Ap Ordinance To Check Errant Financial Cos

Andhra Pradesh governor R Rangarajan has promulgated an ordinance to curb malpractices by financial companies in the state.

The ordinance follows a series of defaulting by financial establishments in the past few months. The companies, by offering attractive interest rates on deposits, collected huge amounts and vanished.

The order contemplates action on two fronts: first, it seeks action to protect the investments and secondly it provides for deterrent punishment to persons and companies indulging in such practices.

Under the ordinance, the government can pass orders attaching the property of financial establishments which are perceived to be acting in a manner prejudicial to the interests of depositors with an intention to defraud them.

Upon receipt of complaint from depositors that any financial establishment has defaulted or is likely to default in the return of deposits in cash or kind after maturity or in any manner agreed upon, attachment of properties is provided for.

The order also contains provisions for appointment of competent authority to exercise control over the attached properties and for constitution of special courts to ensure equitable distribution among the depositors of the money released from out of the properties attached.

As per the ordinance, defaulters could be sentenced to up to 10 years of imprisonment and a fine up to Rs 5 lakh.

Financial companies have been defined in the ordinance as "an individual, an association or body of individuals or a firm carrying on the business of receiving deposits under any scheme or arrangement or in any manner but does not include a company registered under the Companies Act 1956 or a corporation or a co-operative society owned and controlled by any state government or the Central government or a banking company or a non-banking financial company.