Fine vis-a-vis Penalty imposed under the Companies Act, 2013- A prospective understanding

Background :-

We have always seen and witnessed that the erstwhile Companies Act, 1956 and presently Companies Act, 2013 mostly was dealing with “ Fine “(apart from imprisonment)  for the non-compliance made under the Act .

Objective :-

In order to reduce the burden at the NCLTs , it was thought to empower the ROCs and RDs to deal some specific  cases at their level and close the same right there by adjudicating themselves. To make it happen,  “fine” on some 17 offences (mostly are technical lapses in nature) were thought of converted into “ penalty “ by way of introduction of Companies Ordinance and amendment Act which was came into force w.e.f 2nd November 2018.

Meaning

Fine-  Fine is a sum of money exacted as a penalty by a court of law or other authority.

Penalty-  Penalty is a punishment imposed for breaking a law, rule, or contract.

Fine imposed when any application/ petition filed with any court (like: NCLT, High Courts) and penalty imposed when company made any non compliance and adjudicating authority directly can impose penalty on such companies.

“Additional fees” paid is neither a penalty nor a fine. As per Rule 12 of The Companies (The Registered offices and Fees) Rules, 2014, additional fees is only a fees paid by Company for filing of form . Payment of additional fees not deemed to be waiver of any penalty /fine/other SCN/Legal& Regulatory Intervention. Payment of additional fees does not make a “ non-compliance “ as “ Compliance”.

Example:-

Section92-AnnualReturn

92( 4): States about filing of Annual Return and additional fees in case of non filing within prescribed period of 60 days from the AGM.

92( 5): States about penalty in case of company fails to file annual return within time prescribed under sub section 4.

After the Companies (Amendment) Ordinance, 2018 , certain offences has been categorised from Fine to Penalty. Thus, Registrar of Companies (ROC) and Regional Director (RD) can now impose penalties directly after issuing SCN, instead of going to NCLT/Court for imposing fines or for following procedure for composition of offences.

Total 17 sections has been reframed and changed from “ FINE” to “ PENALTY” for the non-compliance made under those respective sections .

Sr. No. Section Descriptions
1 53(3) Prohibition of Issue of shares at a discount
2 64(2) Notice to be given to Registrar for alteration of share capital
3 92(5) Annual Return
4 102(5) Statement to be annexed to Notice
5 105 Proxies
6 117(2) Resolutions and Agreements to be filed
7 121(3) Report on annual general meeting
8 137(3) Copy of financial statement to be filed with Registrar
9 140(3) Removal, resignation of auditor and giving of special notice
10 157(2) Company to inform Director Identification Number to Registrar
11 159 Punishment for Contravention in respect of DIN
12 165(6) Number of Directorships
13 191(5) Payment to Director for Loss of Office
14 197(15) Overall maximum managerial remuneration and managerial remuneration in case of absence or
inadequacy of profits
15 203(5) Appointment of Key Managerial Personnel
16 238(3) Registration of the offer of scheme involving transfer of shares
17 446B Lesser Penalties for OPC or Small Companies

Conclusion

In case of any non-compliance made under the aforesaid 17 sections , ROC/RD are empowered to straightway issue SCN and impose penalty after opportunity of being heard .

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