The companies Act provides a range of obligations to be discharged by every company registered under this act and also on the part of its Directors / Managers / Secretaries, etc. The law relating to penalties and criminal liabilities arising from noncompliance with respect to Annual Accounts are enlisted below:
Officer in default: Section 2(31) of the Companies Act, 1956 defines an officer in default in the following terms “in relation to provision referred to section 5, has the meaning specified in that section.” Section 5 of the Companies Act, 1956 defines officer in default as including all the following officers of the company including the managing director or managing directors, the whole-time director or whole time directors, the manager, the secretary, any person charged by the board with the responsibility of complying with that provision, where no officer mentioned above is specified all the directors.
Section 2(60)[1]of the Companies Act, 2013 ,defines an officer in default for the provisions of the act as any officer who is in default namely whole time director, key managerial personnel, where there is no key managerial personnel, such director or directors specified by board, any person charged with the responsibility by the board , any person with whose advice board of director is accustomed to act, every director who has knowledge of contravention and in respect of share issue, transfer the share transfer agents, registrars and merchant bankers.
1) Default in laying down accounts at AGM:
Under the Companies Act, 1956, Section 210(5) lays down that the board of directors of the company shall lay down the balance sheet and profit and loss at the annual general meeting. If the person being a director of a company fails to take reasonable steps to comply with the provisions of the section, he shall in respect of each offence be punishable with imprisonment for a term which may extent to six months or fine which may extend to ten thousand Rupees or with both.
Under the companies act, 2013, Section 129 (7) [2]lays down that if the company makes a contravention of the section that deals with preparing of financial statements and laying down the financial statement at the AGM , the managing director, the whole time director in charge of finance, the Chief Financial Officer, or any other person charged by the Board with the duty of complying with the requirements of this section and in absence of any of the officers mentioned above all the directors shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than fifty thousand rupees which may extend to five lakh rupees or with both .
2) Failure to file Annual Accounts with MCA:
Section 220 of the Companies Act, 1956 lays down that that after the Balance Sheet and Profit and Loss have been laid at the AGM the Profit and Loss and Balance Sheet duly signed the managing director, manager or secretary of the company or if there be none of these, by a director of the company has to be file with the registrar within 30 days from the date of AGM. If any default is made in complying with the provisions of this section the punishment for the default is penalty of Rs. 500 till the default continues.
Section 137(3)[3]of the Companies Act, 2013 provides that if a company fails to file financial statements before the expiry of time provided in Section 403, the penalty imposed is Rs. 1000 for every day of default but this amount shall not be more than 10 lakh rupees and in the absence of managing director, chief financial officer and in the absence of the managing director and chief financial officer and in the absence of above any director who is charged with the responsibility shall be punishable with imprisonment for a term which may extend to six months or fine which shall not be less than one lakh rupees but which may extend to a five lakh rupees or both .
3) Improper issue, circulation or publication of Balance sheet and Profit and loss Account:
Section 218 of the Companies Act, 1956 states that is any copy of balance sheet and profit and loss which has not been signed and issued, circulated or published or if any balance sheet is issued circulated and published without attachments such as profit and loss, any accounts, statements, auditor’s report , directors report the company and every officer in default shall be punishable with fine which may extent to 5000 Rupees.
Section 134[4]of the Companies Act, 2013 states that the financial statement including the consolidated financial statement shall be approved by the board of directors before they are signed on behalf of the board . The auditor’s and Director’s Report as required by the section shall be attached .The signed copy of every financial statement including consolidated financial statement if any shall be issued, circulated or published. If there is any contravention of this section the company shall be punishable with fine that shall not be less than 50 thousand Rupees but may extend to 25 Lakh Rupees and every officer who is in default shall be punishable with imprisonment for a term which may extend to 3 years or fine which shall not be less than 50 thousand Rupees but may extent to 5 Lakh Rupees or both.
4 ) Failure to comply with provisions of Annual Return :
Section 162 of the Companies Act, 1956 states that the non compliance of Section 159(form of annual return for a company having a share capital ), 160 (form of annual return for a company not having share capital ), 161 (Annual return to be signed by both a directory and secretary and to be filed with the registrar )with respect to Annual Return will attract a fine of Rs. 5000 which has to be paid by the company
Section 92 [5]of the Companies Act, 2013 lays down that a company who fails to file its annual return within a the period so allowed by section 403 with additional fee shall shall be punishable with fine that shall not be less than 50 thousand Rupees but may extend to 25 Lakh Rupees and every officer who is in default shall be punishable with imprisonment for a term which may extend to 6 months or fine which shall not be less than 50 thousand Rupees but may extent to 5 Lakh Rupees or both .
5) Failure to send the Annual Accounts to members:
Section 219(1) of the Companies Act, 1956 lays down that the Annual accounts should be sent atleast 21 days before the Annual General Meeting. Section 219 (3), furthermore states that any default in complying with this requirement would attact a fine of Rs. 5000 by the company and any every officer in default. Section 219(4) lays down that if any member makes a demand of annual account and the same is not provided to him the company and every officer in default would attract a fine of Rs. 5000.
Section 136[6]of the Companies Act, 2013 also lays down the same requirement but the penalty which the company is subject to Rupees 25 thousand and every officer in default is subject to a penalty of 5000 Rupees.
Summing up, criminal liability is only attracted in the following cases with respect to Annual Accounts
a) Default in laying down accounts at AGM: Criminal Liability under both Old and new act
b) Failure to file Annual Accounts with MCA: Criminal Liability Only under new act
c) Improper issue, circulation or publication of Balance sheet and Profit and loss Account: Criminal Liability Only under new act
d) Failure to comply with provisions of Annual Return: Criminal Liability Only under new act