Sections 405 and 406 of the Companies Act 2013: Information, Statistics and Nidhis
Sections 405 and 406 deal with two distinct subjects. Section 405 empowers the Central Government to require companies to furnish specified information or statistics and to verify that information. Section 406 provides the statutory framework for Nidhis or Mutual Benefit Societies and permits specified provisions of the Companies Act, 2013 to be applied to them with notified exceptions, modifications or adaptations.
Updated: 17 September 2026
Section 405: Government power to call for information or statistics from companies, require records or further information for verification, and impose monetary penalties for non-compliance.
Section 406: Definition and statutory treatment of Nidhis or Mutual Benefit Societies, including the Central Government's power to modify the application of specified provisions of the Act through notification.
Section 405: Power of Central Government to direct companies to furnish information or statistics
Section 405 authorises the Central Government, by order, to require companies generally, a class of companies, or an individual company to furnish information or statistics concerning their constitution or working within the time specified in the order.
Publication and effective date of the requirement
An order made under Section 405(1) is required to be published in the Official Gazette. Where the order is addressed generally to companies or to a class of companies, the date of publication is treated as the date on which the requirement is made.
Verification of information
For checking whether information or statistics supplied under Section 405 are correct and complete, the Central Government may require the company to produce records or documents, permit inspection by an authorised officer, or furnish further information considered necessary.
Penalty for failure or materially incorrect information
Section 405(4), as substituted by the Companies (Amendment) Act, 2020 with effect from 21 December 2020, provides a civil penalty where a company fails to comply with an order under sub-section (1) or (3), or furnishes information or statistics that are materially incorrect or incomplete.
| Default | Statutory consequence |
|---|---|
| Initial failure or materially incorrect or incomplete information | Penalty of Rs. 20,000 on the company and every officer in default. |
| Continuing failure | Further penalty of Rs. 1,000 for each day after the first day of continuing failure. |
| Maximum | The continuing penalty is subject to a maximum of Rs. 3,00,000. |
Foreign companies
For a foreign company carrying on business in India, references to a company in Section 405 extend to that foreign company only in relation to its business carried on in India.
Section 406: Nidhis and application of the Companies Act
Section 406 was substituted by the Companies (Amendment) Act, 2017 with effect from 15 August 2019. For this section, a "Nidhi" or "Mutual Benefit Society" means a company that the Central Government may declare, by notification in the Official Gazette, to be a Nidhi or Mutual Benefit Society.
Power to modify application of the Act
The Central Government may notify that specified provisions of the Companies Act, 2013 do not apply to a Nidhi or Mutual Benefit Society, or apply with stated exceptions, modifications and adaptations. The section also provides parliamentary control over such proposed notifications, including laying the draft before both Houses for the prescribed period.
Parliamentary procedure
A proposed notification under Section 406(2) is to be laid in draft before each House of Parliament while in session for a total period of thirty days. If both Houses disapprove the proposed notification, it is not to be issued. If both Houses agree on a modification, it may be issued only in the modified form. Notifications issued under the section are also to be laid before each House of Parliament.
Nidhi Rules, 2014 and the current regulatory framework
The Nidhi Rules, 2014 were made under Section 406 read with Section 469 of the Companies Act, 2013. The rules regulate matters including membership, deposits, lending, net owned funds, branches, statutory returns and the process connected with recognition or declaration as a Nidhi.
The Nidhi (Amendment) Rules, 2019 introduced, among other changes, a definition describing a Nidhi as a company incorporated with the object of cultivating thrift and savings among members, receiving deposits from and lending to members only for their mutual benefit, and complying with the applicable Central Government rules.
The Nidhi (Amendment) Rules, 2022 further strengthened the declaration framework. In particular, Rule 3B requires a public company incorporated after commencement of those amendment rules and seeking declaration as a Nidhi to apply in Form NDH-4 within the prescribed period and satisfy specified conditions, including the prescribed membership and Net Owned Funds requirements. The amended rules should therefore be read with Section 406 when determining present compliance obligations.
Official legal resources
For the authoritative and updated legal text, refer to the India Code portal and the Ministry of Corporate Affairs. MCA notifications include the Nidhi (Amendment) Rules, 2019, the Nidhi (Second Amendment) Rules, 2020, and the official notification containing the Nidhi (Amendment) Rules, 2022.
Related Companies Act provisions
Continue with the surrounding provisions of the Companies Act, 2013:
Sections 403 and 404 - Filing fees and fees credited to the Public Account
Sections 407 and 408 - Definitions and constitution of the National Company Law Tribunal