prpri Prosecution to Adjudication -Non-filing of Annual Accounts & Return under Companies Act, 2013. Prosecution to Adjudication -Non-filing of Annual Accounts & Return under Companies Act, 2013.

We know very well that the provisions of the Companies Act, 2013 (Act, 2013), and the rules framed thereunder, mandate companies to file requisite documents, including Annual Returns and Financial Statements, with the concerned Registrar of Companies (ROC) of their jurisdiction. Accordingly, every Company is required to file its Annual Accounts and Annual Return as per the Act, 2013 within 30 days and 60 days respectively from the conclusion of the Annual General Meeting (AGM). Filing of Annual Accounts is governed under Section 137 of the Act, 2013 read with Rule 12 of the Company (Accounts) Rules, 2014 and Annual Return is governed under Section 92 of the Act, 2013 read with Rule 11 of the Companies (Management and Administration) Rules, 2014.

We also know that non-adherence to such provisions and non-filing of the requisite documents is an offence, exposing non-complaint companies and its directors to severe penal consequences, including fines and prosecution. If any Company fails to file its Annual Accounts and Annual Return within time specified under the relevant provisions of the Section 137 and Section 92 respectively, then, such default is an offence under the Act, 2013 and the ROC has power to issue a notice for such default and may launch a prosecution against the Company and its Directors and officers. Alternatively, the Company may suo motu proceed for compounding of such offence under Section 441 of the Act, 2013. Application/Petition for Compounding of offence under Section 441 of the Act, 2013 may be filed before and after the institution of any prosecution.

It is stated that both Section 92 and Section 137 of the Act, 2013 were enforced with effect from 01.04.2014 and there are lot of changes/amendments were made in both these sections time to time since its enforcement. It is further stated that non-filing of Annual Accounts and Annual Return under the Act, 2013 has reached from ‘prosecution stage’ to ‘adjudication stage’. Now, we will see each and every changes/amendment made in both sections year by year in this Article. It is also stated that during the journey of this Article, it is necessary to read content of relevant provisions of each and every relevant section exact form and along with their modification.

Therefore, we would like to see the content of relevant sections provided by the Act, 2013 since their enforcement i.e. 01.04.2014 regarding filing of Annual Accounts and Annual Return, which are as under-

“92(4) 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.”

“92(5) 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 fee, 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.”

“137(1) A copy of the financial statements, including consolidated financial statement, if any, along with all the documents which are required to be or attached to such financial statements under this Act, duly adopted at the annual general meeting of the company, shall be filed with the Registrar within thirty days of the date of annual general meeting in such manner, with such fees or additional fees as may be prescribed within the time specified under section 403.”

“137(3) 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.

By perusal of the aforesaid provisions, there is no doubt that every company is required to file its annual accounts and annual return as per the Act, 2013 within 30 days and 60 days respectively from the conclusion of its AGM. Further, if the company could not file its Annual Accounts and Annual Return within 30 days and 60 days respectively from the conclusion of its AGM, then, it can file its Annual Accounts and Annual Return along with “additional fees as may be prescribed, within the time as specified, under section 403” and there will be no default under Section 92(5) & 137(3) of the Act, 2013.

 As mentioned above that there will be no default under Section 92(5) & 137(3) of the Act, 2013 if Company files its Annual Accounts and Annual Return along with “additional fees as may be prescribed, within the time as specified, under section 403”, therefore, it become necessary to see and understand the provision mentioned under Section 403 of the Act, 2013 which is headed as “Fee for filling etc.”

Please read the provision of Section 403 of the Act, 2013 as under: –

Fee for filling, etc.

(1) any documents, 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. [Refer Rule 12 and table annexed to Companies (Registration Office & Fees) Rules, 2014]

Provided that any documents, 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. [Refer Rule 12 and table annexed to Companies (Registration Office & Fees) Rules, 2014]

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.

Rule 12 and table annexed to Companies (Registration Office & Fees) Rules, 2014

“(1) The documents required to be submitted, filed, registered or recorded or any fact or information required or authorised to be registered under the Act shall be submitted, filed, registered or recorded on payment of the fee or on payment of such additional fee as applicable, as mentioned in Table annexed to these rules.

(2) For the purpose of filing the documents or applications for which no e-form is prescribed under the various rules prescribed under the Act, the documents or application shall be filed through Form No. GNL.1 or GNL 2 along with fee as applicable and in case of single form is prescribed for multipurpose, the fee shall be paid for each of the purposes contained in the single form.

(3) For the purpose of filing information to sub-clause (60) of section (2) of the Act, such information shall be filed in Form No. GNL.3 along with fee as applicable.”

Table of Additional fees which shall be applicable for delays in filing of the forms other than for increase in Nominal Share Capital:

Period of Delays Forms including charge

Documents

Upto 30 days 2 times of normal filing fees
More than 30 days and upto 60 days 4 times of normal filing fees
More than 60 days and upto 90 days 6 times of normal filing fees
More than 90 days and upto 180 days 10 times of normal filing fees
More than 180 days and upto *270

Days

12 times of normal filing fees

* Delay beyond 270 days, the second proviso of section 403(1) of the Act may be referred.

It is stated that there will be no default under Section 92(5) & 137(3) of the Act, 2013 if Company files its Annual Accounts and Annual Return along with “additional fees as may be prescribed, within the time as specified, under section 403”. Further, first proviso to Section 403(1) of the Act, 2013 provides that if company fails to file its documents within specified time under relevant provision/section, then, the same can be filed or submitted, after the time specified in relevant provision, within a period 270 days from the date by which it should have been submitted on payment of additional fee. Therefore, it is also stated that there will be no default under Section 92(5) & 137(3) of the Act, 2013 if Company files its Annual Accounts and Annual Return along with additional fee within a period 270 days from the date by which it should have been submitted under relevant provision/section i.e. Section 137(1) and 92(4) respectively.

In view of the above, we can say that first proviso to Section 403(1) of the Act, 2013 provides a ‘protection from prosecution’ to every company to file its belated documents including Annual Accounts and Annual Return with ROC in certain cases, besides that the same should be filed with ROC on payment of additional fee within a period 270 days from the date by which these should have been submitted under relevant provision/section of the Act, 2013. Alternatively, we can say that if company file its belated documents including Annual Accounts and Annual Return within the time specified (270 days) under first proviso to Section 403(1) of the Act, 2013, then there will be no default/offence under Section 92(5) & 137(3) of the Act, 2013 and there is no need to go for compounding of offence under Section 441 of the Act, 2013.

Further, the crucial question, which should come into mind after reading the above episode, is “if company fails to file its documents within the time specified (270 days) under first proviso to Section 403(1) of the Act, 2013, then in such situation, whether the company is prohibited to file that document for ever”.  Definitely, the answer is negative. Pursuant to second proviso to Section 403(1) of the Act, 2013, the company can file its belated documents after the time specified in first proviso to Section 403(1) of the Act, 2013 with additional fee.

However, it should be noted that there will be default under Section 92(5) & 137(3) of the Act, 2013 and shall be punishable accordingly. In this situation, ROC has power to issue a notice for such default and to launch a prosecution against the Company and its Directors and officers. Alternatively, the Company may suo motu proceed for compounding of such offence under Section 441 of the Act, 2013. Application/Petition for Compounding of offence under Section 441 of the Act, 2013 may be filed before and after the institution of any prosecution.

Further, it is also important to read the provision under Section 403(2) of the Act, 2013, as under –

“403(2) Where a company fails or commits any default to submit, file, register or record any documents, 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.”

Therefore, if company fails to file its documents within the time specified (270 days) under first proviso to Section 403(1) of the Act, 2013, i.e. company or its officers does not comply with above-mentioned provisions, then penalty or prosecution under Section 92(5) and Section 137(3) shall be initiated against them.

Companies Amendment Act, 2017 (‘the Amendment Act, 2017’):-

We have seen, so far, that if company file its belated documents including Annual Accounts and Annual Return within the time specified (270 days) under first proviso to Section 403(1) of the Act, 2013, then there will be no default/offence under Section 92(5) & 137(3) of the Act, 2013 and there is no need to go for compounding of offence under Section 441 of the Act, 2013.

However, there are drastic changes in the provisions of filing of e-forms and documents with the ROC after the introduction of the Companies (Amendment) Act, 2017 (“Amendment Act, 2017”). The Amendment Act, 2017 has received the assent of the President on 3rd January 2018 and published on the same date. But it has to come into force on such date as the Central Government may, by notification in the Official Gazette, appoint and different dates may be appointed for different provisions of this Act.

The Ministry of Corporate Affairs (“MCA”) vide Notification No. S.O. 1833(E) dated 07 May, 2018 has notified 28 sections of Amendment Act, 2017 w.e.f. 07th May, 2018. With the introduction of Amendment Act, 2017, provision of 270 additional days under Section 403(1) of the Act has been removed w.e.f 07th May, 2018.

With the removal of provision of 270 additional days under Section 403(1) of the Act w.e.f 07th May, 2018, immunity available to companies to file returns/documents within 270 days of the delay in certain cases and post 270 days has been done away and now companies became labile for higher additional fees and prosecution/penal action.

Accordingly, relevant changes/amendments were also made in Section 92(4), 92(5), 137(1) & 137(3) of the Act, 2013 to line up with Section 403 of the Act, as under-

“92(4) 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.”

#words “within the time as specified, under section 403” omitted by the Companies (Amendment) Act, 2017, w.e.f. 07.05.2018.

“92(5) 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 fee therein, 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.

#words “under section 403 with additional fee” substituted with “therein” by the Companies (Amendment) Act, 2017, w.e.f. 07.05.2018.

137(1) A copy of the financial statements, including consolidated financial statement, if any, along with all the documents which are required to be or attached to such financial statements under this Act, duly adopted at the annual general meeting of the company, shall be filed with the Registrar within thirty days of the date of annual general meeting in such manner, with such fees or additional fees as may be prescribed #within the time specified under section 403.

#words “within the time as specified, under section 403” omitted by the Companies (Amendment) Act, 2017, w.e.f. 07.05.2018.

137(3) 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 therein 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.

#words “in section 403” substituted with “therein” by the Companies (Amendment) Act, 2017, w.e.f. 07.05.2018.

With the introduction of Amendment Act, 2017, the first proviso to Section 403(1) of the Act, 2013 has been completely substituted with new proviso which provides a penalty of Rs.100/- per day for delay in filing of Annual Return and Financial Statements.

“Provided that where any document, fact or information required to be submitted, filed, registered or recorded, as the case may be, under section 92 or 137 is not submitted, filed, registered or recorded, as the case may be, within the period provided in those sections, without prejudice to any other legal action or liability under this Act, it may be submitted, filed, registered or recorded, as the case may be, after expiry of the period so provided in those sections, on payment of such additional fee as may be prescribed, which shall not be less than one hundred rupees per day and different amounts may be prescribed for different classes of companies.

Further, additional new provisos were also added by the Amendment Act, 2017, to Section 403(1) of the Act, 2013, which may be read as under-

Provided further that where the document, fact or information, as the case may be, in cases other than referred to in the first proviso, is not submitted, filed, registered or recorded, as the case may be, within the period provided in the relevant section, it may, without prejudice to any other legal action or liability under this Act, be submitted, filed, registered or recorded as the case may be, on payment of such additional fee as may be prescribed and different fees may be prescribed for different classes of companies:

Provided also that where there is default on two or more occasions in submitting, filing, registering or recording of the document, fact or information, it may, without prejudice to any other legal action or liability under this Act, be submitted, filed, registered or recorded, as the case may be, on payment of a higher additional fee, as may be prescribed and which shall not be lesser than twice the additional fee provided under the first or the second proviso as applicable.”

Note: It is stated that first proviso shall came into force from 07.05.2018, Second and Third Proviso are yet to be enforced.

Also, in continuation, MCA notified the Companies (Registration Offices and Fees) Second Amendment Rules 2018 on 7th May 2018 vide Notification No. GSR 435(E) dt 07/05/2018. Accordingly, in case the due date of filings under Section 92 (Annual Return) or 137 (Annual Financial Statement) of the Act, 2013 expires after 30th June, 2018, the additional fee @ Rs.100 per day shall become payable in respect of MGT-7, AoC-4, AoC-4 XBRL and AoC-4 CFS. In all other cases, where the belated annual returns or balance sheet/financial statement which were due to be filed whether under the Companies Act, 1956 (23AC,23ACA,23AC XBRL,23ACA XBRL,20B,21A) or the Act, 2013 (MGT-7, AoC-4, AoC-4 XBRL and AoC-4 CFS) additional fee as per the applicable slab for the period of delay up to 30th June 2018 plus @Rs.100 per day w.e.f 1st July 2018 shall become payable.

Moreover, by the Amendment Act, 2017, the sub-section (2) of Section 403 of the Act, 2013 has been completely substituted with new sub-section as under-

“(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 relevant section, the company and the officers of the company who are in default, shall, without prejudice to the liability for the payment of fee and additional fee, be liable for the penalty or punishment provided under this Act for such failure or default.”

Crux of the amendment by the Amendment Act, 2017 regarding Annual Filing–

1. Provision of 270 additional days removed from the Section 403 of the Act, 2013. Therefore, immunity provided to companies to file within additional 270 days has been done away with. Therefore, any filing beyond timeline specified in the respective section will invite additional fees as well as the condonation of delay.

2. First proviso and second proviso of Section 403(1) of the Act substituted with new provisos.

3. New first proviso to Section 403(1) of the Act, 2013 has been inserted, which provides an additional fee of Rs.100/- per day for delay in filing of Annual Return and Financial Statements and came into force w.e.f. 07th May, 2018.

4. Consequential changes were made in Section 403(2) of the Act, 2013.

5. Consequential changes were made in Section 92(4), 92(5), 137(1) & 137(3) of the Act, 2013 to line up with Section 403 of the Act.

Conclusive Effect: with effect from 07.05.2018 if Company fails to file its Annual Accounts and Annual Return with ROC within the period specified in Section 137(1) & 92(4) of the Act, 2013 (i.e. within 30 days or 60 days respectively), there will be default under Section 92(5) & 137(3) of the Act, 2013 and shall be punishable accordingly. In this situation, ROC has power to issue a notice for such default and to launch a prosecution against the Company and its Directors and officers. Alternatively, the Company may suo motu proceed for compounding of such offence under Section 441 of the Act, 2013. Application/Petition for Compounding of offence under Section 441 of the Act, 2013 may be filed before and after the institution of any prosecution. Moreover, a penalty of Rs.100/- per day for delay in filing of Annual Return and Financial Statements shall be charged w.e.f. 01st July, 2018.

Companies Amendment Act, 2019 (‘the Amendment Act, 2019’):-

The Companies (Amendment) Ordinance, 2018 (“Ordinance Act, 2018”) was promulgated by the President on the 2nd day of November, 2018, effective from the same date. The Ordinance, 2018 has re categorized certain offence from ‘Fine to Penalty’. Thus, ROC and Regional Director (RD) can now impose penalties directly after issuing SCN, instead of going to judiciary for imposing fines or for following procedure for composition of offences.

As Ordinance, 2018 was promulgated by the President on the 2nd day of November, 2018, therefore, it will cease to operate on the 21st day of January, 2019, as an ordinance, once issued, is valid for six weeks from the date when the next session of Parliament starts, during this period, Parliament can either pass the ordinance turning it into an Act or disapprove the ordinance. The Companies (Amendment) Bill 2019 to replace the Ordinance, 2018 had been passed by the House of People on the 4th January, 2019 but was pending in the Council of States.

Since Companies (Amendment) Bill 2019 could not be taken up for consideration and passing in the Council of States, accordingly it was considered necessary to give continued effect to the provisions of the Ordinance, 2018. Thus, the Ministry has issued the Companies (Amendment) Ordinance, 2019 (“Ordinance Act, 2019”) on 12th January, 2019 to give continued effect to the provisions of the Ordinance, 2018 and to further amend the Act, 2013.

Further, Companies (Amendment) Bill 2019 along with amendments to the said bill could not be taken up for consideration and passing in the Council of States and Ordinance 2019 was to cease to operate on 13th March 2019, accordingly it was again considered necessary to give continued effect to the provisions of the Ordinance, 2019. Thus, the Ministry has issued the Companies (Amendment) Second Ordinance, 2019 (“Second Ordinance Act, 2019”) on 21st February, 2019 to give continued effect to the provisions of the Ordinance, 2019 and to further amend the Act, 2013.

By virtue of amendments brought in vide the aforesaid Ordinances, offences arising out of non-compliance or belated compliance of the aforesaid provisions will attract ‘Adjudication proceedings’ in terms of Section 454 of the Act, 2013 and Adjudication Rules. The Act, 2013 vide its Section 454 provides for adjudication mechanism for imposing penalties for non-compliance of provisions of the Act. Accordingly, in exercise of the powers conferred by Section 454, read with Section 469 of the Act, 2013, the Companies (Adjudication of Penalties) Rules, 2014 (“the Adjudication Rules”) was also notified by the Central Government vide Notification No. GSR 254(E) dated 31.03.2014. The Adjudication Rules have also been amended vide Notification dated 19 February, 2019 providing for an elaborate process. Further, in exercise of the power conferred by Section 454 of the Act, 2013, MCA has vide Notification No. S.O. 831(E) dated 24.03.2015 has already appointed various ROC’s as ‘Adjudicating Officer’ for adjudging penalties in their respective jurisdiction. (Please see the said Notification for further reference).

Later on the Companies (Amendment) Act, 2019 (“Amendment Act, 2019”) has received the assent of the President on 31st July 2019 and published on the same date. The Amendment Act, 2019 has carried amendments notified in the Companies (Amendment) Ordinance, 2018 & carried in the Companies (Amendment) Ordinance, 2019 regarding re categorized certain offence from Fine to Penalty, w.r.e.f 02.11.2018. The provisions of this Amendment Act, 2019 except sections 6, 7 and 8, clauses (i), (iii) and clause (iv) of section 14, sections 20 and 21, section 31, sections 33, 34 and 35, sections 37 and 38 was come into force on the 2nd day of November, 2018.

Therefore, by Section 15 of the Amendment Act, 2019, w.r.e.f. 02.11.2018, Section 92(5) of the Act, 2013 has been substituted as under:-

“(5) If any company fails to file its annual return under sub-section (4), before the expiry of the period specified therein, such company and its every officer who is in default shall be liable to a penalty of fifty thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of five lakh rupees.”.

Therefore, by Section 22 of the Amendment Act, 2019, w.r.e.f. 02.11.2018, Section 137(3) of the Act, 2013 has been amended as under:-

137(3) 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 therein, the company shall be #punishable with fine  liable to penalty 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. liable to a penalty of one lakh rupees and in case of continuing failure, with a further penalty of one thousand rupees for each day after the first during which such failure continues, subject to a maximum of five lakh rupees.

Crux of the amendment by the Amendment Act, 2019 regarding Annual Filing–

1. Fine has been converted into penalty.;

2. Further penalty has been added in case of continuing failure.

Conclusive Effect: with effect from 02.11.2018 if Company fails to file its Annual Accounts and Annual Return with ROC within the period specified in Section 137(1) & 92(4) of the Act, 2013 (i.e. within 30 days or 60 days respectively), there will be default under Section 92(5) & 137(3) of the Act, 2013 and shall be punishable as penalty and not fine. Because, the Act, 2013 vide its Section 454 provides for adjudication mechanism for imposing penalties for non-compliance of provisions of the Act, therefore, in this situation, Adjudicating Officer shall issue a notice for such default and may impose the penalty on the company, the officer who is in default, or any other person, as the case may be and direct such company , the officer who is in default, or any other person, as the case may be, to rectify the default, wherever he considers fit. Now, there is no need to initiate any prosecution against the Company and its Directors and officers for such default before Special Court. Moreover, the option of compounding of offence under Section 441 of the Act, 2013 shall not be available to Company and its Directors and officers as only fine can be compounded and not penalty.

*****

Disclaimer: Nothing contained in this document is to be construed as a legal opinion or view of either of the authors whatsoever and the content is to be used strictly for educative purposes only.

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