Delay in ROC Filing with MCA, Penalty imposed by MCA

Delay in ROC Filing with MCA, Penalty imposed by MCA . 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 Karnawat Metal Industries 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 Years 2011-12 onwards. The matter was brought before the Regional Director (WR), Mumbai, for consideration.
Facts of the Case with ROC and RD
Mascarenhas Marine and Logistics 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 12.03.2019 to the company and its directors, calling them to show cause for non-filling of such documents. 
The Registrar of Companies (ROC) considering the facts and circumstances-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 appellant company had filed a compounding application with office of RD, WR, Mumbai u/s 441 of the companies Act 2013. After FY 31.03.2011, the company has not carried out any business or operation and not made any significant transaction from its regular business.

The concerned consultant did not inform the company about any requirement of mandatory ROC filling even in case of insignificant turnover from non- regular business activities. Further the director is not from the legal background and hence had to fully relied on expert consultant who has skipped to advise company on day-to-day compliances and therefore company has not complied, which is purely unintentional.

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, 1,93,000

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

On Company: Rs 66,400

Reduction in penalties:
(a) Considering the request made by the appellant the concerned RD is of the opinion that Adjudicating Officer of ROC has not imparted any hearing to the notices as per provision of Section 454(4) of the Act.
(b) The present appeal is filled by the disqualified director of the company and the Adjudication order id passed without waiting for the company to appoint new directors.
Considering all this RD is of the opinion that, the impugned order of ROC is liable to set aside being defective on many counts and without imparting an opportunity of being heard to the appellants. Along with this RD issue an order to concerned ROC to consider action under section 248 of the Act against the appellant company if found appropriate.
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, in this case, Concerned RD had after considering the fact and circumstances of the appeal of appellant company reduce the quantum of penalty up to substantial amount.
Takeaways:
This adjudication order underscores the critical importance of adhering to the annual filing requirements mandated under the Companies Act, 2013. Non-compliance with Sections 92 and 137 can lead to significant penalties, as seen in the case of Mascarenhas Marine and Logistics Private Limited. However, the appeal process before the Regional Director (RD) provided relief, emphasizing that procedural lapses in adjudication, such as the absence of a proper hearing, can render an order defective. Furthermore, the RD’s directive to consider action under Section 248 highlights the potential consequences of prolonged non-compliance, including the possible removal of the company’s name from the register. This case serves as a crucial reminder for companies and their directors to remain vigilant in fulfilling their statutory obligations and seeking legal recourse when procedural lapses occur.
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 Karnawat Metal Industries 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 Years 2011-12 onwards. The matter was brought before the Regional Director (WR), Mumbai, for consideration.

Facts of the Case with ROC and RD

Mascarenhas Marine and Logistics 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 12.03.2019 to the company and its directors, calling them to show cause for non-filling of such documents.

The Registrar of Companies (ROC) considering the facts and circumstances-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 appellant company had filed a compounding application with office of RD, WR, Mumbai u/s 441 of the companies Act 2013. After FY 31.03.2011, the company has not carried out any business or operation and not made any significant transaction from its regular business.
The concerned consultant did not inform the company about any requirement of mandatory ROC filling even in case of insignificant turnover from non- regular business activities. Further the director is not from the legal background and hence had to fully relied on expert consultant who has skipped to advise company on day-to-day compliances and therefore company has not complied, which is purely unintentional.

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, 1,93,000

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

On Company: Rs 66,400

Reduction in penalties:

(a) Considering the request made by the appellant the concerned RD is of the opinion that Adjudicating Officer of ROC has not imparted any hearing to the notices as per provision of Section 454(4) of the Act.

(b) The present appeal is filled by the disqualified director of the company and the Adjudication order id passed without waiting for the company to appoint new directors.

Considering all this RD is of the opinion that, the impugned order of ROC is liable to set aside being defective on many counts and without imparting an opportunity of being heard to the appellants. Along with this RD issue an order to concerned ROC to consider action under section 248 of the Act against the appellant company if found appropriate.

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, in this case, Concerned RD had after considering the fact and circumstances of the appeal of appellant company reduce the quantum of penalty up to substantial amount.

Takeaways:

This adjudication order underscores the critical importance of adhering to the annual filing requirements mandated under the Companies Act, 2013. Non-compliance with Sections 92 and 137 can lead to significant penalties, as seen in the case of Mascarenhas Marine and Logistics Private Limited. However, the appeal process before the Regional Director (RD) provided relief, emphasizing that procedural lapses in adjudication, such as the absence of a proper hearing, can render an order defective. Furthermore, the RD’s directive to consider action under Section 248 highlights the potential consequences of prolonged non-compliance, including the possible removal of the company’s name from the register. This case serves as a crucial reminder for companies and their directors to remain vigilant in fulfilling their statutory obligations and seeking legal recourse when procedural lapses occur.