Section 27 of the SARFAESI Act, 2002: Penalties

Section 27 appears in Chapter V (Offences and Penalties) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Although it originally prescribed a continuing daily fine for specified failures to report transactions to the Central Registry, a proviso inserted by the 2016 amendment provides for the section to be deemed omitted from the specified commencement date. It should therefore not be read as an ordinary, currently operative daily-fine provision.

Section 27: Statutory text and omission proviso

If a default is made—

(a) in filing under section 23, the particulars of every transaction of any securitisation or asset reconstruction or security interest created by an asset reconstruction company or secured creditors; or

(b) in sending under section 24, the particulars of the modification referred to in that section; or

(c) in giving intimation under section 25,

every company and every officer of the company or the secured creditors and every officer of the secured creditor who is in default shall be punishable with fine which may extend to five thousand rupees for every day during which the default continues:

Proviso (inserted by Act 44 of 2016): Provided that provisions of this section shall be deemed to have been omitted from the date of coming into force of the provisions of this Chapter and section 23 as amended by the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016 (44 of 2016).

Current-law reading: The 2016 proviso qualifies the earlier penalty text and directs its deemed omission upon the stated commencement condition. Historical liability, any savings, and the operative dates of relevant notifications must be assessed separately for the period of an alleged default.

What did Section 27 originally penalise?

Failure to file a transaction: Section 23

Section 23 concerns filing particulars of securitisation, asset reconstruction and creation of security interests with the Central Registrar, in the prescribed manner and subject to the applicable rules and fees.

Failure to report a modification: Section 24

Section 24 addresses changes to the terms, conditions, extent or operation of a registered security interest. The relevant asset reconstruction company or secured creditor must send particulars of the modification for registration.

Failure to report satisfaction: Section 25

Section 25 provides for reporting full payment or satisfaction of a registrable security interest, ordinarily within thirty days. It also prescribes procedures for entries in the Central Register.

Effect of the 2016 amendment

The Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016 (Act 44 of 2016), section 19, inserted the proviso to Section 27 with effect from 1 September 2016. The proviso ties deemed omission to the commencement of the relevant amended Chapter and Section 23. Accordingly, reproducing the former fine of up to Rs. 5,000 per day without explaining the proviso would misstate the present statutory framework.

The 2016 legislation also omitted Section 28 (previously titled penalties for non-compliance with directions of the Reserve Bank), by section 20 of Act 44 of 2016 with effect from 1 September 2016. Other enforcement and penalty provisions must be examined on their own terms rather than treating the historical Section 27 fine as universally applicable.

Related offences and adjudication provisions

Section 29 deals with offences for contravention or attempted contravention of the Act or rules, while Section 30 concerns cognizance of offences. Section 30A provides a distinct adjudicatory penalty mechanism, Sections 30B and 30C concern appeals and the appellate authority, and Section 30D addresses recovery of penalties. Their statutory scope, procedures and conditions are separate from the former Section 27 daily fine.

Amendment history

Act 44 of 2016, section 3: substituted the term "asset reconstruction company" for the former references to securitisation or reconstruction companies, effective 1 September 2016.
Act 44 of 2016, section 19: inserted the deemed-omission proviso to Section 27, effective 1 September 2016.
Act 44 of 2016, section 20: omitted Section 28, effective 1 September 2016.

Official legal sources

For a particular transaction or alleged default, verify the current consolidated statutory text, the relevant commencement notification and the Security Interest (Central Registry) Rules, 2011, as amended.