Pl read this and advise whether a NBFC which is not registered with RBI can do business of lending finance and will monies so advanced treated as legally enforceable debt if cheque bounces.
By Act 23 of 1997 which came into effect on 9-1-1997, Section 45IA was added to the RBI Act, 1934, which made it mandatory that no non-banking financial company shall commence or carry on the business of a non-banking financial institution without–
(a) obtaining a certificate of registration; and
(b) having the net owned fund of twenty-five lakh rupees or such other amount, not exceeding two hundred lakh rupees, as the Bank may, by notification in the Official Gazette, specify. Penalty and punishment for contravention of this provision has been written in
The said company has not complied with any of the two provisions of law.
Section 58B(4A) of the RBI Act, 1934, reads as follows:
If any person contravenes the provisions of sub-section (1) of section 45-IA, he shall be punishable with imprisonment for a term which shall not be less than one year but which may extend to five years and with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.
6) In addition, a NBFC is under legal obligation to submit to RBI every year the certified true copies of the audited balance sheet and profit and loss account together with a copy of the report of the Board of Directors within 15 days from the date of annual general meeting at which these accounts are passed. Non compliance with these obligations would attract penal provisions contained in section 58B(2) read with section 58G of the RBI Act, 1934, for delay or non-submission of the returns. Failure to file the return within the stipulated date is punishable with fine which may extend to Rs.2000 and if the default persists with further fine which may extend to Rs.100 for every day. The fine is leviable on both the company and its Directors. The company is obliged to file “NIL” returns even if it has not done any business in a particular year.