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Violation of Section 117 of the Companies Act, 2013 l Corporate Law l Companies Act l ROC Order l CorpDaily

 Case Study

Case: Delay in the filing of Special Resolution for alteration of the objects clause of the Memorandum of Association (“MoA”) of the Company

Governing Section: Section 117(1) of the Companies Act, 2013  

As per the provisions of Section 117(1), Companies are required to file a copy of the resolution/agreement relating to matters specified in Section 117(3), along with the explanatory statement under Section 102 of the Companies Act, 2013, with the office of the Registrar of Companies within 30 (“thirty”) days of passing of the resolution.

Penal Section: Section 117(2) of the Companies Act, 2013

In terms of the provisions of Section 117(2) of the Companies Act, 2013, if a Company fails to file the resolution/agreement which is required to be filed in terms of the provisions of Section 117(1), such Company shall be liable to a penalty of INR 10,000/- (Rupees Ten Thousand Only) and in case of continuing default, with a further penalty of INR 100/- (Rupees One Hundred) for each day after the first day during which the default continues, subject to a maximum penalty of INR 200,000/- (Rupees Two Lakhs).

Further, the officers in default shall be liable to a penalty of INR 10,000/- (Rupees Ten Thousand Only) and in case of continuing default with a further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of INR 50,000/- (Rupees Fifty Thousand Only).

Penalty Imposed by the Adjudicating Officer: INR 33,750/- (Rupees Thirty-Three Thousand Seven Hundred and Fifty Only)

Abstract of the matter: In the given case, the Company had convened an Extra-Ordinary General Meeting for seeking the approval of the members for altering the object clause of the Memorandum of Association of the Company which was approved by the members as a Special Resolution.

In terms of the provisions of Section 117, the Company was required to file a copy of the resolution along with the Explanatory Statement with the Office of Registrar of Companies within a period of 30 Days in e-form MGT-14. However, the Company could not file the same within the prescribed time which lead to a contravention of Section 117 of the Companies Act, 2013.

The Company contended the delay was caused due to inadvertence and the Company had already filed the e-form MGT-14 along with the additional fee for making good the default.

After hearing the matter and taking into consideration the fact that the concerned Company was a small company, the RoC levied a penalty of INR 11,250/- (Rupees Eleven Thousand Two Hundred and Fifty Only) on the Company and INR 11,250/- (Rupees Eleven Thousand Two Hundred and Fifty Only) on each of its Directors.

The above case law highlights that the payment of an additional fee while filing the e-form does not make good the default committed and penal action can still be initiated against the Company and the officers in default for the delay in reporting and non-compliance of the provisions of the Companies Act. Thus, regulatory timelines should always be kept in mind in order to avoid such legal proceedings against the Company.

Kind Attention: The above information is for educational purposes only.

 

 

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