RD reject the appeal for delay in filling INC-20A

RD reject the appeal for delay in filling INC-20A . In this article we will take you through the Adjudication order in the matter of Tripmemo 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 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
Tripmemo Technologies Private Limited, incorporated under the jurisdiction of the Southern Region (Chennai), was incorporated on 11.02.2019 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 41 days on 20.09.2019.
ROC Kerla and Lakshadweep examined the said default and passed the adjudication order under section 454 (3) & (4) of the Act for the delay of 41-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 27.10.2020. Authorised representative on the behalf of the company has contended that the default had occurred due to a failure on the part of the consultant, who has delayed in filling the form and hence prayed for setting aside the order or at least reduce the penalty on the grounds that the size of the company is small.
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. 41,000 @1000 per day

Penalty Reduced by RD (If Any)
Considering the pleadings and noting that, there was no evidence on record to prove that the directors have acted in due diligence in ensuring to get the consultant to file the form in time. Further directors have also brought the capital at very hefty premium of about Rs. 900 per share on an average, there is no case made out for reduction in penalty too. 
Hence the appeal is dismissed, and the ROC’S adjudication order is upheld. The appellants are directed to remit the penalties imposed within 30 days of receipt of this order failing to which ROC, Kerala is directed to file prosecution in term of Section 454 (8) (ii) of the companies Act 2013 without any further notice. 
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 Tripmemo Technologies 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 if they consider that proper due diligence has been done by the officers in default.
Download MCA Adjudication Order

In this article we will take you through the Adjudication order in the matter of Tripmemo 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 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

Tripmemo Technologies Private Limited, incorporated under the jurisdiction of the Southern Region (Chennai), was incorporated on 11.02.2019 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 41 days on 20.09.2019.

ROC Kerla and Lakshadweep examined the said default and passed the adjudication order under section 454 (3) & (4) of the Act for the delay of 41-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 27.10.2020. Authorised representative on the behalf of the company has contended that the default had occurred due to a failure on the part of the consultant, who has delayed in filling the form and hence prayed for setting aside the order or at least reduce the penalty on the grounds that the size of the company is small.

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. 41,000 @1000 per day

Penalty Reduced by RD (If Any)

Considering the pleadings and noting that, there was no evidence on record to prove that the directors have acted in due diligence in ensuring to get the consultant to file the form in time. Further directors have also brought the capital at very hefty premium of about Rs. 900 per share on an average, there is no case made out for reduction in penalty too.

Hence the appeal is dismissed, and the ROC’S adjudication order is upheld. The appellants are directed to remit the penalties imposed within 30 days of receipt of this order failing to which ROC, Kerala is directed to file prosecution in term of Section 454 (8) (ii) of the companies Act 2013 without any further notice.

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 Tripmemo Technologies 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 if they consider that proper due diligence has been done by the officers in default.