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In this article, we will take you through the mandatory provisions under Section 10A of the Companies Act, 2013. As per section 10A(1) of the Companies Act, 2013, A company incorporated after the commencement of the Companies (Amendment) Ordinance, [2019] and having a share capital shall not commence any business or exercise any borrowing powers unless—
(a) A declaration is filed by a director within a period of one hundred and eighty days of the date of incorporation of the company in such form and verified in such manner as may be prescribed, with the Registrar that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of making of such declaration; and
(b) The company has filed with the Registrar a verification of its registered office as provided in sub-section (2) of section 12.
Failure to comply with these requirements may result in penalties for both the company and the officers in default, as specified under section 10A(2) of the Companies Act, 2013. Therefore, it is essential to adhere to these provisions to avoid any legal consequences.
Applicable Provisions:-
As per section 10A(1) of the Companies Act, 2013, A company incorporated after the commencement of the Companies (Amendment) Ordinance, 2[2019] and having a share capital shall not commence any business or exercise any borrowing powers unless—
(a) A declaration is filed by a director within a period of one hundred and eighty days of the date of incorporation of the company in such form and verified in such manner as may be prescribed, with the Registrar that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him on the date of making of such declaration; and
(b) The company has filed with the Registrar a verification of its registered office as provided in sub-section (2) of section 12.
As per section 10A(2) of the Companies Act, 2013: If any default is made in complying with the requirements of this section, 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.
Facts of the case:
M/s. Ideenkriese Tech Private Limited faced penalties from the Ministry of Corporate Affairs (MCA) for a delay in filing a declaration under Section 10A of the Companies Act, 2013. The adjudication, handled by the Regional Director in Chennai, resulted in a significant reduction of penalties. Under Section 10A, companies with share capital must file a declaration within 180 days of incorporation, verifying that all subscribers to the memorandum have paid for their shares via e-form 20A.
Delay: Ideenkriese Tech filed the declaration 72 days late.
Adjudication and Initial Penalties:
- Adjudication Order: ROC/S-454/10A/719/2020, dated 19.02.2020.
- Penalties Imposed:
Company: Rs. 50,000
Director, Shri Ananthu Vinod: Rs. 72,000
Appeal Process:
- Filing Date: 12.08.2022, using Form ADJ.
- Appeal Arguments: The appellants sought leniency, asserting that the delay was inadvertent and had not harmed public interest.
Hearing and Outcome:
- Hearing Date: 15.11.2023.
- Penalty Reduction:
- For the Company: Reduced from Rs. 50,000 to Rs. 10,000 (20% of original).
- For Director: Reduced from Rs. 72,000 to Rs. 14,400 (20% of original).
Penalty Imposed by Registrar of Companies on Company and Officers in Default
Taking into consideration the facts of the appeal and submissions made by the authorized representative, the penalty imposed by Registrar of Companies is reduced to 20%.
|
Violation of section |
Penalty imposed on company/ directors |
Penalty imposed by ROC |
Revised penalty imposed by RD |
|
Sec. 10A of the Companies Act, 2013 |
Company |
50,000 |
10,000 |
|
|
Director-1 |
72,000 |
14,400 |
|
|
Total |
1,22,000 |
24,400 |
Reduction in penalty
The ground stated for the reduction of penalty are as follows:
- That there was no intentional or deliberate action on the part of the appellant to violate the provisions of the law.
Exemption to Startup/ Small Company/OPC under section 446B:
As per sec. 446B of the Companies Act, 2013, if penalty is payable for non-compliance of any of the provisions of this Act by a One Person Company, small company, start-up company or Producer Company, or by any of its officer in default, or any other person in respect of such company, then such company, its officer in default or any other person, as the case may be, shall be liable to a penalty which shall not be more than one-half of the penalty specified in such provisions subject to a maximum of two lakh rupees in case of a company and one lakh rupees in case of an officer who is in default or any other person, as the case may be.
In this case, Section 446 will not appy as the company does not meet the criteria.
Conclusion
This case shows how the MCA (Ministry of Corporate Affairs) handles penalties. They understand that some rule violations happen by mistake. The big cut in penalties for Ideenkriese Tech Private Limited highlights the MCA’s aim to support business growth by reducing the financial impact of unintentional compliance issues.
The appellants are further directed to file the order in Form No. INC-28 within 30 days on the MCA-21 Portal.
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