Section 79 of The Chit Funds Act, 1982
- (1)Where an offence under this Act 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: Provided that nothing contained in this sub-section shall render any such person liable to any punishment provided in this Act, if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence.
- (2)Notwithstanding anything contained in sub-section (1), where an offence under this Act 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 for 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. Explanation.--For the purposes of this section,--
- (a)"company" means any body corporate and includes a firm or other association of individuals; and
- (b)"director" in relation to a firm means a partner in the firm.
Summary
- When a company commits an offence under the Act, both the company itself and the person in charge of its daily business at that time are deemed guilty.
- A person in charge can escape liability if they prove they did not know about the offence or that they did their best (exercised due diligence) to prevent it.
- Any director, manager, secretary, or other officer can also be held guilty if the offence happened with their consent, connivance (secret approval), or neglect.
- For this section, the word company includes registered corporations, partnerships (firms), and other groups of individuals.
- For partnerships, the term director refers to any partner in that partnership.
Practical examples
FAQ
1. Who can be held liable when a chit company commits an offence under this Act?
Both the company itself and the individual person who was in charge of and responsible for conducting the company's business at the time of the offence are deemed guilty.
2. Can an officer who is not directly in charge of the business still be prosecuted?
Yes, if it is proved that the offence was committed with the consent, connivance, or neglect of any director, manager, secretary, or other officer, they will also be deemed guilty.
3. How can a manager of a company prove they are not guilty of an offence committed by the company?
The manager must prove that the offence was committed without their knowledge, or that they exercised all due diligence (active care) to prevent the commission of the offence.
4. Does the term company in Section 79 only apply to registered corporations?
No, under this section, company means any body corporate and explicitly includes partnership firms or other associations of individuals.
Test yourself
Q1.Under Section 79 of The Chit Funds Act, 1982, if an offence is committed by a partnership firm, who represents the director of the firm for the purpose of liability?
Q2.Under Section 79 of The Chit Funds Act, 1982, what must an in-charge person prove to avoid liability for an offence committed by their company?
Q3.Under Section 79 of The Chit Funds Act, 1982, which of the following officers can be held guilty if a company's offence is attributable to their neglect?
Q4.Under Section 79 of The Chit Funds Act, 1982, what is the legal status of the company itself when an offence is committed?