Non-Compliance penalty for default in Section 137 (AOC-4) & Section 92 (MGT-7) of the Companies Act 2013

Non-Compliance penalty for default in Section 137 (AOC-4) & Section 92 (MGT-7) of the Companies 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 Sycamore Growmore Private Limited. The company’s failure to timely file its financial statements and annual return led to the imposition of penalties by the ROC.
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 for the financial year 2017-2018. The matter was brought before the Regional Director (WR), Mumbai, for consideration.
Facts of the Case with ROC and RD
Sycamore Growmore 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 25/01/2019 to the company and its directors, calling them to show cause for non-filling of such documents. No reply has been received from the company.
However, as per the master data, the company has finally filed the due annua returns and balance sheets for the financial year 2017-18 on 11.02.2019.
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:

Order is without application of mind on the relevant statutory provisions of the Act and without performing the duties cast on the ROC. The ROC present in the course of hearing could not give any plausible reason for the said defects.

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 Statement U/S 137 (1) of the companies Act 2013

On Company: Rs 1,01,000

On officers in default: Rs. 1,10,100 each

For Annual returns u/s 92 (4) of the companies Act 2013

On Company: Rs 57,200

On officers in default: Rs. 57,200 each

Reduction in penalties:
After considering all the submissions made by the appellants in the appeal and oral submissions made by the company concerned RD is of view it is apparent that the impugned order is defective on many counts and without conducting any inquiry and without imparting an opportunity of being heard to the appellants.
The order is accordingly set aside with directions to the ROC to conduct the proceedings de novo and pass an order in accordance and after due compliance of provisions of Section 454 of the Act and the filling made by the appellant company after giving them a due opportunity of being heard as per Rules within 30 days from the date of this order.
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.
Observations:
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 Sycamore Growmore Private Limited. However, in this case appeal filled by the company has contended various grounds which had been surpassed by the ROC while hearing the matter. After considering all the fact and circumstances presented by the appellant company RD set aside the order for being defective on various grounds.
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 Sycamore Growmore Private Limited. The company’s failure to timely file its financial statements and annual return led to the imposition of penalties by the ROC.

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 for the financial year 2017-2018. The matter was brought before the Regional Director (WR), Mumbai, for consideration.

Facts of the Case with ROC and RD

Sycamore Growmore 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 25/01/2019 to the company and its directors, calling them to show cause for non-filling of such documents. No reply has been received from the company.

However, as per the master data, the company has finally filed the due annua returns and balance sheets for the financial year 2017-18 on 11.02.2019.

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:

Order is without application of mind on the relevant statutory provisions of the Act and without performing the duties cast on the ROC. The ROC present in the course of hearing could not give any plausible reason for the said defects.

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 Statement U/S 137 (1) of the companies Act 2013

On Company: Rs 1,01,000
On officers in default: Rs. 1,10,100 each

For Annual returns u/s 92 (4) of the companies Act 2013

On Company: Rs 57,200
On officers in default: Rs. 57,200 each

Reduction in penalties:

After considering all the submissions made by the appellants in the appeal and oral submissions made by the company concerned RD is of view it is apparent that the impugned order is defective on many counts and without conducting any inquiry and without imparting an opportunity of being heard to the appellants.

The order is accordingly set aside with directions to the ROC to conduct the proceedings de novo and pass an order in accordance and after due compliance of provisions of Section 454 of the Act and the filling made by the appellant company after giving them a due opportunity of being heard as per Rules within 30 days from the date of this order.

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.

Observations:

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 Sycamore Growmore Private Limited. However, in this case appeal filled by the company has contended various grounds which had been surpassed by the ROC while hearing the matter. After considering all the fact and circumstances presented by the appellant company RD set aside the order for being defective on various grounds.