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Environmental, Social and Governance (ESG) - Principles and Practice · Board Disclosures and Website Disclosures

Penalties for Non-Compliance with Section 134 of the Companies Act

Updated 11 October 2026 · Fact-checked

Under Section 134(8), if a company defaults in complying with Section 134 (financial statement approval, Board's report, signing and circulation), the company is liable to a penalty of ₹3,00,000 and every officer in default to a penalty of ₹50,000. The penalty is imposed by an adjudicating officer under Section 454, and reduced for small companies by Section 446B.

Understand Penalties for Non-Compliance with Section 134

Section 134 sets out how the financial statement is approved and signed, what the Board's report must contain, who signs the report, and what must be circulated along with the financial statement. Section 134(8) is the penalty clause for breaking any of these rules.

Note the nature of the consequence. After the substitution made by Act 29 of 2020 (w.e.f. 21-12-2020), the default under Section 134(8) is a penalty, not a criminal offence with imprisonment. Earlier the sub-section carried fine and imprisonment. Now it is a monetary penalty on two parties: the company and every officer of the company who is in default.

The penalty is not imposed automatically. Under Section 454, the Central Government appoints adjudicating officers (not below the rank of Registrar). The adjudicating officer gives a reasonable opportunity of being heard, then passes an order imposing the penalty and may direct the company or officer to rectify the default. The order must state the non-compliance and the provisions concerned.

If you are aggrieved, you can appeal to the Regional Director within 60 days of receiving the order. The Regional Director may confirm, modify or set aside the order. Imprisonment can still arise, but only at a later stage: if the order is not complied with within 90 days of receipt, Section 454(8) applies. The company is then punishable with fine of ₹25,000 to ₹5,00,000. The officer in default is punishable with imprisonment up to six months, or fine of ₹25,000 to ₹1,00,000, or both.

Section 446B softens the amount for One Person Companies, small companies, start-up companies and Producer Companies. Their penalty cannot exceed one-half of the penalty stated in the provision, subject to a ceiling of ₹2,00,000 for the company and ₹1,00,000 for an officer in default or other person.

Key rules to remember

Penalty under Section 134(8)
Company: ₹3,00,000. Every officer in default: ₹50,000
Applies to any default in complying with Section 134, including approval, signing, Board's report contents and circulation.
Reduced penalty under Section 446B
Lower of (½ × penalty specified) and the cap: company ≤ ₹2,00,000; officer in default or other person ≤ ₹1,00,000
Applies to One Person Company, small company, start-up company and Producer Company. For Section 134(8): company ₹1,50,000, officer ₹25,000.
Adjudication under Section 454
Adjudicating officer (not below Registrar) → order after hearing → appeal to Regional Director within 60 days
The adjudicating officer may also direct rectification of the default.
Non-compliance with the order (Section 454(8))
Not complied within 90 days of receipt: Company fine ₹25,000 to ₹5,00,000. Officer: imprisonment up to 6 months or fine ₹25,000 to ₹1,00,000, or both
This is the stage at which imprisonment can arise.
Who signs the Board's report (Section 134(6))
Chairperson if authorised by the Board; otherwise at least two directors, one being managing director; or the sole director
Wrong signatory is a default that attracts Section 134(8).

How to solve Penalties for Non-Compliance with Section 134 questions

Use the same sequence for any question on penalties under Section 134. It follows the paper's pattern of provision, analysis of facts, conclusion.

  1. 1Identify the exact default from the facts: financial statement not approved by the Board, wrong signatories, missing auditor's report, a mandatory item missing from the Board's report, wrong signature on the report, or circulation without the required documents.
  2. 2Link it to the relevant sub-section of Section 134, such as (1), (2), (3), (5), (6) or (7).
  3. 3State the penalty clause: Section 134(8) gives ₹3,00,000 on the company and ₹50,000 on every officer in default.
  4. 4Check the type of company. If it is a One Person Company, small company, start-up company or Producer Company, apply Section 446B: half the penalty, within the caps.
  5. 5Identify who is an officer in default on the facts, and say only those persons are liable.
  6. 6Explain the process: adjudicating officer under Section 454, hearing, order, rectification direction, appeal to the Regional Director within 60 days.
  7. 7Add the consequence of ignoring the order: Section 454(8) fine, and for the officer possible imprisonment, after 90 days.
  8. 8Conclude with the amount payable by each party and a practical compliance point.

Quickest way: Four-line penalty answer

When to use it: When you have little time or the question is a short note on the penalty for default under Section 134.

  1. Line 1: Section 134(8) penalty is ₹3,00,000 on the company and ₹50,000 on each officer in default.
  2. Line 2: Small company, OPC, start-up company or Producer Company: half, i.e. ₹1,50,000 and ₹25,000, under Section 446B.
  3. Line 3: Imposed by adjudicating officer under Section 454 after hearing; appeal to Regional Director within 60 days.
  4. Line 4: No compliance with the order within 90 days: company fine ₹25,000 to ₹5,00,000; officer up to 6 months imprisonment or fine ₹25,000 to ₹1,00,000, or both.

Common mistakes in Penalties for Non-Compliance with Section 134

  • Stating that Section 134(8) carries imprisonment for the officer in default.

    Students remember the older version or confuse it with Section 454(8).

    Fix: Say Section 134(8) is a monetary penalty. Imprisonment arises only under Section 454(8) for failing to comply with the order for 90 days.

  • Writing the penalty as a fine range such as ₹50,000 to ₹25,00,000.

    Mixing up Section 134 with other provisions or older text.

    Fix: Remember the fixed amounts: ₹3,00,000 for the company and ₹50,000 for every officer in default.

  • Applying Section 446B to every company.

    Students recall 'lesser penalty' without checking who qualifies.

    Fix: Apply it only to One Person Company, small company, start-up company or Producer Company. Other companies pay the full amount.

  • Making all directors liable by default.

    Students ignore the phrase 'officer who is in default'.

    Fix: Identify from the facts who was responsible, for example the signatories who failed to sign or the persons who failed to approve. Name them and explain why.

  • Saying the Tribunal or court imposes the penalty directly, or forgetting the appeal.

    The adjudication route under Section 454 is skipped.

    Fix: State that the adjudicating officer imposes the penalty after a hearing, and that the appeal lies to the Regional Director within 60 days of receipt of the order.

  • Forgetting that the adjudicating officer can also direct rectification.

    Students focus only on the money.

    Fix: Add that under Section 454(3)(b) the officer may direct the company or officer in default to rectify the default where he considers fit.

Worked examples

Example 1

The Board's report of Kaveri Textiles Limited, a public company that is not a small company, omitted the Directors' Responsibility Statement. The report was signed by the Chairman, who had not been authorised by the Board. The managing director and the company secretary are the officers responsible. Advise on the consequences.

Show the solution
  1. Provision: Section 134(3)(c) requires the Board's report to include the Directors' Responsibility Statement. Section 134(6) requires the report to be signed by the chairperson only if authorised by the Board; otherwise by at least two directors, one being the managing director.
  2. Facts: The statement is missing, and the signature is by an unauthorised chairperson. Both are defaults under Section 134.
  3. Penalty: Section 134(8) applies. The company is liable to a penalty of ₹3,00,000. Every officer in default is liable to ₹50,000.
  4. Section 446B does not apply, since the company is not a OPC, small company, start-up company or Producer Company.
  5. Process: The adjudicating officer under Section 454 will give a hearing and may order the penalty and direct rectification. Appeal lies to the Regional Director within 60 days.
  6. Practical point: The Board should adopt a corrected report with the statement and signatures from the proper signatories.

Answer: Kaveri Textiles Limited is liable to a penalty of ₹3,00,000 and each officer in default to ₹50,000 under Section 134(8), imposed by an adjudicating officer under Section 454, with a direction to rectify and a right of appeal to the Regional Director within 60 days.

Example 2

Aarav Tech Private Limited is a small company. The adjudicating officer finds that its financial statement was not circulated with the auditor's report and Board's report. Two directors are held to be officers in default. Compute the maximum penalty under Section 134(8) read with Section 446B. The directors do not comply with the order for 120 days. What follows?

Show the solution
  1. Provision: Section 134(7) requires a signed copy of the financial statement to be issued, circulated or published with the notes, the auditor's report and the Board's report. Breach attracts Section 134(8).
  2. Normal penalty: company ₹3,00,000; each officer ₹50,000.
  3. Section 446B for a small company: not more than one-half of the penalty, subject to a maximum of ₹2,00,000 for the company and ₹1,00,000 for an officer.
  4. Company: half of ₹3,00,000 = ₹1,50,000, which is below ₹2,00,000. So ₹1,50,000.
  5. Each officer: half of ₹50,000 = ₹25,000, which is below ₹1,00,000. So ₹25,000 each. Two officers: ₹50,000 in total.
  6. Non-compliance with the order for more than 90 days brings Section 454(8). The company faces a fine of ₹25,000 to ₹5,00,000. Each defaulting officer faces imprisonment up to six months, or fine of ₹25,000 to ₹1,00,000, or both.

Answer: The maximum penalty is ₹1,50,000 on the company and ₹25,000 on each of the two officers (₹50,000 in total). Not complying with the order for 120 days exposes the company to a fine under Section 454(8), and the officers to imprisonment up to six months or fine, or both.

Exam tips

  • Write the section number with the amount: Section 134(8), ₹3,00,000 and ₹50,000. Examiners look for the exact figures.
  • Always check the company type in the facts. A mention of small company, OPC, start-up or Producer Company is a signal to apply Section 446B.
  • Show the full route: default, adjudicating officer under Section 454, hearing, order, appeal to Regional Director within 60 days, then Section 454(8).
  • Name the persons in default from the facts rather than writing 'directors' generally.
  • End with a practical drafting or compliance point, such as a checklist for Board approval, signatures and circulation.

Practice questions from Board Disclosures and Website Disclosures

Penalties for Non-Compliance with Section 134 in other exams

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

Penalties for Non-Compliance with Section 134: frequently asked questions

What is the penalty under Section 134(8) of the Companies Act, 2013?

The company is liable to a penalty of ₹3,00,000 and every officer in default to a penalty of ₹50,000. This applies to any default in complying with Section 134.

Is there imprisonment for a defective Board's report?

Not directly under Section 134(8), which provides only a monetary penalty. Imprisonment of up to six months can arise for an officer in default under Section 454(8) if the adjudicating officer's or Regional Director's order is not complied with within 90 days.

Do small companies pay a lower penalty under Section 134?

Yes. Section 446B limits the penalty for a One Person Company, small company, start-up company or Producer Company to half the stated amount, subject to caps of ₹2,00,000 for the company and ₹1,00,000 for an officer. For Section 134(8) that works out to ₹1,50,000 and ₹25,000.

Who decides the penalty and where can I appeal?

An adjudicating officer appointed under Section 454 decides it after giving a reasonable opportunity of being heard. An appeal lies to the Regional Director within 60 days from receipt of the order.