Sections 26 and 27 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 26 bars companies from practising as cost accountants and punishes the officers who knowingly allow it. Section 27 stops anyone who is not a member of the Institute from signing documents on behalf of a cost accountant in practice or a firm of cost accountants. The 2022 Amendment Act raised the penalties in both, and those changes are in force. The Act was called the Cost and Works Accountants Act, 1959 until 10 May 2022.
No company, Indian or foreign, may practise as cost accountants. If it does, every director, manager, secretary or other officer who is knowingly a party faces a fine of two lakh to ten lakh rupees on first conviction and four lakh to twenty lakh rupees on a later one. Only a member of the Institute may sign a document on behalf of a cost accountant in practice or his firm; a breach is punishable by a fine of one lakh to five lakh rupees, and on a later conviction imprisonment up to one year or a fine of two lakh to ten lakh rupees, or both.
How this article reads the Act
This article follows the Act as printed by the Institute (as amended in 2011), read with the 2022 Amendment Act to the extent brought into force by S.O. 2184(E) dated 10 May 2022. Sections 65 and 66 of that Act, which amend sections 26(2) and 27(2), are in force. Later amendments and notifications should be checked.
Section 26: companies not to engage in cost accountancy
Section 26(1). No company, whether incorporated in India or elsewhere, shall practise as cost accountants. The word "practise" must be read with section 2(2); see our article on section 2.
Section 26(2), as substituted in 2022. If any company contravenes section 26(1), then every director, manager, secretary and any other officer who is knowingly a party to the contravention shall be punished:
| Conviction | Before 2022 (the company's contravention) | Since 10 May 2022 (the officers who are knowingly a party) |
|---|---|---|
| First | Fine up to one thousand rupees | Fine not less than two lakh rupees, up to ten lakh rupees |
| Subsequent | Fine up to five thousand rupees | Fine not less than four lakh rupees, up to twenty lakh rupees |
The change in structure matters. The earlier text made "any contravention" punishable. The substituted text targets the individuals (director, manager, secretary or other officer) knowingly a party to the company's contravention. Knowledge is part of the offence. The 2022 text sets a minimum as well as a maximum fine, and it provides fines only, with no imprisonment.
The Explanation (2011). For the removal of doubts, "company" in section 26 includes a limited liability partnership which has a company as its partner. This fits with the definition of "partnership" in section 2(1)(fc), which covers an LLP only if it has no company as its partner. See our article on the LLP Act, 2008 for the background.
Section 27: unqualified persons not to sign documents
Section 27(1). No person other than a member of the Institute shall sign any document on behalf of a cost accountant in practice or a firm of such cost accountants, in his or its professional capacity.
Section 27(2), as amended in 2022. A person who contravenes section 27(1) is, without prejudice to any other proceedings, punishable:
| Conviction | Before 2022 | Since 10 May 2022 |
|---|---|---|
| First | Fine not less than five thousand rupees, up to one lakh rupees | Fine not less than one lakh rupees, up to five lakh rupees |
| Second or subsequent | Imprisonment up to one year, or fine not less than ten thousand rupees up to two lakh rupees, or both | Imprisonment up to one year, or fine not less than two lakh rupees, up to ten lakh rupees, or both |
Section 66 of the 2022 Act substituted the four amounts, and left the imprisonment term and structure unchanged.
Who is caught. The prohibition covers anyone who is not a member of the Institute, including a clerk, an employee or an outside consultant. It applies to documents signed "on behalf of" a cost accountant in practice or a firm of such cost accountants. A document the cost accountant signs himself is outside section 27. Section 27(1) does not list the kinds of document, so the question is whether a signature is given on the cost accountant's or firm's behalf in a professional capacity. A reader who is unsure should check with the firm's own advisers before delegating signature.
Section 27(3) was omitted in 2006. It once said the section did not apply to a University or an affiliated body; that exemption no longer appears in the section as in force.
Who is liable: companies and firms as offenders
If the person committing an offence under the Act is a company, section 28 makes the company and the persons in charge of its business liable, with a due diligence defence. For sections 24, 25 and 27, "company" there means any body corporate and includes a firm or other association of individuals; for section 26 it means a body corporate. See our article on sections 28 and 29. Prosecutions need a complaint by or under the order of the Council or the Central Government.
Two short examples
Example 1. Bharat Costing Services Private Limited advertises that it will prepare and certify cost statements for clients and hires a few qualified members as employees. Section 26(1) says no company shall practise as cost accountants. If its directors and officers are knowingly parties to the contravention, each faces a fine of not less than two lakh rupees on a first conviction.
Example 2. Latha Reddy runs a cost accounting practice. Her office clerk, who is not a member, signs a certificate on her firm's letterhead while she is away, using her firm's name. That falls within section 27(1) as the clerk is not a member signing on behalf of a cost accountant in practice. On a first conviction the clerk faces a fine of not less than one lakh rupees, up to five lakh rupees. The Institute's own disciplinary rules in the Schedules may also be relevant to the member; see our article on the First Schedule items (7) to (11).
Practices and firms that want to set clear signing authority and internal controls can use compliance advisory support.
The same rule for chartered accountants
See Section 25 of the Chartered Accountants Act, 1949 and Section 26. Section 26 of this Act, as substituted in 2022, targets the officers who are knowingly parties.
Need help with signing authority?
If your practice relies on staff, associates or a company structure and you need to confirm who may sign what, our compliance advisory team can review the arrangement against sections 26 and 27.
Key takeaways
- No company may practise as cost accountants; an LLP with a company as a partner is treated as a company for section 26.
- Officers who are knowingly a party face fines of two lakh to ten lakh rupees (first) and four lakh to twenty lakh rupees (later).
- Only members may sign documents on behalf of a cost accountant in practice or his firm.
- Section 27 fines now start at one lakh rupees; a later conviction can bring imprisonment up to one year.
- Prosecution needs a complaint by or under the order of the Council or the Central Government.
Read next
- Sections 23 to 25: regional councils, false claims and misuse of the name
- Sections 28 and 29: offences by companies and sanction to prosecute
- Section 2: definitions and practice
Disclaimer: Based on the Cost and Works Accountants Act, 1959 (now the Cost Accountants Act, 1959) as printed by the Institute of Cost Accountants of India (as amended in 2011), read with the Chartered Accountants, the Cost and Works Accountants and the Company Secretaries (Amendment) Act, 2022 to the extent brought into force by S.O. 2184(E) dated 10 May 2022, as consulted on 3 October 2026. Regulations, rules, later amendments and commencement notifications should be checked. This article is general information, not legal advice; check the official text before acting.