ADJUDICATION OF PENALTIES
ADJUDICATION OF
PENALTIES
There is
always confusion between “Provision of Adjudication of Penalties” and
“Authority having power on Adjudication”.
Through, this editorial author made an attempt to elaborate the basic
meaning and powers under “Adjudication of Penalties”.
Adjudication
of Penalties is New Concept under Companies Act, 2013. In earlier Companies
Act, 1956, there were no such provisions like this. As all of us are aware that
Compliances and governance has been increased under Companies Act, 2013. Minor
non-compliances like failure to file every resolution or agreement, failure to
furnish information about DIN, failure of filling of forms etc ‘Non Filing of MGT-14 within 30 days, Non
filing of AOC-4 within 30 days and non filing of MGT-7 within 60 days” are
proposed to be brought within the purview of the Adjudication by Registrar of
Companies.
The
Companies (Amendment) Ordinance, 2018
The
main maxim of writing of this article is, The Companies (Amendment) Ordinance,
2018 has re categorized certain offence from Fine to Penalty. Thus, Registrar
of Companies (ROC) and Regional Director (RD) can now impose penalties directly
after issuing SCN, instead of going to judiciary for imposing fines or for
following procedure for composition of offences.
There are as many as 16 sections amended via Amendment
Act, 2019 whereby the punishment for non-compliance to be levied under the
Companies Act, 2013 is re-categorized from “FINE” to “PENALTY”. However, there
are approximately 35 sections under Act which states about Penalty.
S. No.
|
Section
|
Section Description
|
1.
|
53(3)
|
Prohibition of Issue of shares at a
discount
|
2.
|
64(2)
|
Notice to be given to Registrar for
alteration of share capital
|
3.
|
92(5)
|
Annual Return
|
4.
|
102(5)
|
Statement to be annexed to Notice
|
5.
|
105
|
Proxies
|
6.
|
117(2)
|
Resolutions and Agreements to be
filed
|
7.
|
121(3)
|
Report on annual general meeting
|
8.
|
137(3)
|
Copy of financial statement to be
filed with Registrar
|
9.
|
140(3)
|
Removal, resignation of auditor and
giving of special notice
|
10.
|
157(2)
|
Company to inform Director
Identification Number to Registrar
|
11.
|
159
|
Punishment for Contravention – in
respect of DIN
|
12.
|
165(6)
|
Number of Directorships
|
13.
|
191(5)
|
Payment to Director for Loss of
Office
|
14.
|
197(15)
|
Overall maximum managerial
remuneration and managerial remuneration in case of absence or inadequacy of
profits
|
15.
|
203(5)
|
Appointment of Key Managerial
Personnel
|
16.
|
238(3)
|
Registration of the offer of scheme
involving transfer of shares
|
ADJUDICATION
PROCESS
I.
|
Who Can adjudicate penalties under the
Companies Act, 2013
|
As per Section 454(1)
The Central Government may, by an order
published in the Official Gazette, appoint as many officers of the Central
Government, not below the rank of Registrar, as adjudicating officers for
adjudging penalty under the provisions of this Act in the manner as may be
prescribed.
MCA has vide Notification No. [F. No. 4-4201
1/l 1212014-Ad.ll] dated 24.03.2015 appointed various ROC’s as adjudicating
officer for adjudging penalties in their respective jurisdiction.
|
|
II.
|
Jurisdiction of Adjudication officer.
|
MCA has vide Notification No. [F. No. 4-4201
1/l 1212014-Ad.ll] dated 24.03.2015 appointed various ROC’s as adjudicating
officer for adjudging penalties in their respective jurisdiction
|
|
III.
|
Whether adjudicating officer can impose penalty
on non-compliance or default under the provisions of Companies Act, 2013?
|
Yes, as per Section 454(3)
Adjudicating officer can impose penalty on
non-compliance or default under the provisions of Companies Act, 2013
|
|
IV.
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On whom penalties may be imposed by
adjudicating officer
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Companies and officer in Default
|
|
V.
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Process for Adjudications
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Foremost Adjudication Office will Find out the defaults. Once adjudication officer will find out
default will start process of adjudication:
STEP-I: ISSUE OF SHAW CAUSE NOTICE TO COMPANY
AND OFFICER IN DEFAULT:
As per Rule 3(2) The adjudicating officer shall
issue a written notice to the company and to every officer of the company who
is in default a show cause notice and ask to the Company and officer “why the
inquiry should not be held against him”.
In Notice Adjudication officer will indicate
the nature of non-compliance or default under the Act alleged to have been
committed or made by such company and officer in default, as the case may be
Period of Shaw Cause Notice:
Not being less than fifteen days and more than
forty five days from the date of service thereon.
Extension of period of Shaw Cause Notice:
The above time limit may be extended by a
further period not exceeding fifteen days, if the company or officer (as
applicable) satisfies the said officer that it has sufficient cause for not
responding to the notice within the stipulated period.
STEP-II: OPPORTUNITY TO BEING HEARD:
The act provides for providing of opportunity
of being heard before imposing of any penalty. Company and officer will file show cause notice with mentioning of
reason “why the inquiry should not be held against him”.
STEP-III: ENQUIRY BY ADJUDICATION OFFICER-
NOTICE FOR HEARING:
If, after considering the cause, if any, shown
by such company or officer, the adjudicating officer is of the opinion that
an inquiry should be held, he shall issue a notice fixing a date for the
appearance of such company (Hearing), through its authorized representative,
or officer of such company whether personally or through his authorized
representative.
STEP-IV: HEARING
On the date fixed for hearing and after giving a reasonable
opportunity of being heard to the person(s) concerned, the adjudicating
officer may, subject to reasons to be recorded in writing, pass any order as
he thinks fit including an order for adjournment of the hearing to a future
date.
STEP-V: ORDER
Every order passed under sub-rule (4), shall be
dated and signed by the adjudicating officer.
|
|
VI.
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If Company and Officer in default make absence
themselves from the Hearing?
|
EX-PARTE HEARINGS
If any person fails, neglects or refuses to
appear before the adjudicating officer, the adjudicating officer may proceed
with the inquiry in the absence of such person after recording the reasons
for doing so.
|
|
VII.
|
Copies of order of Adjudication officer.
|
The adjudicating officer shall send a copy of
the order passed by it to
v The concerned company or officer who is in default and
v To the Central Government.
|
|
VIII.
|
Powers of Adjudication officer during hearing:
|
While
holding an inquiry, the adjudicating officer shall have the following powers,
namely:-
§
To summon and enforce the attendance of any
person acquainted with the facts and circumstances of the case;
§
To order for evidence or to produce any
document, which in the opinion of the adjudicating officer, may be useful for
or relevant to the subject matter of the inquiry.
|
|
IX.
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Quantum of Penalties & factors responsible.
|
While
adjudging quantum of penalty, the adjudicating officer shall have due regard
to the following factors, namely:-
§
The amount of disproportionate gain or unfair
advantage, wherever quantifiable, made as a result of the default;
§
The amount of loss caused to an investor or
group of investors or creditors as a result of the default;
§
The repetitive nature of the default.
|
|
X.
|
Where all there penalty amount invest by the
Government.
|
All sums realized by way of penalties under the
Act shall be credited to the Consolidated Fund of India.
|
|
XI.
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Can assessee file the petition against the
order of adjudication officer?
|
Every appeal against the order of the
adjudicating officer shall be filed in writing with the Regional Director
having jurisdiction in the matter.
|
|
XII.
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In which form Appeal can be made?
|
Form ADJ
|
|
XIII.
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What is the time limit for filling of appeal?
|
Within a
period of sixty days from the date of receipt of the order of adjudicating
officer by the aggrieved party, in Form ADJ setting forth the grounds of
appeal and shall be accompanied by a certified copy of the order against
which the appeal is sought.
|
|
XIV.
|
Who can appear before RD on behalf of the
Party?
|
Authorized Representative consent to be
attached with appeal:
Company
can appear by authorized representative, Where the party is represented by an
authorized representative, a copy of such authorization in favour of the representative
and the written consent thereto by such authorized representative shall also
be appended to the appeal.
|
|
XV.
|
Process for Appeal in Regional Director.
|
Date on Appeal:
On
the receipt of an appeal, office of the Regional Director shall endorse the
date on such appeal and shall sign such endorsement.
Registration/Admission
§ If, on scrutiny, the appeal is found to be in
order, it shall be duly registered and given a serial number or
§ If, on scrutiny, the appeal is not found to be in order or defective, the Regional Director may allow the appellant such
time, not being less than 14 days following the date of receipt of intimation
by the appellant from the Regional Director about the nature of the defects,
to rectify the defects.
If the appellant fails to rectify the defects:
The Regional director may by order and for
reasons to be recorded in writing, decline to register such appeal and
communicate such refusal to the appellant within a period of 7 days thereof:
Extension of period of rectification of
defects:
RD may, for reasons to be recorded in writing,
extend the period referred to in the first proviso above by a further period
of 14 days if an appellant satisfies the RD that the appellant has sufficient
cause for not rectifying the defects with in the period of 14 days.
Copy of
Notice to Adjudication officer:
On the
admission of the appeal, the Regional Director shall serve a copy of appeal
upon the adjudicating officer against whose order the appeal is sought
along-with a notice requiring such adjudicating officer to file his reply
thereto with in such period, not exceeding twenty-one days, as may be
stipulated by the Regional Director in the said notice. The time may be
further extended by 21 days.
Reply of
Adjudication officer:
A copy of
every reply, application or written representation filed by the adjudicating
officer before the Regional Director shall be forthwith served on the
appellant by the adjudicating officer.
Intimation
of Date of Hearing by RD:
The
Regional Director shall notify the parties, the date of hearing of the appeal
which shall not be a date earlier than Thirty Days following the date
of such notification for hearing of the appeal.
Hearing by
RD:
On the
date fixed for hearing the Regional Director may, subject to the reasons to
be recorded in writing, pass any order as he thinks fit including an order
for adjournment of the hearing to a future date.
Ex parte
hearing
In case
the appellant or the adjudicating officer does not appear on the date fixed
for hearing, the Regional Director may dispose of the appeal ex-parte.
Setting
aside ex-parte order
Provided
that where the appellant appears afterwards and satisfies the Regional
Director that there was sufficient cause for his nonappearance, the Regional
Director may make an order setting aside the ex-parte order and restore the
appeal.
Signing
of Order
Every
order passed under this rule shall be dated and signed by the Regional
Director.
Communication
A
certified copy of every order passed by the Regional Director shall be
communicated to the adjudicating officer and to the appellant forthwith and
to the Central Government.
|
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XVI.
|
Note:
|
§ An
appeal in Form ADJ shall not seek relief(s) therein against more than one
order unless the reliefs prayed for are consequential.
§ Every
appeal filed under this rule shall be accompanied by such fee as provided in
the Companies (Registration Offices and Fees) Rules, 2014.
|
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Author – CS Divesh Goyal, GOYAL DIVESH
& ASSOCIATES Company Secretary in Practice from Delhi and can be contacted
at csdiveshgoyal@gmail.com). Disclaimer: The entire
contents of this document have been prepared on the basis of relevant
provisions and as per the information existing at the time of the preparation.
Although care has been taken to ensure the accuracy, completeness and
reliability of the information provided, I assume no responsibility therefore.
Users of this information are expected to refer to the relevant existing
provisions of applicable Laws. The user of the information agrees that the
information is not a professional advice and is subject to change without
notice. I assume no responsibility for the consequences of use of such
information. IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT,
SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION
WITH THE USE OF THE INFORMATION
if delay in filing mgt 14 is more then 30 days then condonation is not required. only adjudication is the way or any other way to safeguard the company.
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