[Opinion] Company and its Directors Penalized for Non-maintenance of Statutory Registers Under Companies Act, 2013

Prof R Balakrishnan – [2023] 153 taxmann.com 670 (Article)

1. Statutory Registers and the Need

As per the provisions of the Companies Act 2013, statutory registers are the registers containing specific records of the company’s shareholders, directors, deposits, loan & guaranty etc. and these are maintained at the registered office of the Company. The requirement/need to maintain the statutory registers is due to the various applicable provisions of the Companies Act 2013 read with the relevant rules framed under the Companies (Management and Administration) Rules 2014. Although there are various other registers that are also required to be maintained as per the provisions of the Companies Act 2013, a company shall have to maintain mandatory those specified statutory registers which are applicable to them according to the business and transactions. Since the maintenance of the statutory register is mandated by the Companies Act 2013, any non-compliance with these sections and rules attracts severe penalties on the companies and also on the defaulting officers of the company. To avoid such penalties and also in the interest of good corporate governance, it is always preferred to maintain the required statutory registers.

2. Relevant provisions of Companies Act 2013 relating to this case

As stated in sub-section (1) of section 88 (Register of members etc.) of the Companies Act, 2013, every company shall keep and maintain the following registers in such form and in such manner as may be prescribed, namely:

(a) register of members indicating separately for each class of equity and preference shares held by each member residing in or outside India;

(b) register of debenture-holders; and

(c) register of any other security holders.

3. Penalty under the Companies Act 2013 for any default/non-compliance

Penal provisions are spelt out in sub-section (5) of section 88 of the Companies Act 2013 which 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) or sub-section (2), the company shall be liable to a penalty 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. Consequences of default/violation

To understand the consequences of any default while complying with the provisions of section 88 read with the relevant Rules framed thereunder i.e. non-maintenance of the statutory registers, not keeping the registered updated with entries, non-authentication etc., let us go through the decided case law decided on 27th July 2023 by the Registrar-Cum-Official Liquidator, High Court, Patna, Bihar in the case of Sarada Pleasure and Adventure Limited, Patna.

5. The relevant case law on this matter

We shall go through the adjudication order by the Registrar-Cum-Official Liquidator, High
Court, Patna, Bihar vide order no. ROC/PAT/Sec. 88/13364/691 dated 27th July 2023 for a penalty for violation of section 88 of the Companies Act 2013 in the matter of Sarada Pleasure and Adventure Limited, Patna in the state of Bihar.

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