Sections 418A, 435, 441, 446B, 450, 452, 454 and 465 of the Companies Act, 2013
The Companies (Amendment) Act, 2020 (Act 29 of 2020) amended the Companies Act, 2013 to rationalise penalties, modify compounding and Special Court provisions, provide concessions for specified classes of companies, and make related institutional and saving provisions. This article explains the amendments relevant to sections 418A, 435, 441, 446B, 450, 452, 454 and 465.
Section 418A - Benches of Appellate Tribunal
Section 59 of the Companies (Amendment) Act, 2020 inserted section 418A into the Companies Act, 2013. It deals with the constitution and sitting of Benches of the National Company Law Appellate Tribunal.
Meaning and effect: The powers of the Appellate Tribunal may be exercised by Benches constituted by the Chairperson. A Bench must have at least one Judicial Member and one Technical Member.
The Benches ordinarily sit at New Delhi or at other places notified by the Central Government in consultation with the Chairperson. The provision also enables establishment of Benches to hear specified appeals under section 53A of the Competition Act, 2002 and section 61 of the Insolvency and Bankruptcy Code, 2016.
Section 435 - Establishment of Special Courts
Section 60 of the Companies (Amendment) Act, 2020 amended section 435(1). The amendment excludes offences under section 452 from the expression governing offences for which Special Courts may be established under this provision.
This change should be read with section 452, which specifically deals with wrongful obtaining, possession or withholding of company property by an officer or employee.
Section 441 - Compounding of certain offences
Section 61 of the Companies (Amendment) Act, 2020 substituted section 441(5). Compounding is a statutory mechanism by which an eligible offence may be settled in accordance with section 441 instead of proceeding through the ordinary prosecution route, subject to the conditions of the Act.
Under the substituted sub-section (5), where an officer or other employee fails to comply with an order made by the Tribunal, Regional Director or an authorised officer under sub-section (4), the maximum amount of fine for the offence proposed to be compounded is twice the amount provided in the corresponding provision prescribing punishment for that offence.
Section 446B - Lesser penalties for certain companies
Section 62 of the Companies (Amendment) Act, 2020 substituted section 446B and significantly widened the concession. It applies where a penalty is payable for non-compliance with the Companies Act, 2013 by a One Person Company, small company, start-up company or Producer Company, or by an officer in default or another person in respect of such company.
The applicable penalty is not more than one-half of the penalty specified in the relevant provision, subject to a maximum of Rs. 2 lakh for the company and Rs. 1 lakh for an officer in default or any other person, as the case may be.
Producer Company: for section 446B, this means a company as defined in section 378A(l).
Start-up company: for section 446B, this means a private company incorporated under the Companies Act, 2013 or the Companies Act, 1956 and recognised as a start-up in accordance with the notification issued by the Central Government in the Department for Promotion of Industry and Internal Trade.
Section 450 - Penalty where no specific penalty or punishment is provided
Section 450 is the residual penalty provision. It applies when a company, officer or other person contravenes the Companies Act, 2013, rules made under it, or a condition, limitation or restriction subject to which an approval, sanction, consent, confirmation, recognition, direction or exemption has been given, and no specific penalty or punishment is otherwise provided.
Following section 63 of the Companies (Amendment) Act, 2020, the provision prescribes a penalty of Rs. 10,000 and, for a continuing contravention, a further penalty of Rs. 1,000 for each day after the first, subject to the statutory maximum of Rs. 2 lakh for a company and Rs. 50,000 for an officer in default or any other person.
Section 452 - Punishment for wrongful withholding of property
Section 452 addresses cases in which an officer or employee wrongfully obtains possession of company property, including cash, or wrongfully withholds or knowingly misapplies it. Section 64 of the Companies (Amendment) Act, 2020 inserted a safeguard into sub-section (2) concerning a dwelling unit.
Imprisonment is not to be ordered for wrongful possession or withholding of a dwelling unit where the court is satisfied that the company has not paid the officer or employee amounts relating to provident fund, pension fund, gratuity fund or another employee welfare fund maintained by the company, or compensation/liability for compensation in respect of death or disablement under the law referred to in the provision.
Section 454 - Adjudication of penalties
Section 454 provides the statutory adjudication mechanism for penalties under the Companies Act, including appointment of adjudicating officers and the procedure for determining defaults.
Section 65 of the Companies (Amendment) Act, 2020 inserted a proviso to section 454(3). Where a default relates to section 92(4) or section 137(1) or (2), and the default is rectified before or within 30 days of issue of notice by the adjudicating officer, no penalty is imposed for that default and the proceedings under section 454 in respect of it are deemed concluded.
Section 465 - Repeal of certain enactments and savings
Section 465 contains repeal and saving provisions connected with the Companies Act, 1956 and specified related enactments. Section 66 of the Companies (Amendment) Act, 2020 made textual changes to section 465(1): the first proviso was omitted, the words introducing the second proviso were changed to "Provided that", and the words introducing the third proviso were changed to "Provided further that".
Quick reference
| Companies Act, 2013 provision | 2020 Amendment Act provision | Subject | Effective date |
|---|---|---|---|
| 418A | Section 59 | Benches of Appellate Tribunal | 22 Jan 2021 |
| 435(1) | Section 60 | Special Courts | 22 Jan 2021 |
| 441(5) | Section 61 | Compounding | 21 Dec 2020 |
| 446B | Section 62 | Lesser penalties for certain companies | 22 Jan 2021 |
| 450 | Section 63 | Residual penalty | 21 Dec 2020 |
| 452(2) | Section 64 | Wrongful withholding of property | 22 Jan 2021 |
| 454(3) | Section 65 | Adjudication of penalties | 22 Jan 2021 |
| 465(1) | Section 66 | Repeal and savings | 11 Feb 2021 |
This page is an explanatory legal-information article. For statutory use, verify the current text of the Act, applicable rules and notifications from official sources.