Default in Registration of Charge in form CHG-1 (Section 77) liable for Penalty

Default in Registration of Charge in form CHG-1 (Section 77) liable for Penalty. In this article we will take you through the Section 77 of the Companies Act, 2013, which  mandates that a company must register any charge created on its assets or properties with the Registrar of Companies (ROC) within 30 days of its creation. This includes mortgages, liens, and other security interests, whether in India or abroad. The registration process ensures transparency and protects the interests of creditors and stakeholders. If a company fails to register a charge within the prescribed period.
Applicable Provisions
The case involves an appeal under Section 454(5) of the Companies Act, 2013, concerning the MCA adjudication of penalties. The relevant rules include the Companies (Adjudication of Penalties) Rules, 2014. The matter was brought before the Regional Director (ER), Kolkata, for consideration.
Facts of the Case with ROC and RD
Maheep Marketing Private Limited, a company, was found to be in default of Section 77 of the Companies Act 2013. The appellants have filed the appeal under section 454 (4) of the Companies Act, 2013 against the adjudication order dated 31/07/2023 passes by the ROC for violation of section 77 of the companies Act 2013.
The concerned ROC had issued adjudication notice for violation of section 77 of the Act to the company and its officers. In response to the same, reply was received vide letter dated 03.03.2023 from the company and its officers for the aforesaid adjudication notice.
The Registrar of Companies (ROC) imposed penalties for non-compliance, leading the company to file an appeal before the Regional Director (RD) and an opportunity of being heard was given by the RD to appellants on 05/09/2024.

The authorised representative was asked to make submissions regarding the infirmity if any in the order of Registrar of Companies. The authorised representative had no valid submissions in this regard.

Hence the order od ROC is confirmed as no cogent ground was made out by the authorised representative.

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

On Company: Rs. 5,00,000

On officer in default: 50,000 each

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 and did not get any valid submissions regarding this non- compliance. Thus confirm the order of ROC.
Any Benefit of Section 446B of Companies Act
Section 446B of the Companies Act, 2013 provides a significant relief mechanism for small companies and start-ups by reducing the penalty burden for certain non-compliances. Under this provision, if a small company or a start-up commits a default for which a penalty is prescribed under the Act, the penalty imposed shall not be more than half of the specified penalty, subject to a maximum limit. However, in Maheep Marketing Private Limited does not fall under the criteria of 446B.
Summary:
In conclusion, the appeal under Section 454(5) of the Companies Act, 2013, was carefully examined by the Regional Director, considering the financial position of Redemption Maheep Marketing Private Limited and the circumstances surrounding its non-compliance with Section 77. While the initial penalties imposed by the ROC were significant and even in appeal the RD confirm the order of ROC as they did not find any suitable submission in this regard. This case highlights the importance of authentic submissions in appeal and compliance with the requirements of the companies act 2013.
Download MCA Adjudication Order

In this article we will take you through the Section 77 of the Companies Act, 2013, which mandates that a company must register any charge created on its assets or properties with the Registrar of Companies (ROC) within 30 days of its creation. This includes mortgages, liens, and other security interests, whether in India or abroad. The registration process ensures transparency and protects the interests of creditors and stakeholders. If a company fails to register a charge within the prescribed period.

Applicable Provisions

The case involves an appeal under Section 454(5) of the Companies Act, 2013, concerning the MCA adjudication of penalties. The relevant rules include the Companies (Adjudication of Penalties) Rules, 2014. The matter was brought before the Regional Director (ER), Kolkata, for consideration.

Facts of the Case with ROC and RD

Maheep Marketing Private Limited, a company, was found to be in default of Section 77 of the Companies Act 2013. The appellants have filed the appeal under section 454 (4) of the Companies Act, 2013 against the adjudication order dated 31/07/2023 passes by the ROC for violation of section 77 of the companies Act 2013.

The concerned ROC had issued adjudication notice for violation of section 77 of the Act to the company and its officers. In response to the same, reply was received vide letter dated 03.03.2023 from the company and its officers for the aforesaid adjudication notice.

The Registrar of Companies (ROC) imposed penalties for non-compliance, leading the company to file an appeal before the Regional Director (RD) and an opportunity of being heard was given by the RD to appellants on 05/09/2024.

The authorised representative was asked to make submissions regarding the infirmity if any in the order of Registrar of Companies. The authorised representative had no valid submissions in this regard.
Hence the order od ROC is confirmed as no cogent ground was made out by the authorised representative.

Imposed Penalty

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

On Company: Rs. 5,00,000
On officer in default: 50,000 each

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 and did not get any valid submissions regarding this non- compliance. Thus confirm the order of ROC.

Any Benefit of Section 446B of Companies Act

Section 446B of the Companies Act, 2013 provides a significant relief mechanism for small companies and start-ups by reducing the penalty burden for certain non-compliances. Under this provision, if a small company or a start-up commits a default for which a penalty is prescribed under the Act, the penalty imposed shall not be more than half of the specified penalty, subject to a maximum limit. However, in Maheep Marketing Private Limited does not fall under the criteria of 446B.

Summary:

In conclusion, the appeal under Section 454(5) of the Companies Act, 2013, was carefully examined by the Regional Director, considering the financial position of Redemption Maheep Marketing Private Limited and the circumstances surrounding its non-compliance with Section 77. While the initial penalties imposed by the ROC were significant and even in appeal the RD confirm the order of ROC as they did not find any suitable submission in this regard. This case highlights the importance of authentic submissions in appeal and compliance with the requirements of the companies act 2013.