Compliance Management, Audit and Due Diligence · Non-Compliances, Penalties and Adjudications

Adjudication of Penalties under Section 454 Companies Act

Updated 11 October 2026 · Fact-checked

Adjudication of penalties is the process by which an adjudicating officer, appointed by the Central Government under section 454, hears a company or person and imposes a civil penalty for a default. The officer may also direct rectification. You solve questions by applying notice, hearing, order, appeal and compliance in sequence.

Understand Adjudication of Penalties

Many defaults under the Companies Act, 2013 carry a money penalty, not a prison term. Someone must decide whether the default happened and how much to impose. Section 454 gives this job to an adjudicating officer instead of a court.

The Central Government appoints these officers by an order published in the Official Gazette. Each must be an officer of the Central Government not below the rank of Registrar. The order must also specify the jurisdiction of each officer.

The officer may impose the penalty on the company, the officer in default, or any other person, and must state the non-compliance or default in the order. The officer may also direct the company, officer or person to rectify the default, wherever he considers fit. Before imposing any penalty, the officer must give a reasonable opportunity of being heard. This is natural justice: an order without a hearing is open to challenge.

If you are aggrieved by the order, you can appeal to the Regional Director having jurisdiction. The Regional Director may confirm, modify or set aside the order after hearing the parties. Non-payment or non-compliance has its own consequences, and repeat defaults within three years attract double penalty under section 454A.

The manner of adjudication is prescribed in rules made under the Act. For the exam, focus on the section text: who adjudicates, the hearing, the appeal, the time limits and the consequences of ignoring the order.

Key rules to remember

Appointment of adjudicating officers (s.454(1)-(2)): Central Government order in Official Gazette; officers not below rank of Registrar; jurisdiction specified; Appointment is by the Central Government, not by the Tribunal or the Registrar of Companies on its own.
Powers of adjudicating officer (s.454(3)): Impose penalty on company, officer in default or any other person + direct rectification where he considers fit; The order must state the non-compliance or default.
Proviso for s.92(4) and s.137(1)/(2) defaults: Default rectified before, or within 30 days of, issue of notice → no penalty; proceedings deemed concluded; Applies only to annual return filing (s.92(4)) and financial statement filing (s.137(1) or (2)) defaults.
Hearing (s.454(4)): Reasonable opportunity of being heard before imposing any penalty; Must be given to the company, the officer in default or any other person concerned.
Appeal (s.454(5)-(7)): Appeal to Regional Director within 60 days from receipt of copy of order; Regional Director may confirm, modify or set aside after hearing the parties.
Non-compliance with order (s.454(8)): Company: fine ₹25,000 to ₹5,00,000. Officer or other person: imprisonment up to 6 months or fine ₹25,000 to ₹1,00,000, or both; Applies if the order under (3) or (7) is not complied with within 90 days of receipt of the copy.
Repeated default (s.454A): Same default again within 3 years of the order → twice the penalty; The three years run from the date of the order of the adjudicating officer or Regional Director.

How to solve Adjudication of Penalties questions

Use this sequence for any case-based question on adjudication. Tie each step to the facts given.

1Identify the default and the section breached, and whether the consequence is a penalty (adjudicable) or an offence needing prosecution.
2Check the proviso: if the default is under s.92(4) or s.137(1)/(2), see whether it was rectified before or within 30 days of the notice.
3State who adjudicates: an adjudicating officer appointed under s.454(1), not below Registrar rank, acting within the specified jurisdiction.
4Check procedure: notice and a reasonable opportunity of being heard under s.454(4) before any penalty.
5State the officer's powers: penalty on the company, officer in default or other person, and a direction to rectify.
6Advise on appeal: to the Regional Director within 60 days of receiving the order's copy, in the prescribed form, manner and fee.
7State the consequence of non-compliance within 90 days under s.454(8), and check s.454A for a repeat default within 3 years.
8Conclude clearly with the practical advice: rectify, reply to notice, appear, or appeal.

Quickest way: Notice-Hearing-Order-Appeal-90 days check

When to use it: Use when time is short and the question gives a short fact pattern about a penalty order or notice.

Write the section: s.454 adjudication, with s.454A if a repeat default.
Write one line on the adjudicating officer: appointed by the Central Government, not below Registrar.
Test for hearing and, for s.92(4) or s.137, the 30-day rectification proviso.
Give the remedy: appeal to Regional Director within 60 days.
Close with the 90-day consequence and the doubled penalty for a repeat within 3 years.

Common mistakes in Adjudication of Penalties

Saying the appeal lies to the NCLT
Students link all Companies Act appeals with the Tribunal.
Fix: Under s.454(5), the appeal against an adjudicating officer's order goes to the Regional Director.
Writing the appeal period as 30 days or 90 days
Numbers from s.454(8) and the proviso get mixed up.
Fix: Remember: appeal 60 days; no-penalty rectification window 30 days from notice; compliance with order 90 days.
Applying the 30-day rectification proviso to every default
Students generalise a relief meant for two specific defaults.
Fix: It covers only s.92(4) and s.137(1) or (2) defaults. For others, penalty can still be imposed.
Ignoring the hearing requirement
Students focus on the penalty amount rather than procedure.
Fix: Always state that the officer must give reasonable opportunity of being heard before imposing any penalty. Lack of it is a ground for appeal.
Treating the adjudicating officer as only a penalty-imposer
Section 454(3)(b) is overlooked.
Fix: Mention that the officer can also direct rectification of the default wherever he considers fit.
Forgetting section 454A on repeated default
It is a separate section, so students don't link it.
Fix: Add that a repeat default within 3 years of the order attracts twice the penalty.

Worked examples

Example 1

Meera Textiles Limited failed to file its annual return as required by section 92(4). The Registrar issued a notice from the adjudicating officer on 1 March. The company filed the return on 15 March with the prescribed fee. Can the adjudicating officer still impose a penalty?

Show the solution

Provision: the proviso to s.454(3) says that for a default under s.92(4) or s.137(1)/(2), if rectified before or within 30 days of the notice issued by the adjudicating officer, no penalty is imposed.
Facts: the default is under s.92(4), which is covered. Rectification was on 15 March, 14 days after the notice of 1 March, so within 30 days.
Effect: all proceedings under s.454 in respect of the default are deemed concluded.
Conclusion: no penalty can be imposed.

Answer: No. The default relates to s.92(4) and was rectified within 30 days of the notice, so no penalty is imposed and the proceedings are deemed concluded.

Example 2

An adjudicating officer imposed a penalty on Kaveri Foods Limited and its director Mr. Rao for a default. The order was received on 10 April. The company thinks the order was passed without hearing it. Advise on the remedy and the risk of inaction.

Show the solution

Provision: s.454(4) requires the officer to give a reasonable opportunity of being heard before imposing any penalty. An order passed without hearing is open to challenge.
Remedy: s.454(5) lets an aggrieved person appeal to the Regional Director having jurisdiction.
Time limit: s.454(6) requires the appeal within 60 days from the date the copy of the order is received, in the prescribed form and manner with the prescribed fee. Receipt was on 10 April, so the appeal must be filed within 60 days of that date.
Powers of the appellate authority: after hearing the parties, the Regional Director may confirm, modify or set aside the order.
Risk of inaction: if the company does not comply with the order within 90 days of receiving the copy, it is punishable with fine of not less than ₹25,000 and up to ₹5,00,000 under s.454(8)(i). Mr. Rao, if he fails to comply, is punishable with imprisonment up to 6 months or fine of ₹25,000 to ₹1,00,000, or both.
Conclusion: file the appeal within 60 days, and comply with the order unless it is set aside or modified.

Answer: The company and Mr. Rao can appeal to the Regional Director within 60 days of receiving the order, citing the lack of hearing. If they do not comply with the order within 90 days, the fine and imprisonment consequences of s.454(8) apply.

Exam tips

Quote section numbers for the points you are sure of: 454(1) appointment, 454(3) powers, 454(4) hearing, 454(5) appeal, 454(8) non-compliance, 454A repeat default.
Keep the three numbers separate in your answer: 60 days, 30 days and 90 days, and say what each one measures.
In case questions, write the sequence provision, facts, conclusion. End with a practical step such as filing the appeal or rectifying the default.
State the penalty ranges in s.454(8) in rupees and mention both the company and the officer limbs.
If the facts show a default repeated within three years, add the doubled penalty under s.454A.

Practice questions from Non-Compliances, Penalties and Adjudications

Adjudication of Penalties in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Adjudication of Penalties: frequently asked questions

Who is the adjudicating officer under section 454?

It is an officer of the Central Government, not below the rank of Registrar, appointed by an order published in the Official Gazette. The order also specifies the officer's jurisdiction.

Where do I appeal against an adjudicating officer's order?

You appeal to the Regional Director having jurisdiction in the matter. The appeal must be filed within 60 days from receipt of the copy of the order, in the prescribed form and manner with the prescribed fee.

What can the Regional Director do on appeal?

After giving the parties an opportunity of being heard, the Regional Director may confirm, modify or set aside the order appealed against.

What happens if the order is not complied with?

If the company does not comply within 90 days of receiving the copy of the order, it is punishable with fine of ₹25,000 to ₹5,00,000. An officer or other person in default faces imprisonment up to 6 months or fine of ₹25,000 to ₹1,00,000, or both.