PENAL PROVISIONS UNDER COMPANIES ACT, 2013 – PART II

[Mr. M. GOVINDARAJAN]

In Part I the penal provisions related to ‘Officer-in-default’ were listed.   In this article the penal provisions related to companies are listed for the information of the readers.

Penal provisions related to companies

Section 2(20) of the Companies Act, 2013 (‘Act’ for short) defines the term ‘company’ as a company incorporated under this Act or any previous company law.   As such the penal provisions are applicable to the existing companies as well as the companies to be registered in future and also applicable to various types of companies enumerated in the Act which are registered under the provisions of Companies Act, 2013 or Companies Act, 1956.

1. Section 8 deals with the formation of companies with charitable objects etc., Section 8(11) provides that if a company makes any default in complying with any of the requirements laid down in this section, the company shall be punishable with fine which shall not be less than Rs.10,00,000/- but which may extend to Rs.1,00,00,000/-;
2. Section 12 deals with registered office of company. Section 12(8) provides that if any default is made in complying with the requirements of this section the company shall be liable to a penalty of Rs.1,000/- for every day during which the default continues but not exceeding Rs.1,00,000/-;
3. Section 15 deals with the alteration of memorandum or articles to be noted in every copy. Section 15(2) provides that if a company any default in complying with the provisions of sub section (1) the company shall be liable to a penalty of Rs.1,000/- for every copy of the memorandum or articles issued without such alteration;
4. Section 16 deals with rectification of name of company. Section 16(3) provides that if a company makes default in complying with any direction given under sub-section (1) the company shall be punishable with fine of Rs.1,000/- for every day during which default continues;
5. Section 17 deals with copies of memorandum, articles etc., to be given to members. Section 17(2) provides that if a company makes any default in complying with the provisions of this section the company shall be liable for each default, to a penalty of Rs.1,000/- for each day during which such default continues or Rs.1,00,000/- whichever is less;
6. Section 26 deals with matters to be stated in prospectus. Section 26 (9) provides that if a prospectus is issued in contravention of the provisions of this section, the company shall be punishable with fine which shall not be less than Rs.50,000/- but which may extend to Rs.3,00,000/-;
7. Section 33 deals with issue of application forms for securities. Section 33(3) provides that if a company makes any default in complying with the provisions of this section, it shall be liable to a penalty of Rs.50,000/- for each default;
8. Section 39 deals with allotment of securities by company. Section 39 (5) provides that in case of any default under sub-section (3) or sub-section (4), the company shall be liable to a penalty of Rs.1,000/- for each day during which such default continues or Rs.1,00,000/- whichever is less;
9. Section 40 deals with securities to be dealt with in stock exchanges. Section 40 (5) provides that if a default is made in complying with the provisions of this section, the company shall be punishable with a fine which shall not be less than Rs.5,00,000/- but which may extend to Rs.50,00,000/-;
10. Section 46 deals with the certificate of shares. Section 46 (5) provides that if a company with intent to defraud issued a duplicate certificate shares the company shall be punishable with fine which shall not be less than 5 times the face value of the shares involved in the issue of the duplicate certificate but which may extend to 10 times the face value of such shares or Rs.10,00,00,000/- whichever is higher;
11. Section 48 deals with variation of shareholders’ rights. Section 48(5) provides that where any default is made in complying with the provisions of this section, the company shall be punishable with fine which shall not be less than Rs.25,000/- but which may extend to Rs.5,00,000/-;
12. Section 53 deals with prohibition of issue of shares at discount. Section 53 (3) provides that where a company contravenes the provisions of this section, the company shall be punishable with fine which shall not be less than Rs.1,00,000/- but which may extend to Rs.5,00,000/-;
13. Section 56 deals with transfer and transmission of securities. Section 56 (6) provides that where any default is made in complying with the provisions of sub-sections (1) to (5) the company shall be punishable with fine which shall not be less than Rs.25,000/- but which may extend to Rs.5,00,000/-;
14. Section 59 deals with rectification of register of members. Section 59 (5) provides that if any default is made in complying with the order of the Tribunal under this Section, the company shall be punishable with fine which shall not be less than Rs.1,00,000/- but which may extend to Rs.5,00,000/-;
15. Section 60 deals with publication of authorized, subscribed and paid up capital. Section 60(2) provides that if any default is made in complying with the requirements of sub-section (1), the company shall be liable to pay a penalty of Rs.10,000/- for each default;
16. Section 64 deals with the notice to be given to Registrar for alteration of share capital. Section 64 (2) provides that if a company  contravenes the provisions of sub-section (1) it shall be punishable with fine which may extend to Rs.1,000/- for each day during which such delay continues, or Rs.5,00,000/- whichever is less;
17. Section 66 deals with reduction of share capital. Section 66 (11) provides that if a company fails to comply with the provisions of sub-section (4), it shall be punishable with fine which shall not be less than Rs.5,00,000/- but which may extend to Rs.25,00,000/-;
18. Section 67 deals with restrictions on purchase by company or giving of loans by it for purchase of its shares. Section 67 (5) provides that if a company contravenes the provisions of this section, it shall be punishable with fine which shall not be less than Rs.1,00,000/- but which may extend to Rs.25,00,000/-;
19. Section 68 deals with power of company to purchase its own securities. Section 68 (11) provides that if a company makes any default in complying with the provisions of this sub-section or any regulation made by SEBI, for the purposes of clause (f) of sub section (2), the company shall be punishable with fine which shall not be less than Rs.1,00,000/- but which may extend to Rs.3,00,000/-;
20. Section 74 deals with repayment of deposits etc., accepted before commencement of this Act. Section 74 (3) provides that if a company fails to repay the deposit or part thereof or any interest thereon within the time specified in sub-section (1) or such further time as may be allowed by the Tribunal under sub-section (2), the company shall be punishable with fine which shall not be less than one crore rupees but which may extend to ten crore rupees;
21. Section 86 provides that if any company contravenes any provisions Chapter VI (Charges), the company shall be punishable with fine which shall not be less than Rs.1,00,000/- but which may extend to Rs.10,00,000/-;
22. Section 88 deals with the register of members etc., Section 88 (5) provides that if a company does not maintain a register of members or debenture holders or other security holders or fails to maintain them in accordance with the provisions of sub-section (1) or sub-section (2) the company shall be punishable with fine which shall not be less than Rs.50,000/- but which may extend to Rs.3,00,000/-;
23. Section 89 deals with declaration in respect of beneficial interest in any share. Section 89 (7) provides that if a company, required to file a return under sub-section (6), fails to do so before the expiry of the time specified under the first proviso to sub-section(1) of Section 403, the company shall be punishable with fine which shall not be less than Rs.500/- but which may extend to Rs.1,000/-;
24. Section 91 deals with power to close register of members or debenture holders or other security holders. Section 91 (2) provides that if the register of members or debenture holders or of other security holders is closed without giving the notice as provided in sub section (1) or after giving shorter notice than that so provided, or for a continuous or an aggregate period in excess of the limits specified in that sub-section, the company shall be liable to a penalty of Rs.5,000/- for every day subject to a maximum of Rs.1,00,000/- during which the register is kept closed;
25. Section 92 deals with Annual Return. Section 92 (5) provides that if a company fails to file its annual return under sub-section (4) before the expiry of the period specified under Section 403 the company shall be punishable with fine which shall not be less than Rs.50,000/- but which may extend to Rs.5,00,000/-;
26. Section 94 deals with the place of keeping  and inspection of registers, return etc., Section 94(4) provides that if any inspection or the making of any extract or copy required under this section is refused, the company shall be liable for each such default, to a penalty of Rs.1,000/- for every day subject to a maximum of Rs.1,00,000/- during which the refusal or default continues;
27. Section 99 provides that if any default is made in holding a meeting of the company in accordance with Section 96 or Section 97 or section 98 or in complying with any directions of the Tribunal, the company shall be punishable with fine which may extend to Rs.1,00,000/- and in the case of a continuing default, with a further fine which may extend to Rs.5,000/- for every day during which such default continues; taxmanagementindia.com
28. Section 111 deals with circulation of members’ resolution. Section 111 (5) provides that if any default is made in complying with the provisions of this section, the company shall be liable to a penalty of Rs.25,000/-;
29. Section 117 deals with resolutions and agreements to be filed. Section 117 (2) provides that if a company fails to file the resolution or the agreement under sub-section (1) before the expiry of the period specified under Section 403 the company shall be punishable with fine which shall not be less than Rs.5,00,000/- but which may extend to Rs.25,00,000/-;
30. Section 118 deals with the minutes of proceedings of general meeting, meeting of Board of Directors and other meeting and resolutions passed by postal ballot. Section 118 (11) provides that if any default is made in complying with the provisions of this section in respect of any meeting, the company shall be liable to a penalty of Rs.25,000/-;
31. Section 119 deals with inspection of minute books of general meeting. Section 119 (3) provides that if any inspection under sub-section (1) is refused, or if any copy specified under sub-section (2) is not furnished within the time specified therein, the company shall be liable to a penalty of Rs.25,000/-;
32. Section 121 deals with the report on annual general meeting. Section 121 (3) provides  that if the company fails to file the report under sub-section (2) before the expiry of the period specified under Section 403 the company shall be punishable with  fine which shall not be less than Rs.1,00,000/- but which may extend to Rs.5,00,000/-;
33. Section 124 deals with unpaid dividend account.  Section 124(7) provides that if a company fails to comply with any of the requirements of this section, the company shall be punishable with fine which shall not be less than Rs.5,00,000/- but which may extend to Rs.25,00,000/-;
34. Section 134 deals with financial statement, Board’s report etc., Section 134 (8) provides that if a company contravenes the provisions of this section, the company shall be punishable with fine which shall not be less than Rs.50,000/- but which may extend to Rs.25,00,000/-;
35. Section 136 deals with the right of member to copies of audited financial statement. Section 136 (3) provides that if any default is made in complying with the provisions of this section, the company shall be liable to a penalty of Rs.25,000/-;
36. Section 137 deals with copy of financial statement to be filed with Registrar. Section 137 (3) provides that if a company fails to file the copy of the financial statements under sub-section (1) or sub-section (2) as the case may be, before the expiry of the period specified in Section 403, the company shall be punishable with fine of Rs.1,000/- for every day during which the failure continues but which shall not be more than Rs.10,00,000/-;
37. Section 147(1) provides that if any of the provisions of Sections 139 to 146 (both inclusive) is contravened, the company shall be punishable with fine which shall not be less than Rs.25,000/- but which may extend to Rs.5,00,000/-;
38. Section 148 deals with the Central Government to specify audit of items of cost in respect of certain compliance. Section 148 (8) provides that if any default is made in complying with the provisions of this section the company shall be punishable in the manner as provided in Section 147 (1) (as per point No. 37);
39. Section 157 deals with the company to inform DIN to registrar.  Section 157 (2) provides that if a company fails to furnish DIN under sub-section (1) before the expiry of the period specified under Section 403 the company shall be punishable with fine which shall not be less than Rs.25,000/- but which may extend to Rs.1,00,000/-;
40. Section 172 provides that if a company contravenes any of the provisions of Chapter XI and for which no specific punishment is provided therein, the company shall be punishable with fine which shall not be  less than Rs.50,000/- but which may extend to Rs.5,00,000/-;
41. Section 178  deals with the nomination and remuneration committee and stakeholders relationship committee.  Section178 (8) provides that in case of any contravention of provisions of Section 177 and this section the company shall be punished with fine which shall not be less than Rs.1,00,000/- but which may extend to Rs.5,00,000/-;
42. Section 182 deals with the prohibitions and restrictions regarding political contributions. Section 182 (4) provides that if a company makes any contribution in contravention of the provisions of this section, the company shall be punishable with fine which may extend to 5 times the amount so contributed;
43. Section 185 deals with loan to directors. Section 185 (2) provides that any loan is advanced or  a guarantee is given or provided in contravention of the provisions of sub-section (1), the company shall be punishable with fine which shall not be less than Rs.5,00,000/- but which may extend to Rs.25,00,000/-;
44. Section 186 deals with loan and investment by company. Section 186 (13) provides that if a company contravene the provisions of this section, the company shall be punishable which shall not be less than Rs.25,000/- but which may extend to Rs.5,00,000/-;
45. Section 187 deals with investments of company to be held in its own name.  Section 187 (4) provides that if a company contravenes the provisions of this section, the company shall be punishable with fine which shall not be less than Rs.25,000/- but which may extend to Rs.25,00,000/-;
46. Section 190 deals with the contract of employment with Managing or whole time directors. Section 190 (3) provides that if any default is made in complying with the provisions of sub-section (1) or sub-section (2) the company shall be liable to a penalty of Rs.25,000/-;
47. Section 203 deals with appointment of key managerial personnel. Section 203 (5) provides that if a company contravenes the provisions of this section, the company shall be punishable with fine which shall not be less than Rs.1,00,000/- but which may extend to Rs.5,00,000/-;
48. Section 204 deals with Secretarial audit for bigger companies. Section 204 (4) provides that if a company contravenes the provisions of this section, the company shall be punishable with fine which shall not be less than Rs.1,00,000/- but which may extend to Rs.5,00,000/-;
49. Section 206 deals with the power to call for information, inspect books and conduct inquiries. Section 206 (7) provides that if a company fails to furnish any information or explanation or produce any document required under this section, the company shall be punishable with a fine which may extend to Rs.1,00,000/-;
50. Section 221 deals with freezing of assets of company on inquiry and investigation. Section 221 (2) provides that in case of any removal, transfer or disposal of funds, assets or properties of the company in contravention of the order of the Tribunal under subsection (1) the company shall be punishable with fine which shall not be less than Rs.1,00,000/- but which may be extend to Rs.25,00,000/-;
51. Section 222 deals with imposition of restrictions upon securities. Section 222 (2) provides that where securities in any company are issued or transferred or acted upon  in contravention of an order of the Tribunal under sub-section (1), the company shall be punishable with fine which shall not be less than Rs.1,00,000/- but which may extend to Rs.25,00,000/-;
52. Section 242 deals with the powers of the Tribunal.  Section 242 (8) provides that if a company contravenes the provisions of sub-section (5), the company shall be punishable with fine which shall not be less than Rs.1,00,000/- but which may extend to Rs.25,00,000/-;
53. Section 245 deals with class action. Section 245 (7) provides  that any company which fails to comply with an order passed by the Tribunal under this section shall be punishable with fine which shall not be less than Rs.5,00,000/- but which may extend to Rs.25,00,000/-;
54. Section 312 deals with the appointment of Company Liquidator to be given to Registrar. Section 312 (2) provides that if a company contravenes the provisions of sub-section (1), the company shall be punishable with fine which may extend to Rs.500/- for every day during which such default continues;
55. Section 344 deals with the Statement that company is in liquidation. Section 344 (2) provides that if a company contravenes the provisions of sub-section (1), the company shall be punishable with fine which shall not be less than Rs.50,000/- but which may extend to Rs.3,00,000/-;
56. Section 392 provides that if a foreign company contravenes the provisions of Chapter XXII the foreign company shall be punishable with fine which shall not less than Rs.1,00,000/- but which may extend to Rs.3,00,000/-;
57. Section 403 deals with fee for filing, etc., Section 403 (2) provides  that where a company fails or commits any default to submit, file, register or record any document, fact or information under sub-section (1) before the expiry of the period specified in the first proviso to that sub-section the company shall be liable for penalty under this Act for such failure or default;
58. Section 405 deals with the companies to furnish information or statistics. Section 405 (4) provides that if any company fails to comply with an order made under sub-section (1) or sub-section (3) or knowingly furnishes any information or statistics which is incorrect or incomplete in any material respect, the company shall be punishable with fine which may extend to Rs.25,000/-;
59. Section 450 provides that if a company contravenes any of the provisions of this Act or rules made there under, for which no penalty is provided elsewhere in the Act the company shall be punishable with fine which may extend to Rs.10,000/- and where the contravention is continuing one, with a further fine which may extend to Rs.1,000/- for every day after the first during which the contravention continues.

I hope that I have listed all the penal provisions related to Officer-in-default. If any provision is missed the same may be informed. On analysis of the above penal provisions, any one can infer that the penalty imposable is very high. The penalty at the peak is Rs.10 crores.