Sections 137, 140, 157, 159, 164 and 165 of Companies Amendment Act 2019
The Companies (Amendment) Act, 2019, Act 22 of 2019, changed several compliance and penalty provisions of the Companies Act, 2013. Sections 22 to 27 of the 2019 Amendment Act dealt respectively with sections 137, 140, 157, 159, 164 and 165 of the principal Act. This article explains those amendments and highlights later changes that affect the current legal position.
Important: The text introduced in 2019 is historically important, but some penalty amounts were changed again by the Companies (Amendment) Act, 2020. For present compliance, the current text of the Companies Act, 2013 and applicable rules and notifications should be checked.
Section 22 of the 2019 Act: Amendment of Section 137
Section 137 of the Companies Act, 2013 concerns filing a copy of the financial statements with the Registrar. Broadly, it requires prescribed financial statements and accompanying documents to be filed within the statutory period.
2019 amendment: Section 22 of the Companies (Amendment) Act, 2019 amended section 137(3), replacing criminal fine and imprisonment language with an in-house monetary penalty framework. The amendment provided a penalty of one lakh rupees for the responsible officers and a further penalty of one hundred rupees per day for continuing failure, subject to the then applicable maximum of five lakh rupees.
Current-position update: Section 28 of the Companies (Amendment) Act, 2020 subsequently revised section 137(3). The company is now subject to an initial penalty of ten thousand rupees plus one hundred rupees for each day of continuing failure, subject to a maximum of two lakh rupees. The specified responsible officer or director is subject to an initial penalty of ten thousand rupees plus one hundred rupees for each day of continuing failure, subject to a maximum of fifty thousand rupees.
Section 23 of the 2019 Act: Amendment of Section 140
Section 140 deals with removal and resignation of auditors and special notice. Under section 140(2), a resigning auditor must file the prescribed statement within thirty days, including reasons and other relevant facts.
2019 amendment: Section 23 substituted section 140(3). Failure by an auditor to comply with section 140(2) attracted a penalty of fifty thousand rupees or an amount equal to the auditor's remuneration, whichever was less, plus five hundred rupees for each day of continuing failure, subject at that time to a maximum of five lakh rupees.
Current-position update: Section 29 of the Companies (Amendment) Act, 2020 reduced the maximum continuing-failure penalty in section 140(3) from five lakh rupees to two lakh rupees.
Section 24 of the 2019 Act: Amendment of Section 157
Section 157 requires a company, within fifteen days after receiving an intimation under section 156, to furnish the Director Identification Number of its directors to the Registrar or other specified authority in the prescribed form and manner.
Penalty under section 157(2): If the company fails to furnish the Director Identification Number, it is liable to a penalty of twenty-five thousand rupees and, for continuing failure, a further one hundred rupees per day after the first day, subject to a maximum of one lakh rupees. Every officer in default is also subject to the statutory penalty structure stated in section 157(2).
Section 25 of the 2019 Act: Substitution of Section 159
Section 159 is titled "Penalty for default of certain provisions." It applies where an individual or director defaults in complying with section 152, section 155 or section 156 of the Companies Act, 2013.
The substituted section provides for a penalty which may extend to fifty thousand rupees and, where the default continues, a further penalty which may extend to five hundred rupees for each day after the first during which the default continues.
Sections 152, 155 and 156 broadly concern appointment of directors, the prohibition against obtaining more than one Director Identification Number, and the duty of a director to intimate the Director Identification Number to the company.
Section 26 of the 2019 Act: Amendment of Section 164
Section 164 specifies disqualifications for appointment as a director. The 2019 Amendment Act inserted clause (i) in section 164(1).
Clause (i) provides that a person is disqualified where he has not complied with section 165(1), which prescribes the statutory ceiling on the number of companies in which a person may hold office as director.
Section 27 of the 2019 Act: Amendment of Section 165
Section 165 regulates the number of directorships that a person may hold. In general, a person cannot hold office as director, including alternate directorship, in more than twenty companies at the same time, and the statutory limit for public companies is ten, subject to the counting rules in the section.
2019 amendment: Section 27 replaced the earlier criminal fine language in section 165(6) with a civil penalty of five thousand rupees for each day after the first during which the contravention continued.
Current-position update: Section 33 of the Companies (Amendment) Act, 2020 later substituted section 165(6). A person who accepts appointment as a director in violation of section 165 is now liable to a penalty of two thousand rupees for each day after the first during which the violation continues, subject to a maximum of two lakh rupees.
Practical compliance note
The 2019 amendments formed part of the shift from criminal prosecution to monetary adjudication for several procedural and compliance defaults. Because sections 137, 140 and 165 were subsequently amended, users should distinguish the wording introduced by the 2019 Act from the penalty amounts presently appearing in the Companies Act, 2013.
For filings and current compliance, refer to the Ministry of Corporate Affairs portal, the current Companies Act, 2013, applicable rules, forms and notifications.
