Penalty For Late Filing of Annual Return Under Companies Act, 2013

Penalty For Late Filing of Annual Return Under 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 Gaffino Resorts and Motels 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 annual return and financial statement for the Financial Year ended on 31.03.2018. The matter was brought before the Regional Director (WR), Mumbai, for consideration.
Facts of the Case with ROC and RD
Gaffino Resorts And Motels 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 01.03.2019 to the company and its directors, calling them to show cause for non-filling of such documents.
In response to the above said show cause the company has replied on 25.03.2019 to ROC and informed that company has already filed its financial statements and annual returns on 15.03.2019
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:

The impugned order is barred by limitation as the show cause notice was issued on 01.03.2019 whereas the impugned adjudication order has been passed on 25.06.2019 after more 90 days from the date of issue of show cause notice.

That the impugned adjudication order was passed in utter disregard to principles of natural justice as no opportunity to explain the delay was provided before passing the impugned adjudication order.

The ROC has failed to conduct the inquiry before the levying the penalty

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, 1,33,000

Director 1: Rs 1,13,300

Director 2: Rs 1,13,300

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

On Company: Rs, 60,400

Director 1: Rs 60,400

Director 2: Rs 60,400

Reduction in penalties:
Upon hearing the appeal, the RD reviewed the circumstances and stated that to revise the penalty as follows:
penalty, are as follows:
For Financial Statements as under section 137(1) of the companies Act 2013

On Company: Rs, 26,600

Director 1: Rs 22,660

Director 2: Rs 22,660

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

On Company: Rs, 12,080

Director 1: Rs 12,080

Director 2: Rs 12,080

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 companysubstantially reduce the penalty amount.
Conclusion
The case of Gaffino Resorts and Motels Private Limited highlights the significance of timely compliance with statutory obligations under the Companies Act, 2013. While the company initially defaulted in filing its financial statements and annual returns, it subsequently rectified the lapse. However, the Registrar of Companies (ROC) proceeded with adjudication and imposed penalties for the non-compliance. The company’s appeal before the Regional Director (RD) primarily challenged the adjudication order on grounds of limitation, procedural irregularities, and non-adherence to the principles of natural justice. Upon review, the RD, while upholding the imposition of penalties, acknowledged the circumstances and exercised discretion to substantially reduce the penalty amounts. Although the company sought the benefit of Section 446B, the RD considered the matter holistically and granted relief accordingly.
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 Gaffino Resorts and Motels 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 annual return and financial statement for the Financial Year ended on 31.03.2018. The matter was brought before the Regional Director (WR), Mumbai, for consideration.

Facts of the Case with ROC and RD

Gaffino Resorts And Motels 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 01.03.2019 to the company and its directors, calling them to show cause for non-filling of such documents.

In response to the above said show cause the company has replied on 25.03.2019 to ROC and informed that company has already filed its financial statements and annual returns on 15.03.2019

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:

The impugned order is barred by limitation as the show cause notice was issued on 01.03.2019 whereas the impugned adjudication order has been passed on 25.06.2019 after more 90 days from the date of issue of show cause notice.
That the impugned adjudication order was passed in utter disregard to principles of natural justice as no opportunity to explain the delay was provided before passing the impugned adjudication order.
The ROC has failed to conduct the inquiry before the levying the penalty

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, 1,33,000
Director 1: Rs 1,13,300
Director 2: Rs 1,13,300

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

On Company: Rs, 60,400
Director 1: Rs 60,400
Director 2: Rs 60,400

Reduction in penalties:

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

penalty, are as follows:

For Financial Statements as under section 137(1) of the companies Act 2013

On Company: Rs, 26,600
Director 1: Rs 22,660
Director 2: Rs 22,660

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

On Company: Rs, 12,080
Director 1: Rs 12,080
Director 2: Rs 12,080

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 companysubstantially reduce the penalty amount.

Conclusion

The case of Gaffino Resorts and Motels Private Limited highlights the significance of timely compliance with statutory obligations under the Companies Act, 2013. While the company initially defaulted in filing its financial statements and annual returns, it subsequently rectified the lapse. However, the Registrar of Companies (ROC) proceeded with adjudication and imposed penalties for the non-compliance. The company’s appeal before the Regional Director (RD) primarily challenged the adjudication order on grounds of limitation, procedural irregularities, and non-adherence to the principles of natural justice. Upon review, the RD, while upholding the imposition of penalties, acknowledged the circumstances and exercised discretion to substantially reduce the penalty amounts. Although the company sought the benefit of Section 446B, the RD considered the matter holistically and granted relief accordingly.