Contravention by companies
Section 27 of the Securities and Exchange Board of India Act, 1992 deals with contravention by companies. [Contravention by companies].--(1) Where [a contravention of any of the provisions of this Act Act or any rule, regulation, direction or order made thereunder] an offence under this Act has been committed by a company, every person who at the time the [contravention] was committed was in charge of, The Act came into force on 30 Jan 1992.
1[Contravention by companies].--(1) Where 2[a contravention of any of the provisions of this Act Act or any rule, regulation, direction or order made thereunder] an offence under this Act has been committed by a company, every person who at the time the 3[contravention] was committed was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:
Provided that nothing contained in this sub-section shall render any such person liable to any punishment provided in this Act, if he proves that the 3[contravention] was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in sub-section (1), where an 3[contravention] under this Act has been committed by a company and it is proved that the 3[contravention] has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the 3[contravention] and shall be liable to be proceeded against and punished accordingly.
Explanation.--For the purposes of this section,--
(a) "company" means any body corporate and includes a firm or other association of individuals; and
(b) "director", in relation to a firm, means a partner in the firm.
Section 27, The Securities and Exchange Board of India Act, 1992 (Act 15 of 1992).
Related judgements & precedents
These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.
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Sunita Bhagat vs Sebi
Court's Decision & Legal Precedent
Section 12(1B) of the SEBI Act creates two classes of persons: (i) those who commenced collective investment activities prior to 25.1.1995 ('proviso category') who may continue until obtaining registration under the regulations; and (ii) those who did not ('non-proviso category') who are absolutely barred from commencing such activities until obtaining registration. The bar for the non-proviso category is self-executing and operative from 25.1.1995 regardless of when regulations are framed. However, criminal prosecution for regulatory non-compliance (such as failure to apply for registration under Regulation 5) requires that the accused was a director/officer of the company at the time the specific breach occurred. A director who resigned before the deadline for compliance cannot be prosecuted for breaches arising on or after the resignation date. The complaint must clearly disclose whether the accused is charged as a non-proviso category violator (commencing activity without authority) or merely as an existing operator who failed to comply with procedural regulations. Absence of such clarity, combined with the accused having exited before the breach date, renders prosecution unsustainable.
On this section: Vicarious criminal liability provision making directors of companies personally liable for offences committed by the company. Court held this applies only when person was 'in charge of and responsible for' the business 'at the time the offence was committed'. Resignation before the offence date excludes liability.
The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.
Made under this section, and citing it
1 instrument states that it was made under this provision — the power to make it comes from here, so a change to any of them changes what this section requires in practice. Newest first.
Questions about Section 27
What have the courts held on Section 27 of the Securities and Exchange Board of India Act?
Sunita Bhagat vs Sebi (15 Jul 2016) is the leading judgment on this section among those set out below: Vicarious criminal liability provision making directors of companies personally liable for offences committed by the company. Court held this applies only when person was 'in charge of and responsible for' the business 'at the time the offence was committed'. Resignation before the offence date excludes liability.
How do I find court cases under Section 27 of the Securities and Exchange Board of India Act?
In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: Sebi Act 27, section 27 Sebi Act, section 27 of the Securities and Exchange Board of India Act. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 1 reported judgment on this section is set out on this page, beginning with Sunita Bhagat vs Sebi (15 Jul 2016).
What should I read with Section 27 of the Securities and Exchange Board of India Act, and has it changed?
The rules and notifications made under it are where it actually bites, and there is one: most recently Companies (Prospectus and Allotment of Securities) Rules, 2014 (2014).
When did Section 27 of the Securities and Exchange Board of India Act come into force?
Section 27 of the Securities and Exchange Board of India Act, cited as Sebi Act 27, came into force on 30 Jan 1992, having been enacted on 04 Apr 1992. It is in force as at the date shown on this page.
Other sections of this Act
- 11. Functions of Board1315 words
- 11C. Investigation1145 words
- 12. Registration of stock-brokers, sub-brokers, share transfer agents, etc678 words
- 28A. Recovery of amounts629 words
- 15U. Procedure and powers of the Securities Appellate Tribunal494 words
- 15D. Penalty for certain defaults in case of mutual funds464 words
Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Text as in force on 17 Oct 2026. This page is not a substitute for legal advice.