The Nagaland Protection of Interests of Depositors (in Financial Establishment) Act, 2014

THE NAGALAND PROTECTION OF INTEREST OF DEPOSITORS 
(IN FINANCIAL ESTABLISHMENT) ACT. 2014 
(NAGALAND ACT No.9 OF 2015) 
Received the assent of the Governor of Nagaland and published in the 
Nagaland Gazette Extraordinary dated 21st  August 2015 
An 
Act 
To protect the deposits made by the public in the Financial 
Establishment and the matters relating thereto. 
It is hereby enacted in the Sixty-fourth Year of the Republic of India as 
follows: 
CHAPTER -I 
	
1. 	 Short title, extent and commencement. 
(1) This Act maybe called the Nagaland Protection of Interest of Depositors 
(in Financial Establishment) Act, 2014. 
(2) It extends to the whole of Nagaland. 
(3) It shall come into force on such date as the State Government may, by 
notification in the Official Gazette, appoint. 
	
2. 	 Definitions- In this Act, unless the context otherwise requires:- 
(1) 	 "Competent Authority" means the authority appointed under Section 4. 
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(2) "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 anykind or for any service. 
(3) "Financial Establishment" means an individual or an association of 
individuals, a firm or a company registered under Companies Act,1956 
(Central Act 1 of 1956) 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 section 5 (c) of the Banking Regulation Act, 
1949 (Central Act x of 1949). 
(4) "Government" means the State Government. 
CHAPTER -11 
3. 	 Attachments 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 deposits after 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 are satisfied that such Financial 
Establishment is not likely to return the depositors or to make payment of 
interest or to provide the service, the Government may, in order to protect 
the interest of the depositor 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 
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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, 
partner, director, 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 (one or more authorities for 
such area or areas or such case or cases as may be specified in the 
notification) hereinafter called "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 purposes of this Act. 
(3) Upon receipt of the authors of the Government under Section 3, the 
Competent Authority shall apply within thirty days to the Special Court 
constituted under this Act for making the ad-interim order of the 
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, 
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 
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specified in Section 3 situated within the territorial jurisdiction of that 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 
commercial bank. 
CHAPTER-Ill 
5. 	 Default in Repayment of deposits and interest honouring the 
commitment: - 
Notwithstanding anything contained in Chapter-11, 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 deposits has been made) every person responsible for the 
management of the affairs of the Financial Establishment shall be punished 
with imprisonment for a term which may extend to ten years and with fine 
which may extend to one Iakh of rupees and such Financial Establishment is 
also liable for a fine which may extend to one lakh of rupees. 
5A. 	 Compounding of offence: - 
(1) An offence punishable under section 5 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 the permission of the Special Court, on payment of the entire amount 
due to the depositors with or without interest. 
(2) When 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 discharge forthwith. 
CHAPTER-IV 
6. 	 Special Court:- 
(1) 	 For the purpose of this Act, the Government may, with the concurrence of 
the Chief Justice of the High Court, by notification constitute (one or more 
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Special Courts for such area or areas or such case or cases may be specified 
in the notification) in the cadre of a District and Session judge. 
(2) No Court including the Court constituted under the Presidency Towns 
insolvencyAct, 1909 and the provincial InsolvencyAct, 1920, other than the 
Special Court shall have jurisdiction in respect of any matter to which the 
provisions of the Act apply. 
(3) Any pending case in any other Courtto which the provisions of the Act apply 
shall stand transferred to the Special Court. 
7. 	 Powers of Special Court regarding attachment (Sale, realization and 
distribution) 
(1) Upon receipt of an application under Section4, the Special Court shall issue 
to the Financial Establishment or to any other person whose property is 
attach by the Government under Section 3, and notice accompanied by the 
application and affidavits and of the evidence, if any recorded, calling upon 
him to show cause on a date to be specified in the notice why the order of 
attachment should not be made absolute and the property so attached be 
sold in public auction. 
(2) The Special Court shall also issue such notice, to all other persons, 
represented to it as having on being likely to claim, any interest ortitle in the 
property of the Financial Establishment orthe person to whom the notice is 
issued calling upon such person to appear on the same date as that 
specified in the notice and make objection if he so desirestothe 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 issued upon him under 
this section, make an objection as aforesaid to the Special Court at any time 
before an order is passed under sub-section (4) or sub-section (6). 
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(4) If no cause is shown and no objection are made on or before the specified 
date, the Special 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 a case is shown or any objection is made as aforesaid the Special Court 
shall proceed to investigate the same, and in doing so, as regards the 
examination of the parties and in all other respects, the Special 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 (Central Act V of 1908) and any person making an objection 
shall be required to adduce evidence to show that at the date of attachment 
he had some interest in the property attached. 
(6) After investigation under sub-section (5), the Special 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 from 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: 
Provided that the Special 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 value 
not less than the value that is required for re-payment to the depositors of 
such Financial Established. 
(7) The Special Court shall on an application by the Competent Authority, pass 
such order or issue such direction as may be necessary for the equitable 
distribution amongthe depositors, of the money attached or realized out of 
the sale. 
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8. 	 Attachment of property of mala fide transferees: - 
(1) When the assets available for attachment of a Financial Establishment or 
the 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 when the Special Court is satisfied by affidavit or otherwise 
that there is reasonable cause for believing that the said Financial 
Establishment has transferred (whether after the commencement of this 
Act or not) any of the property otherwise than in good faith and for 
consideration the Special Court may, by notice, require any transferee of 
such 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 subject 
date, or where after investigation in the manner provided in sub-section (5) 
of Section 7, the Special Court is satisfied that the transfer of the property to 
the said transferee was not in good faith and for consideration the Special 
Court shall order the Attachment of so much of the said transferee's 
property as in the opinion of the Special Court equivalent to the proper 
value of the property transferred. 
9. 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 
anytime, apply to the Special Court for permission to give security in lieu of 
such attachment and where the security offered and given is in the opinion 
of the Special 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 7. 
10. Administration of property attached:- The Special 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 orders as the Special Court considersjust and reasonable for- 
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(a) 	 Providing from such of the property attached as the applicant claims an 
interest in such sums 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 Special Court under SectionS. 
b) Safeguarding so far as may be practicable the interest of any business 
affected by the attachment and in particular in the interest of any partners 
in such business. 
11. Appeal:- Any person including the Competent Authority, if aggrieved byan 
order of the Special Court may appeal to the High Court within thirty days 
from the date ororder. 
12. Special Public Prosecutor:- The Government shall, by notification, appoint 
one or more advocates of not less than ten years standing as a Special Public 
Prosecutor (for each of the Special Court) for the purpose of conducting the 
cases in the Special Court. 
13. Procedure and powers of Special Court regarding Offences:- 
	
1) 	 The Special 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 the Code of Criminal Procedure, 1973 (Central 
Act II of 1974) for the trial of warrant cases by Magistrates. 
	
(2) 	 The provisions of the Code of Criminal Prosedure,1973 (Central Act II of 
1974) shall, so far as may be, apply to the proceedings before a Special 
Court and for the purpose of the said provisions a Special Court shall 
deemed to be a Magistrate. 
CHAPTER-V 
14.Act to override other Laws:- Save as otherwise provided in this Act, the 
provisions of this Act shall have effect notwithstanding anything 
inconsistent therewith contained in any other law for the time being in 
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force or any custom or usage or any instrument having effect by virtue of 
any such law. 
15. 	 Power to make Rules:- 
(1) The Government may make rules for carrying out the provisions of this Act. 
(2) (a) All rules made under this Act shall be published in the Nagaland 
Government Gazette and unless they are expressed to come into force on a 
particular day, shall come into force on the day on which they are so 
published. 
(b) All notifications issued under this Act shall, unless they are expressed 
to come into force on a particular day, shall come into force on the day on 
which they are published. 
Every rule made or notification issued under this Act, shall, as soon as 
possible after it is made or issued be placed on the Table of the Legislative 
Assembly, and if before the expiry of the session in which it is so placed or 
the next session, the Legislative Assembly agrees in making any 
modification in any such rule or notification or the Legislative Assembly 
agrees that the rule or notification should not be made or issued the rule or 
notification shall, thereafter have effect only in such modified form or be of 
no effect as the case may be so, however, that any such modification or 
annulment shall be without prejudice to the validity of anything previously 
done underthat rule or notification. 
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