What is India doing to control e-fraud?
A:
Payment gateways in India currently handle transactions estimated to be around $50 billion. The Reserve Bank of India is taking steps to make digital payments safer and to ensure that frauds are mitigated to the maximum possible extent. The regulator has taken a decision on data localisation to ensure that there is complete security of information. As a result, consumers will get faster refunds and settlements.
To control frauds, policies have been put in place to block money in the receiver’s account so that the fraud is detected and the consumer is protected. The RBI is setting up offices of the ombudsman in 21 locations across 19 cities. This authority will be able to redress grievances and take corrective actions. Consumers can now file complaints against companies that provide services by way of prepaid instruments and e-wallets so that money can be refunded in time in case of a failed transaction.
Q: My father and other family members are carrying on a business in India as a limited liability partnership in which I am a dormant partner. I am told that under a new law that has prohibited unregulated deposit schemes, a firm cannot take a loan or deposit. Will this new law also apply if I want to take a loan for personal purposes, like for the marriage of my daughter?
A:
Under the new law, a deposit is defined to mean money received by way of advance or loan by a deposit taker who has promised to return the same either in cash or kind. The law permits taking of deposits from banks, including cooperative banks and financial institutions. The law also permits taking of deposits from relatives as defined under Companies Act 2013. It has been clarified that a proprietary concern or a partnership firm can take deposits so long as it is strictly for the purpose of the business.
Those in the real estate business can take advances from persons who have booked a flat or apartment, as long as such funds are used for the completion of the project. Acceptance of deposits that are not permitted by the law would result in attachment and freezing of assets. Therefore, your firm should not accept deposits, except from customers who give an advance against a transaction. The main source of funds would, therefore, be from banks, non-banking financial companies that are registered with the RBI and from micro-finance institutions.
Q: I had taken a loan in India from a friend. Despite my best efforts, I have not been able to repay it. He filed a civil suit against me to recover the money and subsequently followed it up with a criminal complaint. I want to know whether he can succeed in the criminal complaint on the ground that I have failed to repay the loan. What remedy do I have as an FIR has been filed and the matter is posted for hearing for framing the charges?
A:
Fortunately for you, there is a recent judgment of the Supreme Court of India that has held that mere inability to repay the loan cannot give rise to a criminal prosecution for cheating, unless a fraudulent or dishonest intention is shown right at the beginning of the transaction. According to the court, a breach of a promise, agreement or contract does not constitute an offence of criminal breach of trust. Therefore, the provisions of section 405 of the Indian Penal Code would not be applicable.
Since you had taken the loan from a friend, a mere delay in repayment of the loan does not result in a criminal offence in view of the apex court’s decision. Therefore, you may file an application in the high court that has jurisdiction over your case for quashing the order under which the criminal charges have been framed. Had you issued a cheque for repayment of the loan which was dishonoured, criminal prosecution would have succeeded under the provisions of the Negotiable Instruments Act.
The writer is a practicing lawyer, specialising in tax and exchange management laws of India.