COMPANIES (AMENDMENT) ORDINANCE, 2019

The Companies (Amendment) Ordinance, 2018 received the assent of the President of India’s to bring into force amendments into the provisions of Companies Act, 2013 with effect from 2 November 2018. The ordinance is based on the recommendations of a committee which was formed with the objective of reviewing the provisions of the Act.

The objectives for which this ordinance was promulgated was Ease of Doing Business and better corporate compliance. The key objectives of the amendment were:

  • Re-categorization of certain offences, which are in the category of compoundable offences to an in-house adjudication framework, wherein defaults would be subject to the penalty levied by an adjudicating officer.
  • Making a transparent and a technology driven adjudication on online platforms and publishing the orders on an online platform for improving efficiency and reducing hassles.
  • Reducing the burden on the already overburdened National Company Law Tribunal by increasing the role and functions of Regional Directors.
  • To curb the burning issue of “shell and bogus companies” which are formed with the objectives of saving tax and increasing profits.

Since, the validity of the ordinance is for 6 weeks only, thereby it was necessary that the ordinance gets the assent of the parliament. The winter session of the parliament was from 11th December 2018 to 8th January 2019. Even though the ordinance got passed in the Lok Sabha, it could not be passed in the Rajya Sabha. Since, the ordinance was to expire on 21st January 2019, the President re-promulgated the ordinance and thereby brought Companies (Amendment) Ordinance, 2019 (“Ordinance, 2019”) on 12th January 2019.

The amendments has resulted in reducing the burden on courts and tribunals by modifying the punishments to just monetary penalties in 16 sections of the act.

With the latest amendments, the jurisdiction of 16 types of corporate offences would be shifted from the special courts to in-house adjudication. This is “expected to reduce the caseload of special courts by over 60 per cent, thereby enabling them to concentrate on serious corporate offences.

With this amendment, the scope of in-house adjudication has gone up from 18 sections at present to 34 Sections of the Act,” the Corporate Affairs Ministry said in November.

Section wise Summary of amendment in Provisions of The Companies Act 2013 vide The Companies (Amendment) Ordinance 2019

S.no
Section
Particulars
Pre-Ordinance
Post Ordinance
Impact/ Effect
Rationale for Amendment
1.
2(41)
Financial year
Application made for following a different financial year was made to the “Tribunal”
Along with holding and subsidiary company, associate company outside India has also been inserted.
Application made for following a different financial year is now to be made to the “Central Government”
For disposal of pending applications with the Tribunals, existing provisions would be used.
This amendment will help in:
♣ de-clogging the already overburdened and overcrowded tribunals.
♣ Making speedy redressal possible under Companies Act.
The scores of cases already pending with the tribunals prompted the government to take this step.
This amendment was brought with the intention of promoting ease of doing business, as the entrepreneurs will no longer have to approach courts for minor violations under Companies Act.
2.
10A
Commen-cement of Business
New insertion
Company can’t commence any business unless a declaration is filed by the Director within a period of 180 days from the incorporation.
And the company is also required to file with the registrar a verification of their registered office.
Non-Compliance of this provision will attract penalty for the company. And, if a declaration has not been filed and the Registrar has reason to believe that no transaction was conducted by the company, then the Registrar has the power to initiate the removal of the company under section 248 of the Companies Act.
This provision was inserted with the motive of tracking and putting a full stop on bogus and shell companies.
3.
12(9)
Registered office of the company
New Insertion
If the registrar of the companies has reason to believe that a particular company is not carrying any business or any operation than the Registrar has the power to physically verify the same.
Without prejudice to the provisions of 12(8), if a Registrar on a physical verification finds out that a company does not have a physical Registered office for receiving commu-nications and notices, then the Registrar has the power to remove the names of such companies from the register of companies under Chapter XVIII.
This provision was inserted with the motive of tracking and putting a full stop on bogus and shell companies.
4.
14
Alteration of Articles
Conversion of Public company to private company will take place with the approval of Tribunal.
The approval for the same is now to be taken by Central Government.
This will help in de-clogging the already overburdened and overcrowded tribunals.
For disposal of pending applications with the Tribunals, existing provisions would be used.
The scores of cases already pending with the tribunals prompted the government to take this step.
This amendment was brought with the intention of promoting ease of doing business, as the entrepreneurs will no longer have to approach courts for minor violations under Companies Act.
5.
53(3)
Prohibition on issue of shares at a discount
Defaulting Company was liable to fine and defaulting officer was liable to either imprisonment or fine.
Defaulting Company and officer are liable for penalty.
The amendment has resulted in linking the penalty with the amount that has been raised through the issue of shares at discount or Rs.5 Lakhs whichever is less.
The Company is required to refund the amount so raised along with an interest of 12%p.a.
The reasons behind substituting penalty for fines or imprisonment was:
♠ To decrease burden on courts and tribunals, as a mere violation of provisions had to be dealt by the courts and tribunals, no matter how trivial they may be.
♠ Penal provisions were creating roadblocks in the path of doing business in India.
♠ To increase efficiency of courts, by dealing with only those matters that are serious in nature.
♠ For speedy disposal of cases.
6.
64(2)
Notice to Registrar for alteration of Share Capital
Failure or Delay in filing notice for alteration for share capital attracted fine only.
Non-compliance by company or officers regarding alteration of share capital will be charged with penalty.
Now both the defaulting companies and officers will be charged with penalty only as penalty has been substituted in place for fines.
The reasons behind substituting penalty for fines or imprisonment was:
♠ To decrease burden on courts and tribunals, as a mere violation of provisions had to be dealt by the courts and tribunals, no matter how trivial they may be.
♠ Penal provisions were creating roadblocks in the path of doing business in India.
♠ To increase efficiency of courts, by dealing with only those matters that are serious in nature.
♠ For speedy disposal of cases.
7.
77(1)
Duty to Register Charges, etc.
Company has to get its charge registered within a period of 30 days from its creation. But, the Registrar on an application by the company can allow the Registration to be made within a period of 300 days from creation on payment of additional fees.
♠ Charges created before Companies (Amendment) Ordinance 2019:
(a) Within 300 days of such creation
(b) if registration not done within 300 days, then within 6 months from the date of commencement of the Companies (Amendment) Ordinance, 2019, on payment of such additional fees.
♠ Charges created after Companies (Amendment) Ordinance 2019:
(a) Within 60 days of such creation
(b) if registration not done within 60 days, then registration is to be made within a further period of 60 days after payment of such additional fees.
The amendment has resulted in reducing the number of days required to file the charge with the Registrar from 300 days to 60 days.
A further period of 60 days is provided to register the charge.
The reason behind reducing the number of days for filing of charge was to keep a check on shell and bogus companies.
8.
86
Punishment for contra-vention
If contravention committed by company, then the company was punishable with fines and if the contravention was committed by any defaulting officer than the officer was punished with either imprisonment or fine or both.
If any person willfully furnishes false or incorrect information or knowingly suppresses any material information pertaining to registration of charges, then that person shall be held liable under Section 447 of the Act.
With the amendment, the contravention under S. 86 would be treated at par with the offences of S.447.
The reason behind imposing a heavy penalty for contravention was to create a stringent and a strict provision for violation.
9.
87
Rectification by Central Government in Register of Charges
“(1) The Central Government on being satisfied that—
(i) (a) the omission to file with the Registrar the particulars of any charge created by a company or any charge subject to which any property has been acquired by a company or any modification of such charge; or
(b) the omission to register any charge within the time required under this Chapter or the omission to give intimation to the Registrar of the payment or the satisfaction of a charge, within the time required under this Chapter; or
(c) the omission or misstatement of any particulars with respect to any such charge or modification or with respect to any memorandum of satisfaction or other entry made in pursuance of section 82 or section 83, was accidental or due to inadvertence or some other sufficient cause or it is not of a nature to prejudice the position of creditors or shareholders of the company; or
(ii) on any other grounds, it is just and equitable to grant relief, it may on the application of the company or any person interested and on such terms and conditions as it may seem to the Central Government just and expedient, direct that the time for the filing of the 63 particulars or for the registration of the charge or for the giving of intimation of payment or satisfaction shall be extended or, as the case may require, that the omission or mis-statement shall be rectified”.
For section 87 of the principal Act, the following section shall be substituted, namely:
87. The Central Government on being satisfied that —
(a) the omission to give intimation to the Registrar of the payment or satisfaction of a charge, within the time required under this Chapter; or
(b) the omission or misstatement of any particulars with respect to any such charge or modification or with respect to any memorandum of satisfaction or other entry made in pursuance of section 82 or section 83, was accidental or due to inadvertence or some other sufficient cause or it is not of a nature to prejudice the position of creditors or shareholders of the company, it may, on the application of the company or any person interested and on such terms and conditions as the Central Government deems just and expedient, direct that the time for the giving of intimation of payment or satisfaction shall be extended or, as the case may require, that the omission or misstatement shall be rectified”
The amendment has allowed rectification only in case of accident or due to inadvertence or some other sufficient cause or when it is not of a nature which prejudices the position of creditors or shareholders of the company.
In order to reduce the cases/situations in which rectification could be allowed, the government came with an amendment limiting the scope of rectification.
10.
90 (9) & (10)
Register of significant beneficial owners in a Company
(9) The company or the person aggrieved by the order of the Tribunal may make an application to the Tribunal for relaxation or lifting of the restrictions placed under sub-section (8).
(10) If any person fails to make a declaration as required under sub-section (1) he shall be punishable with fine which shall not be less than one lakh Rupees but which may extend to ten lakh rupees and where the failure is a continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which the failure continues
For section 90 of the principal Act, the following sub-section shall be substituted, namely:
♠ “(9) The company or the person aggrieved by the order of the Tribunal may make an application to the Tribunal for relaxation or lifting of the restrictions placed under sub-section (8), within a period of one year from the date of such order. Provided that if no such application has been filed within a period of one year from the date of the order under subsection (8), such shares shall be transferred to the authority constituted under sub-section (5) of section 125, in such manner as may be prescribed;
♠ in sub-section (10):
(a) after the word “punishable”, the words “with imprisonment for a term which may extend to one year or” shall be inserted;
(b) after the words “ten lakh rupees”, the word “or with both” shall be inserted.
Taking into consideration the importance of disclosures under S.90, the punishment for the same has been enhanced to imprisonment or fine or both instead of being punished with only fine earlier.
The ordinance has also inserted a time frame of 1 year, within which an aggrieved person by the order of tribunal can make an application to the tribunal for some relaxations. And if no application is made within the time period than the shares will be transferred under S. 125 to Investor Education and Protection Fund.
In order to ensure speedy disposal of cases and to reduce the backlog of cases pending in the courts or tribunals, there was a need for reducing the time limit for filing of application for relaxation or lifting of restrictions with the tribunals and courts. Hence, the amendment.
11.
92(5)
Annual Return
Fine was levied on company for failure/delay in filing of Annual Returns and every defaulting officer under 92(4) was punished with fine or imprisonment or both.
Penalty has been substituted for fine or imprisonment for both defaulting company and officers.
Penalty for continuing default has also been provided.
The substitution of penalty has resulted in imprisonment and fines on defaulting company and officers being withdrawn.
The reasons behind substituting penalty for fines or imprisonment was:
♠ To decrease burden on courts and tribunals, as a mere violation of provisions had to be dealt by the courts and tribunals, no matter how trivial they may be.
Penal provisions were creating roadblocks in the path of doing business in India.
♠ To increase efficiency of courts, by dealing with only those matters that are serious in nature.
♠ For speedy disposal of cases.
12.
102(5)
Statement to be annexed to notice
If a default is made in complying with the provisions of this section, then the defaulting promoter, director, manager or other key personnel was punished with fine which may extend to Rs. 50,000 or five times the amount of benefit accruing to the promoters, directors, manager, or other key personnel.
If a default is made in complying with the provisions of this section, then the defaulting promoter, director, manager or other key personnel will be penalized with Rs. 50,000 or five times the amount of benefit accruing to the promoters, directors, manager, or other key personnel.
Before the amendment, the maximum fine levied on defaulting party was Rs. 50,000. But, after the substitution of penalty for fines has resulted in increasing the minimum amount of penalty to Rs. 50,000.
The reasons behind substituting penalty for fines or imprisonment was:
♠ To decrease burden on courts and tribunals, as a mere violation of provisions had to be dealt by the courts and tribunals, no matter how trivial they may be.
♠ Penal provisions were creating roadblocks in the path of doing business in India.
♠ To increase efficiency of courts, by dealing with only those matters that are serious in nature.
♠ For speedy disposal of cases.
13.
105(3)
Proxies
S. 105(3) states that if default is made in complying with 105(2) than every officer of the company who has defaulted will be punishable with fine which may extend to Rs. 5000.
If a default is made in complying with 105(2), then every defaulting officer will be liable to a penalty of Rs. 5000.
The amendment has resulted in substituting the fine with penalty.
The reasons behind substituting penalty for fines or imprisonment was:
♠  To decrease burden on courts and tribunals, as a mere violation of provisions had to be dealt by the courts and tribunals, no matter how trivial they may be.
♠  Penal provisions were creating roadblocks in the path of doing business in India.
♠  To increase efficiency of courts, by dealing with only those matters that are serious in nature.
♠  For speedy disposal of cases.
14.
117(2)
Resolutions and agreements to be filed
Company and Officer in default are liable to fine in case they fail to file the resolutions and agreements.
Non-compliance with the provisions of S. 117(1) i.e. with respect to filing of resolutions and agreements shall result I the company and officer in default including liquidator being liable to penalty.
The amendment has resulted in substituting the fine with penalty.
In case of continuing offence, per day penalty has also been inserted.
Punishment for imprisonment has also been withdrawn.
The reasons behind substituting penalty for fines or imprisonment was:
♠  To decrease burden on courts and tribunals, as a mere violation of provisions had to be dealt by the courts and tribunals, no matter how trivial they may be.
♠  Penal provisions were creating roadblocks in the path of doing business in India.
♠  To increase efficiency of courts, by dealing with only those matters that are serious in nature.
♠  For speedy disposal of cases.
15.
121(3)
Report on Annual General Meeting
The company and Officer in default will be levied with fines, if they fail/delay to file reports on Annual General Meeting.
Non-compliance with S. 121(2) i.e. with respect to filing of Reports on Annual General Meeting shall result in the company and Officer in default being liable to penalty.
The amendment has resulted in substituting the fine with penalty.
In case of continuing offence, per day penalty has also been inserted.
Punishment for imprisonment has also been withdrawn.
The reasons behind substituting penalty for fines or imprisonment was:
♠  To decrease burden on courts and tribunals, as a mere violation of provisions had to be dealt by the courts and tribunals, no matter how trivial they may be.
♠  Penal provisions were creating roadblocks in the path of doing business in India.
♠  To increase efficiency of courts, by dealing with only those matters that are serious in nature.
♠  For speedy disposal of cases.
16.
137(3)
Copy of financial statement to be filed with Registrar
The Company and Officer in default will be levied with fines, if they fail/delay to file financial statements with the registrar.
Non-compliance with S. 137(1) & (2) i.e. with respect to filing of financial statements with the registrar shall result in the company and Officer in default being liable to penalty.
The amendment has resulted in substituting the fine with penalty.
In case of continuing offence, per day penalty has also been inserted.
Punishment for imprisonment has also been withdrawn.
The reasons behind substituting penalty for fines or imprisonment was:
♠  To decrease burden on courts and tribunals, as a mere violation of provisions had to be dealt by the courts and tribunals, no matter how trivial they may be.
♠  Penal provisions were creating roadblocks in the path of doing business in India.
♠  To increase efficiency of courts, by dealing with only those matters that are serious in nature.
♠  For speedy disposal of cases.
17.
140(3)
Removal, resignation of auditor and giving of special notice.
If the auditor does not comply with the provisions of S. 140(2), then the auditor shall be punishable with fine.
If the auditor does not comply with the provisions of S. 140(2), then the auditor shall be penalized.
The amendment has resulted in substituting the fine with penalty.
In case of continuing offence, per day penalty has also been inserted.
The reasons behind substituting penalty for fines or imprisonment was:
♠  To decrease burden on courts and tribunals, as a mere violation of provisions had to be dealt by the courts and tribunals, no matter how trivial they may be.
♠  Penal provisions were creating roadblocks in the path of doing business in India.
♠  To increase efficiency of courts, by dealing with only those matters that are serious in nature.
♠  For speedy disposal of cases.
18.
157(2)
Company to inform Director Identification Number to Registrar
A company or an Officer of the company who, fails to furnish Director Identification Number to the Registrar shall be punishable with fine.
Non-compliance with sub-section (1) of Section 157 shall result in the company and every officer in default being liable to a penalty.
The amendment has resulted in substituting the fine with penalty.
In case of continuing offence, per day penalty has also been inserted.
The reasons behind substituting penalty for fines or imprisonment was:
♠ To decrease burden on courts and tribunals, as a mere violation of provisions had to be dealt by the courts and tribunals, no matter how trivial they may be.
♠ Penal provisions were creating roadblocks in the path of doing business in India.
♠  To increase efficiency of courts, by dealing with only those matters that are serious in nature.
♠  For speedy disposal of cases.
19.
159
Penalty for default of certain provisions
Any individual, director of a company contravening the provisions of Sections 152, 155 and 156 will be punishable with imprisonment or fine
Any individual, director of a company contravening the provisions of Sections 152, 155 and 156 shall be liable to penalty.
The amendment has resulted in substituting the fine and imprisonment with penalty.
In case of continuing offence, per day penalty has also been inserted.
The reasons behind substituting penalty for fines or imprisonment was:
♠  To decrease burden on courts and tribunals, as a mere violation of provisions had to be dealt by the courts and tribunals, no matter how trivial they may be.
♠  Penal provisions were creating roadblocks in the path of doing business in India.
♠  To increase efficiency of courts, by dealing with only those matters that are serious in nature.
♠  For speedy disposal of cases.
20.
164(1)
Disquali-fications for appointment of Directors
A person shall not be appointed as a director if he:
♠ is of unsound mind,
♠ is an undischarged insolvent,
♠ applied for declaration as insolvent,
♠ is convicted by a court for any offence and has been imprisoned for the same,
♠ an effective order has been passed by either court or tribunal disqualifying a person as a director,
♠ has not paid any calls on shares held by him,
♠ has been convicted of an offence dealing with related party transactions under S. 188,
♠ has not complied with S. 152(3).
A new clause of disqualification for appointment of a person as a director has been inserted i.e. if a person has not complied with the provisions of S.165(1), a person would be disqualified for appointment as a director.
The amendment has resulted in exceeding the maximum number of directorships as a ground for disqualification.
In order to curtail the abuse of number of directorships held by a Director in different corporates, a dire need was there to put a check on the number of Directorships, thereby the amendment.
21.
165(6)
Number of Director-ships
If a person accepts an appointment as a director in contravention of S.165(1), the person shall be punishable with fine.
If a person accepts appointment as a director in contravention of sub-section (1) of Section 165 such person shall be liable to a penalty.
The amendment has resulted in categorizing this default as a civil default with the defaulting company and officers liable to penalty only.
The reasons behind substituting penalty for fines or imprisonment was:
♠  To decrease burden on courts and tribunals, as a mere violation of provisions had to be dealt by the courts and tribunals, no matter how trivial they may be.
♠  Penal provisions were creating roadblocks in the path of doing business in India.
♠  To increase efficiency of courts, by dealing with only those matters that are serious in nature.
♠  For speedy disposal of cases.
22.
191(5)
Payment to director for loss of office, etc., in connection with transfer of under-taking, property or shares.
If a director fails to comply with the provisions of this section, then such director shall be punished with fine.
If a director fails to comply with the provisions of this section, then such director shall be penalized.
The amendment has resulted in shifting the punishment for the default under this section to civil liability i.e. now the defaulting director shall be liable to penalty, instead of being punishable with fine.
The reasons behind substituting penalty for fines or imprisonment was:
♠  To decrease burden on courts and tribunals, as a mere violation of provisions had to be dealt by the courts and tribunals, no matter how trivial they may be.
♠  Penal provisions were creating roadblocks in the path of doing business in India.
♠  To increase efficiency of courts, by dealing with only those matters that are serious in nature.
♠  For speedy disposal of cases.
23.
197(7) & (15)
Overall maximum managerial remun-eration and managerial remun-eration in case of absence or inadequacy of profits.
Sub-section 7 states that an independent director shall not be entitled to any stock option and may receive remuneration by way of fees provided under subsection (5), reimbur-sement of expenses for participation in the Board and other meetings and profit related commission as may be approved by the members.
Clause 15 states that if a person contravenes the provision of this section then that person will be liable to fine.
Sub-Section 7 of S. 197 has been omitted.
Under Sub-Section (15), Non-compliance shall result in any person in default being liable to a penalty.
With the omission of Sub-section 7, the directors are now entitled to stock options and are now liable to receive remuneration, reimbursement of expenses for participation in the Board and other meetings and profit related commissions without the approval of the members.
The amendment has resulted in substituting the fine with penalty.
The reasons behind substituting penalty for fines or imprisonment was:
♠  To decrease burden on courts and tribunals, as a mere violation of provisions had to be dealt by the courts and tribunals, no matter how trivial they may be.
♠  Penal provisions were creating roadblocks in the path of doing business in India.
♠  To increase efficiency of courts, by dealing with only those matters that are serious in nature.
♠  For speedy disposal of cases.
24.
203(5)
Appoint-ment of key managerial personnel
If any company, Director and Key managerial Personnel contravenes the provisions of S. 203, then they shall be punishable with fine.
If any company, Director and Key managerial Personnel contravenes the provisions of S.203, then they shall be liable to penalty.
The amendment has resulted in substituting the fine with penalty.
The reasons behind substituting penalty for fines or imprisonment was:
♠  To decrease burden on courts and tribunals, as a mere violation of provisions had to be dealt by the courts and tribunals, no matter how trivial they may be.
♠  Penal provisions were creating roadblocks in the path of doing business in India.
♠  To increase efficiency of courts, by dealing with only those matters that are serious in nature.
♠  For speedy disposal of cases.
25.
238(3)
Registration of the offer of scheme involving transfer of share
The Director who issues a circular which has not been presented for registration and registered under clause(c) of Sub-Section 1 of Section 238 shall be punishable with fine.
Non-compliance with clause (c) of sub-section (1) of Section 238 shall result in the director being liable to a penalty.
The amendment has resulted in substituting the fine with penalty.
The reasons behind substituting penalty for fines or imprisonment was:
♠  To decrease burden on courts and tribunals, as a mere violation of provisions had to be dealt by the courts and tribunals, no matter how trivial they may be.
♠  Penal provisions were creating roadblocks in the path of doing business in India.
♠  To increase efficiency of courts, by dealing with only those matters that are serious in nature.
♠  For speedy disposal of cases.
26.
248(1)
Power of Registrar to remove name of company from register of companies
The registrar can remove the name of the companies from the register of companies if:
– the company has failed to commence its business within one year of incorporation.
– It is not carrying out any business operations for a period of two years.
– It is a dormant company under Section 455.
Apart from the already existing provisions under S.248, the registrar can also remove the name of the companies if:
  • The subscribers of the memorandum of company have not paid the subscription which they had undertaken to pay at the time of incorporation and the declaration to this effect has not been filed within 180 days of its incorporation.
  • The company is not carrying on any business or operation after physical verification carried out under sub-section 9 of Section 12.
This amendment has widened the scope and powers of registrar under S. 248 for keeping a strict check on all the companies and their functioning.
This provision was inserted with the motive of tracking and putting a full stop on bogus and shell companies.
27.
441(1) & (6)
Compo-unding of certain offences
441(1)(b) states that power of Regional Director or an officer authorized by the Central Government to compound offences should not exceed Five Lakhs Rupees.
441(6)(a) states that for compounding of offences permission of the Special Court is required.
Power of Regional Director to compound offences punishable has been increased to Rs.25,00,000(Twenty Five Lakhs Rupees).
Ordinance has also stated that offences which are punishable with imprisonment only or with imprisonment and fine shall not be compoundable.
Increasing the pecuniary limit up to which Regional Directors can compound offences will help in De-clogging the NCLT and will further help in reducing their burden.
The ordinance has resulted in clause (a) of Section 441(6) being omitted and further being substituted by clause (b) of S. 441(6).
The scores of cases already pending with the tribunals prompted the government to take this step.
This amendment was brought with the intention of promoting ease of doing business, as the entrepreneurs will no longer have to approach courts for minor violations under Companies Act.
28.
446 B
Penalties for One Person Companies or small companies.
If a One Person Company or a small company fails to comply with the provisions of sub-section (5) of section 92, sub-section (2) of section 117 or subsection (3) of section 137, such company and officer in default of such company shall be punishable with fine or imprisonment or fine and imprisonment.
If a One Person Company or a small company fails to comply with the provisions of sub-section (5) of section 92, sub-section (2) of section 117 or subsection (3) of section 137, such company and officer in default of such company shall be liable to a penalty which shall not be more than one half of the penalty specified in such sections.
The amendment has resulted in levying of penalties for One Person Companies and Small companies.
The reasons behind substituting penalty for fines or imprisonment was:
♠  To decrease burden on courts and tribunals, as a mere violation of provisions had to be dealt by the courts and tribunals, no matter how trivial they may be.
♠  Penal provisions were creating roadblocks in the path of doing business in India.
♠  To increase efficiency of courts, by dealing with only those matters that are serious in nature.
♠ For speedy disposal of cases.
29.
447(3)
Punish-ment for Fraud
The section provided that where the fraud involves an amount less than Rs. 10 lakh or 1% of the turnover of the company and did not involve public interest the defaulter shall be punishable with imprisonment or fine or both.
The section provided that where the fraud involves an amount less than Rs. 10 lakh or 1% of the turnover of the company and did not involve public interest the defaulter shall be punishable with imprisonment for a term which may extend to 5years and the maximum fine under section 447 has be increased from Rs.20 lakhs to Rs. 50 lakhs.
The amendment has resulted in increasing the penalty for fraud from 25 Lakhs to 50 Lakhs.
With the cases of frauds by the corporates on the rise, there was a need for curtailing such fraudulent efforts, thereby the amendment.
30.
454(3), (4) & (8)
Adjudication of Penalties
The Adjudicating officer may by an order impose penalty on the company and the officer in default stating any non-compliance or default under the relevant provisions of the Act. [454(3)]
♠  The adjudicating officer before imposing any penalty should give a reasonable opportunity to company and the officer in default who is in default. [454(4)]
♠  Where company does not pay the penalty imposed by the adjudicating officer or Regional Director, within a period of ninety days from the date of the receipt of the copy of the order, the company shall be punishable with fine which shall not be less than twenty five thousand rupees but which may extend to five lakh rupees.[454(8)(i)]
♠  Where an officer of a company who is in default does not pay the penalty, within a period of ninety days from the date of the receipt of the copy of the order, such officer shall be punishable with imprisonment which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees, or with both. [454(8)(ii)]
The Adjudicating officer may by an order
♠ impose penalty on the company, the officer in default or any other person stating any non-compliance or default under the relevant provisions of the Act. [454(3)]
♠ 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. [454(3)]
♠  The adjudicating officer before imposing any penalty should give a reasonable opportunity to company, the officer in default or any other person. [454(4)]
♠  Where company fails to comply with the order made under sub-section (3) or sub-section (7), as the case may be, within a period of ninety days from the date of the receipt of the copy of the order, the company shall be punishable with fine which shall not be less than twenty five thousand rupees but which may extend to five lakh rupees [454(8)(i)].
♠ Where an officer of a company or any other person who is in default fails to comply with the order made under sub-section (3) or sub-section (7), as the case may be, within a period of ninety days from the date of the receipt of the copy of the order, such officer shall be punishable with imprisonment which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees, or with both. [454(8)(ii)]
The amendment has resulted in increasing the scope and powers of Adjudicating officers and have also provided for rectification of default.
In order to reduce the burden of Tribunals and to ensure speedy disposal of cases, there was a need for increasing the powers and scope of adjudicating officers, thereby the amendment.
31.
454A
Penalty for Repeated Default
New insertion
“Where a company or an officer of a company or any other person having already been subjected to penalty for default under any provisions of this Act, again commits such default within a period of three years from the date of order imposing such penalty passed by the adjudicating officer or the Regional Director, as the case may be, it or he shall be liable for the second or subsequent defaults for an amount equal to twice the amount of penalty provided for such default under the relevant provisions of this Act.”
The amendment has resulted in levying double penalty in case of a repeated default committed within a period of 3 years.
In ensuring, that the same offence is not repeated by the company ever, the government was prompted to introduce a new section which would deal with repeat offences. Hence, the amendment.

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