Sections 27 and 28 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 27 is the Act's penalty clause. It has two parts: a fine for intentionally contravening section 8(1) or section 26(2), and a separate fine, not less than Rs 10,000, for a buyer who contravenes section 22. Section 28 says which court may try these offences: none inferior to a Metropolitan Magistrate or a Magistrate of the first class. The amounts are small, but the section 22 disclosure duty is the one that touches audited buyers every year.
Section 27(1): intentional contravention, attempt or abetment of section 8(1) or section 26(2) is punishable with a fine up to Rs 1,000 on first conviction and not less than Rs 1,000 but up to Rs 10,000 on a second or later conviction. Section 27(2): a buyer who contravenes section 22 is punishable with a fine of not less than Rs 10,000. Section 28: no court inferior to a Metropolitan Magistrate or a Magistrate of the first class may try an offence under the Act.
The penalties at a glance
| Provision breached | Who | Mental element | Penalty |
|---|---|---|---|
| Section 8(1) (memorandum) | Whoever contravenes, attempts or abets | "intentionally" | First conviction: fine up to Rs 1,000. Second or later: fine not less than Rs 1,000, up to Rs 10,000 |
| Section 26(2) (information to officers) | Same | "intentionally" | Same as above |
| Section 22 (disclosures in annual accounts) | A buyer | None stated | Fine "not less than rupees ten thousand" |
Section 27(1): memorandum and information
The text: "Whoever intentionally contravenes or attempts to contravene or abets the contravention of any of the provisions contained in sub-section (1) of section 8 or sub-section (2) of section 26 shall be punishable (a) in the case of the first conviction, with fine which may extend to rupees one thousand; and (b) in the case of any second or subsequent conviction, with fine which shall not be less than rupees one thousand but may extend to rupees ten thousand."
- Intent is required. The word "intentionally" governs the contravention, the attempt and the abetment.
- Only fines. The sub-section provides no imprisonment.
- Section 8(1) only bites where filing is compulsory. Clauses (a) and (b) leave filing at the person's discretion; clause (c) says "shall file". See section 8(1).
- Section 26(2) is the officer's power to require information. See sections 25 and 26.
Section 27(2): the section 22 disclosure duty
"Where a buyer contravenes the provisions of section 22, he shall be punishable with a fine which shall not be less than rupees ten thousand."
Three points stand out.
- The clause has no "intentionally". Unlike sub-section (1), sub-section (2) does not state a mental element.
- The fine has a floor of Rs 10,000 and, in the words of the clause, no stated ceiling.
- It applies to "a buyer", meaning a buyer required to get annual accounts audited under any law for the time being in force and to furnish the additional information listed in section 22. Our post on section 22 disclosures covers the five items.
If you are a buyer and need help with the accounts disclosures and the related return, our legal consultation service is aimed at that.
Section 28: which court
"No court inferior to that of a Metropolitan Magistrate or a Magistrate of the first class shall try any offence punishable under this Act."
The clause sets a minimum level of court. It does not name the court by place, and it does not say who may start a prosecution or within what time. Procedure for trial is governed by the general criminal procedure law. As the Act's text does not cite any of the old criminal codes here, only one practical note: from 1 July 2024 the general criminal procedure code was replaced by the Bharatiya Nagarik Suraksha Sanhita, 2023; how the reference to a Metropolitan Magistrate or Magistrate of the first class operates under it is a legal question on which you should take advice.
What these sections do not say
- They do not say who files a complaint.
- They do not give a limitation period for prosecution.
- They do not say how the Rs 10,000 floor is set in a given case; the court decides the amount above it.
- They do not cover a buyer's failure to pay. That is a civil liability under sections 15 to 17, not an offence under section 27.
- They do not name a penalty for contravening section 15 or 16 at all.
Practical examples
Example 1: a medium manufacturer that never filed. A medium enterprise in a First Schedule industry intentionally never files its memorandum. Section 8(1)(c) says "shall file", so section 27(1) can apply: a fine up to Rs 1,000 on a first conviction.
Example 2: a small service business. A small service enterprise never files. Filing was at its discretion under section 8(1)(a), so no contravention arises, though it may not qualify as a "supplier".
Example 3: an audited buyer with no disclosures. A company's audited annual accounts omit the section 22 information. Section 27(2) provides a fine of not less than Rs 10,000 on the buyer.
Example 4: the trial court. A complaint is filed before a court inferior to a Magistrate of the first class. Section 28 says such a court may not try the offence.
Common mistakes
- Thinking section 27 punishes late payment. It does not.
- Reading the Rs 10,000 in sub-section (2) as a maximum. It is a minimum.
- Forgetting that sub-section (1) requires intention while sub-section (2) states none.
- Overlooking the court level in section 28.
Need help meeting the disclosure duty?
An audited buyer's accounts have to carry the MSME payable details section 22 asks for, and the numbers have to tie to its ledgers. If you want help reviewing the position and the related filings, our legal consultation team can assist.
Key takeaways
- Intentional contravention of section 8(1) or section 26(2) is punishable with a fine: up to Rs 1,000 first time; Rs 1,000 to Rs 10,000 after that.
- A buyer contravening section 22 faces a fine of not less than Rs 10,000.
- Section 27(2) states no mental element; section 27(1) requires intention.
- Section 28: only a Metropolitan Magistrate or a Magistrate of the first class, or a higher court, may try the offence.
- Late payment is a civil liability, not an offence under section 27.
Read next
- Sections 25 and 26 of the MSMED Act, 2006: Closure scheme and officers
- Sections 29, 30 and 31 of the MSMED Act, 2006: Rules and removal of difficulties
- MSMED Disclosures Under Section 22: Five Items and the Appointed Day
- Form MSME-1: Purpose, Applicability and Format
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.