Notice Received from MCA: E-Adjudication Notice

Replying to the MCA Notice:

Under Section 96 of the Companies Act, 2013, any company registration must hold an Annual General Meeting within six months of the closure of a particular financial year or within 15 months from the date of holding the last Annual General Meeting in the Company, whichever is earlier.

The company has the responsibility and liability to reply to the MCA notice issued to them. The following points must be mentioned by any company-

  • Stating the actual reasons for why the company could not hold the AGM within due date.
  • Since the non-compliance has occurred during the previous financial years, therefore the company must mention in reply to the MCA Notice that it will surely file application for Compounding with the concerned authority.

Penal Provision related to MCA Notice:

Section 99 of the Companies Act, 2013 states that when there is a non-Compliance of 96 that is if the company has made any default in holding a general meeting in accordance with section 96 or section 97 or section 98 or any directions given by the Tribunal, the company and its every officer who’s at fault shall be punishable with penalty that can extend to one lakh rupees. In cases where the default is in continuation the penalty can may extend to five thousand rupees for each day.

Officer who are at fault means the below mentioned officers of a company. These are-

  • Different types of Directors who are appointed whole-time.
  • Key managerial personnel (KGM) in the company.
  • If there are no key managerial personnel, such director or directors that have been specified by the Board on their behalf and who have given their written consent to the Board for such specification, or all the directors, when no director is particularly specified.

That is the reason why separate fine is imposed both on the Company and Officer in default.

Process of Compounding with Regional Director:

Compounding: Section 96 of the Companies Act, 2013 specifies that the total penalty cannot exceed Rs. 25 Lakhs, therefore it is the Regional Director on whom the power of compounding is vested upon once the MCA Notice is served to the company  and the company has replied to the same.

The Process of Compounding: The Company have to file an application to the Regional Director by the below mentioned process:

  • Preparation for the Application: Under the Companies Act, once the company is served with MCA Notice, no specific format of Compounding application made to the Regional Director has been prescribed.

The Company is required to prepare a normal application mentioning the following details-

  • Name
  • Registered Office
  • Capital Structure
  • Jurisdiction of Regional Director
  • Facts of the Case
  • Relief to be sough

Application made to the RD after receipt of MCA Notice, must be properly annexed with the following attachments-

  • Affidavit that verifies the application
  • Accounts and Financial Statements of Company
  • Documented proof of holding of Annual General Meeting, etc.
  • Filing of Application with Registrar of Companies: In e-form GNL-2, the company has to file a copy of application made to the Regional Director with Registrar of Company. Once the form is received by the ROC, he prepares a report about the same and then submit the same to the Regional Director.
  • Filing of Application with Regional Director: Company Registration after receiving the MCA Notice is required to file a copy of the application with Regional Director through e-form RD-1. It must submit a hard copy of application with all the necessary annexures to the Regional Director.
  • Hearing by Regional Director: A personal hearing before the Regional Director is conducted, where the amount to be paid by the company for the compounding is decided.
  • Passing of Order Regional Director: Once the amount payment is decided in the hearing as per MCA Notice, the order is passed by the RD. the company has to pay the stipulated amount within the time limit fixed by the statutes or the RD.
  • Filing of Order with ROC: The company has to file the order passed by the RD with ROC through the e-form INC-28. ROC takes the note of the same and record it.

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    Author: Anil Agrawal
    EZYBIZ India Consulting LLP, New Delhi. The firm is business and tax consultancy firm providing consultancy in Taxation, Regulatory, Transfer pricing, Valuation, Corporate funding and Business set up matters. He may be reached at 9899217778 or anil@ezybizindia.in.