The provisions of Companies Act, 2013 and rules made thereunder are drafted in such a manner that the compliances related to one section/rule may have a bearing on the other. Therefore, it is imperative that one should read the provisions of the Companies Act, 2013 and rules made thereunder holistically, to avoid ignoring even the minutest compliances, which may lead to imposition of penalty.
Section 158 of the Companies Act, 2013 provides that every person or company, while furnishing any return, information or particulars as are required to be furnished under Companies Act, 2013, should mention DIN in such return, information or particulars in case such return, information or particulars relate to the director or contain any reference of any director.
As per section 172 of the Companies Act, 2013, the penalty for contravention of section 158 is that the company and every officer of the company who is in default should be liable to a penalty of Rs.50,000/- and in case of continuing failure, with a further penalty of Rs.500/- for each day during which such failure continues, subject to a maximum of Rs.3,00,000/- in case of a company and Rs.1,00,000/- in case of an officer who is in default.
Recently, in the matter of M/s. Premier Solution Private Limited (Company), the question came up for adjudication before the Adjudicating Officer, Registrar of Companies, Gujarat, Dadra & Nagar Haveli (Adjudicating Officer) as to whether failure to mention the DIN of the directors on the financial statements of a company is a default under Companies Act, 2013 and would attract penalty thereunder.
Facts of the case
The Company filed its last three years financial statements with the Registrar of Companies, Ahmedabad (ROC) in the matter of Scheme of Amalgamation of the Company with M/s. D.J. Shah Investment Finance Private Limited and their respective shareholders and creditors, where it was observed that the Company has not mentioned DIN of their directors in the Financial Statements, thereby violating the provisions of Section 158 of Companies Act, 2013. The ROC filed its report before the Regional Director, Ahmedabad (Directorate) highlighting certain violations and non-compliance of the Companies Act, 2013. The Directorate instructed to take necessary action for violation of Section 158 of the Companies Act, 2013 in respect of failure to mention the DIN on the financial statements of the Company for the last 3 years and submit action taken report to the Directorate.
Order
After having considered the facts and circumstances of the case and submissions made by the Presenting Officer and the Company Secretary, the Adjudicating Officer imposed the minimum penalty of Rs. 50,000/- and Rs. 1,50,000/- (i.e. Rs.50,000/- x 3 years) on the Company and each of the 3 directors respectively, totalling to Rs. 6,00,000/- for non-disclosure of DIN in the financial statements last three years. The Adjudicating Officer categorically mentioned that the penalty amount should be paid by the Company and its officers from their personal sources/income by way of e-payment available on MCA Portal.
Conclusion
The companies and its directors/officers should be aware and update even about the minutest compliances under Companies Act, 2013 as they are inevitable. The Adjudicating Officer has set an example that the ignorance of law can turn out to be a costly affair for the company and its directors/officers, who might not have been aware that failure to mention the DIN on the financial statements could cost them Rs. 6,00,000/-. Compliances are critical for every business. They help in better corporate governance and reduce the chances of imposition of the fines and penalties.
ONE SHOULD KEEP HIMSELF/HERSELF UPDATED BEFORE BECOMING A DIRECTOR IN A COMPANY.