Recent warnings by the Governor of the Central Bank of Sri Lanka have drawn sharp attention to a little-discussed but powerful legal provision now central to ongoing investigations into plantation and crop-cultivation “investment” schemes operating across the country: Section 83C of the Banking Act.
This section of law does not focus on whether land exists, crops are grown, or agreements are signed. Instead, it asks a single decisive question: are earlier investors being paid mainly from the money brought in by new investors? If the answer is yes, the scheme falls within the definition of a prohibited pyramid structure under Section 83C—regardless of whether it is presented as a ni-miris project, sandalwood cultivation, agarwood plantation, eco-farming venture, land sale, gold-backed plan, or digital asset program.
What Section 83C Actually Prohibits
Section 83C makes it a criminal offence for any person to initiate, promote, advertise, conduct, finance, manage, or direct a scheme where a participant contributes money or monetary value, and the benefit earned depends mainly on increasing the number of participants or increasing the contributions from participants.
The law deliberately broadens the meaning of “money” and “monetary value” to include not only currency, but also stored value, credit entries, payment instruments, gold bullion, and other value forms. This wide definition ensures that schemes cannot escape scrutiny simply by changing the form in which funds are collected.
Why Plantation Schemes Trigger Legal Red Flags
Many plantation-based investment offers follow a similar pattern. Investors pay money upfront and are promised unusually high fixed monthly returns, often supported by cultivation agreements or land deeds. They are told the returns will come from future harvests of high-value crops. Yet, in reality, such crops take months or years to generate revenue. Despite this, investors are paid from the very first month.
This creates the central legal contradiction. If harvest income has not yet materialized, the only possible source for these monthly payouts is money from new investors. That structure matches precisely the pyramid-type cash flow model Section 83C was designed to prohibit.
Strong Enforcement Powers for the Central Bank
Section 83C does more than define an offence. It grants sweeping investigative authority to the Central Bank. Officers can enter and search premises, seize documents and electronic records, demand information, and use computer records as evidence in court. Where a prima facie case exists, the High Court can issue an ex-parte order to immediately halt the scheme.
Obstruction of investigations and failure to produce documents are themselves criminal offences. Upon conviction, penalties can include up to five years of rigorous imprisonment and fines of up to Rs. 2 million or twice the amount collected, whichever is higher.
Why These Schemes Are Considered “Unregulated”
The Governor’s remark that plantation investments are “unregulated” reflects a regulatory gap. These entities are not licensed deposit-taking institutions, not registered investment products under the Securities and Exchange Commission of Sri Lanka, and not supervised by the Central Bank as banks or finance companies. As a result, when they solicit public funds with promised returns, the most directly applicable law becomes the anti-pyramid provision of Section 83C.
This legal framing explains why the Central Bank is currently investigating multiple such entities as suspected illegal deposit or pyramid-type operations.
The Key Legal Insight
Section 83C is indifferent to the story being told. Whether the narrative involves agriculture, eco-projects, land ownership, gold, or crypto assets is irrelevant. What matters is whether the scheme’s sustainability depends on a continuous inflow of new participant money to pay existing participants.
Even if land exists, crops exist, and site visits are arranged, the legal test remains the same. If the return structure relies on new investor funds rather than genuine commercial income, the scheme falls squarely within the offence defined in the Banking Act.
As the Governor pointedly observed, if such extraordinary returns were genuinely possible from crop cultivation, promoters would not need public money to achieve them.
