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Non-Filing of Annual Accounts and Annual Return with ROC

Postby deepika bhardwaj » Tue Apr 24, 2012 1:42 pm

What are the consequences of non-filing of Annual Accounts and Annual Return by a Pvt. Co. with the ROC other than penalty u/s 162 of the Companies Act, 1956.

regards
Deepika
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Re: Non-Filing of Annual Accounts and Annual Return with ROC

Postby chandanmahapatra » Tue Apr 24, 2012 2:45 pm

Your are right the nonfiling of AR will attract the provision contained in S.162 which is the penal section as far as violation of S.159,160 and 161 is concerned.

Further I may add that the offence may be treated as a continuing offence in light of the Supreme Court's decision in State of Bihar v. Deokaran Nenshi case
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Re: Non-Filing of Annual Accounts and Annual Return with ROC

Postby pca » Wed Apr 25, 2012 11:06 am

- Also check Sec.274(1)(g)
- Names of all directors and the company to be included in defaulters list on MCA website
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Re: Non-Filing of Annual Accounts and Annual Return with ROC

Postby chandanmahapatra » Thu Apr 26, 2012 4:51 pm

Dear PCA,

I have a small academic question related to application of S.274(1)(g) in the present case-

1. In my understanding 274(1)(g) deals with disqualification of a person who is already a director in a Public Co and who is seeking appointment in another Public company.
Whereas in the present case it is a Pvt Co which has failed to file returns and hence strictly going by the provisions of law S.274(1)(g) does not have any application in this case.
Say hypothecially a Pvt Co defaults in filing for 3 continuos yrs and one of its directors seeks appointment in a Pub Co as Director or another Pvt Co as director or seeks re-appointement in his own Pvt Co - you would disqualify him u/s.274(1)(g) ?

2.Further if you see the Disqualification Rules, it clearly restrictes its applicablity to "All Public Cos" registered under the Cos Act.

Hence it would be kind of you, if you could elaborate on how the aforementioned section is attracted to the specific query.
Thanks.
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Re: Non-Filing of Annual Accounts and Annual Return with ROC

Postby pca » Fri Apr 27, 2012 9:13 pm

The general impression among most of us is that declaration under Sec.274(1)(g) is not applicable to a private company. However, if we go through Sec.227(3)(f) we will find that auditors of all companies (whether public or private) are required to report whether any of the directors was disqualified u/s 274(1)(g). This can be complied with only if declaration is given by directors of private company also. Further Sec.274(1) states that "A person shall not be capable of being appointed as a director of a 'company' if ----". Here the word 'company' includes both public as well as private company.
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Re: Non-Filing of Annual Accounts and Annual Return with ROC

Postby chandanmahapatra » Sat Apr 28, 2012 4:29 pm

I would partially agree to your view, as the problem does not lie in our academic debate but more in the faulty drafting of the concernd sections and a conjoint reading will throw interesting possibilities to beat the intent of the legislature-

For eg- S.283 which deals with vacation of office does not contain corresponding provision as in S.274(1)(g) and hence a defaulting director continues in office in the defaulting pubic co. Further if he has resigned from the directorship of the defaulting co after the default he may be appointed as dir in a pvt co and in a pub co if default is cured after a cooling of period of 5 yrs

1.Auditor's Duty u/s. 227-
- Yes he is required to report status of default based on records provided.
- But I would also draw ur attention to Clause 4(b) of the Disqualification Rules
-lastly since S.227(1)(g is not applicable to Pvt Co's there would be no default per se and hence the reporting would state that only. So to that extent you are correct in your view.
- But S.227 can not override or change the provisions as contained in S.274(1)(g)- and there lies the problem of faulty drafting!!

2.Sec.274(1) (g) read with Disqualifcation Rules-
- There is absolutely no ground of conjencture of "If and Buts" both Section and Rule make it crystal clear that it relates to only "Public Limited Companies registered under the Companies Act". Hence this being the mother section will stand vis- a- vis, 227 which is merely dealing with Auditors duty of reporting among other things this also ( which was inserted subsequent in 2000) and nothing more.
-Further the Rules in the being itself Point 3- makes it crystal clear, they apply " To All Public Limited Companies registered under the Companies Act'1956".
- Please refer- Pg.20 of Bhart- Guide to Co's Directors by Chandratre, Cal HC Judgement- Pawan Jain v Hindustan Cables. You can also refer to Ramya and they could endorse my stand on 274(1)(g)'s application.
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Re: Non-Filing of Annual Accounts and Annual Return with ROC

Postby chandanmahapatra » Sat Apr 28, 2012 5:17 pm

Sorry I missed out your point " Company If..."-
Though S.274(1) uses the expression " a Company" thereby indicating that it applies to all types of companies- Pvt as well as Public, but it is not so.
The proviso to clause(g) expressly disqualfied persons for being appointed directors of only public companies.
If clause (g) is said to be applicable to Pvt Cos as well, it would mean that the dir of defaulting public cos would incur lifetime disqualification for directorships of pvt cos,as aganist the 5 yrs presently prescribed for pub cos.
Obviously this not the intention of the statute makers of prescribing life time bans !!!
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Re: Non-Filing of Annual Accounts and Annual Return with ROC

Postby pca » Sat Apr 28, 2012 5:38 pm

I completely agree with your views. In fact Companies (Amendment) Act 2000 was not at all drafted properly. When I saw the amendment for the first time in 2000 I was surprised to see amendment of Section 3(1)(iii) (definition of 'Private Company'). How a company on the date of incorporation itself can have minimum paid up capital of Rs.1 lac? After incorporation company will apply for PAN card, then pass Board resolution for opening bank account and then only share application money can be deposited in the Bank and thereafter Board resolution has to be passed for allotment of shares. Companies have to be given reasonable time of 2-3 months for completing these formalities.

Does this mean that till such time the company will be neither private company nor public company, since the definition itself has been amended!! I thought that the government would realise the mistake and willl soon rectify the same. However, the Act continues till date. Now it is for the professionals to go on putting their own arguments without any end result.....
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Re: Non-Filing of Annual Accounts and Annual Return with ROC

Postby chandanmahapatra » Sun Apr 29, 2012 7:57 am

Absolutely I agree with you 100%, there are anomolies which has sometimes lead to bizare situations. Infact the matter presently under debate is a classic case in point.

The reporting which the Cos Act wants from the Auditors, with all its restrictions, for eg- an auditor can not really check the verasity of the claim but only rely on Co's declaration of F-DDA of the Directors. But by a strict interpretation of S.274(1)(g) directors of Pvt Cos need not file DDA-A, even the Cal HC Judgement supports this.

What may be could have been done is that this should have been part of Director Responsibiltiy Statement or Board Report and leave it at that- instead of getting a meaningless reporting from Auditors!!.

However the brighter side is that, we get an opportunity to really go into the nuiances of the legislation and piece togther the intent of the law makers- which I think this debate has really allowed us to do. I need to thank ofcourse Deepika for rasing an issue like this.
Thanks for ur views.
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