Loan from unrelated persons for Business purpose under Unregulated Deposit Ordinance needs clarification: CA Naresh Jakhotia
VIA Taxation & Corporate Laws Forum organized a session on “Unregulated Deposit Ordinance & it’s Impact” today, at VIA Auditorium, Nagpur.
CA Naresh Jakhotia, explained thoroughly that why this ordinance was brought sighting examples from past like Sahara, BC / Kitty Parties; Gold Scheme; Plantations, Pig & Goat Farming etc. He added that this Ordinance will applicable to deposits which are not regulated under any other prevailing laws in force, such as SEBI, IRDA, etc.
Jakhotia further added that as per this Ordinance unregulated deposits scheme shall be banned and the Unregulated Deposits takers will be monitored by competent authority and where required actions will be taken by Designated court. He expressed his concerns that even a single rupee is violation and no threshold limit is given in the ordinance and there are only two roads under which either a deposit is unregulated or regulated, there are no permission or other options available.
This Ordinance will definitely will protect the interest of the depositors but the genuine business transactions may also be adversely affected due to open ended scheme of ‘unregulated deposit scheme’ in the ordinance. He suggested that some alternate option like periodical filing of information/returns could have served the purpose of regulations as well as genuine business needs. This ordinance will adversely affect the new startups willing to develop & implement new creative ideas and innovative concepts where the funding for startups is normally from unrelated parties.
Shri Ashok Chandak in his opening remarks said that similar provision exists under RBI Act, however it was never implemented, thus to have better governing of the unregulated deposit Government has brought this Ordinance. However there are few areas where clarifications are needed from the Government.
He stated recently Government of India has notified ‘The Banning of Unregulated Deposit Schemes Ordinance, 2019’, which intended to protect gullible investors from dubious outfits selling ponzi and pyramid schemes. He further clarify that there are lots of confusions and ambiguities about whom this Ordinance is applicable who are exempted and many more.
He spelt out the background of present regulations were cases likes Anna Scheme as everyone knows,; Shares, which gets handsome return scheme; Pig, Goat or Dairy Farming; Sahara, Share & Land scam, Real Estate Scheme by offering handsome returns; MLM; Franchisee Fee / Security Deposits.
He also explained about why we need this ordinance and why not let the borrower and lender have freedom?
There are regulators for shares transactions, mutual funds, insurance, etc. However, these non regulated deposits where growing day by day and investors were losing their hard earned money though this. He said stringent action, which including prosecution and fine for contravention of this ordinance. He further explained in detail what deposit means as per this ordinance “deposit” means an amount of money received by way of an advance or loan or in any other form, by any deposit taker with a promise to return whether after a specified period or otherwise, either in cash or in kind or in the form of a specified service, with or without any benefit in the form of interest, bonus, profit or in any other form.” He said which deposits are not banned by this ordinance are by firm from partner; advance against sale of inventory; individual or firm receiving from the relatives.
He analyzed the impact of the ordinance with a observation as to whether fraud like Sharada, Gold scheme, fraudulent land & shares scheme, can be prevented from this oridnance? First right of the depositor even before Taxes will provide relief to the taxpayers.
Relatives cannot be taken the shelter of this ordinance and Grandfather / Grandmother are not relatives for this ordinance.
Present were CA Anil Parakh VP-VIA, Girish Deodhar, Omprakash bagdiaji, CS Amit Rajkotiya, CA Mahendra Jain, CA Ravindra Lashkare, CS Tushar Pahade, Vaibhav Agrawal, M.G. Jawanjal, Ca Yash Verma, CA Sachin Agrawal, CA Monika Rathi & others.
Earlier, CS Amit Rajkotia welcomed Naresh Jakhotia with floral bouquet. Sachin Jajodia, Convener of VIA Taxation & Corporate Law Forum conducted the proceedings and formally proposed a vote of thanks.