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FAQ on The Banning of Unregulated Deposit Schemes Ordinance, 2019
May, 15th 2019
       Frequently Asked Questions
                    on
The Banning of Unregulated Deposit Schemes
              Ordinance, 2019




Committee on Economic Commercial Laws & Economic Advisory
The Institute of Chartered Accountants of India
               (Set up by an Act of Parliament)
                          New Delhi
© THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA, NEW DELHI
All rights reserved. No part of this publication may be reproduced, stored in a
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First Edition             :   May, 2019

Committee / Department :      Committee on Economic Commercial Laws &
                              Economic Advisory

E-mail                    :   cecl@icai.in

Website                   :   www.icai.org




Published by              :   The Publication Department on behalf of the
                              Institute of Chartered Accountants of India,
                              ICAI Bhawan, Post Box No. 7100, Indraprastha
                              Marg, New Delhi ­ 110 002
                                                          Foreword
The Institute of Chartered Accountants of India (ICAI) has been playing a
notable role towards empowering/capacity building of professionals by
updating the member's knowledge and skill sets on the provisions of existing
as well as upcoming laws to enable them to render professional and
consultancy services to stake holders in dynamic economic and commercial
scenario.
The `Banning of Unregulated Deposit Schemes Ordinance, 2019' is the
government's endeavor to bridge the regulatory gap in the wake of difficulties
faced in investigating of ponzi-schemes, and the ordinance has been
promulgated with an objective to completely ban unregulated deposit
schemes; prohibit solicitation or acceptance of deposits outside the
Regulated Deposit Scheme. It will also enable creation of an online central
database for information on deposit takers.
I am glad that in view of the significance of the Ordinance, the Committee on
Economic, Commercial Laws & Economic Advisory of ICAI has proactively
taken an initiative of bringing out the publication `FAQs on the Banning of
Unregulated Deposit Schemes Ordinance, 2019'.
I would like to compliment CA. Tarun Jamnadas Ghia, Chairman and CA.
Anuj Goyal Vice-Chairman of Committee on Economic, Commercial Laws &
Economic Advisory, for their contribution and valuable efforts in bringing out
the said publication.
I would also like to appreciate the efforts of all the members of the
Committee on Economic Commercial Laws & Economic Advisory who have
given invaluable contribution in the finalization of this Publication.


New Delhi                                            CA. Prafulla P. Chhajed
10th May, 2019                                               President, ICAI
iv
                                                               Preface
India, has in the recent times witnessed a glut of financial frauds in forms of
ponzi schemes, chit fund scams etc. In order to deter the illegal operators
from running such deposit schemes luring deposits, and to regulate them, the
government brought in the `Banning of Unregulated Deposit Schemes Bill,
2018' in the Parliament. However, the same could not be passed in Rajya
Sabha. Subsequently, the `Banning of Unregulated Deposit Scheme
Ordinance, 2019' was promulgated on February 21, 2019.

The Ordinance provides for a mechanism to completely ban unregulated
deposit schemes to protect the interests of depositors and provides for
stringent penalties for the offences involving wrongful inducement,
solicitation or acceptance of deposits under an unregulated deposit schemes
as well as fraudulent default in repayment or return under a Regulated
Deposit Scheme. The Ordinance also seeks to amend three laws, i.e., the
Reserve Bank of India Act, 1934, the Securities and Exchange Board of India
Act, 1992 and the Multi-State Co-operative Societies Act, 2002.

The objective of this publication is to recommend the parameters to be
followed by the Chartered Accountants while rendering consultancy and
services to stake holders in economic and commercial field.

We are confident that the team work of co-authors CA. Pramod Jain,
CA. Chandrashekhar Vasant Chitale and CA. Sanjeev K. Singhal, Central
Council Members and Members of Committee on Economic Commercial
Laws & Economic Advisory, will prove to be quite useful to the fraternity &
stakeholders and will add to the goodwill of the ICAI.

We are also certain that this publication would assist the members & will help
them in discharging their professional obligations with efficacy and diligence.

We place on record our compliments and gratitude to the authors of valuable
contributions and our appreciation of the officials at the Committee on
Economic Commercial Laws & Economic Advisory for their assistance in
bringing out this publication.
CA. Tarun Jamnadas Ghia,                            CA. Anuj Goyal
Chairman                                            Vice-Chairman
Committee on Economic                       Committee on Economic
Commercial Laws & Economic                     Commercial Laws &
Advisory,                                      Economic Advisory,
ICAI                                                          ICAI

New Delhi
10th May, 2019




                                 vi
FAQs on `The Banning of Unregulated Deposit Schemes
Ordinance, 2019'
Q. No.          Question                          Answer
 1.      What is the need of the The Banning of Unregulated Deposit
         Ordinance?              Scheme Bill 2019 was passed by
                                 Lok Sabha but could not be passed
                                 by Rajya Sabha to make it as an
                                 enacted Act. Hence, to make the
                                 provisions effective immediately the
                                 Ordinance was promulgated by
                                 Hon'ble President of India on 21st
                                 February 2019 and is applicable from
                                 that date onwards.
 2.      What is the objective of The Ordinance is to provide for a
         this Ordinance?          comprehensive mechanism to ban
                                  Unregulated Deposit Schemes and
                                  to protect the interest of the
                                  depositors and for matters connected
                                  therewith or incidental thereto.
 3.      When has this Ordinance From 21st February 2019.
         come into force?
 4.      What    is   appropriate As per Section 2(1) of the
         government   under the Ordinance,                 "appropriate
         Ordinance?               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
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                           Answer
 5.       What is relevance of the "Appropriate Government" has been
          appropriate government vested with right to appoint the
          under the Ordinance?     authorities for administration of the
                                   Ordinance.
 6.       Who is the competent The appropriate government would
          authority  under the appoint one or more officers not
          Ordinance?           below the rank of Secretary to that
                               Government, as the Competent
                               Authority under Section 7 of the
                               Ordinance.
 7.       What is deposit?            Section 2(4) of the Ordinance
                                      defines the term deposit 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 form.
                                      However, certain deposits are
                                      excluded from the definition and as
                                      such the excluded deposits are not
                                      within the scope of the Ordinance.
                                      Please refer Q.8 for knowing list of
                                      excluded deposits.
 8.       What        are     specific The exclusions are set out in Section
          exclusions      from    the 2(4) of the Ordinance itself that
          definition of deposits?      defines `deposits' which are as
                                       follows:
                                       ·    Loans received from banks;
                                       ·    Loans/ financial assistance from
                                            private finance institutions

                                     2
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                           Answer
                                           (PFIs) or any registered non-
                                           banking financial companies
                                           (NBFCs), regional financial
                                           institutions   and     insurance
                                           companies;
                                       ·   Amount received from or
                                           guaranteed by appropriate an
                                           government;
                                       ·   Amount received from a
                                           statutory authority;
                                       ·   Amounts received from foreign
                                           government, foreign banks, and
                                           foreign authorities or person
                                           resident outside India as per the
                                           provisions of the Foreign
                                           Exchange Management Act
                                           (FEMA) 1999;
                                       ·   Capital      contributions     by
                                           partners of a partnership firm or
                                           LLP;
                                       ·   Loans received by an individual
                                           from his relatives;
                                       ·   Loans received by a firm from
                                           relatives of partners;
                                       ·   Any credit given by a seller to a
                                           buyer on the sale of any
                                           property (whether movable or
                                           immovable);
                                       ·   Amounts received by a
                                           registered Asset Reconstruction
                                           Company (ARC);
                                       ·   Amounts      received  under
                                           Section 34 or Section 29B of
                                           the Representation of the
                                           People Act, 1951;
                                       ·   Any periodic payment made by

                                      3
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                            Answer
                                            the members of self-help groups
                                            as per the ceiling prescribed by
                                            state/      Union        territory
                                            government;
                                        ·   Amount received in the course
                                            of, or for the purpose of,
                                            business and bearing a genuine
                                            connection to such business for
                                            following and which has not
                                            become refundable
                                        ·   Payment, advance or part
                                            payment for supply/ hire of
                                            goods / services;
                                        ·   Advance received in connection
                                            with and adjusted towards
                                            consideration of an immoveable
                                            property under an agreement or
                                            arrangement;
                                        ·   Security deposit;
                                        ·   Advance      under     long-term
                                            projects for supply of capital
                                            goods;
 9.       Whether the amount            No, they are not included under
          received      by    Public    `deposits'. Amounts received as loan
          Financial                     or financial assistance from Public
          Institutions/NBFCs/HFCs       Financial Institutions/ NBFCs/HFCs
          included under deposits?      are             exempt            by
                                        virtue of Section 2(4)(b) of the
                                        Ordinance.
 10.      Whether the contribution      Contribution received towards the
          received by a Partnership     capital by partners of Partnership
          Firm/Limited      Liability   Firm/Limited Liability partnership not
          partnership      included     included under deposits under
          under deposits?               Section 2(4) (e) of the Ordinance.


                                        4
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                             Answer
11.       Whether deposits include      No, Loans from scheduled banks or
          loans from scheduled          co-operative banks or any other
          banks or co-operative         banking company are excluded from
          banks or any other            definition of `deposits' under Section
          banking company are           2(4)(a) of the Ordinance.
          excluded from definition of
          `deposits'?
12.       What are the specific (i) Amounts received by way of
          exclusions         for    a contribution towards capital by
          partnership firm or limited partners of any partnership firm
          liability partnership?      or limited liability partnership
                                      are excluded from the definition
                                      of `deposit'.
                                        (ii) Any amount received by a firm
                                             by way of a loan from the
                                             relatives of any of its partners is
                                             excluded.
13.       Are     advances       from   Yes, only if the advance confirms
          customers for the purpose     requirements for exclusion stated in
          of business excluded from     Section 2(4)(l) of the Ordinance.
          the definition of deposits?   Accordingly, the following amounts
                                        are excluded from the definition of
                                        deposits if these are received in the
                                        course or for the purpose of
                                        business or bearing a genuine
                                        connection to such business
                                        including
                                        (i) Payments,       advance,     part
                                             payment for the supply or hire
                                             of goods or provision of
                                             services and is repayable in the
                                             event the goods or services are
                                             in fact sold, hired or otherwise
                                             provided.
                                        (ii) Advance received in connection


                                        5
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                            Answer
                                            with consideration of an
                                            immovable property under an
                                            agreement      /   arrangement
                                            subject to the condition that the
                                            advance is adjusted against
                                            such immovable property as per
                                            agreement.
                                       (iii) Security or dealership deposits
                                             for the performance of contract
                                             or for supply of goods or
                                             provision of services.
                                       (iv) Advance under long term
                                             projects for supply of capital
                                             goods.
                                       However, when the aforesaid
                                       amounts (i) to (iv) become
                                       refundable, such amounts are
                                       deemed to be deposits on expiry of
                                       fifteen days from the date on which
                                       they become due for refund.
 14.      Whether          amounts     Under Section 2(4)(f) of the
          received from relatives      Ordinance, in case of individual,
          are     considered    as     amounts       received      by     way
          `deposits'?                  of loan from his relatives and in case
                                       of any firm, amounts received by way
                                       of loan from the relatives of any of
                                       its partners are not considered as
                                       deposits.
 15.      Who all are covered under    Under explanation (v) to Section 2(4)
          the term `relative'for the   a Relative for the purposes of this
          exclusion as stated in Q     Ordinance would have the same
          14?                          meaning as assigned under
                                       Companies Act 2013 and Section
                                       2(77) of the said Act states `relative'
                                       with reference to any person, means


                                       6
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                            Answer
                                       any one who is related to another, if
                                       (1) they are members of a Hindu
                                            Undivided Family;
                                       (2) they are husband and wife;
                                       (3) Father including step-father.
                                       (4) Mother including step-mother.
                                       (5) Son including step-son.
                                       (6) Son's wife.
                                       (7) Daughter.
                                       (8) Daughter's husband.
                                       (9) Brother including step-brother;
                                       (10) Sister including step-sister.

16.       Whether the Deposit Any deposit made under Section 34
          received by a Political or an amount accepted by a political
          party covered by this party under Section 29B of the
          Ordinance?              Representation of the People Act,
                                  1951 are exempt by virtue of Section
                                  2(4)(i) of the Ordinance.
                                       Section 29B of the Representation of
                                       the People Act, 1951 reads:
                                       Political parties entitled to accept
                                       contribution.--Subject        to    the
                                       provisions of the Companies Act,
                                       1956, every political party may
                                       accept any amount of contribution
                                       voluntarily offered to it by any person
                                       or company other than a
                                       Government company:
                                       Provided that no political party shall
                                       be eligible to accept any contribution
                                       from any foreign source defined
                                       under clause (e) of Section 2 of the
                                       Foreign Contribution (Regulation)


                                      7
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                           Answer
                                      Act, 1976 (49 of 1976).
 17.      What is the meaning of As per Section 2(5) of the
          `depositor' assigned under Ordinance, "depositor" means any
          the Ordinance?             person who makes a deposit under
                                     this Ordinance.
 18.      Who is a deposit taker?     As per Section 2(6) of the
                                      Ordinance, "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;
                                      (ix) any other arrangement of
                                           whatsoever nature, receiving or
                                           soliciting deposits, but does not
                                           include
                                            a.   a Corporation incorporated
                                                 under an Act of Parliament
                                                 or a State Legislature;
                                            b.   a banking company, a
                                                 corresponding new bank,

                                     8
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                            Answer
                                                  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
19.       Whether the Trusts/Co- Yes, they are deposit takers as per
          operatives/ Societies are Section 2(6) of the Ordinance.
          covered     under     the
          Ordinance?
20.       What is a Designated As per Section 8 of the Ordinance,
          Court?               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.
21.       Which        Court     has    Only the Designated Court and no
          jurisdiction in respect of    other court shall have jurisdiction in
          any matter to which the       respect of any matter to which the
          provisions      of     this   provisions of this Ordinance apply.
          Ordinance apply?
22.       Whether the designated        When trying an offence under this
          Court can try an offence      Ordinance, the designated Court
          other than an offence         may also try an offence, other than
          under this Ordinance?         an offence under this Ordinance,
                                        which the accused may under the
                                        Code of Criminal Procedure, 1973,

                                        9
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                            Answer
                                        be charged at the same trial.
 23.      What is a Regulated Regulated Deposit Schemes are the
          Deposit Scheme?     Scheme Specified in First Schedule
                              to the Ordinance.
                              Currently, schemes that are
                              regulated by SEBI, RBI, IRDA, State
                              Government,        Union     Territory
                              Government, National Housing Bank,
                              Pension Fund Regulatory and
                              Developmental Authority, EPFO,
                              Multi-State Co-Operative Society,
                              Deposits accepted or permitted
                              under Chapter-V of the Companies
                              Act, 2013 and any deposits accepted
                              by a company declared as a Nidhi or
                              a Mutual Benefit Society under the
                              Companies Act, 2013 are regulated
                              deposit schemes.
                              Deposits accepted under any
                              scheme      or     an    arrangement
                              registered with any regulatory body
                              in India constituted or established
                              under a statute is also considered as
                              a regulated deposit scheme.
                              Further, Central Government, has a
                              power to notify any other scheme as
                              a regulated deposit scheme.
 24.      Are all deposits taken by     No, any deposit which is not a
          deposit taker other than      Regulated Deposit Scheme would
          by a Regulated Deposit        not mean it is an URDS. Unregulated
          Scheme be an Un-              Deposit      Scheme     has   been
          Regulated          Deposit    specifically defined under Section
          Scheme (URDS)?                2(17) of the Ordinance.
 25.      What is an Un-Regulated As per Section 2(17)                  of the
          Deposit Scheme?         Ordinance "Unregulated                Deposit

                                       10
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                           Answer
                                       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 in First
                                       Schedule of the Ordinance.
26.       In case an individual Yes, it is a deposit as it is not
          takes loan for personal specifically exempted under Section
          purpose to purchase 2(4) of the Ordinance.
          immovable property, is it a
          deposit?
27.       Whether this Ordinance is    Yes, any prize chit or money
          applicable on prize chits    circulation schemes banned under
          or money circulation         the Prize Chits and Money
          scheme?                      Circulation Scheme (Banning) Act,
                                       1978 shall be deemed to be an
                                       Unregulated Deposit Scheme.
28.       What is banned under this In terms of Section 3 of the
          Ordinance?                Ordinance:
                                       ·   Unregulated deposit schemes
                                           are banned and
                                       ·   No deposits taker shall directly
                                           or indirectly promote, operate,
                                           issue advertisement, solicit
                                           participation or enrolment in or
                                           accept deposits in pursuance of
                                           an unregulated deposit scheme.
                                       In terms of Section 4 of the
                                       Ordinance:
                                       ·   No deposit taker, while
                                           accepting deposits pursuant to
                                           a Regulated Deposit scheme,
                                           shall commit any fraudulent


                                      11
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                           Answer
                                           default in the repayment or
                                           return of deposit on maturity or
                                           in rendering any specified
                                           service promised against such
                                           deposit.
                                      In terms of Section 5 of the
                                      Ordinance:
                                      ·    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 or deliberately
                                           conceal any material facts, to
                                           induce another person to invest
                                           in, or become a members or
                                           participant of any URDS.
                                      In terms of Section 6 of the
                                      Ordinance:
                                      ·    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 URDS under this Ordinance.
 29.      Is there any compliance Yes, every deposit taker which
          required to be made by a commences or carries on business
          deposit taker?           after the commencement of the
                                   Ordinance shall intimate the
                                   authority about its business in the
                                   form and manner and within the time
                                   prescribed.


                                     12
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                           Answer
                                       The requirement of intimation is
                                       applicable to:
                                       ·    Deposit taker accepting or
                                            soliciting deposits as defined in
                                            Section 2(4) of the Ordinance.
                                       ·    Company that accepts deposits
                                            under Chapter-V of the
                                            Companies Act, 2013.
30.       What are the powers of       Where the Competent authority or
          the Competent Authority      the officers appointed under Section
          or officers appointed by     7(2) of the Ordinance has a reason
          the           appropriate    to believe (the reason for such belief
          government?                  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 of the Ordinance, he may, by 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 and the Competent Authority
                                       shall, for this purpose 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


                                      13
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                             Answer
                                             him on oath;
                                        c.   compelling the production of
                                             records;
                                        d.   receiving evidence on affidavits;
                                        e.   issuing    commissions    for
                                             examination of witnesses and
                                             documents;
                                        f.   any other matter which may be
                                             prescribed.
                                        The Competent authority shall have
                                        the 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 stated above.
 31.      What is the status of the Every proceeding held under Section
          proceedings held under 7(4) & 7(5) of the Ordinance shall be
          Section 7(4) & 7(5) of the deemed to be a judicial proceeding
          Ordinance?                 within the meaning of Section 193
                                     and Section 228 of the Indian Penal
                                     code.
 32.      Till when can the officers    The officers appointed under Section
          appointed under Section       7(2) of the Ordinance can retain
          7(2) of the Ordinance can     records produced before him in any
          retain     the    records     proceedings under the Ordinance up
          impounded?                    to three months. Thereafter, such
                                        record can be retained only with
                                        obtaining the approval of the
                                        Competent Authority, as stated in
                                        Section 7(8) of the Ordinance.
 33.      What is online Database?      Online database would be online
                                        facility to create, maintain and
                                        operate the information on deposit

                                       14
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                            Answer
                                       takers operating in India, as required
                                       by the designated authority under
                                       Section 9(1) of the Ordinance.
34.       Who       shall  create, The Authority designated by the
          maintain and operate an Central government under Section
          online database?         9(1) of the Ordinance.
35.       What is the procedure of Under Section 10(1) of the
          intimation to the authority Ordinance, every deposit taker which
          by the deposit takers?      commences or carries on its
                                      business as such on or after the
                                      commencement of the Ordinance
                                      shall    intimate     the   authority
                                      designated under section 9(1) of the
                                      Ordinance, about its business in
                                      such form and manner and within
                                      such time, as may be prescribed.
                                      The said form, manner and time are
                                      yet to be prescribed.
                                       It may also be mentioned that every
                                       person soliciting deposits is also
                                       required to intimate the said
                                       authority.
                                       The Company accepting deposit
                                       under Chapter V of the Companies
                                       Act, 2013 is also similarly required to
                                       intimate the said authority.
36.       What is the information      The Competent authority may direct
          that can be sought by the    any deposit taker to furnish such
          competent authority from     statements,         information      or
          deposit takers?              particulars,     as      it   considers
                                       necessary, relating to or connected
                                       with the deposits received by such
                                       deposit taker. The direction can be
                                       issued if it has reason to believe that
                                       the deposits are being solicited or


                                      15
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                             Answer
                                         accepted pursuant to an URDS.
 37.      Whether a company Yes, a Company may be required to
          accepting deposits is intimate as per the provisions of
          required to intimate? Section 10(1) of the Ordinance and
                                the rules framed thereunder, if the
                                Company accepts deposits under
                                Chapter V of the Companies Act,
                                2013. These would be deposits from
                                public and from shareholders.
 38.      Whether a Company              No. amounts which are exempt by
          receiving amounts which        virtue of Rule 2(c) of Companies
          are exempted under             Acceptance of Deposit Rules 2014
          Companies (Acceptance          are not deposits and companies
          of Deposit) Rules 2014         receiving such exempt deposits may
          also required to intimate?     not be required to intimate under this
                                         Ordinance.
 39.      What is the role of other      As per Section 11 of the Ordinance,
          regulatory authorities like    the Competent authority under the
          Income Tax authorities or      Ordinance shall share all information
          any other Investigation        received under Section 29 of the
          agency?                        Ordinance with the CBI and with the
                                         Designated Authority.
                                         Further, 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 Ordinance by the Police or
                                         CBI, shall share all such information
                                         or documents with the Police or the
                                         CBI.
 40.      Are banks required to As per Section 11(3) of the
          share any information with Ordinance, where the principal
          the Competent authority officer of the banking company, a
                                     corresponding new bank, the State

                                        16
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                           Answer
          under the Ordinance?         Bank of India, a subsidiary bank, a
                                       regional rural bank, a co-operative
                                       bank or a Multi-state co-operative
                                       bank has a reason to believe that
                                       any client is a deposit taker and is
                                       acting in contravention to the
                                       provisions of this Ordinance, he shall
                                       forthwith inform the same to the
                                       Competent Authority.
41.       What is the priority of Save as otherwise provided in the
          depositors' claim?      Securitisation and Reconstruction of
                                  Financial Assets and Enforcement of
                                  Securities 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 debts and all
                                  revenues, taxes, cesses and other
                                  rates payable to the appropriate
                                  government or the local authority.
42.       What is the precedence of Save as otherwise provided in the
          attachment under the Securitisation and Reconstruction of
          Ordinance?                Financial Assets and Enforcement of
                                    Securities 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

                                     17
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                              Answer
                                          government or the local authority.
 43.      Can      the      competent     No. The Competent Authority shall
          authority utilize the money     open an account in a scheduled
          realised      under     this    bank for the purpose of crediting and
          Ordinance         for    its    dealing with the money realised
          administrative use?             under this Ordinance, which shall not
                                          be utilized except under the
                                          instructions of the Designated Court.
 44.      Can      the   competent No. The Competent authority shall
          authority alienate the not dispose of or alienate the
          attached property?       property or money attached except in
                                   accordance with the order of the
                                   Designated Court.
 45.      What if, the property The Competent authority may, if it
          attached is perishable? thinks it expedient, order the
                                  immediate sale of perishable items
                                  or assets, and the proceeds of the
                                  sale shall be utilized in the same
                                  manner as provided for other
                                  property.
 46.      What is the timeline of the     The Competent authority shall within
          procedural      compliance      a period of 30 days which may
          under the Ordinance after       extend upto 60 days, for reasons to
          provisional attachment by       be recorded in writing, from the date
          the Competent authority?        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.
 47.      What if the money or In case where the money or property
          property is attached on has been     attached on the

                                         18
          FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

 Q. No.            Question                            Answer
           the permission granted by    permission       granted      by     the
           the Designated Court in      Designated Court in another State or
           another State or Union       Union territory, the application for the
           territory?                   confirmation of such attachment
                                        shall be filed in that Court.
 48.       What steps shall be taken    The Designated court shall issue
           by the designated court      notice to
           on receipt of application    ·    deposit taker
           for    confirmation    of
                                        ·    any person whose property is
           attachment and sale of
                                             attached
           property?
                                        as to why the order of attachment
                                        should not be made absolute and the
                                        properties so attached be sold.
                                        The designated court shall also issue
                                        notice to all other persons
                                        represented to it as having or being
                                        likely to claim interest or title in the
                                        property, to appear on the same
                                        date, to raise objections, if they so
                                        desire, to the attachment of the
                                        property.
49.        What orders can be           The Designated Court shall, after
           passed by the Designated     adopting such procedure as may be
           Court on the application     prescribed, pass an order
           for    confirmation   of     ·    making a provisional order of
           attachment?                       attachment absolute; or
                                        ·    varying it by releasing a portion
                                             of the property from attachment;
                                             and direct the Competent
                                             Authority to sell the property so
                                             attached by public auction or, if
                                             necessary, by private sale and
                                             realise the sale proceeds. The
                                             designated court shall pass


                                       19
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                             Answer
                                             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;
                                         ·   cancelling the provisional order
                                             of attachment.
                                         The Designated Court shall not, in
                                         varying or cancelling the provisional
                                         order of attachment, release any
                                         property from attachment, unless it is
                                         satisfied that-
                                         ·   the deposit taker or any person
                                             whose property is attached, has
                                             interest in such property; and
                                         ·   there shall remain an amount or
                                             property       sufficient   for
                                             repayment to the depositors of
                                             such deposit taker.
 50.      Is there any time limit for    The     Designated   Court    shall
          Designated      Curt     to    endeavour     to   complete     the
          complete the proceedings       proceedings under Section 15 of the
          under Section 15 of the        Ordinance, within a period of 180
          Ordinance?                     days from the receipt of the
                                         application for confirmation of
                                         attachment.
 51.      What is payment in lieu of Any deposit taker or a person
          attachment of property?    referred to in Section 15(1) of the
                                     Ordinance or the transferee referred
                                     to in Section 16 of the Ordinance
                                     whose property is about to be
                                     attached or has been provisionally
                                     attached under this Ordinance, may,


                                        20
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                           Answer
                                       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.
52.       What are the powers of The Designated Court shall exercise
          the Designated Court?  the following powers:
                                       ·   to approve the statement of
                                           dues of the deposit taker due
                                           from various debtors;
                                       ·   to assess the value of the
                                           assets of the deposit taker and
                                           finalize the list of the depositors
                                           and their respective dues;
                                       ·   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;
                                       ·   to approve the necessary
                                           expenditure to be incurred by
                                           the Competent Authority for
                                           taking      possession      and
                                           realisation of the assets of the
                                           deposit taker;
                                       ·   to pass an order for full
                                           payment to the depositors by
                                           the Competent Authority or an
                                           order for proportionate payment

                                     21
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                              Answer
                                             to the depositors in the event
                                             the money so realised is not
                                             sufficient to meet the entire
                                             deposit liability;
                                        ·    to direct any person, who has
                                             made profit or averted loss by
                                             indulging in any transaction or
                                             activity in contradiction of the
                                             provisions of this Ordinance, to
                                             disgorge an amount equivalent
                                             to the wrongful gain made or
                                             loss     averted     by     such
                                             contravention; and
                                        ·    to pass any other order which
                                             the Designated Court deems fit
                                             for realisation of assets of the
                                             deposit taker or on any other
                                             matter or issue incidental
                                             thereto.
 53.      What is the limitation for    Appeal can be filed within 60 days
          filing the Appeal against     from the date of final order of the
          the      order  of     the    Designated Court. The High Court
          Designated Court under        may entertain the appeal after the
          Chapter      V   of    the    expiry of the said period of 60 days,
          Ordinance?                    if it is satisfied that the appellant was
                                        prevented by sufficient cause from
                                        preferring the appeal in time.
 54.      Who can file an appeal        The Competent Authority or any
          against the order of the      other person aggrieved by any final
          Designated Court under        order of the Designated Court can
          Chapter    V    of   the      file an appeal against the said order.
          Ordinance?
 55.      Whether the rights of the Yes, all the attached money or
          person interested in the property of the deposit taker and the


                                       22
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                           Answer
          property attached vested persons mentioned therein shall vest
          with    the    Competent in the Competent authority and shall
          Authority?               remain so vested till further orders of
                                   the Designated Court.
56.       What is the power of On an application filed by the
          Supreme Court under the Competent      Authority   or   any
          Ordinance?              interested party, supported by an
                                  affidavit, 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 of
                                  the Ordinance, the Supreme Court
                                  may, by an order, direct that any
                                  particular case be transferred from
                                  one Designated Court to another
                                  Designated Court.
                                       Where such an application is
                                       dismissed, the Supreme Court may,
                                       if it is of the 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.
57.       What are the offences The offences under this Act are
          under this Ordinance? · Soliciting deposits under URDS
                                       ·   Accepting deposits under URDS
                                       ·   Fraudulently   defaulting    in
                                           repayment of deposits accepted
                                           under URDS
                                       ·   Failure    to   render    service

                                     23
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'






 Q. No.           Question                             Answer
                                             promised against URDS
                                         ·   Fraudulently   defaulting  in
                                             repayment or return of deposit
                                             on maturity of regulated
                                             deposits.
                                         ·   Failure to render service
                                             promised against regulated
                                             deposits
                                         ·   Wrongful     inducements    in
                                             relation to Unregulated Deposit
                                             Schemes
                                         ·   Failure to file intimation by
                                             deposit taker about its business,
                                             or to furnish statements,
                                             information or particulars to the
                                             competent authority
 58.      What is the punishment Imprisonment for a term which shall
          for soliciting deposits not be less than 1 year but which
          under URDS?             may extend to 5 years and with fine
                                  which shall not be less than 2 lakh
                                  rupees but which may extend to 10
                                  lakh rupees.
 59.      What is the punishment Imprisonment for a term which shall
          for accepting deposits not be less than 2 years but which
          under URDS?            may extend to 7 years and with fine
                                 which shall not be less than 3 lakh
                                 rupees but which may extend to 10
                                 lakh rupees.
 60.      What is the punishment         Imprisonment for a term which shall
          for fraudulently defaulting    not be less than 3 years but which
          in repayment of deposits       may extend to 10 years and with fine
          accepted under URDS            which shall not be less than 5 lakh
          and failure to render          rupees but which may extend to
          service promised against       twice the amount of aggregate funds

                                        24
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                             Answer
          URDS?                          collected from the subscribers,
                                         members or participants in the
                                         URDS.
61.       What is the punishment         Imprisonment for a term which may
          for fraudulently defaulting    extend to 7 years or with fine which
          in repayment or return of      shall not be less than 5 lakh rupees
          deposit on maturity of         but which may extend to 25 crore
          regulated deposits and         rupees or three times the amount of
          failure to render service      profits made out of the fraudulent
          promised           against     default, whichever is higher, or with
          regulated deposits?            both.
62.       What is the punishment         Imprisonment for a term which shall
          for wrongful inducements       not be less than 1 year but which
          in relation to Unregulated     may extend to 5 years and with fine
          Deposit Schemes?               which may extend to 10 lakh rupees.
63.       What is the punishment Fine, which may extend to 5 lakh
          for failure to file intimation rupees.
          by deposit taker about its
          business, or to furnish
          statements, information or
          particulars        to      the
          competent authority?
64.       What is the punishment Imprisonment for a term which shall
          for repeat offenders under not be less than 5 years but which
          the Ordinance?             may extend to 10 years and with fine
                                     which shall not be less than 10 lakh
                                     rupees but which may extend to 50
                                     crore rupees.
65.       What is the punishment         Where an offence under this
          for offences committed by      Ordinance has been committed by a
          deposit takers other than      deposit taker other than an
          individuals under the          individual, every person who, at the
          Ordinance?                     time the offence was committed, was
                                         in charge of, and was responsible to,


                                        25
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                           Answer
                                      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.      However, such a
                                      person shall not be liable to any
                                      punishment       provided   in    this
                                      Ordinance, 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.
                                      However, in case it is proved that the
                                      offence has been committed with the
                                      consent or connivance; or 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 punished
                                      accordingly.
 66.      Are      the    offences    Every offence punishable under this
          conducted under the         Ordinance except offence under
          Ordinance cognizable and    Section 22 & 26 shall be cognizable
          non-bailable?               and non-bailable.
 67.      Who can take cognizance The Designated Court can take
          of the offences under the cognizance of an offence under the
          Ordinance?                Ordinance only upon a complaint
                                    made by the Regulator. However,
                                    where a company is accused,
                                    cognizance can be taken upon

                                     26
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                           Answer
                                       complaint of any person.
68.       Which       authority   is Competent Authority.
          empowered              for
          investigation, search and
          seizure      under    the
          Ordinance?
69.       Whether the offences can Yes, the Competent Authority shall
          be investigated by CBI? refer the matter to the Central
                                   Government for investigation by the
                                   CBI, if the Competent authority has
                                   reason to believe that the offences
                                   relate to a deposit scheme or deposit
                                   schemes in which ­
                                       ·   The depositors, deposit takers
                                           or properties involved are
                                           located in more than one State
                                           or Union Territory in India; and
                                       ·   The total value of the amount
                                           involved is of such magnitude
                                           as to significantly affect the
                                           public interest.
70.       Whether the Competent        The reference made by the
          Authority is required to     Competent authority shall be
          take the consent of the      deemed to be with the consent of the
          State Government before      State Government under Section 6 of
          making reference to the      the     Delhi     Special    Police
          Central Government?          Establishment Act, 1946.
71.       What shall the Central       The Central Government may
          Government do on receipt     transfer the investigation of the
          of the reference from the    offence to the CBI under Section 5 of
          Competent Authority?         the     Delhi      Special     Police
                                       Establishment Act, 1946.
72.       Who has the power to Police Officer not below the rank of
          enter, search and seize an Officer-in-charge of a Police

                                      27
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                            Answer
          without warrant in the Station with the written authorization
          premises   under   the of an officer below the rank of
          Ordinance?             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 sub-ordinate to
                                 him to enter, search and seize
                                 without warrant.
                                        However, 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 enter and search such building,
                                        conveyance or place, at any time
                                        between sunset and sunrise after
                                        recording the grounds in writing.
 73.      What is `freezing of          Freezing of account shall mean that
          property' and `freezing of    no transaction, whether deposit or
          account'    under      the    withdrawal shall be allowed in the
          Ordinance?                    said account.
                                        Freezing of property shall mean that
                                        no transfer, conversion, disposition
                                        or movement of property shall be
                                        allowed.
 74.      Whether the Designated        Yes, the Designated Court may take
          Court       can      take     cognizance of offences under the
          cognizance of offences        Ordinance without the accused being
          under the Ordinance           committed to trial.
          without the accused being
          committed to trial?


                                       28
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                             Answer
75.       What is the status of the      Save as otherwise expressly
          other laws for the time        provided in this Ordinance, the
          being in force with respect    provisions of this Ordinance shall
          to the Ordinance?              have overriding effect.
                                         Also the provisions of this Ordinance
                                         shall be in addition to and not in
                                         derogation of the provisions of any
                                         other law for the time being in force.
76.       Who has the power to           The Central Government and the
          make Rules for carrying        State Government or Union territory
          out the provisions of this     government, as the case may be, in
          Ordinance?                     consultation with the Central
                                         Government, by notification make
                                         rules for carrying out the provisions
                                         of this Ordinance.
77.       Whether any rules have Rules are yet to be prescribed.
          been prescribed under the
          Ordinance till date?
78.       What is the power of the The Central Government may make
          Central Government to rules to provide for all or any of the
          make rules?              following matters:
                                         ·   The information and other
                                             particulars to be taken into
                                             consideration before issuing
                                             any order, and manner of
                                             attachment under Section 7(3)
                                             of the Ordinance.
                                         ·   Information to be shared under
                                             Section 9(2) of the Ordinance.
                                         ·   The form and manner in which
                                             and the time within which the
                                             intimation shall be given under
                                             Section 10(1) of the Ordinance.
                                         ·   The particulars contained in the

                                        29
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                           Answer
                                           application to be filed by the
                                           competent authority before the
                                           Designated Court under Section
                                           14(1) of the Ordinance.
                                      ·    The Procedure to be adopted by
                                           the Designated Court before
                                           issuing an order under Section
                                           15(3) of the Ordinance.
                                      ·    Rules under Section 30(1) of
                                           the Ordinance.
                                      ·    The manner of publication of
                                           advertisement under Section 33
                                           of the Ordinance; and
                                      ·    Any other matter which is
                                           required to be, or may be,
                                           prescribed.
 79.      What is the power of the The State Government or Union
          State Government to territory government, as the case
          make rules?              may be, in consultation with the
                                   Central Government, by notification
                                   make rules to provide for all or any
                                   of the following matters:
                                      ·    Ceiling for self help groups
                                           under Section 2(4)(j) of the
                                           Ordinance.
                                      ·    Purpose and       ceiling under
                                           Section 2(4)       (k) of the
                                           Ordinance.
                                      ·    The manner of provisional
                                           attachment of property by the
                                           Competent authority under
                                           Section 7(3) of the Ordinance.
                                      ·    Other matters under Section
                                           7(4)(f) of the Ordinance.

                                     30
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                           Answer
                                       ·   The rules relating to impounding
                                           and custody of records under
                                           Section 7(8) of the Ordinance.
                                       ·   Any other matter which is
                                           required to be, or may be,
                                           prescribed.
80.       How many schedules are Two.
          defined    under   the
          Ordinance?
81.       Who are the Regulators ·         SEBI
          for the Regulated deposit ·      RBI
          schemes?
                                    ·      IRDA
                                       ·   State/UT Government
                                       ·   National Housing Bank
                                       ·   Pension Fund Regulatory &
                                           Development Authority
                                       ·   EPFO
                                       ·   Central Registrar, Multi State
                                           Co-operative Societies
                                       ·   MCA, Government of India
82.       What are the Regulated ·         Collective Investment Scheme;
          Deposit         Schemes ·        Alternative Investment Funds;
          regulated by SEBI?
                                  ·        Funds managed by a portfolio
                                           manager;
                                       ·   Any scheme or an arrangement
                                           regulated under the SEBI
                                           (Share      Based     Employee
                                           Benefits) Regulations, 2014 or
                                           providing for employee benefits
                                           as    permitted    under the
                                           Companies Act, 2013;
                                       ·   Any    other   scheme    or     an


                                     31
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                           Answer
                                           arrangement registered under
                                           SEBI Act, 1992;
                                      ·    Subscription to a Mutual fund
                                           Registered with SEBI
 83.      What are the Regulated ·         Any scheme under which
          Deposit         Schemes          deposits are accepted by
          regulated by RBI?                NBFCs registered with RBI or
                                           any     other   scheme    or
                                           arrangement registered under
                                           RBI Act, 1934;
                                      ·    Any scheme or an arrangement
                                           under which funds are accepted
                                           by individuals or entities
                                           engaged        as      Business
                                           Correspondents and Facilitators
                                           by banks subject to the
                                           Guidelines and Circulars issued
                                           by RBI from time to time;
                                      ·    Any scheme or an arrangement
                                           under which funds are received
                                           by a system provider operating
                                           as an authorized payment
                                           system under the Payment and
                                           Settlement Systems Act, 2007;
                                      ·    Any other scheme or an
                                           arrangement regulated under
                                           RBI Act, 1934, or the guidelines
                                           or circulars of the Reserve Bank
                                           of India
 84.      What are the Regulated A contract of Insurance pursuant to a
          Deposit         Schemes certificate of registration obtained in
          regulated by IRDA?      accordance with the Insurance Act,
                                  1938.
 85.      What are the Regulated ·         Any scheme or an arrangement

                                     32
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                           Answer
          Deposit      Schemes             made or offered by a co-
          regulated by State/UT            operative society registered
          Government?                      under      the      Co-operative
                                           Societies Act, 1912 or a society
                                           being a society registered or
                                           deemed to be registered under
                                           any law relating to co-operative
                                           societies;
                                       ·   Any scheme or an arrangement
                                           commenced or conducted as a
                                           chit business with the previous
                                           sanction     of     the     State
                                           Government in accordance with
                                           the provisions of the Chit Funds
                                           Act, 1982;
                                       ·   Any scheme or an arrangement
                                           regulated by any enactment
                                           relating to money lending which
                                           is for the time being in force in
                                           any State or Union territory;
                                       ·   Any scheme or an arrangement
                                           by a prize chit or money
                                           circulation scheme under the
                                           Prize Chits and            Money
                                           Circulation Schemes (Banning)
                                           Act,1978
86.       What are the Regulated Any scheme or an arrangement for
          Deposit       Schemes acceptance of deposits registered
          regulated by National under the National Housing Bank
          Housing bank?          Act, 1987.
87.       What are the Regulated       Any scheme or an arrangement
          Deposit        Schemes       under the Pension Fund Regulatory
          regulated by Pension         and Development Authority Act,
          Fund Regulatory and          2013.
          Development Authority?
88.       What are the Regulated Any scheme, Pension Scheme, or

                                     33
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                            Answer
          Deposit         Schemes Insurance scheme framed under the
          regulated by EPFO?      Employees' Provident fund and
                                  Miscellaneous Provisions Act, 1952.
 89.      What are the Regulated        Any scheme or an arrangement for
          Deposit           Schemes     acceptance of deposits from voting
          regulated by Central          members by a Multi-State Co-
          registrar, Multi-State Co-    operative Societies registered under
          operative Societies?          the     Multi-State     Co-operative
                                        Societies Act, 2002.
 90.      What are the Regulated ·          Deposits accepted or permitted
          Deposit         Schemes           under the provisions of Chapter
          regulated   by     MCA,           V of the Companies Act, 2013
          Government of India?              read      with      Companies
                                            (Acceptance of Deposit) Rules
                                            2014;
                                        ·   Any scheme or an arrangement
                                            under which deposits are
                                            accepted by a company
                                            declared as a Nidhi or a Mutual
                                            Benefit Society under Section
                                            406 of the Companies Act,
                                            2013.
 91.      What are the other            The following shall also be treated as
          schemes    treated   as       Regulated      Deposit      Schemes,
          Regulated        Deposit      namely:
          schemes    under    this      ·   deposits accepted under any
          Ordinance?                        scheme or an arrangement
                                            registered with any regulatory
                                            body in India constituted or
                                            established under a statute; and
                                        ·   any other scheme as may be
                                            notified   by  the   Central
                                            Government     under    this
                                            Ordinance.


                                       34
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                             Answer
92.       What are the other Acts ·          RBI Act, 1934
          amended      by     this ·         SEBI Act, 1992
          Ordinance?
                                        ·    Multi-State         Co-operative
                                             Societies Act, 2002
93.       What is the role of Currently no specific role has been
          chartered     accountants prescribed      for       Chartered
          under this Ordinance?     Accountants under this Ordinance.
94.       How        a     chartered    After understanding the law, a
          accountant             can    Chartered Accountant should inform
          advise/consult a client on    his clients / management about:
          compliance with respect       ·    Compliance required under
          to this Ordinance?                 Section 10 of this Ordinance
                                        ·    They should not act in violation
                                             of Sections 3, 4 5 and 6 of the
                                             Ordinance.
95.       Whether any amount            If the relative is as per the definition
          received by an individual     given under Section 2(77) of the
          as a loan from a relative     Companies Act, 2013, then the
          included under deposit?       amount received is not a deposit.
                                        Amounts received from other than
                                        those relatives are deposits for the
                                        purpose of this Ordinance.
96.       Whether any amount Yes, amounts received from friends
          received as a loan from a are deposits for the purpose of this
          friend included under Ordinance.
          deposit?
97.       Whether any money             The amounts received by way of
          borrowed or received for      contributions towards the capital by
          business purpose covered      partners of any partnership firm or a
          under this Ordinance?         limited liability partnership      as
                                        provided under Section 2(4)(e) of the
                                        Ordinance are not included under
                                        deposits.


                                       35
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                             Answer
                                         The 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 are not
                                         included by virtue of Section 2(4)(f)
                                         of the Ordinance.
                                         The amounts received in the course
                                         of, or for the purpose of business or
                                         bearing a genuine connection to
                                         such business as provided under
                                         Section 2(4)(l) of the Ordinance are
                                         not covered under deposits under
                                         this Ordinance.
                                         It may be said that the Ordinance is
                                         applicable to the business of taking
                                         deposits i.e., where collecting
                                         deposit is the prime / substantial
                                         activity.
 98.      Whether an unsecured           The amounts received from foreign
          loan from a Company            bodies corporate subject to the
          registered outside India       provisions of the Foreign Exchange
          allowed    under     this      Management Act, 1999 and the rules
          Ordinance?                     and regulations made thereunder are
                                         not covered under deposits under
                                         this Ordinance.
 99.      Whether any money              Any amount received by a
          received by partnership        partnership firm as a loan from the
          firm from a partner, friend    relatives    (as    defined   under
          or relative of a partner       Companies Act, 2013) of any of its
          included under deposit?        partners is excluded.
                                         The amounts received from the
                                         partner as contributions towards the
                                         capital are excluded.


                                        36
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                             Answer
                                         The amounts received in the course
                                         of, or for the purpose of business or
                                         bearing a genuine connection to
                                         such business as provided under
                                         Section 2(4)(l) of the Ordinance are
                                         also not covered under deposits
                                         under this Ordinance.
100.      Whether any money              The amounts received in the course
          received by partnership        of, or for the purpose of business or
          firm from any other firm of    bearing a genuine connection to
          a partner included under       such business as provided under
          deposit?                       Section 2(4)(l) of the Ordinance are
                                         not included under deposits under
                                         this Ordinance. Therefore, any
                                         money received by partnership firm
                                         from any other firm of a partner, in
                                         the course of, or for the purpose of
                                         business or bearing a genuine
                                         connection to such business may be
                                         considered as excluded from the
                                         deposits under this Ordinance.
                                         However, if the amount received is
                                         as a loan, the said amount would be
                                         deposit under this Ordinance.
101.      Does this Ordinance            The amounts received in the course
          cover unsecured loan           of, or for the purpose of business or
          taken by a partnership         bearing a genuine connection to
          firm     from      another     such business as provided under
          partnership firm in which      Section 2(4)(l) of the Ordinance are
          no partner is common?          not included under deposits under
                                         this Ordinance.
                                         Therefore, unsecured loan taken by
                                         a partnership firm from another
                                         partnership firm in which no partner
                                         is common, in the course of, or for
                                         the purpose of business or bearing a


                                        37
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                            Answer
                                        genuine connection to such business
                                        may be considered as excluded from
                                        the deposits under this Ordinance.
                                        However, if the amount received is
                                        as a loan, the said amount would be
                                        deposit under this Ordinance.
 102.     Whether the Ordinance         The Ordinance does not talk about a
          covers       a      single    single transaction or multiple
          transaction of giving or      transactions; hence, even a single
          receiving loan or only a      transaction could be deposit.
          series of transactions of
          giving or receiving loans
          forming a scheme?
 103.     Can a person take loan        Yes, a person can accept such
          being deposit for the         deposit as there is no specific
          purpose of its business       restriction on taking such loan which
          from his friend?              is deposits.
 104.     Is any compliance to be       Yes, he may be required to intimate
          made by a person              about his business under Section 10
          accepting such deposits       of the Ordinance read with the rules
          as stated in above            to be framed to the authority which
          question?                     would be designated under this
                                        Ordinance.

 105.     What would that authority If authority believes that deposits are
          do?                       being accepted / solicited pursuant
                                    to URDS, they would obtain
                                    statements, information, particulars
                                    to take further action.
 106.     Whether          Jewellers    Jewellers in their course of business
          offering saving schemes       accept advance against the goods to
          covered       by      this    be sold after a specified period. Such
          Ordinance?                    advances are not deposits.
 107.     Whether    the     security The security deposited for the

                                       38
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                            Answer
          deposit taken by an           performance of the contract for
          apartment    owner on         supply of goods or provision of
          giving his apartment on       services and the payment, advance
          lease covered under           or part payment for supply or hire of
          deposits    under    the      goods or provision of services is not
          Ordinance?                    included under deposits.
                                        However, such amounts shall be
                                        deemed to be deposits on the expiry
                                        of 15 days from the date on which
                                        they become due for refund.
108.       Whether a partner can The amounts received by way of
          contribute capital by contributions towards the capital by
          borrowing from third partners of the partnership firm or a
          parties ?              limited liability partnership are
                                 excluded from      being `deposits'
                                 under the Ordinance, by virtue of
                                 Section 2(4)(e). A partner may
                                 contribute capital out of his own
                                 funds and/or by borrowing from third
                                 parties.
109.      What is the status of the     The Ordinance per se does not
          money      received     or    provide for any clarification on this
          invested       in      an     part. The Central Government may
          unregulated        deposit    issue some clarification in this
          scheme      before    this    regard. However if the deposit was
          Ordinance             was     received pursuant to URDS, then it
          promulgated?                  may be ensured that it is not banned
                                        or restricted under any existing state
                                        laws or central laws.
110.      Whether action can be         The Ordinance per se does not
          taken against a person        provide for any clarification on this
          who has accepted deposit      part. The Central Government may
          before this Ordinance was     issue some clarification in this
          promulgated?                  regard.
                                        However if the deposit was received

                                       39
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                           Answer
                                      pursuant to URDS, then it may be
                                      ensured that it is not banned or
                                      restricted under any existing state
                                      laws or central laws. Action can be
                                      taken under such laws.
 111.     Whether the Ordinance By virtue of the definition of
          allows taking personal "Unregulated Deposit Scheme"
          loans?                 provided under Section 2 (17) of the
                                 Ordinance, only those amounts have
                                 been included under deposits, which
                                 have been accepted by the deposit
                                 taker under some scheme or an
                                 arrangement by way of business.
                                 The loan taken for personal needs
                                 may not be covered by the above
                                 definition as they are not accepted
                                 by way of business.
                                      Personal loans, if not specifically
                                      exempted under Section 2(4) of the
                                      Ordinance would be deposited,
                                      however a person may take such
                                      deposits for personal needs as there
                                      is no specific restriction to accept
                                      such deposits.
                                      Also, the finance ministry has said
                                      that borrowing of money by
                                      individuals from their relatives or
                                      friends for marriage, medical
                                      emergency, business needs or any
                                      other personal reasons, won't attract
                                      the penal provisions of the
                                      Ordinance.
 112.     Whether the Ordinance The deposit under this Ordinance
          allows taking individual does not include an amount received
                                   in the course of, or for the purpose

                                     40
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                              Answer
          advances?                     of, business and bearing a genuine
                                        connection to such business
                                        including
                                        i.     advance 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
                                            (ii) above.
113.      Whether             credit Money received as a credit for the
          transactions are included sale of any movable or immovable
          under deposit?             property is excluded under deposit.
114.      What will be the effect of    There is no effect of this law on
          this law on Section 185 &     Section 185/186 of the Companies
          186 of the Companies          Act, 2013, as for companies they are
          Act, 2013?                    governed by Companies Act, 2013
                                        and any amounts received as
                                        deposits by them have to be as per

                                       41
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                              Answer
                                         provisions of Chapter V of the Act.
                                         The provisions of this Ordinance are
                                         in addition to, and not in derogation
                                         of, the provisions of any other law for
                                         the time being in force.
 115.     Will     related   party All related party transactions are not
          transactions be covered covered. Only transactions of loans,
          under this?              advances and deposits are covered.
 116.     How do we differentiate        For Companies, deposits means
          deposit under Companies        deposits as defined under Rule 2(c)
          Act, 2013 and Deposit          of Companies (Acceptance of
          Scheme covered under           Deposit) Rules 2014. For other
          this Ordinance?                persons deposit means deposits as
                                         defined under Section 2(4) of this
                                         Ordinance.
 117.     Ministry of finance has         As per the provisions of Section 2(4)
          clarified that business        (l) of the Ordinance, the amounts
          loans are exempt from the      received in the course of, or for the
          Ordinance however the          purpose of business or bearing a
          Ordinance language is          genuine connection to such business
          different.  Which     will     are not covered under deposits
          prevail?                       under this Ordinance.
                                         Further the restriction for accepting
                                         deposits is only for unregulated
                                         deposit schemes under Section 3
                                         read with Section 5 and 6 of the
                                         Ordinance.
 118.     Self     help     members      Any periodic payment made by the
          funding loan schemes           members of self-help groups as per
          (wherein           business    the ceiling prescribed by state/ Union
          members pool resources         territory government is excluded
          and take loans) for 12A        from being considered as a deposit
          registered entities will it    under Section 2(4) of the Ordinance.
          fall under this Ordinance?

                                        42
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                             Answer
119.      Does the Ordinance cover       As per the provisions of Section
          genuine loans between          2(4)(l) of the Ordinance, the amounts
          friends and relatives for      received in the course of, or for the
          personal and business          purpose of business or bearing a
          use?                           genuine connection to such business
                                         are not covered under deposits
                                         under this Ordinance.
                                         Also, the finance ministry has said
                                         that borrowing of money by
                                         individuals from their relatives or
                                         friends for marriage, medical
                                         emergency, business needs or any
                                         other personal reasons, won't attract
                                         the penal provisions of the
                                         Ordinance.
120.      As per the statement of        The finance ministry has said that
          objects and reasons, this      borrowing of money by individuals
          Ordinance is applicable to     from their relatives or friends for
          in genuine schemes with        marriage,     medical     emergency,
          intent to defraud the          business needs or any other
          public and not to any          personal reasons, won't attract the
          other     genuine     loans    penal provisions of the Ordinance.
          between friends and
          relatives. Please clarify?
121.      As per my understanding        As per Section 2(17) of the
          any deposit to fall under      Ordinance, an Unregulated Deposit
          this Ordinance has to          Scheme is a Scheme or an
          pass two tests ­               arrangement under which deposits
          1.   It should be within       are accepted or solicited by the
               the definition of         Deposit taker by way of business
               deposit as per sec.       and which is not a Regulated Deposit
               2(4) of the Ordinance     Scheme included in the list provided
               and                       in the First Schedule.
          2.   If it falls under the This Ordinance covers:
               definition of `Deposit' · Banning of Unregulated Deposit

                                        43
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                             Answer
               as mentioned above,            Schemes and       its    related
               then we need to                promotion, etc.
               apply second test ·            Providing    punishment     for
               that for ascertaining          fraudulent default in refund /
               whether           this         rendering of promised services
               deposit falls under            in case of regulated deposit
               the definition of              schemes.
               Unregulated Deposit
                                      ·       Intimation to the prescribed
               Scheme as defined in
                                              authority by all deposit takers
               Section 2(4)(17) of
                                              starting or carrying on any
               the Ordinance.
                                              business.
          As per this understanding,
          if the loans taken by
          individual, HUF and other
          non corporate entities are
          not exempt under Section
          2(4) of the Ordinance,
          then such deposit should
          satisfy the test of Sec.
          2(17) of the Ordinance.
          For Example if an
          individual takes loan for
          purchase of jewellery or
          purchase of house from
          his friend. Though this
          loan falls within the
          definition of deposit but is
          outside     coverage      of
          Unregulated         deposit
          scheme as the person
          receiving the loan is not
          accepting or soliciting the
          loan by way of a
          business. As per my
          understanding           the
          Ordinance       has     the

                                         44
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                               Answer
          applicability only when the
          person receives loan by
          way of business.
122.      "Company" means a               Foreign Companies have to follow
          company as per Section          certain rules, regulations and
          2(20) of the Companies          guidelines as laid down by the
          Act, 2013 which in turn         Companies Act, 2013, FEMA, RBI,
          means       a      company      etc.
          incorporated under the          RBI has prescribed the Foreign
          Companies Act, 2013 or          Exchange Management (Deposit)
          under      any      previous    Regulations, 2016 relating to
          company        law.      The    deposits between a person resident
          definition of companies         in India and a person resident
          does not include foreign        outside India.
          companies either under
                                          Further, amounts received from
          Section 73 of the
                                          foreign Governments, foreign or
          Companies Act, 2013 or
                                          international banks, multilateral
          in      The      Companies
                                          financial      institutions,    foreign
          (Acceptance of Deposit)
                                          Government owned development
          Rules, 2014.
                                          financial institutions, foreign export
          Does this imply that if a       credit collaborators, foreign bodies
          foreign    company     as       corporate, foreign citizens, foreign
          defined under Section           authorities or person resident outside
          2(42) of the Companies          India subject to the provisions of the
          Act,     2013     accepts       Foreign Exchange Management Act,
          deposits; it would not be       1999 and the rules and regulations
          governed either by the          made there under are excluded from
          Companies Act, 2013 or          being considered as deposit under
          by this Ordinance?              this Ordinance.
123.      Under Section 2(4) of the       There could be many businesses
          Ordinance,      "deposit"       which provide services, for example
          means an amount of              a Saloon. It may accept deposits and
          money received by way of        in return promise to provide services.
          an advance or loan or in        Return in kind includes supply of
          any other form, by any          goods.


                                         45
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.            Question                              Answer
          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.
          Kindly provide examples
          or illustrations as to return
          of deposit with a promise
          to return in the form of a
          specified service. Further,
          what          would        be
          applicability     of      this
          Ordinance if the promise
          is to return by way of
          supply of goods?
 124.     As per Section 2(4) (e) of        Amounts received other than capital
          the Ordinance, "deposit"          contribution from partners may not
          does not include amounts          be allowed under the Ordinance.
          received by way of        Though not specifically provided
          contributions towards the under the Ordinance, yet any amount
          capital by partners of anyreceived from the partners by way of
          partnership firm or a     loan should be treated at par with
          limited             liability
                                    capital contribution from partners
          partnership.              going with the intent and purpose of
          Will amounts received by the Ordinance.
          a partnership firm from
          the partners by way of
          loan    also    not    be
          considered as deposit?



                                           46
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.             Question                               Answer
125.      As per Section 2(4) (f) of        For the purposes of this Ordinance
          the Ordinance, "deposit"          firm would include LLP too, hence
          does not include amounts          loans received from partners of LLP
          received by any firm by           would also be excluded from
          way of loan from relatives        definition of deposits.
          of any of its partners. The
          clause does not make any
          reference       to     limited
          liability partnership.
          Can it be assumed that
          amounts received by any
          limited liability partnership
          by way of loan from
          relatives of any of its
          partners is also included
          and would not be
          considered as deposit?
126.      "Deposit taker" under             HUF may not be specifically included
          Section 2(6) of the               in the definition of `deposit taker
          Ordinance    does   not           provided under the Ordinance,
          include Hindu Undivided           however it is also not specifically
          Family. Does this imply           excluded from the definition. Deposit
          that the Ordinance does           taker includes:
          not apply to HUF                  · Group of individuals
          accepting deposits?
                                            · Sole proprietorship
                                            · Partnership
                                            HUF would be a deposit taker in any
                                            of the above forms.
127.      As per Section 2(6) of the No, ICAI would not be considered as
          Ordinance, "deposit taker" deposit taker under this Ordinance.
          does not include a
          Corporation incorporated
          under     an    Act     of
          Parliament or a State
          Legislature. The Institute

                                           47
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                              Answer
          of Chartered Accountants
          of India is incorporated
          under     an   Act    of
          Parliament but is not a
          Corporation.
          Will   the    ICAI  be
          considered as a deposit
          taker      under   this
          Ordinance?
 128.     If any Branch of ICAI           No, any advance received against
          floats a scheme for its         supply of goods or rendering of
          members where members           services is excluded from the
          can deposit a lump sum          definition of deposits.
          amount with the Branch          A Branch of ICAI cannot float any
          and this amount would get       scheme without prior approval of
          adjusted against the            Council, which is regulated by ICAI
          member attending CPE            Act, 1949.
          events or purchasing ICAI
          publications, and at the
          end of the year the
          Branch shall refund the
          unutilised amount to the
          member, would this be
          considered             as
          Unregulated       Deposit
          under this Ordinance?
 129.     A Chartered Accountant in       A Chartered Accountant can accept
          practice accepts money          any such amount as per the
          from its clients regularly      guidelines issued for the said matter
          for payment of taxes on         by the Council.
          behalf of his clients. There    This amount is neither advance nor
          is a promise to return the      deposit as the same is given just to
          unutilised     /     excess     facilitate payment of taxes.
          amounts periodically.
                                          Kindly refer ICAI Code of Ethics in
          Would such activities by

                                         48
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                             Answer
          covered as acceptance of case of excess amounts received in
          Unregulated Deposits?    such cases.
130.      As per Section 2(17) of        Though legally it cannot be used, yet
          the            Ordinance,      the same intent is reflected through
          "Unregulated        Deposit    the memorandum to Banning of
          Scheme" is a Scheme or         Unregulated Deposits Scheme Bill
          an arrangement under           2018 too.
          which      deposits    are
          accepted or solicited by
          the Deposit taker by way
          of business and which is
          not a Regulated Deposit
          Scheme, as specified in
          the First Schedule.
          Under Section 2(k) of
          Banning of Unregulated
          Deposit Schemes and
          Protection of Depositors'
          Interests Bill, 2015:
          "Unregulated       Deposit
          Scheme means a scheme
          or arrangement under
          which     deposits    are
          accepted by any Deposit-
          taking Establishment by
          way of business and
          which is not a Regulated
          Deposit Scheme:
          Provided that for the
          purpose of determining
          whether or not an activity
          is carried on by way of
          business, the following
          factors     shall      be
          considered:


                                        49
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                           Answer
          (a) degree of continuity
              of the activity;
          (b) existence         of
              commercial element;
          (c) scale of activity; and
          (d) proportion which the
              activity bears to other
              activities carried on
              by the Deposit-taking
              Establishment:
          Provided further that a
          Deposit-taking
          Establishment is not to be
          regarded as accepting
          deposits by way of
          business if it does not
          hold    itself    out   as
          accepting deposits on a
          day to day basis.
          Explanation ­ For the
          purposes of this proviso, a
          Deposit-taking
          Establishment shall be
          considered to have itself
          out as accepting deposits
          on a day to day basis if
          the          Deposit-taking
          Establishment, by way of
          any express or implicit
          invitation, holds itself out
          as being generally willing
          to accept such deposits
          from those persons to
          whom        an    invitation
          soliciting deposits is


                                         50
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.             Question                               Answer
          addressed."
          Since "The Banning of
          Unregulated        Deposit
          Schemes         Ordinance,
          2019" does not provide
          any       guidance     for
          determining whether an
          activity is carried on by
          way of business, can the
          above provisions under
          the       "Banning      of
          Unregulated        Deposit
          Schemes and Protection
          of Depositors' Interests
          Bill, 2015" be considered
          for guidance purposes?
131.      The Reserve Bank of               The following schemes are included
          India Act, 1934 ­ Chapter         in the list of Regulated Deposit
          IIIC:      Prohibition      of    Schemes regulated by RBI:
          Acceptance of Deposits            (i) Any scheme under which
          by Unincorporated Bodies               deposits are accepted by Non-
          ­                                      Banking Financial Companies
          "Section 45S: Deposits                 as defined in clause (f) of
          not to be accepted in                  Section 45-1 of the Reserve
          certain cases:                         Bank of India Act, 1934 (2 of
          (1) No person, being an                1934) and registered with the
          individual or a firm or an             Reserve Bank of India; or any
          unincorporated                         other     scheme        or   an
          association of individuals             arrangement registered under
          shall, accept any deposit­             the Reserve Bank of India Act,
                                                 1934.
          (i) If his or its business
                wholly     or     partly    (ii) Any      scheme        or    an
                includes any of the              arrangement under which
                activities specified in          funds are accepted by
                clause (c) of Section            individuals or entities engaged
                45-I; or                         as Business Correspondents
                                                 and Facilitators by banks

                                           51
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                           Answer
          (ii) if his or its principal      subject to the Guidelines and
                business is that of         Circulars issued by the
                receiving of deposits       Reserve Bank of India from
                under any scheme or         time to time.
                arrangement or in (iii)     Any       scheme     or     an
                any other manner, or        arrangement under which
                lending     in    any       funds are received by a system
                manner;                     provider operating as an
          Provided that nothing             authorised payment system
          contained in this sub-            under      the Payment     and
          section shall apply to the        Settlement     Systems     Act,
          receipt of money by an            2007 (51 of 2007).
          individual by way of loan (iv)    Any other scheme or an
          from any of his relatives         arrangement regulated under
          or to the receipt of money        the Reserve Bank of India Act,
          by a firm by way of loan          1934 (2 of 1934), or the
          from the relative or              guidelines or circulars of the
          relatives of any of the           Reserve Bank of India.
          partners."
          Is there any circular or
          guidance or judgement
          under        the      above
          provisions of The Reserve
          Bank of India Act, 1934 as
          to      what      construes
          business of accepting or
          receiving deposits?
 132.     As per Section 3 of the      The Ordinance per se does not
          Ordinance, on and from       provide for any clarification on this
          the       date         of    part. The Central Government may
          commencement of this         issue some clarification in this
          Ordinance (21st February,    regard.
          2019)        Unregulated     However, it should be ensured that
          Deposit Schemes are          they were / are not banned or
          banned and no Deposit        restricted through any other central
          taker shall directly or      or state law.


                                      52
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.             Question                              Answer
          indirectly        promote,
          participate or accept
          deposits in pursuance of
          Unregulated        Deposit
          Scheme from the effective
          date of the Ordinance.
          What would be the fate of
          deposits accepted before
          21st February, 2019 and
          which are Unregulated
          Deposits?
133.      An individual / firm are in      Amounts received as advance
          the business of investing        against immovable property are
          in immovable property            specifically excluded from definition
          with an intention to sell on     of deposits under Section 2(4) of the
          appreciation. It borrows         Ordinance subject to conditions
          money from relatives,            mentioned therein.
          friends and other known    Advances received which are not
          persons for investment     against immovable property such as
          and promises returns in    loan against which interest is paid
          terms of interest or profits.
                                     would be deposits and related
          Since the amounts as compliances have to be made.
          received and utilized for
          business can it be said
          that the same are
          exempted under Section
          2(4)(l)    as    amounts
          received in the course of,
          or for the purpose of,
          business and bearing a
          genuine connection to
          such business?
134.      An individual borrows            The said amount would not be in the
          money from his friend and        course of, or for the purpose of,
          introduces the same as           business and bearing a genuine
          capital in a firm in which       connection to such business and

                                          53
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                              Answer
          such individual is a            therefore would not be considered as
          partner. The amount             exempted deposit under Section 2(4)
          introduced in the firm will     (l) of the Ordinance.
          not be considered deposit       This is so, as the person has not
          as per the provisions of        given the loan to the firm, but to the
          Section 2(4) (e) of the         partner in his individual capacity.
          Ordinance. Whether the          Hence such amounts received by
          amount received by the          partner would be deposit.
          individual from his friend
          can be said to be received
          in the course of, or for the
          purpose of, business and
          bearing       a     genuine
          connection       to    such
          business and therefore be
          considered as exempted
          deposit under Section
          2(4)(l) of the Ordinance?
 135.     The Reserve Bank of             Every amount received which is not
          India Act, 1934 ­ Chapter       exempt under Section 2(4) of the
          IIIC:    Prohibition   of       Ordinance is not URDS but is only a
          Acceptance of Deposits          deposit. For the amount to be URDS
          by         Unincorporated       it has to be covered under Section
          Bodies­                         2(17) of the Ordinance.
          "Section 45S: Deposits
          not to be accepted in
          certain cases:
          (1) No person, being an
          individual or a firm or an
          unincorporated
          association of individuals
          shall, accept any deposit­
          (i) If his or its business
              wholly     or    partly
              includes any of the

                                         54
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                           Answer
               activities specified in
               clause (c) of section
               45-I; or
          (ii) if his or its principal
               business is that of
               receiving of deposits
               under any scheme or
               arrangement or in any
               other manner, or
               lending      in     any
               manner;
          Provided that nothing
          contained in this sub-
          section shall apply to the
          receipt of money by an
          individual by way of loan
          from any of his relatives
          or to the receipt of money
          by a firm by way of loan
          from the relative or
          relatives of any of the
          partners.
          (3) On and from the 1st
          day of April, 1997, no
          person referred to in
          subsection (1) shall issue
          or cause to be issued any
          advertisement in any form
          for soliciting deposit.
          Explanation.­ For the
          purposes of this section, a
          person shall be deemed
          to be a relative of another
          if, and only if,­
          (i) they are members of
                a Hindu undivided
                family; or

                                         55
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.            Question                          Answer
          (ii) they are husband
               and wife; or
          (iii) the one is related to
                the other in the
                manner indicated in
                the List of Relatives
                below:­
          List of relatives­
          1. Father,
          2. Mother      (including
             step-mother),
          3. Son               (including
             stepson),
          4. Son's wife,
          5. Daughter (including
             step-daughter),
          6. Father's father,
          7. Father's mother,
          8. Mother's mother,
          9. Mother's father,
          10. Son's son,
          11. Son's son's wife,
          12. Son's daughter,
          13. Son's        daughter's
              husband,
          14. Daughter's husband,
          15. Daughter's son,
          16. Daughter's son's wife,
          17. Daughter's daughter,
          18. Daughter's daughter's
              husband,


                                            56
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                           Answer
          19. Brother       (including
              stepbrother),
          20. Brother's wife,
          21. Sister (including step-
              sister),
          22. Sister's husband."
          The definition of relatives
          in the Ordinance refers to
          the meaning assigned to
          in the Companies Act,
          2013 which as per Section
          2(77) of the Companies
          Act, 2013 read with the
          Companies (Specification
          of definitions details)
          Rules, 2014 means:
           Members of a Hindu
               Undivided Family
           Husband and Wife
           Father           (including
               step-father)
           Mother (including the
               step-mother)
               Son (including the
               step-son)
               Son's wife.
               Daughter.
               Daughter's husband.
               Brother (including the
               step-brother)
               Sister (including the
               step-sister)
          If a firm has accepted
          deposit from the father's


                                         57
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                              Answer
          father of a partner, the
          same         would       be
          acceptable as to be in
          accordance with the
          Reserve Bank of India
          Act, 1934. However,
          under the Ordinance the
          definition of relative does
          not contain father's father.
          Will the firm be now said
          to       be       accepting
          Unregulated Deposits?
 136.     What can be said to be a    It could be combination of all and
          scheme or arrangement       would be determined by the
          soliciting or inviting or   regulatory authority when the deposit
          accepting deposits?         taker gives intimation under Section
          Is it number of depositors, 10 of this Ordinance read with rules
          amount,       geographical to be notified and the authority is of
          area,     invitation    by the view that it is accepting deposits
          advertisement?              by way of business being URDS.

 137.     A private limited company       The provisions of this Ordinance
          has accepted deposits in        shall be in addition to and not in
          violation       of      the     derogation of the provisions of any
          Companies Act, 2013 and         other law for the time being in force.
          the       rules     framed
          thereunder. Would the
          company and its office be
          liable to the penal
          provisions under the
          Companies Act, 2013 or
          this Ordinance or both?
 138.     As per Section 10(1) of The     Central  Government    is
          the Ordinance, "every empowered to make rules to provide
          deposit  taker    which for the form and manner in which







                                         58
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                             Answer
          commences or carries on        and the time within which the
          its business as such on or     intimation shall be given under
          after the commencement         Section 10(1) of the Ordinance.
          of this Ordinance shall
          intimate the authority
                                         As, the Rules have not yet been
          referred to in sub-section
                                         notified by the Central Government,
          (1) of Section 9 about its
                                         the same would be clear only on the
          business in such form and
                                         notification of such rules.
          manner and within such
          time,     as    may     be
          prescribed."
          Would this be a one-time
          exercise or would the
          intimation be required
          every time a deposit is
          sought? The question is
          pertinent since intimation
          is      mandated        for
          Companies       accepting
          deposits under Section V
          of the Companies Act,
          2013 as per Section 73(2)
          (b)?
139.      What should be the nature It could be any business as held by
          of business covered under various courts of law. All business
          the Ordinance?            activities   including   profession,
                                    vocation should be covered.
140.      Whether monthly deposit        Jewellers in their course of business
          schemes offered by gold        accept advance against the goods to
          jewellery     shops      to    be sold after a specified period. Such
          prospective buyers who         advances are not deposits.
          will purchase the jewellery
          out of such accumulated
          deposited amount from
          the said shop covered
          under the Ordinance?


                                        59
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                               Answer
 141.     Can a director borrow and No, that is not allowed under the
          give loan to a private Companies (Acceptance of Deposit)
          company?                  Rules 2014 itself.
 142.     Whether      a     deposit      The amounts received in the course
          accepted by a business          of, or for the purpose of business or
          concern for meeting its         bearing a genuine connection to
          business needs, covered         such business as provided under
          under this Ordinance?           Section 2(4)(l) of the Ordinance are
                                          not included under deposits under
                                          this Ordinance.
 143.     Can an individual give This Ordinance is on acceptance of
          loan to other individuals, deposits being loans, it does not
          firm, HUF, etc. and will cover giving of loans.
          that loan be covered
          under this Ordinance?
 144.     How to distinguish loan As per Section 2(4) of this
          and deposit under this Ordinance, Deposits includes Loans.
          Ordinance?

 145.     What is the applicability of    Taking loans and giving further loans
          the Ordinance on the            are regulated by RBI.
          transactions related to         No person can do the business of
          taking and giving deposit       finance unless approved by RBI.
          to other parties in the
          course of the trade and
          business?
 146.     Would deposits made by          There is no specific restriction in this
          relatives out of secured        regard under this Ordinance for
          borrowings covered be           depositors or deposit takers similar
          under the Ordinance?            to restriction imposed in case of
                                          companies where a private company
                                          can accept loans from director or
                                          relatives of its directors out of their
                                          own funds only.


                                         60
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                             Answer
147.      Whether a Person, who is       No, no person can be in business of
          not into the business of       taking and giving deposits unless it
          accepting deposit, accept      is under regulated deposit scheme
          deposit and give deposit       as defined in Schedule 1 of this
          covered     under     this     Ordinance.
          Ordinance?

148.      Whether the deposit            Any scheme or an arrangement for
          accepted by a co-              acceptance of deposits from voting
          operative institution from     members by a Multi-State Co-
          it non-voting members          operative Society registered under
          covered     under      this    the      Multi-State     Co-operative
          Ordinance?                     Societies Act, 2002 is included in the
                                         list of Regulated Deposit Schemes
                                         under this Ordinance.
                                         The Ordinance also provides for
                                         amendment to the Reserve Bank of
                                         India Act, 1934, in Section 45-I, in
                                         clause (bb), by inserting after
                                         Explanation II, the following
                                         Explanation, namely:--
                                         The amounts accepted by a
                                         cooperative 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.
                                         The Ordinance also brings about
                                         amendment to Section 67 Multi-State

                                        61
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                               Answer
                                          Co-operative Societies Act, 2002 by
                                          clarifying that a multi-State co-
                                          operative society shall not be entitled
                                          to receive deposits from persons
                                          other than voting members.
 149.     Can a sole proprietor start  No, no person can be in business of
          finance     business    by   taking and giving deposits unless it
          accepting deposits from      is under regulated deposit scheme
          relatives and friends?       as defined in Schedule 1 of this
          What      will be        the Ordinance.
          applicability  of       this
          Ordinance under         this
          case?
 150.     Why definition of `relative'    The definition of relative for the
          differs under Income Tax        purpose of this law has been
          Act, 1961 and Companies         specifically provided under this
          Act, 2013?                      Ordinance.
 151.     Whether this Ordinance Yes, it applies to all types of
          applies to all type of business.
          business?
 152.     Is there any limit on rate No such limit has been prescribed by
          of interest payable on the Ordinance. However, if the
          deposits?                  deposit is as per regulated deposit
                                     scheme as defined in Schedule 1,
                                     relevant provisions of that regulator
                                     would apply to that entity in that
                                     case.
 153.     Whether interest free The definition of deposit under this
          deposits can be accepted Ordinance specifically states that
          in business?             even if the return of amount received
                                   is with or without any benefit in form
                                   of interest would be deposit.
 154.     Whether a Partner in a Yes, he can, there is no specific

                                         62
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                            Answer
          Firm can give loan to the restriction under this Ordinance.
          firm?

155.      Has Government notified Not Yet.
          any rule for submitting
          information of "deposit"
          with     the  competent
          authority?
156.      Whether loan from a           If the loan is for the purpose of any
          friend will be treated as     business, then it may be required to
          deposit and requires to be    intimate under this Ordinance as per
          informed under deposit to     rules to be framed.
          the competent authority?
157.      What if, the Government An Ordinance, once issued, is valid
          is not able to get the for six weeks from the date when the
          Ordinance cleared in next session of Parliament starts.
          Parliament?             During this period, Parliament can
                                  either pass the Ordinance turning it
                                  into an Act or disapprove the
                                  Ordinance.
                                        If the Ordinance is not passed by
                                        Parliament, it can be re-promulgated
                                        or re-issued by the President too.
                                        The President can during this period,
                                        at any time, withdraw the Ordinance.
158.      Whether the Ordinance is This Ordinance is for regulation of all
          applicable to all deposit or kind of deposits.
          only for those deposits
          received by way of
          business i.e. engaged in
          some sort of money
          lending     business      or
          running some schemes?
159.      Whether loans given to This Ordinance covers receipts of
          friends for non business

                                       63
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                             Answer
          purpose are covered or deposits and not giving of deposits.
          not?
 160.     What is the need to ban The Ordinance was needed to
          unregulated deposits?   provide for a comprehensive
                                  mechanism to ban the unregulated
                                  deposit schemes and to protect the
                                  interest of depositors and for matters
                                  connected therewith or incidental
                                  thereto.
 161.     Is the ban applicable on       No, the ban is only on accepting
          unsecured loan taken           unregulated deposit schemes as
          from non-family members        defined under Section 2(17) of this
          for carrying out trading       Ordinance.
          and         manufacturing
          business (non finance and
          deposit business)?
 162.     Since no rules has yet         As there is no restriction to accept
          been framed, what should       loans for and in the course of
          be the applicability of        business, there is no reporting
          Ordinance for the year         requirement by the auditors in
          ending 31-03-2019 in the       general case.
          audit report / balance         However, if the entity is engaged in
          sheet             of      a    business of accepting deposits by
          trader/manufacture (not        way of business and is not a
          involving      in      any     regulated deposit scheme, then as it
          deposit/money circulation      becomes an Unregulated Deposit
          schemes) in partnership /      Scheme, the auditor should frame
          proprietorship firm, having    his audit report accordingly.
          unsecured loans and
          deposits form other than
          relatives.
          Being the Auditor whether
          we should report the
          same in our Report 3CB,


                                        64
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                              Answer
          since same were not
          repaid within 15 days after
          21-02-2019.       Secondly
          whether       same       is
          applicable if deposits are
          taken by an individual for
          non-business purpose?
163.      Are the loans taken by a        The amounts received in the course
          business for use in his         of, or for the purpose of business or
          business (not a business        bearing a genuine connection to
          of borrowing and lending)       such business are not banned under
          banned       by       the       this Ordinance.
          Ordinance?
164.      Is there any threshold limit The Rules (yet to be notified) may
          over and above that the prescribe any threshold limit.
          Ordinance       will     be
          applicable?
165.      Whether, the entities           Such funds if registered under any
          which are pooling funds of      regulated deposit scheme as defined
          upto 50 persons and in          under Schedule 1 are not banned
          turn providing finance /        under this Ordinance.
          loan to others is covered       All other such funds may be an
          under the Ordinance?            unregulated deposit scheme.
166.      Whether the business            Security deposit for performance of
          security   deposit   is         services or supply of goods is
          covered    under   the          specifically exempted under Section
          Ordinance?                      2(4)(l)(iii) of this Ordinance.
167.      Clause (f) of proviso to        Loans received from non-relatives
          sec. 2(4) exempts loans         for the purpose of business are
          taken from relatives from       deposits and the deposit taker may
          the definition of deposits;     be required to intimate the regulatory
          whereas       clause     (l)    authority under Section 10 read with
          exempts           amounts       rules to be framed for this
          received for business.          Ordinance.

                                         65
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 Q. No.           Question                            Answer
          Does it mean amounts Such loans are not banned under
          taken by individual from this Ordinance.
          non relatives for business
          purpose also would not
          come under the purview
          of the definition of
          deposits?
          Is there any concept of
          deposit      but     not
          unregulated deposit?
 168.     A jeweller (Individual /      It may be said that the Ordinance is
          PF/Pvt Ltd co) accepts        applicable to the business of taking
          gold every month from         deposits i.e., where collecting
          general public as loan and    deposit is the prime / substantial
          pay interest @ x% pa in       activity.
          terms of gold only and the    Mostly jewellers offering monthly
          said gold deposit is          gold savings schemes do not carry
          repayable on demand by        out the scheme as their prime /
          giving a letter 15 days       substantial activity, so they may not
          before the redemption         be covered under the Ordinance, as
          date. Jewellers issue pass    definition of deposit under Section
          book for recording entry      2(4) talks about only amount
          for gold deposit and          received (not in kind).
          interest and repayment.
          What is the impact on
          such     scheme      under
          Banning of unregulated
          deposit Ordinance?
 169.     Jewellers   run    easy       Jewellers in their course of business
          instalment schemes for        accept advance against the goods to
          customers. These are          be sold after a specified period. Such
          advances    given     by      advances are not deposits. For
          customers        against      companies the period of supply
          purchases and, in return      should not exceed 365 days. For
          the customer is given         others including LLP, this Ordinance

                                       66
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                            Answer
          incentive in the form of has not prescribed any time period
          'discount' on the purchase yet.
          that he makes.
          Do these schemes come
          under the purview of
          Deposits if run by a
          company (pvt/public) if the
          period of the schemes is
          less than 365days?
          If such schemes are run
          by an LLP, irrespective of
          period of schemes, do
          they fall under the purview
          of Unregulated deposits?
170.      Difference  in  BUDS           DPT -3 is to be filed for Companies
          Ordinance   and   DPT          under Companies Act, 2013. This
          details to be provided         Ordinance covers all entities and
          under Companies Act,           information would be required to be
          2013?                          filed by persons as and when
                                         specified in the rules.
171.      Are Fresh Loan/Advances If the loans / advances are by way of
          between Individuals who business, then not allowed as it
          are neither engaged in could be URDS.
          Business nor having any
          business      connection
          allowable   under    the
          Ordinance?
172.      Can I give loan to Sharafs Giving of loans is not covered under
          or receive back from this Ordinance.
          them?
173.      What would be the impact Finance business can be done only
          on Finance Business when registered with RBI, otherwise
          carried       on      by the same is not allowed.
          Individual/HUF      after


                                        67
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                           Answer
          enactment of the Banning
          of Unregulated Deposit
          Scheme        Ordinance,
          2019?
 174.     Whether acceptance of Yes, it is a deposit taking activity by
          deposit by an individual way of business.
          other than its relative for
          the purpose of use in the
          business of Finance
          (advancing money) shall
          be treated as acceptance
          of deposit by way of
          business?
 175.     Whether definition of        No, the definition of relative has to
          relative as per RBI Act      be taken as per Companies Act
          plays any role or only       2013.
          definition of Ordinance      However, where the entity is taking
          shall be considered to       deposit by way of business through a
          determine whether receipt    regulated deposit scheme which is
          of amount is deposit or      regulated by RBI, in such cases
          not?                         definition of deposit would be that of
                                       RBI.
 176.     Whether the Credit Co- Any scheme or an arrangement
          operative  Society   is made or offered by a cooperative
          covered    under   the society registered under the Co-
          Ordinance?              operative Societies Act, 1912 (2 of
                                  1912) or a society being a society
                                  registered or deemed to be
                                  registered under any law relating to
                                  co-operative societies for the time
                                  being in force in any State or Union
                                  territory is included in the list of
                                  Regulated Deposit Schemes under
                                  this Ordinance.


                                      68
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                             Answer
177.      Whether the deposit           Deposits accepted or permitted
          accepted by a Company         under the provisions of Chapter V of
          from its shareholders         the Companies Act, 2013 (18 of
          covered    under  the         2013) are included in the list of
          Ordinance?                    Regulated Deposit Schemes under
                                        this Ordinance.
178.      What will be the status of Any deposit which was URDS was
          the deposit which are already banned or restricted under
          already existing in the some state law or central law.
          books of accounts of a
          company before the date
          from which the Ordinance
          is effect?
179.      What types of business        The Ordinance was promulgated to
          activities would    be        tackle the menace of illicit deposits
          covered     by     the        taking    activities    and     bans
          Ordinance?                    unregulated deposit taking business.
                                        Other business activities are not
                                        regulated by this Ordinance.
180.      Whether the loan taken by     It does not seem to be covered as
          a sole proprietorship from    loan taken from financial institution is
          the Financial Institutions    exempted and giving of loans is not
          and then given to an          covered by this Ordinance.
          individual by way of
          business correspondence
          is covered by the
          Ordinance?
181.      Whether a loan taken by a No.
          person from his/her friend
          to buy a property is
          URDS?
182.      Whether the loan given by No, this Ordinance does not cover
          a person to his/her cousin giving of loans.
          (Paternal or Maternal) in

                                       69
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                              Answer
          his personal capacity to
          be utilized for his
          business   purpose    is
          URDS?
 183.     What is the applicability of    They will have to intimate about their
          Section 10 of the               business to the authority in form,
          Ordinance regarding the         manner and time as and when
          intimation, with respect to     prescribed.
          the deposit takers already
          existing     before      the
          Ordinance?
 184.     A requires loan for its         If B is in the business of taking and
          business activities. B          giving loans, then he may be
          gives a loan to A by taking     considered to take deposits by way
          money from C. Will it be        of business and be URDS if B is not
          covered      under      the     covered under any Regulated
          Ordinance?                      Deposit Scheme.
 185.     Whether loan taken to           If loan taken and further giving loan
          give loan in order to earn      thereof is the business then it may
          interest income is covered      be considered to take deposits by
          under the Ordinance?            way of business and be URDS if the
                                          person is not covered under any
                                          Regulated Deposit Scheme.
 186.     Whether a loan taken by a       They are regulated by Companies
          Holding Company from            Act 2013 Chapter V read with
          the Bank and given to its       Companies (Acceptance of Deposit)
          subsidiary       company        Rules 2014.
          covered     under     the
          Ordinance?
 187.     Whether a student taking No.
          money from his friend to
          support his/her education
          is URDS?


                                         70
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                             Answer
188.      What would be status of This transaction is not covered under
          coverage of transaction, if this Ordinance.
          a person buys a property
          and gave the same to a
          partnership firm in which
          he is a partner?
189.      Is the money lent by a         If loan taken and further giving loan
          friend to another friend       thereof is the business then it may
          and basically engaged          be considered to take deposits by
          into the lending activities    way of business and be URDS if he
          between the friend circle      is not covered under any Regulated
          is covered under the           Deposit Scheme.
          Ordinance?
190.      Does interest free loans If loan taken and further giving loan
          given by one friend to thereof is the business then it may
          another is covered?      be considered to take deposits by
                                   way of business and be URDS if he
                                   is not covered under any Regulated
                                   Deposit Scheme.            Being with
                                   interest or without interest would not
                                   impact the status.
191.      A person who has taken It could be specifically exempted by
          deposit from a person virtue of exception given in Section
          who had booked flat in his 2(4)(l)(ii) of the Ordinance.
          society. He could not
          complete the project on
          time. The money kept with
          him will be considered
          under the definition of
          deposit    under       the
          Ordinance?
192.      Whether entities engaged Entities registered and complying
          in direct selling or Multi- with `The Direct Selling Guidelines
          level marketing (MLM), 2016' ("Guidelines") issued by


                                        71
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                            Answer
          also     called pyramid       Ministry of Consumer Affairs would
          selling,        network       not be URDS.
          marketing, and referral       However, if it merely a deposit taking
          marketing covered as          activity in grab of direct selling or
          URDS?                         MLM, then it could be URDS.
 193.     Can director deposit Yes, they are regulated by
          money in its Company? Companies Act, 2013 Chapter V
                                read with Companies (Acceptance of
                                Deposit) Rules 2014.
 194.     Loan extended by one          This transaction is regulated by
          sister company to another     Companies Act, 2013 Chapter V
          is covered under this         read with Companies (Acceptance of
          Ordinance?                    Deposit) Rules 2014.
 195.     Whether a money lender        Any scheme or an arrangement
          registered with the local     regulated by any enactment relating
          authority is covered under    to money lending which is for the
          the Ordinance?                time being in force in any State or
                                        Union territory is included in the
                                        Regulated Deposit Schemes under
                                        this Ordinance.
 196.     Investment done by a          Legally the transaction is an
          person in the business of     unsecured loan only. Loans given
          another as unsecured          are not covered under this
          loan is covered under the     Ordinance.
          Ordinance?
 197.     Whether the auction           A prize chit or a money circulation
          Committee      business       scheme banned under the provisions
          covered    under    the       of the Prize Chits and Money
          Ordinance?                    Circulation Scheme (Banning) Act,
                                        1978 shall be deemed to be an
                                        Unregulated Deposit Scheme under
                                        this Ordinance.
                                        However,    any    scheme      or   an


                                       72
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                           Answer
                                       arrangement      commenced        or
                                       conducted as a chit business with
                                       the previous sanction of the State
                                       Government in accordance with the
                                       provisions of the Chit Funds Act,
                                       1982 (40 of 1982) and any scheme
                                       or an arrangement by a prize chit or
                                       money circulation scheme under
                                       Section 11 of the Prize Chits and
                                       Money      Circulation     Schemes
                                       (Banning) Act, 1978 (43 of 1978)
                                       have been included in the Regulated
                                       Deposit Schemes under this
                                       Ordinance.
198.      Whether deposit accepted     An amount received in the course of,
          by a person under EMI        or for the purpose of, business and
          scheme is covered under      bearing a genuine connection to
          the Ordinance?               such business including 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 is excluded from the
                                       purview of `deposit' under the
                                       Ordinance.
                                       However, if the amounts so received
                                       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

                                     73
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                              Answer
                                          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.
 199.     Unregulated        Deposit      Unregulated      Deposit    Scheme"
          scheme construes that it        means a Scheme or an arrangement
          has to be first a scheme        under which deposits are accepted
          then it would deem to be        or solicited by any deposit taker by
          banned. Scheme is not           way of business and which is not a
          defined in the Ordinance?       Regulated Deposit Scheme, as
                                          specified under column (3) of the
                                          First Schedule.
 200.     If a company availed loan       No, intimation would be required only
          from directors does not         if the company accepts deposits as
          fall under the definition of    per Chapter V of Companies Act
          `Deposits' in Companies         2013     read    with     Companies
          Act,     2013,     whether      (Acceptance of Deposit) Rules 2014.
          intimation under Section        However, penalties and prosecution
          10 of the Ordinance is          for non-compliance of Chapter V of
          required to be submitted?       Companies Act, 2013 would be
                                          applicable to the Company in such
                                          case.
 201.     Does the investment into        Amounts received as loan from a
          fixed      deposit/private      scheduled bank or a co-operative
          investment out of bank          bank or any other banking company
          borrowings covered under        as defined in Section 5 of the
          the Ordinance?                  Banking Regulation Act, 1949 are
                                          excluded from the purview of
                                          `deposits' under the Ordinance.
 202.     Whether     the advance No.
          monthly       maintenance
          charges        paid    to

                                         74
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                           Answer
          developers/builder of the
          society or RWA covered
          under the unregulated
          deposit scheme?
203.      What are the key points      In case it is for the business
          needs to be kept in mind     activities, it is allowed under the
          by a businessman while       Ordinance.
          accepting    or    giving    In case it is forming the business to
          deposit?                     take deposits itself then it is banned
                                       under the Ordinance, if not included
                                       in the list of Regulated Deposit
                                       Schemes.
204.      Whether     chit      fund A prize chit or a money circulation
          business         activities scheme banned under the provisions
          covered    under        the of the Prize Chits and Money
          Ordinance?                  Circulation Scheme (Banning) Act,
                                      1978 shall be deemed to be an
                                      Unregulated Deposit Scheme under
                                      this Ordinance.
                                      However, any scheme or an
                                      arrangement       commenced       or
                                      conducted as a chit business with
                                      the previous sanction of the State
                                      Government in accordance with the
                                      provisions of the Chit Funds Act,
                                      1982 (40 of 1982) and any scheme
                                      or an arrangement by a prize chit or
                                      money circulation scheme under
                                      Section 11 of the Prize Chits and
                                      Money       Circulation    Schemes
                                      (Banning) Act, 1978 (43 of 1978)
                                      have been included in the Regulated
                                      Deposit Schemes under this
                                      Ordinance.
205.      Proprietary        concern Any scheme or an arrangement
          engaged     in      lending regulated by any enactment relating

                                      75
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                             Answer
          business is covered under to money lending which is for the
          the Ordinance?            time being in force in any State or
                                    Union territory is included in the
                                    Regulated Deposit Schemes under
                                    this Ordinance.
 206.     Whether partnership firm       In case it is for the business
          accepting unsecured loan       activities, it is allowed under the
          and surplus funds in the       Ordinance.
          business and giving as         In case it is forming the business of
          loan or advance is             taking deposits and further giving
          covered     under    the       loans itself then it is banned under
          Ordinance?                     the Ordinance, if not included in the
                                         list of Regulated Deposit Schemes.
 207.     If proprietary firm earns      In case it is for the business
          business profits as well as    activities, it is allowed under the
          earns interest income          Ordinance.
          from deposits taken from       In case it is forming the business of
          Mr. X at 10% p.a. and          taking deposits and further giving
          given to Y at 12% p.a.         loans itself then it is banned under
          Does this covered under        the Ordinance, if not included in the
          the definition of by way of    list of Regulated Deposit Schemes.
          business?
 208.     Whether a partnership Yes, there is no restriction.
          firm can take loan from
          any person for business
          purpose?
 209.     Whether debit balance of No.
          partnership capital is
          considered as deposit?
 210.     Whether        cooperative     Any scheme or an arrangement
          societies can accept           made or offered by a cooperative
          deposits from its members      society registered under the Co-
          and also giving loans to       operative Societies Act, 1912 (2 of
          its members will be            1912) or a society being a society

                                        76
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                            Answer
          covered    under       the registered or deemed to be
          Ordinance?                 registered under any law relating to
                                     co-operative societies for the time
                                     being in force in any State or Union
                                     territory is included in the list of
                                     Regulated Deposit Schemes under
                                     this Ordinance.
                                       The Ordinance also provides for
                                       amendment to the Reserve Bank of
                                       India Act, 1934, in Section 45-I, in
                                       clause (bb), by inserting after
                                       Explanation II, the following
                                       Explanation, namely:--
                                       The amounts accepted by a
                                       cooperative 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.
                                       The Ordinance also brings about
                                       amendment to Section 67 Multi-State
                                       Co-operative Societies Act, 2002 by
                                       clarifying that a multi-State co-
                                       operative society shall not be entitled
                                       to receive deposits from persons
                                       other than voting members.
211.      What is the applicability of Any scheme or an arrangement
          this Ordinance on Money regulated by any enactment relating
          Lending activities?          to money lending which is for the
                                       time being in force in any State or

                                     77
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                              Answer
                                         Union territory is included in the list
                                         of Regulated Deposit Schemes
                                         under this Ordinance.
 212.     Whether auction chit fund A prize chit or a money circulation
          are     unregulated    or scheme banned under the provisions
          regulated?                of the Prize Chits and Money
                                    Circulation Scheme (Banning) Act,
                                    1978 shall be deemed to be an
                                    Unregulated Deposit Scheme under
                                    this Ordinance.
                                         However, any scheme or an
                                         arrangement      commenced        or
                                         conducted as a chit business with
                                         the previous sanction of the State
                                         Government in accordance with the
                                         provisions of the Chit Funds Act,
                                         1982 (40 of 1982) and any scheme
                                         or an arrangement by a prize chit or
                                         money circulation scheme under
                                         Section 11 of the Prize Chits and
                                         Money      Circulation     Schemes
                                         (Banning) Act, 1978 (43 of 1978)
                                         have been included in the Regulated
                                         Deposit Schemes under this
                                         Ordinance.
 213.     What      will    be    the    This transaction is regulated by
          applicability     of    the    Companies Act 2013 Chapter V read
          Ordinance        on    ICD     with Companies (Acceptance of
          between        a     public    Deposit) Rules 2014.
          company from another
          company?
 214.     Can an individual take Yes.
          unsecured loans from
          persons other than banks
          for purchase of property?


                                        78
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                              Answer
215.      If any individual, who is       If he starts deposit taking business
          not involved in business,       later, he may have to intimate to the
          has taken loan from a           Authority under the provisions of the
          friend and later he starts a    Ordinance read with rules to be
          business, will be covered       framed.
          under the Ordinance?
216.      Whether any temporary In case it is for the business
          deposit on refundable activities, it is allowed under the
          basis covered under the Ordinance.
          Ordinance?              In case it is forming the business of
                                  taking deposits and further giving
                                  loans itself then it is banned under
                                  the Ordinance, if not included in the
                                  list of Regulated Deposit Schemes.
217.      Whether the retention No.
          money is covered by the
          Ordinance in case the
          same is not refunded or
          adjusted later by the
          parties?
218.      What will be the impact on      Advance received in connection with
          Real Estate Sector who          consideration of an immovable
          are taking advance from         property under an agreement or
          customers and providing         arrangement is excluded from the
          monthly assured returns?        purview of `deposit' under the
                                          Ordinance only on the condition that
                                          such advance is adjusted against
                                          such immovable property as
                                          specified in terms of the agreement
                                          or arrangement.
                                          However, if the amounts so received
                                          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.

                                         79
FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'


 Q. No.           Question                           Answer
                                      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.
 219.     Whether unsecured loan      In case it is for the business
          availed for business or     activities, it is allowed under the
          investment purpose is       Ordinance.
          covered     under   the     In case it is forming the business of
          Ordinance?                  taking deposits and further giving
                                      loans itself then it is banned under
                                      the Ordinance, if not included in the
                                      list of Regulated Deposit Schemes.
 220.     Whether a loan taken by Though it is a deposit, yet it may not
          an Individual from HUF for be URDS.
          a business is covered
          under the Ordinance?
 221.     Whether the security No.
          deposit taken by Housing
          Societies covered under
          the Ordinance?
 222.     Can a private limited       It being a company under
          company take a loan from    Companies Act, 2013, it is regulated
          a HUF? The director of      by Companies Act 2013 Chapter V
          the Company is the Karta    read with Companies (Acceptance of
          of HUF?                     Deposit) Rules 2014.
 223.     Whether firm or LLP can Yes.
          take unsecured loans for
          business purpose from

                                     80
         FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'

Q. No.            Question                           Answer
          persons who      are   not
          relatives?
224.      Whether any intimation is The same would be prescribed in
          to be given for deposits the rules.
          existing   before     the
          enforcement    of    this
          Ordinance?
225.      Is the loan taken by a No, This transaction is regulated by
          company              from Companies Act 2013 Chapter V read
          shareholder is banned?    with Companies (Acceptance of
                                    Deposit) Rules 2014.
226.      What happens to deposits      This transaction is regulated by
          which are already lying in    Companies Act 2013 Chapter V read
          the books of accounts of a    with Companies (Acceptance of
          company before the date       Deposit) Rules 2014.
          of passing the Ordinance?
          If it is banned deposit as
          per the Ordinance? What
          will happen to those
          deposits,     can    such
          deposits be refunded back
          to depositors?




                                       81

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