Section 58C of the RBI Act, 1934: Offences by Companies

Section 58C of the Reserve Bank of India Act, 1934 explains when a company and the individuals responsible for its business may be prosecuted for contraventions or defaults. It operates with Section 58B (Penalties) and sets out a defence of lack of knowledge or due diligence.

Meaning and scope of Section 58C

The provision addresses liability for an offence or default by a company, including certain non-banking institutions, firms, co-operative societies and associations. It distinguishes responsibility for the conduct of the business under sub-section (1) from participation through consent, connivance or neglect under sub-section (2). It does not, by itself, specify the punishment: the underlying offence and applicable penalty must be identified under the Act.

Section 58C(1): Company and persons in charge

Where a company commits a contravention or default referred to in Section 58B, both the company and every person who, at the relevant time, was in charge of and responsible to the company for the conduct of its business are deemed guilty and may be proceeded against and punished accordingly.

Statutory defence: Such a person is not liable to punishment if that person proves that the contravention or default occurred without their knowledge or that they exercised all due diligence to prevent it. Merely holding a designation does not replace examination of the statutory conditions and the person's actual responsibilities.

Section 58C(2): Consent, connivance or neglect

Independently of sub-section (1), where an offence under the Act is committed by a company and it is proved to have occurred with the consent or connivance of, or to be attributable to neglect by, a director, manager, secretary, other officer or employee, that individual is also deemed guilty and may be prosecuted and punished. This requires the relevant consent, connivance or neglect to be established.

Explanation 1: Place of commission of offence

An offence punishable under the Act is deemed to have been committed at the place in India where the company's registered office or, as applicable, principal place of business is situated. This statutory deeming rule is relevant when considering the place of the offence; other procedural requirements must also be considered.

Explanation 2: Definitions

Company: Any body corporate, including a corporation, non-banking institution, firm, co-operative society or other association of individuals.

Director: In relation to a firm, the term means a partner of the firm.

Practical application of the provision

1. Identify the underlying breach: Determine the specific obligation, order, regulation or direction breached and the applicable provision of Section 58B.
2. Establish the entity's role: Identify the company or other entity covered by Explanation 2.
3. Examine individual responsibility: For sub-section (1), examine who was in charge of and responsible for the conduct of the business at the time of default.
4. Assess the evidence: For sub-section (2), consider proof of consent, connivance or neglect; for the proviso to sub-section (1), consider evidence of lack of knowledge or due diligence.
5. Check prosecution procedure: Read Sections 58D and 58E, including applicable restrictions on cognizance, along with other relevant law.

Related RBI Act provisions

Section 58A protects certain good-faith actions; Section 58B sets out offences and penalties; Sections 58D and 58E deal with the application of Section 58B and cognizance; and Sections 58F and 58G address fines.

Official statutory references

Consult the India Code text of Section 58C and the Department of Financial Services copy of the Reserve Bank of India Act, 1934 for statutory wording and legislative notes.

This article explains the statutory framework and does not replace examination of the facts, the relevant date of the alleged offence, amendments and applicable judicial decisions.