The West Bengal Assembly on Tuesday passed a Bill aimed at protecting depositors from money collection schemes and deposit taking companies.
Coming after the Saradha group scam, where thousands of depositors have allegedly been duped, the ‘West Bengal Protection of Interest of Depositors in Financial Establishments Bill, 2013’ was passed in a 2-day special session of the Legislative Assembly. The Congress staged a walkout after its amendments were disallowed. The principal Opposition, Left Front, however, did not oppose the Bill.
The Bill, moved by State Finance Minister Amit Mitra, seeks to take action against the mushrooming growth of financial establishments in the State that “intentionally” fail to return deposits on maturity and payment of interests. It includes deposit taking companies and multi-level marketing schemes.
Penal Action
In case a deposit-taking company fails to repay its promoters, partners, directors, managers and even employees shall be deemed to be involved in fraud and will face conviction, including life imprisonment or for a period of 10 years.
Similarly, defaulting companies will also be fined an amount of Rs 5 lakh or double the default amount, whichever is higher.
Legal Framework
The Bill seeks to bring deposit taking companies under the legal framework by ensuring that they inform the State Government about financial health, area of operations, financial documents including periodic accounts, and any other requirements under the provisions of SEBI or RBI.
The State Government will also, by a special order, “direct any financial establishment in its jurisdiction to furnish such statements, information or particulars relating to or connected with deposits received by such establishments,” the Bill said.
Attachment of assets
Failure to repay deposits, pay interest or provide assured benefits will entail attachment of properties acquired “either in the name of such financial establishment or in the name of any other person on behalf of such financial establishment.”
Further, the Government will have the power to attach any property believed to have been acquired with the money collected through these deposits. It will also attach “personal assets” of the promoter, partner, director, managing director and even employees and other people responsible for management of the financial establishment.
The Bill empowers the authorities to enter the premises and inspect all possible documents that include registers, book of records, information in electronic storage and other mediums. It also allows search, seizure and confiscation of property including freezing of properties.
Competent Authority
The State Government will have the power to set up a “competent authority” that includes appointment of “an officer of the State Government to be designated as Director of Economic Offices”.
The Government may also appoint other persons to assist the “competent authority”, it said.
The authority, with the help of others, will look into the assessment of assets and deposit liabilities that include the total amount of deposits to be returned and seek permission for making part payment of depositors’ dues.