21-July-26
Almost every adjudication order passed by a Registrar of Companies against a private company arises from the same two provisions. Section 92(4) of the Companies Act, 2013 requires the annual return to be filed. Section 137(1) requires the financial statements to be filed. Between them they account for the overwhelming majority of penalties imposed under Section 454, and for nearly every case of director disqualification under Section 164(2)(a).
They are also the two obligations most often treated as a formality. This note sets out what each requires, when it falls due, what happens when it is missed, and the one provision that closes the matter without penalty if you act in time.
Section 92(1) requires every company to prepare an annual return containing the particulars as they stood at the close of the financial year: the registered office and principal business activities, particulars of holding, subsidiary and associate companies, shares and other securities and the shareholding pattern, members and debenture holders and changes since the previous year, promoters, directors and key managerial personnel and changes among them, meetings of members, the Board and its committees with attendance details, remuneration of directors and key managerial personnel, and penalties imposed on the company or its officers together with details of compounding and appeals.
Form. MGT-7. A one person company and a small company file MGT-7A instead, which applies from FY 2020-21 onwards.
Signing. Ordinarily by a director and the company secretary, or where there is no company secretary, by a company secretary in practice. For a one person company and a small company, the proviso to Section 92(1) permits signature by the company secretary or, where there is none, by a director.
Certification. Under Section 92(2) read with Rule 11(2) of the Companies (Management and Administration) Rules, 2014, a listed company and a company with paid-up capital of Rs. 10 crore or more or turnover of Rs. 50 crore or more must have the annual return certified by a company secretary in practice in Form MGT-8.
The filing obligation. Section 92(4) requires the company to file a copy of the annual return with the Registrar within sixty days from the date on which the annual general meeting is held. Where no annual general meeting is held in any year, the period runs from the date on which the meeting should have been held, and the return must be accompanied by a statement specifying the reasons for not holding it.
That last limb is important and widely misunderstood. Failure to hold the annual general meeting does not postpone the filing. The clock runs from the date the meeting ought to have been held.
Section 137(1) requires a copy of the financial statements, including the consolidated financial statement if any, along with all documents required to be attached, duly adopted at the annual general meeting, to be filed with the Registrar within thirty days of the date of the annual general meeting.
Form. AOC-4, with AOC-4 CFS for consolidated statements and AOC-4 XBRL where XBRL filing applies.
Where the statements are not adopted. The first proviso permits unadopted financial statements to be filed within thirty days of the annual general meeting, and the Registrar takes them on record as provisional. The adopted statements must then be filed within thirty days of the adjourned meeting under the second proviso.
Where no annual general meeting is held. Section 137(2) requires the financial statements, duly signed, together with a statement of facts and the reasons for not holding the meeting, to be filed within thirty days of the last date before which the meeting should have been held.
One person company. The third proviso gives an OPC one hundred and eighty days from the closure of the financial year.
For a company with a financial year ending 31 March, and taking Section 96 which requires the annual general meeting to be held within six months of the close of the financial year:
| Step | Provision | Due date |
|---|---|---|
| Annual general meeting | Section 96(1) | 30 September |
| Financial statements, AOC-4 | Section 137(1) | 30 October |
| Annual return, MGT-7 or MGT-7A | Section 92(4) | 29 November |
For the first annual general meeting after incorporation, Section 96(1) allows nine months from the close of the first financial year. The Registrar may extend the time for holding an annual general meeting by up to three months under the third proviso to Section 96(1), but not for the first meeting, and an extension shifts the filing dates correspondingly.
Under Section 92(5), the company and every officer in default are liable to a penalty of Rs. 10,000, and in case of continuing failure a further penalty of Rs. 100 for each day the failure continues, subject to a maximum of Rs. 2,00,000 for the company and Rs. 50,000 for an officer in default.
Under Section 137(3), the company is liable to Rs. 10,000 and a further Rs. 100 per day subject to a maximum of Rs. 2,00,000. On the officers’ side the section works as a cascade: first the managing director and the chief financial officer; in their absence, any other director charged by the Board with responsibility for complying with the section; and only in the absence of any such director, all the directors. Each is liable to Rs. 10,000 and a further Rs. 100 per day after the first, subject to a maximum of Rs. 50,000.
That cascade is worth noting. Where an order fastens liability on every director without any finding on whether a managing director, a chief financial officer, or a Board-charged director existed, the order is open to challenge on that ground alone.
Additional fee under Section 403 accrues separately from penalty. Since 1 July 2018 it runs at Rs. 100 per day per form with no ceiling. This is a fee, not a penalty, and it is payable irrespective of whether penalty proceedings are initiated.
Under Section 164(2)(a), a person who is or has been a director of a company that has not filed financial statements or annual returns for any continuous period of three financial years is disqualified for five years from being reappointed in that company or appointed in any other. The proviso to Section 167(1)(a) permits the disqualified director to continue in office in the defaulting company itself, which is the mechanism by which the default can be cured, but the office in every other company becomes vacant.
The proviso to Section 454(3), inserted by the Companies (Amendment) Act, 2020, is the single most useful provision in this area and is regularly overlooked.
It provides that where the default relates to non-compliance with Section 92(4) or Section 137(1), and the default has been rectified either before the adjudicating officer’s notice, or within thirty days of it, no penalty shall be imposed and all proceedings under Section 454 in respect of that default are deemed concluded.
Three consequences follow:
The practical lesson is that the value of acting early is not incremental. It is the difference between an additional fee and a penalty order running into lakhs.
Two points are worth checking before paying.
Section 446B. Where the company is a one person company, small company, start-up or producer company, Section 446B caps liability at not more than one half of the penalty specified, subject to a maximum of Rs. 2,00,000 for the company and Rs. 1,00,000 for an officer in default. A small company under Section 2(85) is one with paid-up capital not exceeding Rs. 4 crore and turnover not exceeding Rs. 40 crore, other than a holding or subsidiary company, a Section 8 company, or a company governed by a special Act. A great many orders make no reference to Section 446B and record no finding on the status of the company, even though the paid-up capital is on the Registrar’s own database.
The appeal window. An appeal lies to the Regional Director in Form ADJ within sixty days of receipt of the order under Section 454(6). Neither the section nor Rule 4 of the Companies (Adjudication of Penalties) Rules, 2014 confers any power to condone delay. Once that period passes the statutory remedy is gone, and the only route is a writ petition under Article 226, which remains available where the order exceeds the statutory ceiling or was passed without a hearing.
Note also Section 454(8): failure to comply with an adjudication order within ninety days of receipt exposes the company to a fine between Rs. 25,000 and Rs. 5,00,000, and an officer in default to imprisonment up to six months or a fine between Rs. 25,000 and Rs. 1,00,000, or both.
This note is for general information and does not constitute legal advice. For advice on a specific default, an adjudication notice, or an order already passed under Section 454, please get in touch.
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