Sections 15, 16 and 17 of the Banning of Unregulated Deposit Schemes Act, 2019

Sections 15 to 17 form part of the restitution mechanism under Chapter V of the Banning of Unregulated Deposit Schemes Act, 2019. They regulate confirmation of provisional attachment by the Designated Court, attachment of property held by mala fide transferees, and payment of fair value in lieu of attachment.

Updated: 14 September 2026 | Act No. 21 of 2019 | In force from 21 February 2019

In brief: Section 15 gives the Designated Court power to confirm, vary or cancel provisional attachment and to direct sale and equitable distribution for depositors. Section 16 addresses property transferred without good faith and without commensurate consideration. Section 17 allows an affected person, before confirmation of attachment, to seek permission to deposit the fair value of the property instead.

Section 15 - Confirmation of attachment by Designated Court

Section 15 governs what happens after the Competent Authority applies under Section 14 for confirmation of a provisional attachment and sale of property. The provision requires notice, an opportunity to object, judicial consideration by the Designated Court and, where appropriate, sale and distribution of the attached assets for repayment to depositors.

Statutory text

(1) Upon receipt of an application under section 14, the Designated Court shall issue notice to-

(a) the deposit taker; and

(b) any person whose property is attached under section 14,

to show cause, within a period of thirty days from the date of issue of notice, as to why the order of attachment should not be made absolute and the properties so attached be sold.

(2) The Designated Court shall also issue notice to all other persons represented to it as having or being likely to claim any interest or title in the property, to appear on the same date as persons referred to in sub-section (1) to raise objections, if they so desire, to the attachment of the property.

(3) The Designated Court shall, after adopting such procedure as may be prescribed, pass an order-

(a) making the provisional order of attachment absolute; or

(b) varying it by releasing a portion of the property from attachment; or

and in case of an order under clause (a) or clause (b), direct the Competent Authority to sell the property so attached by public auction or, if necessary, by private sale and realise the sale proceeds.

(4) The Designated Court shall not, in varying or cancelling the provisional order of attachment, release any property from attachment, unless it is satisfied that-

(a) the deposit taker or the person referred to in sub-section (1) has interest in such property; and

(b) there shall remain an amount or property sufficient for repayment to the depositors of such deposit taker.

(5) The Designated Court shall pass such order or issue such direction as may be necessary for the equitable distribution among the depositors of the money attached or realised out of the sale.

(6) The Designated Court shall endeavour to complete the proceedings under this section within a period of one hundred and eighty days from the date of receipt of the application referred to in sub-section (1).

What Section 15 means: The provisional attachment is not automatically final. The Designated Court must give the affected parties and other potential claimants an opportunity to show cause or object. The Court may confirm, vary or cancel the attachment, but it must protect sufficient assets for repayment to depositors. It must also provide for equitable distribution of the attached money or sale proceeds.

Section 16 - Attachment of property of mala fide transferees

Section 16 is aimed at transfers that may have been used to put property beyond the reach of depositors. It empowers the Designated Court to proceed against a transferee where there is reasonable cause to believe that the deposit taker transferred property otherwise than in good faith and not for commensurate consideration.

Statutory text

(1) Where the Designated Court is satisfied that there is a reasonable cause for believing that the deposit taker has transferred any property otherwise than in good faith and not for commensurate consideration, it may, by notice, require any transferee of such property, whether or not he received the property directly from the said deposit taker, 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 the Designated Court is satisfied that the transfer of the property to the said transferee was not a bona fide transfer and not for commensurate consideration, it shall order the attachment of so much of the said transferee's property as in its opinion is equivalent to the proper value of the property transferred.

What Section 16 means: The Court can look beyond the deposit taker's own assets where property has been transferred without good faith and without adequate consideration. The transferee receives an opportunity to show cause. If the transferee does not appear, or the Court finds the transfer was not bona fide and not for commensurate consideration, property of equivalent value may be attached.

Section 17 - Payment in lieu of attachment

Section 17 provides an alternative to continued attachment. Before confirmation of attachment, a deposit taker, another person covered by Section 15(1), or a transferee covered by Section 16 may ask the Designated Court for permission to deposit the fair value of the property instead.

Statutory text

(1) Any deposit taker or a person referred to in sub-section (1) of section 15, or transferee referred to in section 16 whose property is about to be attached or has been provisionally attached under this Act, may, at any time before the confirmation of attachment, apply to the Designated Court for permission to deposit the fair value of the property in lieu of attachment.

(2) While allowing the deposit taker or person or transferee referred to in sub-section (1) to make the deposit under sub-section (1), the Designated Court may order such deposit taker or person or transferee to pay any sum towards costs as may be applicable.

What Section 17 means: The right is to apply for permission; substitution is not automatic. The application must be made before confirmation of attachment. The Designated Court may permit payment of the fair value of the property and may also order payment of applicable costs.

Key legal terms used in Sections 15-17

Designated Court

A Designated Court is the court constituted or designated under Section 8 of the Act for exercising the functions assigned to it under the BUDS Act, including proceedings relating to attachment, sale, distribution and related relief.

Deposit taker

The expression "deposit taker" is defined in Section 2 of the Act and broadly covers persons or entities that receive or solicit deposits, subject to the statutory definition and exclusions.

Provisional attachment

In the context of Chapter V, provisional attachment is the interim attachment of property under the Act before the Designated Court decides whether it should be confirmed, varied or cancelled.

Mala fide transferee

Section 16 deals with a transferee connected with a transfer that the Designated Court finds was not bona fide and was not for commensurate consideration. In practical terms, the section is designed to prevent value from being moved out of reach through non-genuine or inadequately valued transfers.

Commensurate consideration

Commensurate consideration means consideration corresponding reasonably to the value of the property transferred. Section 16 uses absence of good faith together with lack of commensurate consideration as the statutory basis for the Court's attachment power against a transferee.

How Sections 15, 16 and 17 work together

These provisions operate as a connected restitution process. Section 15 places judicial control over provisional attachment and the eventual sale or release of property. Section 16 extends the recovery mechanism to specified transferees where property was transferred without good faith and without commensurate consideration. Section 17 gives an affected person an opportunity, before confirmation, to substitute the fair value of the property for the attachment.

The central objective is protection and repayment of depositors while ensuring notice and an opportunity to object before attachment becomes final. Section 15 also expressly requires equitable distribution among depositors and directs the Designated Court to endeavour to complete the proceedings within 180 days from receipt of the Section 14 application.

Related provisions

For the sequence immediately preceding these sections, see Sections 12, 13 and 14 of the BUDS Act, 2019. For the powers of the Designated Court, appeal to the High Court and transfer by the Supreme Court, see Sections 18, 19 and 20.