Section 30A of the SARFAESI Act, 2002 equips the Reserve Bank with a powerful tool to ensure asset reconstruction companies (ARCs) and other players toe the line: the penalty hammer. If an ARC or any individual disobeys the Bank's directives under the Act, they can face some serious financial consequences.
Right here's the way it works:
- Disobey, and pay the charge: The bank can slap a penalty of as much as Rs. 1 crore on the offender. If the disobedience involves quantifiable amounts, like failing to repay a loan, the penalty can double that amount. And for those who like to drag their feet, there's an additional daily penalty that can pile on even more rupees.
- Fairness first: Before the penalty hammer falls, the accused gets a chance to defend themselves. The Bank issues a show-cause notice, basically asking, "Why shouldn't you be penalized?" This ensures everyone gets a fair hearing.
- Pay up on time or face closure: The penalty has to be paid within 30 days. If an ARC fails to comply, the Bank can take the ultimate step: canceling their registration. No more playing in the debt recovery game for them! Of course, the ARC gets a chance to explain itself before this final blow is delivered.
- One bite at the apple: If the Bank levies and collects a penalty, the offender can't be dragged to court for the same offense. No double jeopardy here! But if a court case is already underway, the Bank's penalty powers are put on hold.
- This section sends a clear message: playing fast and loose with debt recovery has its price. It empowers the Reserve Bank to maintain order and protect the integrity of the system.
The section also clarifies some key terms:
- Adjudicating authority: This fancy term simply means the designated Bank official or committee who decides on penalties.
- Person in default: Anyone who disobeys the Act, including ARCs, individuals, and even those responsible for managing such entities, can face the consequences.
In essence, Section 30A acts as a financial watchdog, ensuring smooth debt recovery processes and deterring non-compliance through its potent penalty powers. It promotes accountability, fairness, and ultimately, a well-functioning financial ecosystem
