No. LL(B). 85/2001/36- The Meghalaya Protection of Interest of Depositors (In Financial
Establishments) Act, 2006 (Act No. 6 of 2006) is hereby published for general information.
MEGHALAYA ACT NO. 6 OF 2006
(As passed by the Meghalaya Legislative Assembly)
Received the assent of the Governor on the 26th April, 2006
Published in the Gazette of Meghalaya Extra-ordinary, issued dated 2nd May, 2006
THE MEGHALAYA PROTECTION OF INTEREST OF DEPOSITORS (IN
FINANCIAL ESTABLISHMENTS) ACT, 2006
An
Act
To protect the depositors made by the public in the Financial Establishments and
matters relating thereto.
Be it enacted by the Legislature of the State of Meghalaya in the Fifty Seventh Year
of the Republic of India as follows:-
Short title, extent 1 (1) This Act may be called the Meghalaya Protection of Interest of
and Depositors (In Financial Establishments) Act, 2006.
Commencement
(2) It extends to the whole of Meghalaya.
(3) It shall come into force at once.
Definitions 2 In this Act unless the context otherwise requires,
(a) “Act” means the Meghalaya Protection of Interest of
Depositors (In Financial Establishments) Act, 2006.
(b) “Competent Authority” means the authority appointed under
Section 4;
(c) “Deposit” includes and be deemed always to have included
any receipt of money or acceptance any valuable commodity
by any 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 any other form, but does not include:-
i) Amount raised by way of share capital or by way of
debenture or by bond or by any other instrument
covered under the guidelines given, and regulations
made by Securities Exchange Board of India established
under the Securities and exchange Board of India Act,
1992 (15 of 1992);
ii) Amount contributed as capital by partners of a Firm;
iii) Amount received from a Schedules 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 from:-
(a) The Industrial Development Bank of India;
(b) A State Financial Corporation;
(c) Any Financial Institution specified in Section 4A of
the Companies Act, 1956 (1 of 1956);
(d) Any other institution that may be specified by the
Government in this behalf;
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 of services;
vi) Any amount received from an individual or a firm or an
association of individual not being a body corporate,
registered under any enactment relating to money
lending which is for the time being in force in the state;
and
vii) Any amount received by way of subscriptions in respect
of a chit;
Explanation I: “Chit” has the meaning as assigned to it
in clause (b) of section 2 of the Chit Funds Acts, 1982
(10 of 1982)
Explanation II: Any credit given by a seller to buyer on
the sale of any property (whether movable or
immovable) shall not be deemed to be deposited for the
purposes of this clause;
(d)” Financial Establishment” means an individual or an
association of individuals or a firm carrying on the
business of receiving deposits under any scheme of
arrangement.
Or, in any other manner but does not include a corporation
or a cooperative society owned or controlled by any State
Government or the Central Government or a banking
company as defined under Clause (c) of Section 5 of the
Banking Regulation Act, 1949 (Act No. 10 of 1949);
(e)”Section” means a section of this Act;
(f)”Special Court” means s Special Court constituted
under Section 8; and
(g)”State Government” means the Government of
Meghalaya;
Attachment of 3 (1) The Government or the District Magistrate in their respective
properties on jurisdiction may suo motu or on receipt of complaints, cause
default of return of investigation of the complaint or fraudulent transaction
deposits referred to in section 5, through the Superintendent of Police.
The District Magistrate shall forward his report together with
the complaint to the Government within a maximum period of
thirty days.
(2) Notwithstanding anything contained in any other law for the
time being in force:-
i) Whereupon complaints received from the depositors or
otherwise the State Government is satisfied that any
Financial Establishment has failed:
(a) To return the deposit after maturity or on demand
by the depositor, or
(b) To pay interest or other assured benefit; or
(c) To provide the service promised against such
deposit, or
ii) Where the State Government have reason to believe
that any Financial Establishment is acting in a
calculated manner detrimental to the interests to the
depositors, with an intention to defraud them or if the
State Government is satisfied that such Financial
Establishment is not likely to return the deposits, or
make payment of interest or other benefits assured or to
provide the services against which the deposit is
received.
iii) The State Government may, in order to protect the
interest of the depositors of such Financial
Establishment, after recording reasons in writing issue
an order attaching the money or other property believe
to have been acquired by such Financial Establishment
either in its own name or in the same of any other
person from and out of the deposits collected by such
Financial Establishment, or if it transpires that such
money or other property is not available for attachment
or not sufficient for repayment of the deposits, such
other property of the said Financial Establishment or
the personal assets of the promoters, partners, directors,
managers or members of any other person of the said
Financial Establishment, as the State Government may
think fit.
(3) On the publication of the order under sub-section (2) all the
properties and assets of the Financial Establishment and the
persons mentioned therein shall forthwith vest in the
Competent Authority appointed by the Government pending
further order from the Special Court.
Appointment and 4 (1) The State Government may by notification, appoint
powers of Competent Authority to exercise control over the properties
Competent attached by the State Government under Section 3.
Authority
(2) The Competent Authority shall have other powers as may
be necessary for carrying out the purposes of this Act.
(3) On receipt of the order of the State Government under
Section 3, the Competent Authority shall take such action
as it deems necessary or expedient for taking physical
possession of all the monies, properties and assets of the
concerned Financial Establishment expeditiously and the
Competent Authority shall have all the powers which are
necessary for the aforesaid purpose.
(4) Without prejudice to the generality of the powers vested
under sub-section (3), the Competent Authority shall be
entitled to-
(a) Requires assistance of any police authority or any
other authority or person and on such requisition, it
shall be the duty of the police authority or such other
authority or person to extend necessary assistance.
(b) Open bank accounts in any scheduled commercial
bank and credit all monies realized and operate the
bank accounts while dealing with the money received
in the capacity as Competent Authority;
(c) Require any person believed to be in possession or
control over any information, money, properties or
assets of the Financial Establishment, to furnish
necessary information, to hand over possession of
such properties or assets to the Competent Authority
and such person shall comply with the requisition
without any loss of time.
(d) Appoint legal practitioner of chartered accountant or
any other person whose services are necessary for
taking possession and for realization of the assets of
the Financial Establishment.
(e) Sell, receive, transfer, endorse, negotiate, or otherwise
deal with any marketable security or negotiable
instrument belonging to or n the control of the
Financial Establishment and given proper discharge
for the same;
(f) Sell, transfer or otherwise realize any movable or
immovable property belonging to or in the control of
the Financial Establishment either by public auction or
with the prior approval of the Special Court by private
arrangements;
Provided that the perishable items of such
property shall be sold by public auction as soon as the
Competent Authority deems fit;
(g) Make payment as per the orders passed by the Special
Court from and out of the bank accounts; and
(h) Do all and every acts and deeds, which would be
necessary for the speedy realization of the assets of the
Financial Establishment.
(5) Upon receipt of the order of the State Government under
Section 3, the Competent Authority shall apply within
fifteen days to the Special Court constituted under this Act
for making the add-interim order of attachment absolute.
(6) An application under sub-section (5) shall be accompanied
by one or more affidavits, stating the grounds on which
the belief that the Financial Establishment has committed
any default or is likely to default the amount of money or
value of other property believed to have been procured by
means of the deposit, and the details, if any, of persons in
whose name such property is believed to have been
invested or purchased out of the deposits or any other
property attached under Section 3.
(7) The Competent Authority may make an application to any
Special Court or Designated Court or any other Judicial
Forum established or constituted or entrusted with the
powers of any other State Government under any similar
enactment for adjudicating any issue or subject matter
pertaining to money or property or assets belonging to a
Financial Establishment or any person notified under this
Act situated within the territorial jurisdiction of that
Special Court or any Judicial Forum as the case may be
for passing orders to give effect to the provisions of this
Act.
Explanation: for the purpose of this section, the
expression “Financial Establishment” includes the
directors, promoters, managers or members of the said
establishment or any other person whose personal assets
have been attached under Section 3.
Assessment of 5 (1) Within thirty days from the date of appointment, the
assets and deposit Competent Authority shall assess the deposit liabilities and
liabilities. the assets of the Financial Establishment and submits the
statement thereof to the Special Court.
(2) The Competent Authority thereafter shall issue notice within
ten days either individually or by means of effective media
publication, inviting the claims by secured creditors, if any,
and also the depositors of the Financial Establishment to
submit their claims with proper proof to establish the same.
(3) Every notice under sub-section (2) sent to or deemed to have
been effected to claimants shall state that if the statement of
claim is not sent to the Competent Authority before the expiry
of the period of one month from the date of notice, the claims
shall not be treated as claims entitled to be paid under the
provisions of this Act.
(4) Every notice sent to a secured creditor shall require him to
value the security before the expiry of the period of one
month from the date of the notice and such notice shall also
state that if the statement of the claim together with the
valuation of the security is not sent to the Competent
Authority, the Competent Authority himself shall value the
security and the valuation shall be binding on such secured
creditor.
(5) If the claimed fails to comply with the notice issued under
sub-section (4), such security shall be valued by the
Competent Authority in his best judgement.
Report by the 6 After making a report under Section 5, the Competent Authority
Competent shall make an application to the Special Court seeking permission
Authority. to make payment to the depositors from out of the money
realized. While making such application, the Competent
Authority shall assess the liability to the depositors and the other
liabilities and in case the money realized or realizable is not
sufficient to meet the entire liability make a submission to the
Special Court seeking permission for making payment to the
depositors and disburse the money as per the orders of the Special
Court.
Punishment for 7 Notwithstanding anything contained in Sections 3 and 4 where
default in any Financial Establishment defaults the return of the deposit or
repayment of defaults the payment of interest on the deposit, every person
deposits and responsible for the management of the affairs of the Financial
interest Establishment shall be punished with imprisonment for a term
which may extend to ten years and with fine which may extend to
one lakh of rupees and such Financial Establishment is also liable
for fine which may extend to one lakh of rupees.
Constitution, 8 (1) For the purpose of this Act, the State Government may,
Jurisdiction and with the concurrence of the Chief Justice of the Guwahati
function of Special High Court, by notification in the Official Gazette,
Court constitute a Special Court in the cadre of a District and
Session Judge.
(2) No Court other than the Special Court shall have
jurisdiction in respect of any matter to which the provision
of this Act apply.
(3) Any pending case in any other Court to which the
provisions of this Act apply shall stand transferred to the
Special Court.
(4) The Special Court shall on an application by the
Competent Authority pass such order or issue direction as
may be necessary for the equitable distribution among the
depositors of the money realized from out of the property
attached.
Powers of the 9 (1) The Special Court shall have all the powers for giving effect
Special Court to the provisions of this Act.
regarding
realization of assets (2) Without prejudice to the generality of sub-section (1), the
and payment to Special Court may:-
depositors.
(a) Give any, direction to the Competent Authority, as it
deems fit, for effective implementation of the provisions
of this Act;
(b) Approve the statement of due of the Financial
Establishment due from various debtors, assessment of the
value of the assets of the Financial Establishment, finalise
the list of the depositors and their respective dues;
(c) Direct the Competent Authority to take possession of any
assets belonging to or in the control of the Financial
Establishment and sell, transfer or realize the attached
assets either by public auction or by private sale as he
deems fit depending upon the nature of assets and credit
the sale proceeds thereof to the bank accounts.
(d) Approve the necessary to be incurred by the Competent
Authority for taking possession and realization of the
assets of the Financial Establishment;
(e) Order for payment to the depositors by the Competent
Authority or order for proportionate payment to the
depositors in the event of the money so realized is not
sufficient to meet the entire deposit liability; and
(f) Pass any order which the Special Court deems fit for
realization of the assets of the Financial Establishment and
repayment to the depositors of the Financial Establishment
or on any matter or issue incidental thereto.
Explanation:- For the purpose of this section, the
expression “Financial Establishment” includes the
directors, promoters, managers or members of said
establishment or any other person whose money, property
or assets have.
Powers of Special 10 (1) Upon receipt of an application under sub-section (3) of
Court Regarding Section 4 the Special Court shall issue to the Financial
Attachment. Establishment or to any other person whose property is
attached by the State Government under Section 3, a notice
accompanied by the application and affidavits and of the
evidence, if any, recorded, calling upon him to show cause on
a date to be specified in the notice why the order or
attachment should not be made absolute.
(2) The Special Court shall also issue such notice to all other
persons represented to it as having likely to claim, any interest
or title in the property of the Financial Establishment or the
person to whom the notice is issued calling upon such person
to appear on the same date as that specified in the notice and
make objection if he so desires to the attachment of the
property or any portion thereof on the ground that he has an
interest in such property or proportion thereof.
(3) Any person claiming an interest in the property attached or
any proportion thereof may, notwithstanding that no notice
has been served upon him under this section, make an
objection as aforesaid to the Special Court at any time before
an order is passed under sub-section (4) or sub-section (6).
(4) If no cause is shown and no objections are made on or before
the specified date, the Special Court shall forthwith pass an
order making the ad-interim order of attachment absolute.
(5) If cause is shown or any objection is made as aforesaid the
Special Court shall proceed to investigate the same, and in so
doing, as regards the examinations of the parties and in all
other respects, the Special Court shall, subject to the
provisions of this Act, follow the procedure and exercise all
the powers of a Court in hearing a suit under the Code of Civil
Procedure, 1908 and any person making an objection shall be
required to adduce evidence to show that at the date of the
attachment he had some interest in the property attached.
(6) After investigation under sub-section (5), the Special Court
shall pass an order making the ad-interim order of
attachment absolute or varying it by releasing a portion of
the property from attachment or cancelling the ad-interim
order of attachment;
Provided that the Special Court shall not release from
attachment any interest which it is satisfied that the
Financial Establishment or the person referred to in sub-
section (1) has in the property unless it is also satisfied that
there will remain under attachment an amount property of
value not less than the value that is required for repayment
to the depositors of such Financial Establishment.
(7) Where the Special Court passes an order under sub-section
(6) making an order of attachment absolute or varying the
order of attachment be releasing a portion of the property
from attachment, it may issue such direction as may be
necessary for realization of the assets attached and for the
equitable distribution amongst the depositors of the money
realized from and out of the assets so attached.
(8) Where an application is made by any person duly authorised
or constituted or specified by any other State Government
under similar enactment empowering him to exercise
control over any money or property or assets attached by the
State Government, the Special Court shall exercise all its
powers, as if, such an application were made under this Act
and pass appropriate order or direction on such application
as to give effect to the provisions of such enactment.
Attachment of 11 (1) Where the assets available for attachment of a Financial
property of malafide Establishment or other person referred to in Section 3 are
transferees found to be less than the amount of value which such
Financial Establishment is required to repay to the
depositors and where the Special Court is satisfied by
affidavit or otherwise that there is reasonable cause for
believing that the said Financial Establishment has
transferred (whether after the commencement of this Act or
not) any of the property otherwise that in good faith and for
consideration the Special Court may, by notice, require any
transferee of such property (whether or not he received the
property directly from the said Financial Establishment) to
appear on a date to be specified in the notice and show
cause why so much of the transferee’s property as is
equivalent to the proper value of the property transferred
should not be attached.
(2) Where the said transferee does not appear and show cause
on the specified date, or where after investigation in the
manner provided in sub-section (5) of Section 10, the
Special Court is satisfied that the transfer of the property
to the said transferee was not in good faith and for
consideration the Special Court shall order the attachment
of so much of the said transferee’s property as is the
opinion of the Special Court equivalent.
Security in lieu of 12 Any Financial Establishment or person whose property has
attachment been or is about to be attached under this Act may, at anytime
apply to the Special Court for permission to give security in
lieu of such attachment and where the security offered is in
the opinion of the Special Court, satisfactory and sufficient it
may cancel, the ad-interim order of attachment or, as the case
may be, refrain from passing the order of attachment.
Administration of 13 The Special Court may, on the application of any person
property attached interested in any property attached under this Act and after
giving the Competent Authority an opportunity of being
heard, make such orders as the Special Court considers just
and reasonable for-
(a) Providing from such property attached as the applicant
claims an interest in such sums as may be reasonable
necessary for the maintenance of the applicant and of his
family and for expenses connected with the defence of
the applicant where criminal proceedings have been
instituted against him in the Special Court under Section
8;
(b) Safeguarding so far so as may be practicable the interest
of any business affected by the attachment and
particularly in the interest of any partners in such
business.
(c) Discharging any liability, statutory or otherwise of such
Financial Establishment.
Appeal 14 Any person including the Competent Authority if aggrieved
by an order to the Special Court may appeal to the High
Court within thirty days from the date of order.
Special Public 15 The State Government by notification appoints an Advocate
Prosecutor of not less than ten years standing as a Special Public
Prosecutor for the purpose of conducting the cases under this
Act in the Special Court.
Taking Cognizance, 16 (1) The Special Court may take cognizance of the offence
Procedure and without the accused being committed to it for trial and in
Powers of Special trying the accused person shall follow the procedure
Court regarding prescribed in the code of Criminal Procedure, 1973 for
offence the trial of warrant cases by Magistrates.
(2) The provisions of the Code of Criminal Procedure, 1973
shall, so far as may be, apply to the proceedings before a
Special Court.
Act to over ride other 17 Save as otherwise provided in this Act, the provisions of this
laws Act shall have effect notwithstanding anything inconsistent
therewith contained in any other law for the time being in
force or any custom or usage or any instrument having effect
by virtue of any such law.
Protection of action 18 No suit prosecution or other legal proceedings shall lie
taken in good faith against the State Government or any person for anything who
is in good faith done or intended to be done under this Act.
Power to made rules 19 (1) The State Government may make rules for carrying out
the purposes of this Act.
(2) All rules made under this Act shall be published in the
Official Gazette and unless they are expressed to come
into force on a particular day, shall some into force on the
day on which they are so published.
(3) Every rule made by the State Government under this Act,
shall be laid as soon as may be after it is made, before the
State Legislature.
Power to remove 20 (1) If any difficulty arises giving effect of the provisions of
difficulties this Act, the State Government may, by order not
inconsistent with the provisions of this Act, remove such
difficulties.
(2) Every order made, under this section shall be laid, as
soon as may be after it is made, before the Legislature of
the State of Meghalaya.
L. M. SANGMA,
Joint Secretary to the Govt. of Meghalaya,
Law (B) Department.