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Home Economy and Finance Gujarat Samachar creates panic by spreading lies about Unregulated Deposit Schemes Ordinance

Gujarat Samachar creates panic by spreading lies about Unregulated Deposit Schemes Ordinance

Government has clarified that only schemes of unregulated deposits has been banned

Gujarat Samachar, widely read Gujarati daily, was caught lying about the new norms about Unregulated Deposits. The government had issued the ‘The Banning of Unregulated Deposit Schemes Ordinance, 2019’ last week. The ordinance was issued as the bill could not be passed in Rajya Sabha. It contains a clause which bans deposit takers from promoting, operating, issuing advertisements or accepting deposits in any unregulated deposit scheme.

In an article in Gujarati titled “Aniyantrit deposit leva upar pratibandh thi vepario-udyogo ni haalat kharab (following the restriction on unregulated deposits, traders face tough time)”, author Vivek Mehta claims that after February 21, traders and small businessmen are facing problems after a ban on taking the deposit from private investors. However, the owner or promoter or any relative of the partner could advance such loans to the businesses. Other than relatives, all private deposits are prohibited.

The article claims that when companies take an advance against the supply of goods and if such goods are not delivered, then such advance taken would be considered unregulated deposit and the same will be considered ultra vires the law. The report further states that a separate authority will be created to monitor those businesses which carry business by taking such deposits which will collect periodic information with respect to such deposits. The list will then be checked by the competent authority who will then decide whether the deposit is an authorised one or unregulated. Those found flouting the norms can face imprisonment from 1 to 7 years. Over and above this, the defaulter may be fined Rs 2 lakh to Rs 10 lakh.

However, the truth of the matter is, the law prohibits only schemes or arrangements of money deposit and loans and not the isolated cases of loans or deposits from friends or acquaintances. Any law or any section is never to be read and interpreted in isolation but harmoniously. A careful reading of the section reveals that the ordinance only bars “schemes or arrangements” of unregulated loans/deposits. Reference is drawn to section 2(17), section 3, Section 21, Section 33 to substantiate.

Section 2(17) of Banning of Unregulated Deposit Schemes Ordinance, 2019

Section 3 of Banning of Unregulated Deposit Schemes Ordinance, 2019

Section 21 of Banning of Unregulated Deposit Schemes Ordinance, 2019

Section 33 of Banning of Unregulated Deposit Schemes Ordinance, 2019

The Ordinance makes it clear it is applicable only to schemes of deposits, an isolated transaction of the advance turned into deposit due to non-delivery of goods without any scheme or arrangement can’t attract the Ordinance.

Reacting to misinformation being spread about the ordinance, today the government clarified that it has brought to control the menace of Ponzi schemes. The department of financial services clarified on Twitter that Individual, Firm, Companies & LLP etc are exempt from the ordinance for taking loans for their businesses.

The ordinance states that if a business takes an advance against supply of goods, and such supplies are not made hence the amount becomes refundable, it will be considered as deposits if the amount is not returned fifteen days after it becomes due to be refunded. The ordinance does not say such deposits are prohibited, but only says that advances against delivery of goods will be considered as deposits if such delivery is not made.

The government also clarified that Chit fund is regulated by Chit Fund Act, 1982 and it is treated as Regulated Deposit as per Schedule 1 of Banning of Unregulated Deposit Ordinance, 2019. Which means, Chit funds are not banned, but they are treated as regulated deposits.

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Staff reporter at OpIndia

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