RoC Imposed Hefty Penalty On Company And Directors For Failure To Mention DIN On Financial Statement Of The Companies

In the matter of Unionbase Nidhi Limited 

By Office of Registrar of the Company, Uttar Pradesh

M/s Unionbase Nidhi Limited (“The Company”) is having registered office in the state of Uttar Pradesh with authorised share capital of INR 1,00,000/-. During verification, it was observed that in the Financial statements of the company for 2016-17, 2017-18, and 2018-19, the directors did not mention DIN under their signatures. Therefore, the company and its directors have failed to comply with provisions of Section 158 of the Companies Act and therefore, they are liable to penal action.

The RoC imposed a penalty of INR 18,00,000/- (INR 6,00,000/- per year) on company directors for failure to mention DIN on Financial statements.

1. Brief facts of the case:

• M/s Unionbase Nidhi Limited (“The Company”) is having registered office in the state of Uttar Pradesh with authorised share capital of INR 1,00,000/-.
• During verification, it was observed that in the Financial statements of the company for 2016-17, 2017-18, and 2018-19, the directors did not mention DIN under their signatures.
• Therefore, the company and its directors have failed to comply with provisions of Section 158 of the Companies Act and therefore, they are liable to penal action.
• Accordingly, a show cause notice was issued to the company and its officers in default.
• However, the company and its officers in default have failed to furnish a reply to such show cause notice.

Read Also: Document Identification Number (“DIN”) to be quoted on all communications from CBIC

2. Relevant Legal Extract

The relevant legal extract of the Companies Act, 2013 is reiterated below for ready reference:

1. Section 158

“158. Obligation to indicate Director Identification Number

Every person or company, while furnishing any return, information, or particulars as are required to be furnished under this Act, shall mention the Director Identification Number in such return, information, or particulars in case such return, information, or particulars relate to the director or contain any reference of any director.”

2. Section 172

“172. Penalty

“If a company is in default in complying with any of the provisions of this Chapter and for which no specific penalty or punishment is provided therein, the company and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees, and in case of continuing failure, with a further penalty of five hundred rupees for each day during which such failure continues, subject to a maximum of three lakh rupees in case of a company and one lakh rupees in case of an officer who is in default.”]

3. Analysis and penalty imposed by the Hon’ble Registrar of the Company

The Jurisdictional RoC held that:

• Neither the company nor any of its directors have presented which further strengthened the apprehension that the company and its directors have failed to comply with provisions of Section 158 of the Companies Act, 2013.
• The Date of default in the matter shall be the date of signing of the financial statement and the default has been continuing since the date.
• Accordingly,the  following amount of penalty is imposed:

1. Failure to mention DIN in the Financial Statement 2017-18:

2. Failure to mention DIN in the Financial Statement 2018-19

3. Failure to mention DIN in the Financial Statement 2019-20

Conclusion

RoC is getting strict with Company law compliances and heavy penalties are imposed on the Companies, Directors, and auditors for even nominal mistakes. The Companies are required to comply with Company law provisions precisely without leaving any scope for every clerical mistake.