section 2 of the Companies Act, 2013;(14)"Regulated Deposit Scheme" means the Schemes
specified under column (3) of the First Schedule;(15)"Regulator" means the Regulator specified in
column (2) of the First Schedule;(16)"Schedule" means the Schedule appended to this
Act;(17)"Unregulated Deposit Scheme" means 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, as specified under column (3) of the First Schedule.

Chapter II
Banning of Unregulated Deposit Schemes

3. Banning of Unregulated Deposit Schemes.

- On and from the date of commencement of this Act, -(a)the Unregulated Deposit Schemes shall be
banned; and(b)no deposit taker shall, directly or indirectly, promote, operate, issue any
advertisement soliciting participation or enrolment in or accept deposits in pursuance of an

Banning of Unregulated Deposit Schemes Act, 2019

Indian Kanoon - http://indiankanoon.org/doc/17657769/ 3



Unregulated Deposit Scheme.

4. Fraudulent default in Regulated Deposit Schemes.

- No deposit taker, while accepting deposits pursuant to a Regulated Deposit Scheme, shall commit
any fraudulent default in the repayment or return of deposit on maturity or in rendering any
specified service promised against such deposit.

5. Wrongful inducement in relation to Unregulated Deposit Schemes.

- No person by whatever name called shall knowingly make any statement, promise or forecast
which is false, deceptive or misleading in material facts or deliberately conceal any material facts, to
induce another person to invest in, or become a member or participant of any Unregulated Deposit
Scheme.

6. Certain scheme to be Unregulated Deposit Scheme.

- A prize chit or a money circulation scheme banned under the provisions of the Prize Chits and
Money Circulation Scheme (Banning) Act, 1978 shall be deemed to be an Unregulated Deposit
Scheme under this Act.

Chapter III
Authorities

7. Competent Authority.

(1)The appropriate Government shall, by notification, appoint one or more officers not below the
rank of Secretary to that Government, as the Competent Authority for the purposes of this
Act.(2)The appropriate Government may, by notification, appoint such other officer or officers as it
thinks fit, to assist the Competent Authority in discharging its functions under this Act.(3)Where the
Competent Authority or officers appointed under sub-section (2), for the purposes of this section,
has reason to believe (the reason for such belief to be recorded in writing), on the basis of such
information and particulars as may be prescribed, that any deposit taker is soliciting deposits in
contravention of section 3, he may, by an order in writing, 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 in the name of any other person on behalf of the deposit taker from the date of the order, in such
manner as may be prescribed.(4)The Competent Authority shall, for the purposes of sub-section (3),
have the same powers as vested in a civil court under the Code of Civil Procedure, 1908 while
conducting investigation or inquiry in respect of the following matters, namely: -(a)discovery and
inspection;(b)enforcing the attendance of any person, including any officer of a reporting entity and
examining him on oath;(c)compelling the production of records;(d)receiving evidence on
affidavits;(e)issuing commissions for examination of witnesses and documents; and(f)any other

Banning of Unregulated Deposit Schemes Act, 2019

Indian Kanoon - http://indiankanoon.org/doc/17657769/ 4



matter which may be prescribed.(5)The Competent Authority shall have power to summon any
person whose attendance he considers necessary whether to give evidence or to produce any records
during the course of any investigation or proceeding under this section.(6)All the persons so
summoned shall be bound to attend in person or through authorised agents, as such officer may
direct, and shall be bound to state the truth upon any subject respecting which they are examined or
make statements, and produce such documents as may be required.(7)Every proceeding under
sub-sections (4) and (5) shall be deemed to be a judicial proceeding within the meaning of section
193 and section 228 of the Indian Penal Code.(8)Subject to any rules made in this behalf by the
Central Government, any officer referred to in sub-section (2) may impound and retain in his
custody for such period, as he thinks fit, any records produced before him in any proceedings under
this Act:Provided that the officer or officers referred to in sub-section (2) shall not -(a)impound any
records without recording his reasons for so doing; or(b)retain in his custody any such records for a
period exceeding three months, without obtaining the previous approval of the Competent
Authority.

8. Designated Court.

(1)The appropriate Government shall, with the concurrence of the Chief Justice of the concerned
High Court, by notification, constitute one or more Courts known as the Designated Courts for such
area or areas or such case or cases as may be specified in such notification, which shall be presided
over by a Judge not below the rank of a District and Sessions Judge or Additional District and
Sessions Judge.(2)No Court other than the Designated Court shall have jurisdiction in respect of any
matter to which the provisions of this Act apply.(3)When trying an offence under this Act, the
Designated Court may also try an offence, other than an offence under this Act, with which the
accused may, under the Code of Criminal Procedure, 1973, be charged at the same trial.

Chapter IV
Information On Deposit Takers

9. Central database.

(1)The Central Government may designate an authority, whether existing or to be constituted, which
shall create, maintain and operate an online database for information on deposit takers operating in
India.(2)The authority designated under sub-section (1) may require any Regulator or the
Competent Authority to share such information on deposit takers, as may be prescribed.

10. Information of business by deposit taker.

(1)Every deposit taker which commences or carries on its business as such on or after the
commencement of this Act shall intimate the authority referred to in sub-section (1) of section 9
about its business in such form and manner and within such time, as may be prescribed.(2)The
Competent Authority may, if it has reason to believe that the deposits are being solicited or accepted
pursuant to an Unregulated Deposit Scheme, direct any deposit taker to furnish such statements,

Banning of Unregulated Deposit Schemes Act, 2019

Indian Kanoon - http://indiankanoon.org/doc/17657769/ 5



information or particulars, as it considers necessary, relating to or connected with the deposits
received by such deposit taker.Explanation. - For the removal of doubts, it is hereby clarified that
-(a)the requirement of intimation under sub-section (1) is applicable to deposit takers accepting or
soliciting deposits as defined in clause (4) of section 2; and(b)the requirement of intimation under
sub-section (1) applies to a company, if the company accepts the deposits under Chapter V of the
Companies Act, 2013.

11. Information to be shared.

(1)The Competent Authority shall share all information received under section 29 with the Central
Bureau of Investigation and with the authority which may be designated by the Central Government
under section 9.(2)The appropriate Government, any Regulator, income-tax authorities or any other
investigation agency, having any information or documents in respect of the offence investigated
under this Act by the police or the Central Bureau of Investigation, shall share all such information
or documents with the police or the Central Bureau of Investigation.(3)Where the principal officer of
any banking company, a corresponding new bank, the State Bank of India, a subsidiary bank, a
regional rural bank, a co-operative bank or a multi-State co-operative bank has reason to believe
that any client is a deposit taker and is acting in contravention to the provisions of this Act, he shall
forthwith inform the same to the Competent Authority.

Chapter V
Restitution To Depositors

12. Priority of depositors' claim.

- 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, any
amount due to depositors from a deposit taker shall be paid in priority over all other debts and all
revenues, taxes, cesses and other rates payable to the appropriate Government or the local
authority.

13. Precedence of attachment.

(1)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, an order
of provisional attachment passed by the Competent Authority, shall have precedence and priority, to
the extent of the claims of the depositors, over any other attachment by any authority competent to
attach property for repayment of any debts, revenues, taxes, cesses and other rates payable to the
appropriate Government or the local authority.(2)Where an order of provisional attachment has
been passed by the Competent Authority -(a)such attachment shall continue until an order is passed
under sub-section (3) or sub-section (5) of section 15 by the Designated Court;(b)all the attached
money or property of the deposit taker and the persons mentioned therein shall vest in the
Competent Authority and shall remain so vested till further order of the Designated Court.(3)The

Banning of Unregulated Deposit Schemes Act, 2019

Indian Kanoon - http://indiankanoon.org/doc/17657769/ 6



Competent Authority shall open an account in a scheduled bank for the purpose of crediting and
dealing with the money realised under this Act, which shall not be utilised except under the
instructions of the Designated Court.(4)The Competent Authority shall not dispose of or alienate the
property or money attached, except in accordance with the order of the Designated Court under
sub-section (3) or sub-section (5) of section 15.(5)Notwithstanding anything contained in
sub-section (4), the Competent Authority may, if it thinks it expedient, order the immediate sale of
perishable items or assets, and the proceeds of the sale shall be utilised in the same manner as
provided for other property.

14. Application for confirmation of attachment and sale of property.

(1)The Competent Authority shall, within a period of thirty days, which may extend up to sixty days,
for reasons to be recorded in writing, from the date of the order of provisional attachment, file an
application with such particulars as may be prescribed, before the Designated Court for making the
provisional attachment absolute, and for permission to sell the property so attached by public
auction or, if necessary, by private sale.(2)In case where the money or property has been attached on
the permission granted by a Designated Court in another State or Union territory, the application
for confirmation of such attachment shall be filed in that Court.

15. Confirmation of attachment by Designated Court.

(1)Upon receipt of an application under section 14, the Designated Court shall issue notice to -(a)the
deposit taker; and(b)any person whose property is attached under section 14, to show cause, within
a period of thirty days from the date of issue of notice, as to why the order of attachment should not
be made absolute and the properties so attached be sold.(2)The Designated Court shall also issue
notice to all other persons represented to it as having or being likely to claim any interest or title in
the property, to appear on the same date as persons referred to in sub-section (1) to raise objections,
if they so desire, to the attachment of the property.(3)The Designated Court shall, after adopting
such procedure as may be prescribed, pass an order -(a)making the provisional order of attachment
absolute; or(b)varying it by releasing a portion of the property from attachment; or(c)cancelling the
provisional order of attachment, and in case of an order under clause (a) or clause (b), direct the
Competent Authority to sell the property so attached by public auction or, if necessary, by private
sale and realise the sale proceeds.(4)The Designated Court shall not, in varying or cancelling the
provisional order of attachment, release any property from attachment, unless it is satisfied that
-(a)the deposit taker or the person referred to in sub-section (1) has interest in such property;
and(b)there shall remain an amount or property sufficient for repayment to the depositors of such
deposit taker.(5)The Designated Court shall pass such order or issue such direction as may be
necessary for the equitable distribution among the depositors of the money attached or realised out
of the sale.(6)The Designated Court shall endeavour to complete the proceedings under this section
within a period of one hundred and eighty days from the date of receipt of the application referred to
in sub-section (1).

Banning of Unregulated Deposit Schemes Act, 2019

Indian Kanoon - http://indiankanoon.org/doc/17657769/ 7



16. Attachment of property of mala fide transferees.

(1)Where the Designated Court is satisfied that there is a reasonable cause for believing that the
deposit taker has transferred any property otherwise than in good faith and not for commensurate
consideration, it may, by notice, require any transferee of such property, whether or not he received
the property directly from the said deposit taker, to appear on a date to be specified in the notice and
show cause why so much of the transferee's property as is equivalent to the proper value of the
property transferred should not be attached.(2)Where the said transferee does not appear and show
cause on the specified date or where the Designated Court is satisfied that the transfer of the
property to the said transferee was not a bona fide transfer and not for commensurate
consideration, it shall order the attachment of so much of the said transferee's property as in its
opinion is equivalent to the proper value of the property transferred.

17. Payment in lieu of attachment.

(1)Any deposit taker or a person referred to in sub-section (1) of section 15, or transferee referred to
in section 16 whose property is about to be attached or has been provisionally attached under this
Act, may, at any time before the confirmation of attachment, apply to the Designated Court for
permission to deposit the fair value of the property in lieu of attachment.(2)While allowing the
deposit taker or person or transferee referred to in sub-section (1) to make the deposit under
sub-section (1), the Designated Court may order such deposit taker or person or transferee to pay
any sum towards costs as may be applicable.

18. Powers of Designated Court.

(1)The Designated Court shall exercise the following powers, namely: -(a)power to approve the
statement of dues of the deposit taker due from various debtors;(b)power to assess the value of the
assets of the deposit taker and finalise the list of the depositors and their respective dues;(c)power to
direct the Competent Authority to take possession of any assets belonging to or in the control of the
deposit taker and to sell, transfer or realise the attached assets, either by public auction or by private
sale as it deems fit depending upon the nature of assets and credit the sale proceeds thereof to its
bank account;(d)power to approve the necessary expenditure to be incurred by the Competent
Authority for taking possession and realisation of the assets of the deposit taker;(e)power to pass an
order for full payment to the depositors by the Competent Authority or an order for proportionate
payment to the depositors in the event, the money so realised is not sufficient to meet the entire
deposit liability;(f)power to direct any person, who has made profit or averted loss by indulging in
any transaction or activity in contravention of the provisions of this Act, to disgorge an amount
equivalent to the wrongful gain made or loss averted by such contravention; and(g)power to pass
any other order which the Designated Court deems fit for realisation of assets of the deposit taker
and for repayment of the same to the depositors of such deposit taker or on any other matter or
issue incidental thereto.(2)On the application of any person interested in any property attached and
vested in the Competent Authority under this Act and after giving such Competent Authority an
opportunity of being heard, make such order as the Designated Court considers just and reasonable
for -(a)providing from such of the property attached and vested in the Competent Authority as the

Banning of Unregulated Deposit Schemes Act, 2019

Indian Kanoon - http://indiankanoon.org/doc/17657769/ 8



applicant claims an interest in, such sums as may be reasonably necessary for the maintenance of
the applicant and of his family, and for expenses connected with the defence of the applicant where
criminal proceedings have been initiated against him in the Designated Court under this Act;
or(b)safeguarding, so far as may be practicable, the interest of any business affected by the
attachment.Explanation. - For the purposes of this section, the expression "deposit taker" includes
the directors, promoters, managers or members of said establishment or any other person whose
property or assets have been attached under this Act.

19. Appeal to High Court.

- Any person including the Competent Authority, if aggrieved by any final order of the Designated
Court under this Chapter, may appeal to the High Court, within a period of sixty days from the date
of such order:Provided that the High Court may entertain the appeal after the expiry of the said
period of sixty days, if it is satisfied that the appellant was prevented by sufficient cause from
preferring the appeal in time.Explanation. - The expression "High Court" means the High Court of a
State or Union territory where the Designated Court is situated.

20. Power of Supreme Court to transfer cases.

(1)Whenever it is made to appear to the Supreme Court that there is a default in any deposit scheme
or deposit schemes of the nature referred to in section 30, the Supreme Court may, by an order,
direct that any particular case be transferred from one Designated Court to another Designated
Court.(2)The Supreme Court may act under this section only on an application filed by the
Competent Authority or any interested party, and every such application shall be supported by an
affidavit.(3)Where an application for the exercise of the powers conferred by this section is
dismissed, the Supreme Court may, if it is of opinion that the application was frivolous or vexatious,
order the applicant to pay by way of compensation to any person who has opposed the application
such sum not exceeding fifty thousand rupees as it may consider appropriate in the circumstances of
the case.

Chapter VI
Offences and Punishments

21. Punishment for contravention of section 3.

(1)Any deposit taker who solicits deposits in contravention of section 3 shall be punishable with
imprisonment for a term which shall not be less than one year but which may extend to five years
and with fine which shall not be less than two lakh rupees but which may extend to ten lakh
rupees.(2)Any deposit taker who accepts deposits in contravention of section 3 shall be punishable
with imprisonment for a term which shall not be less than two years but which may extend to seven
years and with fine which shall not be less than three lakh rupees but which may extend to ten lakh
rupees.(3)Any deposit taker who accepts deposits in contravention of section 3 and fraudulently
defaults in repayment of such deposits or in rendering any specified service, shall be punishable

Banning of Unregulated Deposit Schemes Act, 2019

Indian Kanoon - http://indiankanoon.org/doc/17657769/ 9



with imprisonment for a term which shall not be less than three years but which may extend to ten
years and with fine which shall not be less than five lakh rupees but which may extend to twice the
amount of aggregate funds collected from the subscribers, members or participants in the
Unregulated Deposit Scheme.Explanation. - For the purposes of this Act, -(i)the expression
"fraudulently" shall have the same meaning as assigned to it in section 25 of the Indian Penal
Code;(ii)where the terms of the Deposit Scheme are entirely impracticable or unviable, the terms
shall be relevant facts showing an intention to defraud.

22. Punishment for contravention of section 4.

- Any deposit taker who contravenes the provisions of section 4 shall be punishable with
imprisonment for a term which may extend to seven years, or with fine which shall not be less than
five lakh rupees but which may extend to twenty-five crore rupees or three times the amount of
profits made out of the fraudulent default referred to in said section, whichever is higher, or with
both.

23. Punishment for contravention of section 5.

- Any person who contravenes the provisions of section 5 shall be punishable with imprisonment for
a term which shall not be less than one year but which may extend to five years and with fine which
may extend to ten lakh rupees.

24. Punishment for repeat offenders.

- Whoever having been previously convicted of an offence punishable under this Chapter, except the
offence under section 26, is subsequently convicted of an offence shall be punishable with
imprisonment for a term which shall not be less than five years but which may extend to ten years
and with fine which shall not be less than ten lakh rupees but which may extend to fifty crore rupees.

25. Offences by deposit takers other than individuals.

(1)Where an offence under this Act has been committed by a deposit taker other than an individual,
every person who, at the time the offence was committed, was in charge of, and was responsible to,
the deposit taker for the conduct of its business, as well as the deposit taker, shall be deemed to be
guilty of the offence and shall be liable to be proceeded against and punished
accordingly.(2)Nothing contained in sub-section (1) shall render any such person liable to any
punishment provided in this Act, if he proves that the offence was committed without his knowledge
or that he exercised all due diligence to prevent the commission of such offence.(3)Notwithstanding
anything contained in sub-section (1), where an offence under this Act has been committed by a
deposit taker other than an individual, and it is proved that the offence -(a)has been committed with
the consent or connivance of; or(b)is attributable to any neglect on the part of any director,
manager, secretary, promoter, partner, employee or other officer of the deposit taker,such person
shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and

Banning of Unregulated Deposit Schemes Act, 2019

Indian Kanoon - http://indiankanoon.org/doc/17657769/ 10



punished accordingly.

26. Punishment for contravention of section 10.

- Whoever fails to give the intimation required under sub-section (1) of section 10 or fails to furnish
any such statements, information or particulars as required under sub-section (2) of that section,
shall be punishable with fine which may extend to five lakh rupees.

27. Cognizance of offences.

- Notwithstanding anything contained in section 4, no Designated Court shall take cognizance of an
offence punishable under that section except upon a complaint made by the Regulator:Provided that
the provisions of section 4 and this section shall not apply in relation to a deposit taker which is a
company.

Chapter VII
Investigation, Search and Seizure

28. Offences to be cognizable and non-bailable.

- Notwithstanding anything contained in the Code of Criminal Procedure, 1973 every offence
punishable under this Act, except the offence under section 22 and section 26, shall be cognizable
and non-bailable.

29. Competent Authority to be informed of offences.

- The police officer shall, on recording information about the commission of an offence under this
Act, inform the same to the Competent Authority.

30. Investigation of offences by Central Bureau of Investigation.

(1)On receipt of information under section 29 or otherwise, if the Competent Authority has reason
to believe that the offence relates to a deposit scheme or deposit schemes in which -(a)the
depositors, deposit takers or properties involved are located in more than one State or Union
territory in India or outside India; and(b)the total value of the amount involved is of such
magnitude as to significantly affect the public interest, the Competent Authority shall refer the
matter to the Central Government for investigation by the Central Bureau of Investigation.(2)The
reference made by the Competent Authority under sub-section (1) shall be deemed to be with the
consent of the State Government under section 6 of the Delhi Special Police Establishment Act,
1946.(3)On the receipt of the reference under sub-section (1), the Central Government may transfer
the investigation of the offence to the Central Bureau of Investigation under section 5 of the Delhi
Special Police Establishment Act, 1946.

Banning of Unregulated Deposit Schemes Act, 2019

Indian Kanoon - http://indiankanoon.org/doc/17657769/ 11



31. Power to enter, search and seize without warrant.

(1)Whenever any police officer, not below the rank of an officer in-charge of a police station, has
reason to believe that anything necessary for the purpose of an investigation into any offence under
this Act may be found in any place within the limits of the police station of which he is in-charge, or
to which he is attached, such officer may, with the written authorisation of an officer not below the
rank of Superintendent of Police, and after recording in writing so far as possible, the thing for
which the search is to be made and subject to the rules made in this behalf, authorise any officer
subordinate to him, -(a)to enter and search any building, conveyance or place, between sunrise and
sunset, which he has reason to suspect is being used for purposes connected with the promotion or
conduct of any deposit taking scheme or arrangement in contravention of the provisions of this
Act;(b)in case of resistance, to break open any door and remove any obstacle to such entry, if
necessary by force, with such assistance as he considers necessary, for exercising the powers
conferred by clause (a);(c)to seize any record or property found as a result of the search in the said
building, conveyance or place, which are intended to be used, or reasonably suspected to have been
used, in connection with any such deposit taking scheme or arrangement in contravention of the
provisions of this Act; and(d)to detain and search, and if he thinks proper, take into custody and
produce before any Designated Court any such person whom he has reason to believe to have
committed any offence punishable under this Act:Provided that if such officer has reason to believe
that the said written authorisation cannot be obtained without affording opportunity for the
concealment of evidence or facility for the escape of an offender, he may, without the said written
authorisation, enter and search such building, conveyance or place, at any time between sunset and
sunrise after recording the grounds in writing.(2)Where it is not practicable to seize the record or
property, the officer authorised under sub-section (1), may make an order in writing to freeze such
property, account, deposits or valuable securities maintained by any deposit taker about which a
complaint has been made or credible information has been received or a reasonable suspicion exists
of their having been connected with the promotion or conduct of any deposit taking scheme or
arrangement in contravention of the provisions of this Act and it shall be binding on the concerned
bank or financial or market establishment to comply with the said order:Provided that no bank or
financial or market establishment shall freeze such account, deposit or valuable securities, for a
period beyond thirty days unless the same is authorised by the order of the Designated
Court:Provided further that, if at any time, it becomes practicable to seize the frozen property, the
officer authorised under sub-section (1) may seize such property.Explanation. - For the purposes of
this section, the expressions, -(i)"freezing of account" shall mean that no transaction, whether
deposit or withdrawal shall be allowed in the said account; and(ii)"freezing of property" shall mean
that no transfer, conversion, disposition or movement of property shall be allowed.(3)Where an
officer takes down any information in writing or records grounds for his belief or makes an order in
writing under sub-section (1) or sub-section (2), he shall, within a time of seventy-two hours send a
copy thereof to the Designated Court in a sealed envelope and the owner or occupier of the building,
conveyance or place shall, on application, be furnished, free of cost, with a copy of the same by the
Designated Court.(4)All searches, seizures and arrests under this section shall be made in
accordance with the provisions of the Code of Criminal Procedure, 1973.

Banning of Unregulated Deposit Schemes Act, 2019

Indian Kanoon - http://indiankanoon.org/doc/17657769/ 12



32. Application of Code of Criminal Procedure, 1973 to proceedings before
Designated Court.

(1)The Designated Court may take cognizance of offences under this Act without the accused being
committed to it for trial.(2)Save as otherwise provided in section 31, the provisions of the Code of
Criminal Procedure, 1973 shall apply -(a)to all arrests, searches and seizures made under this
Act;(b)to the proceedings under this Act and for the purposes of the said provisions, the Designated
Court shall be deemed to be a Court of Session and the persons conducting the prosecution before
the Designated Court, shall be deemed to be Public Prosecutors.

Chapter VIII
Miscellaneous

33. Publication of advertisement of Unregulated Deposit Scheme.

- Where any newspaper or other publication of any nature, contains any statement, information or
advertisement promoting, soliciting deposits for, or inducing any person to become a member of any
Unregulated Deposit Scheme, the appropriate Government may direct such newspaper or
publication to publish a full and fair retraction, free of cost, in the same manner and in the same
position in such newspaper or publication as may be prescribed.

34. Act to have overriding effect.

- Save as otherwise expressly provided in this Act, the provisions of this Act shall have effect
notwithstanding anything contained in any other law for the time being in force, including any law
made by any State or Union territory.

35. Application of other laws not barred.

- The provisions of this Act shall be in addition to, and not in derogation of, the provisions of any
other law for the time being in force.

36. Protection of action taken in good faith.

- No suit, prosecution or other legal proceedings shall lie against the appropriate Government or the
Competent Authority or any officer of the appropriate Government for anything which is in good
faith done or intended to be done under this Act or the rules made thereunder.

37. Power of Central Government to make rules.

(1)The Central Government may, by notification, make rules for carrying out the provisions of this
Act.(2)In particular and without prejudice to the generality of the foregoing power, such rules may

Banning of Unregulated Deposit Schemes Act, 2019

Indian Kanoon - http://indiankanoon.org/doc/17657769/ 13



provide for all or any of the following matters, namely: -(a)the information and other particulars to
be taken into consideration before issuing an order, and the manner of attachment, under
sub-section (3) of section 7;(b)the information to be shared under sub-section (2) of section 9;(c)the
form and manner in which and the time within which the intimation shall be given under
sub-section (1) of section 10;(d)the particulars contained in the application to be filed by the
Competent Authority before the Designated Court under sub-section (1) of section 14;(e)the
procedure to be adopted by the Designated Court before issuing an order under sub-section (3) of
section 15;(f)rules under sub-section (1) of section 31;(g)the manner of publication of advertisement
under section 33; and(h)any other matter which is required to be, or may be, prescribed.

38. Power of State Government, etc., to make rules.

(1)The State Government or Union territory Government, as the case may be, in consultation with
the Central Government, by notification, make rules for carrying out the provisions of this Act.(2)In
particular and without prejudice to the generality of the foregoing power, such rules may provide for
all or any of the following matters, namely: -(a)ceiling for self-help groups under clause (j) of
sub-section (4) of section 2;(b)purpose and ceiling under clause (k) of sub-section (4) of section
2;(c)the manner of provisional attachment of property by the Competent Authority under
sub-section (3) of section 7;(d)other matters under clause (f) of sub-section (4) of section 7;(e)the
rules relating to impounding and custody of records under sub-section (8) of section 7; and(f)any
other matter which is required to be, or may be, prescribed.

39. Laying of rules.

(1)Every rule made by the Central Government under this Act shall be laid, as soon as may be after it
is made, before each House of Parliament, while it is in session, for a total period of thirty days
which may be comprised in one session, or in two or more successive sessions, and if, before the
expiry of the session immediately following the session or the successive sessions aforesaid, both
Houses agree in making any modification in the rule, or both Houses agree that the rule should not
be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the
case may be; so, however, that any such modification or annulment shall be without prejudice to the
validity of anything previously done under that rule.(2)Every rule made by a State Government or
the Union territory Government, as the case may be, shall be laid, as soon as may be after it is made,
before each House of the State Legislature or the Union territory Legislature, as the case may be,
where it consists of two Houses, or where such Legislature consists of one House, before that House.

40. Power to amend First Schedule.

(1)The Central Government may, having regard to the objects of this Act, and if it considers
necessary or expedient so to do, by notification, add to, or as the case may be, omit from the First
Schedule, any scheme or arrangement, and on such addition, or omission, such scheme or
arrangement shall become, or cease to be, a Regulated Deposit Scheme, as the case may be.(2)A
copy of every notification issued under this section shall, as soon as may be after it has been issued,
be laid before each House of Parliament.

Banning of Unregulated Deposit Schemes Act, 2019

Indian Kanoon - http://indiankanoon.org/doc/17657769/ 14



41. Act not to apply certain deposits.

- The provisions of this Act shall not apply to deposits taken in the ordinary course of business.

42. Amendment to certain enactments.

- The enactments specified in the Second Schedule shall be amended in the manner specified
therein.

43. Power to remove difficulties.

(1)If any difficulty arises in giving effect to the provisions of this Act, the Central Government may,
by order published in the Official Gazette, make such provisions, not inconsistent with the
provisions of this Act, as may appear to it to be necessary for removing the difficulty:Provided that
no such order shall be made under this section after the expiry of three years from the
commencement of this Act.(2)Every order made under this section shall be laid, as soon as may be
after it is made, before each House of Parliament.

44. Repeal and saving.

(1)The Banning of Unregulated Deposit Schemes Ordinance, 2019, is hereby
repealed.(2)Notwithstanding such repeal, anything done or any action taken under the said
Ordinance, shall be deemed to have been done or taken under this Act.The First Schedule[See
section 2 (15)]Regulated Deposit Schemes(1)The Regulator and Regulated Deposit Scheme refers to
the regulators and schemes and arrangements listed in the following Table, namely: -Table

Sl.
No.

Regulator Regulated Deposit Scheme

(1) (2) (3)

1.
The Securities and Exchange
Board of India

(i) Any scheme or an arrangement [as definedunder section
11AA of the Securities and Exchange Board ofIndia Act, 1992 (15
of 1992)] launched, sponsored or carried outby a Collective
Investment Management Company registered withthe Securities
and Exchange Board of India under the Securitiesand Exchange
Board of India (Collective Investment Scheme)Regulations,
1999.

  

(ii) Any scheme or an arrangement registeredwith the Securities
and Exchange Board of India under theSecurities and Exchange
Board of India (Alternative InvestmentFunds) Regulations,
2012.

  (iii) Any scheme or an arrangement, pursuant towhich funds are
managed by a portfolio manager, registered underthe Securities

Banning of Unregulated Deposit Schemes Act, 2019

Indian Kanoon - http://indiankanoon.org/doc/17657769/ 15



and Exchange Board of India (Portfolio Managers)Regulations,
1993.

  

(iv) Any scheme or an arrangement regulatedunder the
Securities and Exchange Board of India (Share BasedEmployee
Benefits) Regulations, 2014 or providing for employeebenefits as
permitted under the Companies Act, 2013 (18 of2013).

  
(v) Any other scheme or an arrangementregistered under the
Securities and Exchange Board of India Act,1992 (15 of 1992), or
the regulations made thereunder.

  

(vi) Any amount received as contributions inthe nature of
subscriptions to a mutual fund registered withSecurities and
Exchange Board of India under the Securities andExchange
Board of India (Mutual Funds) Regulations, 1996.

2. The Reserve Bank of India

(i) Any scheme under which deposits areaccepted by
Non-Banking Financial Companies as defined in clause(f) of
section 45-I of the Reserve Bank of India Act, 1934 (2 of1934)
and registered with the Reserve Bank of India; or anyother
scheme or an arrangement registered under the Reserve Bankof
India Act, 1934.

  

(ii) Any scheme or an arrangement under whichfunds are
accepted by individuals or entities engaged asBusiness
Correspondents and Facilitators by banks subject to
theguidelines and circulars issued by the Reserve Bank of
Indiafrom time to time.

  

(iii) Any scheme or an arrangement under whichfunds are
received by a system provider operating as anauthorised
payment system under the Payment and SettlementSystems Act,
2007 (51 of 2007).

  
(iv) Any other scheme or an arrangementregulated under the
Reserve Bank of India Act, 1934 (2 of 1934),or the guidelines or
circulars of the Reserve Bank of India.

3.
The Insurance Regulatory
and Development
Authorityof India

A contract of insurance pursuant to acertificate of registration
obtained in accordance with theInsurance Act, 1938 (4 of 1938).

4.
The State Government or
Union territory Government

(i) Any scheme or an arrangement made oroffered by a
co-operative society registered under theCo-operative Societies
Act, 1912 (2 of 1912) or a society beinga society registered or
deemed to be registered under any lawrelating to co-operative
societies for the time being in forcein any State or Union
territory.

  (ii) Any scheme or an arrangement commenced orconducted as
a chit business with the previous sanction of theState

Banning of Unregulated Deposit Schemes Act, 2019

Indian Kanoon - http://indiankanoon.org/doc/17657769/ 16



Government in accordance with the provisions of the ChitFunds
Act, 1982 (40 of 1982).

  
(iii) Any scheme or an arrangement regulated byany enactment
relating to money lending which is for the timebeing in force in
any State or Union territory.

  
(iv) Any scheme or an arrangement by a prizechit or money
circulation scheme under section 11 of the PrizeChits and Money
Circulation Schemes (Banning) Act, 1978 (43 of1978).

5. The National Housing Bank
Any scheme or an arrangement for acceptance ofdeposits
registered under the National Housing Bank Act, 1987(53 of
1987).

6.
The Pension Fund
Regulatory and
DevelopmentAuthority

Any scheme or an arrangement under the PensionFund
Regulatory and Development Authority Act, 2013 (23 of2013).

7.
The Employees' Provident
Fund Organisation

Any scheme, Pension Scheme or Insurance Schemeframed
under the Employees' Provident Fund and
MiscellaneousProvisions Act, 1952 (19 of 1952).

8.
The Central Registrar,
Multi-State
Co-operativeSocieties

Any scheme or an arrangement for acceptance ofdeposits from
voting members by a Multi-State Co-operativeSociety registered
under the Multi-State Co-operative SocietiesAct, 2002 (39 of
2002).

9.
The Ministry of Corporate
Affairs, Government ofIndia

(i) Deposits accepted or permitted under theprovisions of
Chapter V of the Companies Act, 2013 (18 of2013).

  

(ii) Any scheme or an arrangement under whichdeposits are
accepted by a company declared as a Nidhi or aMutual Benefit
Society under section 406 of the Companies Act,2013 (18 of
2013).

(2)The following shall also be treated as Regulated Deposit Schemes under this Act, namely:
-(a)deposits accepted under any scheme or an arrangement registered with any regulatory body in
India constituted or established under a statute; and(b)any other scheme as may be notified by the
Central Government under this Act.The Second Schedule(See section 42)Amendments To Certain
Enactments

Part I

Amendment To The Reserve Bank of India Act, 1934In the Reserve Bank of India Act, 1934, in
section 45-I, in clause (bb), after Explanation II, the following Explanation shall be inserted,
namely: -"Explanation III. - The amounts accepted by a co-operative society from the members or
shareholders, by whatever name called, but excluding the amounts received as share capital, shall be
deemed to be deposits for the purposes of this clause, if such members or shareholders are nominal
or associate members, by whatever name called, who do not have full voting rights in the meetings
of such co-operative society.".

Banning of Unregulated Deposit Schemes Act, 2019

Indian Kanoon - http://indiankanoon.org/doc/17657769/ 17



Part II

Amendments To The Securities and Exchange Board of India Act, 1992In the Securities and
Exchange Board of India Act, 1992, -(i)in section 11, in sub-section (4), for clause (e), the following
clause shall be substituted, namely: -"(e) attach, for a period not exceeding ninety days, bank
accounts or other property of any intermediary or any person associated with the securities market
in any manner involved in violation of any of the provisions of this Act, or the rules or the
regulations made thereunder:Provided that the Board shall, within ninety days of the said
attachment, obtain confirmation of the said attachment from the Special Court, established under
section 26A, having jurisdiction and on such confirmation, such attachment shall continue during
the pendency of the aforesaid proceedings and on conclusion of the said proceedings, the provisions
of section 28A shall apply:Provided further that only property, bank account or accounts or any
transaction entered therein, so far as it relates to the proceeds actually involved in violation of any of
the provisions of this Act, or the rules or the regulations made thereunder shall be allowed to be
attached.";(ii)in section 28A, after Explanation 3, the following Explanation shall be inserted,
namely: -"Explanation 4. - The interest referred to in section 220 of the Income-tax Act, 1961 shall
commence from the date the amount became payable by the person.".

Part III

Amendment To The Multi-State Co-Operative Societies Act, 2002In the Multi-State Co-operative
Societies Act, 2002, in section 67, in sub-section (1), -(a)after the words "receive deposits", the
words "from its voting members" shall be inserted;(b)the following Explanation shall be inserted,
namely: -"Explanation. - For the removal of doubts, it is hereby clarified that a multi-State
co-operative society shall not be entitled to receive deposits from persons other than voting
members.".

Banning of Unregulated Deposit Schemes Act, 2019

Indian Kanoon - http://indiankanoon.org/doc/17657769/ 18