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No Act, So a New Act

Acceptance of public deposits is a heavily regulated domain under our existing laws. The Companies Act, as a general rule, prohibits the acceptance of deposits from the public, the SEBI Act too permits it only under strict compliance regulations, the RBI controls the acceptance of public deposits by banks, NBFCs and chit fund companies, the CrPC makes it a criminal offence of cheating and fraud, the Income Tax Act deeply scrutinises deposits and every State too has an Act to protect public depositors, like the MPID Act, in the case of Maharashtra. All these Acts and their authorities are sufficiently armed to prohibit, penalize and punish all those who collect public deposits in violation of these laws. Thus if these laws were strictly enforced, it would be rare for the public to be cheated by illegal and fanciful public deposits and Ponzi schemes of fraudsters. In other words, the Ponzi schemes proliferate and dupe the public, because of the negligence of authorities in their vigilance and enforcement.

West Bengal in recent times has been a classic case, where due to the negligence of the authorities and the active connivance of the ruling party, tens of thousands of crores of public money has been lost in the infamous litany of Ponzi schemes, led by the dubious Sarada, Rose Valley and many others, including the laughable potato bonds schemes. All that these shady Ponzi operators did, was to print glossy brochures, promise fabulous returns on deposits, involve a ruling party MP/minister/MLA to show government support, collect thousands of crores and cheat the gullible and greedy public. It was not that there was a vaccum in the laws of the land that could not prevent this ingenious/blatant ponzis. It was just that there was an utter vaccum of enforcement, perhaps a deliberate one, because the ruling party in West Bengal was a direct beneficiary of these scams.

All that the government needs to do, to tackle this menace, is to simply tighten and pull up the administration of the present laws and also plug loopholes therein if any. The present laws are capable enough to curb this crime. But in India, whenever a scam surfaces, instead of tightening the existing laws/authorities, we tend to enact a new one and make it even more complicated. Every scam results in a new law, which fails to prevent further scams. The Ponzi affairs of West Bengal have resulted in the government seeking to enact a new law to ban unregulated deposit schemes, which incidentally are already banned under a web of laws at present. It seeks to prevent companies from soliciting such funds and proposes punishment by way of heavy fines and imprisonment. But such provisions are also there in the present laws, and a new one is wholly unwarranted. Merely because our authorities do not act on time, we get new Acts, to only add to the confusion and complicity of the underlying authorities.  

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