The Punjab Cabinet today made fraudulent practices by financial establishments a non-bailable offence, inviting up to 10 years of imprisonment, with provisions for attachment of properties.
The Punjab Protection of Interests of Depositors (in Financial Establishments) Bill, 2018, has been brought following several complaints of fraud received by the state government, the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI), he said.
The meeting was chaired by Chief Minister Amarinder Singh.
Under Section 6 of the legislation, if a finance company fails to return the deposits on the due date or defrauds the public, then the promoters, managers and employees would be liable for imprisonment up to 10 years and fine of Rs 1 lakh, the spokesperson said.
The financial establishment shall also be liable for a fine of Rs 2 lakh, which may be extend to Rs 1 crore, he said.
Section 5 of the legislation provides that all financial establishments would be required to submit quarterly return of their business to the district magistrate or additional district magistrate, the spokesperson said.
In case of default, the company would be liable to pay fine of Rs 1 lakh.
Section 3 authorises the government to attach the properties of the company and also that of its owners or directors, and promoters, he said.
The spokesperson said Section 4 provides that the officers, notified by the government, such as district magistrates and additional district magistrate, will dispose of properties as per orders of the court.
Under Section 8, the government would notify district and session judges as the designated courts to implement the Act.
Sections 9 to 12 of the legislation deals with detailed powers of designated courts, while Section 16 states that no anticipatory bail would be allowed to promoters, managers and employees of the company found guilty of fraud, he said.
The move comes in wake of mushrooming of financial establishments in Punjab, with many of them making unlawful gains by way of receiving money as deposits from the public, particularly of the middle class and the poorer sections, the spokesperson said.
This done by companies by making impracticable or commercially unviable promises or by offering highly attractive rates of interest or rewards, with the intention of not fulfilling the obligation of refunding deposits on maturity or of not rendering proper services assured to the investors, he said.
The proposed Bill would go a long way in protecting the rights of innocent depositors, who were often duped by such fraudulent financial institutions on the pretext of supplementing their money manifold, he said.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)