In this article we will take you through the Adjudication order in the matter of Enegix Fire Protection 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
Enegix Fire Protection Private Limited, incorporated under the jurisdiction of the Southern Region (Chennai), was incorporated on 24.04.2019 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 02 days on 23.10.2019
ROC Kerla & Lakshadweep examined the said default and passed the adjudication order under section 454 (3) & (4) of the Act for the delay of 35 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. Ample opportunities have been given to the Appellants, and none have responded their appearance either in person or through Authorized Representative and presented the matter before the authority. Accordingly, appeal is dismissed and the ROC’s adjudication order is upheld.
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. 2,000 @1000 per day
Reduction in Penalty on Appeal (If Any)
RD confirm the order of ROC as none of the representative presented before the authority even after ample opportunity.
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 Enegix Fire Protection 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.