The JAMMU AND KASHMIR PROTECTION OF INTERESTS OF DEPOSITORS (IN FINANCIAL ESTABLISHMENTS) ACT, 2018

PROTECTION OF INTERESTS OF
DEPOSITORS (IN FINANCIAL
ESTABLISHMENTS) ACT, 2018
(Act No. XIII of 2018)
THE JAMMU AND KASHMIR PROTECTION OF
INTERESTS OF DEPOSITORS (IN FINANCIAL
ESTABLISHMENTS) ACT, 2018
(Act No. XIII of 2018)
CONTENTS
SECTION.
1. Short title and commencement.
2. Definitions.
3. Attachment of properties on default of return of deposit.
4. Competent Authority.
5. Report and return by Financial Establishment.
6. Default in Repayment of deposits and interests honoring the commitment.
7. Compounding of offence.
8. Designated Court.
9. Powers of Designated Court regarding attachment, sale, realization and
distribution.
10. Attachment of property of malafide transferees.
11. Security in lieu of attachment.
12. Administration of property attached.
13. Appeal.
14. Special Public Prosecutor.
15. Procedure and powers of Designated Court regarding offences.
16. Offences non-bailable.
SECTION.
17. Act to override other laws.
18. Protection of action taken in good faith.
19. Power to make rules.
20. Power to remove difficulties.
21. Repeal and Savings.
–––––––
PROTECTION OF INTERESTS OF DEPOSITORS (IN FINANCIAL223
ESTABLISHMENTS) ACT, 2018
THE JAMMU AND KASHMIR PROTECTION OF
INTERESTS OF DEPOSITORS (IN FINANCIAL
ESTABLISHMENTS) ACT, 2018
(Act No. XIII of 2018)
[Received the assent of the Governor on 29th March, 2018 and
published in Government Gazette dated 29th March, 2018].
An Act to protect the deposits made by the public in the Financial
Establishments and matters relating thereto.
Be it enacted by the Jammu and Kashmir State Legislature in the Sixty-
ninth Year of the Republic of India as follows :––
1. Short title and commencement. ––(1) This Act may be called  the
Jammu and Kashmir Protection of Interests of Depositors (In Financial
Establishments) Act, 2018.
(2) It shall come into force on such date as the Government may, by
notification in the *[Government Gazette], appoint.
2. Definitions.–– In this Act, unless the context otherwise requires,––
(a) “Act” means the Jammu and Kashmir Protection of Interests of
Depositors (In Financial Establishments) Act, 2018 ;
(b) “Competent Authority” means the Authority appointed under
section 4 ;
(c) “Deposit” means the deposit of  money either in one lump sum or
by installments made with the Financial Establishment for a fixed
period for interest or for return in any kind or for any service and
includes and shall be deemed always to have included any receipt
of money or acceptance of 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 specified service with or
without any benefit in the form of  interest, bonus, profit, or in any
other form, but does not include––
(i) amount raised by way of share capital or by any way of
debenture, bond or any other instrument covered under the
* Now Official Gazette.
224 PROTECTION OF INTERESTS OF DEPOSITORS (IN FINANCIAL
ESTABLISHMENTS) ACT, 2018
guidelines given, and regulations made, by the SEBI,
established under the Securities and Exchange Board of India
Act, 1992 (15 of 1992) ;
(ii) amounts contributed as capital by partners of a film ;
(iii) amounts received from a Scheduled bank or 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 received from––
(a) the Industrial Development Bank of India ;
(b) a State Financial Institution ;
(c) any financial institution specified in or under section 6-
A of Industrial Development Bank of India Act, 1964
(18 of 1964) ; or
(d) any other institution that may be specified by the
Government in this behalf ;
(v) amounts received in the ordinary course of business by way
of––
(a) security deposit ;
(b) dealership deposit ; and
(c) earnest money ;
(vi) any amount received from an individual or a firm or an
association or individuals not being a body corporate,
registered under any enactment relating to money lending
which is for the time being in force in the 1[Union territory of
Jammu and Kashmir] ; and
(vii) any amount received by way of subscriptions in receipt of a
Chit.
1. Substituted by S.O. 1229(E) dated 31.3.2020 for “State”.
PROTECTION OF INTERESTS OF DEPOSITORS (IN FINANCIAL225
ESTABLISHMENTS) ACT, 2018
Explanation I––“Chit” shall have the same meaning as assigned to in
clause (b) of section 2 of 1[the Chit Funds Act, 1982 (40
of 1982)].
Explanation II.––A transaction is not a chit within the meaning of this
clause, if in such transaction,––
(i) some alone, but not all, of the subscribers get the
prize amount without any liability to pay future
subscriptions ; or
(ii) all the subscribers get the chit amount by turns
with a liability to pay future subscriptions.
Explanation.––Any credit given by a seller to a buyer on the sale of any
property (whether movable or immovable) shall not be
deemed to be a deposit for the purposes of this clause.
(d) “Designated Court” means the Designated Court constituted under
section 8 ;
(e) “Financial Establishment” means an individual or an association of
individuals, a firm or a  company registered under the Companies
Act,  2013 carrying on the business of receiving deposits under
any scheme or arrangement or in any other manner but does not
include a corporation or a co-operative 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 ;
(f) “Government” means the Government of Jammu and Kashmir ; and
(g) “prescribed” means prescribed by rules made under this Act.
3. Attachment of properties on default of return of deposit.––
Notwithstanding anything contained in any other law for the time being in
force,––
(i) where, upon complaints received from a number of depositors that
any Financial Establishment defaults the return of depositors after
1. Substituted by S.O. 1229(E) dated 31.3.2020 for “the Jammu and Kashmir Chit Funds Act,
2016”.
226 PROTECTION OF INTERESTS OF DEPOSITORS (IN FINANCIAL
ESTABLISHMENTS) ACT, 2018
maturity or fails to pay interest on deposit or fails to provide the
service for which deposit has been made ; or
(ii) where the Government has  reason to believe that any Financial
Establishment is acting in a calculated manner with an intention to
defraud the depositors, and if  the Government is satisfied that
such Financial Establishment is not likely to return the deposits  or
to make payment of interest or to provide the service, the
Government may, in order to protect the interest of the depositors
of such Financial Establishment, pass an ad-interim order attaching
the money or other property alleged to have been procured either
in the name of the Financial Establishment or in the name of any
other person from and out of the deposits collected by the 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 Promoter, Director, Partner or Manager or
Member of the said Financial Establishment or a person who has
borrowed money from the Financial Establishment to the extent of
his default or such other properties of that person in whose name
properties were purchased from and out of the deposits collected
by the Financial Establishment, as the Government may think fit
and transfer the control over the said money or property to the
Competent Authority.
4. Competent Authority. ––(1) The Government may, by notification,
appoint a District Magistrate or an Additional District Magistrate for such area
or areas or for such case or cases as may be specified in the notification as the
Competent Authority to exercise control over the properties attached by the
Government under section 3.
(2) The Competent Authority shall have such other powers as may be
necessary for carrying out the purpose of this Act.
(3) Upon receipt of the ad interim orders passed under section 3 by the
Government, the Competent Authority shall apply within thirty days to the
Designated Court for making the ad-interim order of attachment absolute and
for a direction to sell the property so attached by public auction and realize the
sale proceeds.
(4) An application under sub-section (3) 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 defraud, is founded,
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ESTABLISHMENTS) ACT, 2018
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.
(5) The Competent Authority shall make an application to any court having
jurisdiction to try similar cases or deal with the subject matter pertaining to
money or property belonging to a Financial Establishment or any person
specified in section 3 situated within the territorial jurisdiction of that court for
appropriate orders.
(6) For the purpose of crediting and dealing with the money realized by
the Competent Authority, he shall open an account in any Scheduled Bank.
5. Report and return by Financial Establishment. ––(1) Every Financial
Establishment which commences or carries on its business as such in the
1[Union territory of Jammu and Kashmir] on or after the commencement of this
Act shall make a report to the District Magistrate and the Superintendent of
Police of the district, mentioning the details about its authority to carry on
such business, the location of the Financial Establishment in  the 1[Union
territory of Jammu and Kashmir] and its main Branch Office, if any, wherever
situated,  permanent address of every person responsible for the management
of, or conducting of the business or affairs of, the Financial  Establishment in
the 1[Union territory of Jammu and Kashmir] and such other particulars as may
be prescribed.
(2) Such report shall be made within seven days from the date on which
a Financial Establishment commences or carries on its business as such in the
1[Union territory of Jammu and Kashmir] :
Provided that a Financial Establishment which has been carrying on its
business as such prior to the commencement of this Act shall make such report
within seven days form the date of such commencement.
(3) Every Financial Establishment shall furnish a quarterly return within
one month of the expiry of each quarter of a financial year to the Collector and
the Superintendent of Police of the district in respect of its business and
financial position, the area of its investment and the location of investments of
moneys made by it within and outside the 1[Union territory of Jammu and
Kashmir], if any, and such other particulars as may be prescribed.
1. Substituted by S.O. 1229(E) dated 31.3.2020 for “State”.
228 PROTECTION OF INTERESTS OF DEPOSITORS (IN FINANCIAL
ESTABLISHMENTS) ACT, 2018
(4)  Whoever fails to submit report required under sub-section (2) or fails
to furnish return under sub-section (3) shall be punishable with fine which may
be extended to fifty thousand rupees.
6. Default in Repayment of deposits and interests honoring the
commitment.–– Notwithstanding  anything contained in section 3, where any
Financial Establishment defaults the return of the deposit or defaults the
payment  of interest on the deposit or fails to return in any kind or fails to
render service for which the deposit have been made, every person responsible
for the management of the affairs of the Financial Establishment shall be
punished with imprisonment of a term which may extend to ten years and with
fine which may extend to one lakh rupees and such Financial Establishment is
also be liable for a fine which may extend to two lakh rupees.
7. Compounding of offence. ––(1) An offence punishable under section 6
may, before the institution of the prosecution, be compounded by the Competent
Authority or after the institution of the prosecution, be compounded by the
Competent Authority with permission of the Designated Court on payment of
the entire amount due to the depositors with or without interest.
(2) Where an offence has been compounded under sub-section (1), no
proceeding or further proceeding, as the case may be, shall be taken or
continued against the offender in respect of the offence so compounded and
the offender, if in custody, shall be discharged forthwith.
8. Designated Court. ––(1) For the purpose of this Act, the Government
may, with the concurrence of the Chief Justice of the Jammu and Kashmir High
Court, by notification, designate one or more session courts for such area or
areas or such case or cases as may be specified in the notification for trial of
offences under the Act.
(2) Any pending case in any other court to which the provisions of this
Act apply shall stand transferred to the Designated Court.
(3) When trying any case, the Designated Court may also try any offence,
other than an offence specified in section 6, with which the accused may,
under 1[the Code of Criminal Procedure, 1973 (2 of 1974)] be charged at the
same trial.
9. Powers of Designated Court regarding attachment, sale, realization
and distribution. ––(1) Upon receipt of an application  under section 4, the
Designated Court shall issue to the Financial Establishment or to any other
1. Substituted by S.O. 1229(E) dated 31.3.2020 for “the Code of Criminal Procedure, Svt.
1989”.
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ESTABLISHMENTS) ACT, 2018
person whose property is attached by the Government under section 3, a notice
accompanied by the application and affidavits and of the evidence, if any,
recorded, calling upon the said Establishment or the said person to show
cause on a date to be specified in the notice as to why the order of attachment
should not be made absolute and the properties so attached be sold in public
auction.
(2) The Designated Court shall also issue such notice to all other persons
represented to it as having or being likely to claim any interest or title in the
property of the Financial Establishment or the person to whom the notice is
issued under sub-section (1), 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 portion  thereof.
(3) Any person claiming an interest in the property attached or any portion
thereof may, notwithstanding that no notice has been served upon him under
this section, make an objection as aforesaid to the Designated 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 Designated Court shall forthwith pass an order making the
ad-interim order of attachment absolute and direct the Competent Authority to
sell the property so attached by public auction and realize the sale proceeds.
(5) If cause is shown or any objection is made as aforesaid the Designated
Court shall proceed to investigate the same and in so doing, as regards the
examination of the parties and in all other respects, the Designated 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 on the date of the attachment he had some interest in the property attached.
(6) After investigation under sub-section (5), the Designated Court shall
pass an order, within a period of one hundred and eighty days from the date of
receipt of an application under sub-section (3) of section 4, either making the
ad-interim order of attachment absolute or varying it by releasing a portion of
the property form attachment or cancelling the ad-interim order of attachment
and then direct the Competent Authority to sell the property so attached by
public auction and realize the sale proceeds  :
1[x x x x]
1. First proviso omitted by S.O. 1229(E) dated 31.3.2020.
230 PROTECTION OF INTERESTS OF DEPOSITORS (IN FINANCIAL
ESTABLISHMENTS) ACT, 2018
Provided further that the Designated 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 or property of a
value not less than the value that is required for repayment to the depositors
of such Financial Establishment.
(7) The Designated Court shall, on an application by the Competent
Authority, pass such order or issue such direction as may be necessary for the
equitable distribution among the depositors of the money attached or realized
out of the sale.
(8) In case the money realized from sale of property attached is not enough
to cover the shortfall, the Designated Court may impose fine on every person,
including the promoter, partner, director, manager or any other person or an
employee responsible for the management of or conducting of the business of
the affairs of such Financial Establishment to cover the shortfall as may be
necessary for the purpose of repayment to the depositors.
(9) Where an application is made by any person duly authorized or
specified by any other enactment empowering him to exercise control over any
money or property or assets attached by the  Government, the Designated
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, so as to
give effect to the provisions of such enactment.
10. Attachment of property of malafide transferees. ––(1) Where the
assets available for attachment of a Financial Establishment or other person
referred to in section 3  are found to be less than the amount or value which
such Financial Establishment is required to repay to the depositors and where
the Designated Court is satisfied by affidavit or otherwise, that there is
reasonable cause for believing that the said Financial Establishment has
transferred, whether before or after the commencement of this Act, any of the
property otherwise than in good faith and for consideration, the Designated
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 9, the Designated Court is satisfied that the transfer for
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the property to the said transferee was not in good faith and for consideration,
the Designated Court shall order the attachment of so much of the said
transferee’s property as in the opinion of the Designated Court equivalent to
the proper value of the property transferred.
11. Security in lieu of attachment.–– Any Financial Establishment or
person, whose property has been or is about to be attached under this Act
may, at any time, apply to the Designated Court for permission to give security
in lieu of such attachment and where the security offered and given is, in the
opinion of the Designated Court, satisfactory and sufficient, it may cancel the
ad-interim order of attachment or, as the case may be, refrain from passing the
order under sub-section (6) of section 9.
12. Administration of property attached.–– The Designated Court may,
on the application of any person interested in any property attached under
this Act, and after giving the Competent Authority an opportunity of being
heard, make such order as the Designated Court considers just and reasonable
for,––
(a) providing from such of the property attached as the applicant claims
an interest in, such sum as may be reasonably 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 Designated
Court under section 6 ;
(b) safeguarding so far as may be practicable, the interest of any
business affected by the attachment and in particular, the interest
of any partners in such business.
13. Appeal. ––(1) Any person including the Competent Authority, if
aggrieved by an order of the Designated Court, may prefer an appeal to the
High Court within thirty days from the date of the order.
(2) No appeal under sub-section (1), by a person who is in any manner
liable to repay the deposit and the interest accrued thereon to the depositors,
shall be entertained unless, the appeal is accompanied by satisfactory proof
for the deposit with the Competent Authority of an amount equivalent  to
seventy five percent of the aggregate amount of deposit liability.
14. Special Public Prosecutor.–– The Government shall, by notification,
appoint one or more Advocates of having not less than ten years standing
232 PROTECTION OF INTERESTS OF DEPOSITORS (IN FINANCIAL
ESTABLISHMENTS) ACT, 2018
practice as Special Public Prosecutor for each of the Designated Court for the
purpose of conducting cases in the Designated Court.
15. Procedure and powers of Designated Court regarding offences. ––
(1) The Designated Court may take cognizance of the offence without the
accused being committed to it for trial and in trying the accused person, shall
follow the procedure prescribed in 1[the Code of Criminal Procedure, 1973 (2 of
1974)] for the trial of warrant cases by Magistrates.
(2) The provisions of 1[the Code of Criminal Procedure, 1973 (2 of 1974)]
shall, so far as may be, apply to the procedure before a Designated Court and
for the purposes of the said provisions, a Designated Court shall be deemed to
be a Magistrate.
16. Offences non-bailable.–– Notwithstanding anything contained in
this Act or in any other law for the time being in force all offences under this
Act other than those compoundable under section 7 shall be non-bailable and
nothing in 2[section 438 of the Code of Criminal Procedure, 1973 (2 of 1974)]
shall apply to offences under this Act.
17. Act to override other laws.–– Save as otherwise provided in this Act,
the provisions of this Act shall have overriding 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.
18. Protection of action taken in good faith.–– No suit or other
proceedings shall lie against the Government or the Competent Authority or
an officer or employee of the Government for anything which is, in good faith,
done or intended to be done under this Act.
19. Power to make rules. ––(1) The Government may, by notification,
make rules to carry out the purposes of this Act.
(2) Every rule made under this Act, shall, as soon as possible after it is
made, be laid on the table of the 1[Union territory of Jammu and Kashmir]
Legislature.
20. Power to remove difficulties. ––(1) If any difficulty arises in giving
effect to the provisions of this Act, the Government may, by order, make such
1. Substituted by S.O. 1229(E) dated 31.3.2020 for “the Code of Criminal Procedure, Svt.
1989”.
2. Substituted ibid for “section 497-A of the Code of Criminal Procedure, Svt. 1989”.
PROTECTION OF INTERESTS OF DEPOSITORS (IN FINANCIAL233
ESTABLISHMENTS) ACT, 2018
provisions not inconsistent with the provisions of this Act as may appear to
be necessary for removing the difficulty :
Provided that no order shall be made under this section after expiry of a
period of two years from the date of commencement of this Act.
(2)  Every order made under this section shall be laid, as soon as may be
after it is made, before the 1[Union territory of Jammu and Kashmir] Legislature.
21. Repeal and Savings.––The Jammu and Kashmir Protection of Interest
of Depositors (In Financial Establishments) Act, 2012 (Act No. XV of 2012) is
hereby repealed.
(2) Notwithstanding such repeal, anything done or action taken or orders,
notifications, directions issued under the provisions of aforesaid repealed
Act, shall be deemed to have been taken under the provisions of this Act.
–––––––
1. Substituted by S.O. 1229(E) dated 31.3.2020 for “State”.

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