The provisions of section 147 of the Companies Act, 2013 (CA 2013) provides for punishment for contravention. Section 147 has come into force on 1st April, 2014 vide Notification No. S.O. 902(E) issued dated 27.03.2014.
Section 147 has provided specific and stringent penalties for contravention of provisions of sections 139 to 146 of the Companies Act, 2013. Section 147 of CA 2013 corresponds to section 232 (Penalty for non-compliance with sections 225 to 231) and section 233 (Penalty for non-compliance by auditor with sections 227 and 229) of the Companies Act, 1956.
Punishment for contravention under Section 147 of Companies Act, 2013
We have already discussed the provisions of sections 139, 140, 141, 142, 143, 144, 145, and 146 of the Companies Act, 2013. Section 147 of CA 2013 deals with the penalty provisions for non-compliance with sections 139-146 of the Companies Act, 2013.
1) Penalty on Company [Section 147(1):
In accordance with sub-section (1) of section 147 of CA 2013, if any of the provisions of sections 139 to 146 (both inclusive) is contravened, the company shall be punishable with a minimum fine of ₹25,000 which may extend to five lakh rupees.
2) Penalty on Officer [Section 147(1):
As per section 147(1) of the CA 2013, if any of the provisions of sections 139 to 146 (both inclusive) is contravened, every officer of the company who is in default shall be punishable with:
a) Imprisonment for a term up to 1 year; or
b) Fine which shall not be less than ₹10,000 but which may extend to ₹1,00,000; or
c) Both with imprisonment and fine.
3) Penalty on Auditor [Section 147(2)]:
According to section 147(2) of the CA 2013, if an auditor of a company contravenes any of the provisions of section 139, section 143, section 144 or section 145, the auditor shall be punishable with:
a) Minimum Fine: ₹25,000;
b) Maximum Fine: ₹5,00,000.
If an auditor has contravened such provisions (Sections 139, 143, 144 or 145) knowingly or wilfully with the intention to deceive:
– the company; or
– its shareholders; or
– creditors; or
– tax authorities,
he shall be punishable with:
a) Imprisonment: Up to one year; and
b) Fine: Minimum ₹1,00,000; Maximum ₹25,00,000.
4) Refund of Remuneration by Auditors [Section 147(3)]:
Where an auditor has been convicted u/s 147(2) of the CA 2013, the convicted auditor shall be liable to the following in addition to the penalty under sub-section (2) of section 147 of CA 2013:
(i) refund the remuneration received by him to the company; and
(ii) pay for damages to the company, statutory bodies or authorities or to any other persons for loss arising out of incorrect or misleading statements of particulars made in his audit report.
Note that such provisions for refunding remuneration and payment of damages was not present in the Old Companies Act, 1956.
5) Ensuring prompt payment of Damages [Section 147(4)]:
In accordance with the provisions of section 147(4) of the CA 2013, the Central Government (CG) shall, by notification, specify any statutory body or authority or an officer for ensuring prompt payment of damages to the company or the persons under clause (ii) of sub-section (3) of section 147 of the CA 2013.
Such body, authority or officer shall after payment of damages to such company or persons file a report with the CG in respect of making such damages in such manner as may be specified in the said notification.
6) Liability of Audit Firm of a Company [Section 147(5)]:
If audit of a company is conducted by an audit firm and it is proved that the partner or partners of the audit firm has or have:
– acted in a fraudulent manner; or
– abetted or colluded in any fraud by, or in relation to or by, the company or its directors or officers,
the liability, whether civil or criminal as provided in CA 2013 or in any other law for the time being in force, for such act shall be of the partner or partners concerned of the audit firm and of the firm jointly and severally.