Corporate and Managerial Liability under Section 70 PMLA: Company Offence, Responsible Persons and Individual Fault

Section 70 of the Prevention of Money-Laundering Act, 2002 prevents a business organisation from becoming a shield for contraventions committed through it. At the same time, it does not make every director, officer, partner or employee criminally liable merely because of designation. The section creates two distinct statutory routes, each with its own facts, pleading requirements and defences.

The analysis should begin with the company’s alleged contravention, identify the relevant period, and then examine the individual’s responsibility or fault. Starting with a list of directors and assuming liability reverses the statutory sequence.

Who and what is covered

Section 70 uses “company” broadly. Its explanation includes a body corporate and also a firm or other association of individuals. “Director,” in relation to a firm, means a partner. The provision is therefore capable of applying beyond an incorporated company to partnerships and other associations.

The section speaks of a contravention of a provision of PMLA or a rule, direction or order made under it. In a prosecution for the offence under Sections 3 and 4, Section 70 does not replace the substantive ingredients. The prosecution must still establish the relevant proceeds of crime and the alleged process or activity connected with them. Corporate attribution answers who may be responsible; it cannot create proceeds of crime where none exist.

The first route: persons in charge and responsible

Section 70(1) provides that where a contravention has been committed by a company, the company as well as every person who, at the time of the contravention, was in charge of and responsible to the company for the conduct of its business shall be deemed guilty and liable to be proceeded against and punished.

The words impose a cumulative requirement. The person must have been both in charge of the business and responsible to the company for its conduct at the relevant time. A title may support an inference in context, but “director” is not itself the statutory test. The inquiry concerns actual authority, operational responsibility and the part of the business through which the alleged contravention occurred.

The proviso creates a defence. The person is not liable if he proves either that the contravention took place without his knowledge or that he exercised all due diligence to prevent it. Those alternatives should not be collapsed. Absence of knowledge addresses awareness; due diligence addresses preventive conduct even where risk might have been foreseeable.

The second route: consent, connivance or neglect

Section 70(2) operates notwithstanding subsection (1). Where a company’s contravention is proved to have occurred with the consent or connivance of, or is attributable to neglect by, a director, manager, secretary or other officer, that person is also deemed guilty.

This route is fault-specific. Consent involves approval; connivance conveys knowing acquiescence or participation; attributable neglect requires a demonstrated failure connected to the contravention. A complaint relying on subsection (2) should identify the act, communication, decision or omission said to constitute that fault. Repeating the statutory words without facts does not explain the case the officer must meet.

Why the company’s contravention comes first

Both subsections begin from a contravention by the company. The complaint should therefore identify the corporate act: for example, acquisition, possession, concealment, use, projection or claiming of identified proceeds through company accounts or assets. It should then connect the individual through subsection (1), subsection (2), direct liability under Section 3, or a properly particularised combination.

A director may also face direct prosecution where the evidence shows his own knowing participation in a Section 3 process or activity. That is not merely vicarious liability. The legal route matters because the facts and available defences differ.

Sunil Bharti Mittal: no liability from office alone

In Sunil Bharti Mittal v Central Bureau of Investigation, (2015) 4 SCC 609, 2015 INSC 18, the Supreme Court examined summons issued to senior corporate officers even though the investigating agency had not named them as accused. The Court reaffirmed that a company acts through individuals, but corporate attribution does not automatically operate in reverse so as to make a directing officer criminally liable for every offence of the company.

The judgment explains two recognised routes: sufficient evidence of the individual’s active role coupled with criminal intent, or a statutory provision that expressly creates vicarious liability. Section 70 PMLA is such an express provision, but its exact conditions must still be pleaded and supported. Sunil Bharti Mittal therefore does not nullify Section 70; it prevents the provision from being replaced by a free-standing assumption based on status.

At the cognizance or summoning stage, the court must apply its mind to the complaint and material. Where liability is said to arise under Section 70(1), the allegations should show how the officer was in charge of and responsible for the relevant business. Where subsection (2) is invoked, the alleged consent, connivance or neglect should be particularised.

Aneeta Hada: important analogy, but not automatic transplantation

Aneeta Hada v Godfather Travels & Tours Private Limited, (2012) 5 SCC 661, concerned Section 141 of the Negotiable Instruments Act, 1881. The Supreme Court held, in that statutory setting, that commission of the offence by the company is an express condition precedent for fastening vicarious liability and that arraigning the company is imperative, subject to recognised legal impediments.

Section 70 PMLA uses materially similar company-liability architecture, so Aneeta Hada is an important interpretive analogy. But it is not a PMLA judgment and should not be presented as if it directly decided every procedural question under Section 70. PMLA’s definition of company, the wording “contravention,” its complaint procedure and the substantive offence under Section 3 must be addressed on their own terms.

The safe proposition is narrower: where the prosecution relies upon deemed liability for a company’s contravention, the corporate contravention must be alleged and established, and the individual conditions in Section 70 must be satisfied. Whether a particular proceeding can continue despite a legal impediment to prosecuting the entity will depend on the statute, pleadings and authoritative PMLA case law applicable to the facts.

No comprehensive Supreme Court ruling on every Section 70 question

As of this review, no located Supreme Court decision provides an exhaustive construction of both limbs of Section 70 PMLA, including all questions concerning arraignment of the company, the precise evidentiary burden under the proviso, independent directors, dissolved entities and insolvency. General corporate-criminal-liability precedents are useful, but their statutory context must be disclosed.

Courts and counsel should therefore resist turning an analogy from the Negotiable Instruments Act or another statute into a supposedly settled PMLA rule. The primary anchor remains the language of Section 70 read with Sections 2(1)(u), 3, 4, 44 and 45.

Nav Nirman Builders: corporate veil in property proceedings

M/s Nav Nirman Builders & Developers Private Limited v Union of India, 2026 INSC 130, decided on 6 February 2026, concerned confiscation under Section 8 rather than prosecution under Section 70. A firm accused in the predicate and PMLA proceedings had links with a later company whose properties were attached. The Supreme Court examined the company’s claim of separate ownership, the fund trail, the statutory hearing under Section 8 and the circumstances in which the corporate form could be scrutinised.

The judgment is relevant to corporate structures but must not be overstated. It confirms that separate legal personality is not an evidentiary blindfold where the record suggests a sham or front and property is allegedly held through related entities. It does not hold that common ownership automatically establishes guilt of every director under Section 70. Property attachment or confiscation and personal criminal liability remain distinct inquiries.

Pleading and proof: what a legally sufficient case should contain

A complaint relying on Section 70 should ordinarily identify:

1. The company and the precise PMLA contravention attributed to it. 2. The proceeds of crime, scheduled criminal activity and relevant Section 3 process or activity. 3. The period during which the contravention occurred. 4. The individual’s office, actual functions and authority during that period. 5. Whether liability is alleged under subsection (1), subsection (2), direct participation, or more than one route. 6. For subsection (1), facts showing that the person was in charge of and responsible for conduct of the relevant business. 7. For subsection (2), facts constituting consent, connivance or attributable neglect. 8. The documents, communications, approvals, account control or conduct supporting the allegation.

Generic language copied against an entire board obscures the statutory test. Equally, a person exercising real control cannot avoid scrutiny by remaining off the formal organisational chart or delegating signatures while retaining decision-making power.

Independent and non-executive directors

Section 70 contains no blanket exemption merely because a director is described as independent or non-executive. But those roles may be highly relevant to whether the person was in charge of and responsible for the conduct of the business, or whether consent, connivance or neglect can be proved.

The inquiry should consider committee membership, attendance, information supplied to the board, reserved matters, transaction approvals, compliance escalations, objections and the company’s real governance structure. Liability cannot rest solely on a Companies Act label; nor can that label defeat evidence of actual participation.

The due-diligence defence

Due diligence is conduct, not a policy binder. Relevant evidence may include a functioning anti-money-laundering or anti-fraud framework, beneficial-ownership checks, transaction approval thresholds, segregation of duties, escalation systems, independent audits, documented objections, suspension of suspicious payments and timely remedial steps.

The defence is transaction- and period-specific. A general compliance programme will carry little weight if red flags concerning the challenged transaction were ignored. Conversely, minutes, emails, audit trails and prompt action can distinguish an officer who took reasonable preventive steps from one who participated or consciously remained passive.

Corporate change, insolvency and dissolution

Resignation does not answer liability for an earlier period, and later appointment ordinarily does not make a person responsible for conduct predating the appointment. The relevant dates must be proved through reliable corporate records and tested against evidence of actual control.

Insolvency, change of management or dissolution can raise separate issues about prosecution of the corporate person, management immunity, property and procedural feasibility. They do not automatically erase historical facts or impose personal guilt. Section 32A of the Insolvency and Bankruptcy Code, 2016 may protect a corporate debtor and its property when its conditions are fulfilled, but it does not grant a general personal immunity to individuals who were responsible for offences.

Current criminal-code references

Alleged predicate conduct may historically have been charged under the Indian Penal Code, 1860 and investigated under the Code of Criminal Procedure, 1973. For conduct and proceedings governed by the new codes, the corresponding BNS and BNSS provisions must be identified issue by issue and subject to commencement and savings. Section 70 itself is a special PMLA provision and has not been replaced by BNS or BNSS. No mechanical old-to-new cross-reference changes its test.

Practical implications

For investigators, the sound approach is role mapping. Obtain the delegation matrix, account mandates, board and committee records, communications and transaction approvals before alleging that every officer was responsible. Separate direct participation from deemed liability.

For companies, governance should make responsibility traceable. Beneficial-ownership checks, documented escalation and genuine independence are preventive controls and potential evidence. For directors and officers, a response should address the exact statutory route rather than rely only on designation or resignation documents.

For courts, the complaint and summoning material should be assessed person by person. Section 70 is express vicarious-liability legislation, but express legislation still has elements. Its purpose is to reach responsible human conduct behind a corporate contravention, not to punish a corporate directory.

Conclusion

Section 70 creates corporate accountability through two disciplined routes. Subsection (1) reaches persons actually in charge of and responsible for the business, subject to lack of knowledge or due diligence. Subsection (2) reaches officers whose consent, connivance or attributable neglect caused or accompanied the contravention. Neither route dispenses with proof of the company’s contravention or the substantive PMLA foundation. Accurate pleading, role-specific evidence and a fair opportunity to establish the statutory defence are therefore central to lawful prosecution.

Sources

Prevention of Money-Laundering Act, 2002, Sections 2(1)(u), 3, 4 and 70: https://www.indiacode.nic.in/bitstream/123456789/2036/1/A2003-15.pdf

Sunil Bharti Mittal v Central Bureau of Investigation, Criminal Appeal Nos. 34–37 of 2015, decided 9 January 2015, (2015) 4 SCC 609, 2015 INSC 18: https://scr.sci.gov.in/scrsearch/

Aneeta Hada v Godfather Travels & Tours Private Limited, Criminal Appeal No. 838 of 2008 and connected matters, decided 27 April 2012, (2012) 5 SCC 661: https://scr.sci.gov.in/scrsearch/

M/s Nav Nirman Builders & Developers Private Limited v Union of India, Criminal Appeal arising from SLP (Criminal) No. 9216 of 2023, decided 6 February 2026, 2026 INSC 130: https://api.sci.gov.in/supremecourt/2023/21046/21046_2023_4_1501_67910_FinalOrder_06-Feb-2026.pdf

Insolvency and Bankruptcy Code, 2016, Section 32A: https://www.indiacode.nic.in/bitstream/123456789/2154/1/A2016-31.pdf

Disclaimer: This article provides general legal information and is not advice concerning any particular company, officer, investigation or prosecution. The governing statute, procedural stage and later authorities should be checked for the specific matter.

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