Difference Between Fine & Penalty
There is
always confusion between “Fine and Penalties”.
Through, this editorial author made an attempt to elaborate the
difference and basic meaning of between “Fine & Penalties”. Let’s first see
the meaning as per dictionary:
Fine
|
Penalty
|
As
per Oxford Dictionary:
Fine is “a sum of money exacted as a penalty by a court of law
or other authority.”
|
As
per Oxford Dictionary:
Penalty is
“a
punishment imposed for breaking a law, rule, or contract.”
|
In
General words, Fine imposed when any application/ petition filed with any court
(like: NCLT, High Court) and penalty imposed when company made any non
compliance and authority directly can impose penalty on them.
Quick Bites:
i. Many people having doubt whether ‘Additional Fees’ paid on filing of
form is penalty or fine?
As per Rule 12 of The Companies (The Registered
offices and Fees) Rules, 2014.
Additional fees is only a fees paid by Company for
filing of form it Is neither Fine nor Penalty.
Example: Section 92- Annual
Return
Sub section 4: States about filing of Annual Return
and additional fees in case of non filing with in prescribed period of 60 days
from AGM.
Sub Section 5: States about fine in case of company
fails to file annual return within time prescribed under sub section 4.
Therefore, one can
observe that for one form Annual Return MGT-7 Company is paying additional fees
and fine both in case company make any non compliance for filing of same.
Therefore,
Additional fees is neither fine nor penalty.
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 Ordinance,
whereby the punishment for non-compliance to be levied under the Companies Act,
2013 is re-categorized from “FINE” to “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
|
Example- Discussion on one of above section:
ii.
Section 117(2) - Resolutions and Agreements to be Filed: As per this section Companies
are required to file e-form MGT-14 with ROC for passing of resolutions
mentioned u/s 117(3) within 30 days of passing of resolution.
S. No.
|
Fine
|
Penalty
|
Company
|
Company shall be punishable
with FINE which shall not be less than 5,00,000 rupees but
which may extend to 25,00,000 rupees
|
Liable to PENALTY of 1,00,000 rupees and incase of continuing
failure futher penalty of 500 rupees for each day upto maximum 25,00,000
rupees
|
Director
|
punishable with FINE which shall not be less than 1,00,000 rupees but
which may extend to 5,00,000.
|
PENALTY of 50,000 and Incase of continuing failure with
further penalty of 500 rupees for each day up to 5,00,000
|
Thus,
before ordinance section 117(2) states about Fine and after ordinance section states
about Penalty.
Therefore, before ordinance default can be make good by petition in NCLT
by filing compounding application Suo Moto or after receipt of notice form ROC/
MCA.
And, After Ordinance ROC may start
levying penalty by issuing ‘Show Cause Notice’ without any petition to NCLT or
any other authorities.
Conclusion
This is a
welcoming step from the government as it will reduce the burden of NCLT as
after this re-categorisation, 24 offenses will not be looked after by NCLT.
The Ordinance has decriminalized certain
offences and has given scope to companies to settle such offences through in
house mechanism, where a penalty could be levied in instances of violations.
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
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