Penalties for Sec 137 Non-Compliance: Case Study on Relief

Penalties for Sec 137 Non-Compliance: Case Study on Relief.  In this article, we will take you through the mandatory annual filing requirements under Section 137 of the Companies Act, 2013, focusing on the implications of non-compliance and the penalties involved. 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 Bridgetown Hospitality Private 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 financial statement for the Financial Year ended on 31.03.2015. The matter was brought before the Regional Director (WR), Mumbai, for consideration.
Facts of the Case with ROC and RD
Bridgetown Hospitality Private Limited, a company registered under the Companies Act, 1956, with its registered office in Goa, was found to be in default of section 137 (3) of the Companies Act 2013. The ROC issued a show cause notice dated 19.02.2016 to the company and its directors, calling them to show cause for non-filling of such documents.
ROC fixed a date of hearing on 24.09.2019 to adjudicate the default under section 137 (3) of the companies Act 2013. The authorised representative of the defaulters attended the hearing and explained the reason of defaults. Accordingly, ROC has imposed the penalty on the company and its directors. 
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:
• That Mrs Archana Jeffy Kurian, Director to be relived from charge of penalty, being not the officer in default for this default. 
• To charge with the lesser penalty for this default considering the initial stage of business growth of the company and on just and equitable ground.
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, 3,04,000
• Director 1: Rs 1,30,400 
• Director 2: Rs 1,30,400 
Reduction in penalties:
Upon hearing the appeal, the RD reviewed the circumstances and stated to revise the penalty as follows: 
• On Company: Rs, 30,400
• Director 1: Rs 13,040
• Director 2: Rs 13,040
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 appeal of appellant company substantially reduce the penalty amount. 
Conclusion
The case of Bridgetown Hospitality Private Limited underscores the critical importance of timely compliance with the annual filing requirements under Section 137 of the Companies Act, 2013. While non-compliance can lead to significant penalties, the appeal process offers an opportunity for reduction, provided there are justifiable circumstances. The Regional Director’s decision to reduce the penalties reflects the importance of presenting mitigating factors, such as the company's early-stage growth and the specific role of directors.
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In this article, we will take you through the mandatory annual filing requirements under Section 137 of the Companies Act, 2013, focusing on the implications of non-compliance and the penalties involved. 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 Bridgetown Hospitality Private 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 financial statement for the Financial Year ended on 31.03.2015. The matter was brought before the Regional Director (WR), Mumbai, for consideration.

Facts of the Case with ROC and RD

Bridgetown Hospitality Private Limited, a company registered under the Companies Act, 1956, with its registered office in Goa, was found to be in default of section 137 (3) of the Companies Act 2013. The ROC issued a show cause notice dated 19.02.2016 to the company and its directors, calling them to show cause for non-filling of such documents.

ROC fixed a date of hearing on 24.09.2019 to adjudicate the default under section 137 (3) of the companies Act 2013. The authorised representative of the defaulters attended the hearing and explained the reason of defaults. Accordingly, ROC has imposed the penalty on the company and its directors.

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:

• That Mrs Archana Jeffy Kurian, Director to be relived from charge of penalty, being not the officer in default for this default.

• To charge with the lesser penalty for this default considering the initial stage of business growth of the company and on just and equitable ground.

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, 3,04,000

• Director 1: Rs 1,30,400

• Director 2: Rs 1,30,400

Reduction in penalties:

Upon hearing the appeal, the RD reviewed the circumstances and stated to revise the penalty as follows:

• On Company: Rs, 30,400

• Director 1: Rs 13,040

• Director 2: Rs 13,040

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 appeal of appellant company substantially reduce the penalty amount.

Conclusion

The case of Bridgetown Hospitality Private Limited underscores the critical importance of timely compliance with the annual filing requirements under Section 137 of the Companies Act, 2013. While non-compliance can lead to significant penalties, the appeal process offers an opportunity for reduction, provided there are justifiable circumstances. The Regional Director’s decision to reduce the penalties reflects the importance of presenting mitigating factors, such as the company's early-stage growth and the specific role of directors.