MCA Imposes ₹11.1 Lakh Penalty on a Company for Non-Filing of MGT-14

The Ministry of Corporate Affairs (MCA) has recently imposed a penalty of ₹11,11,000 on a Nidhi company and its directors for failing to file Form MGT-14 for multiple financial years. This violation of the Companies Act, 2013 highlights the importance of timely compliance and serves as a warning to all businesses to avoid such penalties.

What Happened?

A Nidhi company, incorporated with an authorised capital of ₹15 lakh, failed to file Form MGT-14 to record board resolutions approving financial statements for four consecutive financial years (2017-18 to 2020-21).

This failure violated Section 117(1) read with Section 179(3)(g) of the Companies Act, 2013, which mandates companies to file certain board resolutions, including financial statement approvals, within 30 days of passing them.

Legal Requirement: What is Form MGT-14?

Form MGT-14 is a critical compliance requirement under the Companies Act, 2013. It mandates companies to file a copy of certain board resolutions and agreements with the Registrar of Companies (ROC) within 30 days of their passing. These include resolutions related to:

• Approval of financial statements.
• Alteration of the company’s capital structure.
• Appointment or remuneration of key managerial personnel.
• Other significant decisions as outlined in Section 117(1) read with Section 179(3)(g) of the Companies Act.

Failure to comply with this requirement results in penalties under Section 117(2) of the Act.

Consequences of Non-Compliance

Since the Nidhi company did not file the required MGT-14 forms, the Registrar of Companies (ROC), Kanpur, initiated an inquiry and took the following steps:

Key Events:

• Non-Filing Identified: ROC Kanpur discovered the company’s failure to file Form MGT-14 for financial statement approvals.
• Show Cause Notice Issued: On April 25, 2024, ROC issued a Show Cause Notice to the company and its directors.
• No Response Received: The company and its representatives failed to respond or appear for a hearing.
• Penalty Imposed: As a result, the ROC imposed penalties as follows:
  • ₹2,00,000 on the company for each financial year.
  • ₹50,000 on each director for each financial year.

This led to a total penalty of ₹11,11,000, which must be paid via Demand Draft in favor of the ‘Pay & Accounts Officer, Ministry of Corporate Affairs, New Delhi’ within 90 days of the order.

Breakdown of Penalties

The penalties were capped as per Section 117(2) of the Companies Act despite the prolonged default.

Legal Framework for Penalties

• Section 117(1): Companies must file resolutions or agreements related to specific matters with the ROC within 30 days.
• Section 117(2): 
  • Company Penalty: ₹10,000 plus an additional ₹100 per day for continuing failure (capped at ₹2 lakh).
  • Officer Penalty: ₹10,000 plus an additional ₹100 per day for continuing failure (capped at ₹50,000).
• Section 179(3)(g): Approvals of financial statements by the board require filing under Section 117.

What Happens If the Penalty is Not Paid?

Failure to pay the penalty within 90 days may result in further legal action under Section 454(8) of the Companies Act, 2013, leading to additional fines and prosecution of the company and its directors.

Next Steps for the Company

The company and its directors can appeal within 60 days by filing Form ADJ before the Regional Director (Northern Region), MCA, New Delhi, along with a certified copy of the adjudication order.

Lessons for Businesses: Why Companies Should File MGT-14 on Time

This case is a clear reminder for Nidhi companies to stay compliant and file MGT-14 within 30 days of passing board resolutions on key matters. The repercussions of non-compliance can be severe, including hefty penalties and legal consequences.

• Timely Compliance is Crucial: Filing forms like MGT-14 within stipulated deadlines is not optional but mandatory under Indian corporate law.
• Penalties Can Accumulate: Delays in compliance lead to significant financial penalties that can strain a company's resources.
• Accountability Matters: Directors and officers are personally liable for non-compliance. This reinforces their responsibility toward ensuring adherence to legal requirements.
• Proactive Governance: Companies must establish robust compliance monitoring systems to avoid inadvertent lapses.

Also read: MCA Imposes ₹3.50 Lakh Penalty for AOC-4 Non-Compliance

How to Avoid Costly Compliance Mistakes

• Maintain a Compliance Calendar: Track deadlines for all statutory filings, including MGT-14.
• Monitor Board Resolutions: Ensure that key decisions, especially financial approvals, are properly recorded and filed.
• Seek expert guidance – If unsure about compliance requirements, consult with  IndiaFilings experts to avoid penalties.

Need Help Filing MGT-14? Contact IndiFilings Today!

The penalty imposed on this Nidhi Limited is a stark reminder that non-compliance with statutory obligations can have severe repercussions. Businesses must prioritise adherence to legal requirements such as filing Form MGT-14 promptly. 

Don’t risk penalties and legal trouble! IndiFilings provides expert assistance in filing Form MGT-14 and ensuring complete Company compliance with the Companies Act, 2013. Our professionals handle all documentation and submissions, so you remain stress-free.

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