ROC Impose penalty of RS 4,74,200 for Violation of Section 137 of Companies Act 2013

ROC Impose penalty of RS 4,74,200 for Violation of Section 137 of Companies Act 2013. If the financial statements (AOC-4) are filed after 30 days from the date of AGM with the MCA, then this would be considered as a violation of section 137 of the Companies Act 2013. Any violation of this section will result in penalties for both company and its officers under section 137 (3) of the Act.
Annual Filling is a mandatory compliance for any company irrespective of their size, nature and location. As we can observe in this MCA adjudication order in which a company has failed to file a copy of financial statement with the ROC.
Section 137 of the Companies Act, 2013 mandates that every company must file a copy of its financial statements, including consolidated financial statements (if applicable), along with the necessary documents with the Registrar of Companies (ROC) within thirty days of its annual general meeting (AGM). If the financial statements are not adopted at the AGM, they must still be filed as provisional documents within the same timeframe, with the final adopted version to be submitted after an adjourned AGM.
Applicable Provisions
This MCA adjudication order involves an appeal under Section 454(5) of the Companies Act, 2013, concerning the adjudication of penalties. The relevant rules include the Companies (Adjudication of Penalties) Rules, 2014. The matter was brought before the Regional Director (WR), Mumbai, for consideration.
Facts of the Case with ROC and RD
In In House Production Limited & ORS, concerned ROC had passed adjudication order dated 26/12/2023 for violation of section 137 of the companies Act 2013.
The concerned ROC vide adjudication order dated 26/12/2023held the company and its additional directors, who have defaulted liable for penalty under section 137(3) of the Act from 31/10/2019 to 12/03/2020 for not filling financial statements for the financial Year 2018-19 within 30 days from the date of Annual General Meeting in pursuance of Section 96 of the Act.
The Registrar of Companies (ROC) imposed penalties for non-compliance, leading the company to file an appeal before the Regional Director (RD) and an opportunity of being heard was given by the RD to appellants on 11/06/2024.The authorised representative on the behalf of the company stated that they have appealed on the ground that the financial statements has been filled by the company under the Companies Fresh Start Scheme (CFSS), 2020 along with the following:-

The penalty levied on officers in default is beyond the maximum limit specified in section 137(3) of the companies Act 2013.

The company is non operative since many years and having no business.

There was no mala fide or fraudulent intention in delay in filing the financial statements.

ROC vide further letter dated 03/06/2024 concluded that the ground of appeal relied by the appellants in their submissions  are not tenable.
Imposed Penalty
Considering all the facts, circumstances and all the submission made by the company, the adjudicating authority had imposed penalty on companies and officers for violation of section 137 of the Act.
Penalty u/s 137(3) of the companies Act, 2013 against the defaulters (First Default = Rs. 10,000. Continuing default = Rs100 day. Maximum Rs.2,00,000 in case of company and Rs 50,000 in case of officer in default and any other person)

No of days default

Penalty imposed on company/KMP

First Default

Default Continues

Total Penalty levied

Maximum penalty

134 days

On Company

N.A.

134*1000=1,34,000

1,34,000

5,00,000

On 1st director

1,00,000

134*100= 13,400

1,13,400

5,00,000

On 2nd director

1,00,000

134*100= 13,400

1,13,400

5,00,000

On 3rd director

1,00,000

134*100= 13,400

1,13,400

5,00,000

Reduction in Penalty
Taking into consideration the adjudication order of the ROC, submission made by the appellants in their application, further letter of ROC, dated       03/06/2024 and, oral submissions of the authorised representative during the hearing, it is observed that there is no inherent defect in the adjudication order dated 26/12/2023.The appellants have failed to furnish the immunity certificate  issued by the MCA under CFSS- 2020.
Any Benefit of Section 446B of Companies Act
Section 446B of the Companies Act, 2013 offers relief to small companies and start-ups by reducing penalties for certain non-compliances. It states that if such entities commit a default punishable with a monetary penalty under the Act, the imposed penalty shall not exceed half of the standard amount, subject to a maximum limit. However, in the adjudication case of In-House Production Limited & ORS, the Regional Director upheld the ROC's order, and no relief under Section 446B was granted. Penal provisions for small and startup companies like those under Sections 92, 117, and 137 are halved for eligible companies, unless the default involves fraud or public interest.
Findings: -
In conclusion, the appeal under Section 454(5) of the Companies Act, 2013, was carefully examined by the Regional Director and considering all the fact and circumstances RD is of view that there is no inherent defect in the adjudication order of ROC.
Download MCA Adjucation Order

If the financial statements (AOC-4) are filed after 30 days from the date of AGM with the MCA, then this would be considered as a violation of section 137 of the Companies Act 2013. Any violation of this section will result in penalties for both company and its officers under section 137 (3) of the Act.

Annual Filling is a mandatory compliance for any company irrespective of their size, nature and location. As we can observe in this MCA adjudication order in which a company has failed to file a copy of financial statement with the ROC.

Section 137 of the Companies Act, 2013 mandates that every company must file a copy of its financial statements, including consolidated financial statements (if applicable), along with the necessary documents with the Registrar of Companies (ROC) within thirty days of its annual general meeting (AGM). If the financial statements are not adopted at the AGM, they must still be filed as provisional documents within the same timeframe, with the final adopted version to be submitted after an adjourned AGM.

Applicable Provisions

This MCA adjudication order involves an appeal under Section 454(5) of the Companies Act, 2013, concerning the adjudication of penalties. The relevant rules include the Companies (Adjudication of Penalties) Rules, 2014. The matter was brought before the Regional Director (WR), Mumbai, for consideration.

Facts of the Case with ROC and RD

In In House Production Limited & ORS, concerned ROC had passed adjudication order dated 26/12/2023 for violation of section 137 of the companies Act 2013.

The concerned ROC vide adjudication order dated 26/12/2023held the company and its additional directors, who have defaulted liable for penalty under section 137(3) of the Act from 31/10/2019 to 12/03/2020 for not filling financial statements for the financial Year 2018-19 within 30 days from the date of Annual General Meeting in pursuance of Section 96 of the Act.

The Registrar of Companies (ROC) imposed penalties for non-compliance, leading the company to file an appeal before the Regional Director (RD) and an opportunity of being heard was given by the RD to appellants on 11/06/2024.The authorised representative on the behalf of the company stated that they have appealed on the ground that the financial statements has been filled by the company under the Companies Fresh Start Scheme (CFSS), 2020 along with the following:-

The penalty levied on officers in default is beyond the maximum limit specified in section 137(3) of the companies Act 2013.
The company is non operative since many years and having no business.
There was no mala fide or fraudulent intention in delay in filing the financial statements.

ROC vide further letter dated 03/06/2024 concluded that the ground of appeal relied by the appellants in their submissions are not tenable.

Imposed Penalty

Considering all the facts, circumstances and all the submission made by the company, the adjudicating authority had imposed penalty on companies and officers for violation of section 137 of the Act.

Penalty u/s 137(3) of the companies Act, 2013 against the defaulters (First Default = Rs. 10,000. Continuing default = Rs100 day. Maximum Rs.2,00,000 in case of company and Rs 50,000 in case of officer in default and any other person)

No of days default	Penalty imposed on company/KMP	First Default	Default Continues	Total Penalty levied	Maximum penalty
134 days	On Company	N.A.	134*1000=1,34,000	1,34,000	5,00,000
	On 1st director	1,00,000	134*100= 13,400	1,13,400	5,00,000
	On 2nd director	1,00,000	134*100= 13,400	1,13,400	5,00,000
	On 3rd director	1,00,000	134*100= 13,400	1,13,400	5,00,000

Reduction in Penalty

Taking into consideration the adjudication order of the ROC, submission made by the appellants in their application, further letter of ROC, dated 03/06/2024 and, oral submissions of the authorised representative during the hearing, it is observed that there is no inherent defect in the adjudication order dated 26/12/2023.The appellants have failed to furnish the immunity certificate issued by the MCA under CFSS- 2020.

Any Benefit of Section 446B of Companies Act

Section 446B of the Companies Act, 2013 offers relief to small companies and start-ups by reducing penalties for certain non-compliances. It states that if such entities commit a default punishable with a monetary penalty under the Act, the imposed penalty shall not exceed half of the standard amount, subject to a maximum limit. However, in the adjudication case of In-House Production Limited & ORS, the Regional Director upheld the ROC's order, and no relief under Section 446B was granted. Penal provisions for small and startup companies like those under Sections 92, 117, and 137 are halved for eligible companies, unless the default involves fraud or public interest.

Findings: -

In conclusion, the appeal under Section 454(5) of the Companies Act, 2013, was carefully examined by the Regional Director and considering all the fact and circumstances RD is of view that there is no inherent defect in the adjudication order of ROC.