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Money Circulation Scheme (Banning) Rules, 2013
Published vide Notification No. /F 2-13/2013/Est/4, dated 11th March, 2013
Last Updated 15th October, 2019 [cg208]
(a) "Act' means the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (Act No. 43 of 1978);
(b) "Compensation Plan" means plans whether explicitly stated or not, but put in practice by the business entities for distribution of benefits to the subscribers;
(c) "Competent Authority" means authority notified by the State Government for winding-up of the business entities indulging in money circulation schemes and perform other tasks as assigned by the State Government in order to implement the Act;
(d) "Downline Subscribers" means a subscriber who is at a lower level in the pyramid;
(e) "Enrollment" means a subscriber enrolling one or more subscribers;
(f) "Money Circulation Scheme" includes a scheme which is used for making of quick or easy money in disguise of such scheme as a scheme for sale of products or providing or claiming to provide certain goods or services etc.;
(g) "Nodal Police Authority" means police authority in the State notified by the State Government and entrusted with the responsibility of collecting, collecting and sharing information with other States, Central Government, Reserve Bank of India and other concerned authorities regarding money circulation schemes;
(h) "Promoter" means a person or persons who conduct disguised money circulation schemes and includes heirs, assignees etc. of the persons who promote business entities running disguised money circulation schemes. It also includes persons who actually control the operations of such schemes even though they may not be on record acting as promoters of the business entities;
(i) "Pyramid" means a multi-layered network of subscribers to a scheme formed by subscribers enrolling one or more subscribers in order to receive any benefit, directly or indirectly, as a result of enrollment, action or performance of additional subscribers to the scheme. The subscribers enrolling further subscriber(s) occupy higher position and the enrolled subscriber(s) lower position, thus, with successive enrollments, they form multi-layered network of subscribers;
(j) "Section" means a Section of the Act;
(k) "Subscriber" means a subscriber by whatever name called to a Money Circulation Scheme including disguised Money Circulation Scheme;
(l) "Upline Subscriber" means subscriber who is at a higher level in the pyramid.
2. Words and expressions used in these rules but not defined herein shall have meaning respectively assigned to them in the Act. 3. No individual or company or firm or business association, in any form, shall promote, run or participate in the money circulation scheme including a disguised money circulation scheme as defined in Rule 2 (f). 4. No individual or Company or firm or business association, in any form, shall run a scheme with a compensation plan in which the subscribers have to enroll one or more subscribers to become entitled to certain benefits, directly or indirectly, as a result of enrollment, action or performance of additional subscribers. 5. No individual or company or firm or business association, in any form, shall run a scheme that induces enrollment of new members by offering benefits or commission, by whatever name called, to upline members in the pyramid out of the action or performance like sale or purported sale of goods or services by the downline members. 6. No individual or company or firm or business association, in any form shall run a scheme with a compensation plan which envisages receipts of deposits or entry fee or periodical subscription and gives incentive to subscribers out of these funds for enrollment of new subscribers. 7. The Nodal Police Authority in a State shall be responsible for co-ordinating with other State Governments, the Central Government and the agencies concerned under such Government and the Reserve Bank of India and shall also be responsible for furnishing the information to the Reserve Bank of India in the format and periodicity as decided by the State Government in consultation with the Reserve Bank of India. Explanation. - This does not debar the investigating agencies from interacting with other State Governments and other agencies for the purpose of investigation. 8. The Competent Authority shall be responsible for taking all necessary action in connection with the winding-up of companies/firms/business associations in any form indulging in Money Circulation Schemes including disguised Money Circulation Scheme. 9. The Promoters of Money Circulation Schemes shall be personally liable even if such schemes are run by companies registered under the Companies Act, 1956 or other business entities carrying limited liability. 10. On a report received from the investigating officer and on being satisfied that prima-facie evidence exists, that a money circulation scheme including disguised money circulation scheme is being operated, an officer not below the rank of Superintendent of Police or other officers as notified by the State Government in this regard, may order sealing of the business premises and offices connected with such schemes, suspend operations of the bank accounts connected with such schemes and take such other action as required for closure of business operations pertaining to such schemes. 11. On conclusion of the investigation, if adequate evidence exists that a money circulation scheme is being run by a company or firm or business association in any form, the investigating officer, apart from prosecuting the case under the Prize Chit and Money Circulation Schemes (Banning) Act, 1978, shall forward a report giving details of the evidence collected during the investigation through the Superintendent of Police concerned to the Competent Authority in the State as defined under Section 2(c). The Competent Authority shall take action for winding-up such businesses in cases where the power to initiate winding-up business entity is vested in the State Government. In case of companies and other business entities where such power is vested in the Central Government, the Competent Authority shall forward a report with its recommendations to the concerned Ministry in the Central Government for initiating action for winding-up of the company.
