Offences, Cognizance and Offences by Companies (Sections 32, 35 and 50)

Civil penalties are not always enough. Where pension money is misappropriated or the regulator's orders are defied, the PFRDA Act provides for criminal prosecution. Section 32 creates the offences and fixes punishments of up to ten years' imprisonment and twenty-five crore rupees fine. Section 35 controls how prosecutions begin and which court tries them, and Section 50 extends liability for offences by companies to the individuals responsible.

1. Contravention of the Act (Section 32(1))

• Wide scope: any contravention, attempt to contravene, or abetment of a contravention of the Act, rules or regulations.
• Punishment: imprisonment up to ten years, or fine up to ₹25 crore, or both.
• Alongside penalties: prosecution is without prejudice to a civil penalty, so both may follow from the same conduct.

2. Non-payment of Penalty and Defiance of Orders (Section 32(2))

• Conduct: failure to pay a penalty imposed by the member, or failure to comply with any directions or orders issued by the member.
• Punishment: imprisonment of not less than one month and up to ten years, or fine up to ₹25 crore, or both.
• Effect of the word "or": although a minimum term of imprisonment is stated, the punishment is framed in the alternative, so a court may, on the wording, impose a fine alone.
• Purpose: to give teeth to the Authority's civil enforcement. Without this provision, a defaulter could simply ignore penalties and directions.

3. Cognizance of Offences (Section 35)

• Complaint by the Authority only (Section 35(1)): no court may take cognizance of an offence under the Act, rules or regulations except on a complaint made by the Authority.
• Court of Session (Section 35(2)): no court inferior to a Court of Session may try an offence under the Act.

The first rule prevents private prosecutions and police cases under the Act, so that prosecution is used only where the specialist regulator considers it justified. A subscriber who suspects an offence must therefore approach the Authority. Offences under the general criminal law, such as criminal breach of trust or cheating, may still be prosecuted in the ordinary way, because Section 35 applies only to offences "punishable under this Act".

The second rule recognises the gravity of offences carrying up to ten years' imprisonment and the complexity of financial cases. Unlike the SEBI Act, which provides for Special Courts, the PFRDA Act uses the ordinary Court of Session. The procedure is that of the criminal procedure code, now the Bharatiya Nagarik Suraksha Sanhita, 2023.

4. Offences by Companies (Section 50)

Liability of persons in charge

Where an offence under the Act is committed by a company, every person who, at the time of the offence, was in charge of, and responsible to, the company for the conduct of its business, as well as the company, is deemed to be guilty and liable to be proceeded against and punished.

• Defence: such a person is not liable if he proves that the offence was committed without his knowledge, or that he exercised all due diligence to prevent it.

Liability for consent, connivance or neglect

Where the offence is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, any director, manager, secretary or other officer, that person is also deemed guilty.

Explanation

• Company means any body corporate, and includes a firm or other association of individuals.
• Director, in relation to a firm, means a partner in the firm.

5. Interpreting Section 50

Section 50 follows a pattern found in many statutes, such as Section 141 of the Negotiable Instruments Act, 1881. Principles developed under those provisions apply:

• Specific averments: the complaint must state how each accused person was in charge of and responsible for the conduct of the company's business; a bare statement that a person is a director is not enough, as held in S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla (2005).
• Company as accused: vicarious liability of officers depends on the company being prosecuted, as held in Aneeta Hada v. Godfather Travels and Tours (2012).
• Burden: once the prosecution shows that the person was in charge and responsible, the burden shifts to him to prove lack of knowledge or due diligence.

6. The Overall Scheme of Sanctions

• Civil penalty under Section 28, imposed through adjudication under Section 30;
• Regulatory action: directions, cease and desist, suspension or cancellation, supersession;
• Criminal prosecution under Section 32, on the Authority's complaint, before a Court of Session, with vicarious liability under Section 50;
• Immunity under Section 33, which may be granted by the Central Government for full and true disclosure.

7. Related Topics and Provisions

• Penalties under the Act (Section 28)
• Adjudication of penalties (Section 30)
• Power to grant immunity (Section 33)
• Investigation, search and seizure (Sections 16 and 17)