GOVERNMENT BANNING UNORGANISED DEPOSIT SCHEMES ....WILL HAVE IMPACT HEAVILY TO SMALL AND MEDIUM BUSINESS ORGANISATIONS WHICH GENERALLY RUNS THEIR BUSINESS ON LOANS AND ADVANCES FROM NON RELATED PARTIES.....

With Aim to Banning of Unregulated Deposit Scheme

Ordinance on 21/09/2019.

Salient Features:

With aim to save crores of hard earned money which people lose in day in and day out Unorganized Deposit schemes on various new names and concepts, which seems very attractive initially but finally it converts into a fraudulent transaction with innocent people. It’s a very welcome step further by our ownerable Government to put check on such a type of transactions and to add good governance in such a type of financial transactions but at the same time, it will also affect to small and medium size business organizations which runs their business by taking loan funds and advances from Friends and other related firms on basis of references and merits, in addition to fund taken from Relatives and related firms.

More clarifications will be required soon from the Government Side and guidelines for existing loans and advances already taken and already in books.

Summary of the Provisions are discussed as below for the information.

(1) It extends to the whole of India except J & K. It shall be regulated by the concerningStateGovernments/UTs.

(2) It shall come into force with the immediate effect.

(3) It is aimed only to ban Unregulated Deposit Schemes..

DEPOSIT MEANS:

An amount of money received by way of an advance or loan or in any other form, by any deposit taker Means

An Individual

Group of individuals

Proprietorship concern

Partnership firm

A limited liability partnership (LLP) company

An Association of Persons (AOP)

Trust (private or public),

Co-Operative society or any other arrangement).

"Deposit" means an amount of money received by way of an advance or loan or in any other form, by any deposit taker with a promise to return whether after a specified period or otherwise, either in cash or in kind or in the form of a specified service, with or without any benefit in the form of interest, bonus, profit or in any other form, but does not include-

(a) Amounts received as loan from a scheduled bank or a co-operative bank or any other banking company as defined in section 5 of the Banking Regulation Act, 1949;

       

(b) amounts received as loan or financial assistance from the Public Financial Institutions notified by the Central Government in consultation with the Reserve Bank of India or any non-banking financial company as defined in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 and is registered with the Reserve Bank of India or any Regional Financial Institutions or insurance companies;

(c) amounts received from the appropriate Government, or any amount received from any other source whose repayment is guaranteed by the appropriate Government, or any amount received from a statutory authority constituted under an Act of Parliament or a State Legislature;

(d) amounts received from foreign Governments,  foreign  or   international   banks, m ultilateral financial institutions, foreign Government owned development financial institutions, foreign export credit collaborators, foreign bodies corporate, foreign citizens, foreign authorities or person resident outside India subject to the provisions of the Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder;

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

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

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

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

(i) Any deposit made under section 34 or an amount accepted by a political party under section 29B of the Representation of People Act, 1951;    

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

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

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

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

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

(iii) Security or dealership deposited for the performance of the contract for supply of goods or provision of services; or

(iv) An advance under the long-term projects for supply of capital goods except those specified in item (ii):

Provided that if the amounts received under items (i) to (iv) become refundable, such amounts shall be deemed to be deposits on the expiry of fifteen days from the date on which they become due for refund:

Provided further that where the  said amounts become refundable, due to the deposit taker  not  obtaining  necessary   permission   or  approval under the law for the time being in force, wherever required, to deal in the goods or properties or services for which money is taken, such amounts shall be deemed to be deposits.

Does not include

a corporation incorporated under an act of the Parliament or a state legislature, a banking company, State Bank of India (SBI), Regional Rural Banks (RRBs), a co-operative bank or a multi-state co-operative bank as defined in the Banking Regulations Act, 1949.

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.

Disclaimer – Please note that the above articles is based on the interpretation of related laws and judicial pronouncement which may differ from person to person. The reader are expected to take the expert opinion on the matter.