Banning of Unregulated Deposit Schemes Act, 2019
Sections 12, 13 and 14: Depositor Priority, Attachment and Sale of Property
Sections 12, 13 and 14 form part of Chapter V, "Restitution to Depositors", of the Banning of Unregulated Deposit Schemes Act, 2019. Together they establish the priority of depositors' claims, the precedence of provisional attachment, and the procedure by which the Competent Authority seeks confirmation of attachment and permission to sell attached property.
Updated: 14 September 2026
Key definitions relevant to Sections 12-14
For understanding these provisions, the following expressions used in the Act are important:
Competent Authority: Under Section 2 read with Section 7, this means the authority appointed by the appropriate Government to exercise the attachment and related powers provided under the Act.
Designated Court: A court constituted by the appropriate Government under Section 8 for proceedings under the Act, including confirmation of attachment and directions concerning attached property.
Deposit taker: The Act uses this expression for a person or entity receiving deposits in the manner covered by the statutory definition. The detailed definition is contained in Section 2.
The Central Government has also framed the Banning of Unregulated Deposit Schemes Rules, 2020, which supplement the Act, including the application contemplated by Section 14.
Section 12 - Priority of depositors' claim
Save as otherwise provided in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002) or the Insolvency and Bankruptcy Code, 2016 (31 of 2016), any amount due to depositors from a deposit taker shall be paid in priority over all other debts and all revenues, taxes, cesses and other rates payable to the appropriate Government or the local authority.
What Section 12 means
Section 12 creates a statutory priority in favour of depositors. Subject to the express saving for the SARFAESI Act, 2002 and the Insolvency and Bankruptcy Code, 2016, money due to depositors from a deposit taker ranks ahead of other debts and government or local-authority dues such as taxes, cesses and rates.
The opening words "Save as otherwise provided" are important. They preserve any priority or distribution regime that applies under the two specifically named enactments rather than automatically displacing those regimes.
Section 13 - Precedence of attachment
Save as otherwise provided in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002) or the Insolvency and Bankruptcy Code, 2016 (31 of 2016), an order of provisional attachment passed by the Competent Authority shall have precedence and priority, to the extent of the claims of the depositors, over any other attachment by any authority competent to attach property for repayment of any debts, revenues, taxes, cesses and other rates payable to the appropriate Government or the local authority.
Continuation and vesting of attached property
Under Section 13(2), once the Competent Authority passes an order of provisional attachment:
(a) the attachment continues until the Designated Court passes an order under Section 15(3) or Section 15(5); and
(b) the attached money or property of the deposit taker and the persons mentioned in the attachment order vests in the Competent Authority and remains so vested until further order of the Designated Court.
Separate bank account and court control
Section 13(3) requires the Competent Authority to open an account in a scheduled bank for money realised under the Act. That money cannot be used except under the instructions of the Designated Court.
No disposal without court order
Section 13(4) prevents the Competent Authority from disposing of or alienating attached property or money except in accordance with an order of the Designated Court under Section 15(3) or Section 15(5).
Immediate sale of perishable property
Section 13(5) creates a limited exception. If expedient, the Competent Authority may order the immediate sale of perishable items or assets. The sale proceeds are then dealt with in the same manner as other attached property.
Section 14 - Application for confirmation of attachment and sale of property
The Competent Authority shall, within a period of thirty days, which may extend up to sixty days, for reasons to be recorded in writing, from the date of the order of provisional attachment, file an application with such particulars as may be prescribed before the Designated Court for making the provisional attachment absolute, and for permission to sell the property so attached by public auction or, if necessary, by private sale.
Time limit for filing the application
The normal period is thirty days from the date of provisional attachment. The period may extend up to sixty days, but the reasons for the extension must be recorded in writing.
Purpose of the application
The application asks the Designated Court to make the provisional attachment absolute and to permit sale of the attached property. Public auction is the ordinary mode expressly mentioned in Section 14, while private sale may be used where necessary.
The Banning of Unregulated Deposit Schemes Rules, 2020 define an "application" as an application filed by the Competent Authority under Section 14. The Rules also define the Competent Authority and Designated Court by reference to Sections 7 and 8 of the Act and prescribe supporting procedural requirements for attachment proceedings.
Attachment authorised by a court in another State or Union territory
Under Section 14(2), where money or property has been attached with permission granted by a Designated Court in another State or Union territory, the application for confirmation of that attachment must be filed in that court.
Practical effect of Sections 12-14
These provisions operate as a connected restitution framework. Section 12 determines the priority of depositors' monetary claims. Section 13 protects the effectiveness of provisional attachment and places attached assets under the control of the Competent Authority and the Designated Court. Section 14 then requires prompt judicial confirmation and, where appropriate, permission for sale so that attached assets can be dealt with under court supervision.
The detailed judicial process after an application under Section 14 is addressed in Sections 15, 16 and 17 of the BUDS Act, 2019.
Official statutory source
The current text of the Act and the subordinate rules may be checked on India Code.