Sections 25 and 26 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 25 empowered the Central Government to notify a scheme facilitating closure of business by a micro, small or medium enterprise, within one year of the Act's commencement. Section 26 lets the Central Government or a State Government appoint officers and staff for the Act and, through sub-section (2), lets those officers require any person to furnish information in a prescribed form. Section 27 attaches a penalty to refusing that request.
Section 25: the Central Government may notify a scheme to facilitate closure of business by a micro, small or medium enterprise, not being a company registered under the Companies Act, 1956, within one year from the date of commencement of the Act. Section 26(1): the Centre or a State may appoint officers and employees and entrust powers and functions to them. Section 26(2): those officers may by order require any person to furnish information, in the prescribed form. Non-compliance is punishable under section 27(1).
Section 25: the closure scheme
The text: "Notwithstanding anything contained in any law for the time being in force, the Central Government may, with a view to facilitating closure of business by a micro, small or medium enterprise, not being a company registered under the Companies Act, 1956, notify a scheme within one year from the date of commencement of this Act."
| Element | Text |
|---|---|
| Who acts | The Central Government |
| Power | "may ... notify a scheme" |
| Purpose | "facilitating closure of business" |
| Who it covers | A micro, small or medium enterprise, "not being a company registered under the Companies Act, 1956" |
| Time | "within one year from the date of commencement of this Act" |
| Overriding words | "Notwithstanding anything contained in any law for the time being in force" |
A time-limited power. The power is to notify a scheme within one year of commencement. Section 1(2) allowed different provisions to commence on different dates; see commencement and repeal. The Act's text does not say whether a scheme was in fact notified, or what it provided. This article does not state that any scheme exists. If you are considering winding up an enterprise, look at the notifications, not at section 25 alone.
Companies are carved out. The phrase "not being a company registered under the Companies Act, 1956" means that an enterprise which is such a company is outside section 25. Closure of a company follows the company-law route. Our site has general material on exits; if you are dealing with a company's closure, please seek specific advice.
Not a general closure law. Section 25 empowers a scheme. It does not itself lay down how to close a proprietorship, partnership or other non-company enterprise. It does not say how liabilities, employees or dues are handled.
Section 26(1): officers and employees
The Central Government or a State Government "may appoint such officers with such designations and such other employees as it thinks fit for the purposes of this Act and may entrust to them such of the powers and functions under this Act as it may deem fit".
Two points: the power is to appoint officers and to "entrust" powers and functions; the Act does not name them. The designations, number and powers are for the appointing Government. If an officer claims to exercise a function under the Act, the order entrusting it is the thing to look for.
Section 26(2): power to require information
"The Officers appointed under sub-section (1) may, for the purposes of this Act, by order require any person to furnish information, in such form, as may be prescribed."
| Element | Text |
|---|---|
| Who | Officers appointed under sub-section (1) |
| How | "by order" |
| Whom | "any person" |
| What | "information, in such form, as may be prescribed" |
| Purpose | "for the purposes of this Act" |
The phrase "as may be prescribed" points to rules. Section 29(2)(e) lets the Central Government's rules provide for "the information to be furnished and the form in which it is to be furnished under sub-section (2) of section 26". See sections 29 to 31. Whether rules have been made, and what they provide, is not in the Act; check the rules.
The penalty link
Section 27(1) punishes whoever "intentionally contravenes or attempts to contravene or abets the contravention" of sub-section (2) of section 26: a fine of up to Rs 1,000 on a first conviction, and not less than Rs 1,000 but up to Rs 10,000 on a second or subsequent conviction. See sections 27 and 28. The offence needs intent: "intentionally".
If you receive an order under section 26(2) and want help responding with the right information, or want legal advice on an exit from an enterprise, our legal consultation service can assist.
What sections 25 and 26 do not say
- Section 25 does not say a scheme was notified or what it contained.
- Section 25 does not apply to a company registered under the Companies Act, 1956.
- Section 26 does not set qualifications for officers.
- Section 26(2) does not say what information may be asked beyond "for the purposes of this Act".
- Neither section gives a right of appeal against an order.
Practical examples
Example 1: closing a proprietorship. A proprietor asks whether section 25 gives a simple closure procedure. Section 25 only authorised a scheme within a year of commencement. The text does not itself provide a procedure; check what, if anything, was notified, and take advice on the general law.
Example 2: a company. A private limited company that is a small enterprise asks about section 25. As a company registered under the Companies Act, 1956 it is outside the section's words.
Example 3: an information order. An officer appointed under section 26(1) issues an order asking a supplier to furnish information in the prescribed form. If the person intentionally refuses, section 27(1) may apply.
Common mistakes
- Treating section 25 as a current, standing closure procedure.
- Assuming a company can use it.
- Ignoring an order under section 26(2). The penalty is for intentional contravention.
Need help with an exit or an information order?
Closing an enterprise or responding to an official order raises different questions in each case. If you would like advice on your position, our legal consultation team can look at your facts and papers.
Key takeaways
- Section 25 let the Central Government notify a closure scheme within one year of commencement, for enterprises that are not companies registered under the Companies Act, 1956.
- The text does not say whether a scheme was notified; do not assume one.
- Section 26(1) lets the Centre and States appoint officers and employees and entrust powers.
- Section 26(2) lets officers require any person, by order, to furnish information in the prescribed form.
- Intentional contravention of section 26(2) is punishable under section 27(1).
Read next
- Sections 27 and 28 of the MSMED Act, 2006: Penalties and jurisdiction of courts
- Sections 29, 30 and 31 of the MSMED Act, 2006: Rules and removal of difficulties
- Sections 23 and 24 of the MSMED Act, 2006: Interest not deductible and overriding effect
- Introduction to the MSME Development Act 2006
Disclaimer: Based on the Micro, Small and Medium Enterprises Development Act, 2006 (official text, not amended by the Jan Vishwas Acts of 2023 or 2026) and the Udyam notifications S.O. 2119(E) of 26 June 2020 and S.O. 1364(E) of 21 March 2025, read with later developments noted in the article, as on 30 September 2026. Notifications, rules and the Udyam portal change; verify the current position before acting.