INTRODUCTION

The Companies Act 2013 in India prescribes penalties and offenses for companies. Key violations include filing false information, non-compliance with financial reporting, corporate governance norms, and related party transaction disclosure. Failure to hold annual general meetings, insider trading, and non-payment of dividends also incur penalties. Breach of board composition rules and deposit regulations leads to consequences. Violation of investor protection regulations incurs penalties and imprisonment for company officers. These measures aim to ensure transparency and accountability among Indian companies, promoting good corporate governance. Companies and their officers must be diligent in adhering to these provisions to avoid legal repercussions.

Sections in Companies Act 2013 which are Punishable in nature (Both composite and Non-Compoundable) Offenses under Companies Act 2013 are distributed under following orders-

The Companies Act 2013 in India outlines various offenses that companies can commit. These

offenses cover a wide range of activities, from financial matters to corporate governance. Some of the common offenses include:

OFFENCES

Companies in India are allowed to engage in a variety of offenses under the Companies Act of 2013. The Act’s legal provisions and regulations are being broken in these crimes. Here are a few normal offenses of organizations under the Organizations Act 2013:

1. Inability to Submit Documents: Organizations are expected to record different reports and structures with the Enlistment centre of Organizations (ROC) inside determined time spans. Inability to do as such, like not recording yearly returns or fiscal summaries, is an offense.

2. Failure to Adhere to Corporate Governance: Organizations should stick to corporate administration standards, including the arrangement of the board, the arrangement of free chiefs, and the development of board advisory groups. Rebelliousness with these standards can bring about legitimate activity.

3. Break of Chief’s Duties: Assuming chiefs act in a way that is biased to the organization’s advantages or participate in exercises that are not in accordance with their guardian obligations, it is viewed as an offense.

4. Interest withholding: In contracts or agreements with the company, directors and officers are required to disclose their interests. Inability to make these divulgences is an offense.

5. Fake Activities: A serious crime is to engage in fraudulent activities like providing false information, manipulating financial statements, or misrepresenting facts.

6. Mismanagement: Assuming the undertakings of an organization are led in a way that is biased to the interests of the organization or its investors, it can prompt charges of blunder.

7. Non-compliance with the Merger and Acquisitions Rules: Infringement of arrangements connected with consolidations, acquisitions, and combinations, including getting endorsements and following recommended techniques, can bring about lawful outcomes.

8. Non-compliance with Regulations Concerning Insider Trading: It is illegal to trade in the company’s securities based on confidential information or to violate regulations regarding insider trading.

9. Dividends that aren’t paid out: An offense can be brought against businesses that fail to pay dividends to shareholders in accordance with the regulations.

10. Non-compliance with the Rules for Related-Party Transactions: Rules governing related-party transactions must be followed by businesses. Infringement can prompt legitimate activity.

11. Resistance with CSR Provisions: Organizations meeting specific rules are expected to spend a piece of their benefits on CSR exercises. Inability to do so can bring about legitimate results.

12. Resistance with Keeping Unclaimed Dividends: Organizations are expected to move unclaimed profits to the financial backer Schooling and Insurance Asset. Neglecting to do an offense is as well.

Depending on the severity of the offense, penalties, fines, legal action, or even imprisonment may be imposed. It’s fundamental for organizations to have a decent comprehension of the Organizations Act 2013 and guarantee severe consistence to keep away from lawful repercussions and keep up with the honesty of their tasks. In this regard, legal counsel and compliance with regulatory requirements are essential.

PENALITIES

The Companies Act 2013 in India prescribes various penalties for companies that commit offenses or fail to comply with its provisions. These penalties are meant to enforce corporate governance, transparency, and accountability. Here are some common penalties that companies can face under the Companies Act 2013:

1.Financial Penalties: Companies may be subjected to financial penalties for a wide range of offenses, such as failure to file required documents, non-compliance with corporate governance norms, and non-disclosure of interests. These fines can vary in amount depending on the nature and severity of the offense.

2.Imprisonment: In some cases, officers or directors of a company may be liable for imprisonment in addition to financial penalties. For instance, fraudulent activities or mismanagement of company affairs can lead to imprisonment.

3. Non-Compliance with Corporate Governance: Failure to comply with corporate governance norms, such as not appointing independent directors or forming required board committees, can result in penalties on the company and its officers.

4. Fraudulent Activities: Engaging in fraudulent activities, such as providing false information or manipulating financial statements, can lead to significant fines and imprisonment for those involved.

5. Mismanagement and Oppression: If the affairs of a company are conducted in a manner prejudicial to the interests of shareholders or the company itself, the court may order penalties, including winding up of the company or compensation to affected parties.

6. Non-Compliance with Merger and Acquisition Rules: Violations of merger and acquisition provisions can result in penalties, including fines and disapproval of the proposed transactions.

7. Insider Trading Violations: Non-compliance with insider trading regulations can lead to substantial penalties, including fines for the company and imprisonment for those involved.

8. Non-Compliance with CSR Provisions: Companies required to spend on CSR activities but fail to do so may face penalties.

9. Non-Payment of Dividends: Failure to pay dividends to shareholders as per prescribed rules can result in penalties.

10. Non-Compliance with Related-Party Transaction Rules: Violations of rules governing related-party transactions can lead to penalties and potential legal action.

11. Non-Compliance with Depositing Unclaimed Dividends: Failing to transfer unclaimed dividends to the Investor Education and Protection Fund can result in fines.

It’s important to note that the severity of penalties can vary, and in some cases, both the company and its officers may be held liable. Additionally, certain offenses may lead to the disqualification of directors from serving on the boards of other companies.

To avoid penalties and legal consequences, companies should ensure strict compliance with the Companies Act 2013, maintain proper records, and seek legal counsel when necessary. Staying informed about regulatory requirements and adhering to corporate governance standards is essential for maintaining the integrity of a company’s operations.

PROVISONS

The Companies Act 2013 is an important piece of legislation in India that governs the formation, operation, and regulation of companies. It has several provisions covering various aspects of company law. Here are some key provisions of the Companies Act 2013:

1. Types of Companies: The Act defines various types of companies, including private companies, public companies, one-person companies, and small companies, each with its own set of rules and regulations.

2. Incorporation: It outlines the procedure for the incorporation of companies, including the minimum number of directors and shareholders required, the name approval process, and the issuance of a certificate of incorporation.

3. Share Capital: The Act regulates the issuance, transfer, and buyback of shares, including rules on share capital reduction and the issuance of different classes of shares.

4. Corporate Governance: Provisions related to the appointment and role of directors, the composition of the board, and the functioning of board committees are specified to ensure corporate governance.

5. Financial Reporting: The Act mandates the preparation and disclosure of financial statements, the appointment of auditors, and the filing of annual financial reports with the Registrar of Companies.

6. Shareholders’ Rights: It establishes the rights of shareholders, including the right to receive dividends, attend meetings, and vote on company matters.

7. Corporate Social Responsibility (CSR): The Act requires certain companies to spend a portion of their profits on CSR activities and disclose their CSR initiatives in their annual reports.

8. Merger and Acquisition: Provisions for mergers, acquisitions, and amalgamations of companies, including the approval process by shareholders and regulators, are outlined.

9. Insolvency and Bankruptcy: The Act contains provisions for the resolution of insolvency and bankruptcy issues, including the establishment of the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT).

10. Investor Protection: Various provisions are aimed at protecting the interests of investors, such as stricter regulations on related-party transactions and insider trading.

11. Prevention of Oppression and Mismanagement: The Act provides remedies for shareholders and stakeholders in cases of oppression and mismanagement of a company.

12. Special Courts: It establishes special courts for speedy resolution of corporate disputes and violations of company law.

13. Offenses and Penalties: The Act specifies offenses and penalties for non-compliance with its provisions, including fines and imprisonment.

These are just some of the key provisions of the Companies Act 2013. It’s a comprehensive piece of legislation that governs nearly all aspects of corporate entities in India, with the aim of promoting transparency, good governance, and the protection of stakeholders’ interests. It’s important for businesses and professionals to be aware of and adhere to the provisions of this law when operating in India.

KEYPOINTS

Punishable offence under companies acts Chapter No. Chapter name Nature of Punishment

CHAPTER NUMBER- XI, CHAPTER NAME- Appointment and qualification of Directors, NATURE OF PENALITIES-Only Fine Only Fine

CHAPTER NUMBER- XII, CHAPTER NAME- Meetings of Board and its Powers, NATURE OF PENALITIES-Imprisonment or Fine or both

CHAPTER NUMBER- XIV CHAPTER NAME-Inspection, Inquiry, and Investigation NATURE OF PENALITIES- Only Fine

It’s important for companies to adhere to the provisions of the Companies Act 2013 to avoid legal complications. For specific details and the most up-to-date information, it’s recommended to refer directly to the Companies Act and consult legal experts.

Under the Companies Act 2013 in India, there are various penalties that can be imposed on companies for non-compliance with the provisions of the Act.

CASE LAWS

ALIBABA NABIBASHA V SMALL FARMERS AGRI- BUSINESS CONSORITUM & ORS.

FACTS

Mr. Alibaba (Petitioner) was a director of a company. The company has issued certain cheques to the Repliers, and the cheques have been lowered and hence the replier company has filed case against Mr. Alibaba. •Mr. Alibaba (Petitioner) has filed this solicitation against the cases filed contended that he wasn’t the Director when the underpinning contract was executed, nor when the cheques were issued and when they were presented and that he has abnegated 8 times previous to the allocation of cheques, and the abdication has been properly filed with ROC as well. • According to the Replier company, the Petitioner was involved in the discussion before an agreement was executed. Further, the Petitioner had shared in meetings and supported the officers of the Respondent • who had visited for verification of its fiscal and physical status.

Decision-

HC held that after abdication, Director cannot be held responsible for diurnal affairs of Company including Cheques issued and lowered. Reason Delhi High Court held that, in cases where the indicted has abnegated from the Company and it has also been filed with the Registrar of Companies also in similar cases if the cheques are latterly issued and dishonoured, it cannot be said that such an indicted is in- charge of and responsible for the conduct of the day- to- day affairs of the Company, as contemplated in Section 141 of the NI Act. therefore, Petitioner after his abdication cannot continue to be held responsible for the conduct of the Company including the allocation of cheques and dishonour of the same. Hence, complaint cases filed under Section 138 of the NI Act, against the supplicant are quashed. CL 4.DR. RAJESH KUMAR YADUVANSHIV. SERIOUS FRAUD disquisition OFFICE(SFIO) & ANR. (DELHI, HC) detail Data • The supplicant (Dr. Rajesh Kumar Yaduvanshi) has filed the present solicitation inform as a summoning order dated August 16, 2019 issued by learned fresh Session Judge in “Serious Fraud Investigation Office (SFIO)V. Bhushan Steel Limited and Ors.”

The supplicant was designee Director of Punjab National Bank Limited on the Board of Bhushan Steel Limited (‘BSL’) at the material time. • The supplicant submitted that There’s no specific allegation in the SFIO report that the supplicant was indeed ever connected or apprehensive of the same farther, simply mentioning the supplicant’s name as being one of the persons who’s allegedly liable to fulfilled as above offence, without describing any specific part or pointing out any culpable conduct would not constitute sufficient material to convert any Court to issue process. • Hence, there was no allegation in the complaint that the supplicant has connived with the Promoters or any other person to falsify the accounts and thus the order given over is wholly incorrect. • The Respondent (SFIO) submitted that the supplicant was a designee Director appointed by PNB on the Board of BSL and was anticipated to be independent, watchful and conservative against any fraudulent acts committed by BSL. He was also needed to raise red flags and inform PNB of any fraudulent exertion. Decision Person as a designee Director of the Company cannot be summoned for offences in respect of Sections 128, 129, 448 read with Section 447 of the Companies.

Reason •

Delhi High Court observed that there’s no allegation that the supplicant was involved in the affairs of BSL except in his capacity as a designee Director of PNB. In similar capacity, he wasn’t assigned any administrative work of BSL but was simply needed to attend and share in the Board Meetings of BSL. • Indeed, SFIO disquisition report doesn’t contain any specific allegations against the Petitioner of being complicit or having acted in bad faith. • There’s a material difference between the allegation that a designee Director has been careless and an allegation that he’s complicit(involved) in approving fiscal statements, which he knows to be false or conceal material information. • Since, there’s nothing against the designee director in the disquisition report he can be held liable for negligence but can be fulfilled for fraud, Consequently the process is set away.

K.V. BRAHAMJI RAO v UNION OF INDIA

FACTS

• In the huge fiscal fiddle in PNB, Union of India has initiated disquisition against 107 companies and 7 LLPs of Nirav Modi Group and Gitanjali Group of Companies. • At the applicable time the Appellant was Administrative Director, PNB, Head Office, New Delhi. NCLT, Mumbai bench, passed the order for indurating means of the Appellant and banned him from disposing portable and immoveable Properties/ means. • The Appellant submits that the order has been passed in violation of Principle of Natural Justice since the Appellant wasn’t served with advance dupe of the said operation and without giving occasion of hail order has been passed. • Important legal issue is whether any person means (who is head of some other associations) be attached in exercising the powers under Sections 337 & 339 of the Companies Act, 2013?

Any person means (who is head of some other associations) cannot be attached in exercising the powers under Sections 337 & 339 of the Companies Act, 2013. Reason • The NCLAT observed that the person who may be the head of some other associations cannot be roped and his or her means cannot be attached in exercising the powers under Sections 337 & 339 of the Companies Act, 2013. Actually, the Appellant was the Administrative Director of PNB, Head Office, New Delhi i.e., hand of other association. thus, he cannot be impleaded as Respondent in the case against the Nirav Modi Group and Gitanjali Group of Companies. • therefore, the order of NCLT, Mumbai bench is set away, and the Appeal is allowed. CL 7.S.P. VELUMANI & ANR.V. MAGNUM SPINNING MILLS INDIAPVT.LTD. & ORS. (NCLAT) detail Data • The Appellant filed a case contending that bogus deals and siphoning of finances is taking place in the company and filled a company solicitation in NCLT, Chennai for oppression and mismanagement. • After having heard the parties the NCLT, Chennai Bench dismissed the case stating that the acts complained of aren’t falling within the horizon of Oppression and mismanagement. • Being displeased by the said order of the NCLT the complainant has filed the present appeal to NCLAT. • The contention of the Appellant that during the fiscal time 2017- 18, a quantum of Rs. /- has been written off as bad debts, and the details as to identity of the party, whether related party or else isn’t bared.

Decision

The NCLAT upheld the decision of the NCLT, Chennai bench that decision of the Board of Directors to write off the bad debt is a marketable decision, which doesn’t warrant any judicial hindrance. Reason • NCLT has correctly put its reliance on Judgement of NCLAT in Upper India Steel Manufacturing and Engineering Co. Ltd. & Ors. Vs. Gurlal Singh Grewal & Ors. where it was held that cheque signing power is solely a business decision and cannot be obtruded. • also, decision of the Board of Directors to write off the bad debt is a marketable decision, which doesn’t warrant any judicial hindrance.

CONCLUSION

In conclusion, the Companies Act 2013 in India establishes a comprehensive framework to regulate the behaviour of companies and ensure their proper functioning. The Act covers a wide range of offenses and violations that companies can commit, spanning from failure to meet filing requirements and financial mismanagement to corporate governance breaches and fraudulent activities.

To uphold the principles of transparency, accountability, and fairness, the Act prescribes various penalties for these offenses. These penalties can include fines, imprisonment for key personnel, additional fees, disqualification of directors, dissolution of the company, and more. The severity of the penalties varies based on the nature and gravity of the offense.

It’s crucial for companies and their directors to fully understand and comply with the provisions of the Companies Act 2013 to avoid legal repercussions. Staying updated on the Act’s requirements, seeking legal guidance when necessary, and maintaining ethical business practices are essential to ensure the well-being of the company and its stakeholders while fostering a healthy corporate environment in India.