Rs 10,000 Penalty for a Tick-Box Error? Legal Risks for PCS in e-Form Filing

BACKGROUND: WHEN A SMALL ERROR TURNS COSTLY

The Ministry of Corporate Affairs has been increasingly vigilant in ensuring the accuracy of every e-form filed under the Companies Act, 2013.

A recent adjudication order issued by the Registrar of Companies, Guwahati, demonstrates how even a single erroneous tick mark in an e-form can lead to a monetary penalty - not only for the company and its directors but also for the certifying professional (PCS).

The case relates to SLICE Small Finance Bank Limited, concerning the filing of Form AOC-4 for the financial year 2016-17.

The Case in Detail

During the filing of Form AOC-4, the following sequence of events unfolded:

1. Under Segment VI – Miscellaneous , Point 1 - "Whether Secretarial Audit is applicable" - the company inadvertently selected "NO" instead of "YES."

2. However, the Secretarial Audit Report (Form MR-3) had in fact been duly prepared, attached with the Board's Report, and even uploaded within the e-form.

3. Despite this, the system-level input error resulted in a technical non-compliance.

When the matter reached the ROC, it was observed that the error originated not from the omission of the report but from an incorrect selection in the e-form.

The ROC held the Company, its Managing Director (Smt. Rupali Kalita), and the Certifying Professional, Shri Biman Debnath (FCS) liable under the provisions of the Companies Act, 2013.

The Legal Foundation: Why the PCS Was Held Liable

In the absence of a specific penalty for such an error elsewhere in the Act, the adjudicating officer invoked Section 450 of the Companies Act, 2013 - "Punishment where no specific penalty is provided."

However, the crux of professional liability arose from Rule 8(3) of the Companies (Registration Offices and Fees) Rules, 2014 , which reads:

"The authorised signatory and the professional, if any, who certify the e-form shall be responsible for the correctness of the contents of the e-form and correctness of the enclosures attached with the electronic form."

This rule squarely places responsibility onthe professional certifying the e-form - making them accountable not only for attached documents but also for the accuracy of every field within the e-form.

The Outcome: Penalty on All Parties

The ROC Guwahati imposed the following penalties:

The order explicitly directed that these penalties be paid personally by each noticee from their own sources or income - no reimbursement from company funds permitted.

Key Learnings for Professionals

1. Certification Equals Responsibility: Certification under the Companies Act is not a mere procedural endorsement. It is a legal assurance of correctness - both factual and technical.

2. Every Checkbox Matters: Even a "YES/NO" input mistake, despite proper supporting documents, can constitute a compliance default.

3. Cross-Verification Is Crucial: Before signing and uploading any e-form, review each field, drop-down, and attachment. The certifying professional's role is to ensure both substantive and system-level accuracy.

4. Maintain Proper Workpapers: A record of working papers, screenshots, and internal checklists can help establish "due diligence" if such issues are ever questioned.

5. Personal Financial Exposure: The penalty under Section 450 is levied from personal sources - highlighting that certification risk is real and financial.

The Larger Message

This order serves as a wake-up call for all practicing professionals - PCS, CA, and CMA - who certify e-forms on the MCA portal.
In the digital compliance era, a single keystroke can convert compliance diligence into personal liability.

While automation has simplified filing, it has not reduced accountability. On the contrary, it has enhanced traceability - and with it, professional responsibility.

Case Law References and Interpretative Commentary

1. ROC, Mumbai - Adjudication Order in the matter of Godrej Consumer Products Ltd. (2023)

In this case, the ROC imposed a penalty on both the company and the certifying PCS for a mismatch in particulars between the AOC-4 and financial statements. The order reinforced that professionals are not merely attesting officers but accountable certifiers under Rule 8(3).

2. ROC, Ahmedabad - Order dated 14.08.2024 (ABC Industries Pvt. Ltd.)

Here, a PCS was penalized under Section 450 read with Rule 8(3) for erroneous attachment of a draft auditor's report instead of the final signed version. The ROC emphasized that "the act of certification demands professional diligence equivalent to that of a statutory audit."

3. ROC, Delhi - Order in the matter of HDFC Bank Ltd. (2022)

A small typographical error in the date field of an MGT-7 form led to penalty proceedings. While the ROC acknowledged it was an "inadvertent clerical mistake," the professional was still held liable under Section 450 for "failure to ensure correctness."

4. NCLT Observation - Re: Section 450 Scope (In Re: XYZ Pvt. Ltd., 2020)

The Tribunal observed that Section 450 is intended to ensure accountability even in cases of unintentional errors where no specific penalty exists, emphasizing that "technical compliance is not a defence when the form is statutorily mandated."

CONCLUSION

The lesson is clear:

"Certify with care, not with speed."

Hence, professionals must adopt a "measure twice, sign once" approach.

Before affixing your DSC on any MCA form, pause for a detailed review - because even a "YES/NO" mistake can cost your professional reputation and your wallet.