[Opinion] RoC’s penalty for non-filing of financials and board report resolution

Prof R Balakrishnan – [2023] 147 taxmann.com 367 (Article)

1. Filing of Resolution with the Registrar of Companies

Companies hold meetings of the board of directors/shareholders/creditors of the company and pass resolutions. At the board meeting, the resolutions are passed by the board of directors while in the general meetings, the resolutions are passed by the shareholders of the company which could be either an ordinary resolution which is passed by a simple majority or special resolutions which are passed with three- fourth of majority. A company is required to file with the concerned Registrar of Companies certain resolutions and agreements. These are to be filed after being passed at the meeting of the board/shareholders / creditors of the company. The particulars of such resolutions or/and agreements are to be filed through the e-form MGT-14. The provisions of section 117 of the Companies Act 2013 and the rules made thereunder, are applicable regarding the registration of certain resolutions and agreements which are to be filed with the Registrar of Companies. The e-form MGT-14 is required to be filed with the Registrar of Companies within 30 days of passing the resolution or of the making of the agreement.

However, private companies are exempted from filing board resolutions and are required to file specified resolutions passed at the general meetings.

2. Relevant Provision on this under the Companies Act 2013

The following are the relevant provisions under the provisions of Companies Act 2013, relating to this case.

3. Penal Provisions for Violation

Sub-section (2) of section 117 of the Companies Act 2013 (as amended with effect from 21^st December 2020) spells out that if any company fails to file the resolution or the agreement under sub-section (1) before the expiry of the period specified therein, such company shall be liable to a penalty of ten thousand rupees and in case of continuing failure with a further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of two lakh rupees and every officer of the company who is in default including liquidator of the company, if any, shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of fifty thousand rupees.

4. Consequences of Default/Violation – Action from the Regulator

To understand the consequences relating to default in complying with section 117 (3) (g) read with section 179 (3) (g) relating to filing of the board resolution for passed for approval of financial statements and board report, let us go through one of the decided case law on this matter decided on 6^th February 2023 – by the Registrar of Companies Tamil Nadu, Coimbatore.

5. The relevant case law on this matter

We shall go through a case law relating to an adjudication order passed by the Registrar of Companies Tamil Nadu, Coimbatore vide order no. ROC/CBE/A.O/ 117(3) (g)/031419/2022 dated 6^th February 2023 order for penalty under section 454 of the Companies Act 2013 for violation of section 117(3) (g) of the Companies Act 2013 read with 179 (3) (g) of the Companies Act 2013 read with Companies (Adjudication of Penalties) Rules 2014, in the matter of M/s Adhiban Mutual Benefit Nidhi Limited.

6. Details of the company

M/s. Adhiban Mutual Benefit Nidhi Limited was incorporated on 14^th December 2018 under the provisions of the Companies Act 2013 having its registered office at IA, 1^st Floor, KMP Commercial Centre No. 63, Narayanaswamy Layout, New GKNM Hospital Signal, Pappanaikenpalayam, Coimbatore in the state of Tamil Nadu. The company is in the financial services offering strategic financial consulting to its customers. The company falls under the jurisdiction of the Registrar of Companies of Tamil Nadu and the Registrar of Company is situated at Coimbatore. The company is currently having three directors on its board and one of them is a managing director.

7. Facts of the Case

Upon the routine scrutiny carried out by the Registrar of Companies sometime in June 2021, for the financial years 2018 – 2019 and 2019 – 2020, he noticed:-

• • That the company had filed the financial statements and the board report for these two years with the MCA portal.
  • However, the Registrar did not find the MGT-14 form for the resolution passed by the board of directors for the financial statements and board report for both financial years (i.e. financial year ended as at 31st March 2019 and also the year ended as at 31st March 2020)
  • The Registrar had a reason to believe that the company was in default by not filing the MGT 14 form for the two years as required under the provisions of section 117(3)(g) read with section 179 (3) (g) of the Companies Act 2013.

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