For thousands across Manipur, the dream of effortless financial growth turned into a waking nightmare as their hard-earned savings vanished into thin air. The seductive promise of high returns—once whispered at social gatherings—was exposed as a ruthless, sophisticated fraud, rocking the state to its core. From the sprawling network of the Lamjingba Group to the deceptive promises of Salai, Birla Emporium, PayGD Enterprises, and Scholar’s Finance, a series of, now notorious, Ponzi schemes have left a trail of economic devastation, forcing many to confront a harsh question: What truly is a Ponzi scheme, and how did these entities evade detection under the Banning of Unregulated Deposits Scheme Act, 2019.
A Ponzi scheme is a sophisticated financial illusion built on a foundation of empty promises. At its core, it is a fraudulent investment operation that lures participants with deceptive promises of outsized returns. However, unlike a legitimate business that generates profit through trade or production, a Ponzi scheme creates the appearance of success by using capital from new investors to pay “dividends” to earlier ones. It is a perpetual cycle of robbing Peter to pay Paul. To survive, the scheme requires a compounding influx of new capital. To attract this, promoters often leverage the “halo effect” of abnormally high or suspiciously consistent returns that defy market volatility. As the pool of participants grows, so does the administrative weight of the lie, inevitably drawing the scrutiny of regulators or exhausting the supply of new recruits. When the momentum stalls and the cash flow tightens, the house of cards collapses. Historically, the finale is almost always the same: the promoter vanishes, leaving a trail of depleted life savings and broken trust. Named after Charles Ponzi—who infamously exploited a postage stamp speculation loop in the 1920s—these schemes have evolved in complexity but remain tethered to the same red flags: (a) Low Risk, High Reward: The promise of “guaranteed” returns that outperform the market. (b) The Black Box Strategy: Obscure, overly complex investment methods that the promoter claims are “proprietary.”; (c)Transparency Issues: Unregistered securities, unlicensed sellers, and persistent “clerical errors” when an investor attempts to withdraw funds. Despite a century of cautionary tales, the public continues to fall prey to these traps. This persistence is rarely due to a lack of intelligence, but rather a masterclass in psychological manipulation. Scammers weaponize the “Fear Of Missing Out” (FOMO) and exploit social proof—using the initial, fake success of early investors to silence the scepticism of the next wave. In a world of economic uncertainty, the dream of a “sure thing” remains the ultimate bait.
Before the BUDS Act of 2019 stepped in to comprehensively shatter the Ponzi ecosystem, fraudulent deposit-taking operated in a fragmented regulatory landscape. The fight against these financial predators was previously managed through a patchwork of statutes, often failing to keep pace with innovation in fraud. Prior to this, the legal regime was notoriously fragmented, relying on the generic, often inadequate, provisions of the Indian Penal Code, 1860, which offered little in terms of preventive, rapid asset attachment, or specialized adjudication. As financial scandals, exemplified by major Ponzi schemes, devastated public trust, the inefficiency of the archaic system became apparent. The BUDS Act, 2019, fundamentally altered this landscape by introducing a comprehensive framework aimed at dismantling the burgeoning shadow banking sector, empowering designated competent authorities for immediate attachment of properties, and creating a unified, swift mechanism for the repayment of depositors.
Key legislations prior to 2019 included—The Prize Chits and Money Circulation Schemes (Banning) Act, 1978, various State-level Protection of Interest of Depositors (PID) Acts (such as the Maharashtra Protection of Interest of Depositors Act, 1999 and Tripura Protection of Interest of Depositors Act, 2000), and regulatory checks under The Reserve Bank of India Act, 1934, The Securities and Exchange Board of India Act, 1992, The Companies Act, 2013, and The Multi-State Co-operative Societies Act, 2002.
However, these scattered laws lacked the swift, pan-India asset attachment mechanisms that the BUDS Act now enforces.
While Manipur initially moved towards creating a dedicated legal shield for depositors, this legislative effort faltered, leaving a significant regulatory vacuum. The proposed Manipur Protection of Interests of Depositors (in Financial Establishments) Bill, 2014 (Bill No.14 of 2014) was unexpectedly withdrawn by the State Government, under the leadership of then-Chief Minister Shri O. Ibobi Singh, during the 13th Session of the 10th Manipur Legislative Assembly. This regulatory inaction persisted, exposing the public to financial fraud until the central government intervened in 2019, enacting the landmark Banning of Unregulated Deposit Schemes (BUDS) Act to address the escalating menace of illicit financial schemes. The regulatory landscape governing deposit-taking in India—and notably within Manipur—underwent a seismic shift with the enactment of the Banning of Unregulated Deposit Schemes (BUDS) Act, 2019.
Before fully analysing the structural impact of the BUDS Act, 2019, it is crucial to assess the current efficacy of India’s economic offense jurisprudence in providing swift redressal. In the context of Manipur’s volatile financial landscape, victims are not restricted to a single statute; rather, they must leverage a multifaceted approach—combining immediate provisional attachment via Competent Authorities under the BUDS Act with the enhanced criminal liability provisions in the BNS 2023—to recover defrauded deposits. The contemporary legal architecture offers a dual-track strategy for redress, balancing punitive criminal justice with proactive financial restitution. At the vanguard of this framework is the Banning of Unregulated Deposit Schemes (BUDS) Act, 2019, which serves as a specialized instrument for dismantling Ponzi-like structures through its expedited restitution mechanisms and dedicated judicial oversight. This is bolstered by the Bharatiya Nyaya Sanhita (BNS) and the Bharatiya Nagarik Suraksha Sanhita (BNSS), which categorize such activities under ‘Organised Economic Crime’ (Section 111). Crucially, the BNSS shifts the focus toward victim-centric outcomes, utilizing Section 395 for judicial compensation and Section 396 to mandate state-sponsored victim compensation schemes that function independently of trial conclusions. For systemic or large-scale financial breaches, the framework scales to include the Prevention of Money Laundering Act (PMLA), empowering the Enforcement Directorate to trace and recover proceeds of crime, thereby ensuring that the legal response is as sophisticated as the fraud itself.
Recent enforcement actions in Manipur, most notably concerning the Lamjingba Finance Group, illustrate a pivot toward restitutive justice in financial crime adjudication. The Enforcement Directorate’s (ED) Imphal sub-zonal office has successfully facilitated the repatriation of substantial confiscated assets to thousands of defrauded investors through judicial mandates. Beyond criminal prosecution, the Indian legal framework offers robust civil avenues for asset recovery. These include summary suits under Order XXXVII of the Code of Civil Procedure for expedited relief based on liquidated claims, and the invocation of writ jurisdiction under Article 226 of the Constitution to address administrative inertia. Furthermore, the Consumer Protection Act, 2019, provides a secondary layer of redress, allowing victims to seek restitution for ‘unfair trade practices’ and systemic misrepresentation.
The BUDS Act, 2019, constitutes a seismic recalibration of India’s financial oversight, specifically engineered to rectify the institutional paralysis that allowed Ponzi schemes to devastate the socioeconomic fabric of states like Manipur. By superseding a patchwork of antiquated statutes with a unified, specialized framework, the Act eliminates the procedural loopholes inherent in the general criminal law. It empowers Competent Authorities with the draconian—yet necessary—power of immediate attachment, effectively shifting the legal focus from protracted prosecution to rapid asset recovery. This shift signals an end to the era of regulatory passivity, establishing a formidable barrier against the proliferation of unregulated financial intermediaries.
The Banning of Unregulated Deposit Schemes (BUDS) Act, 2019, functions as a formidable federal instrument designed to systematically dismantle the infrastructure of Ponzi schemes across India. Its efficacy is significantly amplified at the state level through the Manipur Banning of Unregulated Deposit Schemes Rules, 2021, which translates broad federal mandates into specific, localized enforcement protocols. The high-profile prosecution of the Salai Group of Companies—which saw the attachment of over ₹50.80 crore in assets—serves as a definitive case study in this dual-layer efficacy. This coordinated legal architecture empowers state authorities to move beyond mere containment, achieving tangible restitution for defrauded investors through the decisive sequestration of illicit wealth.
To determine whether Mediation—as an Alternative Dispute Resolution (ADR) mechanism—possesses any legal viability within the specific context of Manipur’s regulatory framework, one must first deconstruct the rigorous procedural hierarchy established by the Banning of Unregulated Deposit Schemes (BUDS) Act, 2019. An overall overview of the Buds Act, 2019 and its accompanying Rules of 2020 along with the Manipur Banning of Unregulated Deposit Schemes Rules, 2021 (specifically applicable only for the State of Manipur) are quintessential for understanding if mediation can be a viable option for cases pertaining to the BUDS Act, 2019.
The BUDS Act, 2019 comprises 8 chapters with a total of 44 sections along with two schedules. The Chapter-I deals with the Preliminary; Ch- II exaggerates on the Banning of Unregulated Deposit Schemes; Ch-III lays down the composition of the Authorities under the Act; Ch-IV deals with information on Deposit Takers; Ch-V deliberates on Restitution to Depositors; Ch- VI is dedicated specifically to the Offences and Punishment; Ch-VII elucidates on the provisions concerning the Investigation, Search and Seizure and lastly, Ch- VIII deals with Miscellaneous. The two main schedules to the Act define and regulate deposit-taking activities- First Schedule lists the Regulated Deposit Schemes. Deposits accepted under the schemes specified in this schedule are exempt from being categorized as “Unregulated Deposit Schemes,” meaning they are permissible under the Act. It covers various schemes regulated by entities like the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), and others. The second schedule outlines amendments to certain enactments. It specifically lists amendments to three existing laws to ensure alignment with the BUDS Act. (a) The Reserve Bank of India Act, 1934. (b)The Securities and Exchange Board of India Act, 1992 (c) The Multi-State Co-operative Societies Act, 2002.
The Rules 2019, which came into effect on the date of its publication on 12th February 2020 11 Rules along with a form appended to the Rules lays down the procedural framework to enforce the 2019 Act and eliminate fraudulent Ponzi Schemes. The rules mandate that every deposit taker must report their business details to a centralized online database within 30 days of operation, a requirement that applies even to legally regulated entities. Additionally, they empower appointed Competent Authorities to provisionally attach properties and assets of violators, outline the legal process for Designated Courts to make these asset seizures permanent, and provide mechanism for the forced retraction of misleading advertisements linked to illegal deposit schemes
Additionally, since BUDS, Act, 2019 BUDS Act, 2019 is designed with a dual-structured legislative framework, the Government of Manipur enacted the Manipur Banning of Unregulated Deposit Schemes Rules, 2021, not to replace or oppose the Central Rules 2020 but aid in the overall effective, efficient and efficacious implementation of the laws for addressing crime under the BUDS Act, 2019. The Manipur Rules, 2021 notified on 30th January 2021 comprises a total of 9 Rules with three forms appended to the said Rules.
Having outlined the framework of the Act along with the applicable Rules, it is now impediment to understand the nature of the offences defined under the Act, 2019 and whether the penalties imposed are suitable for consideration for Mediation process under the applicable Mediation Act, 2023 and its accompanying rules to the act and the Apex Court and various other High Courts judgements on what are the cases that can be considered for mediation and whether cases pertaining to BUDS Act, 2019 falls within the ambit of the parameters laid down and if not, then why.
As aforementioned, the Ch-VI of the Act, 2019 deals with the Offences and Punishments from Section 21 to 27 and Chapter VI of the Act establishes strict liability for operating, promoting, or accepting unregulated deposits. A brief cursory presentation here of the offences and their punishments are (a) Section 21: Contravention of Section 3 (Prohibition of UDS) (i) Solicitation: Penalized with imprisonment (1–5 years) and a fine (₹2–10 lakh). (ii) Acceptance: Penalized with imprisonment (2–7 years) and a fine (₹3–10 lakh).(iii) Fraudulent Default: If a deposit taker accepts unregulated deposits and fails to repay, the penalty increases to 3–10 years imprisonment and a fine up to twice the collected amount (b) Section 22: Contravention of Section 4 (Promoting/Operating UDS)- Imprisonment up to 7 years, along with a fine of ₹5 lakh to ₹25 crore, or three times the profits made, whichever is higher. (c) Section 23: Contravention of Section 5 (Wrongful Inducement): Penalizes false statements or deceptive promises to induce deposits, with imprisonment (1–5 years) and a fine up to ₹10 lakh.(d) Section 24: Penalty for Repeat Offenders: Subsequent convictions under this chapter (excluding Section 26) attract mandatory imprisonment (5–10 years) and a fine of ₹10 lakh up to ₹50 crore.(e) Section 25: Offences by Entities Other Than Individuals: Holds individuals in charge (directors, partners, managers) vicariously liable, unless they prove the offence occurred without their knowledge or they exercised due diligence. (f) Section 26: Failure to Comply with Information Requests: Penalizes failure to report to the database or submit information required by the Competent Authority, with fines up to ₹5 lakh. (g)Section 27:Cognizance of Offences: Requires Designated Courts to take cognizance only upon a complaint filed by the Regulator, ensuring structured prosecution. Note: This does not apply to companies under Corporate Insolvency Resolution Process (CIRP
Having laid out the penalty for the offences provided in the BUDS Act, 2019, it may be pertinent to state here before examining the intersectionality of BUDS Act, 2019 with other laws that section 34 of the BUDS Act, 2019 gives it an overriding effect over other laws, which means the provisions of this Act, unless expressly provided otherwise would have an overriding effect and the provisions of this Act would have prominence over all other provisions contained in any other law for the time being in force. It would further have an overriding effect on any State Law or Law promulgated by the Union Territory. Further, section 28 classifies offences under the Act as cognizable and non-bailable, which means the offences enshrined in the Act are offences involving criminal liability against the State, they cannot be privately compounded or mediated away by an independent mediator. It however, excludes the offences under Section 22 of the Act- which deals with the contravention of the provisions of section 4 of the Act and excludes the violation of the provision of section 26 of the Act relating to the violation of sub – section (1) of section 10 of this Act. Hence, offences under this Act except the exclusions provided would be cognizable and non-bailable
On perusal of the provisions aforementioned, the maximum penalty attracted for an offence under this Act, is elucidated under section 24 which is Penalty for Repeat Offenders being mandatory imprisonment (5–10 years) and a fine of ₹10 lakh up to ₹50 crore and the lowest punishment is for the contravention of Section 3 (soliciting deposits). It carries a minimum imprisonment term of 1 year (extending up to 5 years) and a minimum fine of ₹2 lakh. The Act also contemplates under 27 of the BUDS Act, 2019 that notwithstanding anything contained in the Code of Criminal Procedure, 1973 (now replaced with the Bharatiya Nagarik Suraksha Sanhita, 2023) every offence punishable under the Act, except the offence under section 22 and 26, shall be cognizable and non-bailable. In the cases of offences under section 22 and 26, the nature of offences are non-cognizable and bailable
Now, it is pertinent to understand the terms – cognizable, non-cognizable, bailable and non-bailable to appreciate the next question of whether the cases under the BUDS Act, 2019 can be referred for mediation or not? The term “bailable offence” as defined under Section 2 (a) of of the Code of Criminal Procedure 1973 (corresponding to Section 2(1)(c) of BNSS) means an offence which is shown as bailable in the First Schedule, or which is made bailable by any other law for the time being in force; and “non-bailable offence” means any other offence. Section 2 (c) (corresponding to Section 2(1)(g) of BNSS) “cognizable offence” means an offence for which, and “cognizable case” means a case in which a police officer may, in accordance with the First Schedule or under any other law for the time being, be arrested without warrant. Section 2 (l) (corresponding to Section 2(1)(o) of BNSS) defines “non- cognizable offence” means an offence for which, and “non cognizable case” means a case in which a police officer has no authority to arrest without warrant. Section 2(n) (corresponding to Section 2(1)(n) of BNSS) defines “offence” as any act or omission made punishable by any law for the time being in force and includes any act in respect of which a complaint may be made under section 20 of the Cattle -Trespass Act, 1871.
Now, having understood the nature of the offences and their punishments respectively, it is pertinent to understand the relevant provisions of the Mediation Act, 2023 along with its accompanying Rules, Manipur State Mediation Rules, 2021 to ascertain whether the cases under the BUDS Act, 2019 can be referred for mediation or not. Section 2(h) of the Act, 2023 defines “mediation” includes a process, whether referred to by the expression mediation, pre-litigation mediation, online mediation, community mediation,conciliation or an expression of similar import, whereby parties attempt to reach an amicable settlement of their disputes with the assistance of a third person referred to as mediator, who does not have the authority to impose a settlement upon the parties to the dispute. Further, Section 6 of the Act, 2023 elucidates on the Disputes or matters not fit for mediation wherein it is stated that the category of cases indicated on the list of the First Schedule of the Act, 2023 cannot be referred for mediation. Further, it is stated that, the court shall if it deemed appropriate shall refer any dispute relating to compoundable offences including the matrimonial offences which are compoundable and pending between the parties, to mediation. It is also provided further that the outcome of such mediation shall not be deemed to be a judgment or a decree of court referred to in sub-section (2) of section 27, and shall be further considered by the court in accordance with the law for the time being in force
The First Schedule appended to the Act, 2023 lists certain categories of cases which cannot be referred for mediation. Enacted pursuant to Section 6 of the Mediation Act, 2023, the First Schedule delineates the categorical exclusions of disputes deemed conceptually or legally non-amenable to mediation. This exclusionary framework is deeply anchored in public policy, designed to preserve sovereign regulatory authority, safeguard third-party rights, and protect vulnerable demographics. Consequently, the Schedule explicitly bars mediation in matters involving criminal prosecution, direct or indirect taxation, statutory professional misconduct proceedings, and claims involving minors, deities, or persons with intellectual disabilities. Furthermore, it systemically excludes disputes falling within the specialized jurisdiction of statutory regulators and tribunals—such as the Securities and Exchange Board of India (SEBI), the Competition Commission of India (CCI), the Telecom Regulatory Authority of India (TRAI), and the National Green Tribunal (NGT)—along with matters arising from land acquisition laws and stringent financial frameworks like the Banning of Unregulated Deposit Schemes (BUDS) Act, 2019. Through these mandates, the legislature ensures that disputes with broader systemic, public law, or strictly regulated statutory implications remain exclusively within formal judicial and regulatory ambits
Having detailed the relevant provisions of law, now we shall proceed to examine how the Supreme Court and various High Courts in India have interpreted the aforementioned provisions on the eligibility of the cases that can be referred for mediation and those which cannot be referred for mediation and finally we shall conclude whether cases under BUDS Act, 2019 can be referred for meditation and if not why.
The first and foremost classic case till today that deliberated on “Mediation and ADR mechanisms” and its operability was in the case of Afcons Infrastructure Ltd. and Ors. Vs. Cherian Varkey Construction Co. (P) Ltd. and Ors.MANU/SC/0525/2010 wherein the Apex Court deliberated on various issues including whether the reference to ADR Process is mandatory? To which the Apex Court has clearly held in para 17 of the judgment that actual reference to an ADR process in all cases is not mandatory and that where the case falls under an excluded category there need not be reference to ADR process and that in all cases reference to ADR process is a must. Further, the Court has in para 18 have categorically listed out cases which are normally considered to be not suitable for ADR process having regard to their nature: (i) Representative suits under Order 1 Rule 8 CPC which involve public interest or interest of numerous persons who are not parties before the court. (In fact, even a compromise in such a suit is a different process requiring notice to the persons interested in the suit, before its acceptance). (ii) Disputes relating to election to public offices (as contrasted from disputes between groups trying to get control over the by the court after enquiry, as for example, suits for grant of probate or letters of administration. (iv) Cases involving serious and specific allegations of fraud, fabrication of documents, forgery, impersonation, coercion etc. (v) Cases requiring protection of courts, as for example, claims against minors, deities and mentally challenged and suits for declaration of title against government. (vi) Cases involving prosecution for criminal offences.
The Delhi High Court has in the case of Abhishek@ Love & Ors. v. The State of NCT of Delhi & Ors. 2023 SCC OnLine Del 5057 observed that settlement of non-compoundable offences through mediation agreements is not permissible, the Delhi High Court has issued various guidelines to be followed in such cases by mediators in all mediation centres in the national capital.
From the provisions aforementioned of all the relevant statutes, it is evident that the law is very clear and the Supreme Court judgement aforementioned have also categorically listed the cases which are not suitable for mediation. Now, we further proceed with the examination of the issue regarding whether the concept of mediation can be employed in resolving investor disputes under the BUDS Act, 2019 within the confines of the statutory provisions aforementioned and whether there exist any statutory obstacles to mediation under the BUDS Act, 2019?
Under the Banning of Unregulated Deposit Schemes (BUDS) Act, 2019, offenses involving fraudulent investment and illicit deposit schemes are inherently non-compoundable. The Supreme Court and various High Courts have consistently maintained that these statutory violations cannot be referred to mediation. This judicial stance is predicated on three core rationales: the profound impact on public interest, the systemic nature of widespread economic fraud, and the strict statutory mandate under the Act for asset attachment and restitution directed by a competent authority. Consequently, the legal consensus restricting mediation in statutory, economic, and non-compoundable offenses is firmly anchored in established Supreme Court doctrines. Offenses under Sections 21, 22, and 23 of the Banning of Unregulated Deposit Schemes (BUDS) Act, 2019—encompassing fraudulent defaults, wrongful inducement, and the promotion of unregulated deposit schemes—constitute public wrongs rather than mere inter-partes civil disputes. In accordance with the foundational jurisprudence established by the Supreme Court of India in Gian Singh v. State of Punjab (2012) 10 SCC 303, severe offenses, specifically socio-economic crimes and institutional financial frauds, possess an inherent public dimension that reverberates deleteriously across society. Consequently, because these transgressions compromise public interest and financial stability, they are legally incapable of being quashed, compounded, or resolved through private mediation or bilateral compromise. Further, the statutory architecture of the Banning of Unregulated Deposit Schemes (BUDS) Act, 2019—specifically delineated under Section 7 and Chapter V—mandates a centralized, state-administered mechanism wherein the designated Competent Authority assumes exclusive jurisdiction to provisionally attach properties and equitably distribute assets among affected depositors. Private mediation between a subset of depositors and the accused deposit-taker fundamentally disrupts this statutory hierarchy. By bypassing the mandatory priority list established by the Act, such ad-hoc settlements inherently prejudice the claims of unrepresented victims, violate the principle of equitable distribution, and subvert the overarching regulatory framework designed to prevent fragmented, preferential liquidations. This statutory preemption aligns with the established jurisprudence of the Supreme Court of India regarding special socio-economic legislations. The Apex Court has consistently maintained that when the legislature enacts a comprehensive regulatory framework to safeguard public interest and protect vulnerable classes—such as depositors or consumers—private contractual arrangements must yield to statutory mandates. In matters of economic policy and financial malpractice, private bilateral settlements cannot be permitted to subvert public law mechanisms, as doing so would effectively immunise the accused from systemic accountability and dilute the statutory protections enacted for the collective benefit of all affected stakeholders. The impermissibility of bypassing this state-administered mechanism is deeply rooted in the Supreme Court’s jurisprudence on financial regulatory stability. In Bhavesh D. Parish v. Union of India (2000) 5 SCC 471 , the Apex Court reinforced that legislative curbs on unregulated deposit-taking are inherently designed to protect the broader public interest and maintain financial system integrity, thereby overriding individual commercial liberties. Furthermore, drawing a parallel to the Supreme Court’s consistent stance on state protection of depositors’ interest acts—such as in New Horizons (India) Ltd. or K.K. Baskaran v. State (2011) 3 SCC 793—the judiciary has firmly established that special socio-economic statutes create a collective, non-divisible remedy. Consequently, any attempt to resolve these disputes through ad-hoc private mediation creates preferential liquidations that directly violate the pari passu principle of equitable distribution implicit in Chapter V of the BUDS Act.
Lastly, and very very recently, in line with rulings such as Rupa and Co. Limited v. Firhad Hakim (2025)SCC OnLine SC 355 (a Supreme Court decision setting aside a High Court’s forced referral to mediation in a contempt matter), the Apex Court emphasized that mediation cannot be thrust upon unwilling parties or used to bypass binding statutory commands. Because the BUDS Act requires criminal prosecution and administrative asset liquidation, courts have routinely rejected requests to settle BUDS cases in alternative dispute resolution. For example, in Elesha Pou John v. State of Manipur (2026), the High Court declined to refer matters arising out of the BUDS Act to the Supreme Court-sponsored “Mediation for the Nation” drive and is still under consideration. While the offenses themselves under the BUDS Act cannot be mediated, if a private settlement or compromise is reached that results in the 100% restitution of funds to the depositors, the accused must petition the High Court under Section 528 of the Bharatiya Nagrik Suraksha Sanhita, 2023 (BNSS) to quash the accompanying FIR or criminal proceedings under their inherent powers, rather than going through a formal mediation referral.
Although statutory text and judicial precedents explicitly preclude mediation under the BUDS Act, 2019, the application of law is rarely rigid. Because legal structures are human constructs, practitioners and judicial actors inevitably exercise a degree of contextual flexibility when interpreting these frameworks. Chapter V of the Banning of Unregulated Deposit Schemes (BUDS) Act, 2019, outlines essential restitution mechanisms for depositors. Specifically, Sections 12 through 15 regulate the priority of claims, precedence of attachment, and the judicial confirmation of property attachment and sale. To circumvent protracted litigation among competing victims, the Designated Court in Manipur—could integrate mediation into the liquidation and claim-prioritisation processes. While Section 6 and the First Schedule of the Mediation Act, 2023, explicitly bar certain disputes from mediation, judicial precedent has expanded the scope of alternative dispute resolution. The Supreme Court and various High Courts have routinely established that even non-compoundable criminal offences may be referred to mediation, subject to the specific facts and circumstances of the case. Consequently, the structural framework of the BUDS Act, 2019, presents a viable opportunity to employ judicial mediation to expedite depositor restitution.
The burgeoning jurisprudence under the Banning of Unregulated Deposit Schemes (BUDS) Act, 2019, highlights a critical enforcement deficit in Manipur, characterized by a stark disparity between the widespread proliferation of illicit Ponzi schemes and the negligible volume of sustainable prosecutions. Data from the Designated Court in Manipur reveals severe procedural and institutional frictions: over 168 cases have been summarily disposed of due to structural non-compliance and a fundamental ignorance of the statutory framework and its accompanying rules by enforcement agencies, leaving a mere 13 cases currently pending. This high rate of threshold dismissals, combined with a lack of expeditious trials, undermines the legislative intent of the Act, transforming a mandatory framework for swift investor restitution into an underutilized and operationally stagnant remedy.
In conclusion, the pervasive deficit in legal literacy among both law enforcement and the general public in Manipur necessitates immediate, targeted awareness campaigns on the Banning of Unregulated Deposit Schemes (BUDS) Act, 2019. Public sensitization is a dual imperative: it empowers victims to seek institutional redress while serving as a vital prophylactic against future Ponzi schemes. To fulfill the statutory mandate of Section 12, which explicitly prioritizes depositor protection, the designated Competent Authority must pivot from a passive, reactive posture to an aggressive enforcement model. Ultimately, the efficacy of the BUDS Act hinges on the speed of this authority’s jurisdictional interventions. Without swift, proactive enforcement, the statutory framework fails, leaving depositor rights perpetually frozen alongside the unliquidated assets of fraudulent actors.
EXPLANATORY NOTES ON SOME POINTS:
- The “Competent Authority” as defined under section 2 (3), 7 of the BUDS Act, 2019 read with Rule 2 (d) of the Rules, 2020. Powers of the “Competent Authority’ are further elaborated under Section 18 of the Act read with Rules, 2020. For the State of Manipur, the State Government, Finance Department have by their notification dated 8th September 2025 vide No. 3/66/2018-D/IF issued the list of “Competent Authority” along with officers concerned for assisting them respectively with allocated agencies in Manipur for the purposes of the Banning of Unregulated Deposit Schemes Act, 2019 (Act No. 21 of 2019) with immediate effect and until further orders. Additionally, the Law and Legislative Department, Government of Manipur have also issued notifications from time to time for engaging Asst. Public Prosecutors (District)-cum-Asst. Government Advocates (District), Manipur to assist the office of the “Competent Authority” under the BUDS, Act.
- The “Designated Court” as defined under section 8 of the “Act, 2019”, Section 2 (7) read with Rule 2 (e) of the Rules 2020 and the powers are further provided under section 18 of the Act, 2019. For the State of Manipur, the Addl. District & Sessions Judge (FTC), Designated Court (BUDS Act), Manipur, is designated to handle cases under the Banning of Unregulated Deposit Schemes (BUDS) Act, 2019. Presently, the total number of cases which have been disposed of are 168 in number and currently pending before the designated court is only 13 in number. With regard to the cases before the High Court of Manipur, the total number of cases currently pending or listed before the High Court of Manipur under the BUDS Act, 2019 is 6 and the number of new cases filed under this Act during the calendar year 2025 and 2026 (up to May) is 3 in all.
The writer is magistrate with the Manipur Judicial Services
