BACK TO RERA Act 2016
RERA Act 2016
Section 65
Offences by Companies
THE STATUTE
Original Text
Where any 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 its business, 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 person liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in sub-section (1), where any 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 of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the 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.
Legal Commentary
Section 65 pierces the corporate veil in RERA enforcement — ensuring that directors and officers of real estate companies cannot shelter behind the company structure to escape personal liability for RERA violations.
**The three-limb liability structure:**
1. *Primary liability — all officers in charge (Section 65(1)):* Every person who was in charge of and responsible for the company's business at the time of the offence is automatically deemed guilty — the entire senior leadership faces personal prosecution alongside the company.
2. *Specific connivance liability (Section 65(2)):* Even if a person was not 'in charge' in the general sense, if they specifically consented to, connived in, or neglected to prevent the offence — they are personally liable. This catches passive enablers and those who looked away.
3. *The due diligence defence (Section 65(1) proviso):* A person avoids personal liability only if they prove: (a) the offence was committed without their knowledge, OR (b) they exercised all due diligence to prevent it. Both are high bars — a director who claims ignorance of the company's core real estate sales activities will struggle to establish 'without knowledge.'
**'Company' defined broadly:** The Explanation includes firms, partnerships, and associations of individuals — not just registered companies. A partnership of developers has the same director-equivalent liability for partners.
**Parallel with NI Act Section 141:** Section 65 is structurally identical to NI Act Section 141 (corporate liability for cheque dishonour). The extensive case law under Section 141 on which directors are 'in charge' and what constitutes due diligence defence is directly applicable to RERA Section 65.
**Practical impact on real estate:** Most large real estate projects are developed through SPVs (Special Purpose Vehicles) — separate companies for each project. Section 65 ensures that the parent company's directors cannot escape liability by claiming the SPV is a separate legal entity — if they were in charge of and responsible for the SPV's business, they are personally liable.
**What directors should do:** Directors of real estate companies should ensure compliance systems are in place, maintain records of RERA compliance activities, and avoid approving transactions that violate RERA — documentation of compliance steps is the best defence under Section 65.
Questions & Answers
Yes — Section 65 makes every person in charge of and responsible for the company's business personally liable for RERA offences, alongside the company. The director must prove they had no knowledge of the offence OR exercised all due diligence to prevent it. Simply being a director without operational responsibility may be a defence if the director can demonstrate no involvement in real estate sales activities.
Yes — the Explanation to Section 65 specifically defines 'company' to include firms and other associations of individuals, and 'director' in relation to a firm means a partner. Partners of a real estate firm face the same personal liability as directors of a company.