Economic, Commercial and Intellectual Property Laws · Law relating to Special Economic Zones

SEZ Act 2005: Offences, Special Courts and Dispute Resolution

Updated 11 October 2026 · Fact-checked

Under the SEZ Act, 2005, the State Government designates courts to try civil suits and notified offences arising in an SEZ (section 23). Appeals go to the High Court within 60 days (section 24). Offences by companies bring in persons in charge (section 25). Until courts are designated, civil disputes go to arbitration (section 42).

Understand Offences, Penalties, Special Courts and Dispute Resolution

The SEZ Act wants one clear forum for disputes and offences inside a Special Economic Zone. Without it, parties could go to many ordinary courts and agencies. The Act fixes this by designating courts, naming one enforcement agency and giving a route for appeals.

Start with notified offences. The Central Government may notify any act or omission that is punishable under a Central Act as a notified offence for this Act. It may then authorise an officer or agency as the enforcement officer or agency for such offences committed in an SEZ. That officer has the matching powers of investigation, inspection, search or seizure under the relevant Central Act (section 21).

Next, designated courts (section 23). The State Government where the SEZ is situated, with the concurrence of the Chief Justice of the High Court, may designate one or more courts. These courts try all civil suits arising in the SEZ and notified offences committed in it. No other court may try such a suit or conduct such a trial. Provisos protect cases already filed or being tried before the Act commenced, and say older competent courts continue until designation, after which pending cases are transferred.

The arbitration route (sections 42 and 43) is a stop-gap. A civil dispute among entrepreneurs, among Developers, or between an entrepreneur and a Developer goes to arbitration only if no court has been designated under section 23(1). No dispute can be referred on or after the date of designation. The arbitrator is appointed by the Central Government, and the Arbitration and Conciliation Act, 1996 applies save as the SEZ Act otherwise provides. Limitation follows the Limitation Act, 1963, but the arbitrator may admit a late dispute for sufficient cause.

Finally, offences by companies (section 25) and appeals (section 24). A company and every person in charge of and responsible for its business are deemed guilty, but a person escapes if he proves lack of knowledge or all due diligence. Directors, managers, secretaries or other officers are also liable if the offence was with their consent or connivance or due to their neglect.

Key rules to remember

Designated courts: State Government + concurrence of Chief Justice of High Court → designates courts for civil suits and notified offences (s. 23(1)); Only the designated court may try such suits or notified offences (s. 23(2)), subject to the provisos for pre-commencement cases.
Appeal to High Court: Appeal within 60 days from communication of decision or order; further period up to 60 days for sufficient cause (s. 24); Appeal lies on any question of fact or law. High Court means the High Court of the State where the SEZ is situated.
Offences by companies: persons in charge: Company + every person in charge of and responsible for business = deemed guilty (s. 25(1)); Defence: offence without his knowledge, or he exercised all due diligence. The burden is on him to prove it.
Offences by companies: officers: Consent or connivance, or neglect → director, manager, secretary or other officer also guilty (s. 25(2)); Here the offence must be proved to be due to consent, connivance or neglect. For this section, company includes a firm or association; director of a firm means a partner.
Arbitration of disputes: Civil dispute between entrepreneurs/Developers + no designated court → arbitration by arbitrator appointed by Central Government (s. 42); Not available on or after the date of designation. The Arbitration and Conciliation Act, 1996 applies (s. 42(3)).
Limitation in arbitration: Limitation Act, 1963 applies as if dispute were a suit and arbitrator a civil court (s. 43); Arbitrator may admit a late dispute if sufficient cause is shown.
Notified offences and enforcement: Central Government notifies offence (s. 21(1)); authorises enforcement officer or agency (s. 21(2)); officer has powers under the relevant Central Act (s. 21(3)); The Act creates a single enforcement channel for notified offences in the SEZ.

How to solve Offences, Penalties, Special Courts and Dispute Resolution questions

Use this order for any question on offences, courts or disputes under the SEZ Act. It keeps your answer in ICSI style: provision, analysis, conclusion.

1Identify the nature of the matter: a civil dispute, a notified offence, an offence by a company, or an appeal.
2Check whether the Central Government has notified the offence and authorised an enforcement agency (section 21) if the question involves an offence.
3Check whether the State Government has designated a court under section 23(1). This decides between court and arbitration.
4For a civil dispute, test the parties: only entrepreneurs and Developers, in the combinations section 42 lists, can go to arbitration, and only if no court is designated.
5For a company offence, apply section 25(1) to persons in charge, test the due diligence or no knowledge defence, then section 25(2) for officers.
6For an appeal, check the 60-day period from communication and whether sufficient cause allows a further 60 days.
7State the conclusion in one clear sentence, citing the section.

Quickest way: Forum-first shortcut

When to use it: Use it when the question asks which forum or authority handles a dispute or offence and you have little time.

Ask: is a court designated under section 23? If yes, that court only. If no, civil disputes between entrepreneurs or Developers go to arbitration.
Ask: who is liable? Company plus persons in charge (s. 25(1)); officers only on consent, connivance or neglect (s. 25(2)).
Ask: what remedy after the order? Appeal to the High Court in 60 days, plus up to 60 on sufficient cause (s. 24).
Write the section numbers beside each point and end with a one-line conclusion.

Common mistakes in Offences, Penalties, Special Courts and Dispute Resolution

Saying disputes in an SEZ always go to arbitration.
Students remember section 42 but forget its two conditions.
Fix: Arbitration applies only if no court has been designated under section 23(1), and not on or after the date of designation.
Stating that the appeal period is 90 days or 30 days.
Confusion with periods in other statutes.
Fix: Remember 60 days from communication, extendable by up to 60 days for sufficient cause (section 24).
Holding every director liable automatically under section 25.
Students ignore the proviso and the separate officer rule.
Fix: Under 25(1) only persons in charge and responsible are deemed guilty, and they can prove no knowledge or due diligence. Under 25(2) officers are liable on consent, connivance or neglect.
Saying the Central Government designates the courts.
The Central Government appoints the arbitrator and notifies offences, so roles get mixed.
Fix: The State Government designates courts, with the concurrence of the Chief Justice of the High Court.
Appealing to the High Court of any State.
Students skip the Explanation to section 24.
Fix: The High Court is that of the State in which the SEZ is situated.
Treating section 25 as covering only companies in the Companies Act sense.
Students assume the usual definition.
Fix: For section 25, company means any body corporate and includes a firm or other association of individuals; a director of a firm is a partner.

Worked examples

Example 1

A Developer and an entrepreneur in an SEZ in Gujarat have a civil dispute over a lease. The State Government has designated a court under section 23(1). The Developer wants to refer the dispute to arbitration by the Central Government's arbitrator. Advise.

Show the solution

Provision: section 42(1) allows arbitration of a civil dispute between an entrepreneur and a Developer only if the courts to try suits had not been designated under section 23(1).
The proviso says no dispute can be referred to arbitration on or after the date of designation.
Facts: a court has been designated, so the second condition fails.
Section 23(2) also bars any court other than the designated court from trying such a suit.

Answer: The dispute cannot be referred to arbitration. The Developer must file a suit in the designated court. An aggrieved party can later appeal to the Gujarat High Court within 60 days under section 24.

Example 2

An offence is committed by Zenith Exports Pvt Ltd, a company in an SEZ. Mr. A is the managing director in charge of the business and proves the offence happened without his knowledge. Ms. B is the company secretary, and it is proved that the offence was due to her neglect. Who is liable under section 25?

Show the solution

Provision: section 25(1) deems the company and every person in charge of and responsible for the business guilty.
Proviso: such a person is not liable if he proves the offence was without his knowledge or that he exercised all due diligence.
Mr. A: he proved lack of knowledge, so he escapes liability under 25(1).
Ms. B: section 25(2) applies notwithstanding 25(1). An offence by a company that is proved to be attributable to the neglect of a director, manager, secretary or other officer makes that officer also guilty.
The company itself remains liable under 25(1).

Answer: The company and Ms. B are liable. Mr. A is not liable because he proved lack of knowledge.

Exam tips

Write the section number next to each rule: 21, 23, 24, 25, 42 and 43 are the core set.
Learn the two periods in section 24 as one pair: 60 days, plus up to 60 for sufficient cause.
In company offence problems, always address the proviso defence to section 25(1) and then section 25(2) separately.
In forum questions, begin by asking whether a court has been designated. That one fact decides the answer.
Keep the roles distinct: State Government designates courts, Central Government notifies offences and appoints the arbitrator.

Practice questions from Law relating to Special Economic Zones

Offences, Penalties, Special Courts and Dispute Resolution in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Offences, Penalties, Special Courts and Dispute Resolution: frequently asked questions

Who designates the Special Courts under the SEZ Act?

The State Government in which the SEZ is situated designates them, with the concurrence of the Chief Justice of the High Court of that State. They try civil suits arising in the SEZ and notified offences committed there (section 23).

How are disputes resolved under the SEZ Act?

If a court is designated, civil suits go to that court. If none is designated, a civil dispute among entrepreneurs, among Developers or between an entrepreneur and a Developer goes to arbitration by an arbitrator appointed by the Central Government (section 42).

What is the appeal period under the SEZ Act?

An appeal to the High Court must be filed within 60 days from communication of the designated court's decision or order. The High Court may allow a further period of up to 60 days if there was sufficient cause (section 24).

Who is liable when a company commits an offence in an SEZ?

The company and every person in charge of and responsible for its business are deemed guilty, unless the person proves lack of knowledge or due diligence. Directors, managers, secretaries or other officers are also liable if the offence was with their consent or connivance or due to their neglect (section 25).