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

Non-Compliance and Consequences under Companies Act, 2013

Updated 11 October 2026 · Fact-checked

Non-compliance means failing to follow a duty the Companies Act, 2013 imposes. The Act punishes it by penalty (decided by an adjudicating officer), fine, imprisonment, or both. To answer a question, find the provision breached, who is liable, the punishment, and any relief or lesser-penalty rule.

Understand Non-Compliance and Consequences under Companies Act

Non-compliance means a company, an officer or any other person does not do what the Act requires, or does what it forbids. Examples are not constituting a committee, not filing a return, or not following a Tribunal order. The Act attaches a consequence to almost every such failure.

The consequences come in two broad kinds. A penalty is a civil money consequence imposed by an adjudicating officer. A fine or imprisonment is a criminal punishment imposed by a court after prosecution. Each section tells you which applies. The words "shall be liable to a penalty" point to adjudication. The words "shall be punishable with fine" or "with imprisonment" point to a court.

Liability usually falls on two parties: the company and every officer who is in default. For example, under section 178(8), a contravention of section 177 or 178 makes the company punishable with fine of not less than ₹1,00,000 but up to ₹5,00,000. Each officer in default is liable to a penalty of ₹1,00,000.

The Act also adds layers. Section 454A doubles the penalty for a repeat default within three years. Section 446B halves the penalty for small companies, One Person Companies, start-up companies and Producer Companies. Section 439 controls how offences are taken up in court. Always check these layers after finding the base punishment.

For winding up, section 274 shows how serious non-compliance can be. A company that fails to file its statement of affairs forfeits the right to oppose the winding-up petition. The directors and officers responsible face imprisonment up to six months or a fine, or both.

Key rules to remember

Repeated default (Sec 454A): Penalty for repeat default = 2 × penalty provided for that default; Applies if the same person commits such default again within 3 years from the date of the order imposing the earlier penalty by the adjudicating officer or Regional Director.
Lesser penalty (Sec 446B): Penalty ≤ ½ × penalty specified, capped at ₹2,00,000 (company) and ₹1,00,000 (officer in default or other person); Applies to One Person Company, small company, start-up company and Producer Company, where a penalty is payable. The words are 'not more than one-half'.
Adjudication appeal (Sec 454): Appeal to Regional Director within 60 days of receiving the order; The adjudicating officer must give a reasonable opportunity of being heard before imposing any penalty.
Non-compliance with adjudication order (Sec 454(8)): Company: fine ₹25,000 to ₹5,00,000. Officer or other person in default: imprisonment up to 6 months, or fine ₹25,000 to ₹1,00,000, or both; Applies if the order under sub-section (3) or (7) is not complied with within 90 days of receiving its copy.
Offences non-cognizable (Sec 439): Every offence is non-cognizable, except those in Sec 212(6); Court takes cognizance only on written complaint of the Registrar, a shareholder or member, or a person authorised by the Central Government. SEBI-authorised complaints are allowed for issue and transfer of securities and non-payment of dividend.
Statement of affairs (Sec 274): File objections and statement of affairs within 30 days of the Tribunal's order; Tribunal may allow 30 more days; Failure means forfeiting the right to oppose. Officers face imprisonment up to 6 months or fine ₹25,000 to ₹5,00,000, or both.

How to solve Non-Compliance and Consequences under Companies Act questions

Use this order for any case-based question on non-compliance. It matches the provision, analysis, conclusion format.

1Identify the exact provision breached and state what it requires.
2Extract the facts: type of company, who acted, what was not done, dates.
3Decide who is liable: the company, the officer in default, or any other person.
4Find the punishment clause: penalty (adjudication) or fine or imprisonment (court).
5Check modifiers: repeat default within 3 years (Sec 454A), lesser penalty for small company, OPC, start-up or Producer Company (Sec 446B).
6Check the process: hearing, appeal within 60 days, compliance within 90 days, who may file the complaint.
7Check relief such as rectification or compounding, where the facts suggest it.
8Conclude with the amount or punishment and a practical compliance advice.

Quickest way: Four-line answer frame

When to use it: Use when time is short and the question asks 'what are the consequences?'.

Line 1: name the section breached and the default.
Line 2: name who is liable (company and officer in default).
Line 3: state the punishment and whether it is a penalty or a court-imposed fine or imprisonment.
Line 4: apply any modifier (454A, 446B) and give the corrective step.

Common mistakes in Non-Compliance and Consequences under Companies Act

Treating penalty and fine as the same thing.
Both mean money paid, so students use the words loosely.
Fix: Penalty comes through adjudication by an officer of Registrar rank or above. Fine and imprisonment come from a court. Use the section's own wording.
Making only the company liable.
Students focus on the company as the wrongdoer.
Fix: Check the section for 'officer who is in default'. Most provisions name both, as in section 178(8).
Applying Sec 446B as a flat half for everyone.
Students remember 'half' and forget the conditions.
Fix: It applies only to OPCs, small companies, start-up companies and Producer Companies. It says 'not more than one-half', with caps of ₹2,00,000 and ₹1,00,000.
Applying double penalty for any second default after any period.
Students forget the time limit in Sec 454A.
Fix: The repeat must occur within three years from the date of the earlier order, and it must be the same default. Penalty is twice the amount provided.
Forgetting the right to be heard and the appeal route.
Students jump straight to the penalty amount.
Fix: State that a reasonable opportunity of hearing is given and that appeal lies to the Regional Director within 60 days.
Saying any person can file a complaint for an offence.
Students confuse general criminal law with the Act.
Fix: Under Sec 439(2), cognizance is on written complaint of the Registrar, a shareholder or member, or a person authorised by the Central Government.

Worked examples

Example 1

Rohini Textiles Ltd, a listed public company, did not constitute a Nomination and Remuneration Committee. Advise on the consequences for the company and its officers.

Show the solution

Provision: Sec 178(1) requires the Board of every listed public company to constitute the NRC. It must have three or more non-executive directors, at least one-half being independent.
Facts: the company is listed and public, and no committee exists. This is a contravention of section 178.
Liability: under Sec 178(8), the company is punishable with fine of not less than ₹1,00,000 but up to ₹5,00,000.
Each officer in default is liable to a penalty of ₹1,00,000.
Advice: constitute the committee promptly with the required composition and record it in the Board minutes.

Answer: The company faces a fine between ₹1,00,000 and ₹5,00,000. Each officer in default is liable to a penalty of ₹1,00,000. The company should constitute a compliant NRC at once.

Example 2

A small company's officer in default was penalised by the adjudicating officer on 10 March 2025 for a default carrying a penalty of ₹50,000. He committed the same default on 15 January 2027. State the maximum penalty on him and the remedy against the order, assuming he is not covered by any other relief.

Show the solution

Repeat default rule: Sec 454A applies if the same default recurs within three years of the order date.
10 March 2025 plus three years is 10 March 2028. The new default on 15 January 2027 falls within this period.
Base for repeat default: twice ₹50,000 = ₹1,00,000.
Small company rule: Sec 446B limits the penalty to not more than one-half of the penalty specified, capped at ₹1,00,000 for an officer.
Apply the specified penalty as the Act would for the repeat default, which is ₹1,00,000. Half of that is ₹50,000, within the cap.
Remedy: the officer may appeal to the Regional Director within 60 days of receiving the order, after being heard by the adjudicating officer.

Answer: The maximum penalty is ₹50,000, being one-half of the doubled penalty of ₹1,00,000, and within the ₹1,00,000 cap. He may appeal to the Regional Director within 60 days of receiving the order.

Exam tips

Start every answer with the provision breached. The paper rewards provision, analysis, conclusion.
Name both the company and the officer in default, with separate amounts.
Use the exact section wording: penalty, fine, imprisonment. Do not interchange them.
For small companies, OPCs, start-ups or Producer Companies, always test Sec 446B.
Show date arithmetic for three-year or 60-day and 90-day periods.

Practice questions from Non-Compliances, Penalties and Adjudications

Non-Compliance and Consequences under Companies Act in other exams

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

Non-Compliance and Consequences under Companies Act: frequently asked questions

What is an officer in default?

It is the person the Act makes answerable when a company breaches a provision. Section 178(8) shows how the Act names such officers for liability. In an answer, identify who was responsible for the failure and apply the punishment to that person.

What is the difference between a penalty and a fine?

A penalty is imposed by an adjudicating officer after a hearing. A fine or imprisonment is imposed by a court on prosecution. The punishment clause of each section tells you which applies.

Can a penalty be doubled?

Yes. Under Sec 454A, if a person already penalised commits the same default again within three years from the date of the order, the penalty is twice the amount provided. The period runs from the order of the adjudicating officer or Regional Director.

Who can file a complaint for an offence under the Act?

Under Sec 439(2), the court takes cognizance on the written complaint of the Registrar, a shareholder or member, or a person authorised by the Central Government. SEBI-authorised persons may complain on issue and transfer of securities and non-payment of dividend.