Factoring Regulation Act, 2011- Sections 21 to 35 and Schedule

Chapter VI

OFFENCES AND PENALTIES

21. Penalties.

21. Penalties.—If a default is made in filing under Section 19 the particulars of any transaction of assignment of receivables and realisation of receivables by a factor, such company and every officer of the company who is in default shall be punishable with fine which may extend to five thousand rupees for every day during which the default continues.

22. Penalties for non-compliance of direction of Reserve Bank.

22. Penalties for non-compliance of direction of Reserve Bank.—(1) If any factor fails to comply with any direction issued by the Reserve Bank under Section 6, the Reserve Bank may impose a penalty which may extend to five lakhs rupees and in the case of a continuing offence, with an additional fine which may extend to ten thousand rupees for every day during which the default continues.

(2) For the purpose of adjudging the penalty under sub-section (1), the Reserve Bank shall serve notice on the factor requiring it to show cause why the amount specified in the notice should not be imposed and a reasonable opportunity of being heard shall also be given to such factor.

(3) Any penalty imposed by the Reserve Bank under this section shall be payable within a period of fourteen days from the date on which notice issued by the Reserve Bank demanding payment of the sum is served on the factor and in the event of failure of the factor to pay the sum within such period, may be levied on a direction made by the principal civil court having jurisdication in the area where the registered office of the factor is situated; or, in the case of a factor incorporated outside India, where its principal place of business in India is situated:

Provided that no such direction shall be made except on an application made to the court by the Reserve Bank or any officer authorised by Reserve Bank in this behalf.

(4) The court which makes a direction under sub-section (3) shall issue a certificate specifying the sum payable by the factor and every such certificate shall be enforceable in the same manner as if it were a decree made by the court in a civil suit.

23. Offences.

23. Offences.—If any person contravenes or attempts to contravene or abets the contravention of the provisions of this Act or of any rules made thereunder, for which no specific penalty has been provided for, he shall be punishable with imprisonment for a term which may extend to one year, or with fine, or with both.

24. Cognizance of offences.

24. Cognizance of offences.—(1) No court shall take cognizance of any offence punishable under this Act except upon a complaint in writing made by an officer of the Reserve Bank, generally or specially authorised in writing in this behalf by the Reserve Bank.

(2) No court other than that of a Metropolitan Magistrate or a Judicial Magistrate of the first class or a court superior thereto shall try any such offence punishable under this Act.

25. Offences by factors.

25. Offences by factors.—(1) Where an offence under this Act has been committed by a factor, every person who at the time the offence was committed was in charge of, and was responsible to, the factor, for the conduct of the business of the factor, as well as the factor, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall render any such person liable to any punishment provided in this Act, if he proves that the offence was committed without his knowledge or that he has exercised all due diligence to prevent the commission of such offence.

(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a factor and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of any director, manager, secretary or other officer of the factor, such director, manager, secretary or other officer shall also be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.

Explanation.—For the purpose of this section, a “director”, in relation to a factor means any officer entrusted with the management of the whole or substantially the affairs of the factor.

Chapter VII

MISCELLANEOUS

26. Provisions of this Act to override other laws.

26. Provisions of this Act to override other laws.—The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.

27. Application of other laws not barred.

27. Application of other laws not barred.—The provisions of this Act or the rules made thereunder shall be in addition to and not in derogation of the Negotiable Instruments Act, 1881 (26 of 1881), the Transfer of Property Act, 1882 (4 of 1882), the Reserve Bank of India Act, 1934 (2 of 1934), the Banking Regulation Act, 1949 (10 of 1949), the Companies Act, 1956 (1 of 1956), the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006) or any other law for the time being in force.

28. Limitation.

28. Limitation.—No assignee of any receivable shall be entitled to take any measures for recovery of any assigned receivable, through any court or Tribunal unless his claim in respect of the receivable is made within the period of limitation specified under the Limitation Act, 1963 (36 of 1963).

29. Confidentiality of information.

29. Confidentiality of information.—Save as otherwise provided in this Act, or unless required to do so by an order passed by any court or Tribunal or any other statutory authority under any provision of law for the time being in force or for the purpose of recovery of the receivable, a factor shall maintain confidentiality and shall not disclose to any person information obtained by it from, any assignor, its present and future customers, its commercial and business activities and the terms of sale between the assignor and any debtor and other detail about the assignor.

30. Power to exempt.

30. Power to exempt.—(1) The Central Government may, by notification in the public interest, direct that any of the provisions of this Act,—

(a) shall not apply to such class or classes of banks or a company or a factor; or

(b) shall apply to such class or classes of banks or a company or a factor with such exceptions, modifications and adaptations as may be specified in the notification.

(2) A copy of every notification issued under sub-section (1), shall be laid before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the notification or both the Houses agree that the notification shall not be issued or, the notification shall have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under the notification.

31. Provisions of this Act not to apply or affect in certain cases.

31. Provisions of this Act not to apply or affect in certain cases.—(1) The provisions of this Act shall not apply to any assignment of receivables arising under or from the following transactions, namely—

(a) any merger, acquisition or amalgamation of business activities or sale or change in the ownership or legal status of the business;

(b) transactions on any stock exchange or commodities exchange regulated by the Securities and Exchange Board of India constituted under the provisions of the Securities and Exchange Board of India Act, 1992 (15 of 1992), or by the Forward Markets Commission under the Forward Contracts (Regulation) Act, 1952 (74 of 1952), respectively;

(c) financial contracts governed by netting agreements, except a receivable owed on the termination of all outstanding transactions;

(d) foreign exchange transactions except receivables in any foreign currency;

(e) inter-bank payment systems, inter-bank payment agreements or clearance and settlement systems relating to securities or other financial assets or instruments;

(f) bank deposits;

(g) a letter of credit or independent guarantee;

(h) rights and obligations of any person under the law governing negotiable instruments, negotiable warehouse receipts under the Warehousing (Development and Regulation) Act, 2007 (37 of 2007) or to instruments which are for the time being, by law or custom negotiable or any mercantile document of title to goods;

(i) sale of goods or services for any personal, family or household use;

(j) any assignment of loan receivables by a bank or non-banking financial company to another bank or non-banking financial company;

(k) securitisation transactions (including assignment of receivables to special purpose vehicles or trusts that issue securities against such receivables, bought from a single debtor or single group of debtors).

(2) Nothing contained in this Act shall affect the rights and obligations of a consumer, manufacturer, trader or service provider under the provisions of the Consumer Protection Act, 1986 (68 of 1986).

32. Power of Central Government to make rules.

32. Power of Central Government to make rules.—(1) The Central Government may, in consultation with the Reserve Bank, by notification and in the Electronic Gazette as defined in clause (5) of sub-section (1) of Section 2 of the information Technology Act, 2000 (21 of 2000) make rules for carrying out the provisions of this Act.

(2) In particular and without prejudice to the generality of the foregoing power such rules may provide for all or any of the following matters, namely—

(a) the form and manner in which the transactions of assignment of receivables in favour of a factor shall be filed and the fee for filing such transaction under sub-section (1) of Section 19.

(b) the form and manner in which satisfaction of assignment of receivable or settlement of the claim shall be registered and the fee for filing such transactions under sub-section (3) of Section 19;

(c) fee for inspecting the Central Register under Section 20; and

(d) any other matter which is required to be or may be prescribed, in respect of which provision is to be made or may be made by rules.

33. Laying of rules.

33. Laying of rules.—Every rule made under this Act shall be laid, as soon as may be after it is made, before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.

34. Power to remove difficulties.

34. Power to remove difficulties.—(1) If any difficulty arises in giving effect to the provisions of this Act, the Central Government may, by order published in Official Gazette, make such provisions not inconsistent with the provisions of this Act, as may appear to be necessary for removing the difficulty:

Provided that no order shall be made under this section after the expiry of a period of two years from the commencement of this Act.

(2) Every order made under this section shall be laid, as soon as may be, after it is made, before each House of Parliament.

35. Amendments to certain enactments.

35. Amendments to certain enactments.—The enactments specified in the Schedule shall be amended in the manner specified therein.

The Schedule

THE SCHEDULE

(See Section 35)

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