Offences and Penalties under the SARFAESI Act

An enforcement statute needs sanctions to back its duties, and Chapter V supplies them. A default in registering a security interest with the Central Registry draws a penalty; a broader contravention of the Act or the rules is an offence punishable with imprisonment or fine. The Act also fixes which court may try an offence and how cognizance is taken. This note sets out the penalty for default in filing, the general offence, and the cognizance of offences.

1. Penalty for Default in Filing

Figure 1: Backing the duty to register

• Penalty for default, s.27. Failure to file the particulars, a modification, or the satisfaction of a security interest with the Central Registry attracts a penalty.
• A continuing default. The penalty is framed to bite for the period of default, so a persisting failure to register is not treated as a one-time lapse.
• Backs the duty to register. The penalty gives teeth to the registration duties under ss.23 to 25, so filing is enforced, not merely expected (Topic 42)
• Civil-penalty route, 2016. The 2016 amendment added an adjudicating authority empowered to impose such penalties, with an appeal against its orders, a civil track beside prosecution.

2. The General Offence

Figure 2: Contravention of the Act or the rules

• General offence, s.29. A person who contravenes, attempts to contravene, or abets the contravention of the Act or the rules is punishable.
• The punishment. Imprisonment for a term which may extend to one year, or with fine, or with both, for the contravention.
• Officers of a company. Where the offender is a company, the persons in charge of and responsible for its business may also be held liable in the usual way.
• A deterrent, not the engine. Prosecution is a backstop; the Act's real force lies in enforcement and registration, with the offences guarding the edges.

3. Cognizance of Offences

Figure 3: Who tries an offence, and how it starts

• Who tries it, s.30. No court inferior to a Metropolitan Magistrate or a Judicial Magistrate of the First Class shall try an offence under the Act.
• On complaint. Cognizance is taken on a complaint in writing by an officer authorised for the purpose, not by a private party at large.
• Civil penalties separately. Defaults in registration are dealt with as civil penalties by the adjudicating authority, apart from criminal prosecution under s.29.
• A measured scheme. The two tracks, a civil penalty for registration defaults and a criminal offence for contravention, keep the sanctions proportionate to the wrong.

4. Frequently Asked Questions

What is the penalty for failing to register a security interest with the Central Registry?

Under Section 27, a default in filing the particulars of a security interest, a modification of it, or its satisfaction with the Central Registry attracts a penalty, which is framed to bite for the period during which the default continues rather than as a one-time fine. The penalty backs the registration duties under Sections 23 to 25, ensuring that filing is actually enforced. The 2016 amendment added an adjudicating authority empowered to impose such penalties, with an appeal against its orders, so defaults in registration are now dealt with largely through this civil-penalty route, separate from criminal prosecution for a contravention of the Act.

What is the punishment for contravening the SARFAESI Act, and who can try the offence?

Under Section 29, a person who contravenes, attempts to contravene, or abets the contravention of the Act or the rules made under it is punishable with imprisonment for a term which may extend to one year, or with fine, or with both. Where the offender is a company, the persons in charge of and responsible for the conduct of its business may also be held liable. Under Section 30, an offence under the Act can be tried only by a court not inferior to a Metropolitan Magistrate or a Judicial Magistrate of the First Class, and cognizance is taken on a complaint in writing made by an officer authorised for the purpose, not on a private complaint at large.

5. Related Topics

• Topic 42: Registration of Security Interests with CERSAI. The registration duties Section 27 backs.
• Topic 33: Sections 16 and 32 Protections. The good-faith shield for lawful acts.