Penalty under Companies Act 2013

The Companies Act 2013 (the Act) imposes penalties on Companies registered under the Act and/or ‘Officers in default’ (see below) of such Companies for non-compliance or default under the relevant provisions of the Act. Penalties so imposed require the payment of monetary sums by the person/Company in default in accordance with the relevant Rules and may differ in quantum, payment schedule etc. depending on the particular penalty imposed as prescribed under the said relevant provision(s) of the Act infringed.

MinusTax’ Legal, Company Law and Taxation professionals via the e-medium (i.e. email, skype, whatsapp etc) provide the complete spectrum of services which include the following —

  • Advisory and Litigation Support/Legal Representation Services
  • Professional and Legal Assessment and Analysis of Written Notice/Show Cause Notice/Penalty Notice
  • Drafting and filing Reply/Objections to Written Notice/Show Cause Notice/Penalty Notice
  • Drafting and Filing Appeal against Penalty Order before Regional Director (RD)
  • Legal representation and litigation support before the relevant Companies Act and Economic/Criminal offences Authorities (Special Courts/MM/AO/RD/NCLT/NCLAT/High Court) (optional)
  • Drafting and filing a Writ Petition (where appropriate) and legal representation before the jurisdictional High Court


Access e-Help services

(click the “MinusTax Professionals” red banner below and fill-up/submit the pop-up form)

Need Tax Help?


Adjudication of Penalties

The Act via section 454 and relevant Rules thereunder provide a mechanism for adjudicating on allegations of such non-compliance etc. and consequential imposition of penalty by an Adjudicating Officer (AO) under the relevant provisions of the Act. The essential features of this adjudicatory mechanism have been briefly detailed below.

Registrar of Companies (ROC) have been appointed by the Central Government to function asAdjudicating Officers(AO) for adjudging penalty under the provisions of the Act in the manner prescribed and subject to their specified jurisdiction as notified. Such AOs by an order (penalty order) may impose the penalty on the concerned Company and the Officer who is in default, stating any non-compliance or default under the relevant provision of the Act.


Written Notice

Before adjudging penalty, the AO is required to issue a ‘written notice’ to the Company and to every Officer of the Company who is in default, to show cause, within such period as may be specified in the notice (not being less than 15 days and more than 45 days from the date of service thereon), why the inquiry should not be held against him/her/it.

Every such written notice issued is required to clearly indicate the nature of non-compliance or default under the Act alleged to have been committed or made by such Company and Officer in default (as the case may be)


Inquiry

After considering any such cause or explanation shown or provided by such Company or Officer, the AO is of the opinion that an inquiry should be held, he/she shall issue a notice fixing a date for the appearance of such Company, through its authorised representative, or Officer of such Company whether personally or through his/her authorised representative.


Reasonable Opportunity of Being Heard

The Act requires such Adjudicating Officer to give a reasonable opportunity of being heard to such Company and the Officer who is in default, before imposing any penalty, to ensure fairness and in the interests of justice.

On the date fixed for hearing of such matter and after giving such reasonable opportunity of being heard to the person(s) concerned, the AO may, subject to reasons to be recorded in writing, pass any order as he/she thinks fit.


Quantum of Penalty

The Rules list the factors to be regarded by the AO while adjudging the quantum of penalty to be imposed, namely —

  • Amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default
  • Amount of loss caused to an investor or group of investors or creditors as a result of the default
  • Repetitive nature of the default.


Access Professional Help – Draft Reply/Objections against Written Notice/Penalty Order

(click the “MinusTax Professionals” red banner below and fill-up/submit the pop-up form)

Need Tax Help?

Any person aggrieved by a penalty order as passed by the concerned Adjudicating Officer (AO) may prefer an appeal to the Regional Director (RD) having jurisdiction in the matter, essential features of this appellate mechanism have been briefly detailed below


Memorandum of Appeal (MoA) and Time Limit

An appeal against such penalty order is termed as a ‘Memorandum of Appeal‘ (MoA) and is required to be submitted before the jurisdictional RD in eForm ADJ, setting forth therein the grounds for appeal and accompanied by a certified copy of the relevant penalty order and such fee as prescribed by the relevant Rules.

Every such appeal is required to be filed within 60 days from the date on which the copy of the relevant penalty order is received by the concerned aggrieved person, and


Disposal of Appeal by RD

  • On the admission of the appeal, the RD shall serve a copy of appeal upon the AO against whose order the appeal is sought along with a notice requiring such AO to file a reply thereto within such period, not exceeding 21 days, as may be stipulated by the RD in the said notice.
  • A copy of every such reply, application or written representation filed by the AO in response before the RD shall be forthwith served on the appellant by the AO.
  • The RD shall notify the parties of the date of hearing of the appeal (not be a date earlier than 30 days following the date of such notification).
  • On the date fixed for hearing, the RD may, subject to the reasons to be recorded in writing, pass any order as he thinks fit including an order.
  • In case the appellant or the AO does not appear on the date fixed for hearing, the RD may dispose of the appeal ex-parte. Provided that where the appellant appears afterwards and satisfies the RD that there was sufficient cause for non-appearance, the RD may make an order setting aside the ex-parte order and restore the appeal.
  • The RD after giving the parties to the appeal an opportunity of being heard, may pass such order as he/she thinks fit, which may confirm, modify or set aside the penalty order appealed against.


Access Professional Help – Draft Appeal against Penalty Order and Access e-Help services

(click the “MinusTax Professionals” red banner below and fill-up/submit the pop-up form)

Need Tax Help?

> Where a Company does not pay the penalty imposed by the Adjudicating Officer or the RD within a period of 90 days from the date of the receipt of the copy of the relevant penalty order, the Company shall be punishable with fine which shall not be less than Rs.25,000 and which may extend to Rs.5 lakhs.

> Where an Officer of a Company is adjudged as being in default, does not pay the penalty within a period of 90 days from the date of the receipt of the copy of the penalty order, such officer shall be punishable with imprisonment which may extend to 6 months or with fine which shall not be less than Rs.25,000 and which may extend to Rs.1 lakhs, or with both.


Access e-Help services – Draft Reply/Objections to Penalty Notice and Appeal Penalty Order

(click the “MinusTax Professionals” red banner below and fill-up/submit the pop-up form)

Need Tax Help?

An “Officer who is in default” for the purpose of any provision of the Act, is defined therein as an officer of the Company who is in default and liable to any penalty or punishment by way of imprisonment, fine or otherwise, and to mean any of the following officers of a Company, namely —

  • Whole-time Director
  • Key Managerial Personnel (KMP)
  • Where there is no KMP, such Director(s) as specified by the Board in this behalf and who has or have given his or their consent in writing to the Board to such specification, or all the Directors, if no Director is so specified
  • Any person who, under the immediate authority of the Board or any KMP, is charged with any responsibility including maintenance, filing or distribution of accounts or records, authorises, actively participates in, knowingly permits, or knowingly fails to take active steps to prevent, any default
  • Any person in accordance with whose advice, directions or instructions the Board of Directors of the Company is accustomed to act, other than a person who gives advice to the Board in a professional capacity
  • Every Director, in respect of a contravention of any of the provisions of this Act, who is aware of such contravention by virtue of the receipt by him of any proceedings of the Board or participation in such proceedings without objecting to the same, or where such contravention had taken place with his
    consent or connivance
  • In respect of the issue or transfer of any Shares of a Company, the share transfer agents, registrars and merchant bankers to the issue or transfer


Key Managerial Personnel

Key Managerial Personnel” (KMP), in relation to a Company, under the Act is defined to mean —

  • Chief Executive Officer or the Managing Director or the Manager
  • Company Secretary
  • Whole-time Director
  • Chief Financial Officer
  • Such other officer as may be prescribed


Access e-Help services – Draft Reply/Objections to Penalty Notice and Appeal Penalty Order

(click the “MinusTax Professionals” red banner below and fill-up/submit the pop-up form)

Need Tax Help?


Administrative Help

For administrative assistance and general queries, please feel free to contact via —
Telephone: +91 8800 38 1950
Email: contact@minustax.com

Alternatively, please contact for an appointment and visit our representational office in DLF Phase IV, Gurgaon (click for Google Map directions).

Follow us @MinusTax

Need Tax Help?
Need Tax Help?