Millennium Post

Govt all set to amend law to compensate duped investors

In what could come as a big relief to investors duped by ponzi schemes like Saradha, the government on Friday said it is amending the law to provide compensation to them.

"The government has provided and made amendments in the Prevention of Money Laundering Act (PMLA), which after the full passage of the Finance Bill, will enable for the 'restitution' of assets to those investors whose assets and monies have been fraudulently cheated away by chit fund or ponzi schemes," Revenue Secretary Shaktikanta Das said. Thousands of crores of rupees are stuck in these schemes as CBI Director Anil Sinha had recently said that Rs 80,000 crore of 6 crore investors stands locked in such scams probed by the agency.

"Talking about ponzi schemes, a very important component in the Finance Bill has been not highlighted adequaltely...the Enforcement Directorate (ED) attaches and confiscates the assets involved in a ponzi scheme (during its money laundering probe against perpetrators of such scams) but we have to also think about the small, innocent and poor investor," Das said.

It is a fact that people in rural India get carried away by the promise of some handsome returns under these schemes, he said while speaking at an event organised by the ED here. "Hence, the government has very rightly provided in the PMLA to the Finance Bill for restitution of these assets to the duped investors," he said. Das said guidelines and rules in this regard will be spelt out in due course and the entire restitution (of assets) will be done under court supervision and the orders of the court.

He also said the second important component in the Finance Bill has been the amendment in the PMLA that violations under direct or indirect tax laws will be treated as "predicate offences" now. This effectively means that the ED can now book cases of tax evasion under the criminal provisions of the money laundering law as, till now, they were being dealt only under the civil clauses of the Foreign Exchange Management Act (FEMA). The Secretary also said investigative agencies including the ED have three "huge" challenges before them in the form of checking and curbing hawala trade (illegal transfer of funds by skirting the legal banking route), Trade Based Money Laundering (TBML) and evasion of taxes by way of accommodation entries. 

Under the TBML, an offender either under-invoices or over-invoices his trade receipts, Das said the modus operandi is to evade taxes and funds which could be illegally transferred across the world in a matter of seconds and minutes. 

With regard to accommodation entries crime, he said this entails an offender setting up a company only on paper, launching of an IPO, offer shares at face value and then later "jack up" its value 
several times and hence stands to escape capital gains tax. 

Easier regulations for setting up companies come into effect
In a move aimed at improving the ease of doing business, government has eased the procedure for setting up companies by introducing an integrated electronic application form. The new e-form, available from on Friday, can be used instead of separately filling up at least five e-forms by entities seeking to incorporate a company in India. Corporate Affairs Ministry, which is implementing the Companies Act, has come out with the new form -- INC 29. It also comes at a time when Prime Minister Narendra Modi-led government is making efforts to improve the country's overall ease of doing business.

Through the new e-form, entities can apply for company name, Director Identification Number (DIN) and registration of company. This single form would be in addition to other separate forms that are available for registering a company. The form requires the interested entity to furnish the proposed name along with details about "significance of abbreviated or coined word in the proposed name". Besides, it should be mentioned whether the proposed name contains names of any person other than the promoters or their close blood relatives. It also has to be disclosed whether the name is similar to an existing Indian or foreign company.

While filling up the form, it has to be declared that the proposed name is not offensive to any section of people and also not in violation of the provisions of Emblems and Names (Prevention of Improper Use) Act, 1950. The government is looking at ways to improve India's position to top-50 in terms of ease of doing business globally. At present, the country is at the 142nd position, according to the latest World Bank report in this regard. As part of efforts to improve the ease of doing business in the country, the ministry has also proposed various changes to the new Companies Act, wherein most provisions came into force from April 1 last year. 
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