Chapter VI OFFENCES AND PENALTIES

Offence of unregistered lending.—Any person or entity who carries on the business of lending loans in violation of Section 4 (without obtaining registration and compliance certification) shall be punishable with imprisonment for a term which may extend to three years, and with a fine which may extend to five lakh rupees, or with both.

Failure to comply with transparency and reporting requirements.—Any lender who

1. (a) fails to provide required disclosures, loan documentation, or receipts to borrowers under Section 5; or
2. (b) fails to establish a registered office, helpline, or deliver pre-loan disclosure under this Act; or
3. (c) fails to submit annual returns as required under section-5

1. (10) of this Act shall be punishable with a fine not less than ten thousand rupees but which may extend to one lakh rupees.

Prohibited coercive recovery practices.—Any lender or agent who engages in, facilitates, or attempts any form of coercive recovery in violation of Section 8 shall be punished

1. (a) for physical coercion, stalking, harassment, or threats under clauses (1),

1. (2) and
2. (6) of Section 7, with imprisonment up to three years or with fine up to five lakh rupees, or both;
   • (b) for acts involving digital coercion, misuse of identity, illegal surveillance, or intimidation through impersonation under clause
3. (3) of Section 7 or for seizure of essential documents or pressure on family and children under clause
4. (4) and
5. (5) of Section 7 with imprisonment up to five years or fine up to five lakh rupees, or both.

Abetment of suicide.—Where a borrower or their family member commits suicide, and it is proven that coercive recovery practices as defined in Section 7 were used immediately prior to such suicide, the lender or their agents shall be deemed to have abetted the suicide, and shall be punishable under Section 108 of the Bharatiya Nyaya Sanhita, 2023.

Punishment for repeat offenders.—Who ever having been previously convicted of an offence punishable under this Act; shall be punishable with imprisonment for a term which shall not be less than five years but which may extend to ten years and with fine which shall not be less than ten lakh rupees but which may extend to five crore rupees.

General penalty.—Any contravention of this Act or the rules made thereunder, for which no specific penalty is provided, shall be punishable with a fine up to ten thousand rupees.

Cognizable and Non-bailable Offence.— All offences under Sections 12, 14, 15 and 16 shall be cognizable and non-bailable except sections 13 and 17.

Corporate and institutional liability.—Where any violation under this Act is committed by a company, partnership firm, society, or other entity, every director, partner, manager, or officer who was in charge of and responsible for the conduct of business at the time of violation shall be deemed guilty of the violation and shall be liable for punishment, unless such person proves that the violation occurred without their knowledge and they exercised due diligence to prevent such violation.

Suspension or cancellation of registration upon conviction.—Upon conviction of any lender or agent under this Chapter, the Registering Authority shall suspend or cancel their compliance certification or registration under this Act.

Relief measures for affected borrowers.—

1. (1) Discharge of illegal and excessive loans.—All loans advanced by unregistered lenders, loans that violate the interest rate caps specified in this Act, loans obtained through coercive means, or loans that violate other provisions of this Act shall be deemed discharged to the extent of violation, and borrowers shall have no legal obligation to repay such excess amounts.
2. (2) Prohibition on civil recovery of illegal amounts.—No civil court, tribunal, authority, or arbitrator shall entertain any suit, application, petition, or proceeding for recovery of loans or amounts that are deemed discharged under sub-section (1), and all pending proceedings for recovery of such illegal amounts shall abate immediately upon determination of such illegality.
3. (3) Relief from excessive recovery.—Where any borrower has already repaid amounts exceeding the limits prescribed under this Act such borrower shall be entitled to refund of excess amounts with interest at the rate of twelve percent per annum from the Borrower Protection Fund or directly from the lender.