What are the consequences of not filing AOC 4 and MGT-7?

What are the consequences of not filing AOC 4 and MGT-7?. 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 Karnawat Metal Industries Limited. The company’s failure to timely file its financial statements and annual return led to the imposition of penalties by the ROC.
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 for the financial year 2017-18. The matter was brought before the Regional Director (WR), Mumbai, for consideration.
Facts of the Case with ROC and RD
Paulo Travels 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 14.02.2019 to the company and its directors, calling them to show cause for non-filling of such documents. 
In response to the show cause notice the company had mention that, they could not file the requisite return within the prescribed time period due to “ Wannacry Ransomware attack in May 2017” the entire backed data was lost. Instead of various endeavours the company could not retrieve the company’s accounting data for any year including financial year 2016-17.
Due to this loss company could not get is account audited in order to file the returns within the prescribed time period given under the Act.
Though the company has finally filled the due annual returns and balance sheet  for the financial year 2017-18 as on 10.04.2019.
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 appellant company had filed a compounding application with office of RD, WR, Mumbai u/s 441 of the companies Act 2013. They contend that they have regularised the filling of annual return and financial statements for FY 2017-18 as on 10.04.2019 by paying additional fee and filling fee.

The further contended that the financial condition of the company is not sound as per financial report of the company for the FY 31.03.2016, 31.03.2017 & 31.03.2018 and has incurred losses.

The company has no investors or creditors, the company is belonging to one family and there are no outsiders involved.

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, 1,59,000

On officers in default: Rs. 1,15,900 each

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

On Company: Rs 63,000

On officers in default: Rs. 63,000 each

Reduction in penalties:

Considering the request made by the appellant the concerned RD is of the opinion that Adjudicating Officer of ROC did not take into consideration the merit in reply submitted by the company to show cause notice issued by the adjudicating officer and during hearing held on 09.04.2019.

Further, there is no comment by the adjudicating officer on submission made by the company regarding delay in filling annual return and financial.

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..
Takeaways:
This adjudication order underscores the critical importance of adhering to the annual filing requirements mandated under the Companies Act, 2013. Non-compliance with Sections 92 and 137 can lead to significant penalties, as seen in the case of Paulo Travels Private Limited. However, the appeal process before the Regional Director (RD) provided relief, emphasizing that procedural lapses in adjudication, such as the absence of a proper hearing, can render an order defective.
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 Karnawat Metal Industries Limited. The company’s failure to timely file its financial statements and annual return led to the imposition of penalties by the ROC.

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 for the financial year 2017-18. The matter was brought before the Regional Director (WR), Mumbai, for consideration.

Facts of the Case with ROC and RD

Paulo Travels 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 14.02.2019 to the company and its directors, calling them to show cause for non-filling of such documents.

In response to the show cause notice the company had mention that, they could not file the requisite return within the prescribed time period due to “ Wannacry Ransomware attack in May 2017” the entire backed data was lost. Instead of various endeavours the company could not retrieve the company’s accounting data for any year including financial year 2016-17.

Due to this loss company could not get is account audited in order to file the returns within the prescribed time period given under the Act.

Though the company has finally filled the due annual returns and balance sheet for the financial year 2017-18 as on 10.04.2019.

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 appellant company had filed a compounding application with office of RD, WR, Mumbai u/s 441 of the companies Act 2013. They contend that they have regularised the filling of annual return and financial statements for FY 2017-18 as on 10.04.2019 by paying additional fee and filling fee.
The further contended that the financial condition of the company is not sound as per financial report of the company for the FY 31.03.2016, 31.03.2017 & 31.03.2018 and has incurred losses.
The company has no investors or creditors, the company is belonging to one family and there are no outsiders involved.

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, 1,59,000
On officers in default: Rs. 1,15,900 each

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

On Company: Rs 63,000
On officers in default: Rs. 63,000 each

Reduction in penalties:

Considering the request made by the appellant the concerned RD is of the opinion that Adjudicating Officer of ROC did not take into consideration the merit in reply submitted by the company to show cause notice issued by the adjudicating officer and during hearing held on 09.04.2019.
Further, there is no comment by the adjudicating officer on submission made by the company regarding delay in filling annual return and financial.

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..

Takeaways:

This adjudication order underscores the critical importance of adhering to the annual filing requirements mandated under the Companies Act, 2013. Non-compliance with Sections 92 and 137 can lead to significant penalties, as seen in the case of Paulo Travels Private Limited. However, the appeal process before the Regional Director (RD) provided relief, emphasizing that procedural lapses in adjudication, such as the absence of a proper hearing, can render an order defective.