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Section 28: Offences by companies

Micro, Small and Medium Enterprises Development Act, 2006 • Official Statutory Text & Practice Guide

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Act 27 of 2006
Section 27 All 32 Sections of MSMED Act Section 29
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Legal Commentary & Landmark Judgments: Section 28

Section 28 delineates corporate criminal liability and vicarious liability of directors, managers, secretaries, and other officers for offences committed by companies under the MSMED Act.

  • Primary Corporate Liability: Where an offence under the Act has been committed by a company, the company as a distinct legal juristic entity is deemed guilty and liable to be proceeded against and punished.
  • Vicarious Liability of Officers in Charge: Every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of its business, is equally deemed guilty under Section 28(1).
  • Statutory Proviso (Due Diligence Defense): Exonerates an officer who proves that the offence was committed without their knowledge, or that they exercised all due diligence to prevent the commission of such offence.
  • Specific Managerial Consent or Neglect: Section 28(2) fastens individual liability on any director, manager, secretary, or other officer where the offence was committed with their consent, connivance, or is attributable to their neglect.
Key Landmark Precedents:
  • SMS Pharmaceuticals Ltd. v. Neeta Bhalla (2005) 8 SCC 89: The Supreme Court 3-Judge Bench established that to fasten vicarious liability on a director under statutory provisions mirroring Section 28, there must be specific and unequivocal averments in the complaint detailing the exact role and responsibility of the director in the conduct of corporate business.
  • Sunil Bharti Mittal v. CBI (2015) 4 SCC 609: Reaffirmed that a director cannot be held vicariously liable for an offence committed by a company purely by virtue of holding an executive position; vicarious liability must be strictly provided by statute and supported by specific factual allegations.
  • Dayle De'Souza v. Union of India (2021 SCC OnLine SC 1002): Held that prosecution of directors without arraigning the company as an accused is non-maintainable where corporate liability is the foundation of vicarious culpability.
Courtroom Practice & Strategic Litigation Guidance:

In any criminal complaint or prosecution under Section 28, ensure that the company itself is named as Accused No. 1. If representing an independent or non-executive director, move for quashing under Section 482 CrPC (or Section 528 BNSS) citing SMS Pharmaceuticals and Sunil Bharti Mittal where the complaint fails to plead specific day-to-day managerial involvement.

Section 27 All 32 Sections of MSMED Act Section 29