RD Eases Penalty: Relief Granted for Delay in Filing INC-20A

RD Eases Penalty: Relief Granted for Delay in Filing INC-20A. In this article we will take you through the Adjudication order in the matter of Jivrom Technologies 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. 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
Jivrom Technologies Private Limited, incorporated under the jurisdiction of the Southern Region (Chennai), was incorporated on 21.11.2018 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 56 days on 15.07.2019
ROC Kerla & Lakshadweep examined the said default and passed the adjudication order under section 454 (3) & (4) of the Act for the delay of 56 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 prescribed time period of 60 days in term of section 454 (6) of the Act and contended that the company is a small company, and the penalty imposed is more than the paid up capital and hence sought condonation. 
Considering the facts and circumstances presented by the authorised representative on the behalf of the company penalties amount imposed by ROC were reduced by RD to a sustainable amount.
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. 56,000 @1000 per day
Reduction in Penalty on Appeal (If Any)
In this order concerned RD considering the contention of appellants reduce the quantum of penalties as follows:
• On Company: Rs 15,000
• For officer in default: Rs 12,500
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 case of Jivrom Technologies Private Limited highlights the critical importance of timely regulatory compliance. Non-compliance with Section 10A leads to financial penalties and regulatory scrutiny, impacting a company’s credibility. Startups and newly incorporated entities should ensure adherence to statutory declarations to avoid penalties and operational disruptions. Companies must prioritize compliance with initial incorporation requirements, ensuring a seamless business commencement and avoiding unnecessary legal consequences.
Download MCA Adjudication Order

In this article we will take you through the Adjudication order in the matter of Jivrom Technologies 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. 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

Jivrom Technologies Private Limited, incorporated under the jurisdiction of the Southern Region (Chennai), was incorporated on 21.11.2018 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 56 days on 15.07.2019

ROC Kerla & Lakshadweep examined the said default and passed the adjudication order under section 454 (3) & (4) of the Act for the delay of 56 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 prescribed time period of 60 days in term of section 454 (6) of the Act and contended that the company is a small company, and the penalty imposed is more than the paid up capital and hence sought condonation.

Considering the facts and circumstances presented by the authorised representative on the behalf of the company penalties amount imposed by ROC were reduced by RD to a sustainable amount.

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. 56,000 @1000 per day

Reduction in Penalty on Appeal (If Any)

In this order concerned RD considering the contention of appellants reduce the quantum of penalties as follows:

• On Company: Rs 15,000

• For officer in default: Rs 12,500

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 case of Jivrom Technologies Private Limited highlights the critical importance of timely regulatory compliance. Non-compliance with Section 10A leads to financial penalties and regulatory scrutiny, impacting a company’s credibility. Startups and newly incorporated entities should ensure adherence to statutory declarations to avoid penalties and operational disruptions. Companies must prioritize compliance with initial incorporation requirements, ensuring a seamless business commencement and avoiding unnecessary legal consequences.