BENGALURU: With thousands of people being duped every year by Ponzi schemes that promise high returns on investment, and financial establishments engaged in fraudulent business, the State government is coming up with tougher measures to protect investors’ interest. The CBI is investigating the IMA multi-crore scam and the state government has initiated measures to help depositors get their money back.
The Karnataka Protection of Interest of Depositors in Financial Establishments (Amendment) Bill 2020, tabled in the assembly on Friday by Chief Minister BS Yediyurappa, empowers police or a competent authority appointed by the government to take up investigation into complaints of fraudulent transactions. If convicted, those involved in such transactions or who fail to render service to investors as promised, can be jailed for up to seven years.
Promoters, directors, partners, managers and employees of a financial establishment, which fraudulently defaults on repayment of deposit on maturity, along with any benefit in the form of interest, bonus, profit or any other form as promised, or fails to render service as assured against the deposit, shall on conviction, be punished with imprisonment for a term of not less than three years, which may extend to seven years, the Bill states. Imprisonment and penalty for fraudulent default has been enhanced on par with the ‘Banning of Unregulated Deposits Schemes Act 2019’, a Central Act.
The Bill also authorises the government, district magistrate or police to take up investigation of a complaint or fraudulent transaction and to empower the revenue secretary or any authority nominated by the government to conduct an investigation. It empowers the secretary or competent authority with the powers of a civil court judge to summon persons and documents as per the Code of Civil Procedure, 1908.
The police or competent authority appointed to conduct investigation shall have the power to enter and search any premises, seize moveable properties, freeze bank accounts and attach money or property believed to have been acquired by such financial establishment either in its own name or the name of any other person. Depending on the magnitude of the fraud, a special court may constitute a committee for realisation of proceeds and payment to depositors, and to utilise e-auction platforms for auction of attached assets.
CRACKING DOWN
Tough measures to protect investors’ interest
3-7 years jail term for fraudulent default
Police or competent authority can take up investigation
Can enter and search any premises, seize moveable properties