Summary: The action of the Registrar of Companies (ROC) to prosecute the company for non-compliance is not justified. While the Companies Act, 2013, includes penalties for failing to file an annual return under Section 92(4) and financial statements under Section 137(2), a crucial amendment to Section 454(3) changes the procedure for such defaults. According to the Companies (Amendment) Act, 2020, if a company rectifies the default of not filing these forms either before or within thirty days of the ROC issuing a notice, no penalty should be imposed. All proceedings related to that specific default are considered concluded. In this case, the company rectified the default by filing the required forms within 30 days of receiving the notice. Therefore, the ROC cannot legally proceed with the prosecution or impose a penalty. This amendment provides a window for companies to correct their filings without facing penalties, concluding the matter once the default is made good.
QUESTION & ANSWER SERIES -DEFAULT U/S. 92 & 137 OF CA,2013
QUESTION: Registrar of Companies (ROC) has sent a Notice to a Company alleging default under Section 92(4) and Section 137(2) of the Companies Act, 2013. On receiving the notice, the Company immediately arranges to file the respective Forms/ Returns and communicates within 30 days of the notice that the it has made good the default.
However, the ROC proceeded to prosecute the Company for non-compliance under the aforesaid Section.
Is the action of the Registrar justified? If so, what may be the penalty for such non-compliances ?
| APPLICABLE PROVISIONS:
SECTION 92(4) OF CA,2013: Every company shall file with the Registrar a copy of the annual return, within sixty days from the date on which the annual general meeting is held or where no annual general meeting is held in any year within sixty days from the date on which the annual general meeting should have been held together with the statement specifying the reasons for not holding the annual general meeting, with such fees or additional fees as may be prescribed, within the time as specified, under section 403. SECTION 92(5) OF CA,2013 If a company fails to file its annual return under sub-section (4), before the expiry of the period specified under section 403 with additional fees, the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lakhs rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both. SECTION 137(2) OF THE CA,2013 : Copy of financial statement to be filed with Registrar. Where the annual general meeting of a company for any year has not been held, the financial statements along with the documents required to be attached under sub-section (1), duly signed along with the statement of facts and reasons for not holding the annual general meeting shall be filed with the Registrar within thirty days of the last date before which the annual general meeting should have been held and in such manner, with such fees or additional fees as may be prescribed within the time specified, under section 403. SECTION 137(3)OF CA,2023: 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 one thousand rupees for every day during which the failure continues but which shall not be more than ten lakh rupees, and the managing director and the Chief Financial Officer of the company, if any, and, in the absence of the managing director and the Chief Financial Officer, any other director who is charged by the Board with the responsibility of complying with the provisions of this section, and, in the absence of any such director, all the directors of the company, shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees, or with both. SECTION 403 OF CA,2013 Fee for filing, etc.— (1) Any document, required to be submitted, filed, registered or recorded, or any fact or information required or authorised to be registered under this Act, shall be submitted, filed, registered or recorded within the time specified in the relevant provision on payment of such fee as may be prescribed: Provided that any document, fact or information may be submitted, filed, registered or recorded, after the time specified in relevant provision for such submission, filing, registering or recording, within a period of two hundred and seventy days from the date by which it should have been submitted, filed, registered or recorded, as the case may be, on payment of such additional fee as may be prescribed: Provided further that any such document, fact or information may, without prejudice to any other legal action or liability under the Act, be also submitted, filed, registered or recorded, after the first time specified in first proviso on payment of fee and additional fee specified under this section. (2) 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 with additional fee, the company and the officers of the company who are in default, shall, without prejudice to the liability for payment of fee and additional fee, be liable for the penalty or punishment provided under this Act for such failure or default. SECTION 454(3) OF CA,2013- Adjudication and Penalties The adjudicating officer may, by an order impose the penalty on the company and the officer who is in default stating any non-compliance or default under the relevant provision of the Act. |
ANSWER:
Section 454(3) of the Companies Act, 2013(the Act), provides that the adjudicating officer may, by an order-
(a) impose the penalty on the company, the officer who is in default, or any other person, as the case may be, stating therein any non-compliance or default under the relevant provisions of the Act; and
(b) direct such company, or officer who is in default, or any other person, as the case may be, to rectify the default, wherever he considers fit.
However, a proviso has been to section 454(3) of the Act inserted vide the Companies (Amendment) Act, 2020 w.e.f. 22.01.2021, which provides as under:
In case the default relates to non-compliance of section 92(4) or section 137(1) or 137(2) and such default has been rectified either prior to, or within thirty days of, the issue of the notice by the adjudicating officer, no penalty shall be imposed in this regard and all proceedings under this section in respect of such default shall be deemed to be concluded.
Accordingly, in the given case, the Registrar of Companies, who is the designated Adjudicating Officer for levying penalties under the above-mentioned provisions is not empowered to proceed to levy penalty if the requisite Forms prescribed under the said provisions have been filed within 30 days of issue of the Notice
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