The Jharkhand Protection of Interest of Depositors (in Financial Establishments) Act, 2011

(1) This Act may be called the Jharkhand Protection of Interest of Depositors (in Financial Establishments) Act, 2011. (2) It shall extend to the whole of Jharkhand State. (3) It shall come into force from the date of its publication in the official Gazette by way of notification.

Unless the context otherwise requires, in this Act - (1) "Competent Authority" means the Competent Authority appointed under Section 5. (2) "Designated Court" means the Designated Court notified under Section 7. (3) "Deposit" includes and shall be deemed to have always included any receipt of money or acceptance of any valuable commodity by a Financial Establishment to be returned after a specified period or otherwise, either in cash or in kind or in the form of a specified service with or without any benefit in the form of interest, bonus, profit or in any other form, but does not include the following - (i) amount raised by way of share capital or by way of debenture, bond or any other instrument covered by the guidelines issued and regulations made by the SEBI established under the Securities and Exchange Board of India Act, 1992 (15 of 1992); (ii) amount contributed as capital by the partners of a firm; (iii) amount received from a scheduled bank or a co-operative bank or any other banking company as defined in clause (c) of Section 5 of the Banking Regulation Act, 1949 (10 of 1949); (iv) any amount received from: (a) Industrial Development Bank of India, (b) State Financial Corporation, (c) any financial institution specified in or under Section 6A of the Industrial Development Bank of India Act, 1964; (v) amount received in the ordinary course of business by way of: (a) security deposit, (b) dealership deposit, (c) earnest money, (d) advance against order for goods or services; (vi) any amount received from a person or firm or association of persons, not being a corporate body, registered under any act related to money lending for the time being in force in the State; and (vii) any amount received as subscription in respect of a chit. Explanation I - "Chit" has the same meaning as defined in clause (6) of Section 2 of the Chit Funds Act, 1982. Explanation II - Any credit given by a seller to a buyer on the sale of any property (whether movable or immovable) shall not be deemed to be a deposit for the purposes of this clause. (4) "Financial Establishment" means any person/association of persons in any form or manner of operation, firm or company, which accepts any deposit under any scheme or arrangement or in any other manner, but does not include a corporation/co-operative society owned or controlled by the State Government, Central Government or banking company as defined under clause (c) of Section 5 of the Banking Regulation Act, 1949. (5) "Government" means Government of Jharkhand. (6) "Prescribed" means prescribed under this Act.

When a Financial Establishment defaults in return of any deposit on maturity, along with interest, bonus, profit or in any other form as promised, or fails to provide service against the deposit, every person responsible for the management or operation of the business of such Financial Establishment, including promoter, partner, director, manager or any other person or employee, shall, on conviction, be punished with imprisonment for a term which may extend to 10 years and with fine which may extend to Rs. 1,00,000, or where such default is related to the determined amount of money, with a fine of double the amount of default, whichever is higher: Provided that in the absence of special and sufficient reasons to be recorded in the judgement of the court, the imprisonment shall not be less than 3 years and the fine shall not be less than Rs. 50,000. Explanation I - For the purposes of this section, any Financial Establishment which defaults in making repayment as promised, or commits a fraudulent default or fails to provide any service against the deposit for wrongful gain to one person and wrongful loss to another, or due to impractical or commercially unviable promises made at the time of accepting the deposit, or due to default arising from inherent risks of recovery in deployment of funds or assets derived from such deposits, shall be deemed to have committed a fraudulent default or failure. Explanation II - When the question arises whether a Financial Establishment has committed a fraudulent default under this section, the court shall presume that such Financial Establishment has committed a fraudulent default.

(1) Notwithstanding anything contained in any other law for the time being in force: (i) On complaint from depositors or otherwise, if the Government is satisfied that a Financial Establishment has failed to: (a) return deposit after maturity; or (b) provide interest or other promised benefit; or (c) provide promised service against such deposit. (ii) Where the Government has reason to believe that a Financial Establishment is acting in a calculated manner detrimental to the interest of depositors, and if the Government is satisfied that such Financial Establishment is not likely to return the deposit or pay interest or benefit or provide services for which the deposit was received, then to protect the interest of depositors, after recording reasons, by notification in the Gazette, the Government may order the attachment of money or other property which the Government has reason to believe was acquired by the Financial Establishment, either in its own name or in the name of any other person, from deposits collected. If it appears that the money or property is not available for attachment or is insufficient for repayment, the Government may attach such other property of the Financial Establishment or the promoter, director, partner or manager or members of said Financial Establishment as the Government deems appropriate, by issuing an order published in the Gazette. (2) On publication of the order under sub-section (1), the entire property and assets of the Financial Establishment and persons mentioned therein shall immediately vest in the Competent Authority appointed by the Government until further orders of the Designated Court. (3) Unless specifically provided otherwise in any other law, the attachment shall be made in the manner as prescribed for the attachment of property in execution of decree under Order 21, Rules 43, 43A, 46, 47, 49, 50, 51 and 54 of the Code of Civil Procedure, 1908.

(1) At the time of issuing an order under sub-section (1) of Section 4, the Government may appoint any of its officers, not below the rank of Deputy Collector, as Competent Authority to control the money and property of the Financial Establishment attached under Section 4. (2) On receipt of the order of appointment, the Competent Authority shall immediately take all necessary steps to take physical possession of all money and assets of the concerned Financial Establishment, and the Competent Authority shall have all such powers as are necessary for the said purpose. (3) The Competent Authority shall, within 30 days of the publication of the said order, apply to the Designated Court for making the order absolute, stating the grounds on which the Government issued the order under Section 4, the details of the money or property believed to be acquired from the deposits, the details of persons, if any, in whose names such property is believed to be held, or details of any other property attached under Section 4, along with one or more affidavits. (4) The Competent Authority may also apply to any Designated Court or other judicial forum/authority constituted under similar legislation in another jurisdiction to make the provisions of this Act effective in respect of money or property of a notified Financial Establishment or person situated within that jurisdiction. (5) Without prejudice to the generality of the powers under sub-section (1), the Competent Authority shall be entitled to: (i) seek assistance from any police or other authority/person, and it shall be their duty to provide such assistance; (ii) open a bank account in a scheduled commercial bank to handle money received in the capacity of Competent Authority and deposit all recovered money and operate the bank account; (iii) require any person believed to have possession or control over the money or assets of the Financial Establishment to provide necessary information or hand over possession of such property, and such person shall comply without waste of time; (iv) appoint legal professionals or chartered accountants or any other person whose services are necessary for taking possession or recovery of assets; (v) sell, receive, transfer, endorse, negotiate or otherwise deal with any sale security or negotiable instrument under the control of the Financial Establishment; (vi) sell, transfer or otherwise recover any movable or immovable property of the Financial Establishment by public auction or, with the prior approval of the Designated Court, by private arrangement; (vii) make payments from the bank account as per the orders passed by the Designated Court; (viii) perform all acts and duties necessary for the prompt recovery of the property of the Financial Establishment. Provided that movable properties shall not be sold or transferred before the attachment order by the Government is made absolute by the Designated Court or a revised attachment order is issued under Section 8. (6) The Competent Authority shall apply to the Designated Court from time to time for permission to pay the depositors from the recovered money. While making such application, the Competent Authority shall determine the liabilities of the depositors and other liabilities. In case the recovered money is insufficient, the Competent Authority shall request the Designated Court for permission to make partial payment to the depositors and other creditors and shall distribute the money according to the orders of the Designated Court. Explanation - For the purposes of this section, "Financial Establishment" includes directors, promoters, managers or members of the said establishment or any other person whose property or assets have been attached under Section 3.

(1) The Competent Authority shall, within 30 days from the date of his appointment, determine the assets and deposit liability of the Financial Establishment and send its details to the Designated Court. (2) The Competent Authority shall subsequently issue a notice to secured creditors, if any, and also to the depositors of the Financial Establishment to present their claims along with proper supporting evidence through personal or effective public media. (3) Each notice sent to a claimant under sub-section (2) shall state that if the details of the claim are not sent to the Competent Authority before the expiry of the period of one month from the date of the notice, the claimant shall not be considered as a rightful claimant for payment under the provisions of this Act. (4) Each notice sent to a secured creditor shall require them to value the security before the expiry of the period of one month from the date of the notice, and the notice shall also state that if the details of the claim along with the valuation of the security are not sent to the Competent Authority, the Competent Authority himself shall value the security and his valuation shall be binding on such secured creditor. (5) If the claimant fails to comply with the notice, the valuation of such security shall be done by the Competent Authority according to his best judgment as per sub-section (4).

(1) For the purposes of this Act, the State Government, with the concurrence of the Honourable Chief Justice of the Jharkhand High Court, Ranchi, may, by notification in the Gazette, declare the Court of Assistant Sessions Judge-cum-Civil Judge (Senior Division) as the Designated Court for this work. (2) No court other than the Designated Court, including courts constituted under the Presidency Towns Insolvency Act, 1909 and the Provincial Insolvency Act, 1920, shall have jurisdiction in respect of any matter to which the provisions of this Act apply. (3) Any case pending in any other court to which the provisions of this Act apply, shall stand transferred to the Designated Court from the date of publication of this Act.

(1) Upon receiving an application under Section 5, the Designated Court shall issue a notice to the Financial Establishment or any other person whose property has been attached by the Government under Section 4, along with a copy of the application and affidavit and evidence, if any, to show cause on a specified date as to why the attachment order should not be made absolute. (2) The Designated Court shall also issue such notice to all persons who have interest or claim over the property of the Financial Establishment or persons mentioned in sub-section (1), to appear on the date specified in the notice, and to object to the attachment if they wish, on the ground that they have an interest in the property or any part thereof. (3) Any person claiming an interest in the attached property or any part thereof, notwithstanding the fact that no notice was served upon them under this section, may file an objection in the Designated Court at any time before any order is passed under sub-section (4) or sub-section (6). (4) If no cause is shown or no objection is raised under sub-section (3), the Designated Court shall immediately pass an order making the attachment of the property absolute and issue directions, as necessary, for the recovery of assets and equitable distribution of the money recovered from the attached property among the depositors. (5) If cause is shown or objection is raised, the Designated Court shall begin proceedings for investigation. While doing so, the Designated Court shall follow the summary procedure as contemplated in Order 37 of the Code of Civil Procedure, 1908 in relation to the examination of parties and in all other matters, and shall exercise all the powers of the court in hearing a suit under the said Code, and the person raising the objection shall be required to produce evidence to show that they had an interest in the property attached on the date of attachment. (6) After the investigation under sub-section (5), the Designated Court shall pass an order making the attachment order under sub-section (1) of Section 4 absolute, or modifying it by releasing a part of the property from attachment, or cancelling the attachment order: Provided that the Designated Court shall not release from attachment any interest until it is satisfied that the Financial Establishment or person referred to in sub-section (1) has an interest in that property, and until it is satisfied that the value of the remaining amount or property under attachment is not less than the value required for repayment to the depositors of the Financial Establishment. (7) Where the application has been made by a person who has been duly appointed or specified by any other State Government under a similar act, the Designated Court shall exercise all its powers as if the application had been made under this Act and shall pass appropriate orders or instructions.

(1) The Designated Court shall have all the powers to make the provisions of this Act effective. (2) Without prejudice to the generality of sub-section (1), the Designated Court may: (i) give any direction it deems fit to the Competent Authority for effective implementation of the provisions of this Act; (ii) approve the liability statement of the Financial Establishment from different creditors, determine the value of the assets of the Financial Establishment, and finalize the list of depositors and their dues; (iii) direct the Competent Authority to take into possession any assets of the Financial Establishment or under its control, and direct the sale, transfer or recovery of the attached assets, either by public auction or private sale as it deems fit, and deposit the sale proceeds in a bank account; (iv) approve the necessary expenditure to be incurred by the Competent Authority for taking possession of or recovery of the assets of the Financial Establishment; (v) order payments to the depositors by the Competent Authority, or in case the money thus recovered is insufficient to meet the entire deposit liabilities, order proportional payment to the depositors; and (vi) pass any order it deems proper on any matter or dispute related to the recovery of the assets of the company, or payment to the depositors of the Financial Establishment, or any matter incidental thereto. Explanation - For the purposes of this section, the expression "Financial Establishment" includes the director, promoter, manager or member of the said establishment or any other person whose assets or property have been attached under Section 3.

(1) Where the assets of a Financial Establishment or person referred to in Section 4 are found to be less than the amount required for repayment to the depositors, and where the Designated Court, through affidavit or otherwise, is satisfied that there is reasonable ground to believe that the said Financial Establishment has transferred any property (whether after or before the commencement of this Act) otherwise than in good faith and for adequate consideration, the Designated Court may, by notice, require the transferee of such property (whether they received the property directly from the Financial Establishment or not) to appear on the date specified in the notice and show cause why the property of the transferee, to the extent of the fair market value of the transferred property, should not be attached. (2) Where the said transferee does not appear on the specified date and show cause, or where, after investigation in the manner provided in sub-section (5) of Section 8, the Designated Court is satisfied that the transfer of the property to the said transferee was not in good faith and for adequate consideration, the Designated Court shall pass an order for the attachment of as much of the property of the said transferee as in the opinion of the Designated Court is equivalent to the fair market value of the transferred property.

Any Financial Establishment or person whose property has been attached or is proposed to be attached under this Act, may at any time apply for permission to provide security in lieu of such attachment before the Designated Court, and where the security offered and provided is, in the opinion of the Designated Court, satisfactory and sufficient, it may, as the case may be, cancel the attachment order or refrain from passing one.

The Designated Court may, on the application of any person interested in any property attached and vested in the Competent Authority, give an opportunity of hearing to the concerned person and may pass such order as it considers just and reasonable for: (1) Providing for the maintenance of the applicant and their family and, where criminal proceedings have been instituted against the applicant under Section 3 in the Designated Court, for the expenses related to their own defence, which is reasonably necessary, from the amount in which the applicant claims interest in the property attached and vested in the Competent Authority. (2) As far as is practicable, to protect the interests of any business affected by the attachment, especially the interests of the partner of such business.

(1) An appeal against the final order passed by the Designated Court regarding and in connection with the attachment may be filed before the Jharkhand High Court within 60 days of the passing of the final order. (2) A person convicted in a trial by the Designated Court may appeal to the Jharkhand High Court.

For the purpose of conducting cases in the Designated Court, the Government may, by order, appoint one or more advocates who have not less than 7 years of experience as Special Public Prosecutor/Special Government Advocate, after consulting the District and Sessions Judge of the concerned district.

(1) The Designated Court may take cognizance of the offence without the accused being committed to it for trial, upon perusing the police report on the facts constituting an offence under this Act or upon a complaint made by an authority authorised by the State Government. (2) While trying an accused person, the Designated Court shall follow the procedure prescribed in the Code of Criminal Procedure, 1973 for the trial of warrant cases. (3) The Designated Court shall exercise the power of remand as provided under Section 167 and 309 of the Code of Criminal Procedure, 1973 in respect of the person sent to it. (4) While considering an offence under this Act, the Designated Court may also try any other offence other than the offence under this Act, for which the accused has been charged in the same trial under the Code of Criminal Procedure, 1973. (5) (i) The offence punishable under this Act shall be cognizable and non-bailable. (ii) Provisions regarding bail under Chapter XXXIII of the Code of Criminal Procedure, 1973 shall, subject to the provisions contained in this Act, be applicable, excluding the provision for granting anticipatory bail under Section 438 of the Code of Criminal Procedure.

Save as otherwise provided in this Act, the provisions of this Act shall have an overriding effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any custom or usage.

No suit or other proceeding shall be instituted against the Government or the Competent Authority or any officer or employee of the Government for any act done or intended to be done in good faith under this Act.

(1) The State Government may, by notification in the Gazette, make rules for carrying out the purpose of this Act. (2) Every rule made under this Act shall, as soon as may be after it is made, be laid before the State Legislature for a period of 30 days which may be comprised in one session or in two successive sessions, and if before the expiry of the session in which it is so laid or the successive session, the State Legislature agrees for any modification in the rules or agrees that the rules should not be made, and its decision is notified in the Gazette, the rules shall thereafter have effect only in such modified form or be of no effect, as the case may be; provided that any such modification shall be without prejudice to the legal validity of anything previously done or deleted under these rules.

If any difficulty arises in giving effect to the provisions of this Act, the Government may, as soon as the difficulty arises, by order, do anything which is not inconsistent with the provisions of this Act and which appears to be necessary for the purpose of removing the difficulty.