Section 33 of the SARFAESI Act: Offences by Companies

Section 33 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) addresses criminal responsibility when an offence under the Act is committed by a company. It identifies when the company and persons managing its business may be prosecuted and punished, and provides an express defence based on absence of knowledge or the exercise of due diligence.

Section 33(1): Responsibility of the company and persons in charge

Where an offence under the SARFAESI Act is committed by a company, the company itself and every person who, at the relevant time, was in charge of and responsible to it for the conduct of its business are deemed guilty and liable to proceedings and punishment in accordance with the Act. The two requirements - being in charge of the business and being responsible to the company for its conduct - are central to the statutory description of the persons concerned.

Proviso to Section 33(1): Defence of no knowledge or due diligence

The proviso protects a person who proves either that the offence occurred without that person's knowledge or that the person had exercised all due diligence to prevent the offence. Relevant evidence may include assigned responsibilities, internal controls, compliance instructions, correspondence and steps taken to prevent or correct a contravention. This defence concerns the individual person's liability and does not, by itself, extinguish the company's liability.

Section 33(2): Consent, connivance or neglect by officers

Notwithstanding sub-section (1), if the company's offence is proved to have occurred with the consent or connivance of, or to be attributable to neglect by, any director, manager, secretary or other officer, that individual is also deemed guilty and liable to be proceeded against and punished. The provision requires proof of the specified connection between the individual and the offence; it is distinct from the general responsibility described in sub-section (1).

Explanation to Section 33: Meaning of company and director

• Company: Any body corporate, including a firm or other association of individuals.
• Director in relation to a firm: A partner of that firm.

The definition is broader than an incorporated company and expressly extends the operation of Section 33 to firms and other associations within the statutory wording.

How liability under Section 33 is assessed

1. Identify the underlying offence: Section 33 addresses offences committed under the Act; the prosecution must identify the substantive offence, including the applicable provisions such as Section 29 (offences) and Section 30 (cognizance).
2. Establish the company's involvement: Determine whether an offence was committed by the company within the meaning of the Explanation.
3. Examine the person's role: For Section 33(1), consider the person's actual responsibilities at the time of the offence; for Section 33(2), examine evidence of consent, connivance or neglect.
4. Consider the statutory defence: Under the proviso to Section 33(1), relevant individuals may establish absence of knowledge or all due diligence to prevent the offence.

Does being a director automatically establish criminal liability?

A designation alone should not be treated as a substitute for the statutory requirements. Sub-section (1) speaks of persons in charge of and responsible for conducting the company's business at the relevant time. Sub-section (2) concerns directors and specified officers whose consent, connivance or neglect is proved. The actual role, alleged offence, evidence and applicable legal standards must be assessed in each case.

Relationship with penalties and other SARFAESI provisions

Section 30A provides for regulatory monetary penalties for failures to comply with Reserve Bank directions and contains specific rules on parallel proceedings. Section 33, in contrast, concerns liability for offences committed by companies. Section 32 deals with protection for specified good-faith acts under the legislation. The scope of each provision must be considered independently.

Official statutory text and updates

For the operative legislation and amendments, consult India Code and the Gazette of India. Regulatory directions and notifications, where relevant, may be checked at the Reserve Bank of India. The provisions and relevant dates should be verified against the legal position applicable to the alleged offence.

This article explains the statutory framework and does not replace examination of the complaint, evidence, applicable amendments or binding judicial decisions.