9-21-406 - Invalid obligations.
9-21-406. Invalid obligations.
(a) Any note or promise to repay money (herein called obligation) issued or made under this chapter contrary to requirements precedent to the issuance of notes under this part and parts 5-8 of this chapter, as the case may be, shall not constitute a valid obligation of the local government and shall be subject to the restrictions and penalties of this section.
(b) No obligation described in subsection (a) which would be a valid obligation but for failure to comply with the requirements precedent to the issuance of such obligation shall be repaid until such requirements are met and the obligation approved by the state director of local finance. During any period in which the obligation has not met such requirements, the creditor (or holder) of such obligation shall forfeit any right to interest on such obligation.
(c) In any obligation issued after April 25, 1988, where the right to all or some of the interest has been forfeited by the creditor (or holder) of such obligation, the creditor (or holder) may be directed to repay to the state general fund any forfeited interest received by the creditor (or holder) by an order of an administrative law judge or a circuit or chancery court. The comptroller of the treasury on the comptroller's own initiative, or petition of any state agency, resident or taxpayer of the locality, may convene an administrative hearing, or the comptroller of the treasury or any resident or taxpayer of the locality may petition the circuit or chancery court.
[Acts 1986, ch. 770, § 4-6; 1988, ch. 798, § 1.]