Section 70 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 70 deals with what happens when a company contravenes the Act or a rule, direction or order made under it. The company and every person then in charge of its business are deemed guilty, unless the person proves lack of knowledge or all due diligence. Directors, managers, secretaries and other officers are also liable where the contravention occurred with their consent or connivance or is attributable to their neglect.
This article reads the section as per the consolidated text of the Act consulted (amendments shown up to 1 August 2019). Later amendments and notifications should be checked. Directors and officers who want their position reviewed before an inquiry can start with legal consultation.
Where a company contravenes the Act or a rule, direction or order under it, the company and every person who was in charge of, and responsible to the company for, the conduct of its business at the time are deemed guilty and may be proceeded against. A person escapes if he proves the contravention took place without his knowledge or that he exercised all due diligence to prevent it. Separately, a director, manager, secretary or other officer is also deemed guilty where the contravention took place with his consent or connivance or is attributable to his neglect. A "company" includes a firm or other association of individuals.
Sub-section (1): the company and the person in charge
Where a person committing a contravention of any of the provisions of the Act or of any rule, direction or order made under it is a company, every person who, at the time the contravention 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 contravention and shall be liable to be proceeded against and punished accordingly.
Reading the sub-section in parts:
| Part | What it says |
|---|---|
| Trigger | A contravention of a provision of the Act, or of a rule, direction or order made under it |
| Offender | A company |
| Who else is deemed guilty | Every person in charge of and responsible to the company for the conduct of its business at the time of the contravention |
| Result | Deemed guilty; liable to be proceeded against and punished accordingly |
Two phrases carry the weight. "In charge of and responsible to the company for the conduct of the business" is a double test: charge and responsibility. And the time is fixed: "at the time the contravention was committed". A person who joined later, or left before, is outside the words.
The section is wide in subject, because it covers "any of the provisions of this Act or of any rule, direction or order", not only the offence of money-laundering. It covers contraventions by a reporting entity that is a company, for example.
The proviso: lack of knowledge or due diligence
Nothing in sub-section (1) renders any such person liable to punishment if he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent such contravention.
Points to notice:
- The words are "if he proves": the person must prove it.
- There are two alternatives joined by "or": without his knowledge; or all due diligence to prevent the contravention.
- The defence is for the person in charge, not for the company itself.
In practical terms, the due-diligence limb rewards documents: board minutes, written compliance policies, training records and internal escalations that predate the contravention.
Sub-section (2): directors, managers, secretaries and other officers
Notwithstanding anything in sub-section (1), where a contravention of any of the provisions of the Act or of any rule, direction or order made under it has been committed by a company and it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of any company, such director, manager, secretary or other officer shall also be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly.
Compare the two sub-sections:
| Sub-section (1) | Sub-section (2) | |
|---|---|---|
| Who | Person in charge of and responsible for the conduct of business at the time | Any director, manager, secretary or other officer |
| What must be shown | Contravention by a company; the person was in charge and responsible | "It is proved" that the contravention took place with consent or connivance, or is attributable to neglect |
| Defence in the text | Proviso: without knowledge, or all due diligence | None stated in the sub-section |
| Opening words | Contravention by a company | "Notwithstanding anything contained in sub-section (1)" |
Sub-section (2) names four kinds of office-holder and then "other officer". It does not define "neglect" or "connivance".
The Explanations
The first Explanation is printed as "Explanation 3[1]", the footnote showing it numbered as Explanation 1 by Act 2 of 2013 (w.e.f. 15-2-2013); it is quoted as printed.
Explanation 1: definitions for the section
For the purposes of the section:
- (i) "company" means any body corporate and includes a firm or other association of individuals; and
- (ii) "director", in relation to a firm, means a partner in the firm.
So the section is not confined to companies registered under company law. A body corporate, a firm and an association of individuals are all within "company" for section 70, and a partner is treated as a director.
Explanation 2: prosecution of a company
For the removal of doubts, it is clarified that a company may be prosecuted notwithstanding whether the prosecution or conviction of any legal juridical person shall be contingent on the prosecution or conviction of any individual. (The footnote shows it inserted by Act 2 of 2013, s. 28, w.e.f. 15-2-2013.) The words "legal juridical person" are printed as they are; the Explanation says the company's prosecution does not depend on an individual's prosecution or conviction. The text says nothing more, and this article does not describe how any court has applied it.
What the section leaves unsaid
- It prints no separate punishment; the person is "punished accordingly", that is, as the contravened provision provides. For the offence of money-laundering that is section 4; see our article on section 4.
- It does not list the persons "in charge" by designation.
- It does not set the standard of "all due diligence".
- It does not say how the defence must be raised or at what stage.
For reporting entities, the penalty route in section 13 is separate and is explained in our article on section 13; section 70 applies to a contravention "of any of the provisions of this Act" committed by a company. Foreign exchange law has a comparable provision on company contraventions, covered in our post on section 42 of FEMA, 1999; that is a different Act.
A worked example
Greenfield Securities Pvt Ltd (invented) is a reporting entity that fails to maintain records as required. Its managing director, Ms Neha Kulkarni (invented), is in charge of and responsible to the company for the conduct of its business. Under sub-section (1), both the company and Ms Kulkarni are deemed guilty, unless she proves the failure took place without her knowledge or that she exercised all due diligence to prevent it. She produces board minutes, a compliance manual and a record of staff training that predate the failure. Separately, the company secretary, Mr Arvind Rao (invented), had been told of the gap in the record system by an internal audit and did nothing: if it is proved that the contravention is attributable to his neglect, sub-section (2) deems him guilty as well.
If the company were a partnership firm instead, "company" includes it and each partner is a "director" for this section.
Need help with director or officer exposure?
If a company you serve has received a notice under the Act, the roles held at the time of the contravention and the records showing diligence matter more than anything else. Our team reviews such positions through legal consultation, starting from board papers and compliance records.
Key takeaways
- When a company contravenes the Act or a rule, direction or order under it, the company and every person in charge of and responsible for its business at that time are deemed guilty.
- The person in charge is not liable if he proves lack of knowledge or all due diligence to prevent the contravention.
- A director, manager, secretary or other officer is also deemed guilty where it is proved the contravention was with his consent or connivance or attributable to his neglect.
- "Company" means any body corporate and includes a firm or other association of individuals; a "director" of a firm is a partner.
- A company may be prosecuted regardless of whether the prosecution or conviction of any individual follows.
- The section prints no separate penalty; punishment follows the provision contravened.
Read next
- Section 4 PMLA: punishment for money-laundering
- Section 13 PMLA: powers of the Director to impose fine on a reporting entity
- Sections 72 and 72A PMLA: death or insolvency and the Co-ordination Committee
- Reporting entity obligations under PMLA for CAs, banks and NBFCs
Disclaimer: Based on the consolidated text of the Prevention of Money-laundering Act, 2002 published by the Enforcement Directorate, showing amendments up to Act 23 of 2019 (1 August 2019), and on the Department of Revenue consolidated copy of the Prevention of Money-laundering (Maintenance of Records) Rules, 2005 listing amendments up to 19 July 2024, as consulted on 2 October 2026. Later amendments, notifications, other rules and regulator directions should be checked. This article is general information, not legal advice; check the official text before acting.