Corporate Liability under Section 70 PMLA: When Directors and Officers Can Be Prosecuted

Section 70 addresses offences by companies and other juridical entities. It prevents the corporate form from insulating responsible decision-makers, but it does not impose criminal liability merely because a person holds a designation.

The two routes to liability

Where a company contravenes PMLA, every person who was in charge of and responsible for conduct of its business at the relevant time may be deemed guilty, along with the company. The statutory defence is that the contravention occurred without that person’s knowledge or that the person exercised all due diligence to prevent it.

A separate limb applies where the offence is proved to have occurred with the consent, connivance or attributable neglect of a director, manager, secretary or other officer. This route focuses on individual fault.

Designation is not enough

The complaint should plead the person’s actual role, relevant period, decision-making authority and connection with the alleged laundering process. A non-executive or independent director cannot properly be prosecuted through a copied assertion applicable to the entire board. Conversely, formal distance will not protect a person who actually controlled the transactions.

The company as accused

Corporate prosecution and individual prosecution should ordinarily reflect the statutory structure. Courts examine whether the company committed the underlying contravention and whether the individual conditions are pleaded and supported. Changes in management, insolvency or dissolution do not automatically answer responsibility for conduct during the relevant period.

Due diligence defence

Useful evidence includes board minutes, delegated authority, dissent, compliance reports, escalation emails, transaction limits, independent audits and action taken when red flags emerged. A paper policy without implementation may not establish due diligence.

Interaction with Section 3

Section 70 does not replace the ingredients of money-laundering. ED must still establish proceeds of crime and the relevant process or activity described in Section 3. Vicarious liability cannot create a PMLA offence where no scheduled-offence proceeds exist.

Sound corporate governance is therefore both preventive and evidentiary. Clear responsibility, traceable approvals and genuine escalation can stop laundering and distinguish responsible management from individual wrongdoing.

Sources

Prevention of Money-Laundering Act, 2002, Sections 3 and 70: https://www.indiacode.nic.in/handle/123456789/15402

Supreme Court of India, Sunil Bharti Mittal v. Central Bureau of Investigation, (2015) 4 SCC 609.

Supreme Court of India, Aneeta Hada v. Godfather Travels & Tours Pvt. Ltd., (2012) 5 SCC 661.

Supreme Court of India, Yash Tuteja v. Union of India, 2024 INSC 301.

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