Section 21 of BUDS Act : Section 21: Punishment For Contravention Of Section 3

Explanation using Example

Imagine a company, QuickReturns Ltd., that advertises a new investment scheme promising exceptionally high returns within a short period. They claim that the investment is for a revolutionary technology project. This entices many individuals to invest their savings. However, QuickReturns Ltd. has not registered this scheme with any regulatory authority, making it an unregulated deposit scheme as per the law.

Under Section 21 of The Banning of Unregulated Deposit Schemes Act, 2019:

• If QuickReturns Ltd. is found soliciting deposits for this scheme, they could face imprisonment of one to five years and a fine between two to ten lakh rupees.
• If they accept deposits, the punishment could increase to imprisonment of two to seven years and a fine of three to ten lakh rupees.
• Further, if QuickReturns Ltd. fails to repay the investors or provide the promised services and is found to have had fraudulent intent, the imprisonment could extend from three to ten years, with a fine of at least five lakh rupees or twice the amount collected from investors, whichever is higher.

This law is intended to protect the public from fraudulent investment schemes and to penalize those who operate such schemes.