Section 30D SARFAESI Act: Recovery of Penalties by RBI
Section 30D of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) sets out how the Reserve Bank of India (RBI) may recover a monetary penalty imposed under Section 30A. This is a statutory process for recovering regulatory penalties, not the ordinary process for recovering secured loans.
Meaning and scope
A recoverable sum means a penalty imposed under Section 30A and recoverable under Section 30D. The expression person in default must be understood with the explanation to Section 30A, which covers an asset reconstruction company or another person responsible for a relevant failure, contravention or default.
Section 30D explained, sub-section by sub-section
30D(1): Recovery following demand notice
If payment is not made within 30 days after service of the demand notice, the RBI may (a) debit any current account of the person in default maintained with the RBI or liquidate securities held to that person's credit in RBI books; or (b) direct a third party owing money to that person to deduct an amount equivalent to the recoverable sum from money payable and pay it to the RBI.
30D(2): Binding effect of notice
Subject to sub-section (4), a third-party notice is binding. Where issued to a post office, bank or insurance company, production of a passbook, deposit receipt, policy or similar document is not necessary for payment notwithstanding contrary practices or requirements.
30D(3): Claims arising after notice
Claims concerning an amount that arise after the notice is issued are void as against the demand contained in the notice. The effect is specific to that statutory demand.
30D(4): Objection on oath
A third party may object by a statement on oath that the sum demanded, or a part of it, is not due to the person in default or that the third party holds no money for or on account of that person. In that case, the provision does not require payment of the disputed amount.
30D(5): False sworn objection
If the statement is materially false, the third party is personally liable to the RBI up to the lesser of the third party's own liability to the person in default on the date of notice and the recoverable sum.
30D(6): Changes to notice
The RBI may amend or revoke a notice or extend the time for payment.
30D(7): RBI receipt and discharge
The RBI must give a receipt for payment made under the notice. The person paying is discharged from liability to the person in default to the extent paid to the RBI.
30D(8): Paying the defaulter despite notice
Someone who discharges a liability to the person in default after receiving the notice is personally liable to the RBI up to the lesser of the amount discharged and the recoverable sum.
30D(9): Third party's failure to pay
A notice recipient who fails to pay the RBI as required is deemed a person in default for the specified amount and may face the recovery procedure under this section.
30D(10): Principal civil court enforcement
The RBI may recover the amount through the principal civil court having jurisdiction where the defaulter's registered office, head office, principal place of business or usual residence is situated, as if the RBI notice were a decree of that court.
30D(11): Authorised officer's application
Recovery through the court under sub-section (10) requires an application by an authorised RBI officer certifying that the person in default has failed to pay.
Practical compliance and legal safeguards
- Check the underlying penalty order under Section 30A and the precise recoverable amount.
- Preserve proof of the date the demand notice was served, since the 30-day period runs from service.
- If a third-party notice is issued, identify the actual amount payable to the person in default and any grounds for a truthful sworn objection under sub-section (4).
- Keep evidence of payment, the RBI's receipt, any amendment or revocation, and any applicable appellate stay.
Relationship with appeal and penalty provisions
Section 30A governs imposition of penalties. Section 30B permits appeals against the order specified there; Section 30C empowers the Appellate Authority to grant a stay subject to terms. Merely filing an appeal should not be assumed to stay recovery automatically. Sections 29 and 30 separately address criminal offences and cognizance.
Legislative background
Section 30D was inserted by the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016 (Act 44 of 2016), in the framework for adjudication, appeal and recovery of regulatory penalties.
Frequently asked questions
When must a Section 30D penalty be paid?
Within 30 days from the date of service of the notice demanding the recoverable sum.
Can RBI require another person to pay?
Yes, where a third party owes money to the defaulter, subject to the notice, sworn objection and liability safeguards in Section 30D.
Can the RBI enforce the penalty through a civil court?
Yes. Sub-sections (10) and (11) permit enforcement through the principal civil court following an authorised RBI officer's application and certification.
Official sources
Consult India Code for the statute, e-Gazette of India for notifications and amendments, and the Reserve Bank of India for applicable regulatory directions.
General legal information; consult the current statute, relevant orders and notices for a particular case.