Cabinet clears ponzi Ordinance, fresh changes in the Companies Act

The Union Cabinet on Tuesday cleared four ordinances, including those banning unregulated deposit or ponzi schemes and allowing amendments to the Companies Act, after the Bills concerned could not be taken up the Rajya Sabha due to disturbance despite being cleared in the Lok Sabha. 

The other two were the re-issuance of the contentious triple talaq ordinance that makes the practice of instant divorce by Muslim men a penal offence, and the Indian Medical Council (Amendment) Second Ordinance, 2019, to allow the Board of Governors (BoG) to run the scam-tainted apex body for regulating medical education.

After the Cabinet meeting in the evening, Finance Minister Arun Jaitley said it has requested President Ram Nath Kovind to promulgate these ordinances.

The ordinance on ponzi schemes will prohibit all deposit-taking activities that are not regulated by various regulators. 

It will identify three different types of offences — running of unregulated deposit schemes, fraudulent default in regulated deposit schemes, and wrongful inducement in relation to unregulated deposit schemes. 

The related Bill prescribes monetary penalty which could be as high as Rs 50 crore and a jail term of up to 10 years for duping depositors. 

The Bill aims at banning unregulated deposit collections altogether, by making such activities an offence ex-ante, replacing the existing legislative-cum-regulatory framework that only comes into effect ex-post, with considerable time lags.

The ordinance to amend the Companies Act will re-categorise 16 minor offences as purely civil defaults, said an official statement.    

It will also transfer certain routine functions such as dealing with applications for change of financial year and conversion from public to private companies from the National Company Law Tribunal (NCLT) to the central government. The changes are expected to lead to greater compliance by the corporate, de-clogging of special courts and the NCLT, and effective enforcement of the Act. 

Currently, around 60 per cent of the 40,000-odd cases pending in courts pertain to sections dealing with procedural lapses that are proposed to be shifted to in-house adjudication mechanism, thereby incentivising compliance by the corporate. 

The ordinance on the triple talaq Bill will amend the Muslim Women (Protection of Rights on Marriage) Bill, 2018. It seeks to protect the rights of married Muslim women and prevent divorce by the practice of instantaneous and irrevocable ‘talaq-e-biddat’ by their husbands, the statement said. 

The ordinance on medical council will enable the Board of Governors (BOG), appointed in supersession of the Medical Council of India (MCI), according to the provisions of the earlier ordinance, to continue exercising the powers of the MCI.