(1) Notwithstanding anything contained in section 26, if a contravention or default of the nature referred to in sub-section (2) or sub-section (6) of section 26, as the case may be, the Reserve Bank may impose on the person contravening or committing default a penalty not exceeding five lakh rupees or twice the amount involved in such contravention or default where such amount is quantifiable, whichever is more, and where such contravention or default is a continuing one, a further penalty which may extend to twenty-five thousand rupees for every day after the first during which the contravention or default continues.
(2) For the purpose of imposing penalty under sub-section (1), the Reserve Bank shall serve a notice on the defaulter requiring him to show cause why the amount specified in the notice should not be imposed as a penalty and a reasonable opportunity of being heard shall also be given to such defaulter.
(3) Any penalty imposed by the Reserve Bank under this section shall be payable within a period of thirty days from the date on which notice issued by the Reserve Bank demanding payment of the sum is served on the defaulter and, in the event of failure of the person to pay the sum within such period, may be recovered on a direction made by the principal civil court having jurisdiction in the area where the registered office of the defaulter company or the official business of the person is situated:
Provided that no such direction shall be made, except on an application made by an officer of the Reserve Bank authorised by it in this behalf.
(4) The Reserve Bank may recover the amount of penalty by debiting the current account, if any, of the defaulter or by liquidating the securities held to the credit of the defaulter or in accordance with the provisions of this Act.
(5) The court which makes a direction under sub-section (3) shall issue a certificate specifying the sum payable by the defaulter and every such certificate shall be enforceable in the same manner as it were a decree made by the court in a civil suit.
(6) Where any complaint has been filed against any person in any court in respect of the contravention or default of the nature referred to in sub-section (2), or, as the case may be, sub-section (4) of section 26, then, no proceeding for the imposition of any penalty on the person shall be taken under this section.
Simplified Explanation
Section 30 of the Payment and Settlement Systems Act, 2007 grants the Reserve Bank of India (RBI) the power to impose fines on individuals or entities that contravene or default on the provisions of the Act. The section outlines the procedure and limits for imposing penalties, as well as the methods for recovery.
Key Provisions:
- Penalty for Contravention or Default:
- The Reserve Bank may impose a penalty on a person who contravenes or defaults under the provisions mentioned in Section 26 (Sub-sections (2) and (6)).
- The penalty amount can be:
- Up to ₹5 lakh, or
- Twice the amount involved in the contravention or default, if the amount is quantifiable.
- Continuing Contravention or Default: If the contravention or default continues, a further penalty of ₹25,000 per day may be imposed after the initial penalty.
- Procedure for Imposing Penalty:
- The RBI must issue a show cause notice to the defaulter, giving them a reasonable opportunity to explain why the penalty should not be imposed.
- This ensures that the person or entity has a chance to defend themselves or address the contravention.
- Payment of Penalty:
- The penalty must be paid within 30 days from the date the RBI serves the notice.
- If the penalty is not paid within this period, the amount can be recovered through the principal civil court in the area where the defaulter’s registered office or official business is located. The RBI officer will apply to the court to recover the penalty.
- Recovery Methods: The RBI can also recover the penalty by debiting the defaulter’s current account or liquidating any securities held by the defaulter.
- Enforcement of Recovery:
- Once the court issues a direction for recovery, it will also issue a certificate specifying the sum payable.
- This certificate can be enforced in the same manner as a court decree in a civil suit, providing a legal basis for the RBI to recover the fine.
- Bar on Dual Penalties:
- If a complaint has already been filed against a person in a court for the contravention or default (as per Section 26(2) or Section 26(4)), then no penalty will be imposed under this section. This prevents the defaulter from facing double penalties for the same violation.
Practical Implications:
- Fair Process:
- The RBI is required to give the defaulter a show cause notice and an opportunity to present their case, ensuring that the penalty process is fair and transparent.
- Potential for Significant Financial Penalties:
- Penalties can be quite substantial, especially if the amount involved in the contravention is large or if the default continues for a prolonged period.
- Recovery Mechanisms:
- The RBI has multiple avenues for recovering unpaid penalties, including direct debit from the defaulter’s account or through legal action in civil courts, making the enforcement of penalties more efficient.
- Avoiding Double Penalty:
- The provision ensures that no double penalty is imposed if a defaulter is already facing legal proceedings in court, safeguarding against unfair duplication of penalties.
Conclusion:
Section 30 provides the Reserve Bank of India with a robust mechanism for enforcing compliance with the Payment and Settlement Systems Act. By allowing the RBI to impose significant fines and facilitating efficient recovery through civil courts and direct account debits, the provision ensures that entities comply with the regulatory framework. Furthermore, the dual penalty prohibition safeguards against unfair legal proceedings.
