Is Filling INC-20A is mandatory if company has “NIL” Revenue?

Is Filling INC-20A is mandatory if company has “NIL” Revenue?. In this article we will take you through the Adjudication order in the matter of Fazz Holdings Private Limited incorporated under the jurisdiction of the Southern Region (Chennai) which mandates to file a declaration under Section 10A of the Companies Act, 2013. This section mandates to file a declaration in Form INC-20A within 180 days of its incorporation. It refers that every company with share capital must declare that subscribers to the memorandum have paid the value of shares agreed upon. Failure to comply these requirements can attract penalties under the company shall be liable to a penalty of fifty thousand rupees and every officer who is in default shall be liable to a penalty of one thousand rupees for each day during which such default continues but not exceeding an amount of one lakh rupees.
Applicable Provision – Section 10A of the Companies Act, 2013
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 declaration in the E form INC-20A as per section 10A of the companies Act 2013. The matter was brought before the concerned Regional Director, Chennai, for consideration
Section 10A states that a company incorporated after the commencement of the Companies (Amendment) Act, 2019, shall not commence business or exercise any borrowing powers unless:

A declaration is filed by a director within 180 days of incorporation, confirming that every subscriber to the memorandum has paid the value of shares agreed upon.

The company has filed verification of its registered office with the ROC.

Non-compliance with this provision results in penalties imposed on the company and its officers in default.
Facts of the Case
Fazz Holdings Private Limited, incorporated under the jurisdiction of the Southern Region (Chennai), was incorporated on 22.11.2018 failed to comply with the provisions of Section 10A. The company did not file the required declaration within 180 days of incorporation and had filed said belatedly with a delay of 51 days on 11.07.2019.
ROC Kerla examined the said default and passed the adjudication order under section 454 (3) & (4) of the Act for the delay of 51-days delay in filling the Form INC-20A under section 10A (2) of the Act.
Aggrieved by the order, company has filled the appeal within the limitation period. An opportunity of being heard was given to the Appellants on 26.10.2020. Authorised representative on the behalf of the company has contended that the default had occurred due to a marginal delay in pooling the subscription money and since it is a small company, the penalties as imposed may be waived. The company further stated that the company did not do any business till date. To support this company has provided the filled financial statements for the period ending 31.03.2019 which reflects that there was NIL revenue from operations. 
Penalty Imposed by the Registrar of Companies
Upon identifying the non-compliance, the ROC imposed penalties as per the prescribed legal framework:

Company Penalty: Rs. 50,000 for failure to comply with Section 10A.

Officers in Default: Rs. 51,000 @1000 per day

Penalty Reduced by RD (If Any)
Considering the grounds urged by the Appellants in the Appeal and submission made concerned RD reduce the penalty as follows for both company and officer in default as follows:

Company Penalty: Rs. 15,000

Officers in Default: Rs. 15,500

The appellant shall pay the penalty in 30 days.
Exemption to Startups, Small Companies, and OPCs Under Section 446B
Section 446B provides relief to startups, small companies, and One Person Companies (OPCs) by reducing the penalty amount levied under various provisions of the Companies Act. However, Section 10A is not explicitly covered under Section 446B, and hence, no exemption is available in such cases. The full penalty amount applies unless reduced through appeal.
Conclusion
The adjudication order in the case of Fazz Holdings Private Limited highlights the significance of compliance with Section 10A of the Companies Act, 2013. The mandatory filing of Form INC-20A ensures that companies declare their initial capital infusion before commencing business operations. While non-compliance attracts statutory penalties, this case demonstrates that appellate authorities may consider mitigating factors, such as the company's financial condition and minimal delay, when reviewing penalties.
Download MCA Adjudication Order

In this article we will take you through the Adjudication order in the matter of Fazz Holdings Private Limited incorporated under the jurisdiction of the Southern Region (Chennai) which mandates to file a declaration under Section 10A of the Companies Act, 2013. This section mandates to file a declaration in Form INC-20A within 180 days of its incorporation. It refers that every company with share capital must declare that subscribers to the memorandum have paid the value of shares agreed upon. Failure to comply these requirements can attract penalties under the company shall be liable to a penalty of fifty thousand rupees and every officer who is in default shall be liable to a penalty of one thousand rupees for each day during which such default continues but not exceeding an amount of one lakh rupees.

Applicable Provision – Section 10A of the Companies Act, 2013

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 declaration in the E form INC-20A as per section 10A of the companies Act 2013. The matter was brought before the concerned Regional Director, Chennai, for consideration

Section 10A states that a company incorporated after the commencement of the Companies (Amendment) Act, 2019, shall not commence business or exercise any borrowing powers unless:

A declaration is filed by a director within 180 days of incorporation, confirming that every subscriber to the memorandum has paid the value of shares agreed upon.
The company has filed verification of its registered office with the ROC.

Non-compliance with this provision results in penalties imposed on the company and its officers in default.

Facts of the Case

Fazz Holdings Private Limited, incorporated under the jurisdiction of the Southern Region (Chennai), was incorporated on 22.11.2018 failed to comply with the provisions of Section 10A. The company did not file the required declaration within 180 days of incorporation and had filed said belatedly with a delay of 51 days on 11.07.2019.

ROC Kerla examined the said default and passed the adjudication order under section 454 (3) & (4) of the Act for the delay of 51-days delay in filling the Form INC-20A under section 10A (2) of the Act.

Aggrieved by the order, company has filled the appeal within the limitation period. An opportunity of being heard was given to the Appellants on 26.10.2020. Authorised representative on the behalf of the company has contended that the default had occurred due to a marginal delay in pooling the subscription money and since it is a small company, the penalties as imposed may be waived. The company further stated that the company did not do any business till date. To support this company has provided the filled financial statements for the period ending 31.03.2019 which reflects that there was NIL revenue from operations.

Penalty Imposed by the Registrar of Companies

Upon identifying the non-compliance, the ROC imposed penalties as per the prescribed legal framework:

Company Penalty: Rs. 50,000 for failure to comply with Section 10A.
Officers in Default: Rs. 51,000 @1000 per day

Penalty Reduced by RD (If Any)

Considering the grounds urged by the Appellants in the Appeal and submission made concerned RD reduce the penalty as follows for both company and officer in default as follows:

Company Penalty: Rs. 15,000
Officers in Default: Rs. 15,500

The appellant shall pay the penalty in 30 days.

Exemption to Startups, Small Companies, and OPCs Under Section 446B

Section 446B provides relief to startups, small companies, and One Person Companies (OPCs) by reducing the penalty amount levied under various provisions of the Companies Act. However, Section 10A is not explicitly covered under Section 446B, and hence, no exemption is available in such cases. The full penalty amount applies unless reduced through appeal.

Conclusion

The adjudication order in the case of Fazz Holdings Private Limited highlights the significance of compliance with Section 10A of the Companies Act, 2013. The mandatory filing of Form INC-20A ensures that companies declare their initial capital infusion before commencing business operations. While non-compliance attracts statutory penalties, this case demonstrates that appellate authorities may consider mitigating factors, such as the company's financial condition and minimal delay, when reviewing penalties.