RULES UNDER THE COMPANIES ACT, 2013 – AN ANALYSIS

[Mr. M. GOVINDARAJAN]

Rules under Companies Act, 1956

 The Companies Act, 1956 was self contained and almost all processes, timeliness were specified.  The Act has been amended several times (1960, 1963, 1974, 1977, 1988, 2000, and 2002).   The Revised Companies Act was expected during 2002 and because of unable to bring the new law the Act has underwent many changes by means of amendments.   Despite the clear provisions in the Companies Act in order to implement the same many rules, regulations were framed.   Notifications, circulars, schemes, guidelines etc., were issued now and then.

 The regulations such as ‘Companies Regulations, 1956’, ‘Company Law Board Regulations, 1991’ were framed.  Schemes, such as ‘Easy Exit Scheme, 2010’ were frames.   Guidelines such as ‘Guidelines on Corporate Identity Numbers’ were issued.  The following the are rules framed for the purposes of Companies Act, 1956 by the Government of India by virtue of powers conferred under various section in Companies Act, 1956:

• Companies (Central Government’s) General Rules and Forms, 1956;
• Companies (Court) Rules, 1959;
• Companies (Fees on Application) Rules, 1999;
• Company Law Board (Fees on Applications and Petitions) Rules, 1991;
• Companies (Appointment and Qualifications of Secretary) Rules, 1988;
• Company Law Board (Qualifications, Experience and Other conditions of Service of Members) Rules, 1996;
• Companies (Acceptance of Deposit) Rules, 1975;
• Companies (Application for Extension of Time of Exemption under Section 58(A)(8)) Rules, 1979;
• Private Limited Company and Unlisted Public Limited Company (Buy Back of Securities) Rules, 1999;
• Public Companies (Terms of Debentures and Raising of Loans with option to convert such Debentures or Loans into Shares) Rules, 1977;
• Companies (Issue of Share Certificate) Rules, 1960;
• Companies (Preservation and Disposal of Records) Rules, 1966;
• Companies (Transfer of Profits to Reserves) Rules, 1975;
• Companies (Declaration of Dividend out of Reserves) Rules, 1975;
• Companies Unpaid Dividend (Transfer to General Revenue Account of the Central Government) Rules, 1978;
• Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988;
• Companies (Particulars of Employees) Rules, 1988;
• Companies (Branch Audit Exemption) Rules, 1961;
• Cost Audit Report Rules, 2001;
• Companies (Appointment of Sole Agents) rules, 1975;
• Companies (Official Liquidator’s Accounts) Rules, 1965;
• Companies Liquidation Accounts Rules, 1965;
• Application of Section 159 to Foreign Companies Rules, 1975;
• Officers of the Company Law Board Benches (Destruction of Records) Rules, 1980;
• Offices of the Regional Directors (Destruction of Records) Rules, 1976;
• Disposal of Records (in the offices of the Registrars of Companies) Rules, 2003;
• Companies (Compliance Certificate) Rules, 2001;
• Companies (Issue of Share Capital with Differential Voting Rights) Rules, 2001;
• Companies (Appointment of Small Shareholders’ Direction) Rules, 2001;
• Companies (Passing of the Resolutions by Postal Ballots) Rules, 2001;
• Investor Education and Protection Fund (Awareness and Protection of Investors) Rules, 2001;
• Director’s Relatives (Office of Place of Profit) Rules, 2003;
• Companies (Disqualification of Direction under Section 274 (1)(g) of Companies Act, 1956) Rules, 2003;
• Unlisted Companies (Issue of Sweat Equity Shares) Rules, 2003;
• Unlisted Companies (Preferential Allotment) Rules, 2003;
• Companies (Director Identification Number) Rules, 2006;
• Companies (Electronic Filing and Authentication of Documents) rules, 2006;
• The Companies (Issue of India Depository Receipts) Rules, 2004;
• Companies (Accounting Standards) Rules, 2006.

Due to the amendment of Companies (Amendment) Act, 2000 some rules, such as ‘Companies (Public Trustee) Rules, 1973 became redundant.

New Companies Act, 2013

The Central Government, after due deliberations, decided to repeal the Companies Act, 1956 and enact a new legislation to provide for new provisions to meet the changed national and international economic environment and further accelerate the expansion and growth of our economy.   The Lok Sabha passed the Companies Bill, 2012 on 18^th December, 2012.  Rajya Sabha passed the bill on 08^th August, 2013.  The Companies Act, 2013 has been notified on 30^th August 2013 after getting the assent of the President.  The Act is having 29  Chapters, 470 sections and 7 schedules.  The New Act does not contain provisions, timeliness etc., but provide the same will be prescribed.   Section 2(66) of the new Act defines the term ‘prescribed’ as prescribed in the rules made under this Act.  Therefore more rules may be expected from Government of India in regard to carry out the provisions of Companies Act, than in the previous regime besides instructions, clarifications, circulars etc., which may be more complex and may not be easy for proper compliance of the law.

Rule making power

Section 468 and 469 of the Companies Act, 2013 give powers to Central Government for making rules.

Section 468(1)  provides that the Central Government shall make rules consistent with the  Code of Civil Procedure, 1908 providing for all matters relating to winding up of companies, which by this Act, are to be prescribed, and may make rules providing for all such matters, as may be prescribed.   Section 468 (2) provides that in particular, and without prejudice to the generality of  the foregoing power, such rules may provide for all or any of the following matters, namely:-

• as to the mode of proceedings to be held for winding up of a company by the Tribunal;
• for the voluntary winding up of companies, whether by members or by creditors;
• for the holding of meetings of creditors and members in connection with proceedings under Section 230;
• for giving effect to the provisions of this Act as to  the reduction of capital;
• generally for all applications to be made to the Tribunal under the provisions of this Act;
• the holding and conducting of meetings to ascertain  the wishes of creditors and contributories;
• the settling of lists of contributories and the rectifying of the register of members where required, and collecting and applying the assets;
• the payment, delivery, conveyance, surrender or transfer of money, property, books or papers to the liquidator;
• the making of calls; and
• the fixing of a time within which debts and claims shall be proved.

Section 468(3) provides that all rules made by the Supreme Court on the matters referred to in this section as it stood immediately before the commencement of this Act and in force at such commencement, shall continue to be in force, till such time the rules are made by the Central Government and any reference to the High Court in relation to winding up of a company in such rules shall be construed as reference to the Tribunal.

Section 469 gives powers to the Central Government for making rules.   Section 469 (1) of the Act provides that the Central Government may by Notification make rules for carrying out the provisions of this Act.  Section 469 (2) of the Act provides that without prejudice to the generality of the provisions contained in Section 469 (1), the Central Government may make rules  for all or any of the matters which by this Act are required to be,  or may be, prescribed or in respect of which provision is to be or  may be made by rule.

Section 469 (3) provides that any rule made under Section 469 (1) may provide that a contravention thereof shall be punishable with fine which may extend to ₹ 5000/-  and where the contravention is a continuing one, with a further fine which may extend to  ₹ 500/- for every day after the first during which such contravention continues.

Section 469 (4) provides that every rule made under this section and every regulation made by SEBI under this Act, shall be laid, as soon as  may be after it is made, before each House of Parliament, while it is in session, for a total period of 30 days  which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or regulation or both Houses agree that the rule or regulation should not be  made, the rule  or regulation shall thereafter have effect only in such modified form or be of no effect, as the case may be; so however,  that any such modification or annulment shall be without prejudice to the validity of anything previously done under the rule or regulation.

Draft Rules

 The Ministry of Corporate Affairs posted in their web site ‘draft’ rules on Companies Act, 2013 for the comments of the stake holders in phased manner. .  The first tranche of draft rules, covering 16 chapters of the new Act were posted in their web site on 07.09.2013, seeking suggestions/comments on the above said draft rules on or before 08.10.2013.  Besides 133 forms were also posted for public comments. The second phase of draft rules were posted for another 9 chapters on 20.09.2013 for the comments of the stake holders on or before 19.10.2013.  Besides 86 Forms were also posted for public comments.  The last date was further extended to 23.10.2013.  The third and fourth set of draft rules released by the Corporate Affairs Ministry pertained to chapters on deposits, SFIO, National Financial Regulatory Authority (NFRA) and Investor Educations and Protection Fund (IEPF) Authority. Government extended the deadline for giving comments on the third and fourth tranches of draft rules for the new Companies Act to November 10.

 Draft rules for winding up under 5^th tranche has been put for public comments. The last date for giving suggestions is 19.12.2.13.

 The MCA has issued the draft of Companies (Cost Records and Cost Audit) Rules, 2013 under Phase 6.  These draft rules are open for public comments till 19 December 2013 and 06 December 2013, respectively. 

 The government has received 25,891 comments till October 31, 2013 on the draft rules and the first phase, comprising 16 chapters, got as many as 20,553 comments.  The second tranche of draft norms, that covered nine chapters, saw 5,218 comments.  Third and fourth tranches that together covers four chapters, the comments received so far is around 120.

New Rules

The new Rules were framed by the Government of India after taking into considerations of the comments/suggestions of the stakeholders.  The following shows the rules made by the Central Government:

• The Companies (Specification of definition details) Rules, 2014 – Chapter I – Notification No. GSR 238 (E), dated 31.03.2014;
• The Companies (Incorporation) Rules, 2014 – Chapter II – Notification No. GSR 250 (E), dated 31.03.2014;

• The Companies (Prospectus and Allotment of Securities) Rules, 2014 – Chapter III – Notification No. GSR 251(E), dated 31.03.2014;
• The Companies (Share Capital and Debenture) Rules, 2014 – Chapter IV - Notification No. GSR 265 (E), dated 31.03.2014;

• The Companies (Acceptance of Deposits) Rules, 2014 – Chapter V- Notification No. GSR 256 (E), dated 31.03.2014;
• The Companies (Registration of Charges) Rules, 2014 – Chapter VI – Notification No. GSR 248 (E), dated 31.03.2014;
• The Companies (Management and Administration) Rules, 2014 – Chapter VII – Notification No. GSR 260 (E), dated 31.03.2014;
• The Companies (Declaration and Payment of Dividend) Rules, 2014 – Chapter VIII – Notification No. GSR 241 (E), dated 31.03.2014;
• The Companies (Accounts) Rules, 2014 – Chapter IX – Notification No. GSR  239 (E), dated 31.03.2014;
• The Companies (Corporate Social Responsibility Policy) Rules, 2014 – Chapter IX – Notification No. GSR 129 (E), dated 31.03.2014;
• The Companies (Audit and Auditors) Rules, 2014 – Chapter X – Notification No. GSR 246 (E), dated 31.03.2014;
• The Companies (Appointment and Qualification of Directors) Rules, 2014 – Chapter XI – Notification No. GSR 259 (E), dated 31.03.2014;
• The Companies (Meetings of Board and its Powers) Rules, 2014 – Chapter XII – Notification No. GSR 240 (E), dated 31.03.2014;

• The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 – Chapter XIII - Notification No. GSR 249 (E), dated 31.03.2014;
• The Companies (Inspection, Investigation and Inquiry) Rules, 2014 – Chapter XIV – Notification No. GSR 247(E), dated 31.03.2014;
• The Companies (Authorized to Registered) Rules, 2014 – Chapter XXI – Notification No. GSR 257 (E), dated 31.03.2014;
• The Companies (Registration of Foreign Companies) Rules, 2014 – Chapter – XXII – Notification No. GSR 266 (E), dated 31.03.2014;
• The Companies (Registration Offices and Fees) Rules, 2014 – Chapter XXIV – Notification No. GSR 268 (E), dated 31.03.2014;
• Nidhi Rules, 2014 – Chapter XXVI – Notification No. GSR 258 (E), dated 31.03.2014;
• The Companies (Miscellaneous) Rules, 2014 – Chapter XXIX - Notification No. GSR 253 (E), dated 31.03.2014;
• The Companies (Adjudication of Penalties) Rules, 2014 – Chapter XXIX - Notification No. GSR 254 (E), dated 31.03.2014;
• The Companies (Cost Records and Audit) Rules, 2014 – dated 30.06.2014.

Still the Government has to frame rules since some of the Chapters are missing in the above said list.

Clarifications to Rules

We may expect clarifications for the Rules from the Ministry now and then.  Ministry of Corporate Affairs, vide Circular No.1/22/2013-CL-V (General Circular No. 14/2014), dated 09.06.2014 issued clarifications on Rules relating to appointment and qualifications of Directors and independent directors.

 Vide Circular No. 15/2014, dated Ministry of Corporate Affairs issued clarification regarding maintenance of register in the new format.

 Vide Circular No. 17/2014, dated 11.06.2014, Ministry of Corporate Affairs issued clarification on filing of MGT-10.

 Vide Circular No. 18/2014, dated 11.06.2014, Ministry of Corporate Affairs issued clarifications for filing of form No. INC-27 for conversion of company from public to private under the provisions of Companies Act, 2013

 Vide Circular No. 19/2014, dated 12.06.2014 Ministry of Corporate Affairs issued clarifications with regard to the matters related to share capital and debentures.

 Vide Circular No. 20/2014, dated 17.06.2014 the Ministry of Corporate Affairs issued clarification with regard to voting through electronic means;

 Vide Circular No. 21/2014, dated 18.06.2014 the MCA issued clarifications with regard to the provisions of Corporate Social Responsibility under Section 135 of the Companies Act, 2013;

 Vide Circular No. 22/2014, dated 25.06.2014 the MCA issued clarifications with regard to format of annual return applicable for Financial Year 2013-14 and fees to be charged by companies for allowing inspection of records;

 Vide Circular No.23/2014, dated 25.06.2014 the MCA issued clarifications relating to incorporation of a company incorporated outside India;

 Vide Circular No. 24/2014, dated 25.06.2014, the MCA issued clarifications with regard to holding of shares in a fiduciary capacity by associate company under Section 2(6) of the Companies Act, 2013;

 Vide Circular No. 25/2014, dated 26.06.2014, the MCA issued clarification on applicability of requirement of resident director;

 Vide Circular No. 26/2014, dated 27.06.2014 MCA issued clarification regarding to the use of words ‘Commodity Exchange’ in a company;

 Vide Circular No. 27/2014, dated 30.06.2014 the MCA issued clarification regarding filing of Form DPT4 under Companies Act, 2013;

The Corporate bodies  and professionals are to update with such clarifications to Rules.

Amendments to Rules

 Amendment to Rules is also inevitable because amendment needs to meet out the current requirements of the business world.  As on date the following amendment was brought to the rules by Ministry of Corporate Affairs:

• The Companies (Registration Offices and Fees) Amendment Rules, 2014 – Chapter XIV – Effect from 28.04.2014;
• The Companies (Declaration and payment of Dividend) Amendment Rules, 2014 with effect from 12.06.2014;
• The Companies (Acceptance of Deposits) Amendment Rules, 2014 with effect from 06.06.2014;
• The companies (Meeting and Powers of Board) Amendment Rules, 2014 with effect from 12.06.2014;
• The Companies (Share Capital and Debentures) Amendment Rules, 2014 with effect from 18.06.2014;
• The Companies (Management and Administration) Amendment Rules, 2014 with effect from 23.06.2014;
• The Companies (Prospectus and Allotment of Securities) Amendment Rules, 2014 with effect from 30.06.2014.

Views of CII on Act and Rules              

Mr Ajay Shriram, the CII President referring to the fact that the final set of Rules  were released in the last week of March 2014 to be implemented from April 1, 2014 observed -  ‘Due to the hurried pace in which the Companies Act, 2013 and the Companies Rules, 2014 were implemented, the industry barely got an opportunity to absorb and understand the provisions or their impact in their entirety. Many new concepts are being introduced in the legislation for the first time, and practices with respect to these need to be allowed to evolve over time. However, the rush to notify the Act has introduced disruptive features making it harder for corporates to ensure compliance”.

He further observed that in absence of any unambiguous clarifications from the Ministry of Corporate Affairs, companies are resorting to different interpretations of the provisions. There is no uniform interpretation of even items of ordinary business such as appointment of Independent Directors.  The clarity required to be done by MCA as suggested by CII are-

• clarity is required vis-à-vis transitional provisions. For example, while the Act provides transitional period of one year for the appointment of independent directors, constitution of Audit Committee and Nomination & Remuneration Committees is mandatory with effect from 1 April 2014. The two requirements need to be aligned;
• Directors of the Nomination and Remuneration Committee are expected to prescribe the criteria for evaluation of all directors; carry out evaluation of every director’s performance and recommend the appointment and removal of directors. It is also required to lay down remuneration policies. Provisions such as this could make board’s functioning difficult resulting in break-down of trust and too much caution. The Act should lay down specific and objective parameters in this regard;
• provisions pertaining to Related Party Transactions indirectly seeks to vest power in minority in most of cases which is against the fundamental principle of shareholders’ democracy and majority rule. Legislation should balance interests of multiple stakeholders and equity must apply to both big and small shareholders to avoid misuse of the provisions by any class – majority or minority Further, the compliance requirement to obtain prior approval of audit committee for all related party transactions is too onerous and may result in Audit Committees not being able to give due focus to key items;
• transactions between a holding company and its 100% subsidiary does not compromise interests of any stakeholders. However, it still has to comply with all procedural requirements as transactions with other parties.
• a careful review of the mandate of the Audit Committee is also required.  It is for the auditors to monitor and confirm the effectiveness of the systems, processes and controls to the Audit Committee. A reverse obligation on the Audit Committee is clearly unwarranted. Requiring the Audit Committee to evaluate risk management system is also unreasonable;
• corporates should be allowed adequate legroom to comply with the CSR provision in a self-responsible manner. Incidental and supplementary activities even if related to Company’s business should be allowed as CSR so long as they fall in the activities specified in schedule VII. Onerous provisions would hold back innovation, defeat legislative intent and shift the focus from ‘comply with conscience’ to ‘tick-box compliance.’ Government had in fact assured that it will authorize the Boards to choose the scope of CSR activities as it deems fit – this power has not been given in the Act as of now;.
• private companies which are neither subsidiaries of listed companies nor have substantial borrowings from banks or financial institutions should be exempted from certain provisions of the Act. Such companies should not be treated at par with other public interest entities;
• applicability of the requirement of rotation of auditors for companies other than listed companies is also prescribed under the Act. CII strongly suggests that private companies and public companies which do not have substantial public funding be exempted from this requirement;

Some are of the view that there are several inconsistencies between the Act and Rules and at times within the Act itself.

Companies (Management and Administration) Rules, 2014

As an example, one rule viz., Companies (Management and Administration) Rules, 2014  is discussed whether there is any inconsistency is there between the Rules and the Act.

Maintaining Registers

Section 88 (1) of the Act requires every company to keep register of members, register of debenture holders and register of any other security holders.   Rule 3 prescribes the manner of maintaining registers by the companies limited by shares and the companies not having share capital.  The Act says that every company is to keep registers but rules restrict the same to companies limited by shares and companies not having share capital.  Rule 4 prescribes the procedure for maintaining register of debenture holders and register of any other security holders by every company.  Rule 5 and 6 say the procedure for maintaining the abovementioned three registers by every company.

Section 88(4) of the Act deals with the maintaining the ‘foreign register’ by a company, if so authorized in its articles.  Rule 7 deals with the procedure of maintaining the said register by a company which has share capital or which has issued any debentures or any other security, if so authorized by its articles.

Declaration

Section 89 (1), 89(2) and 89(6) deals with the declaration in respect of beneficial interest in any share.  Rule 9 gives the procedure for the same which is consistent to the Act.

Closing Register

Section 91(1) deals with the power of the company to close the register of members or debenture holders or any other security holders.  Rule 10(1) prescribes the procedure to be followed in closing the registers which is consistent to the Act.  Rule 10(2) prescribes that the Rule 10(1) will not be applicable to private companies provided that the notice has been sent to all members seven days before the closure of the register.

Annual Return

Section 92(2) provides that the annual return is to be filed by the listed company or a company having such paid up share capital and turnover as may be prescribed.  Rule 11 deals with the same indicating the company having paid up share capital of ₹ 10 crores or more or turnover of ₹ 50 crores or more is required to file the annual returns.

Section 92(3) provides that an extract of annual return in the prescribed form shall form part of the Board’s Report.   Rule 12 prescribes the Form MGT-9 for the same.

Return in case promoter’s stake changes

Section 93 provides that every listed company shall file a return in the prescribed form with the Registrar with respect to change in the number of shares held by promoters and top ten shareholders of such company, within fifteen days of such change.  Rule 13 prescribes the form for the same and giving definition for the word ‘change’.

Place of keeping and inspection of registers

Section 93(1) provides for keeping of registers and return in the registered office or any other place as approved by a special resolution in the general meeting.  Section 93(2) deals with the inspection of registers and returns by the members, debenture holders, beneficiaries or any other security holder as prescribed.   Section 93(3) deals  with taking copy or extract of the registers/returns.

Rule 14 deals with the procedure for inspection of registers.  Rule 15 deals with the procedure of preservation of register and annual return and the duration for which they are to be maintained.   Rule 16 deals with the procedure for taking copies of registers or annual returns.

Calling for Extraordinary General Meeting

Section 100(4) deals with the conducting of extra ordinary general meeting by the requisitionists if the Board does not conduct the extra ordinary general meeting within 21 days from the date of receipt of valid request.

Rule 17 provides the procedure for conducting the extraordinary general meeting by the requistionists if the Board does not conduct the extra ordinary general meeting within 21 days from the date of receipt of valid request.

Notice of meeting

Section 101(1) of the Act provides that the notice for the general meeting may be given either in writing or in electronic mode as may be prescribed.   Rule 18 provides the procedure for issuing of notice under electronic mode in detail.

Proxy

Section 105 of the Act deals with the proxies attending the meeting.  Rule 19 provides the procedure for appointing the proxies and indicates the form to be used for appointing proxies.

e-Voting

Section 108 of the Act provides that the Central Government may prescribe the class or classes of companies and manner in which a member may exercise his right to vote by the electronic means. Rule 20 elaborates the procedure of electronic voting.

Scrutinizing the poll process

Section 109(5) provides that where a poll is to be taken, the Chairman of the meeting shall appoint such number of persons, as he deems necessary, to scrutinize the poll process and votes given on the poll and to report thereon to him in the manner as may be prescribed.  Rule 21 prescribes the manner in which the Chairman of the meeting shall get the poll process scrutinized and report thereon.

Postal Ballot

Section 110 of the Act deals with postal ballots through which such transactions can be taken place.  Rule 22 gives the elaborate procedure to be followed for conducting business through postal ballot.

Resolutions requiring special notice

Section 115 of the Act provides for issuing of special notice for passing of special resolution in the manner prescribed.  Rule 23 provides the procedure for issuing of special notice for passing special resolution.

Resolutions and agreements to be filed

Section 117(1) of the Act provides that a copy of every resolution or any agreement, in respect of matters specified in sub-section (3) together with the explanatory statement under section 102, if any, annexed to the notice calling the meeting in which the resolution is proposed, shall be filed with the Registrar within thirty days of the passing or making thereof in such manner and with such fees as may be prescribed within the time specified under section 403.  Rule 24 prescribes the form No. MGT – 14 for the purposes.

Minutes of the Meetings

Section 118 (1) of the Act that every company shall cause minutes of the proceedings of every general meeting of any class of shareholders or creditors, and every resolution passed by postal ballot and every meeting of its Board of Directors or of every committee of the Board, to be prepared and signed in such manner as may be prescribed and kept within thirty days of the conclusion of every such meeting concerned, or passing of resolution by postal ballot in books kept for that purpose with their pages consecutively numbered.  Rule 25 prescribes the procedure for the same.

Inspection of minute books

Section 119 (2)  requires that any member shall be entitled to be furnished, within seven working days after he has made a request in that behalf to the company, and on payment of such fees as may be prescribed, with a copy of any minutes.  Rule 26 prescribes the procedure for the same.

Maintenance and inspection of documents in electronic form

Section 120 of the Act provides that if any document, record, register, minutes etc., are required to be maintained and inspected in electronic form such company is required to comply with this provisions as per the procedure prescribed in the Rule.   Rule 27 provides the procedure for the same.   Rule 28 provides for the security measures to be taken for the electronic records.  Rule 29 provides for the procedure for the inspection of electronic documents.

Report on Annual General Meeting

Section 121(1) of the Act provides that every listed public company shall prepare in the prescribed manner a report on each annual general meeting including the confirmation to the effect that the meeting was convened, held and conducted as per the provisions of this Act and the rules made there under.

Rule 31 provides the procedure for the preparation of the Report on Annual General Meeting.

Penalty

Rule 30 provides that if any default is made in compliance with any of the provisions of this rule, the company and every officers or such other person who is in default shall be punishable with fine which may extend to five thousand rupees and where the contravention is a continuing one, with a further fine which may extend to five hundred rupees for every day after the first during which such contravention continues.

From the above analysis this Rule is mostly consistent with the Act.

Conclusion

The Act gives the main objects and the Rule prescribes the procedures for carrying out the provisions of the Act.  Without the Rules the Act may not be complete.  At the same time the Rules shall not be inconsistent with the provisions of the Act.  If so the Rule is invalid to the extent of the inconsistency with the Act.  The present Companies Act, 2013 even though is having lesser sections, the procedures prescribed in the Rules are many and to come to consonance with the Act and Rules will take time.   Failure to comply with the provisions of the Act and Rules lead to heavier penalties than the erstwhile Companies Act.  The transition period given in the Act is not considered to be enough to change over to the new Act.  This will be possible when Rules are made for all aspects of the Companies Act.