Consequences of Not Doing Mandatory Filling: AOC-4 & MGT-7

Consequences of Not Doing Mandatory Filling: AOC-4 & MGT-7. 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 CFL Pharmaceuticals 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 along with this the notice of hearing was not given as per provision of Rule 3 (2) of the companies (Adjudication of Penalties) Rules 2014. The matter was brought before the Regional Director (WR), Mumbai, for consideration.
Facts of the Case with ROC and RD
CFL Pharmaceuticals Limited, a company registered under the Companies Act, 1956, with its registered office in Daman, 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 01.11.2016 to the company and its directors, calling them to show cause for non-filling of such documents. On the date of hearing the representative of the defaulters attended the hearing on 24.09.2019 on the behalf of the applicant of compounding application.
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 and contended that the:
The financial statement could not get prepared and audited within stipulated time limit due to ongoing family disputes between the family members.
The notice served by Adjudication Officer of ROC on the company and its officer to provide opportunity for hearing on 24.09.2019. the said notice was received on 23.09.2019. This notice was in violation of Rule 3(2) of the companies (Adjudication of penalties) Rules 2014. As notice of hearing should not be less than 15 days, but notice was given here for one day only. However, the authorized representative of the company & its director have presented their case before the Adjudication officer on 24.09.2019.
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

On Company: Rs, 1,17,400

Director 1: Rs 1,17,400

Director 2: Rs 1,17,400

Director 3: Rs 1,17,400

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 stated that impugned penalty is bad in law as the same was not passed within the prescribed time limit and exercised its discretion to reduce the penalty amount, providing partial relief to the appellant as follows:

On Company: Rs 11,740

Director 1: Rs 11,740

Director 2: Rs 11,740

Director 3: Rs 11,740

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, CFL Pharmaceuticals Limited, being a listed entity or a company falling outside the defined categories, may not have qualified for the benefits of this section. The applicability of Section 446B would depend on the company’s classification and whether it met the prescribed criteria.
Conclusion
In conclusion, the appeal under Section 454(5) of the Companies Act, 2013, brought before the Regional Director (WR), Mumbai, addressed the procedural irregularity in the issuance of the notice under Rule 3(2) of the Companies (Adjudication of Penalties) Rules, 2014. The penalty imposed by the Registrar of Companies was found to be disproportionate, considering the company’s circumstances and the delay in compliance due to familial disputes. The Regional Director, exercising its discretion, reduced the penalty after acknowledging the mitigating factors.
Download MCA Adjudication Order

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 CFL Pharmaceuticals 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 along with this the notice of hearing was not given as per provision of Rule 3 (2) of the companies (Adjudication of Penalties) Rules 2014. The matter was brought before the Regional Director (WR), Mumbai, for consideration.

Facts of the Case with ROC and RD

CFL Pharmaceuticals Limited, a company registered under the Companies Act, 1956, with its registered office in Daman, 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 01.11.2016 to the company and its directors, calling them to show cause for non-filling of such documents. On the date of hearing the representative of the defaulters attended the hearing on 24.09.2019 on the behalf of the applicant of compounding application.

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 and contended that the:

The financial statement could not get prepared and audited within stipulated time limit due to ongoing family disputes between the family members.

The notice served by Adjudication Officer of ROC on the company and its officer to provide opportunity for hearing on 24.09.2019. the said notice was received on 23.09.2019. This notice was in violation of Rule 3(2) of the companies (Adjudication of penalties) Rules 2014. As notice of hearing should not be less than 15 days, but notice was given here for one day only. However, the authorized representative of the company & its director have presented their case before the Adjudication officer on 24.09.2019.

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

On Company: Rs, 1,17,400
Director 1: Rs 1,17,400
Director 2: Rs 1,17,400
Director 3: Rs 1,17,400

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 stated that impugned penalty is bad in law as the same was not passed within the prescribed time limit and exercised its discretion to reduce the penalty amount, providing partial relief to the appellant as follows:

On Company: Rs 11,740
Director 1: Rs 11,740
Director 2: Rs 11,740
Director 3: Rs 11,740

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, CFL Pharmaceuticals Limited, being a listed entity or a company falling outside the defined categories, may not have qualified for the benefits of this section. The applicability of Section 446B would depend on the company’s classification and whether it met the prescribed criteria.

Conclusion

In conclusion, the appeal under Section 454(5) of the Companies Act, 2013, brought before the Regional Director (WR), Mumbai, addressed the procedural irregularity in the issuance of the notice under Rule 3(2) of the Companies (Adjudication of Penalties) Rules, 2014. The penalty imposed by the Registrar of Companies was found to be disproportionate, considering the company’s circumstances and the delay in compliance due to familial disputes. The Regional Director, exercising its discretion, reduced the penalty after acknowledging the mitigating factors.