Implication of Non Compliance - Condonation of Delay Scheme, 2018

SHORT SUMMARY:

In this editorial the author shall discuss the some queries raised by professionals and Corporates / Key Effects in relation to Condonation of Delay Scheme, 2018. More than one month has been passed when the scheme notified by the MCA. However, still there are many issues are unanswered under this scheme:

1. Implication of non-compliance of this scheme?

2. After activation of DIN for period 01.01.2018 to 31.03.2018, whether Directors can file forms of 'Active-Non defaulting Company' with his DIN?

3. Whether director can file documents other than over-due documents during temporary re-activation of DIN?

4. Whether scheme can be avail for filing of all the pending documents till date?

I. IMPLICATION OF NON-COMPLIANCE OF THIS SCHEME.

Language of Para-7: At the conclusion of the Scheme, the Registrar shall take all necessary actions under the Companies Act, 1956/ 2013 against the companies who have not availed themselves of this Scheme and continue to be in default in filing the overdue documents.

OUR CLARIFICATION:

As per para 7 ROC can take the necessary actions as per Companies Act, 2013 Like: Penalty/ Prosecution/ Imprisonment etc.

Let's have a look on the penalty as per act in case of non compliance of filing of financial statement or annual return or to continue as director after become disqualified.

Penalty Section 92- Annual Return

If a company fails to file its annual return under sub-section (4), before the expiry of the period specified under section 403 with additional fee;

• the company shall be punishable with fine which shall not be less than Rs. 50,000/- rupees but which may extend to Rs. 500,000/- and

• every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both

Penalty Section 137- Filing of Financial Statement

If a company fails to file the copy of the financial statements under sub-section (1) or sub-section (2), as the case may be, before the expiry of the period specified in section 403,

• the company shall be punishable with fine of one thousand rupees for every day during which the failure continues but which shall not be more than ten lakh rupees, and

• the managing director and the Chief Financial Officer of the company, if any, and, in the absence of the managing director and the Chief Financial Officer, any other director who is charged by the Board with the responsibility of complying with the provisions of this section, and, in the absence of any such director, all the directors of the company, shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees, or with both.

Penalty Section 167- Continue as Director even after Disqualification

If a person, functions as a director even when he knows that the office of director held by him has become vacant on account of any of the disqualifications specified in sub- section (1), he shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees, or with both.

Conclusion:

One can opine that, If a Company doesn't make compliances as per CODS, 2018 then ROC shall be allowed to prosecute defaulting Companies and their Directors/ Officer in default with Fine or Imprisonment or both.

II. After activation of DIN for period 01.01.2018 to 31.03.2018, whether Directors can file forms of  'Active-Non defaulting Company' with his DIN?

III. Whether director can file documents other than over-due documents during temporary re-activation of DIN

Language of Para -5: This scheme shall not apply to the filing of documents other than the following overdue documents: (23B, AOC-4, MGT-7, 23AC, ACA, 66, ADT-1).

Language of Para-4(1): The DIN of the concerned disqualified directors de-activated at present, shall be temporarily activated during the validity of the scheme to enable them to file the overdue documents.

OUR CLARIFICATION:

As per para 5 and 4 this scheme is available for filing of overdue documents only.

Filing of Documents of non- defaulting Company: One can opine that, DIN shall be activating for filing of 'only overdue documents' of "Only Defaulting Company". A defaulting director shall not allow filing documents of non-defaulting active company during the period of temporary activation of DIN.

Filing of Other Documents of defaulting Company: One can opine that, While this scheme is not available for filing of documents other than overdue documents. However, if any person acts as Director for any other purpose, other than filing of overdue documents, using such re-activation, ground, then he shall be liable for both civil and criminal provisions of Act of his deeds done during this period.

IV. Whether scheme can be avail for filing of all the pending documents till date?

Language of Para -3: A defaulting company is permitted to file its overdue documents which were due for filing till 30.06.2017.

OUR CLARIFICATION:

Overdue Documents due for filing till 30.06.2017 only can file under this scheme. Annual filing of F.Y. 31.03.2017 not allowed under the scheme.