Kerala Government Issues Fresh Directive to Banks on BUDS Act Compliance
The Kerala state government has issued a stringent warning to banks and financial institutions, mandating immediate adherence to court-ordered attachment of funds in cases registered under the Banning of Unregulated Deposit Schemes (BUDS) Act, 2019. This directive aims to accelerate the process of returning money to victims of financial fraud, emphasizing that any delays could severely undermine restitution efforts.
Circular Highlights Reluctance and Delays in Implementation
In a circular from the home department, the government noted instances where banks exhibited reluctance or sluggishness in executing orders passed by designated courts under the BUDS Act. Such delays have adversely impacted the refund process for thousands of investors who fell prey to illegal deposit schemes, leaving them in financial distress without timely recourse.
The circular was disseminated to a wide range of entities, including nationalised and private banks, co-operative banks, and other financial institutions across Kerala, along with district collectors, the state police chief, and various enforcement agencies. It included explicit instructions to ensure strict compliance with the legal framework.
Legal Obligations and Priority of Attachment Orders
The government clarified that orders issued under the BUDS Act must be treated as binding legal directives. "Once orders are issued by the competent authority or the designated court, the transfer of attached amount shall be treated as a statutory obligation of the bank concerned," stated the circular. This underscores the mandatory nature of these transactions, leaving no room for hesitation or procedural lags.
Government sources explained that the BUDS Act was enacted to combat fraudulent investment schemes that entice individuals with promises of unusually high returns, only to collapse later and leave depositors without their savings. The law empowers authorities to attach properties and bank deposits of the accused, facilitating the distribution of recovered funds among victims.
The circular further stressed that attachment orders issued under Section 13 of the Act take precedence over other recoveries, such as tax dues or government claims. This prioritization is crucial to ensure that defrauded investors receive compensation as swiftly as possible, aligning with the primary objective of the legislation.
Consequences for Non-Compliance and Context of Major Fraud Cases
Additionally, the government warned that officials who fail to implement these directions could face serious consequences, including disciplinary action. This directive emerges against the backdrop of several high-profile deposit fraud investigations in Kerala, where thousands of investors are still awaiting the recovery of their hard-earned savings.
In the Popular Finance case in Pathanamthitta, which involves an estimated Rs 2,000 crore and approximately 30,000 investors, the high court recently criticized delays in proceedings under the BUDS framework. Similarly, authorities have invoked the Act in other significant cases, such as the Farmfed deposit scam, where investors were allegedly lured with promises of 12.5% interest, and the High Rich Online Shoppe multi-level marketing case, where over Rs 200 crore in bank accounts was provisionally attached during the investigation.
These examples highlight the urgent need for efficient enforcement to protect citizens from financial exploitation and restore trust in the banking and investment sectors.
