LEXIM ASSOCIATES Provisions of Payment & Settlement Systems Act, 2007 Jairam Chandnani January 05,...

LEXIM ASSOCIATESLEXIM ASSOCIATES

Provisions of Payment & Provisions of Payment & Settlement Systems Act, 2007Settlement Systems Act, 2007

Jairam ChandnaniJairam Chandnani

January 05, 2008January 05, 2008


Definition of Electronic Fund Definition of Electronic Fund Transfer (EFT)Transfer (EFT)

Section 2(1)(c) defines electronic fund transfer as Section 2(1)(c) defines electronic fund transfer as any transfer funds which is initiated by a person by any transfer funds which is initiated by a person by way of instructions, authorization or order to a way of instructions, authorization or order to a bank to debit or credit an account maintained with bank to debit or credit an account maintained with that bank through electronic means & included that bank through electronic means & included point of sale transfers, automated teller machine point of sale transfers, automated teller machine transactions, direct deposits or withdrawal of transactions, direct deposits or withdrawal of funds, transfer intimated by telephone, internet funds, transfer intimated by telephone, internet and card payment”and card payment”


Provisions Governing Dishonour of Provisions Governing Dishonour of EFTEFT

S.25 (1) states that “where an electronic funds transfer S.25 (1) states that “where an electronic funds transfer initiated by a person from an account maintained by him initiated by a person from an account maintained by him cannot be executed on the ground that the amount of cannot be executed on the ground that the amount of money standing to the credit of that account is insufficient money standing to the credit of that account is insufficient to honour the transfer instruction or that it exceeds the to honour the transfer instruction or that it exceeds the amount arranged to be paid from that account by an amount arranged to be paid from that account by an agreement made with the bank, such person shall be agreement made with the bank, such person shall be deemed to have committed an offence and shall without deemed to have committed an offence and shall without prejudice to any other provisions of this act be punished prejudice to any other provisions of this act be punished with imprisonment for a term which may extend to two with imprisonment for a term which may extend to two years or with fine which may extend to twice the amount of years or with fine which may extend to twice the amount of the electronic funds transferred or with both”the electronic funds transferred or with both”


Requisites for initiating action Requisites for initiating action against dishonour of EFTagainst dishonour of EFT

1.1. The EFT was initiated for payment of any amount of The EFT was initiated for payment of any amount of money to another person for the discharge, in whole or in money to another person for the discharge, in whole or in part, of any debt or other liability;part, of any debt or other liability;

2.2. The EFT was initiated in accordance with the relevant The EFT was initiated in accordance with the relevant procedural guidelines issued by the system provider;procedural guidelines issued by the system provider;

3.3. The beneficiary makes a demand for the payment of the The beneficiary makes a demand for the payment of the said amount of money by giving a notice in writing to the said amount of money by giving a notice in writing to the person initiating the EFT within 30 days of the receipt of person initiating the EFT within 30 days of the receipt of information by him from the bank concerned regarding information by him from the bank concerned regarding the dishonour of the EFT; andthe dishonour of the EFT; and

4.4. The person initiating the EFT fails to make the payment The person initiating the EFT fails to make the payment of the said money to the beneficiay within 15 days of the of the said money to the beneficiay within 15 days of the receipt of the said noticereceipt of the said notice


Provisions of Chapter XVII of the NI Provisions of Chapter XVII of the NI Act to applyAct to apply

S. 25 (5) of the act provides that provisions S. 25 (5) of the act provides that provisions of chapter XVII of the Negotiable of chapter XVII of the Negotiable Instruments Act, 1881 (26 of 1881), shall Instruments Act, 1881 (26 of 1881), shall apply to the dishonour of EFT to the extent apply to the dishonour of EFT to the extent the circumstances permit.the circumstances permit.


Presumption u/s 25(2)Presumption u/s 25(2)

U/s 25(2) of the said act “it shall be U/s 25(2) of the said act “it shall be presumed, unless the contrary is proved, presumed, unless the contrary is proved, that the electronic funds transferred was that the electronic funds transferred was initiated for the discharge, in whole or in initiated for the discharge, in whole or in part, of any debt or other liabilty.part, of any debt or other liabilty.


Cognizance of offenceCognizance of offence

S. 28(1) states that no court shall take cognizance S. 28(1) states that no court shall take cognizance of offence punishable under this act except upon a of offence punishable under this act except upon a complaint in writing made by an officer of the RBI complaint in writing made by an officer of the RBI generally or especially authorised by it in writing in generally or especially authorised by it in writing in this behalf and no court, lower than that of a this behalf and no court, lower than that of a Metropolitan Magistrate or a Judicial Magistrate of Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any such offencethe first class shall try any such offence– Provided that the court make take cognizance of the Provided that the court make take cognizance of the

offence punishable u/s 25 upon a complaint in writing offence punishable u/s 25 upon a complaint in writing make by the person aggrieved by the dishonour of the make by the person aggrieved by the dishonour of the EFT.EFT.


PunishmentPunishment

A person committing offence u/s 25 of this A person committing offence u/s 25 of this act shall without prejudice to any other act shall without prejudice to any other provisions of this act be punished with provisions of this act be punished with imprisonment for a term which may extend imprisonment for a term which may extend to two years or with fine which may extend to two years or with fine which may extend to twice the amount of the electronic funds to twice the amount of the electronic funds transferred or with both.transferred or with both.


Documents required for filing Documents required for filing complaintcomplaint

1.1. Copy of instructions, authorization or order Copy of instructions, authorization or order to a bank to debit or credit account of the to a bank to debit or credit account of the borrower.borrower.

2.2. Intimation of dishonour of EFT.Intimation of dishonour of EFT.

3.3. Copy of Demand Notice along with postal Copy of Demand Notice along with postal receipts and proof of Delivery thereof.receipts and proof of Delivery thereof.

4.4. Power of attorney for complainant officer. Power of attorney for complainant officer.


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LEXIM ASSOCIATES Provisions of Payment & Settlement Systems Act, 2007 Jairam Chandnani January 05,...

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