Adudication Order: Violations of Sections 92 & 137, under Company Act 2013

Adudication Order: Violations of Sections 92 & 137, under Company Act 2013. In this article, we will take you through the mandatory annual filing requirements under Section 92 and Section 137 of the Companies Act, 2013, focusing on the implications of non-compliance and the penalties involved. Section 92(5) mandates that every company, including its directors, must file an annual return, while Section 137(3) requires the filing of the financial statement with the Registrar of Companies (ROC) within a specified time. Failure to comply with these provisions can result in penalties being levied against both the company and its directors, as demonstrated in the case of Ataide Construction Private Limited. The company’s failure to timely file its financial statements and annual return led to the imposition of penalties by the ROC.
However, in the appeal process, the Regional Director (RD) considered the company’s mitigating circumstances and reduced the penalties, highlighting the importance of understanding the consequences of non-compliance and the opportunities for relief when justified reasons are presented.
Applicable Provisions
The case involves an appeal under Section 454(5) of the Companies Act, 2013, concerning the adjudication of penalties for defaulting in filling of its annual return and financial statement for the Financial Year 31.03.2017 & 31.03.2018. The matter was brought before the Regional Director (WR), Mumbai, for consideration.
Facts of the Case with ROC and RD
Ataide Construction Private Limited, a company registered under the Companies Act, 1956, with its registered office in Goa, was found to be in default of Section 92(5) and section 137 (3) of the Companies Act 2013. The ROC issued a show cause notice dated 25.02.2019 to the company and its directors, calling them to show cause for non-filling of such documents.
 The Registrar of Companies (ROC) imposed penalties for non-compliance, leading the company to file an appeal before the Regional Director (RD). The hearing was attended by the company's representative, and contended that the:

The annual return and financial statements for the financial year on 31.03.2017 & 31.03.2018 were filed on 17.04.2019 to regularize the default along with the additional fee of Rs 98,900.

The company’s operation have been stopped since 2017-18 and the directors do not foresee resumption of the operation in the near future. Directors are already contemplating to close the company.

Imposed Penalty
The ROC after considering the fact and circumstances of the case levied penalties. The penalty amount was determined based on the company's failure to comply with the relevant legal requirements. The details of the penalty, are as follows:
For Financial Statements as under section 137(1) of the companies Act 2013

On Company: Rs, 1,66,000

Director 1: Rs 1,16,600

Director 2: Rs 11,660

For Annual Return as per section 92 (4) of the companies Act 2013

On Company: Rs, 63,700

Director 1: Rs 63,700

Director 2: Rs 63,700

Reduction in Penalty
Upon hearing the appeal, the RD reviewed the circumstances surrounding the non-compliance. The company’s arguments, including mitigating factors and potential rectifications, were considered. Consequently, the RD exercised its discretion to reduce the penalty amount, providing partial relief to the appellant as follows:
For Financial Statements as under section 137(1) of the companies Act 2013

On Company: Rs, 16,600

Director 1: Rs 11,660

Director 2: Rs 11,660

For Annual Return as per section 92 (4) of the companies Act 2013

On Company: Rs, 6,370

Director 1: Rs 6,370

Director 2: Rs 6,370

Any Benefit of Section 446B of Companies Act
Section 446B of the Companies Act, 2013, provides for lesser penalties in cases involving small companies and startups. However, Ataide Construction Private Limited, being a private company falling within the defined categories, may qualified for the benefits of this section. However, RD after considering the given fact and circumstances had already been reduced the amount of penalty.
Conclusion
In conclusion, the case of Ataide Construction Private Limited highlights the importance of timely compliance with the mandatory filing requirements under Sections 92 and 137 of the Companies Act, 2013. While the Registrar of Companies imposed significant penalties for non-compliance, the appeal process demonstrated the possibility of mitigating circumstances leading to reduced penalties. The Regional Director’s discretion in lowering the penalties, considering the company’s halted operations and the steps taken to regularize the defaults, underscores the potential for relief in cases where justified reasons are presented. Additionally, although the company could have potentially benefited from Section 446B, the RD’s reduction in penalty already provided partial relief, showcasing the balanced approach to enforcement and the consideration of individual circumstances in penalty adjudication.
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In this article, we will take you through the mandatory annual filing requirements under Section 92 and Section 137 of the Companies Act, 2013, focusing on the implications of non-compliance and the penalties involved. Section 92(5) mandates that every company, including its directors, must file an annual return, while Section 137(3) requires the filing of the financial statement with the Registrar of Companies (ROC) within a specified time. Failure to comply with these provisions can result in penalties being levied against both the company and its directors, as demonstrated in the case of Ataide Construction Private Limited. The company’s failure to timely file its financial statements and annual return led to the imposition of penalties by the ROC.

However, in the appeal process, the Regional Director (RD) considered the company’s mitigating circumstances and reduced the penalties, highlighting the importance of understanding the consequences of non-compliance and the opportunities for relief when justified reasons are presented.

Applicable Provisions

The case involves an appeal under Section 454(5) of the Companies Act, 2013, concerning the adjudication of penalties for defaulting in filling of its annual return and financial statement for the Financial Year 31.03.2017 & 31.03.2018. The matter was brought before the Regional Director (WR), Mumbai, for consideration.

Facts of the Case with ROC and RD

Ataide Construction Private Limited, a company registered under the Companies Act, 1956, with its registered office in Goa, was found to be in default of Section 92(5) and section 137 (3) of the Companies Act 2013. The ROC issued a show cause notice dated 25.02.2019 to the company and its directors, calling them to show cause for non-filling of such documents.

The Registrar of Companies (ROC) imposed penalties for non-compliance, leading the company to file an appeal before the Regional Director (RD). The hearing was attended by the company's representative, and contended that the:

The annual return and financial statements for the financial year on 31.03.2017 & 31.03.2018 were filed on 17.04.2019 to regularize the default along with the additional fee of Rs 98,900.

The company’s operation have been stopped since 2017-18 and the directors do not foresee resumption of the operation in the near future. Directors are already contemplating to close the company.

Imposed Penalty

The ROC after considering the fact and circumstances of the case levied penalties. The penalty amount was determined based on the company's failure to comply with the relevant legal requirements. The details of the penalty, are as follows:

For Financial Statements as under section 137(1) of the companies Act 2013

On Company: Rs, 1,66,000
Director 1: Rs 1,16,600
Director 2: Rs 11,660

For Annual Return as per section 92 (4) of the companies Act 2013

On Company: Rs, 63,700
Director 1: Rs 63,700
Director 2: Rs 63,700

Reduction in Penalty

Upon hearing the appeal, the RD reviewed the circumstances surrounding the non-compliance. The company’s arguments, including mitigating factors and potential rectifications, were considered. Consequently, the RD exercised its discretion to reduce the penalty amount, providing partial relief to the appellant as follows:

For Financial Statements as under section 137(1) of the companies Act 2013

On Company: Rs, 16,600
Director 1: Rs 11,660
Director 2: Rs 11,660

For Annual Return as per section 92 (4) of the companies Act 2013

On Company: Rs, 6,370
Director 1: Rs 6,370
Director 2: Rs 6,370

Any Benefit of Section 446B of Companies Act

Section 446B of the Companies Act, 2013, provides for lesser penalties in cases involving small companies and startups. However, Ataide Construction Private Limited, being a private company falling within the defined categories, may qualified for the benefits of this section. However, RD after considering the given fact and circumstances had already been reduced the amount of penalty.

Conclusion

In conclusion, the case of Ataide Construction Private Limited highlights the importance of timely compliance with the mandatory filing requirements under Sections 92 and 137 of the Companies Act, 2013. While the Registrar of Companies imposed significant penalties for non-compliance, the appeal process demonstrated the possibility of mitigating circumstances leading to reduced penalties. The Regional Director’s discretion in lowering the penalties, considering the company’s halted operations and the steps taken to regularize the defaults, underscores the potential for relief in cases where justified reasons are presented. Additionally, although the company could have potentially benefited from Section 446B, the RD’s reduction in penalty already provided partial relief, showcasing the balanced approach to enforcement and the consideration of individual circumstances in penalty adjudication.