Liability of Directors Under The Companies Act 2013

Second Edition June 2017
First Edition August 2015
,
Anil Chawla Law Associates LLP
www.indialegalhelp.com
Anil Chawla Law Associates LLP is registered with limited liability and bears LLPIN AAA-8450.
This Presentation is an academic exercise. It does not offer any advice or suggestion to any individual or firm or company. While all
efforts have been made to ensure accuracy and correctness of information provided, no warranties / assurances are provided or
implied. Readers are advised to consult a Legal Professional / Company Secretary / Chartered Accountant before taking any business
decisions. Anil Chawla Law Associates LLP does not accept any liability, either direct or indirect, with regard to any damages /
consequences / results arising due to use of the information contained in this Presentation.
Copyright Anil Chawla Law Associates LLP, 2017
This Presentation gives only an indication of the various provisions related to penalties and punishments for Directors under The
Companies Act, 2013 of India. It is not intended to be either complete or exhaustive narration of the subject.
Companies Act, 2013 (the Act) is a Draconian law
Hardly any distinction between small companies and

large companies
Start of a new inspector-raj
Anti-business bias
Duties, penalties and punishments more stringent

than applicable for public servants or heinous
crimes.
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A1. Officer
A2. Manager
A3. Managing Director
A4. Key Managerial Personnel
A5. Officer in Default

A1. Officer
Section 2(59)

A2. Manager
Section 2(53)

A3. Managing Director
Section 2(54)

A4. Key Managerial Personnel
Section 2(51)

A5. Officer in Default
Section 2(60)

A5. Officer in Default (Continued)
Section 2(60)
B1. Duties of Directors
B2. Disqualification to be a Director
B3. Cognizable Offences with No Bail
B4. Protection of Independent Directors

B1. Duties of Director

B1. Duties of Director (Continued)

B2. Disqualification to be a Director
Section 164

B2. Disqualification to be a Director (Continued)
Section 164

B3. Cognizable Offences Without Bail
Section 212(6)

B4. Protection of Independent Directors
Section 149(12)

Chapter II Incorporation of Company and
Matters Incidentals Thereto
Section Punishment - Applicability of

Short Description of Offence Penalty for Company Penalty for Officer in Default
No. Imprisonment Punishment
17 Supply to Member of Copies of Rs. 1000 per day; maximum Rs. Rs. 1000 per day; maximum Rs. NIL Not Applicable
Memorandum, Articles and 1 Lakh 1 Lakh
Agreements 117(1)
Note:
Rs. 1 Lakh = Rs. 100,000 = Rs. 0.1 million
Rs. 1 Crore = Rs. 10,000,000 = Rs. 10 million

Chapter III Prospectus & Allotment of
Securities
26 Prospectus Minimum Rs. 50,000; Maximum Minimum Rs. 50,000; Maximum Up to 3 years Every person who is
Rs. 3 Lakhs Rs. 3 Lakhs knowingly a party
35 Damage from misleading NIL Compensation without any NIL Not Applicable
prospectus limitation to liability
36 Fraudulently inducing to invest NIL As per Section 447 As per Section Person fraudulently
or lend 447 inducing
40 Permission from Stock Minimum Rs. 5 Lakhs; Minimum Rs. 50,000; Maximum Up to 1 year Officer in default
Exchange before offering Maximum Rs. 50 Lakhs Rs. 3 Lakhs
securities to public
42 Private Placement Amount Involved in Offer or Rs. Amount Involved in Offer or Rs. NIL Not Applicable
2 Crores, whichever is higher + 2 Crores, whichever is higher
Refund of amount collected

Chapter IV Share Capital & Debentures
46 Issue of duplicate shares with Not less than 5 times value of As per Section 447 As per Section Officer in default
intent to defraud shares; Max. 10 times value of 447
shares or Rs. 10 Crores,
whicever is higher
48 Variation of Rights of Minimum Rs. 25,000; Maximum Minimum Rs. 25,000; Maximum Up to 6 months Officer in default
Shareholders Rs. 5 Lakhs Rs. 5 Lakhs
53 Issue of Shares at a Discount Minimum Rs. 1 Lakh; Maximum Minimum Rs. 1 Lakh; Maximum Up to 6 months Officer in default
Rs. 5 Lakhs Rs. 5 Lakhs
56 Transfer of Shares Minimum Rs. 25,000; Maximum Minimum Rs. 10,000; Maximum NIL Not Applicable
Rs. 5 Lakhs Rs. 1 Lakh
59 Default in complying with orders Minimum Rs. 1 Lakh; Maximum Minimum Rs. 1 Lakh; Maximum Up to 1 year Officer in default
of Tribunal reg. Rectification in Rs. 5 Lakhs Rs. 3 Lakhs
Register of Members

Chapter IV Share Capital & Debentures (Continued)
60 Mentioning Authorized Capital Rs. 10,000- Rs. 5,000 NIL Not Applicable
and not mentioning paid-up
capital
64 Informing Registrar about Rs. 1000 per day subject to Rs. 1000 per day subject to NIL Not Applicable
alteration of share capital maximum of Rs. 5 Lakhs maximum of Rs. 5 Lakhs
67* Reduction of Share Capital and Minimum Rs. 1 Lakh; Maximum Minimum Rs. 1 Lakh; Maximum Up to 3 years Officer in default
giving loans to persons for Rs. 25 Lakhs Rs. 25 Lakhs
buying shares of the company
68 Purchase by company of its Minimum Rs. 1 Lakh; Maximum Minimum Rs. 1 Lakh; Maximum Up to 3 years Officer in default
own securities Rs. 3 Lakhs Rs. 3 Lakhs
71 Default in complying with order NIL Minimum Rs. 2 Lakhs; Up to 3 years Officer in default
of Tribunal in the matter of Maximum Rs. 5 Lakhs
Debentures
* Not applicable to Private companies in which no corporate has invested in share capital; Debt less than two times equity or Rs. 50 crores; No default in
repayment to banks / financial institutions

Chapter V Acceptance of Deposits

74 Failure to repay the deposit Minimum Rs. 1 Crore; Maximum Minimum Rs. 25 Lakhs; Up to 7 years Officer in default
after order by Tribunal Rs. 10 Crores (in addition to Maximum Rs. 2 Crores
repayment of principal +
interest)
75 Acceptance of deposits with NIL NIL In addition to under Officer responsible
intention to defraud (after sec. 74, for accepting deposit
default under sec. 74) punishment under

sec. 447

Chapter VI Registration of Charges

86 Contravention of any of the Minimum Rs. 1 Lakh; Maximum Minimum Rs. 25,000; Maximum Up to 6 months Officer in default
provisions of the Chapter Rs. 10 Lakhs Rs. 1 Lakh

Chapter VII Management & Administration
88 Failure to maintain Register of Minimum Rs. 50,000; Maximum Minimum Rs. 50,000; Maximum NIL Not Applicable
Members Rs. 3 Lakhs + Rs. 1,000 per day Rs. 3 Lakhs + Rs. 1,000 per day
91 Closing of Register of Members Rs. 5,000 per day subject to a Rs. 5,000 per day subject to a NIL Not Applicable
without proper notice or longer maximum of Rs. 1 Lakh maximum of Rs. 1 Lakh
than prescribed
92 Delay in filing Annual Return Minimum Rs. 50,000; Maximum Minimum Rs. 50,000; Maximum Up to 6 months Officer in default
beyond period specified for Rs. 5 Lakhs Rs. 5 Lakhs
additional fee
94 Refusing to a member Rs. 1,000 per day subject to a Rs. 1,000 per day subject to a NIL Not Applicable
inspection of Register of maximum of Rs. 1 Lakh maximum of Rs. 1 Lakh
Members or Annual Return
99 Default in holding Annual Maximum Rs. 1 Lakh + Rs. Maximum Rs. 1 Lakh + Rs. NIL Not Applicable
General Meeting 5,000 per day 5,000 per day
102* Statement giving material facts NIL Up to Rs. 50,000 or five times the NIL Not Applicable
about special business at a benefit to the promoter / director /
General Meeting manager / KMP / relative.
Whichever is more
* Sec. 101-107 apply in case of private company unless otherwise specified in respective sections or Articles of Association of the company

Chapter VII Management & Admin. (Continued)
105* Voting by proxy / Invitation by NIL Up to Rs. 5,000 / Rs. 1 Lakh NIL Not Applicable
company to appoint a person as
proxy
111 Failure to circulate a resolution Rs. 25,000 Rs. 25,000 NIL Not Applicable
moved by members
117 Delay in filing of special resolution Minimum Rs. 5 Lakhs; Minimum Rs. 1 Lakh; Maximum NIL Not Applicable
and some resolutions passed by Maximum Rs. 25 Lakhs Rs. 5 Lakhs
Board of Directors beyond period
with additional fees
118 Minutes of meetings of Board or Rs. 25,000- Rs. 5,000- Up to 2 years + Anyone tampering
Members or Committee of Fine Rs. 25,000 with the minutes of
Board meeting
Board to Rs. 1 Lakh
119 Refusal to a member to inspect Rs. 25,000- Rs. 5,000- NIL Not Applicable
Minutes Book of General
Meeting
121** Delay in Filing of Report on Minimum Rs. 1 Lakh; Maximum Minimum Rs. 25,000; Maximum NIL Not Applicable
AGM beyond the specified Rs. 5 Lakhs Rs. 1 Lakh
period with additional fees
* Sec. 101-107 apply in case of private company unless otherwise specified in respective sections or Articles of Association of the company
** Applicable only to listed public companies

Chapter VIII Declaration & Payment of Dividend

124 Unpaid Dividend Account Minimum Rs. 5 Lakhs; Minimum Rs. 1 Lakh; Maximum NIL Not applicable
Maximum Rs. 25 Lakhs Rs. 5 Lakhs
127 Failure to distribute dividends Simple Interest at the rate of Rs. 1000 per day of default Up to 2 years Director who is
18% per annum knowingly a party to
the default

Chapter IX Accounts of Companies
128 Maintaining books of accounts NIL Minimum Rs. 50,000; Maximum Up to 1 year MD, Whole-time
Director Finance,
Rs. 5 Lakhs
CFO and any other
person charged with
this duty by the
Board.
129 Preparing Financial Statements NIL Minimum Rs. 50,000; Maximum Up to 1 year -do- And in the
absence of any of
as per Accounting Standards Rs. 5 Lakhs
the above, all the
and Schedule III directors
134 Board's approval of Financial Minimum Rs. 50,000; Maximum Minimum Rs. 50,000; Maximum Up to 3 years Officer in default
Statements and Directors Rs. 25 Lakhs Rs. 5 Lakhs
Report
136 Sending audited financial Rs. 25,000- Rs. 5,000- NIL Not applicable
statement to members
137 Sending Financial Statements Rs. 1000 per day of delay; Minimum Rs. 1 Lakh; Maximum Up to 6 months MD or CFO or any
Director responsible.
to Registrar Maximum Rs. 10 Lakhs Rs. 5 Lakhs
In the absence of
such Director, all
directors.

Chapter X Audit and Auditors

147 Contravention of any of the Minimum Rs. 25,000; Maximum Minimum Rs. 10,000; Maximum Up to 1 year Officer in default
provisions related to audit and Rs. 5 Lakhs Rs. 1 Lakh
auditors

Chapter XI Appointment & Qualification of Directors
157 Failure to furnish DIN of a Minimum Rs. 25,000; Maximum Minimum Rs. 25,000; Maximum NIL Not Applicable
Director Rs. 1 Lakh Rs. 1 Lakh
159 Defaults under sec. 152, 155 NIL Maximum Rs. 50,000 + Rs. 500 Up to 6 months Individual or Director
and 156 related to DIN and per day for default
such matters
165 Acting as Director in more than NIL Minimum Rs. 5,000; Maximum NIL Not Applicable
20 companies Rs. 25,000 per day
166 Duties of a Director NIL Minimum Rs. 1 Lakh; Maximum NIL Not Applicable
Rs. 5 Lakh
167 Functioning as Director even NIL Minimum Rs. 1 Lakh; Maximum Up to 1 year The person or
after the post has become Rs. 5 Lakh Director
vacant
172 Violation of any provisions of Minimum Rs. 50,000; Maximum Minimum Rs. 50,000; Maximum NIL Not Applicable
the chapter where no specific Rs. 5 Lakh Rs. 5 Lakh
punishment is provided

Chapter XII Meetings of Board & Its Powers

184 Disclosure of Interest by NIL Minimum Rs. 50,000; Maximum Up to 1 year Director who is in
default
Director and not participating in Rs. 1 Lakh
meetings when related
transactions discussed
185* Prohibition on loans, guarantee, Minimum Rs. 5 Lakhs; Minimum Rs. 5 Lakhs; Up to 6 months Director or person
who benefits
security to Directors and firms Maximum Rs. 25 Lakhs Maximum Rs. 25 Lakhs
in which Directors are interested
186 Loans and Investment in other Minimum Rs. 25,000; Maximum Minimum Rs. 25,000; Maximum Up to 2 years Officer in default
companies Rs. 5 Lakhs Rs. 1 Lakh
187 Investments to be held in Minimum Rs. 25,000; Maximum Minimum Rs. 25,000; Maximum Up to 6 months Officer in default
company's name Rs. 25 Lakhs Rs. 1 Lakh
* Not applicable to Private companies in which no corporate has invested in share capital; Debt less than two times equity or Rs. 50 crores; No default in
repayment to banks / financial institutions

Chapter XII Meetings of Board (Continued)
188 Related Party Transactions NIL Minimum Rs. 25,000; Maximum Only in case of Director / employee
Rs. 5 Lakhs listed companies - who authorized or
entered into contract
Up to 1 year
189 Register of Transactions under NIL Rs. 25,000- NIL Not Applicable
sec. 184 or 188 to be signed by
all Directors
190** Register of Contract with MD or Rs. 25,000 Rs. 5,000 NIL Not Applicable
Wholetime Director
191 Payment to Director for loss of NIL Minimum Rs. 25,000; Maximum NIL Not Applicable
office or transfer of property Rs. 1 Lakh
194 Prohibition on forward dealings NIL Minimum Rs. 1 Lakhs; Up to 2 years Director or Key
Managerial
in the securities of the company Maximum Rs. 5 Lakhs
Personnel
195 Prohibition on Insider Trading NIL Minimum Rs. 5 Lakhs; Up to 5 years Any person including
Director or Key
Maximum Rs. 25 Crores or 3
Managerial
times profit made from insider Personnel
trading, whichever is higher
** Not applicable in case of private companies

Chapter XIII Appointment & Remuneration of
Managerial Personnel

197 Maximum Managerial NIL Minimum Rs. 1 Lakh; Maximum NIL Not Applicable
Remuneration Rs. 5 Lakhs
203 Whole-time Key Managerial Minimum Rs. 1 Lakh; Maximum Up to Rs. 50,000 + Rs. 1,000 NIL Not Applicable
Personnel to be appointed Rs. 5 Lakhs per day of default
necessarily
204 Secretarial Audit Minimum Rs. 1 Lakh; Maximum Minimum Rs. 1 Lakh; Maximum NIL Not Applicable
Rs. 5 Lakhs Rs. 5 Lakhs

Chapter XIV Share Capital & Debentures
206(4) Business of company being NIL NIL As provided in Officer in default

carried out for fraudulent or Section 447
unlawful purpose
206(7) Failure to furnish any Up to Rs. 1 Lakh + Rs. 500 per Up to Rs. 1 Lakh + Rs. 500 per NIL Not Applicable
information or explanation or day of continuing default day of continuing default
document required by Registrar
207 / Disobeying direction issued by NIL Minimum Rs. 25,000; Maximum Up to 1 year + Any Director or
Immediate removal officer
217(6) Registrar or Inspector Rs. 1 Lakh
and disqualification
from holding any
office in any
company
217(8) Failure to provide information or NIL Minimum Rs. 25,000; Maximum Up to 6 months Any person
documents to Inspector Rs. 1 Lakh + Rs. 2000 per day
213 Company conducted with NIL NIL As provided in Officer in default and
persons involved in
fraudulent intent or person Section 447
formation or
involved with forming or management
conducting guilty of fraud

Chapter XVI Prevention of Oppression &
Mismanagement

245 Not complying with order of Minimum Rs. 5 Lakhs; Minimum Rs. 25,000; Maximum Up to 3 years Officer in default
Tribunal in relation to Class Maximum Rs. 25 Lakhs Rs. 1 Lakh
Action

Chapter XX Winding Up
Section Penalty for Punishment - Applicability of
Short Description of Offence Penalty for Officer in Default
No. Company Imprisonment Punishment
336 Concealment, NIL Minimum Rs. 1 Lakh; Maximum Minimum 3 Any person who has
been an officer of the
misrepresentation and fraud etc. Rs. 3 Lakh years, Up to 5
company being
years wound up
337 Inducing to give credit to NIL Minimum Rs. 1 Lakh; Maximum Minimum 1 year, Any person who was
company later wound up or Rs. 3 Lakh Up to 3 years an officer at the time
concealing or removing property
338 Not keeping proper books of NIL Minimum Rs. 1 Lakh; Maximum Minimum 1 year, Officer in default
account for two years preceding Rs. 3 Lakh Up to 3 years
winding up
339 Fraudulent conduct of business NIL Personally liable without any As provided Any person who is
limitation of liability under sec. 447 knowingly a party
342 Failure to give assistance to NIL Minimum Rs. 25,000; Maximum NIL Not Applicable
liquidator Rs. 1 Lakh
344 Every invoice or order or Minimum Rs. Minimum Rs. 50,000; Maximum NIL Not Applicable
business letter to carry that the 50,000; Maximum Rs. 3 Lakh
company is being wound up Rs. 3 Lakh
347 Contravention of order related NIL Up to Rs. 50,000- Up to 6 months Any person
to disposal of books etc. of resonsible for
contravention
company wound up

Chapter XXIX Miscellaneous
Section Short Description of Punishment - Applicability of
Penalty for Company Penalty for Officer in Default
No. Offence Imprisonment Punishment
447 Fraud NIL Not less than the amount of Not less than 6 months Any person guilty of
but may be up to 10 fraud
fraud but may extend to three
times the amount of fraud years. In case of public
interest, not less than 3
years.
449 Giving false evidence NIL Up to Rs. 10 Lakhs Not less than 3 years, Any person
on oath up to 7 years
450 Where no specific Maximum Rs. 10,000 Maximum Rs. 10,000 + Rs. NIL Not Applicable
punishment provided + Rs. 1000 per day of 1000 per day of default
in the Act default
451 Repeat offence within Twice the amount of Twice the amount of fine As provided for the As provided in the
relevant section
three years fine provided for the provided for the offence offence
offence
452 Wrongful holding of NIL Minimum Rs. 1 Lakh; Maximum Up to 2 years Officer or employee
cash or property Rs. 5 Lakhs
454 Non-payment of Minimum Rs. 25,000; Minimum Rs. 25,000; Maximum Up to 6 months Officer in default
penalty Maximum Rs. 5 Lakhs Rs. 1 Lakh

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Liability of Directors Under The Companies Act 2013

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Second Edition June 2017

First Edition August 2015

Copyright Anil Chawla Law Associates LLP, 2017

Hardly any distinction between small companies and

Duties, penalties and punishments more stringent

A3. Managing Director

A4. Key Managerial Personnel

A5. Officer in Default

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B2. Disqualification to be a Director

B3. Cognizable Offences with No Bail

B4. Protection of Independent Directors

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Section Punishment - Applicability of

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Section Punishment - Applicability of

default under sec. 74) punishment under

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Section Punishment - Applicability of

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Section Punishment - Applicability of

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Section Punishment - Applicability of

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Section Punishment - Applicability of

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** Not applicable in case of private companies

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Section Punishment - Applicability of

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206(4) Business of company being NIL NIL As provided in Officer in default

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Section Punishment - Applicability of

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concealing or removing property

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We take an entrepreneurs perspective on every issue.

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