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
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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
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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
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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.
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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
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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
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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)
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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,
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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
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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
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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'
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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
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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
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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,
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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
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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
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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
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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
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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,
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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
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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
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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?
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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
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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.
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· 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
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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
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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
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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.
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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.
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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.
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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
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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
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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
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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
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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
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FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'
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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?
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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
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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
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FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'
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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.
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FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'
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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?
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FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'
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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
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FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'
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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
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FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'
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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:
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FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'
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(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
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FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'
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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
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(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.
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FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'
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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
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FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'
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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
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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
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FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'
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(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,
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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
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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
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FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'
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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?
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FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'
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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.
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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
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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
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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
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FAQs on `The Banning of Unregulated Deposit Schemes Ordinance, 2019'
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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,
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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.
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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
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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
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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.
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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
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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?
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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
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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
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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
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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
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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
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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
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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
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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?
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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.
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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
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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?
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