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Consequences For Non-Compliance Under The Companies Act. 2013
CS Priyanka Chuphal | Updated: 15 October, 2021
Companies have a normal responsibility towards society in the pursuit of their growth and development. Responsible behaviour by a company is demonstrated by the extent of its disclosures and transparency in business and by adherence to the laws applicable to it. These aspects of governance bring about confidence in the minds of the investors in particular and society at large. Proper, timely, and accurate disclosures play a large role in establishing a company as a good corporate citizen.
The Companies Act, 2013 outline various responsibilities and obligations to be discharged by the Companies, its Directors, Managers and other Key Managerial Personnel. Non-compliance with such obligations attract punishments in the form of fines, penalties and in some cases imprisonment. Such fines may go up to 25 lacs and/or imprisonment up to 7 years.
In this article, we try to analyze different penalties and punishments by which a company may be held liable for non-compliance under the Companies Act, 2013.
SCHEDULE OF PENALTIES
S. No. | Section | Nature of Default | Penalty (In Rs.) | ||||
Company | Director | Officer in Default | KMP | Person Responsible for default | |||
1 | 26 | If Public Company defaults in the Provisions of issue of Prospectus (Minimum) | 50,000 | 50,000 | |||
(Maximum) | 3,00,000 | 3,00,000 | |||||
2 | 60 | If a Company advertises its authorized capital on Companies Letterheads, Business Heads | 10,000 | 5,000 | |||
3 | 88 | Failure to maintain a register of members/ debenture-holders/ security holders | 3,00,000 | 50,000 | |||
4 | 89 | Failure to make a declaration in respect of a beneficial interest in any share. Failure to file return pertaining to the declaration with the registrar (Minimum) | 50,000 | ||||
(Continuing Default) | 1,000 | 1,000 | 2,000 | ||||
(Maximum) | 5,00,000 | 2,00,000 | 5,00,000 | ||||
5 | 91 | Closure of register of members or debentures or other security holders without notice/in excess of limits prescribed (Continuing default) | 5,000 | 5,000 | |||
(Maximum) | 1,00,000 | 1,00,000 | |||||
6 | 92 | Failure to file an annual return (Minimum) | 50,000 | 50,000 | |||
(Maximum) | 5,00,000 | 5,00,000 | |||||
7 | 99 | Default in Complying with Sec 96 – AGM Sec 97 – Power of the tribunal to call AGM Sec 98 – Power of the tribunal to call meetings of members or orders of the tribunal. | 1,00,000 | 1,00,000 | |||
8 | 105 | Failure to mention Members eligibility to appoint a proxy. Willfully/ knowingly issues the invitation to appoint a proxy (Minimum) | 5,000 | ||||
(Maximum) | 1,00,000 | ||||||
9 | 111 | Failure to Circulate Members resolution | 25,000 | 25,000 | |||
10 | 117 | Failure to file the resolution and agreement (Minimum) | 10,000 | 10,000 | |||
(Continuing Default) | 100 | 100 | |||||
(Maximum) | 2,00,000 | 2,00,000 | |||||
11 | 121 | Failure to file the report on AGM before the expiry of a specific period. (Minimum) | 1,00,000 | 25,000 | |||
(Continuing Default) | 500 | 500 | |||||
(Maximum) | 5,00,000 | 1,00,000 | |||||
12 | 124 | Default in complying with provisions related to Unpaid Dividend Account (Minimum) | 1,00,000 | 25,000 | |||
(Continuing Default) | 500 | 100 | |||||
(Maximum) | 10,00,000 | 2,00,000 | |||||
13 | 127 | Punishment for failure to distribute dividends. | 1000/- | ||||
(Continuing Default) | Simple Interest 18% p.a. from the date of default | ||||||
14 | 128 | Failure to comply with provisions relating to maintenance books of accounts etc. by the company (Minimum) | 50,000 | 50,000 (CFO) | 50,000 (Person in Charge) | ||
(Maximum) | 5,00,000 | 5,00,000 | 5,00,000 (Person in Charge) | ||||
15 | 129 | Failure to comply with Provisions related to proper disclosure of financial statements (Minimum) | 50,000 | 50,000 | 50,000 (Person in Charge) | ||
(Maximum) | 5,00,000 | 5,00,000 | 5,00,000 (Person in Charge) | ||||
16 | 134 | Contravention of the Provisions of the Financial Statements, Board Report etc. | 3,00,000 | 50,000 | |||
17 | 137 | Failure to file the copy of the financial statement with the Registrar (Minimum) | 10,000 | 10,000 | 10,000 | 10,000 (Person in Charge) | |
(Continuing Default) | 100 | 100 | 100 | 100 (Person in Charge) | |||
(Maximum) | 2,00,000 | 50,000 | 50,000 | 50,000 (Person in Charge) | |||
18 | 140 | Failure of the auditor to file the notice of resignation, with the company and registrar & also the C&AG in case of Government Companies. (Minimum) | 50,000 (Auditor) | ||||
(Maximum) | 5,00,000 (Auditor) | ||||||
19 | 143 | Failure of the auditor to report the fraud by employees against the Company (Listed Company) | 5,00,000 (Auditor, Cost Accountant, or CS in practice) | ||||
(Any Other Company) | 1,00,000 (Auditor, Cost Accountant, or CS in practice) | ||||||
20 | 157 | Failure by the Company to inform DIN to Registrar (Minimum) | 25,000 | 25,000 | |||
(Continuing Default) | 100 | 100 | |||||
(Maximum) | 1,00,000 | 1,00,000 | |||||
21 | 159 | Contravention of Sec 152 – Appointment of Director Sec 155 – Prohibition to obtain more than one DIN Sec 156 – Director to Intimate DIN (Minimum) | 50,000 | ||||
(Continuing Default) | 500 | ||||||
22 | 165 | Person Accept Directorship in contravention of this section (Continuation) | 2,000 | ||||
(Maximum) | 2,00,000 | ||||||
23 | 166 | Default in Complying with Duties of Director (Minimum) | 1,00,000 | ||||
(Maximum) | 5,00,000 | ||||||
24 | 167 | Functioning as director after attaining disqualification (Minimum) | 1,00,000 | ||||
(Maximum) | 5,00,000 | ||||||
25 | 172 | No Specific Punishment Under Chapter XI related to Appointment and Qualifications of Directors (Minimum) | 50,000 | 50,000 | |||
(Maximum) | 5,00,000 | 5,00,000 | |||||
26 | 177 | Contravention of Provisions related to Audit Committee | 5,00,000 | 1,00,000 | |||
27 | 178 | Contravention of Provision related to Nomination and Remuneration Committee and Stakeholders Relationship Committee | 5,00,000 | 1,00,000 | |||
28 | 184 | Default in Compliance in Disclosure of Interest by Director | 5,00,000 | ||||
29 | 187 | Default in Compliance of Investments by Company to be held in its own name | 5,00,000 | 50,000 | |||
30 | 188 | Violation of Related Party Transaction Provision (Listed Company) | 25,00,000 | 25,00,000 (any other employee) | |||
(Any other Company) | 5,00,000 | 5,00,000 (any other employee) | |||||
31 | 189 | Fails to Comply, Register of Contract in which director is interested, | 25,000 | ||||
32 | 190 | Contravention of Sec. 190 (Contract of employment with managing of Whole Time Directors) | 25,000 | 5,000 | |||
33 | 191 | Payment to Director for loss of profit in connection with Transfer of Property of Shares | 1,00,000 | ||||
34 | 197 | Default in Compliance with applicable limits for payment of Managerial Remuneration | 5,00,000 | 1,00,000 | |||
35 | 203 | Default in Complying with Appointment of KMP (Minimum) | 5,00,000 | 50,000 | 50,000 | ||
(Continuous Default) | 1,000 | 1,000 | |||||
(Maximum) | 5,00,000 | 5,00,000 | |||||
36 | 204 | Default in Complying with Secretarial Audit provisions | 2,00,000 | 2,00,000 | 2,00,000 (CS in Practice) | ||
37 | 206 | If a Company fails to furnish any information or explanation or produce any document required under this section | 1,00,000 | 1,00,000 | |||
(Continuing Default) | 500 | 500 | |||||
38 | 247 | If a Valuer contravenes the provisions of this section or rules made thereunder | 50,000 (Valuer) | ||||
39 | 347 | Disposal of Books and Papers of the Company | 50,000 | ||||
40 | 392 | If a Foreign Company Contravenes the provisions of this chapter (Minimum) | 1,00,000 | 25,000 | |||
(Maximum) | 3,00,000 | 5,00,000 | |||||
(Continuing offence) | 50,000 | ||||||
41 | 405 | If any Fails to comply with an order or furnishes any information or statistics which is incorrect or incomplete in any manner (Minimum) | 20,000 | 20,000 | |||
(Continuing Default) | 1000 | 1000 | |||||
(Maximum) | 3,00,000 | 3,00,000 | |||||
42 | 450 | If a company or an officer of a Company or any other person contravenes any of the provisions of this act or the rules made thereunder, or any condition, limitation, or restriction subject to which any approval, sanction, consent, confirmation, recognition, direction or exemption in relation to any matter has been accorded, given or granted, and for which no penalty or punishment is provided elsewhere in this act (Minimum) | 10,000 | 10,000 | |||
(Continuing Default) | 1,000 | 1,000 | |||||
(Maximum) | 2,00,000 | 50,000 | |||||
SCHEDULE OF PENALTIES ALONG WITH PUNISHMENTS
S. No. | Section | Nature of Default | Penalty (In Rs.) | Imprisonment | |||||||
Company | Director | Officer in Default | KMP | Person Responsible for default | Director | Officer in Default | KMP | Person Responsible for default | |||
1 | 118 | Failure to Maintain the minutes of proceedings of the general meeting, meeting of Board of Directors and other meeting and resolutions passed by postal ballot. Guilty of tampering with minutes of the proceedings of the meeting. (Minimum) | 25,000 | 5,000 | 25,000 | ||||||
(Maximum) | 1,00,000 | 2 Years | |||||||||
2 | 147 | Contravention of Sec 139 to 146 (aspects related to audit and auditor) (Minimum) | 25,000 | 10,000 | 25,000 (Auditor) | ||||||
(Maximum) | 5,00,000 | 1,00,000 | 5,00,000 (Auditor) | ||||||||
If Auditor Contravenes Knowingly or willfully (Minimum) | 50,000 (Auditor) | ||||||||||
(Maximum) | 25,00,000 (Auditor) | 1 Year (Auditor) | |||||||||
3 | 182 | Prohibition and restriction on Political Contribution | 5 Times of amount contributed | 5 Times of amount contributed | 6 Months | ||||||
4 | 185 | Contravention of Loan to Director (Minimum) | 5,00,000 | 5,00,000 | 5,00,000 | 5,00,000 | |||||
(Maximum) | 25,00,000 | 25,00,000 | 25,00,000 | 25,00,000 | 6 Months | 6 Months | 6 Months | ||||
5 | 186 | Loan & Investment by Company (Minimum) | 25,000 | 25,000 | |||||||
(Maximum) | 5,00,000 | 1,00,000 | 2 Years | ||||||||
6 | 217(6) | If any director or officer of the company disobeys the direction issued by the registrar or the inspector under this section (Minimum) | 25,000 | 25,000 | |||||||
(Maximum) | 1,00,000 | 1,00,000 | 1 Year | 1 Year | |||||||
7 | 217(8) | If any person fails without reasonable cause or refuses— (a) to produce to an inspector or any person authorised by him on this behalf any book or paper which is his duty (b) to furnish any information which is his duty to furnish; (c) to appear before the inspector personally when required to do so or to answer any question which is put to him by the inspector; or (d) to sign the notes of any examination. (Minimum) | 25,000 | ||||||||
(Maximum) | 1,00,000 | 6 Months | |||||||||
(Continuing Default) | 2000 | ||||||||||
8 | 221 | In case of any removal, transfer or disposal of funds, assets, or properties of the company in contravention of the order of the Tribunal (Minimum) | 1,00,000 | 50,000 | |||||||
(Maximum) | 25,00,000 | 5,00,000 | 3 Years | ||||||||
9 | 222 | Where securities in any company are issued or transferred or acted upon in contravention of an order of the Tribunal (Minimum) | 1,00,000 | 50,000 | |||||||
(Maximum) | 25,00,000 | 5,00,000 | 3 Years | ||||||||
10 | 245 | Any person who disobeys the order passed by the Tribunal against the application made by any member, depositor or depositors or any class of them | 3 years | ||||||||
11 | 274 | Directions for filing statement of affairs – If any company fails to obey the direction issued by Tribunal | 6 Months | ||||||||
12 | 336 | Offences by officers of Companies in Liquidation (Minimum) | 3 Years | ||||||||
(Maximum) | 5 Years | ||||||||||
13 | 337 | Fraud done by officers with creditors of the company (Minimum) | 1 Year | ||||||||
(Maximum) | 3 Years | ||||||||||
14 | 338 | Liability Where Proper Accounts not kept (Minimum) | 1 Year | ||||||||
(Maximum) | 3 Years | ||||||||||
15 | 449 | Punishment for False Evidence. Any person who willfully submits any false Information (Minimum) | 3 Years | ||||||||
(Maximum) | 7 Years | ||||||||||
16 | 454 | Fail to Comply with the order of the adjudicating officer under subsection (3) or Regional Director under subsection (7) (Minimum) | 25,000 | ||||||||
(Maximum) | 1,00,000 | 6 Months | |||||||||