[Opinion] Co. & Directors Penalized Rs. 8.50 Lakhs for Not Maintenance of Registered Office and Not Maintenance of Register of Members

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  • 2 Min Read
  • By Taxmann
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  • Last Updated on 7 February, 2024

Penalty on company and director

Prof R Balakrishnan – [2024] 159 taxmann.com 110 (Article)

1. Background of this case

When the inspection was carried out in the premises of M/s Navcom Industries Limited, the inspecting officials had observed that the company was not maintaining the registered of members which is one of mandatory statutory register which is required to be maintained by all companies. Subsequently when the Adjudication officer sent a communication to the company’s registered office address, the same was returned back by the postal authorities undelivered to the company. This incident made the regulators to believe that the company had not been maintaining the registered office of the company as required under the provisions of the Companies Act 2013. The Adjudicating Officer, after following the procedure of law levied penalty upon the company and its directors to a tune of Rs. 8.50 lakhs and we shall go through these cases in details in order to understand the provisions of the Act and the consequences of the default committed by the company.

2. Relevant provisions of the Companies Act 2013 relating to maintenance of register of members

The sub-section (1) of section 88 of the Companies Act 2013 states that every company shall keep and maintain register of members indicating separately for each class of equity and preference shares held by each member residing in or outside India in such form and in such manner as may be prescribed.

3. Penal action for default/non-compliance if any

Sub-section (5) of section 88 of the companies Act 2013 read with Rule 3 of the Companies (Management and Administration) Rules 2014 states that if a company does not maintain a register of members or debenture-holders or other security holders or fails to maintain them in accordance with the provisions of sub-section (1) section 88 of the Companies Act 2013, the company shall be liable to apenalty of three lakh rupees and every officer of the company who is in default shall .be liable to a penalty of fifty thousand rupees

4. Relevant provisions of the Companies Act 2013 relating to maintenance of register office of the company

Section 12(1) of the Companies Act 2013 read with Rule 25 of the Companies (Incorporation) Rules 2014, “A company shall, within thirty days of its and at all times thereafter, have a registered office capable of acknowledging all communications and notices as may be addressed to it.

5. Penal action for default/non-compliance if any

Section 12(8) of the Companies Act 2013 states that if any default is made in complying with the requirements of this section, the company and every officer who is in default shall be liable to a penalty of one thousand rupees for every day during which the default continues but not exceeding one lakh rupees,

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