Summary: Section 454 of the Companies Act, 2013 read with the Companies (Adjudication of Penalties) Rules, 2014 provides the framework for adjudication of penalties for contraventions of the Act where penalty is prescribed. The procedure begins with the Registrar of Companies acting as Adjudication Officer issuing a Show Cause Notice to the company, officer in default or any other person, specifying the nature of default, relevant provisions and maximum penalty leviable, and providing the prescribed period for submission of reply. The noticee is required to file a reply electronically, with extension potentially being granted by the Adjudication Officer. Where required or requested, an oral or physical hearing may be allowed, following which the Adjudication Officer, after providing a reasonable opportunity of being heard, may pass an order in writing, including an order for adjournment, subject to reasons being recorded where required. The prescribed timelines for passing the order depend upon whether a reply or hearing is involved. The order is communicated to the concerned parties and the Central Government and is also uploaded on the website. Fixed penalties are imposed where prescribed, and penalties are paid through the MCA portal, with sums realised credited to the Consolidated Fund of India. An aggrieved person may appeal against the order before the Regional Director having jurisdiction within 60 days from receipt of the order, in Form ADJ accompanied by a certified copy of the order. The procedure also recognises suo-motu applications for adjudication of penalties.
Governing provisions of The Companies Act, 2013
| Section 454 of the Companies Act, 2013 read with Companies (Adjudication of Penalties) Rules, 2014 |
Procedure
| Sr. No | Steps |
|---|---|
| 1. | Section 454 of the Companies Act, 2013 (“the Act”) becomes applicable where the provision/s of the Act is contravened and where only penalty is prescribed under the governing section of the Act and not the punishment in the form of Fine or Imprisonment. |
| 2. | The Adjudication Officer (AO) i.e. Registrar of Companies (ROC) shall issue a Show Cause Notice to the Company/Officer in default or any other person. |
| 3. | The notice specifies a time period (minimum 15 days and maximum 30 days) for submission of reply. |
| 4. | The notice contains:
• Nature of default • Relevant provisions • Maximum penalty leviable. |
| 5. | The noticee shall file a reply electronically within the specified time. Extension may be granted by AO on a case-to-case basis. |
| 6. | If required (or on request), AO may allow oral/physical hearing, and shall issue notice within 10 working days of receiving reply. |
| 7. | Upon giving a reasonable opportunity of being heard, the AO shall, subject to reasons to be recorded in writing, pass an order in writing as he/she thinks fit including an order for adjournment. |
| 8. | Timeline for passing order:
• 30 days – where no reply or no hearing • 90 days – where hearing is conducted |
| 9. | Every Order of the adjudicating officer shall be duly dated and signed by him and shall clearly state the reasons for requiring physical appearance. |
| 10. | If any person fails to reply or neglects or refuses to appear as required before the AO, the AO may pass an order imposing the penalty, in the absence of such person after recording the reasons for doing so. |
| 11. | The AO shall send a copy of the Order passed by him/her to the concerned Company or officer who is in default or any other person or all of them and to the Central Government and a copy of the order shall also be uploaded on the website. |
| 12. | In case a fixed sum of penalty is provided for default of a provision, the AO shall impose that fixed sum, in case of any default therein. |
| 13. | Penalty shall be paid through the MCA portal. |
| 14. | All sums realized by way of penalties under the Act shall be credited to the Consolidated Fund of India. |
| 15. | An Aggrieved Person also reserves the right to Appeal against the Order passed by the AO in writing with the Regional Director having jurisdiction in the matter within a period of 60 days from the date of receipt of the order of AO by the aggrieved person, in Form ADJ setting forth the grounds of appeal and shall be accompanied by a certified copy of the Order against which the appeal is sought. |
NOTE
| Suo- moto application for adjudication of penalties can also be filed. |
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**This document is for educational purposes only and does not constitute legal advice.**
Author: Ms. Kathanshi Jain Article Assistant at M/s Ronak Jhuthawat & Co, Practicing Company secretary Call: +91 98874 22212 | Email: [[email protected]](mailto:[email protected])
