(1) Where a person contravenes the provisions of section 4 or fails to comply with the terms and conditions subject to which the authorisation has been issued under section 7, he shall be punishable with imprisonment for a term which shall not be less than one month but which may extend to ten years or with fine which may extend to one crore rupees or with both and with a further fine which may extend to one lakh rupees for every day, after the first during which the contravention or failure to comply continues.
(2) Whoever in any application for authorisation or in any return or other document or on any information required to be furnished by or under, or for the purpose of, any provision of this Act, wilfully makes a statement which is false in any material particular, knowing it to be false or wilfully omits to make a material statement, shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine which shall not be less than ten lakh rupees and which may extend to fifty lakh rupees.
(3) If any person fails to produce any statement, information, returns or other documents, or to furnish any statement, information, returns or other documents, which under section 12 or under section 13, it is his duty to furnish or to answer any question relating to the operation of a payment system which is required by an officer making inspection under section 14, he shall be punishable with fine which may extend to ten lakh rupees in respect of each offence and if he persists in such refusal, to a further fine which may extend to twenty-five thousand rupees for every day for which the offence continues.
(4) If any person discloses any information, the disclosure of which is prohibited under section 22, he shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five lakh rupees or an amount equal to twice the amount of the damages incurred by the act of such disclosure, whichever is higher or with both.
(5) Where a direction issued under this Act is not complied with within the period stipulated by the Reserve Bank or where no such period is stipulated, within a reasonable time or where the penalty imposed by the Reserve Bank under section 30 is not paid within a period of thirty days from the date of the order, the system provider or the system participant which has failed to comply with the direction or to pay the penalty shall be punishable with imprisonment for a term which shall not be less than one month but which may extend to ten years, or with fine which may extend to one crore rupees or with both and where the failure to comply with the direction continues, with further fine which may extend to one lakh rupees for every day, after the first during which the contravention continues.
(6) If any provision of this Act is contravened, or if any default is made in complying with any other requirement of this Act, or of any regulation, order or direction made or given or condition imposed thereunder and in respect of which no penalty has been specified, then, the person guilty of such contravention or default, as the case may be, shall be punishable with fine which may extend to ten lakh rupees and where a contravention or default is a continuing one, with a further fine which may extend to twenty-five thousand rupees for every day, after the first during which the contravention or default continues.
Simplified Explanation
Section 26 of the Payment and Settlement Systems Act, 2007 outlines the penalties for various offences and contraventions of the Act’s provisions, as well as failure to comply with directions or legal requirements. The section is structured to address multiple forms of non-compliance, including failure to adhere to regulations, false statements, failure to produce documents, and unauthorized disclosures.
Key Provisions of Section 26:
- Failure to Comply with Authorisation Conditions (Subsection 1):
- Offence: If a person contravenes the provisions of Section 4 or fails to comply with the terms and conditions of an authorisation issued under Section 7, the person will face severe penalties.
- Penalty:
- Imprisonment for a term not less than one month but up to ten years.
- Fine: Up to one crore rupees, with a further fine of up to one lakh rupees for each day the contravention continues.
- Making False Statements or Omissions (Subsection 2):
- Offence: If someone wilfully makes a false statement in an application for authorisation, return, document, or any information required under the Act (or omits a material statement), knowing it to be false, they will be penalized.
- Penalty:
- Imprisonment for up to three years.
- Fine: Not less than ten lakh rupees, but it may extend to fifty lakh rupees.
- Failure to Provide Required Documents or Information (Subsection 3):
- Offence: If a person fails to produce documents, returns, statements, or information as required under Sections 12 or 13 or refuses to answer questions during an inspection under Section 14, penalties will apply.
- Penalty:
- Fine: Up to ten lakh rupees for the first offence.
- Further Fine: If the refusal persists, a fine of up to twenty-five thousand rupees for each additional day the offence continues.
- Disclosure of Confidential Information (Subsection 4):
- Offence: If a person discloses any information prohibited under Section 22 (i.e., information that must be kept confidential), penalties apply.
- Penalty:
- Imprisonment for up to six months.
- Fine: Up to five lakh rupees or an amount equal to twice the damages incurred due to the disclosure, whichever is higher.
- Both imprisonment and fine are possible.
- Failure to Comply with Directions or Pay Penalty (Subsection 5):
- Offence: If a person fails to comply with a direction issued by the Reserve Bank (under this Act), or fails to pay the penalty imposed by the Reserve Bank (under Section 30) within the stipulated time (or within a reasonable time), penalties apply.
- Penalty:
- Imprisonment for a term not less than one month but up to ten years.
- Fine: Up to one crore rupees, with a further fine of up to one lakh rupees for each day the non-compliance continues.
- General Penalty for Contravention or Default (Subsection 6):
- Offence: If a person contravenes any provision of the Act or fails to comply with any requirement for which no specific penalty is mentioned (such as not adhering to regulations, orders, or directions), penalties will apply.
- Penalty:
- Fine: Up to ten lakh rupees.
- Further Fine: If the contravention or default continues, a fine of up to twenty-five thousand rupees for each additional day the contravention persists.
Summary of Penalties:
- Contravention of Section 4 or Failure to Comply with Authorisation:
- Imprisonment: 1 month to 10 years.
- Fine: Up to 1 crore rupees, plus a daily fine for continuing contravention.
- Making False Statements or Omissions in Documents:
- Imprisonment: Up to 3 years.
- Fine: Rs. 10 lakh to 50 lakh.
- Failure to Provide Information or Documents:
- Fine: Up to 10 lakh rupees, plus a daily fine for continuing refusal.
- Disclosure of Confidential Information:
- Imprisonment: Up to 6 months.
- Fine: Rs. 5 lakh or twice the damages, whichever is higher.
- Failure to Comply with Directions or Pay Penalty:
- Imprisonment: 1 month to 10 years.
- Fine: Up to 1 crore rupees, plus a daily fine for continuing non-compliance.
- General Penalty for Contravention or Default:
- Fine: Up to 10 lakh rupees, plus a daily fine for continuing contravention or default.
Practical Implications:
- Serious Consequences for Non-Compliance: The penalties outlined in Section 26 are severe, with long imprisonment terms and hefty fines for contravention of key provisions like those governing authorisations, false statements, document production, and unauthorized disclosures.
- Ongoing Violations: A key feature of this section is the continuing fine for non-compliance, which ensures that entities or individuals are incentivized to resolve violations swiftly to avoid accumulating daily fines.
- General Penalties for Defaults: In cases where no specific penalty is defined for an offence, a general fine of up to 10 lakh rupees applies, with additional daily fines for persistent contraventions.
- Compliance Urgency: This section emphasizes the importance of compliance with all provisions of the Act, including timely document submission, cooperation during inspections, and adherence to confidentiality requirements.
Section 26 ensures a robust framework for enforcing the provisions of the Payment and Settlement Systems Act, with substantial penalties designed to deter non-compliance and ensure the integrity of the payment system.
