Mannappuram Finance

 The Reserve Bank of India (RBI) has imposed monetary penalty on the following two Payment System Operators (PSOs) for non-compliance with certain provisions of the Master Direction – Know Your Customer (KYC) Direction, 2016 dated February 25, 2016 (as updated from time to time).

S.No.	Name of the PSO	Speaking Order dated	Amount of Penalty (₹ lakh)
1	Manappuram Finance Limited	July 16, 2024	41.50
2	Ola Financial Services Pvt. Ltd.	July 16, 2024	33.40

Compounding Orders were also issued to two PSOs i.e. Ola Financial Services Pvt. Ltd. and Visa Worldwide Pte. Limited, for contravention of certain provisions contained in the Master Directions on Prepaid Payment Instruments (PPIs) dated August 27, 2021 (as updated from time to time) and Card Not Present transactions – Relaxation in Additional Factor of Authentication for payments upto ₹2000/- for card network provided authentication solutions dated December 06, 2016, respectively.

S.No.	Name of the PSO	Compounding Order dated	Compounding Amount (₹ lakh)
1	Ola Financial Services Pvt. Ltd.	July 05, 2024	54.15
2	Visa Worldwide Pte. Limited	July 16, 2024	240.75

The above actions have been taken in exercise of powers vested in RBI under the provisions of Section 30 and Section 31 of the Payment and Settlement Systems Act, 2007 and are based on deficiencies in regulatory compliance and are not intended to pronounce upon the validity of any transaction or agreement entered into by the entity with its customers.

Background

Manappuram Finance Limited and Ola Financial Services Pvt. Ltd.

Both the entities were non-compliant with the directions issued by RBI on KYC requirements. Accordingly, notices were issued to the entities advising them to show cause as to why penalty should not be imposed for non-compliance with the directions. After considering their written responses and the oral submissions made during the personal hearing, RBI concluded that the aforesaid charges of non-compliance with RBI directions were substantiated and warranted imposition of monetary penalty.

Further, Ola Financial Services Pvt. Ltd. had also reported instances of shortfall in the balance in its escrow account and filed an application for compounding of the violation. After analysing the compounding application and oral submissions made during the personal hearing, RBI determined that the aforementioned contravention can be compounded.

Visa Worldwide Pte. Limited

It was observed that the entity had implemented a payment authentication solution without regulatory clearance from RBI. Accordingly, notice was issued to the entity advising it to show cause as to why penalty should not be imposed for non-compliance with the directions. The entity in its response had filed an application for compounding of the violation. After analysing the compounding application and oral submissions made during the personal hearing, RBI determined that the aforementioned contravention can be compounded.

Muthoot Finance

 The Reserve Bank of India (RBI) has, by an order dated July 15, 2024, imposed a monetary penalty of ₹1,90,000/- (Rupees One Lakh Ninety Thousand only) on Muthoot Finance Limited (the company) for non-compliance with certain provision of ‘Know Your Customer (KYC) Directions, 2016’ issued by RBI. 

The statutory inspection of the company was conducted by RBI with reference to its financial position as on March 31, 2022. Based on supervisory findings of non-compliance with RBI directions and related correspondence in that regard, a notice was issued to the company advising it to show cause as to why penalty should not be imposed on it for its failure to comply with the said directions.

After considering the company’s reply to the notice, oral submissions made by it during the personal hearing, RBI found, inter alia, that the charge of allotting more than one Unique Customer Identification Code (UCIC) to its individual customers was sustained, warranting imposition of monetary penalty.

This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the company with its customers. Further, imposition of this monetary penalty is without prejudice to any other action that may be initiated by RBI against the company.

payment and settlement systems

RBI circular dated 10th January 2020 follows, for laying down framework for imposing monetary penalty on authorised payment system operators/ banks under the Payment and Settlement Systems Act, 2007.

Some of violations are compoundable offences so procedure for dealing with that also mentioned in this circular.

https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=11785&Mode=0

MCA filings - Penalties for late filings.

Section 403 of the Companies Act, 2013 is a wake up call for companies in India. Not any more they can afford to relax and file documents months and years after they are supposed to do so.

Section 403(1) provides that documents should be submitted, filed, registered or recorded within the time specified in the relevant section for the same. For eg. most of the forms require to be filed within 30 days of the event, save for a few provisions such as Auditors appointment within 15 days, annual return within 60 days and charge registration/ modification within 300 days of the event.

The first proviso to section 403(1) provides for additional time within which the documents can be filed by paying additional filing fees. This additional period is 270 days beyond the original period of filing. Therefore in most cases a 300 days period is given for filing the document by paying the normal fees and additional filing fees.

The second proviso to section 403(1) provides that such documents can be filed beyond the said 300 days but it says "without prejudice to any other legal action or liability under the Act"

Section 403(2) provides that where the company fails to submit/ deliver the documents within the time specified including the additional time given, the company and every officers of the company shall be liable for penalty or punishment provided under the Act. This is apart from the fees and additional filing fees payable by the company for filing the document.

The various sections give different penalties for delayed filing beyond the normal period and additional period given thereunder, for eg.

1) delayed filing of annual return under section 92 is liable for a penalty of minimum Rs.50,000 but which may extend to Rs.5 lakhs and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than Rs.50,000/- but which may extend to Rs.5 lakhs or with both;
2) for failure to file documents required under section - minimum penalty is Rs.5 lakhs but which may extend to Rs.25 lakhs for the company and every officer of the company who is in default shall be punishable with fine which shall be minimum Rs.1 lakh but which may extend to Rs.5 lakhs;
3) Audited financial statements under section 137 - Fine of Rs.1000/- per day during which the failure continues but which shall not be more than Rs.10 lakhs and MD and CFO (or in the absence of MD/ CFO, any director who is charged by the Board of complying with this section, or in the absence of any such director, all directors of the company) shall be punishable with imprisonment for a term which may extend to six months or with fine, which shall not be less than Rs.1 lakh but which may extend to Rs.5 lakhs or both;

Apparently the system will not allow filings to take place after the period stipulated in section 403 unless the company applies for a an application for condonation of delay with the prescribed authorities which in this case is the REgistar of Companies of the respective jurisdiction.

Therefore Compliance is the Need of the Hour for every company in India. Gone are the days when the companies can sleep for years on end without doing any filings whatever.