Workshop
Organized by
Confederation Of Indian Industry
Madhya Pradesh Chapter
On 18th August 2015
At ABV Indian Institute of Information Technology, Gwalior
By Advocate Anil Chawla
Senior Partner,
Anil Chawla Law Associates LLP
www.indialegalhelp.com
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
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A1.
Officer
Section 2(59)
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A2.
Manager
Section 2(53)
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A3.
Managing Director
Section 2(54)
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A4.
Key Managerial Personnel
Section 2(51)
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A5.
Officer in Default
Section 2(60)
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A5.
Officer in Default (Continued)
Section 2(60)
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B1.
Duties of Directors
B2.
Disqualification to be a Director
B3.
Cognizable Offences with No Bail
B4.
Protection of Independent Directors
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B1. Duties of Director
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B1. Duties of Director (Continued)
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B2.
Disqualification to be a Director
Section 164
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B2.
Disqualification to be a Director (Continued)
Section 164
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B3. Cognizable Offences Without Bail
Section 212(6)
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B4. Protection of Independent Directors
Section 149(12)
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Chapter II – Incorporation of Company and
Matters Incidentals Thereto
Section
No.
17
Short Description of Offence
Penalty for Company
Penalty for Officer in Default
Supply to Member of Copies of Rs. 1000 per day; maximum Rs. Rs. 1000 per day; maximum Rs.
Memorandum, Articles and
1 Lakh
1 Lakh
Agreements 117(1)
Punishment Imprisonment
Applicability of
Punishment
NIL
Not Applicable
Note:
Rs. 1 Lakh = Rs. 100,000 = Rs. 0.1 million
Rs. 1 Crore = Rs. 10,000,000 = Rs. 10 million
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Chapter III – Prospectus & Allotment of
Securities
Section
No.
Short Description of Offence
Penalty for Company
Penalty for Officer in Default
26
Prospectus
35
Damage from misleading
prospectus
NIL
Compensation without any
limitation to liability
36
Fraudulently inducing to invest
or lend
NIL
As per Section 447
40
Permission from Stock
Exchange before offering
securities to public
Minimum Rs. 5 Lakhs;
Maximum Rs. 50 Lakhs
42
Private Placement
Amount Involved in Offer or Rs. Amount Involved in Offer or Rs.
2 Crores, whichever is higher + 2 Crores, whichever is higher
Refund of amount collected
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Minimum Rs. 50,000; Maximum Minimum Rs. 50,000; Maximum
Rs. 3 Lakhs
Rs. 3 Lakhs
Minimum Rs. 50,000; Maximum
Rs. 3 Lakhs
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Punishment Imprisonment
Applicability of
Punishment
Up to 3 years
Every person who is
knowingly a party
NIL
Not Applicable
As per Section
447
Person fraudulently
inducing
Up to 1 year
Officer in default
NIL
Not Applicable
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Chapter IV – Share Capital & Debentures
Section
No.
Short Description of Offence
Penalty for Company
Penalty for Officer in Default
Punishment Imprisonment
Applicability of
Punishment
46
Issue of duplicate shares with
intent to defraud
Not less than 5 times value of
shares; Max. 10 times value of
shares or Rs. 10 Crores,
whicever is higher
As per Section
447
Officer in default
48
Variation of Rights of
Shareholders
Minimum Rs. 25,000; Maximum Minimum Rs. 25,000; Maximum Up to 6 months
Rs. 5 Lakhs
Rs. 5 Lakhs
Officer in default
53
Issue of Shares at a Discount
Minimum Rs. 1 Lakh; Maximum Minimum Rs. 1 Lakh; Maximum
Rs. 5 Lakhs
Rs. 5 Lakhs
Up to 6 months
Officer in default
56
Transfer of Shares
Minimum Rs. 25,000; Maximum Minimum Rs. 10,000; Maximum
Rs. 5 Lakhs
Rs. 1 Lakh
NIL
Not Applicable
59
Default in complying with orders Minimum Rs. 1 Lakh; Maximum Minimum Rs. 1 Lakh; Maximum
of Tribunal reg. Rectification in Rs. 5 Lakhs
Rs. 3 Lakhs
Register of Members
Up to 1 year
Officer in default
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As per Section 447
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Chapter IV – Share Capital & Debentures
Section
No.
Short Description of Offence
Penalty for Company
Penalty for Officer in Default
(Continued)
Punishment Imprisonment
Applicability of
Punishment
60
Mentioning Authorized Capital
and not mentioning paid-up
capital
Rs. 10,000-
Rs. 5,000
NIL
Not Applicable
64
Informing Registrar about
alteration of share capital
Rs. 1000 per day subject to
maximum of Rs. 5 Lakhs
Rs. 1000 per day subject to
maximum of Rs. 5 Lakhs
NIL
Not Applicable
67*
Reduction of Share Capital and Minimum Rs. 1 Lakh; Maximum Minimum Rs. 1 Lakh; Maximum
giving loans to persons for
Rs. 25 Lakhs
Rs. 25 Lakhs
buying shares of the company
Up to 3 years
Officer in default
68
Purchase by company of its
own securities
Up to 3 years
Officer in default
71
Default in complying with order
of Tribunal in the matter of
Debentures
Up to 3 years
Officer in default
Minimum Rs. 1 Lakh; Maximum Minimum Rs. 1 Lakh; Maximum
Rs. 3 Lakhs
Rs. 3 Lakhs
NIL
Minimum Rs. 2 Lakhs;
Maximum Rs. 5 Lakhs
* 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
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Chapter V – Acceptance of Deposits
Section
No.
Short Description of Offence
74
Failure to repay the deposit
after order by Tribunal
75
Acceptance of deposits with
intention to defraud (after
default under sec. 74)
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Penalty for Company
Penalty for Officer in Default
Minimum Rs. 1 Crore; Maximum Minimum Rs. 25 Lakhs;
Rs. 10 Crores (in addition to
Maximum Rs. 2 Crores
repayment of principal +
interest)
NIL
NIL
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Punishment Imprisonment
Applicability of
Punishment
Up to 7 years
Officer in default
In addition to under Officer responsible
for accepting deposit
sec. 74,
punishment under
sec. 447
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Chapter VI – Registration of Charges
Section
No.
86
Short Description of Offence
Contravention of any of the
provisions of the Chapter
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Penalty for Company
Penalty for Officer in Default
Punishment Imprisonment
Minimum Rs. 1 Lakh; Maximum Minimum Rs. 25,000; Maximum Up to 6 months
Rs. 10 Lakhs
Rs. 1 Lakh
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Applicability of
Punishment
Officer in default
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Chapter VII – Management & Administration
Section
No.
Short Description of Offence
Penalty for Company
Penalty for Officer in Default
Applicability of
Punishment
NIL
Not Applicable
NIL
Not Applicable
Up to 6 months
Officer in default
88
Failure to maintain Register of
Members
91
Closing of Register of Members Rs. 5,000 per day subject to a
without proper notice or longer maximum of Rs. 1 Lakh
than prescribed
92
Delay in filing Annual Return
beyond period specified for
additional fee
Minimum Rs. 50,000; Maximum Minimum Rs. 50,000; Maximum
Rs. 5 Lakhs
Rs. 5 Lakhs
94
Refusing to a member
inspection of Register of
Members or Annual Return
Rs. 1,000 per day subject to a
maximum of Rs. 1 Lakh
Rs. 1,000 per day subject to a
maximum of Rs. 1 Lakh
NIL
Not Applicable
99
Default in holding Annual
General Meeting
Maximum Rs. 1 Lakh + Rs.
5,000 per day
Maximum Rs. 1 Lakh + Rs.
5,000 per day
NIL
Not Applicable
Up to Rs. 50,000 or five times the
benefit to the promoter / director /
manager / KMP / relative.
Whichever is more
NIL
Not Applicable
102*
Statement giving material facts
about special business at a
General Meeting
Minimum Rs. 50,000; Maximum Minimum Rs. 50,000; Maximum
Rs. 3 Lakhs + Rs. 1,000 per day Rs. 3 Lakhs + Rs. 1,000 per day
Punishment Imprisonment
NIL
Rs. 5,000 per day subject to a
maximum of Rs. 1 Lakh
* Not applicable in case of a Private Company
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Chapter VII – Management & Admin. (Continued)
Section
No.
Punishment Imprisonment
Applicability of
Punishment
NIL
Not Applicable
Rs. 25,000
NIL
Not Applicable
Minimum Rs. 1 Lakh; Maximum
Rs. 5 Lakhs
NIL
Not Applicable
Rs. 25,000-
Rs. 5,000-
Up to 2 years +
Fine Rs. 25,000
to Rs. 1 Lakh
Anyone tampering
with the minutes of
Board meeting
Rs. 25,000-
Rs. 5,000-
NIL
Not Applicable
NIL
Not Applicable
Short Description of Offence
Penalty for Company
105*
Voting by proxy / Invitation by
company to appoint a person as
proxy
NIL
111
Failure to circulate a resolution
moved by members
117
Delay in filing of special resolution
and some resolutions passed by
Board of Directors beyond period
with additional fees
118
Minutes of meetings of Board or
Members or Committee of
Board
119
Refusal to a member to inspect
Minutes Book of General
Meeting
121*
Delay in Filing of Report on
AGM beyond the specified
period with additional fees
Rs. 25,000
Minimum Rs. 5 Lakhs;
Maximum Rs. 25 Lakhs
Penalty for Officer in Default
Up to Rs. 5,000 / Rs. 1 Lakh
Minimum Rs. 1 Lakh; Maximum Minimum Rs. 25,000; Maximum
Rs. 5 Lakhs
Rs. 1 Lakh
* Not applicable in case of a Private Company
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Chapter VIII – Declaration & Payment of Dividend
Section
No.
Short Description of Offence
Penalty for Company
Penalty for Officer in Default
124 Unpaid Dividend Account
Minimum Rs. 5 Lakhs;
Maximum Rs. 25 Lakhs
Minimum Rs. 1 Lakh; Maximum
Rs. 5 Lakhs
127 Failure to distribute dividends
Simple Interest at the rate of
18% per annum
Rs. 1000 per day of default
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Punishment Imprisonment
Applicability of
Punishment
NIL
Not applicable
Up to 2 years
Director who is
knowingly a party to
the default
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Chapter IX – Accounts of Companies
Section
No.
Short Description of Offence
Penalty for Company
Penalty for Officer in Default
Punishment Imprisonment
Applicability of
Punishment
128
Maintaining books of accounts
NIL
Minimum Rs. 50,000; Maximum
Rs. 5 Lakhs
Up to 1 year
MD, Whole-time
Director Finance,
CFO and any other
person charged with
this duty by the
Board.
129
Preparing Financial Statements
as per Accounting Standards
and Schedule III
NIL
Minimum Rs. 50,000; Maximum
Rs. 5 Lakhs
Up to 1 year
-do- And in the
absence of any of
the above, all the
directors
134
Board's approval of Financial
Statements and Directors
Report
Minimum Rs. 50,000; Maximum Minimum Rs. 50,000; Maximum
Rs. 25 Lakhs
Rs. 5 Lakhs
Up to 3 years
Officer in default
136
Sending audited financial
statement to members
Rs. 5,000-
NIL
Not applicable
137
Sending Financial Statements
to Registrar
Minimum Rs. 1 Lakh; Maximum
Rs. 5 Lakhs
Up to 6 months
MD or CFO or any
Director responsible.
In the absence of
such Director, all
directors.
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Rs. 25,000-
Rs. 1000 per day of delay;
Maximum Rs. 10 Lakhs
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Chapter X – Audit and Auditors
Section
No.
Short Description of Offence
Penalty for Company
Penalty for Officer in Default
147 Contravention of any of the
Minimum Rs. 25,000; Maximum Minimum Rs. 10,000; Maximum
provisions related to audit and Rs. 5 Lakhs
Rs. 1 Lakh
auditors
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Punishment Imprisonment
Applicability of
Punishment
Up to 1 year
Officer in default
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Chapter XI – Appointment & Qualification of Directors
Section
No.
Short Description of Offence
Penalty for Company
Penalty for Officer in Default
Applicability of
Punishment
NIL
Not Applicable
157
Failure to furnish DIN of a
Director
159
Defaults under sec. 152, 155
and 156 related to DIN and
such matters
NIL
Maximum Rs. 50,000 + Rs. 500
per day for default
165
Acting as Director in more than
20 companies
NIL
Minimum Rs. 5,000; Maximum
Rs. 25,000 per day
NIL
Not Applicable
166
Duties of a Director
NIL
Minimum Rs. 1 Lakh; Maximum
Rs. 5 Lakh
NIL
Not Applicable
167
Functioning as Director even
after the post has become
vacant
NIL
Minimum Rs. 1 Lakh; Maximum
Rs. 5 Lakh
Up to 1 year
The person or
Director
172
Violation of any provisions of
the chapter where no specific
punishment is provided
NIL
Not Applicable
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Minimum Rs. 25,000; Maximum Minimum Rs. 25,000; Maximum
Rs. 1 Lakh
Rs. 1 Lakh
Punishment Imprisonment
Minimum Rs. 50,000; Maximum Minimum Rs. 50,000; Maximum
Rs. 5 Lakh
Rs. 5 Lakh
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Chapter XII – Meetings of Board & Its Powers
Section
No.
Punishment Imprisonment
Applicability of
Punishment
Up to 1 year
Director who is in
default
Up to 6 months
Director or person
who benefits
Up to 2 years
Officer in default
Short Description of Offence
Penalty for Company
Penalty for Officer in Default
184
Disclosure of Interest by
Director and not participating in
meetings when related
transactions discussed
NIL
Minimum Rs. 50,000; Maximum
Rs. 1 Lakh
185*
Prohibition on loans, guarantee, Minimum Rs. 5 Lakhs;
security to Directors and firms Maximum Rs. 25 Lakhs
in which Directors are interested
186
Loans and Investment in other
companies
Minimum Rs. 25,000; Maximum Minimum Rs. 25,000; Maximum
Rs. 5 Lakhs
Rs. 1 Lakh
187
Investments to be held in
company's name
Minimum Rs. 25,000; Maximum Minimum Rs. 25,000; Maximum Up to 6 months
Rs. 25 Lakhs
Rs. 1 Lakh
Minimum Rs. 5 Lakhs;
Maximum Rs. 25 Lakhs
Officer in default
* 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
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Chapter XII – Meetings of Board (Continued)
Section
No.
Short Description of Offence
Penalty for Company
Penalty for Officer in Default
Punishment Imprisonment
Applicability of
Punishment
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
188
Related Party Transactions
NIL
189
Register of Transactions under
sec. 184 or 188 to be signed by
all Directors
NIL
Rs. 25,000-
NIL
Not Applicable
190**
Register of Contract with MD or
Wholetime Director
Rs. 25,000
Rs. 5,000
NIL
Not Applicable
191
Payment to Director for loss of
office or transfer of property
NIL
Minimum Rs. 25,000; Maximum
Rs. 1 Lakh
NIL
Not Applicable
194
Prohibition on forward dealings
in the securities of the company
NIL
Minimum Rs. 1 Lakhs;
Maximum Rs. 5 Lakhs
Up to 2 years
Director or Key
Managerial
Personnel
195
Prohibition on Insider Trading
NIL
Up to 5 years
Any person including
Director or Key
Managerial
Personnel
Minimum Rs. 5 Lakhs;
Maximum Rs. 25 Crores or 3
times profit made from insider
trading, whichever is higher
** Not applicable in case of private companies
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Chapter XIII – Appointment & Remuneration of
Managerial Personnel
Section
No.
Short Description of Offence
Penalty for Company
Penalty for Officer in Default
NIL
Minimum Rs. 1 Lakh; Maximum
Rs. 5 Lakhs
Punishment Imprisonment
Applicability of
Punishment
NIL
Not Applicable
197
Maximum Managerial
Remuneration
203
Whole-time Key Managerial
Personnel to be appointed
necessarily
Minimum Rs. 1 Lakh; Maximum Up to Rs. 50,000 + Rs. 1,000
Rs. 5 Lakhs
per day of default
NIL
Not Applicable
204
Secretarial Audit
Minimum Rs. 1 Lakh; Maximum Minimum Rs. 1 Lakh; Maximum
Rs. 5 Lakhs
Rs. 5 Lakhs
NIL
Not Applicable
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Chapter XIV – Share Capital & Debentures
Section
No.
Short Description of Offence
206(4) Business of company being
carried out for fraudulent or
unlawful purpose
Penalty for Company
Penalty for Officer in Default
NIL
NIL
206(7) Failure to furnish any
Up to Rs. 1 Lakh + Rs. 500 per Up to Rs. 1 Lakh + Rs. 500 per
information or explanation or
day of continuing default
day of continuing default
document required by Registrar
207 / Disobeying direction issued by
217(6) Registrar or Inspector
NIL
Punishment Imprisonment
Applicability of
Punishment
As provided in
Section 447
Officer in default
NIL
Not Applicable
Up to 1 year +
Minimum Rs. 25,000; Maximum
Immediate removal
Rs. 1 Lakh
Any Director or
officer
and disqualification
from holding any
office in any
company
217(8) Failure to provide information or
documents to Inspector
213
Company conducted with
fraudulent intent or person
involved with forming or
conducting guilty of fraud
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NIL
Minimum Rs. 25,000; Maximum
Rs. 1 Lakh + Rs. 2000 per day
Up to 6 months
Any person
NIL
NIL
As provided in
Section 447
Officer in default and
persons involved in
formation or
management
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Chapter XVI – Prevention of Oppression &
Mismanagement
Section
Short Description of Offence
No.
245 Not complying with order of
Tribunal in relation to Class
Action
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Penalty for Company
Minimum Rs. 5 Lakhs;
Maximum Rs. 25 Lakhs
Punishment Imprisonment
Applicability of
Punishment
Minimum Rs. 25,000; Maximum Up to 3 years
Rs. 1 Lakh
Officer in default
Penalty for Officer in Default
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Chapter XX – Winding Up
Section
No.
Penalty for
Company
Short Description of Offence
Penalty for Officer in Default
Punishment Imprisonment
Applicability of
Punishment
Minimum 3
years, Up to 5
years
Any person who has
been an officer of the
company being
wound up
336
Concealment,
misrepresentation and fraud etc.
NIL
Minimum Rs. 1 Lakh; Maximum
Rs. 3 Lakh
337
Inducing to give credit to
company later wound up or
concealing or removing property
NIL
Minimum Rs. 1 Lakh; Maximum Minimum 1 year, Any person who was
an officer at the time
Rs. 3 Lakh
Up to 3 years
338
Not keeping proper books of
account for two years preceding
winding up
NIL
Minimum Rs. 1 Lakh; Maximum Minimum 1 year,
Rs. 3 Lakh
Up to 3 years
339
Fraudulent conduct of business
NIL
Personally liable without any
limitation of liability
As provided
under sec. 447
Any person who is
knowingly a party
342
Failure to give assistance to
liquidator
NIL
Minimum Rs. 25,000; Maximum
Rs. 1 Lakh
NIL
Not Applicable
344
Every invoice or order or
business letter to carry that the
company is being wound up
NIL
Minimum Rs. 50,000; Maximum
Rs. 3 Lakh
NIL
Not Applicable
347
Contravention of order related
to disposal of books etc. of
company wound up
NIL
Up to Rs. 50,000-
Up to 6 months
Any person
resonsible for
contravention
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Officer in default
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Chapter XXIX – Miscellaneous
Section
No.
Short Description of
Offence
Penalty for Company
Penalty for Officer in Default
Applicability of
Punishment
Not less than 6 months
but may be up to 10
years. In case of public
interest, not less than 3
years.
Any person guilty of
fraud
447
Fraud
NIL
449
Giving false evidence
on oath
NIL
Up to Rs. 10 Lakhs
Not less than 3 years,
up to 7 years
Any person
450
Where no specific
punishment provided
in the Act
Maximum Rs. 10,000
+ Rs. 1000 per day of
default
Maximum Rs. 10,000 + Rs.
1000 per day of default
NIL
Not Applicable
451
Repeat offence within
three years
Twice the amount of
fine provided for the
offence
Twice the amount of fine
provided for the offence
As provided for the
offence
As provided in the
relevant section
452
Wrongful holding of
cash or property
NIL
Minimum Rs. 1 Lakh; Maximum
Rs. 5 Lakhs
Up to 2 years
Officer or employee
454
Non-payment of
penalty
Up to 6 months
Officer in default
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Not less than the amount of
fraud but may extend to three
times the amount of fraud
Punishment Imprisonment
Minimum Rs. 25,000; Minimum Rs. 25,000; Maximum
Maximum Rs. 5 Lakhs
Rs. 1 Lakh
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We wish you the best in facing up to the Companies Act, 2013.
Anil Chawla Law Associates LLP
www.indialegalhelp.com
info@indialegalhelp.com
Tel. – 09425009280
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.
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