valid as on 19/02/2019

29.1.3- Companies (Adjudication of Penalties) Rules, 2014

( I ) The Central Government may appoint any of its officers, not below the rank of Registrar, as adjudicating officers for adjudging penalty under the provisions of the Act.

(2) Before adjudging penalty, the adjudicating officer shall issue a written notice in the specified manner, to the company, the officer who is in default or any other person, as the case may be, to show cause, within such period as may be specified in the notice (not being less than fifteen days and more than thirty days from the date of service thereon), why the penalty should not be imposed on it or him.

(3) Every notice issued under sub-rule (2). shall clearly indicate the nature of non -compliance or default under the Act alleged to have been committed or made by such company officer in default, or any, other person, as the case may be and also draw attention to the relevant penal provisions of the Act and the maximum penalty which can be imposed on the company, and each of the officers in default, or the other person.

(4) The reply to search notice shall be filed in electronic mode only within the period as specified in the notice:

Provided that the adjudicating officer may, for reasons to be recorded in writing, extend the period referred to above by a further period not exceeding fifteen days, if the company or officer in default or any person as the case may be, satisfies the adjudicating officer that it or he has sufficient cause for not responding to the notice within the stipulated period or the adjudicating officer has reason to believe that the company or the officer or the person has received a shorter notice and did not have reasonable time to give reply.

(5) If, after considering the reply submitted by such company, its officer. or any other person, as the case may be, the adjudicating officer is of the opinion that physical appearance is required, he shall issue a notice, within a period of ten working days from the date of receipt of reply fixing a date for the appearance of such company, through its authorised representative, or officer of such company, or any other person, whether personally or through his authorised representative:

Provided that if any person, to whom a notice is issued under sub-rule (2), desires to make an oral representation, whether personally or through his authorised representative and has indicated the same while submitting his reply in electronic mode, the adjudicating officer shall allow such person to make such representation after fixing a date of appearance.

(6) on the date fixed for hearing and aricr giving a reiuonable opportunity of heing heard to rhe
person concerned’ the ad.ludicating officer rnay, subject to reasons to be recorded in rvriting. pass
any order in writing as he thinks fit including an orcler fbr acli.urnr.e’t:
Provided 1l.rat afler hearing, adjudicating ollicer may requile the concerned person to submit his
lepl-v in rvriting on cedain other issues r.claled to the notice under sub_nrle (2). relevant lbr
delemrination of the default.
(7) The ad.iudicating ol’licer shall pass an or<jer.-
(a) *ithin thirty da1.s ofthe expiry ofthe period ref’err.ed in sub_rule (2) or ofsuch extended period
as referred therein. w.here physical appearance was not required under sub_rule (5);

(b) within ninety days ofthe date ofissue ofnotice under sub-rule (2). whcre any person appeared
before the adjudicating officer under sub-rule (5):
Provided that in case an order is passed after the afbrementionec{ duration. the reasons ofthe delay
shall be recorded by the adjudicating officer and no such order shall be invalid merely because of
its passing after the expiry olsuch thirty days or nine,ty days as the case may be.
(8) Every order ofthe adjudicating officer shall be duly dated and signecl by him and shall clearly
state the reasons lbr requiring the physical appearance under sub-rule (5).
(9) ‘l’he adjudicating otlicer shall send a copy of the order passecl by him to the concemeo
company, officer who is in default or anv other person or all ollthern and to the Central Governmenr
and a copy oflhe order shall also be uploaded on the website.
(10) For the purposes of this rule, the adjudicating ollicer shall exercise the followilg powers,
namely:-
(a) to surnmon and enforce the attendance ol’any person acquainted with the facts and
circumstances of the ca.se after recording reasons in writing;
(b) to order for evidence or to produce any document, which in the opinion of the adjudicating
oflicer. may be lelevant to the sub.ject malter.
(l l) Ifany person fails to reply or neglecls or refuses to appear as required under sub-rule (5) or
sub-rule (10; before the adjudicating officer, the adjudicating officer may pass an order imposing
the penalty. in the absence ofsuch person aRer recording the reasons lbr <ioing so.
(12)while adjudging quantwn of penalty, the adjudicating officer shall have due regard to :he
lbllowing factors, namely:-
(a) size of1he contpanyl
(b) naturc ofbusiness carried on by the company;
(c) injury to public interest;
(d) nature ofthe default;
(e) repetition of the dcfault;

(1-) the amount ofdisproportionate gain or unf’air advantage, wherever quantifiable, made as a result
ofthe deflult: and
(g) the amourt of loss caused to an investor or group ol inveslors or creditors as a result of the
default:
Provided that, in no case, the penalty imposed sha.ll be less than the minimurn penalty prescribed,
ifany, under the relevant section ofthe Act.
(1 3) In case a fixed sum of penalty is provided .[or dcfault oli a provision, the adjudicating olificer
shall impose thal lixed srun, il case ol’any delbult therein.
(14) Penalty shall be paid through Ministry of Corporate Affairs portal only.
(15) All sums realised by way ofpenalties under the Act shall be credited to the Consolidated Fund
of India.
Explanation L- For xhe purposes of this rule, the lerm “specified manner” shall mean service of
documents as specifiecl under section 20 ofthe Act and rules made thereunder and details in respect
ofaddress (including electronic mail ID) provided in the KYC documents filed in the registry shall
be used for communication under this rule.
Explanation 2.- For tlre purposes of this rule, it is hereby clarifred that the requirement of
submission of replies in electronic mode shall become mandatory after the creation of the eadiudication
platlbrm

(1) The Central Government may appoint any of its officers, not below the rank of Registrar, as adjudicating officers for adjudging penalty under the provisions of the Act.

(2) Before adjudging penalty, the adjudicating officer shall issue a written notice to the company and to every officer of the company who is in default, to show cause, within such period as may be specified in the notice (not being less than fifteen days and more than forty five days from the date of service thereon), why the inquiry should not
be held against him:

Provided that every notice issued under this sub-rule, shall clearly indicate the nature
of non-compliance or default under the Act alleged to have been committed or made
by such company and officer in default, as the case may be:

Provided further that the adjudicating officer may, for reasons to be recorded in writing, extend the period referred to above by a further period not exceeding fifteen days, if the company or officer (as applicable) satisfies the said officer that it has sufficient cause for not responding to the notice within the stipulated period.

(3) If, after considering the cause, if any, shown by such company or officer, the adjudicating officer is of the opinion that an inquiry should be held, he shall issue a notice fixing a date for the appearance of such company, through its authorised representative, or officer of such company whether personally or through his
authorised representative

(4) On the date fixed for hearing and after giving a reasonable opportunity of being heard to the person(s) concerned, the adjudicating officer may, subject to reasons to be recorded in writing, pass any order as he thinks fit including an order for adjournment of the hearing to a future date.

(5) Every order passed under sub-rule (4), shall be dated and signed by the adjudicating officer.

(6) The adjudicating officer shall send a copy of the order passed by it to the concerned company or officer who is in default and to the Central Government.

(7) While holding an inquiry, the adjudicating officer shall have the following powers, namely:-
(a) to summon and enforce the attendance of any person acquainted with the facts and circumstances of the case;
(b) to order for evidence or to produce any document, which in the opinion of the adjudicating officer, may be useful for or relevant to the subject matter of the inquiry.

(8) If any person fails, neglects or refuses to appear as required under sub-rule (7) before the adjudicating officer, the adjudicating officer may proceed with the inquiry in the absence of such person after recording the reasons for doing so.

(9) While adjudging quantum of penalty, the adjudicating officer shall have due regard
to the following factors, namely:-

(a) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made as a result of the default;
(b) the amount of loss caused to an investor or group of investors or creditors as a result of the default;
(c) the repetitive nature of the default.

(10) All sums realised by way of penalties under the Act shall be credited to the Consolidated Fund of India.

Substituted vide the Companies (Adjudication of Penalties) Amendment Rules, 2019 dated 19.02.2019. To view the Notification, Click Here.

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