Sections 39 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.
When an offence under the Act is committed by a company, who answers for it? Section 39 says the company and every person in charge of its business at the time are deemed guilty, subject to a defence, and also reaches directors, managers, secretaries and other officers where the offence was committed with their consent or connivance or is attributable to their neglect. An Explanation widens "company" to include a firm, society, trade union or other association of individuals. Section 40 adds a gate: no court may take cognizance of an offence under the Act without the previous sanction of the Central Government.
This article reads sections 39 and 40 as per the Act as enacted, read with the Foreign Contribution (Regulation) Amendment Act, 2020 (33 of 2020), which did not change these sections. Later amendments should be checked.
Where an offence under the Act is committed by a company, every person in charge of, and responsible to, the company for the conduct of its business, as well as the company, is deemed guilty, unless he proves the offence was committed without his knowledge or that he used all due diligence. For this section "company" includes a firm, society, trade union or other association of individuals. No court takes cognizance without the previous sanction of the Central Government or an officer it authorises.
Section 39(1): the company and the persons in charge
Because liability follows the form of the organisation, those setting up an entity that will hold a certificate should weigh it early; our section 8 company registration service covers one such form.
"Where an offence under this Act or any rule or order made thereunder has been committed by a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly."
Three observations:
- Two kinds of liability. The company, and each person in charge of and responsible for its business at the time. Both parts of the test, "in charge of" and "responsible to the company", have to apply to the person.
- Deemed guilt. The word "deemed" is strong; the proviso provides the answer.
- Offences under rules and orders. The section covers an offence under the Act "or any rule or order made thereunder".
Proviso. "Nothing contained in this sub-section shall render such person liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence." The burden is on the person: he must prove either that the offence was committed without his knowledge, or that he exercised all due diligence to prevent it. The two defences are alternatives, joined by "or".
Section 39(2): consent, connivance or neglect
"Notwithstanding anything contained in sub-section (1), where an offence under this Act or any rule or order made thereunder has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly."
| Sub-section (1) | Sub-section (2) | |
|---|---|---|
| Who | Persons in charge of, and responsible to, the company for the conduct of business, and the company | Any director, manager, secretary or other officer |
| Basis | Position at the time of the offence | It is proved that the offence was committed with consent or connivance of, or is attributable to neglect on the part of, that person |
| Proof | The person proves his defence, through the proviso | The text says "it is proved" that consent, connivance or neglect existed |
| Overrides | "Notwithstanding anything contained in sub-section (1)" |
So an officer who was not "in charge of" the business can still be reached under sub-section (2), but only if consent, connivance or neglect is proved.
The Explanation: what "company" means here
"For the purposes of this section, (a) 'company' means any body corporate and includes a firm, society, trade union or other association of individuals; and (b) 'director', in relation to a firm, society, trade union or other association of individuals, means a partner in the firm or a member of the governing body of such society, trade union or other association of individuals."
This is the part that matters most to non-profit organisations. For this section a society, a trade union or an association of individuals is a "company", and a member of its governing body is a "director". A trustee of a trust is not named in the Explanation; a trust that is an "association of individuals" may be within it, but the text does not say so in terms, and that question should be taken up on advice. A charitable company is a body corporate in any case. Our posts on the governing body of a society under the Societies Registration Act, 1860 and on the section 8 company form explain those separate laws.
If you are setting up or restructuring an entity that will hold a certificate, the choice of form changes who sits in the chain of liability; see the comparison of society, trust and section 8 company.
Example (invented). Pragati Mahila Samiti, a society, has a president, a secretary and a treasurer who are all members of its governing body. An offence under the Act is committed by the Samiti. For section 39, the Samiti is a "company" and its governing-body members are "directors". The president, who was in charge of its business, is deemed guilty unless he proves lack of knowledge or all due diligence. The treasurer, who was not in charge, can be reached under sub-section (2) only if it is proved that the offence was committed with her consent or connivance or is attributable to her neglect.
Section 40: previous sanction
"No court shall take cognizance of any offence under this Act, except with the previous sanction of the Central Government or any officer authorised by that Government in this behalf."
The bar is on cognizance: the court cannot start on the offence unless the sanction exists first. It applies to every offence under the Act, in chapters VIII and elsewhere, and it is a protection for the accused. The text does not say what form sanction must take or who among the authorised officers gives it; the words are "any officer authorised by that Government in this behalf".
The offences are set out in the article on sections 33 and 34, the article on sections 35 and 36 and the article on sections 37 and 38. Compounding, which can avoid prosecution altogether in eligible cases, is in section 41; see the article on section 41.
Need help structuring an organisation for FCRA?
The form of the organisation decides who sits in the chain of liability and how accountability is shared. For incorporation and governance support, see our section 8 company registration team.
Key takeaways
- Section 39(1) deems the company and every person in charge of, and responsible to, it for the conduct of its business to be guilty of an offence by the company, unless he proves lack of knowledge or all due diligence.
- Section 39(2) reaches directors, managers, secretaries and other officers where consent, connivance or neglect is proved.
- For section 39, "company" includes a firm, society, trade union or other association of individuals, and "director" includes a member of the governing body of a society.
- Section 40 bars cognizance of any offence under the Act without previous sanction of the Central Government or an authorised officer.
- Compounding under section 41 is a separate route.
Read next
- Sections 35 and 36: punishment for contravention and additional fine
- Sections 37 and 38: residual penalty and bar after second conviction
- Section 41: compounding of offences
- Section 12: conditions for registration and prior permission
Disclaimer: Based on the Foreign Contribution (Regulation) Act, 2010 as enacted, read with the Amendment Act, 2020 and the other amendments named in this article, and on the Foreign Contribution (Regulation) Rules, 2011 as amended by the notifications named (latest consulted: S.O. 3272(E) dated 22 June 2026), as consulted on 2 October 2026. No consolidated official text was available; some provisions rest on a third-party copy and are identified as such. Later amendments, notifications and Ministry of Home Affairs orders should be checked. This article is general information, not legal advice; check the official text before acting.